The Office of Management and Budget has amended its compliance rules to allow for a simplified process for municipalities that would not be required to undergo a federal audit if not for expenditures of Coronavirus State and Local Fiscal Recovery Funds under the American Rescue Plan Act.

Under the OMB addendum, issued on April 8, SLFRF recipients that expend $750,000 or more during their fiscal year and meet two specific criteria have the option for their auditor or practitioner to follow the Alternative Compliance Examination Engagement guidance.

The criteria are:
1. The recipient’s total SLFRF award received directly from the U.S. Department of the Treasury or received (through states) as a non-entitlement unit of local government is at or below $10 million; and

2. Other federal award funds the recipient expended (not including their SLFRF award funds) are less than $750,000 during the recipient’s fiscal year.

The revision is Addendum 3 to the 2021 Single Audit Compliance Supplement.

Addendum 3 includes a simplified single-audit process (an “attestation”) for direct recipients that are considered exempt from the single audit if it was not for the expenditures of SLFRF funds. This alternative is intended to reduce the burden of a full single audit on eligible recipients (estimated at more than 10,000 entities). This alternative applies to fiscal year audits beginning after June 30, 2020.

Attestation would result in an auditor’s opinion on compliance, which includes an assessment of two activities, specifically “activities allowed” and “unallowed/allowable cost.”

Finally, the OMB’s “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” (commonly known as Uniform Guidance) still applies to all expended funds, whether the recipient performs an attestation or a single audit.

Municipal recipients of ARPA’s State and Local Fiscal Recovery Funds are divided into two categories: metro cities, which are typically municipalities with a population greater than 50,000, and non-entitlement units of government, which have populations below 50,000.

The MMA has been working with the National League of Cities and the Massachusetts congressional delegation to ease ARPA’s administrative burdens and increase flexibility in how the funds can be used by cities and towns.