OMB Sets Schedule To Publish Next Compliance Supplement in April 2022

Auditors seeking federal program audit guidance earlier in the year may finally get such assistance next year as the Office of Management and Budget (OMB), in a recent controller alert, gave federal agencies a strict timeline for submitting audit guidance on financial assistance programs to enable OMB to publish the 2022 Compliance Supplement by April 2022. The audit community and the Government Accountability Office (GAO) have emphasized for years the importance of having the supplement released earlier in the year to enable them to timely conduct their audits, but OMB traditionally has not made it available until mid- to late summer.

The alert includes a schedule for agencies to submit their drafts for Part 4 of the supplement, and adds that if agencies are unable to meet this schedule, the Part 4 draft would not be included in the 2022 supplement and will be considered for the 2023 supplement instead. In these cases, auditors would use Part 7 of the supplement for auditing programs not covered by Part 4. OMB notes that there is a possibility that late programs can be considered in a potential addendum to the 2022 supplement if OMB decides to issue one to accommodate new programs created by the Infrastructure Investment and Jobs Act (Pub. L. 117-58).

To ensure that Part 4 directs auditors to the most important information, OMB is telling agencies to limit changes in the 2022 supplement to four areas: (1) updates or additions required due to changes in statutory or regulatory requirements; (2) updates or additions necessary to highlight coverage of an area found to be critically vulnerable to waste, fraud, abuse or increased likelihood of improper payments; (3) updates or additions necessary to highlight the review of performance reporting and results; and (4) removal of references to programs no longer required for audit or no longer warranting inclusion in Part IV, requirements not supported by statute or regulation and reporting requirements not supported by a valid Paperwork Reduction Act clearance number.

According to the timeline, all federal agencies by Nov. 16 had submitted their Part 4 drafts to OMB, and OMB has been working with them on any needed revisions. OMB is scheduled to submit a preliminary draft of the 2022 supplement by Dec. 17 to federal agencies and key stakeholder auditing organizations, and receive comments on the draft by Jan. 18, 2022. By Feb. 18, 2022, federal agencies must submit updated guidance for the supplement based on the comments, and OMB will resolve any outstanding issues by Feb. 25, 2022, and finish its own review by March 14, 2022. Ultimately, the 2022 supplement is scheduled to be published on April 30, 2022.

GAO, in a report to Congress earlier this year, explained that auditors who conduct single audits for entities whose fiscal year ends on June 30 have emphasized the need to receive the Compliance Supplement by no later than April each year to effectively plan their audits and conduct interim testing. GAO recommended that OMB work with federal agencies and the audit community to update OMB’s process for preparing single audit guidance so that it can “be issued in a timely manner and is responsive to users’ input and needs.”

First Addendum Released

Auditors waiting to conduct testing for client recipients under two key American Rescue Plan Act (ARPA) (Pub. L. 117-2) programs can now proceed, as OMB also has issued an addendum to the 2021 Compliance Supplement providing auditing guidance for the Education Stabilization Fund (ESF) and the Coronavirus State and Local Fiscal Recovery Fund (SLFRF).

The addendum, published in the Dec. 3 Federal Register, complements the 2021 supplement issued in August (see ¶1171 of the Single Audit Information Module and Service) and applies to federal fiscal year (FY) audits beginning after June 30, 2020. Stakeholders may submit written comments to Regulations.gov on the addendum by Jan. 3, 2022, and OMB will consider these comments when developing the 2022 Compliance Supplement.

The addendum ― the first of two that OMB plans to issue ― was needed because federal agencies did not have time to provide guidance on the ARPA programs by the time OMB released the August supplement (see “2021 Compliance Supplement Issued; Addenda on ARP 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. This addendum includes the Department of Education’s ESF program (Assistance Listings No. 84.425) and the Treasury Department’s SLFRF program (Assistance Listings No. 21.027).

Program Specifics

The ESF program is considered a higher risk program for 2021, according to uniform guidance provisions at §200.519(c)(2). The guidance in the addenda addresses the various subprograms under 84.425, as listed by their alpha-numeric number (e.g., American Rescue Plan ― Elementary and Secondary School Emergency Relief (84.425U); American Rescue Plan ― State Educational Agency (Outlying Areas) (84.425X)), and explains how auditors and auditees should identify them on the Data Collection Form and Schedule of Expenditures for Federal Awards (SEFA). Each subprogram has its own funding requirements and compliance requirements.

The ESF program was included in the 2021 Compliance Supplement, in two sections ― Section 1 addressed the objectives and compliance requirements of the subprograms that generally focused on elementary and secondary education, while Section 2 identified the objectives and compliance requirements of the subprograms focused on higher education. However, Section 1 did not include ARPA implications relevant to 84.425U and 84.425X, which is provided in the addendum. Section 2 updates related to ARPA were made within the 2021 supplement.

No guidance for the SLFRF was included in the 2021 supplement. Auditors assessing the use of SLFRF funds must audit recipients on award funds they expended for FY 2021 based on the requirements set forth in ARPA, Treasury’s SLFRF interim final rule and its Frequently Asked Questions for the program that were in effect at the time of those expenditures. Auditors must conduct testing under the following compliance requirements: activities allowed or unallowed; allowable costs/cost principles; period of performance; procurement suspension and debarment; reporting; and subrecipient monitoring.

Auditors should be aware that the aggregate expenditures under the SLFRF’s categories of eligible uses are to be reported on the SEFA, not the result of the revenue loss calculation. Additionally, because non-entitlement units (NEUs) of local government are considered direct recipients under the fund, they are required to report their award expenditures on the SEFA and Data Collection Form as direct awards. Further, states must not report award funds that were required to be distributed to the NEUs on state SEFAs or Data Collection Forms.

Second Addendum to Come

OMB also is working with federal awarding agencies to identify audit guidance for several other ARPA programs, which OMB will add in a second addendum to the 2021 supplement. These programs include the Department of Agriculture’s Pandemic EBT ― Food Benefits (10.542) and Pandemic EBT ― Administrative Costs (10.649) programs; the Department of Health and Human Services’ Child Care and Development Block Grant (93.575), Low Income Household Water Assistance (93.499) and Temporary Assistance for Needy Families (93.558) programs; the Department of Housing and Urban Development’s Section 8 Housing Choice Vouchers program (14.871); and the Department of Transportation’s National Railroad Passenger Corporation Grants program (20.315). OMB has not indicated when this second addendum will be published.

For More Information

The controller alert is available at https://tinyurl.com/3drc3phc.