Five Things to Know About the 2021 Compliance Supplement

On Aug. 13, the Office of Management and Budget (OMB) published the 2021 Compliance Supplement (2 C.F.R. Part 200, Appendix XI). While OMB maintained some aspects of previous year’s supplements, such as continuing the practice that began in 2019 requiring auditors to test a maximum of six compliance requirements under Part 3, this year’s 1,787-page supplement contains a great deal of new material, such as an increased focus on performance and widescale discussion of auditing procedures for COVID-19 programs.

Each year, OMB issues the Compliance Supplement for auditors to follow in determining the compliance requirements that could have a direct and material effect on the programs included in a single audit. The supplement identifies compliance information to help auditors understand each program’s objectives, procedures and requirements, and provides audit objectives and suggested audit procedures for determining a federal recipient’s single audit compliance. The 2021 supplement applies to audits of fiscal years beginning after June 30, 2020, and replaces the 2020 version of the supplement and the 2020 Compliance Supplement addendum that OMB published in November 2020 to address audit requirements for COVID-19 programs that it could not timely include in last year’s main supplement.

While the entirety of this year’s supplement is very broad and contains varying guidance on auditing programs for compliance and internal controls, this whitepaper focuses on five key areas of interest that the auditing community, as well as auditees, should be aware of as they prepare to audit programs using this year’s supplement.