2023 Compliance Supplement Updates Auditors on BABA Provisions, FAC

The Office of Management and Budget (OMB) recently issued the 2023 Compliance Supplement (2 C.F.R. Part 200, Appendix XI). Among the key updates within the 2,061-page supplement includes a discussion on the Build America, Buy America (BABA) provisions within the Infrastructure Investment and Jobs Act (Pub. L. 117-58), and the fall 2023 transition of the Federal Audit Clearinghouse (FAC) from the Department of Commerce Census Bureau to the General Services Administration (GSA) (see ¶650 in the Single Audit Information Service Module).

Each year, OMB issues the Compliance Supplement for auditors to follow in determining the compliance requirements that could have a direct and material effect on the programs included in a single audit. The supplement identifies compliance information to help auditors understand each program’s objectives, procedures and requirements, and provides audit objectives and suggested audit procedures for determining a federal recipient’s single audit compliance. The 2023 supplement replaces the 2022 version, and applies to audits of fiscal years beginning after June 30, 2022.

Appendix VII Topics

Most topics within Appendix VII, Other Audit Advisories, in the 2023 supplement did not change compared to the 2022 version. This includes the audit information on numerous issues related to COVID-19 programs, which includes funding provided through the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) (Pub. L. 116-136); the Coronavirus Response and Relief Supplemental Appropriations Act (CRRSAA) (Pub. L. 116-260); the American Rescue Plan Act (ARP) (Pub. L. 117-2); and other emergency relief packages.

One update, however, involves the FAC’s transition from the Census Bureau to GSA as part of an overall effort to add improved functionality through consistent data formats. In the 2022 supplement, OMB noted that the transition was originally slated to occur in phases as of Oct. 1, 2022. However, the GSA FAC launch was postponed by a year, so now the functionality will switch to GSA’s system this Oct. 1. At that time, all submissions with 2023 federal fiscal year end (FYE) dates will need to be submitted to the GSA FAC (FAC.gov).

Any audit report not fully submitted to the Census FAC before Sept. 30, 2023, may need to be completely re-started at the new GSA FAC. For any 2023 submissions with fiscal periods ending between Jan. 1, 2022, and Sept. 30, 2022, OMB is waiving the uniform guidance requirement at §200.512(a)(1) stating that single audits are due to the FAC 30 days after receipt of the auditors’ report. These audits will be considered on time if they are submitted within nine months after their fiscal period end date.

For example, a March 31, 2022, FYE single audit that was issued on June 30, 2022, would technically have been due to the FAC on July 30, 2022 (i.e., 30 calendar days after the auditee’s receipt of the auditor’s reports). Because the SF-SAC Data Collection Form was not available until Oct. 6, 2022, if the single audit was submitted to the FAC by Oct. 31, 2022, it would be considered timely and have no impact on the low-risk auditee status of the auditee.

OMB in Appendix VII also noted that in September and October 2022, President Biden issued emergency declarations for Hurricane Fiona; the Alaska storm, flooding and landslides; and Hurricane Ian. To assist affected recipients during these emergencies, OMB granted a six-month extension for all single audits that cover recipients in the affected areas and had due dates between Sept. 18, 2022, and Dec. 31, 2022. Recipients in the less-affected areas were encouraged to submit their reports as soon as possible.

Updates in Part 3

Within the “Procurement and Debarment and Suspension” section of Part 3, Compliance Requirements, in the 2023 Compliance Supplement, OMB added information pertaining to the BABA provisions. As of May 14, 2022, nonfederal entities must ensure that all applicable programs comply with BABA, including through incorporation of a Buy America preference in the terms and conditions of each award with an infrastructure project. Awarding agencies must ensure that none of the funds made available for a federal financial assistance program for infrastructure may be obligated for a project unless all of the iron, steel, manufactured products and construction materials used in the project are produced in the U.S. The act requires the following Buy America preferences: (1) all iron and steel used in the project must be produced in the U.S.; (2) all manufactured products used in the project must be produced in the U.S.; and (3) all construction materials must be manufactured in the U.S.

This section notes that nonfederal entities must comply with the BABA requirements to the extent that they have been informed of these requirements, such as through the award terms and conditions. In addition, several federal agencies, in consultation with OMB, issued waivers for the law. A listing of waivers by agency is available at https://www.madeinamerica.gov/waivers/financial-assistance.

OMB provided a new suggested audit procedure for auditors, urging them to “select a sample of procurement agreements for infrastructure projects subject to BABA and test whether the nonfederal entity included the Buy America domestic preference provisions in each agreement, or obtained a BABA waiver.”

In addition, OMB deleted a sentence that was included in the 2022 supplement under the “Cash Management” section. The paragraph maintained in the 2023 supplement states that the reimbursement payment method is the preferred payment method if: (a) the nonfederal entity cannot meet the requirements in §200.305(b)(1) for advance payment; (b) the federal awarding agency sets a specific condition for use of the reimbursement method; or (c) requested to be used by the nonfederal entity (§§200.305(b)(3), 200.208)).

The reimbursement payment method also may be used on a federal award for construction or for “other construction activity” as specified in §200.305(b)(3). OMB deleted a sentence that was included in last year’s supplement that states that program costs must be paid by nonfederal entity funds before a payment request can be submitted (§200.305(b)(3)) (i.e., the nonfederal entity must disburse its own funds for program purposes before requesting payment from the federal awarding agency or pass-through entity).

Other Updates

In Part 5, Clusters of Programs, OMB “decoupled” the Highway Planning and Construction Cluster so that the Department of Transportation’s (DOT) Highway Planning and Construction Federal-Aid Highway Program (Assistance Listing No. 20.205); Recreational Trails Program (20.219); Federal Lands Access Program (20.224); and Appalachian Development Highway System Program (23.003) each now has its own separate compliance requirements.

According to the Part 2, Matrix of Compliance Requirements, nine programs experienced compliance requirement changes, as did the Employment Services and the Workforce Innovation and Opportunity Act (WIOA) clusters. There were 11 new programs added to this year’s supplement, as follows:

• Department of the Interior (DOI) — Abandoned Mine Land Reclamation (15.252);
• DOT — Railroad Crossing Elimination (20.327); Passenger Ferry Program, Electric or Low-Emitting Ferry Pilot Program, and Ferry Service for Rural Communities Program (20.532); All Stations Accessibility Program (20.533); Community Project Funding Congressionally Directed Spending (20.534); and Natural Gas Distribution Infrastructure Safety and Modernization Program (20.708); and
• Department of the Treasury — Community Development Financial Institutions Capital Magnet Fund (21.011); Native Initiatives Program (21.012); Community Development Financial Institutions Rapid Response Program (21.024); Community Development Financial Institutions Small Dollar Loan Program (21.025); and Local Assistance and Tribal Consistency (21.032).

In the list of “higher-risk programs” in Appendix IV, OMB newly added Treasury’s Homeowner Assistance Fund (21.026) and Coronavirus Capital Projects Fund (21.029), as well as DOI’s Abandoned Mine Land Reclamation program (15.252) and the Social Security Administration’s Disability Insurance/Social Security Income Cluster (96.001/96.006).

Other “higher-risk programs” are Treasury’s Emergency Rental Assistance Program (21.023) and the State and Local Fiscal Relief Fund (21.027); Department of Education’s Education Stabilization Fund (84.425); and the Department of Health and Human Services’ Provider Relief Fund and American Rescue Plan (ARP) Rural Distribution (93.498) and Medicaid clusters (93.775/93.777/93.778). Appendix IV further provides auditors with information about testing Type A and Type B major programs with a “higher-risk” status.

OMB is accepting stakeholder comments on the 2023 supplement, which must be submitted to Regulations.gov by July 21, and such comments will be addressed, if appropriate, in the 2024 Compliance Supplement. Submissions should include “2 CFR part 200 Subpart F — Audit Requirements, Appendix XI — Compliance Supplement — 2023” in the subject line.

For More Information

The 2023 Compliance Supplement is available at https://www.thompsongrants.com/sites/grants/files/advisory_files/2023-Compliance-Supplement-%E2%80%93-2-CFR-Part-200-Appendix-XI.pdf.