As the Broadband Equity, Access, and Deployment (BEAD) program rolls out, telecom professionals must prepare for the compliance and audit requirements tied to federal funding. For subrecipients expending over $1 million in grant funds within a single year, the stakes are high. These entities will be required to undergo a Single Audit, program-specific audit, or Generally Accepted Government Auditing Standards (GAGAS) financial audit. Here’s what you need to know to help maintain compliance and avoid common pitfalls.
Understanding Audit Requirements
A Single Audit is an in-depth review of a non-federal entity’s federal expenditures, typically required for states, local governments, nonprofits, and tribal organizations. While cooperatives are typically exempt under federal guidelines, some states have categorized cooperatives as nonprofit organizations. This would require cooperatives to have a Single Audit, so it’s important to clarify those definitions with the state. For-profit entities receiving BEAD funding are also not exempt from this requirement. The U.S. Department of Commerce’s standard terms and conditions extend these requirements to commercial subrecipients, meaning telecom companies must prepare for compliance audits if they exceed the $1 million threshold.
Key audit types include:
- Single Audit: The most rigorous, involving financial statement audits, compliance testing, and internal control testing.
- Program-Specific Audit: Focused on a single federal program, with similar compliance and control testing as a Single Audit.
- GAGAS Financial Audit: A less intensive option, focusing on financial reporting and compliance without the full scope of compliance and control testing.
Internal Controls & Documentation: The Cornerstones of Compliance
Compliance audits don’t just evaluate financial records; they also scrutinize internal controls. Auditors will test whether policies are in place, controls are executed consistently, and documentation supports the control. For example, telecom companies must demonstrate proper approvals, reviews, and documentation for expenditures, procurement processes, and reporting.
Common areas of focus include:
- Allowable Costs: Ensuring expenditures align with grant purposes, e.g., fiber and engineering expenses, and excluding ineligible costs like general office supplies.
- Cash Management: Verifying that advanced funds are used promptly and reimbursement requests are submitted after expenditures are incurred.
- Equipment Management: Maintaining detailed property records, conducting physical inventories, and safeguarding federally funded assets.
- Matching: Ensuring all match requirements are met, and matching expenditures are allowable under the grant.
- Reporting: Reviewing submitted reports for timely submission and accuracy.
Procurement, Suspension, & Debarment: Avoiding Common Pitfalls
Procurement is a frequent source of audit findings. BEAD subrecipients must follow federal procurement guidelines, which vary by expenditure amount:
- Micro Purchases (< $10,000): No competitive quotes required.
- Small Purchases ($10,000–$350,000): Require quotes from multiple vendors.
- Formal Procurement (> $350,000): Involves sealed bids or competitive proposals.
Suspension and debarment checks are another critical requirement. Subrecipients must verify that contractors are not excluded from federal programs by searching the System for Award Management (SAM) database. This simple step, often overlooked, should be completed prior to contracting with vendors.
Strategies for Readiness
To help with compliance, telecom companies should:
- Develop Written Policies: Establish clear procurement, suspension, and debarment policies, as well as conflict-of-interest guidelines.
- Document Everything: Maintain thorough records of procurement processes, approvals, and compliance checks. If it’s not documented, it didn’t happen.
- Communicate With Grantors: Seek clarification on grant requirements and obtain written confirmation for any exemptions or waivers.
- Train Staff: Educate teams on compliance requirements and internal controls to help with consistent execution.
How Forvis Mazars Can Help
BEAD funding presents a transformative opportunity for telecom companies to expand broadband access. However, with federal dollars come federal responsibilities. By understanding audit requirements, strengthening internal controls, and adhering to procurement guidelines, telecom organizations can navigate the compliance landscape with confidence. Remember, preparation and documentation are your best defenses against audit findings. Interested in learning more? Connect with our Telecommunications team at Forvis Mazars today.
Watch the on-demand webinar, “Navigating Broadband Funding & Federal Compliance for Telecom Providers,” for a more in-depth discussion on these topics.