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FY18 Compliance Supplement Serves as Transition to FY19

New Supplement Is Released On Time, But Offers a "Skinny" Version 

For those of us who could not cope with reading all of Moby Dick, or any number of other lengthy novels that were required reading in school, we often turned to a CliffsNotes student guide that presented an abbreviated, but complete version of the original. In this regard, the FY 2018 Compliance Supplement is abbreviated, however, it is not complete, making it unlike any other previous version, and creating the need to use dual sets of audit requirements, both FY 2018 and FY 2017 supplements. So much for the CliffsNotes version.

The FY 2018 Compliance Supplement only updated some sections of its 2017 version. Those sections without revision were not included in the 2018 supplement and are still effective, requiring auditors, auditees, and federal agencies alike to keep and use the prior 2017 supplement together with the new 2018 supplement for audits of fiscal years beginning after June 30, 2017.
 
The Table of Contents in the 2018 supplement describes where it adds, deletes, or supersedes sections in the 2017 supplement.
 
Highlights of Changes
 
There were some changes from the 2017 to the 2018 supplement. The National Defense Authorization Acts (NDAAs) of 2017 and 2018 both include language that raises the micro-purchase threshold from $3,500 to $10,000 for defense-related funding and certain nonfederal entities, including institutions of higher education and affiliated research labs and organizations; however, neither the uniform guidance nor the Federal Acquisition Regulation (FAR), has been updated as of this writing, to identify the applicability date. The 2018 Compliance Supplement affirms once the applicability date is determined, the FAR and the uniform guidance will be updated, and the new micro-purchase threshold can be implemented, but only for the specific nonfederal entities.

The NDAA of 2018, Sections 805 (41 USC 134) and 806 (41 USC 1902(a)(1)), also raises the simplified acquisition threshold from $150,000 to $250,000 for all nonfederal entities, but again, the applicability date has not been identified. Both the new micro-purchase and the simplified acquisition thresholds will become effective when they are formally codified in the FAR at 48 CFR Subpart 2.1 Definitions. The uniform guidance will follow the FAR. The FY 2018 Compliance Supplement warns that early implementation is not permissible, and therefore, the current thresholds remain in effect until the FAR is updated.
 
The three-fiscal year grace period for procurement (200.317-200.326) has ended. The uniform guidance procurement requirements are now required for all nonfederal entities with fiscal years beginning on or after December 26, 2017. Nonfederal entities must have written local procurement policies that reflect which procurement standards are followed, beginning at the identified fiscal year date.
 
The 2018 Compliance Supplement does not include an updated Matrix of Compliance Requirements in Part 2. Auditors must refer to programs described in Part 4 of the 2018 supplement, in Clusters Part 5, or in the 2017 matrix.
 
Part 4 in the 2018 supplement contains some additions and deletions of CFDA numbers and their associated programs. The remaining programs are described in the 2017 supplement.
 
Appendix VII contains some language relating to hurricanes Harvey, Irma and Maria.
 
Why Dual Supplements?
 
The President's Management Agenda, announced in March, describes Cross-Agency Priority (CAP) goals. One of the goals relates specifically to grants, CAP Goal Results-Oriented Accountability for Grants. Under Strategy 3 of the CAP goal, Risk-Based Performance Management, a key milestone was for OMB to issue a 2018 "skinny" single audit compliance supplement that will "allow for additional time and resources to be dedicated to the effort to streamline the FY 2019 single audit compliance supplement." In 2019, OMB will release a redesigned compliance supplement "with an increased focus on compliance requirements that inform performance." Updates will follow as more information becomes available.
 
Design of the Compliance Supplement
The compliance supplement contains seven parts and nine appendices, although much of this information must be located in the FY 2017 supplement, rather than the skinny version for FY 2018. In general, all compliance supplements are released annually, and provide requirements as well as additional information about single audits for auditors, but can also be helpful to auditees and federal agencies. Because of this year's skinny supplement, both the 2017 and the 2018 supplements must be used together.
 
For More Information
 
The 2018 Compliance Supplement can be accessed at: https://www.whitehouse.gov/omb/management/office-federal-financial-management/
 
The 2017 Compliance Supplement can be accessed at: https://www.whitehouse.gov/sites/whitehouse.gov/files/omb/circulars/A133/2017/Compliance_Supplement_2017.pdf.
 
To reach author Karen Norris, email knorris@k4rnoco.com.
 

 

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