Compliance Supplement and Uniform Guidance Changes to Know

Changes this year to both the annual Compliance Supplement and Uniform Guidance should be on non-federal entities’ radars. Below, we recap the major updates:

Compliance Supplement Updates for 2024

Released in May 2024, the Compliance Supplement guides federal agencies in establishing audit protocols to ensure non-federal entities comply with 2 CFR Part 200. The Supplement is also used by entities’ auditors to shape and select audit procedures for confirming this compliance. From the 2019 edition forward, agencies must test six compliance requirements, excluding the Research & Development Cluster and Child Care Disaster Fund Cluster, which may test seven. The “pick six” method remains under the 2024 Supplement, which applies to fiscal years starting after June 30, 2023. Entities with year-end dates of June 30, 2024 must adhere to this latest Supplement.

High vs. Low Risk

Key updates in the 2024 Compliance Supplement involve reclassifying programs from “high” to “low” risk. For instance, the Assistance Listing Number (ALN) 84.425 Education Stabilization Fund, initially deemed high risk during the pandemic, has seen its status change to low and is now a prominent U.S. Department of Education program.

While ALN 21.027 Coronavirus State and Local Fiscal Recovery Funds remain a high-risk program, the recent compliance supplement did introduce extra purposes for the funds that impact the compliance requirement for allowable costs. The new purposes encompass:

• Provide emergency relief from natural disasters or the negative economic impacts of natural disasters
• Fund projects eligible under certain programs administered by the U.S. Department of Transportation (“Surface Transportation projects”)
• Fund projects eligible under the programs established in Title I of the Housing and Community Development Act of 1974 (“Title I projects”)

Student Financial Aid Cluster

Revisions were made to the Student Financial Aid Cluster concerning cash management and the associated reporting for the Fiscal Operations Report and Application to Participate (FISAP). A notable change within the Student Financial Aid Cluster, specifically for higher education institutions, is the requirement to more precisely delineate all related party transactions and include certain mandatory elements within an institution’s financial statement notes.

While the Compliance Supplement does not suggest this, the National Association of College and University Business Officers (NACUBO) advises producing a distinct report that carries the detailed information on related parties that gets filed with EZ-Audit, with a recommendation to classify this information as “unaudited.” This extra report aims at safeguarding the sensitive personal information of the related parties in the versions released to the public in the Federal Audit Clearinghouse submission.

Uniform Guidance Updates in 2024

Significant updates to Uniform Guidance were announced in April 2024, to be implemented for fiscal years starting on or after October 1, 2024. This means that non-federal entities with fiscal year ends of September 30, 2025 or later will need to adhere to the new guidelines. The most significant of these changes is the elevation of the threshold for requiring a Single Audit for non-federal entities from the current $750,000 to $1 million. While not explicitly stated in the guidance, it’s anticipated that the Type A threshold will similarly rise to $1 million.

Other key changes to Uniform Guidance involve raising the threshold for equipment purchases from $5,000 to $10,000 and the de minimis rate for indirect costs from 10 to 15%. Further, the updated guidance allows recipients to give fixed amount subawards up to $500,000 with prior written consent from the federal agency – an increase from the previous $250,000 limit. The new guidance also introduces cybersecurity internal control standards under 202.303(e), without requiring a specific framework.

Taking Action to be Compliant

Recognizing when the new 2024 Compliance Supplement and updated Uniform Guidance take effect is crucial, as many grants span multiple years or do not align with a non-federal entity’s fiscal year. This can result in grants being governed by different sets of Uniform Guidance.

Ultimately, entities should be familiar with the changes and updates going into their reporting periods. Please talk to our team to discuss your situation, as we can support you in understanding the changes and implementing best practices for compliance.