Single audits: Using Compliance Supplements for success

August 12, 2021

Published: Journal of Accountancy

The massive influx of federal relief funding in response to the COVID-19 pandemic has created many audit challenges. There are new programs subject to single audits, along with existing programs receiving new funding, and new and revised compliance requirements. Understanding how to use the Compliance Supplement is more important than ever for auditors responsible for single audits.

A session at the AICPA & CIMA Governmental Accounting & Auditing Online Update, scheduled Aug. 16–17, will discuss requirements of the soon-to-be-released 2021 Compliance Supplement along with certain continuing challenges introduced in the 2020 Compliance Supplement and subsequent Addendum. The session will be co-led by Kim McCormick, CPA, audit partner at Grant Thornton and chair of the AICPA Governmental Audit Quality Center (GAQC) Executive Committee; Lindsey Oakley, CPA, partner at BKD LLP; and Amanda Ward, CPA, partner at Plante Moran.

“Single audits are not the same as last year, and auditors must use the Compliance Supplement as a starting point to get it right,” McCormick said during a preconference telephone interview. “The devil is in the details, and there are a lot of details. There are new programs that didn’t exist last year and that don’t fit into existing models, new programs from last year we are still getting used to, and rules are changing midstream, so it’s a moving target to audit.”

A major challenge for auditors continues to be which guidance to apply and the timing of the Office of Management and Budget’s issuance of the Compliance Supplements and Addenda. Auditors need to be familiar with the requirements that apply to determine their audit scope, approach, and testing.

“The 2021 Compliance Supplement and Addenda will be applicable for audits of fiscal years ending on or after June 30, 2021. While we expect the 2021 Compliance Supplement to be issued this month, the Addenda is not expected until late fall. This may result in delayed single audits as auditors await compliance guidance necessary to complete major program testing,” Ward said. 

The timing of COVID-19 funding does not coincide with when the related regulations were developed, and keeping up with the changes has proved to be very challenging. New COVID-19 funding was signed into law at the end of December 2020 and again in March with the American Rescue Plan Act of 2021, P.L. 117-2, which allotted $1.9 trillion in aid. “The American Rescue Plan was the most significant amount of new money added to the system and includes new and existing programs that will be expended for the next three to five years,” Oakley said. “Some of the newly created programs are still under development, and the guidance may or may not be included in the 2021 Supplement.”

Like last year, auditors will again be waiting for additional OMB guidance to be issued in the second half of the calendar year.


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