OMB Releases Addendums to the 2021 Compliance Supplement

In our previous article we indicated that upon the release of the 2021 version of the Compliance Supplement, the Office of Management and Budget (OMB) intended to release two additional addendums to provide additional guidance on certain federal programs. The first of those addendums was issued on December 3, 2021, and the second was finally released on January 19, 2022. As a reminder the 2021 supplement supersedes the previous compliance supplements and is effective for audits of fiscal years beginning after June 30, 2020. A summary of these two addendums follows:

2021 Supplement Addendum #1

Addendum #1 covered only two federal programs, but two very big and influential programs of the federal government. The first was the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF). The CSLFRF program (AL 21.027) is a new federal program included in the American Rescue Plan (ARP) which delivered $350 billion to state, local, and Tribal governments across the country to support their response to and recovery from the COVID-19. Funds generally are used for investment in water, sewer, and broadband infrastructure; pay for essential workers; and other support of the pandemic. The addendum provides the necessary program details and compliance requirements subject to audit. The second was the Education Stabilization Fund (ESF). The updates in the addendum for the ESF fund centered around specific updates related to Elementary and Secondary Education (AL 84.425U and AL 84.425X). Important to note, these updates do not address Higher Education, which was included in the original release of the 2021 supplement.

Addendum #1 is effective for auditor report dates after December 3, 2021. Auditors are not expected to retroactively apply this guidance to audits that were previously issued.

2021 Supplement Addendum #2

Unlike the first addendum which focused on only two programs, Addendum #2 is further reaching and provides updates on 7 key federal programs. Some of these programs have narrow applicability due to their recipients, but others are more broadly accessed by numerous nonprofit organizations and governmental entities. A summary of the impacted programs follows:

Changes mainly to existing programs to address ARP funding provisions:

•  Section 8 Housing Choice Vouchers (AL 14.871). Assists low-income, elderly, and disabled families in finding affordable housing.
• Temporary Assistance for Needy Families (TANF) (AL 93.558). Supports families with children to provide for certain basic needs.
• Child Care and Development Block Grant (AL 93.575). Increases the availability, affordability, and quality of childcare services. Of importance to auditors, the addendum requires the reporting compliance requirement to be tested, which is in excess of the 6-requirement mandate.

New Programs:

•  Low Income Household Water Assistance Program (AL 93.499). Aids low-income households that pay a high proportion of income for water and wastewater services.
• Pandemic Electronic Benefits Transfer (EBT) Food Benefits (AL 10.542). Funds provided to state governments to support school age children with nutrition assistance.
• Pandemic EBT Administrative Costs Grants (AL 10.649). Funds provided to state government to defray administrative costs of executing the pandemic EBT initiative.
• National Railroad Passenger Corporation Grants (AL 20.315). Amtrak specific program.

Addendum #2 is effective for auditor report dates after January 19, 2022. Auditors are not expected to retroactively apply this guidance to audits that were previously issued.

Lastly it is very important to note that both supplements are not posted to the OMB website as of the date of this article. A link to both 2021 supplement addendums can be found here: https://www.cfo.gov/2021-addendum-1and2/

If you have any questions regarding the 2021 Compliance Supplement and its two addendums, and how they may impact your organization, please contact Jim Shellenberger, Partner with McKonly & Asbury.

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