Not-for-profit or governmental entities that expend $750,000 or more of federal funds are subject to single audit requirements for that fiscal year. The Compliance Supplement is an extensive federal government guide created by the Office of Management and Budget (OMB) and is used by both federal grant recipients and auditors to follow program requirements and auditing of the federal programs, respectively. The Compliance Supplement was created to ensure that recipients of federal awards understand and comply with program requirements.

The 2023 OMB Compliance Supplement was released on May 22, 2023, and is effective for audits of fiscal years beginning on or after June 30, 2022. The full version of the 2023 OMB Compliance Supplement can be found here.

How to use the supplement

The OMB Compliance Supplement is divided into eight sections:

Part I - Background, purpose, and applicability

Consistent with prior years, this section outlines the general applicability and usage of the Compliance Supplement and related guidance.

Part II - Matrix of compliance requirements

This section specifies the compliance requirements applicable to each program. The six-requirement mandate and its related rules and exceptions continue for 2023 and program requirements that were modified this year have changes identified with yellow highlights. We strongly recommend that each auditee review these requirements annually and implement control procedures that ensure compliance with each program. These compliance requirements should be evaluated in conjunction with parts IV and V of the supplement.

Part III - Compliance requirements

This section provides guidance and description for the types of compliance guidelines established by federal agencies, in addition to providing certain audit objectives and suggested audit procedures. A significant update to this section includes guidance related to the modification of the procurement compliance requirement to address the Build America Buy America Act (BABA), inclusive of when and to who it applies, and links to a list of the federal agencies that issued waivers amongst others.

Part IV - Agency program requirements

This section discusses how each compliance requirement applies to specific programs. New programs emerged from the Departments of Interior, Transportation, and Treasury, some of which are funded through Infrastructure Investment and Jobs Act. Programmatic changes were made to certain frequently audited, high-risk programs, including but not limited to: Education Stabilization Fund, Coronavirus State and Local Fiscal Recovery Funds, and Provider Relief Fund and American Rescue Plan Rural Distribution.

Part V - Clusters of programs

This section discusses clusters of programs (i.e., grouping of closely related programs with similar compliance requirements). The Student Financial Assistance Cluster requirements had updates in cash management, eligibility, special tests and provisions. The Highway Planning and Construction Cluster previously under “other clusters” has also been separated into individual programs and moved to Part IV.

Part VI - Internal control

This section discusses the objectives, principles, and components of internal controls based on the Standards for Internal Control in the Federal Government, also known as the Green Book, and the Internal Control Integrated Framework. Auditors are required to assess and report on internal controls that relate to major program compliance. We strongly recommend auditees revisit this section annually to assist in their review and assessment of internal controls ahead of their upcoming. Illustrative examples and guidance are also provided in this section.

Part VII - Guidance for auditing programs not included in this compliance supplement

This section provides overall guidance based on governmental procurement and cost principles for those programs not specifically covered in a compliance supplement.

Part VIII - Appendices

This section includes other information and considerations such as a summary of changes to the prior year compliance supplement and program-specific audits guidance. The 2023 OMB Compliance Supplement has several significant changes from previous supplements:

• Appendix IV, Internal reference tables: This appendix includes a complete list of designated higher risk programs, inclusive of several new programs attaining that designation.
• Appendix V, List of changes for the 2023 Compliance Supplement: The appendix provides a more high-level overview to the changes in the 2023 OMB Compliance Supplement as opposed to a comprehensive guide. While it remains the best place to start in reviewing changes from previous supplements, additional research will most likely be needed.
• Appendix VII, Other audit advisories: Discusses the transition of Federal Audit Clearinghouse from the U.S. Department of Census to the General Services Administration by an update anticipated date of October 1, 2023, for audits with fiscal periods ending in 2023.

This summary of changes within the compliance supplement does not encompass all changes made in 2023. We highly encourage all auditees to fully review the 2023 compliance supplement in detail to ensure they remain compliant.

How we can help

Citrin Cooperman’s Not-for-Profit Practice professionals can assist you in further understanding the changes and impact that the new 2023 Compliance Supplement may have on your organization. If you have any questions about how the 2023 Compliance Supplement may impact your organization, please contact John Eusanio at jeusanio@citrincooperman.com or Joyce Amankwah at jamankwah@citrincooperman.com.