SVOG: Types of Compliance Requirements and Potential Applicability

In my first article, I shared the Shuttered Venue Operators Grant (SVOG) Program general requirements for use of funds, compliance audit requirements, and certain administrative items. In this article, I will address in more depth the compliance audit requirements.

As a Federal grant program, all funds awarded under the SVOG Program (CFDA# 59.075) will count toward the audit requirement to comply with the Single Audit Act. If an entity expends $750,000 or more in Federal grant funding (across all sources, including SVOG) in any single fiscal year, the entity will be required to complete an audit under the Single Audit Act. If your not-for-profit or for-profit entity was one of the over twelve thousand entities fortunate enough to have received a SVOG award, you will need to understand your responsibilities for a compliance audit.

SVOG Completion Requirements

The Single Audit requires non-federal entities, specifically a not-for-profit entity, institute of higher education, Tribe, or state or local government, that expend $750,000 or more in federal financial assistance in any fiscal year to have a compliance audit of those expenditures performed by independent public accountants. If you are a for-profit entity that expends $750,000 or more in federal financial assistance in any fiscal year, the SVOG Program requires you to complete one of the following:

• A Single Audit or program specific audit consistent with 2 CFR Part 200, Subpart F; or
• A financial related audit of the award in accordance with Generally Accepted Government Auditing Standards (GAGAS).

Compliance audits in accordance with these requirements are generally due the earlier of 30 days after the compliance report is issued or within nine months after the end of your fiscal year.  However, an extension was granted for entities with June 30, 2021 year-end compliance audits.  You will have until September 30, 2022 to file.

The U.S. Office of Management and Budget’s (OMB) most recent Compliance Supplement (2 CRF Part, Appendix XI) issued in July 2021 for fiscal years beginning after June 30, 2021 does not provide specific compliance guidance for the SVOG Program. Therefore, you and your auditors must determine the appropriate and direct and material compliance requirements by reviewing the award documents in conjunction with OMB Compliance Supplement Part 7 – Guidance for Auditing Programs Not Included in This Compliance Supplement. OMB Compliance Supplement Part 3 – Compliance Requirements identifies and describes the 12 types of compliance requirements where noncompliance may have a direct and material effect on a federal program and provides audit objectives and suggested internal control and compliance procedures. OMB resources and other information can be accessed on The White House website.

Types of Compliance

The 12 types of compliance requirements and potential applicability to the SVOG program:

1. Activities Allowed or Unallowed. These are unique to each federal program. The SBA has guidance on this on their website and included in their FAQs answers to common questions about the program.
2. Allowable Costs/Cost Principles. This describes the types of costs allowed to be charged to the federal charged to the federal program. Allowable costs consist of: costs deemed legally permissible based on the authorizing language in SVOG Program statute and Title 2 of the Code of Federal Regulations, Part 200 (2CFR 200); costs that align within the allowable budget and categories of your Final Budget from the SBA; and costs that are reasonable and necessary for your business and supported by sound business practices. See my first article which describes eligible uses of funds in greater detail.
3. Cash Management. Grants can be funded in advance or on a reimbursement basis. SVOG awards were funded in advance.  Recipients are required to minimize the time between receipt of award and disbursement of funds for allowable costs. Depending on whether you received funding in the Initial Phase and the Supplemental Phase, disbursement of funds for allowable costs are for the periods from March 1, 2020 through December 31, 2021 or June 30, 2022.
4. (Reserved)
5. Eligibility. This would not apply since the SBA processed all applications and assessed eligibility before funding was released.
6. Equipment and Real Property Management. This applies if equipment or real property having a useful life of more than one year and the acquisition cost equals or exceeds the lesser of your capitalization policy established for financial statement purposes or $5,000.
7. Matching, Level of Effort, Earmarking. This is unique to each federal program. The SVOG program does not have this requirement.
8. Period of Performance. The period of performance has been defined by SBA as eligible costs incurred between March 1, 2020, and December 31, 2021, or June 30, 2022, if the recipient received Supplemental Phase funding.
9. Procurement and Suspension and Debarment. When procuring property and services using SVOG funds, you are required to use the same policies and procedures used for procurements of property and services from non-federal funds as long as those comply with federal procurement regulations.  Additionally, you are prohibited from contracting with parties that are suspended or disbarred by the federal government.
10. Program Income. Gross income earned that is directly generated by an allowable activity or because of the federal awarded during the period of performance.
11. (Reserved)
12. Reporting. The SBA requires recipients to initiate the SVOG closeout process no later than 120 days after the end of your Budget Period (as noted by the “Through” date on Form 1222, Box 5). The SBA has implemented a multi-step grant award closeout process that is completed through the SVOG portal.
13. Subrecipient Monitoring. This requirement applies if you transfer SVOG funds to another that will be responsible for fulfilling the program’s requirements.  Generally, this would not apply to SVOG funding.
14. Special Tests and Provisions. These are unique to each federal program and can be found in the program’s contract and grant agreements and any referenced statutes and regulations. Generally, this would not apply to SVOG funding.

Our team of experienced professionals can help you understand the compliance requirements and assist you with the audit of your SVOG Program funds and any other COVID-related Federal program grant awards your company has received.