The December 2020 Compliance Supplement Addendum

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The Office of Management and Budget (OMB) just released the December 2020 addendum for the August 2020 Compliance Supplement.  Auditors who performed single audits for clients have been anxiously awaiting this addendum to prepare for year-end audits.  Because many organizations received federal COVID-19 assistance and relief, the OMB had to add to the current Compliance Supplement to account for these program requirements.  Non-COVID-19 program changes are also included in this addendum.  This post will provide information on some of the provisions of the December 2020 Compliance Supplement addendum.

Single Audit Defined

A single audit is an audit performed on an entity that expends more than $750,000 in federal assistance on an annual basis.  The purpose is to ensure that the entities receiving federal aid are managing and using the funds for their intended purposes.  A variety of financial and compliance tests are conducted, depending on the type of assistance the entity has received.  The guidance for the single audit testing is found in the Compliance Supplement, which is written and updated by the OMB.  With the influx of federal COVID-19 relief, many entities will be required to have a single audit of their federal expenditures.  

General Information

Users are reminded that the December 2020 addendum must be used in conjunction with the 2020 Compliance Supplement issued in August.  The addendum is applicable to fiscal years starting on or after July 1, 2019, which is the same as the 2020 Compliance Supplement.  The basic scope of the addendum can be found in Part One of the Compliance Supplement.

Matrix of Compliance Requirements

The matrix addendum identifies the audit testing requirements for the new COVID-19 programs as well as some existing programs included in the addendum.  The matrix addendum is covered in Part Two.

Compliance Requirements by Type

While Part Three of the 2020 Compliance Supplement, which details each type of compliance requirement, is largely unchanged by the addendum, there are some additional reporting requirements under Section L of Part Three.  These requirements address the Federal Funding Accountability and Transparency Act (FFATA) testwork required of fund recipients.      

Federal Agency Program Additions and Changes

Part Four of the 2020 Compliance Supplement addresses new programs and their requirements, divided by federal agency.  Some federal agencies have no new programs requiring disclosure in this addendum.  New programs and changes to existing programs are described through program objectives and procedures and relevant compliance requirements are detailed for the auditor’s use in testing procedures.  For existing programs receiving COVID-19 assistance but not listed in Part Four, additional information is provided in Appendix VII. 

Submission Deadline Extensions

If an entity receives some type of COVID-19 related funding and it has a 2020 year-end, up to September 30, 2020, then the deadline for the submission of its single audit to the OMB has been extended by three months.  Generally, the deadline for submission is nine months after year-end, so this extension would increase the entity’s deadline for submission to one year.  Any previous submission extensions for 2019 year-end audits expire on December 31, 2020.  Additional information on the deadline changes can be found in Appendix VII, Additional Audit Advisories of the Compliance Supplement.