On August 12, 2021, the Office of Management and Budget (OMB) published the 2021 Compliance Supplement in the Federal Register. Shortly thereafter, on August 25, 2021, the OMB posted a corrected 2021 Supplement, which is the Supplement that should be used.
Two addenda are expected to be released at a future time to primarily address new programs established by the American Rescue Plan Act (ARPA). This may result in delayed audit test work and single audit report issuance.
Below are some key takeaways from the Compliance Supplement for not-for-profit auditees.
Codified under Title 2 of the Code of Federal Regulations, Chapter 2, Part 200, Appendix XI, the 2021 Compliance Supplement is effective for audits of fiscal years beginning after June 30, 2020.
It supersedes the 2020 Compliance Supplement published in August 2020 and its addendum from December 2020.
Appendix VII of the Supplement contains other advisories, including information about two follow-up addenda that will be issued at a future date to provide additional audit guidance for some ARPA programs that aren’t included in the 2021 Compliance Supplement, as well as to revise existing program sections to address implications from ARPA.
For example, certain portions of the Education Stabilization Fund guidance in Part 4 of the 2021 Supplement weren’t updated for ARPA. The Department of Education plans to update these in an addendum, so auditors of this program with ARPA funding will have to wait for the release of the addendum or use the framework provided in Part 7 of the Supplement to perform the audit.
Single-Audit Extension Granted
A six-month extension for submitting single audit report packages to the Federal Audit Clearinghouse had been previously granted to organizations with fiscal year-ends through June 30, 2021. The 2021 Compliance Supplement refers to OMB Memorandum M-21-20 that provided that extension.
Seeking approval for the extension isn’t required; however, not-for-profit organizations should complete and submit their single audit reporting packages as early as possible. Organizations should also document their reasoning for delayed filings.
The OMB has revised risk designations for certain programs, which means there are more that are now considered higher risk. This could increase the number of major programs identified for audits.
For more information about which programs are now designated as higher risk, and the impact on major program determination, read Appendix IV of the Compliance Supplement.
As part of this revision process, certain COVID-19–related funds and programs administered by organizations have been designated by federal agencies as higher risk and may be more likely to be tested. These programs include the following:
- Education Stabilization Fund, including the Higher Education Emergency Relief Fund
- Coronavirus Relief Fund
- Provider Relief Fund
Extended Application of Federal Funding Accountability and Transparency Act (FFATA)
The Compliance Supplement includes special reporting for FFATA—with expanded application in comparison to the 2020 Compliance Supplement.
Changes to Student Financial Assistance
Details for all audit sampling approaches are still required to be submitted to the US Department of Education.
There are also several changes to compliance requirements impacting earmarking as well as the following special tests and provisions:
- Return of Title IV Funds
- Institutional eligibility
- Distance education
There are also two new requirements related to Perkins loan recordkeeping and record retention as well as clock-to-credit-hour conversion.
We're Here to Help
For more information about how the 2021 Compliance Supplement may affect your not-for-profit organization, contact your Moss Adams professional.