The Shuttered Venue Operators Grant (“SVOG”), administered by the U.S. Small Business Administration (“SBA”), has so far provided over $10 billion in federal grant awards for entertainment venues, including live concert venues, museums, and theatres, to offset losses from the pandemic. This funding has provided a tremendous boost to the arts and culture sector as well as the entertainment industry, but it did not come without additional requirements.
Those venues who received substantial grants may require a Single Audit for the first time. A Single Audit is a compliance-type audit performed by a qualified CPA firm which evaluates the compliance with award requirements by a non-federal entity. These audits are required anytime a non-federal entity spends $750,000 or more in federal awards during their fiscal year. Your organization may find itself in need of a Single Audit if either of the following scenarios applies to you:
- You currently operate federal award programs, have usually spent less than $750,000 in federal awards, and your SVOG expenses have caused you to exceed that threshold, or
- You have never operated federal award programs, but your SVOG grant expenses are $750,000 or more.
A Single Audit includes an audit of the organization’s financial statements, along with audit procedures related to certain federal compliance requirements, as noted below. Therefore, if you have not had a financial statement audit before, a Single Audit requirement will also mean that your organization will experience a financial statement audit for the first time.
As the need for a Single Audit is triggered by the grant expenditures rather than the actual award amount, it is critical that recipients properly track their costs and take steps to ensure those costs are both eligible and allowable expenses.
Eligible cost refers to the timing of the expense. To be eligible, the cost must be incurred during the Project Period. Guidance from the SBA defines this timeline as March 1, 2020 through the date indicated on your Notice of Award (Form 1022, Box 4). Since the project period starts March 1, 2020, allowable expenditures may spread over multiple years, depending on your fiscal year-end.
Allowable costs are defined by the SVOG program’s statute, for which the SBA has provided a comprehensive list. Some of the most common examples of allowed expenses are payroll costs, rent, utilities, PPE purchases, and payments to independent contractors.
In addition to ensuring that funds are eligible and allowable, venues are also responsible for ensuring compliance with a wide range of other requirements which auditors will need to review as part of a Single Audit. These include, but are not limited to:
- Ensuring that appropriate procurement policies are followed
- Ensuring all reporting is properly submitted to the SBA
Once your Single Audit gets underway, you can expect that your auditors will perform procedures which may not be as familiar as those typically experienced with a standard financial statement audit. The auditors will test a selection of your expenses charged under the program to ensure that the expenses were permissible. Additionally, recipients of federal awards are required to have internal controls in place to make sure that no unallowable expenses are charged. The auditors will therefore include testing of your internal controls in their procedures. Your auditors will also examine your policies and procedures to ensure that they meet federal requirements (i.e., procurement policy). Finally, they will assess your compliance with the reporting requirements of the SVOG program to make sure your organization has complied with all the rules.
If your SVOG is your only program involving federal funding, you have the option of having a program-specific audit conducted, rather than a Single Audit. The internal control and compliance procedures detailed above are still performed in a program-specific audit, but a program-specific audit does not include an audit of the organization’s financial statements.
Additional assistance on administering your SVOG can be found at the SBA website, Post-application guidance for SVOG applicant, or by contacting your GJC advisor.