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2021 Compliance Supplement Release

August 18, 2021
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Not-for-profit entities are subject to a federal single audit if they expend $750,000 of federal financial assistance or more in their fiscal year. Federal funding newly created as a result of the COVID-19 pandemic, such as the Coronavirus Aid, Relief and Economic Security (CARES) Act, have pushed many organizations over this threshold. As a result, not-for-profit organizations receiving support in the form of grants or other assistance may now find themselves with new reporting requirements.

The Compliance Supplement is an extensive federal government guide created by the Office of Management and Budget (OMB) and is used by auditors and auditees (grant recipients) alike in the preliminary preparation and auditing of federal assistance and grant programs. The Compliance Supplement is needed by the recipients of federal awards so they may understand and comply with the program requirements.

The 2021 OMB Compliance Supplement was released on August 12, 2021 and is effective for audits of fiscal years beginning after June 30, 2020. In addition, the OMB advised that they will most likely be issuing two addendums to the 2021 Supplement by the fall of 2021.

The full version of the 2021 OMB compliance supplement can be found here

How to Use the Supplement

The OMB Compliance Supplement is divided into eight sections:

  • Part I: Background, Purpose, and Applicability – This section outlines the general applicability and usage of the Compliance Supplement and related guidance.
  • Part II: Matrix of Compliance Requirements – This section specifies the compliance requirement applicable to each program. While most programs have not modified their requirements subject to audit this year, we strongly recommend that each auditee review these requirements annually and put controls in place to ensure compliance with each program. These compliance requirements should be evaluated in conjunction with part IV and V of the supplement.
  • Part III: Compliance Requirements – This section provides guidance and description for the types of compliance guidelines established by federal agencies, in addition to providing certain audit objectives and suggested audit procedures. Updates have been made throughout Part III to reflect the August 2020 revisions to Uniform Guidance, procurement thresholds, and other reporting considerations.
  • Part IV: Agency Program Requirements – This section discusses how each compliance requirement applies to a specific program. For the 2020 audit year, there were several program additions and deletions, as well as many programs with significant changes. Additional guidance for programs such as the Education Stabilization Fund, Coronavirus Relief Fund, and Provider Relief Fund has been included. A close study of these provisions will help organizations maintain a high level of compliance.
  • Part V: Clusters of Programs – This section discusses clusters of programs (i.e., grouping of closely related programs with similar compliance requirements) for Research and Development (R&D), Student Financial Aid (SFA), and other clusters.
  • Part VI: Internal Control – This section discusses the objectives, principles, and components of internal control based on the “Standards for Internal Control in the Federal Government,” and the “Internal Control Integrated Framework.” This section can be a very helpful tool for organizations to prepare for an upcoming audit, and to review and consider whether they have established effective controls. As auditors will be testing internal controls that relate to major program compliance, a proactive review of this section can help organizations avoid potential non-compliance issues. Illustrative examples and guidance are also provided.
  • Part VII: Guidance for Auditing Programs Not Included in This Compliance Supplement – This section provides overall guidance based on governmental procurement and cost principles for those programs not specifically covered in a compliance supplement.
  • Part VIII: Appendices – This section includes various other information and considerations such as single audit extensions provided, a summary listing changes to the prior year compliance supplement, COVID-19 awards, and program-specific audits guidance.

How We Can Help

As further OMB updates are released, including the anticipated fall addendums to the 2021 Compliance Supplement, Citrin Cooperman’s Not-for-Profit Practice professionals will continue to monitor and communicate those changes to you in a timely manner. If you have any questions about how the 2021 Compliance Supplement will impact your organization, please contact us.