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SVOG Funding May Trigger Compliance Audit

The Shuttered Venue Operators Grant (SVOG) program is a COVID-19 relief program administrated by the U.S. Small Business Administration (SBA) to support operations of eligible recipients who have experienced significant losses because of the COVID-19 pandemic. Recipients may be non-federal entities (states, local governments, or nonprofit organizations) or for-profit entities. Eligible recipients include but are not limited to; live performing arts organizations, live venue operator or promoter, museums, talent representative, and theaters.

Check out the below frequently asked questions (FAQ) to learn more about this program and what it might mean for you:

Is my organization required to have a compliance audit?

Non-federal entities (states, local governments, or nonprofit organizations) are subject to the requirements in Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, And Audit Requirements for Federal Awards (Uniform Guidance) if $750,000 or more is spent in all federal funds during the fiscal year.

For-profit entities that have recognized revenue of an SVOG award of $750,000 or more have four options to meet SBA’s audit requirement:

  1. A single audit conducted in accordance the Uniform Guidance
  2. A program-specific audit conducted in accordance with the Uniform Guidance
  3. An audit of the for-profit entity’s financial statements; or
  4. A compliance examination engagement

Which option is best for a for-profit entity?

Each for-profit entity should decide what is best based on professional judgment and specific facts and circumstances. If a for-profit entity does not typically undergo an audit or prepare year-end financial statements, a compliance examination (Option 4) is most likely the best option. Current expectations are that a compliance examination engagement will be the most frequently used option for for-profit entities. This option generally requires less administrative effort and is less costly than the other three options.

What does an “Option 4” compliance examination entail?

In a compliance examination, you’ll need to provide a listing of those expenditures that you are claiming as a usage of the SVOG funds. Documentation supporting each expenditure, its eligibility for SVOG, and its timeliness in the context of SVOG allowed usage periods will need to be provided. To the extent you are claiming payroll against the SVOG funds, you will need to show that those payroll dollars were not utilized for other federal funding programs, such as PPP forgiveness or Employer Retention Credit claims. Some elements of SVOG compliance can be complicated. Engaging a CPA with experience in federal award programs who can help you navigate the requirements is important.

What reports are issued?

An examination report is issued in accordance with Government Auditing Standards. If applicable, findings would be reported in accordance with Government Auditing Standards and may include significant deficiencies and/or material weaknesses in internal control, noncompliance that could be material to the examination, or instances of fraud.

How can I learn more?

The Bonadio Group has professionals who are experienced with the SVOG program and can assist with the compliance audit requirements. Please do not hesitate to reach out for more information.

This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.