| Dear Center Members: |
The U.S. Office of Management and Budget (OMB) has just released the 2023 OMB Compliance Supplement (Supplement). After reading this GAQC Alert you will be aware of the following:
- The effective date and how to access the 2023 Supplement;
- Key changes and updates made in the 2023 Supplement, including updates to the “higher risk” programs identified; and
- How to learn more, including a reminder to register for the upcoming GAQC Web event on the 2023 Supplement to be held on June 13, 2023, from 1:00 PM – 3:00 PM (Eastern Time).
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Effective Date and Access
The 2023 Supplement is effective for audits of fiscal years beginning after June 30, 2022. It is available on the OMB Web site. In addition to posting one large PDF file, OMB has posted the Supplement broken down into smaller sections for the first time in many years. The GAQC will be updating its Compliance Supplement Resource Center for the 2023 Supplement in the coming weeks.
Key Changes and Updates
We always recommend that auditors first refer to Appendix V, List of Changes for the 2023 Compliance Supplement, to get a detailed overview of the changes made. Unfortunately, Appendix V has been prepared at a much higher level this year so it may not be as helpful as it has been in prior years. While it is still a good starting point, additional time will likely be needed to identify what has changed in the various programs you typically audit. To further assist you, the following describes some of the key changes and updates that you should be aware of:
Part 2, Matrix of Compliance Requirements. The requirements subject to audit for several programs have been modified this year and those with changes are identified in bold and yellow highlighting. The 6-requirement mandate and its related rules and exceptions continue for 2023.
Part 3, Compliance Requirements. There are two main areas of change made to Part 3 this year. The first is in the Procurement type of compliance requirement which has been modified to address a new requirement related to the Build America Buy America Act, along with a summary of when it applies, which types of entities it applies to, where waiver information can be found, and a new related suggested audit procedure. The second change is in the Cash Management type of compliance requirement to clarify the auditor's responsibility when testing non-federal entities funded under the reimbursement method. Previous Supplements asked the auditor to ascertain if the entity "paid" for the costs in reimbursement requests prior to the date of the reimbursement period. This procedure was clarified to ask the auditor to ascertain if the expenditures were "incurred prior to the date of the reimbursement request."
Programmatic Changes. There are several new programs in Part 4 this year from the Departments of Interior, Transportation, and Treasury. Some of the new programs are being funded through the Infrastructure Investment and Jobs Act (IIJA).
Key Changes in Certain Programs. The following describe certain programmatic changes in several programs that may be audited frequently:
- Education Stabilization Fund (ESF). This program (84.425) is once again identified as a higher risk program and continues to be broken down into two sections covering the various ESF subprograms. There are no changes or additions to the subprograms included this year and the overall level of change for the entire program is less than previous years.
- Section 1 has no changes to the compliance requirements subject to audit. However, changes and updates are made in various compliance requirement areas including Level of Effort, Special Reporting, and Special Tests and Provisions.
- Section 2 also has no changes to the compliance requirements subject to audit. However, updates were made in a few other compliance requirement areas including Period of Performance and Special Reporting.
- Coronavirus State and Local Fiscal Recovery Funds (CSLFRF). This program (21.027) continues to be identified as a higher risk program. One key change is that the Part 2 matrix is revised to make the Matching, Level of Effort, Earmarking requirement subject to audit (Earmarking is the only applicable requirement). Updates are also made to add reference to the Consolidated Appropriations Act, 2023 which provides state, local, and Tribal governments the flexibility to use CSLFRF funds for additional eligible uses and adds other clarifying language. Other types of compliance requirements that are updated include Activities Allowed or Unallowed, Allowable Cost/Cost Principles, and Procurement. The option for an Alternative Compliance Examination engagement for certain eligible recipients is continued.
- Provider Relief Fund (PRF) and American Rescue Plan (ARP) Rural Distribution (referred to herein as PRF). This program (93.498) continues to be identified as a higher risk program. The "Program Objectives" section adds an additional reporting period and clarifies the amount of PRF expenditures and lost revenue to be reported on the Schedule of Expenditures of Federal Awards (SEFA) and the timing of when such expenditures and lost revenue are to be reported for Period 6 PRF payments. In the Special Reporting section, it also removes the requirement to test each cell by payer for both the 2019 Actuals and 2020 Budgeted in the "Calculation of Lost Revenues Attributable to Coronavirus."
- Disaster Grants – Public Assistance (Presidentially Declared Disasters). This program (97.036), is significantly updated to describe changes in the processes used by the Federal Emergency Management Agency (FEMA) that impact the guidance in this section. New definitions are added, other definitions are revised, and the guidance regarding when expenditures for this program are recorded is clarified. The section elaborates on what constitutes FEMA approval of a Project (a critical point for SEFA recognition) and the Matching, Level of Effort, Earmarking, and Period of Performance requirements include new and clarified guidance. Finally, the Performance Reporting section was removed from Reporting.
- Many other programs are also updated this year. In particular, you will see more changes and deletions in the Reporting type of compliance requirement sections for various programs as this was an area of focus by the federal agencies due to problems noted by the AICPA and others in previous comments on the Supplement (read the AICPA comment letter on the 2022 Supplement and the related appendix).
Part 5, Student Financial Assistance (SFA) Cluster. This program has several changes, clarifications, and updates for 2023 to reflect regulatory changes and other updates. In particular, the information provided in the Cash Management section has been expanded. Updates were also made in the Eligibility type of compliance requirement and in various of the Special Tests and Provisions. Two new Special Tests and Provisions were also added covering "Using a Servicer or Financial Institution to Deliver Title IV Credit Balances to a Card or Other Access Device" and "Incentive Compensation."
Part 5, Other Clusters. There is one significant change made to the Other Clusters listing this year. The previous Highway Planning and Construction Cluster has been broken down into individual programs (referred to in the Supplement as a decoupling). Thus, the cluster is removed from the Other Clusters listing in Part 5 and each of the individual programs appear as individual programs in Part 4.
Appendix IV, Internal Reference Tables. This section of the 2023 Supplement identifies higher risk programs and has been updated to include a complete list of programs with the higher risk designation. The list includes several of the same pandemic programs that have appeared on the higher risk list for the last several years, as well as several new programs (identified with an asterisk) as follows:
- 84.425 – ESF
- 93.498 – PRF
- 93.778/93.777/93.775 – Medicaid Cluster
- 21.023 - Emergency Rental Assistance
- 21.026 - Homeowner Assistance Fund*
- 21.027 - Coronavirus State and Local Fiscal Recovery Funds
- 21.029 – Capital Projects Fund*
- 15.252 - Abandoned Mine Land Reclamation (AMLR)*
- 96.001/96.006 - Disability Insurance/Supplemental Security Income Cluster*
Additionally, the following programs were removed from the higher risk list:
- 32.009 – Emergency Connectivity Fund Program
- 93.461 – Testing for the Uninsured
- 20.106 – Airport Improvement Program
- 20.500/20.507/20.525/20.526 - Federal Transit Cluster
- 20.315 - National Railroad Passenger Corporation Grants
The Appendix also explains the meaning of the higher risk designation in a manner similar to the 2022 Supplement including which of the higher risk programs are 100% COVID-19 or include IIJA funding which is an important distinction in determining whether a higher risk program should be audited in the current year.
Appendix VII – Other Audit Advisories. Most of the content of this Appendix is the same or very similar to the prior year. The most significant update relates to the section discussing the upcoming Federal Audit Clearinghouse (FAC) transition from the U.S. Department of Census (Census) to the General Services Administration (GSA) The transition, which was supposed to occur in 2022, is now expected to occur by October 1, 2023. The updates to the Appendix explain that single audits with a fiscal period ending in 2022 (or earlier) should be submitted to Census FAC (https://facweb.census.gov/) and single audits with a fiscal period ending in 2023 will be submitted to the new GSA FAC beginning on October 1, 2023 (www.fac.gov). Guidance is also included for how the single audit submission deadline is to be addressed for fiscal year 2023 audits that are completed prior to the new GSA portal being available and states that these audits "will be considered on time if they are submitted within nine months after their fiscal period end date." Finally, the section discusses the status of various submission extensions related to recent weather-related events.
How to Learn More
The GAQC team will continue to analyze the new Supplement over the coming weeks and communicate any developments. Further, a GAQC Web event, 2023 Compliance Supplement and Single Audit Update, will be held on June 13, 2022, from 1:00 PM – 3:00 PM (Eastern Time). We recommend you and your staff view this event to help you more fully understand the changes made in the 2023 Supplement. The following includes registration information:
GAQC Member Registration with CPE (fee). Access the member CPE registration page.
GAQC Member Registration with no-CPE (free). Access the member no-CPE registration page.
Public Registration with CPE (fee) (to share with your clients if they are interested in learning what will be important to auditors). Access the public CPE registration page.* * * * *
Sincerely,
AICPA Governmental Audit Quality Center |
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| In This Alert |
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| Required GAQC Webcast Archive Posted |
| If you missed the live offering of the 2023 Annual Required GAQC Webcast you should view it as soon as possible as it is an important membership requirement. The archived no-CPE version is now available. If you prefer to obtain CPE, a rebroadcast will be held on June 23, 2023, from 2:00PM – 4:00PM (Eastern Time). Access registration information. |
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