OMB Issues Second Addendum to 2021 Compliance Supplement

The Office of Management and Budget (OMB) has now completed providing audit guidance for 2021 after issuing a second addendum to the 2021 Compliance Supplement on Jan. 19 that includes testing information related to seven programs.

The 2021 Compliance Supplement was released Aug. 13, 2021, but it was published before federal agencies could develop audit testing guidance for certain programs created under the American Rescue Plan Act (ARPA) (Pub. L. 117-2) (see “2021 Compliance Supplement Issued; Addenda on ARPA Programs To Come,” September 2021). OMB used a similar approach last year when it issued an addendum to the 2020 supplement to address audit requirements for COVID-19 programs that it could not timely include in that supplement.

On Dec. 3, 2021, OMB published the first of two addenda related to these ARPA programs, particularly addressing the Education Stabilization Fund and the Coronavirus State and Local Fiscal Recovery Fund (see ¶1171 of the Single Audit Information Service Module). OMB now has released a second addendum and, like programs in the initial supplement and the first addendum, it applies to federal fiscal year (FY) audits beginning after June 30, 2020.

The second addendum adds audit guidance for seven programs to Part 4 of the 2021 Compliance Supplement. This guidance is applicable only for audits with report dates subsequent to issuance of the guidance. The programs are:

• Department of Agriculture (USDA) ― Pandemic Electronic Benefits Transfer (P-EBT) ̶ Food Benefits (Assistance Listing No. 10.542) and P-EBT ̶ Administrative Costs (10.649);
• Department of Health and Human Service (HHS) ― Child Care and Development Block Grant (CCDBG) (93.575), Low-Income Household Water Assistance Program (LIHWAP) (93.499) and Temporary Assistance for Needy Families (TANF) (93.558);
• Department of Housing and Urban Development (HUD) ― Section 8 Housing Choice Vouchers (14.871); and
• Department of Transportation (DOT) ― National Railroad Passenger Corporation Grants (20.315).

Key Programmatic Guidance

The two USDA programs, newly developed under ARPA, provide nutritional assistance for schools impacted by the COVID-19 pandemic. Key objectives for auditors under the P-EBT food benefits program are to confirm that state agencies set benefit levels consistent with the process outlined in their USDA-approved P-EBT plans, and that states identify the population of children eligible for free or reduced-price school meals by application or direct certification.

For the P-EBT administrative costs program, auditors should be aware that funds provided under this program were available for all necessary, allowable and reasonable costs of implementing and administering P-EBT incurred during FY 2021, including costs associated with the issuance of FY 2021 benefits as well as costs associated with the issuance of retroactive FY 2020 benefits incurred in FY 2021. States could incur costs related to competitive acquisitions of system changes and/or equipment and services to implement P-EBT, but these costs must have been allocable to the administration of P-EBT.

HHS’s LIHWAP program also is a new ARPA program designed to target assistance to low-income households that pay a high proportion of household income for water and wastewater services. LIHWAP grantees must provide the bill payment benefits directly to the owners or operators of public water systems or treatment works on behalf of specific, approved households with accounts with such providers in order for the cost to be allowable. Funds must not be used towards infrastructure purchases or repairs or improvements (e.g., repair or replacement of toilets, pipes and other related equipment), and funds must not be used towards in-kind benefits to the household. The addendum also addresses compliance requirements for the program related to cost principles, eligibility, earmarking, period of performance, reporting and subrecipient monitoring.

DOT’s National Railroad Passenger Corporation Grants provide Amtrak with federal funds for a range of operating and capital activities. Grants made to Amtrak often include certain requirements, including but not limited to: (1) spend at least $75 million from its FY 2021 Northeast Corridor and National Network grants to bring Amtrak-served facilities and stations into compliance with the American Disabilities Act, and (2) use no less than $109.805 million for states’ Passenger Rail Investment and Improvement Act of 2008 (Pub. L. 110-432) Section 212 capital payments. Under special tests and provisions, Amtrak’s grant agreements have some qualitatively material special provisions, including but not limited to: (1) use and reporting of overtime for agreement employees; (2) preventing and reporting on employee furloughs; and (3) Buy American Act domestic buying preference.

COVID-19 Funding under Existing Programs

Although audit testing details were provided in the initial 2021 Compliance Supplement for the CCDBG, TANF and Section 8 Housing Choice Vouchers programs, the addendum provides new information for pandemic-related funding under these programs. The Section 8 program in the addendum now addresses audit guidance for the ARPA-funded Emergency Housing Voucher (EMV) program designed to enable public housing authority (PHA) recipients to prevent, prepare for and respond to the COVID-19 pandemic to facilitate issuing vouchers for the leasing of the emergency housing, such as security deposit assistance and other costs related to the retention and support of participating owners.

The addendum suggests numerous audit testing procedures for the EMV program including determining whether the PHA maintained separate financial records from its regular Housing Choice Voucher funding for all EHV funding; sampling tenants enrolled in the EHV program during the audit fiscal period to determine whether they are eligible to receive assistance; and assessing whether funds were inappropriately used for the repayment of debts or any amounts owed to HUD.

For the CCDBG program, the addendum particularly addresses ARPA CCDBG stabilization funds to states, territories and tribes making awards to child care providers to support the stability of the child care sector during and after the COVID-19 public health emergency. It particularly identifies activities allowed under the program and eligibility requirements.

In its application for stabilization funds, a child care provider must certify that it will: (1) implement policies in line with guidance and orders from corresponding state, territorial, tribal and local authorities and, to the greatest extent possible, implement policies in line with guidance from the Centers for Disease Control and Prevention; (2) pay each employee at least the same amount in weekly wages and maintain the same benefits for the duration of the stabilization funding; and (3) provide relief from copayments and tuition payments for the families enrolled in the provider’s program, to the extent possible, and prioritize such relief for families struggling to make either type of payment.

Auditors testing this program are encouraged to review documentation for child care providers receiving ARP Act stabilization funds to verify that they meet eligibility criteria and submitted the required certifications as part of their applications for funding.

Under guidance for the TANF program, the addendum addresses ARPA’s Pandemic Emergency Relief Fund (PEAF), which provides funding to states, tribes and U.S. territories to assist needy families impacted by the pandemic. Under eligibility, the addendum notes that recipients of PEAF-funded nonrecurring short-term benefits must be financially needy families with children, but they do not necessarily have to be eligible for TANF cash assistance.

A grantee has the flexibility to determine what “needy” means and may wish to set a higher standard than it does for TANF cash assistance, such as aligning with SNAP or Medicaid income eligibility criteria. In addition, state and territory grantees may use up to 15% of their PEAF funds for administrative costs, while for tribes, the same cap will apply to administrative costs for PEAF that a tribe negotiated for administrative costs in its approved tribal TANF plan.

Stakeholders may submit written comments to Regulations.gov on the second addendum by Feb. 18, and OMB will consider these comments when developing the 2022 Compliance Supplement.

For More Information

The Federal Register notice about the addendum is available at https://tinyurl.com/yyhktcef.