As OMB Issues 2020 Compliance Supplement, Structure Questions Arise for 2021 Version
As if the issuance of the revised uniform guidance wasn’t important enough, the Office of Management and Budget continued to make this an August to remember today by making available the 2020 Compliance Supplement (2 C.F.R. Part 200, Appendix XI)! The 2020 supplement replaces the 2019 version and applies to audits of fiscal years beginning after June 30, 2019.
We address most of the changes to this year’s uniform guidance within an article we posted to our Grants Compliance Expert Top News section. One of the key topics addressed in this year’s supplement in Appendix VII pertains to COVID-19 funding. While Congress made available trillions of dollars in emergency funding in response to COVID-19 through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. 116-136) and other supplemental packages, OMB could not completely address the auditing of this funding due to the limited time between the issuance of the legislation and release of the supplement. OMB now is working with federal agencies on developing additional audit guidance for release as an addendum to the supplement later this fall. On good thing to note for auditors — this addendum will not add any new clusters of programs to those listed in Part 5 of the 2020 supplement, nor will it revise the composition of any existing clusters listed in Part 5.
This year’s supplement maintains a change in the 2019 supplement that reduced the number of required compliance requirements that auditors must test under Part 3 from a maximum of 12, as in past years, to a maximum of six for the programs in the Part 2 matrix, with the exception of the Research and Development cluster, which was permitted to identify seven compliance requirements as subject to audit. However, auditors should be aware that the testing requirements for certain programs in this year’s version may have changed from last year’s version based on the Part 2 matrix. In addition, there are numerous other testing changes for programs and clusters listed in parts 3 and 4.
However, one of the noticeable changes we wanted to mention was that Part 3 of the Compliance Supplement, in this year’s version is much shorter. In recent years, Part 3 has contained two separate portions. Part 3.1 covered auditor testing for major program awards received prior to Dec. 25, 2014, while auditors testing for major program awards received after that date was covered in Part 3.2 of the supplement. Since the vast majority of awards for testing are for awards received after Dec. 26, 2014, OMB has deleted Part 3.1 from the 2020 supplement. In the rare case that an auditor is still reviewing activities for awards made prior to Dec. 25, 2014, the auditor should refer to the 2019 Compliance Supplement.
Going back to our discussion in the first sentence about the revised uniform guidance, the provisions in the revised guidance will take effect on Nov. 12, 2020. Therefore, awards received prior to Nov. 12 will continue to follow the existing uniform guidance, while those awards received beginning on Nov. 12 will follow the revised guidance. This brings up an interesting discussion for the 2021 Compliance Supplement, which will apply to audits of fiscal years after June 30, 2020. Auditors next year may be testing on awards received under the current uniform guidance, as well as testing on awards received under the revised guidance. Could this mean that OMB may have to separate Part 3 into two parts yet again — Part 3.1 for traditional uniform guidance awards and Part 3.2 for awards under the revised guidance? It will be interesting to see what kind of approach OMB takes next year. Until then, we have our work cut out for us in poring through the new OMB documents and keeping you up-to-date on how to stay compliant!
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