|Dear Center Members:
|On July 1, 2019, OMB released the final 2019 OMB Compliance Supplement (the Supplement). After reading this GAQC Alert you will be aware of the following:
- The effective date and how to access the Supplement;
- The key changes made in the Supplement; and
- How to learn more.
|Effective Date and Access Information
Unlike the 2018 Supplement, the 2019 Supplement has been issued in one stand-alone document. Access the single PDF of the Supplement on OMB's Web site. It is effective for audits of fiscal years beginning after June 30, 2018. As a public service, the GAQC is currently working to separate the document into individual sections and will post it on the GAQC Web site in the next few days. Once posted, you can access it on the GAQC OMB 2019 Compliance Supplement Web page (there is also a quick link to this page on the GAQC home page at www.aicpa.org/GAQC). We will send a follow-up communication as soon we have it posted.
Because there are many more changes to the Supplement than in recent years, it is critical for auditors to carefully read it, inclusive of those parts that may not be referred to frequently such as Part 1, Background, Information, and Applicability. Auditors should also refer to Appendix V, List of Changes for the 2019 Compliance Supplement, to get a high-level overview of the detailed changes made. The following describes some of the key changes that you should be aware of.
New 6-requirement mandate for programs included in the Supplement. OMB required agencies to limit the compliance requirements subject to the compliance audit to 6 for each program or cluster included in the 2019 Supplement. The only exception is the Research and Development cluster which was permitted to identify 7 requirements. For this purpose, the requirements relating to A. Activities Allowed and Unallowed, and B. Allowable Costs and Cost Principles, are treated as one requirement (i.e., allowability in its entirety will be considered one requirement even though the Supplement includes it in two sections). Auditors should carefully review Part 2, Matrix of Compliance Requirements, to identify the requirements relevant to your major programs this year as they will likely be different than prior years. There were many questions received on this change during our recent GAQC Web event on the Supplement and we encourage you to listen to that event to learn more (see the "How to Learn More" section of this alert for access information). Also watch for a future GAQC Alert that covers common questions and answers on this change.
Note that the 6-requirement mandate does not apply to programs not specifically included in Part 4, Agency Program Requirements, or Part 5, Clusters of Programs. Therefore, if you are auditing a major program that is not in the Supplement, you will continue to use Part 7, Guidance for Auditing Programs Not Included in This Supplement, to identify the compliance requirements to be tested.
Procurement. Section 3.2.I on procurement in Part 3, Compliance Requirements, has been updated to discuss the effect of the 2017 and 2018 National Defense Authorization Acts (NDAA) and OMB Memorandum M-18-18, Implementing Statutory Changes to the Micro-Purchase and Simplified Acquisition Thresholds for Financial Assistance, on the simplified acquisition and micro-purchase thresholds. On a related note, Appendix VII, Other Audit Advisories, has been revised to state that due to the confusion over the timing of the effective date of higher thresholds, auditors are not expected to develop audit findings for grant recipients that have implemented the increased thresholds in the 2017 NDAA after December 23, 2016, and the 2018 NDAA after June 20, 2018, as long as the entity documented the decision in their internal procurement policies.
Programmatic changes. There are several program additions and deletions in Part 4, and there are more programs than usual having significant changes. As it relates to the 6-requirement mandate, the matrices in each program and cluster in Parts 4 and 5 have been revised to be consistent with Part 2 and all requirements no longer subject to audit and any related suggested audit procedures have been deleted.
Performance reporting. Many programs for which L. Reporting is subject to audit have added new sections to Part 4 to add requirements relating to performance reports and special reports.
Student Financial Assistance. Many more changes than usual have been made to the SFA cluster for regulatory and other changes, including a new objective and suggested audit procedures relating to institutions complying with provisions of the Gramm-Leach-Bliley Act regarding securing student information. Additionally, a new requirement has been added for the auditor to report certain information about the sampling used for compliance testing for the Pell Grant and Direct Loan Programs and a voluntary option to report related instances of noncompliance deemed to be immaterial. The GAQC will be following up with Education on some of the changes made to this cluster including how this new sampling information is to be reported in the Schedule of Findings and Questioned Costs and will inform members in a future GAQC Alert.
Part 6 Overhaul. Over the last year, the GAQC has worked collaboratively with OMB to enhance Part 6, Internal Control, to more closely align it with how auditors consider internal control over compliance and to provide more illustrative controls. The new Part 6 includes a summary of the Uniform Guidance requirements for internal control, a background discussion on important internal control concepts, and appendices that include illustrations of entity-wide internal controls over federal awards and internal controls specific to each type of compliance requirement. Watch for more from the GAQC on this updated part in the future.
Appendix VII. In addition to the guidance added regarding procurement (described above), this Appendix adds a reminder to auditors that AU-C 530, Audit Sampling, contains requirements and guidance on sampling and that failure to follow the standards may result in the audit being considered nonconforming. It also refers auditors to the AICPA Audit Guides, Government Auditing Standards and Single Audits, and Audit Sampling, for guidance. This emphasis was added due to continued concerns that federal agencies have about the application of sampling in a single audit environment. A good action item to take away on this topic is to listen to the GAQC archived no-CPE Web event, Smart Sampling in a Single Audit.
How to Learn More
The GAQC has posted a no-CPE archive of the recently held Web event, 2019 Compliance Supplement and Single Audit Update. If you or your key single audit staff did not attend the event live, we strongly encourage you to listen to the archive as it further explains some of the nuances of the 6-requirement mandate and other key changes. The GAQC will also be rebroadcasting this event for CPE on September 4, 2019, from 1:00 PM – 3:00 PM (Eastern Time) if you prefer to view it for CPE. Watch for a future GAQC Alert with registration information.
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AICPA Governmental Audit Quality Center
|In This Alert
|SLG Independence Interpretation Issued
|A revised AICPA ethics interpretation addressing state and local government client affiliates has been issued and is effective for years beginning after December 15, 2020. Read the interpretation to learn more and watch for a future GAQC Alert with more detail.
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