OMB Releases 2020 Compliance Supplement

In August 2020, the Office of Management and Budget (OMB) released the 2020 version of the Compliance Supplement. This supplement is critical to the performance of Single Audits for nonprofit organizations and governmental entities, and for the adherence to applicable federal agency compliance requirements. In 2020, the compliance supplement holds additional and significant importance due to the increase of federal funds distributed as a result of the COVID-19 pandemic, as well as the operational changes experienced by virtually all nonprofit organizations and governmental entities.

While auditors were hopeful that the 2020 Compliance Supplement would answer ALL questions related to COVID-19 funding and the changes to the compliance requirements for impacted federal programs, unfortunately that did not happen with this release. Appendix VII (Other Audit Advisories) has indicated a separate addendum to the 2020 Compliance Supplement will be released later this fall to address certain new COVID-19 programs, as well as existing programs with compliance requirements that will change.

The 2020 Compliance Supplement did include certain COVID-19 matters, including:

• The requirement to separately identify programs (either new or existing) that received COVID-19 related funding on the schedule of expenditures of federal awards and on the data collection form.
• A notice that some federal agencies may have modified compliance requirements as a result of COVID-19, even if additional funding was not provided. These changes may not be included in the supplement itself, and auditors have been advised to look at separate agency guidance, where appropriate. For example, some compliance requirements may have been communicated to recipients through agency websites and updated or modified multiple times.
• Any audit finding that is applicable to new or existing COVID-19 programs should include “COVID-19” in the finding identification.

Some of the other key items noted in the 2020 Compliance Supplement were:

• Section 3.1 of the supplement has been removed. This section was included in prior publications and was used during the transition to the Uniform Guidance for awards made prior to December 26, 2014.
• The OMB maintained the maximum number of applicable compliance requirements a federal agency can identify as 6, and compliance requirements that changed from 2019 are highlighted in yellow in Part 2 of the supplement. Similar to last year, this requirement does not apply to the Research and Development cluster, and for purposes of identifying the 6 requirements, Activities Allowed and Unallowed, and Allowable Costs are considered one requirement.
• Numerous changes to agency program requirement are noted in Part 4 of the supplement. This section, along with Appendix V should be reviewed for specific federal programs.
• No changes were made to Part 6 of the supplement, which addresses internal control over compliance requirements.

The 2020 Compliance Supplement is effective for audits of fiscal years beginning after June 30, 2019 and a full version can be located on the OMB’s website here: https://www.whitehouse.gov/wp-content/uploads/2020/08/2020-Compliance-Supplement_FINAL_08.06.20.pdf

As further OMB updates are released, including the anticipated fall addendum to the 2020 Compliance Supplement, McKonly & Asbury will continue to monitor and communicate those changes in a future post. If you have any questions regarding the 2020 Compliance Supplement and how it will impact your organization, contact Jim Shellenberger, Principal, at jshellenberger@macpas.com.