The COVID-19 pandemic has resulted in a tremendous increase in federal financial assistance managed by numerous new federal programs. More funding was added to existing programs to assist local governments, businesses, schools, and nonprofits in response to continued coronavirus outbreaks.
Many organizations receiving these funds are becoming subject to the Single Audit rules for the first time, and many other organizations that previously had Single Audits are now receiving new COVID-19-related funding. The OMB compliance supplement guides first-timers who want to understand what rules their auditing team must follow.
If your organization received and expended federal grant funds of $750,000 or more in its fiscal year, either obtained directly from a federal agency or passed through from a local government or another nonprofit, then your organization is subject to a Single Audit under Uniform Guidance. Be aware, however, that certain federal programs are not subject to a Single Audit, such as the Paycheck Protection Program and the Restaurant Revitalization Fund.
The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards can be accessed here. It is comprised of six subparts:
Subpart A, Acronyms and Definitions, 200.0–200.99
Subpart B, General Provisions, 200.100–200.113
Subpart C, Pre-Federal Award Requirements and Contents of Federal Awards, 200.200–200.211
Subpart D, Post Federal Award Requirements, 200.300–200.345
Subpart E, Cost Principles, 200.400–200.475
Subpart F, Audit Requirements, 200.500–200.521
Auditors should focus specifically on Subparts D and E. Subpart D contains administrative requirements, and Subpart E has the requirements regarding charging costs to a federal program. Part 3 of the Compliance Supplement is based on the requirements in these subparts.
Subpart F includes the audit requirements that auditors must follow and comply with to perform their Single Audits. It is where OMB Circular A-133 now resides.
To determine if your federal program is subject to a Single Audit, you can check online at www.sam.gov and search for the assistance listing number. Each assistance listing number appears in this format: ##.### (e.g. 10.001). If it states under policy requirements that 2 CFR 200 Subpart F (Title 2 CFR 200.500 series) applies, it is subject to a Single Audit.
OMB Compliance Supplement
The guidance and requirements auditors must follow to perform Single Audits are included in the U.S. Office of Management and Budget's (OMB) Compliance Supplement (the Supplement). Although the Supplement is written for auditors, it is an excellent resource for organizations that received and expended federal awards.
The Supplement has helpful information to assist recipients of federal grants with federal program regulations and requirements. It is the audit program with suggested audit procedures that auditors will use for compliance testing. So why not know what your auditors will be looking for and test ahead of time? It's like getting the answer key before taking the test!
The Supplement consists of seven parts and nine appendices. The seven parts are:
- Part 1 – Background, Purpose, and Applicability. This part contains general Single Audit information.
- Part 2 – Matrix of Compliance Requirements. Part 2 identifies which of the 12 types of compliance requirements are subject to audit for the federal programs included in this supplement.
- Part 3 – Compliance Requirements. Part 3 includes the generic program objectives and audit procedures pertaining to the 12 types of compliance requirements.
- Part 4 – Agency Program Requirements. Part 4 contains the federal agency's specific program objectives and procedures and assistance listing number. This section includes the compliance requirements specific to the individual program for Activities Allowed or Unallowed; Eligibility; Matching; Level of Effort; Earmarking; Reporting; and Special Tests and Provisions.
- Part 5 – Clusters of Programs. Part 5 identifies those programs to be considered clusters of federal programs.
- Part 6 – Internal Control. Part 6 describes characteristics of internal control relating to each of the five components of internal control.
- Part 7 – Guidance for Auditing Programs Not Included in This Compliance Supplement. Part 7 states that for those programs not covered in the Supplement, the auditor must use the 12 types of compliance requirements described in Part 3.
Auditors need to utilize the Compliance Supplement to perform Single Audits. They will be testing the six requirements deemed subject to audit by the federal agency and within those deemed by the auditor to be direct and material to the audit. The following is a description of the 12 compliance requirements:
- Activities Allowed or Unallowed – This discusses activities that federal program funds can and cannot be used for. Since this is specific to each federal program, it is included in the audit program in Part 4.
- Allowable Costs – This describes the types of costs that can be charged to a federal program. Generally, only necessary and reasonable costs can be charged to a federal program. However, certain costs are unallowed, such as fines, penalties, bad debt, tobacco, and alcohol. Part 3 of the Supplement has an extensive list of selected items of cost and whether they are unallowable, allowable, or allowable with restrictions. See Part 3B.
- Cash Management – Most federal programs are either funded on a reimbursement basis, advances, or a combination of both. For advances, the organization must minimize the time elapsed between receiving funds and disbursements. For reimbursements, the organization must pay for program costs with their own funds before requesting reimbursement. See Part 3C for complete details.
- Eligibility – This relates to beneficiary eligibility, not organizational eligibility. The specific requirements for eligibility are unique to each federal program. See the eligibility requirements for your federal program in Part 4.
- Equipment and Real Property Management – This requirement only applies if equipment or real property is purchased with federal grant funds of over $5,000 or over the organization's capitalization policy. See Part 3F for the requirements.
- Matching, Level of Effort, Earmarking – The specific requirements for these are unique to each federal program. See the specific requirements for your federal program in Part 4.
- Period of Performance - Federal grants may specify a time period during which the organization may use the federal funds. Where a funding period is specified, the organization may charge to the award only costs resulting from obligations incurred during the funding period and any pre-awards authorized by the Federal awarding agency. See Part 3H for the requirements.
- Procurement and Suspension and Debarment - Organizations must use their own documented procurement procedures, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in Uniform Guidance as set out in Title 2 CFR sections 200.318 through 200.326.
- Suspension and Debarment – Organizations are prohibited from contracting with or making subawards under covered transactions to suspended or debarred parties. "Covered transactions" include contracts awarded under a grant or cooperative agreement expected to equal or exceed $25,000. All non-procurement transactions entered into by a pass-through entity, irrespective of the award amount, are considered covered transactions. See Part 3I for complete details.
- Program Income – Program income is the gross income earned by an organization that is directly generated by a supported activity or earned due to a federal award. It is generally fees charged to participants in the federal program. It can also be interest earned on loans made with federal award funds. Program income does not include interest earned on advances of federal funds or the proceeds from the sale of equipment or real property acquired with federal funds. See Part 3J for complete details.
- Reporting – This requirement relates to the reporting required to the federal agency or the pass-through agency. It includes financial reporting (requests for advances or reimbursements), performance, and special reporting. The specific requirements for reporting are unique to each federal program. See the reporting requirements for your federal program in Part 4.
- Subrecipient Monitoring – This requirement applies if an organization passes the federal funds through to another organization running the federal program on its behalf. The organization that passes through the funds must identify the award and applicable requirements to the other entity, evaluate the risk of their noncompliance and monitor their activities. See Part 3M for complete details.
- Special Tests and Provisions – The specific requirements for Special Tests and Provisions are unique to each federal program. See the specific requirements for your federal program in Part 4.
Organizations that wish to use the OMB Compliance Supplement to ensure their audit goes smoothly should first see if their specific federal program is included in the Supplement by looking up the Assistance Listing number in Part 2, the Matrix of Compliance Requirements. If it is in Part 2, it means the federal agency wrote a specific audit program, which is included in either Part 4 (or part 5 if it is Student Financial Aid or Research and Development) of the Supplement. The Part 2 Matrix will then indicate which of the 12 requirements were deemed to be audited, and the organization should then access Part 4 for those specific requirements and Part 3 for requirements deemed subject to audit.
To learn more, read "Key Changes and Updates in the 2022 OMB Compliance Supplement".
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