Important Nonprofit Considerations
Office of Management and Budget (OMB) Issues Addenda to 2021 Compliance Supplement
OMB issued a Federal Register notice announcing the issuance of Addendum #1 to the 2021 Compliance Supplement (Supplement) on Dec. 3, 2021. Addendum #1 includes the following two programs: (1) the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF), and (2) an update to the Education Stabilization Fund (ESF).
Then on Jan. 19, 2022 OMB issued a Federal Register notice announcing the issuance of Addendum #2 to the 2021 OMB Compliance Supplement (Supplement). Addendum #2 includes seven programs as outlined below.
The Addenda are located at https://www.cfo.gov/2021-addendum-1/cfo.gov. It is important to note that the Addenda are not posted to the OMB web site where the original 2021 Supplement is located.
CSLFRF in Addendum #1
Addendum #1 contains a new program section for CSLFRF (Assistance Listing 21.027). This new section outlines the U.S. Department of the Treasury’s (Treasury) auditing expectations for this new program, which will likely be a major program for many recipients.
State and local governments are most often the direct recipients of this funding; however, many nonprofit organizations have received funding under this program from state and local governments.
Addendum #1 provides program objectives and the compliance requirements entities must adhere to as well as those subject to audit. In addition, Addendum #1 clarifies that the “beneficiary” concept introduced in the Coronavirus Relief Fund also applies to CSLFRF. Addendum #1 also notes that Treasury has proposed program requirements in an interim Final Rule and notes that auditors should test compliance with the requirements that existed at the time of the expenditure. Thus, entities should ensure they are in compliance with these requirements. Treasury released the Final Rule on Jan. 6, 2022. The Final Rule is effective April 1, 2022. Until that date, the Interim Final Rule remains in effect although early implementation of the Final Rule provisions is permitted. (See article that discusses the Final Rule in more detail.)
The compliance requirements identified as being subject to audit for CSLFRF in the Addendum are as follows:
- Activities Allowed or Unallowed
- Allowable Costs/Cost Principles
- Period of Performance
- Procurement Suspension & Debarment
- Subrecipient Monitoring
Remember, as a recipient of federal funds an organization must comply with all compliance requirements, even those not identified as subject to audit, if they are outlined in the agreement.
Addendum #1 also includes a discussion of the following facts related to revenue loss, which is an important component of the program:
- Revenue loss is not an eligible use; instead, recipients calculate it based on a formula to determine the limit for the amount of CSLFRF funds that can be used for the “provision of government services.” Government services is one of the four eligible uses of CSLFRF funds.
- Revenue replacement calculations for expenditures covered under the Treasury’s interim Final Rule are not subject to audit in the single audit of this program for fiscal year 2021.
- For the schedule of expenditures of federal awards (SEFA) reporting purposes, the aggregate expenditures for all four eligible use categories are reported on the SEFA and not the result of the revenue loss calculation.
ESF in Addendum #1
As a reminder the original Supplement for ESF is divided into 2 sections:
- Section 1 – Elementary and Secondary Education
- Section 2 – Higher Education
Only Section 1 was updated in Addendum #1 to address American Rescue Plan Act (ARPA) funding implications in subprograms 84.425U and 84.425X. Please note that Section 2 was not included in the Addendum since it was already updated for ARPA implications in the original release of the Supplement. As a result, if your organization has significant funding under subprograms 84.425U or 84.425X and also funding under Section 2 subprograms you will use Section 1 in Addendum #1 and Section 2 in the 2021 Supplement to ascertain the program objectives and compliance requirements.
If Section 1 applies to your client but that client did not have funding under subprograms 84.425U or 84.425X, you can utilize the original release of the ESF program in the Supplement to identify the requirements your organization must comply with.
Implications of Timing of Addendum #1 Release
The cfo.gov page states that “For audits with report dates prior to the issuance of the guidance in Addendum #1, auditors are not required to go back retroactively to review these two programs based on the newly issued guidance.” For example, if your entity had already completed its audit of CSLFRF as a major program in advance of Addendum #1’s release by using Part 7 of the Supplement, the organization would not have to go back and refer to Addendum #1 as long as the audit report was issued with a date prior to Dec. 3, 3021.
Programs Included in Addendum #2
The following programs were included in Addendum #2:
10.542 – Pandemic Electronic Benefits Transfer (EBT) Food Benefits
This is a new U.S. Department of Agriculture program that provides school-age children with nutrition assistance. Funding was provided to state governments.
10.649 – Pandemic EBT – Administrative Costs Grants
This is a new U.S. Department of Agriculture program that is provided primarily to defray administrative cost of executing the pandemic EBT initiative. Funding was provided to state governments.
14.871 – Section 8 Housing Choice Vouchers
This is an existing U.S. Department of Housing and Urban Development program with changes made primarily to address new American Rescue Plan Act (ARPA) funding provisions.
20.315 – National Railroad Passenger Corporation Grants
This is a new Department of Transportation program that has only one recipient (i.e., Amtrak).
93.499 – Low-Income Household Water Assistance
This is a new Department of Health and Human Services (HHS) program that targets assistance to those households with the lowest incomes that pay a high proportion of household income for water and wastewater services.
93.558 – Temporary Assistance for Needy Families (TANF)
This is an existing HHS program which is part of the TANF Cluster with changes made primarily to address ARPA funding provisions.
93.575 – Child Care and Development Block Grant
This is an existing HHS program which is part of the Child Care and Development Fund cluster. In addition to changes to address ARPA funding provisions, auditors should note that Addendum #2 makes the reporting type of compliance requirement subject to audit (which includes testing of a financial report and special reporting requirements associated with the Federal Funding Accountability and Transparency Act). HHS received approval from OMB to add this requirement and to exceed the six-requirement mandate.
Action to be Taken
Organizations with funding sources that are included in these Addenda should familiarize themselves with the requirements related to these programs. It is important to ensure that your organization has complied with the requirements in the Supplement and Addenda even if you are not subject to a Single Audit. Compliance with the requirements in both the originally issued Supplement and the two addenda are required.