| Dear Center Members: |
On May 18, 2018, the Office of Management and Budget (OMB) released the final 2018 OMB Compliance Supplement (2018 Supplement). The first thing you will notice about the 2018 Supplement is that it is in a different format. You may hear it referred to as a “skinny” Supplement because it only includes significant updates and changes. For this reason, OMB is requiring auditors to use the 2018 Supplement and the 2017 OMB Compliance Supplement (2017 Supplement) together to perform single audits of fiscal years beginning after June 30, 2017. It will be important for audit teams to appropriately use the two Supplements together to ensure a successful single audit. After reading this GAQC Alert you will be aware of the following:
- What the new Supplement includes, changes made, how to access it and how to use it in conjunction with the 2017 Supplement;
- A new GAQC 2018 Supplement Access Tool to assist auditors in using the 2018 and 2017 Supplements together and improve efficiency; and
- Registration information for a June 7th GAQC Web event that will cover the 2018 Supplement in detail and provide other important single audit updates.
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2018 Compliance Supplement
Effective Date. Part 1, Background, Purpose, and Applicability, states that it is effective for audits of fiscal years beginning after June 30, 2017. It also states that the portions of the 2017 Supplement that were not superseded or deleted continue to be effective for audits of fiscal years beginning after June 30, 2017.
How to Access the 2018 Supplement. OMB has only posted a single PDF version of the 2018 Supplement on the OMB Web site. However, as a public service, the GAQC has posted to the GAQC Web site a tool which includes the 2018 Supplement broken down by section along with the relevant sections of the 2017 Supplement and key auditor considerations. See the later section of this Alert, “GAQC 2018 Supplement Access Tool” for more information on this tool.
Summary of 2018 Supplement Revisions. You should review Appendix V, List of Changes for the 2018 Compliance Supplement, to learn more about the type of changes made and the specific programmatic changes by Catalog of Federal Domestic Assistance (CFDA) number. The following describes certain matters of note and provides a high-level summary of the changes made.
- Programmatic Changes. Various programs that were considered to need more substantive regulatory or other changes are included. Two programs were deleted: CFDA 84.377, School Improvement Grants, and 84.395, State Fiscal Stabilization Fund (SFSF) – Race-to-the-Top Incentive Grants, Recovery Act. A new program was added: CFDA 84.424, Student Support and Academic Enrichment Program. Finally, a new program, CFDA 93.872, was added to existing CFDA 93.508, to form a new cluster, Tribal Maternal, Infant, and Early Childhood Home Visiting Program Cluster.
- Table of Content. The 2018 Supplement Table of Content describes what is included. It is a critical roadmap for determining how to use the 2017 and 2018 Supplements together since it describes specifically where the 2017 Supplement is superseded and/or continues to be relevant.
- Part 1. This part supersedes Part 1 of the 2017 Supplement. Changes made include an updated discussion of the effective date and an explanation of how auditors need to use the 2017 and 2018 Supplements together.
- Part 2. An updated Part 2, Matrix of Compliance Requirements, is not included in the 2018 Supplement. Instead, for new or revised programs, auditors are instructed to use the individual program matrices included in Parts 4 and 5 of the 2018 Supplement (individual matrices can be found at the beginning of section III. Compliance Requirements in each program section). For programs not included in the 2018 Supplement, the auditor is to use the Part 2 matrix in the 2017 Supplement.
- Part 3. The 2018 Supplement provides an updated 3.2.I, “Procurement and Suspension and Debarment,” that should be used by auditors when testing this requirement. Changes made primarily include information on how the 2017 and 2018 National Defense Authorization Acts (NDAA) affect the simplified acquisition and/or micro-purchase thresholds that are to be used by auditees. This is a complex area and should be read in conjunction with new 2018 Appendix VII-A, Other Audit Advisories – Hurricane and NDAA Addendum, which includes additional guidance on this topic (see below). Otherwise, auditors should use the remainder of Part 3, Compliance Requirements, in the 2017 Supplement (i.e., Parts 3.1 and 3.2), as appropriate, for other compliance testing.
- Part 4. This part, Agency Program Requirements, only includes new programs and programs that were updated due to significant regulatory or other changes. For all other programs not included, the auditor will continue to use Part 4 of the 2017 Supplement.
- Part 5. This part, Clusters of Programs, makes regulatory and other updates to the Student Financial Assistance Cluster. Additionally, the listing of “Other Clusters” is updated to add the new Tribal Maternal, Infant, and Early Childhood Home Visiting Program Cluster. Auditors will need to use Part 5 of the 2017 Supplement, to refer to the “Introduction” section and when auditing the Research and Development Cluster.
- Part 6. This part, Internal Control, is not included in the 2018 Supplement. Therefore, auditors will continue to use Part 6 in the 2017 Supplement.
- Part 7. This part, Guidance for Auditing Programs Not Included in This Compliance Supplement, is not included in the 2018 Supplement. Therefore, auditors will continue to use Part 7 in the 2017 Supplement.
- Appendix V. This Appendix describes the various changes, additions, and deletions made by the 2018 Supplement.
- Appendix VII-A. This Appendix is an addendum to Appendix VII in the 2017 Supplement. It includes guidance regarding certain reliefs relating to the effects of hurricanes Harvey, Irma and Maria. It also includes additional guidance on procurement including further discussion of the effect of the 2017 and 2018 NDAA on the auditors testing of procurement. Due to confusion regarding the effective date of changes brought about from the NDAA, it advises that auditors are not expected to develop findings for certain entities in certain circumstances. However, in other circumstances auditors are expected to develop findings. This area is complex and should be reviewed carefully in conjunction with updated Part 3.2.I (see discussion above). The GAQC Web event referred to below will cover the procurement topic in more detail.
- Other Appendices. Other than Appendices V and VII-A, no other Appendices were included in the 2018 Supplement. Therefore, auditors should continue to use the 2017 Supplement for all other appendices.
Importance of the Supplement. The Supplement identifies the compliance requirements that the federal government expects to be considered as part of a single audit and is one of the most important pieces of guidance that you use in performing single audits. You should give the 2018 Supplement your immediate attention and ensure that your staff has the information they need to help ensure single audit quality. It is especially important this year to ensure that your audit teams have an appropriate understanding of how to use the 2017 and 2018 Supplements together to ensure a successful single audit.
Give Us Your Feedback. The GAQC will be monitoring implementation of the 2018 Supplement. If you have any questions or clarifications that you think need to be addressed, please e-mail us at gaqc@aicpa.org.
New GAQC 2018 Supplement Access Tool
Using the 2018 Supplement this year will be more challenging than in previous years. Pulling various sections from 2018 and 2017 to develop audit programs will take time and effort, as well as increase the potential for error. To help auditors be more efficient and effective, the GAQC has posted a GAQC 2018 Supplement Access Tool. It includes each section of the 2018 Supplement broken down by section in one column. In another column, it includes the sections of the 2017 Supplement (obtained from those posted by GAQC last year) that continue to be effective. Because the 2017 Supplement PDF files are broken down by agency, some of the 2017 sections include superseded or deleted programs. To assist auditors, we have included a watermark in the 2017 Supplement files posted to identify sections that have been superseded or deleted. This marking of the 2017 files has been done to help auditors avoid mistakenly using a superseded or deleted section of the 2017 Supplement and is nonauthoritative. Finally, a third column in the tool includes key auditor considerations when using the 2018 and 2017 Supplement together.
GAQC Supplement Web Event
Members can learn more about the 2018 Supplement in an upcoming GAQC Web event, 2018 Compliance Supplement and Single Audit Update, to be held on Thursday, June 7, 2018, from 1:00 PM – 3:00 PM (Eastern Time). Register now or read GAQC Alert #359 for more information.
We hope you find this information useful as you plan and perform your 2018 single audits. As always, thank you for your commitment to governmental audit quality.* * * * *
Sincerely,
AICPA Governmental Audit Quality Center |
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