June 19, 2020

Note: This article is of importance to tax exempt organizations administering federal grant assistance.

On June 18, 2020 the Office of Management and Budget (OMB) issued OMB Memo M-20-26 (the Memo). The Memo provides authorization to federal awarding agencies to further administrative relief exceptions as a result of the COVID-19 crisis. The Memo extends certain flexibilities provided under existing OMB Memos M-20-17 and M-20-20, which expired June 16, 2020, as well as OMB Memo M-20-11, which is set to expire July 26, 2020. The Memo also covers several new directives that are important for federal grantees to understand.

Here is a quick summary of what is covered in the Memo to guide your review:

Paycheck Protection Program (PPP) Loans

The Memo provides long awaited guidance from the OMB on the topic of PPP loan “double dipping.” Federal agencies are given this directive:

“Under this flexibility, payroll costs paid with the Paycheck Protection Program (PPP) loans or any other Federal CARES Act programs must not be also charged to current Federal awards as it would result in the Federal government paying for the same expenditures twice.”

As you can see, the guidance is short and to the point.

Single Audit Extension

OMB Memo M-20-17 previously provided a six month Single Audit extension for entities with year-end dates through June 30, 2020. The Memo has removed the Single Audit extension for June 30, 2020 year-ends. This is a significant reversal from OMB Memo M-20-17.

It’s important to note that the Memo does still provide a six month Single Audit extension for entities with a September 30, 2019 year-end, as well as a three month Single Audit extension for entities with a December 31, 2019 year-end.

The Memo also retains the guidance that no further approval is needed to take advantage of these extensions, though entities are instructed to maintain documentation of the reason for the delayed filing. The Federal Audit Clearinghouse (FAC), via their website, is instructing entities to reference the memorandum in their Single Audit reporting packages submitted to the FAC as part of the data collection form process.

Allowability of Salaries and Other Project Activities

OMB Memo M-20-17 tasked federal agencies with issuing guidance to their recipients allowing them to continue to charge salaries of idle staff under unexpected or extraordinary circumstances. This also applied to costs that were necessary to resume activities supported by the award.

The Memo authorizes federal agencies to extend these flexibilities through September 30, 2020. However, entities should be aware of new language directing federal agencies to inform their recipients that they are required to exhaust other available funding sources to sustain their workforce and must implement necessary steps to save overall operational costs.

Entities should be alert to their federal agencies’ implementation of this provision via future grants policy statements or directives. We suspect further clarification will be sought by entities on this new provision.

Schedule of Expenditures of Federal Awards

In the Memo, the OMB has provided the directive that recipients and subrecipients must separately identify the COVID-19 Emergency Acts expenditures on the Schedules of Expenditures of Federal Awards and audit report findings.

We encourage entities to closely read this newly released Memo and, just as much, monitor their federal agencies’ grants policy statements and other directives implementing provisions of the Memo.

If you have questions regarding the implications of the Memo, contact a Clark Nuber professional.

© Clark Nuber PS, 2020. All Rights Reserved

This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.