Have SVOG Audit Questions? We’ve Got Answers!

Frequently asked questions about the Shuttered Venue Operators Grant (SVOG)

Sikich’s team of Shuttered Venue Operators Grant (SVOG) and federal grant audit specialists field many questions related to SVOG every day. We’ve put together the following commonly asked questions to support for-profit businesses during this audit or exam. For many that received SVOG funds, this is likely the first time you are subject to a compliance examination or audit requirements. 

If you have questions about your SVOG audit and situation, please contact our SVOG specialists below, who would be happy to speak with you, answer your questions, and walk you through the process – all complimentary.

Do I need an audit?

If you spent more than $750,000 of SVOG funds in 2020/2021 or 2022, you may be required to complete one of the SBA audit requirements. Because the SVOG funds were not received until 2021, all expenses allocated to 2020 are combined with 2021 to determine if you meet the $750,000 threshold. Any fiscal/calendar year in which SVOG expenses exceed $750,000 will require a separate audit.

What Expenses are Allowable for SVOG?

Funds could be used across a broad range of expenses, from payroll costs, rent payments and utility payments, to worker protection expenditures, payments to independent contractors and insurance payments. Award funds cannot be used to buy real estate, make investments, pay loans originated after February 15, 2020, and more (listed here).

How Long do I have to Spend SVOG Funds?

If your business received the first round of funding, you could spend it over a 12-month period between March 1, 2020 and December 31, 2021. If you received both the initial and supplemental phases, you could spend it over an 18-month period between March 1, 2020 and December 31, 2021.

Which of the Four Audit Requirements Should I use?

You can meet your audit requirements using one of four methods:

1. A compliance exam
2. An audit of your entity’s financial statements
3. A single audit conducted in accordance with 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
4. A program-specific audit conducted in accordance with 2 CFR 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards

As a reminder, companies that have an annual financial statement audit performed can submit those audited financial statements to meet SBA requirements. For those that don’t have an annual audit, the first option, a compliance examination engagement, is the most cost effective and best solution. For-profit entities that select the financial statement audit option must provide a copy of the financial statements and the related audit opinion on the financial statements. Submitting your annual audit to the SBA is all you need to do (the period of your audit should cover the period that your SVOG funds meet the audit threshold).

What is a Compliance Examination?

A compliance examination intends to reduce the burden of a single audit or program-specific audit. It focuses on compliance with specific grant requirements and is performed under different professional standards than regular financial or single/program-specific audits.

Compliance examinations (and the other three audit options) must be completed by an external accounting firm and retained by the recipient. The SBA will not perform these audits or appoint/hire an auditor for you. Because these audits are required to be performed under Government Auditing Standards, not all CPA firms are qualified (or willing) to perform them.

My Financial Statements are Reviewed, Not Audited – Will that Work?

Unfortunately, no. In this case, you will still need to submit one of the four audit requirements. It might, however, be more beneficial and cost effective (or cost neutral) to simply change from a review to a financial statement audit, rather than complete a compliance examination or single audit.

Can I Avoid the Audit Requirement?

Possibly! Many businesses have much more expenses that would be allowable than SVOG funds. Because of the broad nature in which SVOG funds can be spent, businesses may be able to strategically allocate their SVOG expenses so that individual fiscal years are below the $750,000 audit threshold.

Only businesses that received the supplemental round should have expenses in 2022. Accordingly, if you did not receive the supplemental round and spent over $750,000, you likely will need to satisfy the audit requirement, regardless of how you allocate your expenses.

For example, assume you received $800,000 of the initial round and $600,000 of the supplemental round ($1,400,000 in total). You can strategically look at your expenses and, assuming the expenses are allowable under the program, allocate $700,000 to 2020/2021 (combined) and $700,000 to 2022.  Because each year is below the $750,000 audit threshold, no audit is needed.

When is my Audit Due?

Audits must be completed and submitted within the later of nine months after your company’s fiscal year-end or April 22, 2023.

For example, you are a calendar year-end business that received $2,000,000 in funds and determined you spent $600,000 in 2020, $600,000 in 2021, and $800,000 in 2022. You will need two audits, as both periods are over the $750,000 threshold. In this example, your 2020/2021 audit ($1,200,000 of expenses) will be due April 22, 2023, and your 2022 audit ($800,000 of expenses) will be due September 30, 2023.

How do I Find an Auditor and What will my Auditor Need?

Finding an auditor that is capable of and willing to conduct this audit is one of the crucial first steps businesses must take. Be sure to identify an auditor that can perform a compliance exam under Government Auditing Standards, and then schedule your audit as soon as you can. Your auditor, in order to complete the audit or exam, may request organizational and SVOG-related documents, which can include partnership agreements, articles of incorporation and other relevant documents, and will observe your company’s activities and operations. Further, you likely may be asked to provide supporting documentation for your expenses.

Essentially, it is their job to test and determine if you used SVOG funds properly under the Uniform Guidance.

How do I Prepare for my Audit?

Make sure to collect all expenses and past spending relating to your SVOG funds. Include identifiable information, such as invoice numbers, payroll dates, invoice dates and amounts. Then, ensure your supporting documentation is complete.

I am a For-Profit Company – Do I have to Submit my SVOG Audit to the Federal Audit Clearinghouse (FAC)?

Generally, for-profit companies are not required to submit audits to the Federal Audit Clearinghouse (FAC). Your audit just needs to be submitted to the SBA through its action item and then retained for your records.

Will I have for Pay Taxes on the SVOG Funds?

The Consolidated Appropriations Act of 2021 (PL 116-260) established that SVOG funds are not taxable on your federal income tax return.

States are not required to follow the federal treatment. We recommend asking your accountant about the state tax treatment for your unique tax situation.

What if my Final Expenses don’t Match my Proposed Budget?

That’s okay. The SBA clarified (Question 167) that grantees may move costs between allowable categories. Upon grant closeout, you will need to submit your final budget, which should match your final expense allocation.

Can you Claim Both the Employee Retention Credit (ERC) and SVOG?

Yes. Your auditor can help you properly allocate expenses to minimize the audit burden and maximize the use of other federal programs, such as the ERC (read about if you qualify for untapped refunds here). SVOG funds are compatible with the ERC, meaning, if you receive or apply for the ERC on behalf of an employee and the credit does not completely cover the employee’s wages, you may use SVOG funds to cover the remaining portion.

Can I Still get the ERC?

Yes, many organizations can still qualify for the ERC. Startup companies, SVOG and PPP recipients that had previously not qualified under earlier IRS guidance may now be eligible because of updated, enhanced tax legislation. Read more about if you qualify as a recovery startup business here.

I Need Help with Monitoring

Monitoring is very similar to a compliance examination, only it is led by the SBA. The SBA uses monitoring to help verify the proper use of the grant funds. Generally, you do not need to prepare for monitoring, as you would likely already have the documentation the SBA will request readily available as part of your requirement to keep accurate records of your SVOG funds. We can help review your monitoring submissions and answer any questions you may have.

What are my Next Steps?

Talk to your existing accountant about your options and their qualifications and availability to perform these audits. Evaluate if you qualify for other federal programs, such as the ERC, as failing to consider all federal programs may cause you to leave money on the table. Begin accumulating and organizing your SVOG support – receiving federal funding is unique and is subject to higher levels of compliance and scrutiny. Retain and schedule your SVOG audit or compliance examination, and ensure your auditor is fluent in compliance examinations and the SVOG requirements.

I’m from a CPA Firm and my Client Needs One of the Audits – Can you Help?

We’ve found that many accounting firms either can’t do these audits due to the specialized nature of them or have elected not to perform them. If your client needs one of these audits, we can assist you with these requirements. Please reach out to our team below to get started.

I Still have Questions

We’re here to help you! We would be happy to have a complimentary conversation with you about your situation and guide you through your next steps. Please call or email our SVOG specialists to talk to us about your business or to receive a fee quote for an audit or compliance examination:

Allan Lyon, CPA, CMA, Partner
(630) 566-8447
LinkedIn: www.linkedin.com/in/allanlyon
allan.lyon@sikich.com

Sikich’s SVOG team performs compliance examinations, financial audits, single audits, and program-specific audits each year and has firsthand, in-depth experience with entertainment and for-profit businesses.