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What is the audit period for federal funds?

The U.S. Department of the Treasury’s (“Treasury”) May 10, 2021 Interim Final Rule states “payments from the Fiscal Recovery Funds as a general matter will be subject to the provisions of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR 200) (the Uniform Guidance), including the cost principles and restrictions on general provisions for selected items of cost.”[1]  Given this guidance, municipalities should review 2 CFR 200 in its entirety. Because Treasury has indicated that 2 CFR 200 applies to the American Rescue Plan (ARP), certain subsections may provide some insight regarding audit requirements and scope of audits.

2 CFR § 200.501 discusses audit requirements: 

2 CFR § 200.514 discusses the scope of audits:

  • (a) General. The audit must be conducted in accordance with Generally Accepted Government Auditing Standards (GAGAS). The audit must cover the entire operations of the auditee, or, at the option of the auditee, such audit must include a series of audits that cover departments, agencies, and other organizational units that expended or otherwise administered Federal awards during such audit period, provided that each such audit must encompass the financial statements and schedule of expenditures of Federal awards for each such department, agency, and other organizational unit, which must be considered to be a non-Federal entity. The financial statements and schedule of expenditures of Federal awards must be for the same audit period.[3]

2 CFR § 200.1 defines the “budget period” as “the time interval from the start date of a funded portion of an award to the end date of that funded portion during which recipients are authorized to expend the funds awarded, including any funds carried forward or other revisions pursuant to § 200.308.”[4]

 2 CFR § 200.514 indicates that the audit will cover “the entire operation,”[5] providing some insight into the audit’s temporal scope.  Presumably, the definition of “budget period”[6] is relative to the “operations”[7] an “auditee”[8] would be conducting during grant programming. These provisions, among others, should be considered in preparing for any audit to determine the scope, or potential scope, of any audit.

The Interim Final Rule indicates a major risk for funding recipients, noting, “[u]nder the ARPA, failure to comply with the restrictions on use contained in sections 602(c) and 603(c) of the Act may result in recoupment of funds.”[9]

Last Revised: June 8, 2021