Accounting and Auditing Updates
The year 2020 has been quite the rollercoaster thus far, but the Financial Accounting Standards Board (FASB) has granted organizations a reprieve from several significant standards.
The FASB, in issuing Accounting Standards Update (ASU) 2020-05 Revenue from Contracts with Customers (Topic 606) and Leases (Topic 842), has allowed organizations who have not yet adopted Accounting Standards Codification (ASC) Topic 606 and ASC Topic 842 as of June 3, 2020, to delay the adoption for one more year. This delays the required adoption of Topic 606 until fiscal 2021. This also delays the required adoption of Topic 842 until fiscal 2021 for “public non-profits,” defined as colleges and universities that have issued or are conduit bond obligors for securities that are traded, listed, or quoted on an exchange or over-the-counter market. Non-public colleges and universities may delay the adoption of Topic 842 until fiscal 2023.
2020 OMB Compliance Supplement
The 2020 Compliance Supplement was issued and applicable for fiscal years ending June 30, 2020, and later. The Compliance Supplement was issued without guidance regarding Coronavirus Aid, Relief, and Economic Security Act (CARES Act) funding compliance testing. We expect an Addendum to be issued, providing additional guidance regarding required testing of CARES Act funding, including Higher Education Emergency Relief Funds (HEERF). Many single audits are being held open, even for a fiscal year-end prior to June 30, 2020, due to uncertainty regarding the Addendum to the Compliance Supplement that is expected to be issued. The guidance issued in the Addendum could be retroactive and apply to fiscal years ending before June 30, 2020.
Retirement Plan Update
A new auditing standard, SAS 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA, as amended, was to be applicable for employee benefit plan audits for the calendar 2020 year-end. Due to the pandemic, this standard has been delayed by one year. The new standard places additional responsibility on management to acknowledge, in writing, its responsibility for:
- Maintaining a current plan instrument, including amendments.
- Administering the plan and determining that plan’s transactions are in conformity with plan provisions.
- Maintaining sufficient records for each participant to determine benefits when due.
Additionally, while the concept of a ‘limited scope audit’ (now referred to as “ERISA section 103(a)(3)(C) audit”) remains, there is an additional responsibility on management to determine that an ERISA section 103(a)(3)(C) audit is permissible, that the entity preparing/certifying investment information is a qualified institution, that the certification meets applicable regulatory requirements, and that the certified investment information is appropriately measured, presented, and disclosed in accordance with the applicable financial reporting framework.
Examples of actions the sponsoring college or university can take to prepare for this standard are ensuring that there is a signed, executed plan document, together with all applicable amendments, and reviewing internal control structure, at the plan level, to ensure that plan transactions are being executed in accordance with plan provisions.
If you have questions or need additional assistance, please feel free to reach out to us.
The information and advice we are providing for this matter relates to COVID-19 legislative relief measures. Because legislative efforts are still ongoing, we expect that there may be additional guidance and clarification from regulators that could modify some of the advice and information provided to you, after the conclusion of our engagement. We, therefore, make no warranties, expressed or implied, on the services provided hereunder.
