On December 3, 2021, the Office of Management and Budget (OMB) released the first of two 2021 Compliance Supplement Addenda (2021 Addendum 1). 2021 Addendum 1 applies to fiscal year audits beginning after June 30, 2020; however, for audits with report dates prior to the issuance of the Addendum, auditors are not required to go back retroactively to review programs based on the newly issued guidance. 2021 Addendum 1 mainly addresses two programs that were created or expanded within the American Rescue Plan Act of 2021 (ARP); Department of Treasury’s Coronavirus State and Local Fiscal Recovery Fund (assistance listing number 21.027) and the Department of Education’s Education Stabilization Fund (assistance listing number 84.425). The additional guidance should be utilized for all audits of these programs that are completed after the 2021 Addendum 1 was issued.
Coronavirus State and Local Fiscal Recovery Fund
The biggest update from the 2021 Addendum 1 is the addition of the Part 4 guidance for the Coronavirus State and Local Fiscal Recovery Fund (CSLFRF). The CSLFRF was established by the ARP to provide support to states, U.S. territories, tribal governments, metropolitan cities, counties and nonentitlement units of local government to assist with responding to the public health emergency due to COVID-19, responding to workers performing essential work during the COVID-19 public health emergency, provide government services to the extent COVID-19 caused a reduction in revenues collected, and to make necessary investments in sewer, or broadband infrastructure.
The Part 4 guidance indicates the following compliance requirements are applicable for the scope of the single audit:
Education Stabilization Fund
Part 4 of the Compliance Supplement for the Education Stabilization Fund (ESF) was updated to add 84.425U American Rescue Plan – Elementary and Secondary School Emergency Relief (ARP ESSER) and 84.425X American Rescue Plan – State Educational Agency (Outlying Areas) (ARP-OA SEA) subprograms. Guidance prior to Addendum 1 only addressed the Section 1 programs of the ESF that included provisions from the CARES Act and the 2021 Consolidated Appropriations Act. Additionally, guidance that had been communicated separately by the Department of Education on presentation of the ESF in the Data Collection Form (DCF) was included in the update, which specified that entities should list “COVID-19, [insert full assistance listing number including alpha code]” in the Additional Award Identification section of the Federal Awards section of the DCF.
The allowable activities did not change significantly from those identified in the initial issuance of the Compliance Supplement.
Addendum 1 added a special test and provision for an auditor to test the requirements of the Davis-Bacon Act for the ESF funds for purchases where Davis-Bacon Act wage requirements would apply. There were no other substantive changes to the ESF program. Additionally, it was noted that there were no changes to ESF Section 2 which included funding primarily for higher education institutions.
The OMB communicated in the Federal Register on December 3, 2021 that it also intends to provide updated guidance for additional programs in Addendum 2 which could potentially include the following programs:
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