Skip to Content

OMB 2020 Compliance Supplement Addendum: Higher education considerations

February 5, 2021 Article 2 min read
Katie Thornton Sadie Mayle

External auditors will now need to follow OMB guidance regarding compliance with federal programs relating to COVID-19 relief, including the Education Stabilization Fund and Higher Education Emergency Relief Fund. Here’s what to know now. 

Close-up photo of red auditorium chairs.In December, the long-awaited 2020 Compliance Supplement Addendum (Addendum) was released by the Office of Management and Budget. The Addendum includes guidance that external auditors are required to follow for certain federal programs related to COVID-19 relief funding, including the Education Stabilization Fund (ESF). All ESF programs are administered under the CFDA #84.425. A significant amount of funds were made available to higher education institutions through an ESF subprogram called the Higher Education Emergency Relief Fund (HEERF).

Higher Education Emergency Relief Fund (HEERF) highlights

Auditees should read the entire HEERF section to understand the areas of compliance that will be subject to external audit. Here are some key takeaways related to the HEERF content included in the Addendum:

  • Funding received under CFDA 84.425 will be evaluated in aggregate for the purposes of audit testing, regardless of the subprogram that it was awarded under (denoted by the letter immediately following the 84.425 – i.e. 84.425E). Institutions primarily received funding under the HEERF subprograms, but could have received aid through other channels as well.
  • The compliance requirements subject to audit for funds awarded under HEERF programs are:
    • Activities allowed or unallowed
    • Allowable costs and cost principles
    • Matching, level of effort, and earmarking
    • Period of performance
    • Procurement suspension and debarment
    • Reporting
  • Testing of reporting compliance will be limited to testing of reports that were submitted during the fiscal year under audit. For June 30, 2020 fiscal year-ends, that will only include the special reporting related to student aid quarterly reporting for CFDA 84.425E that was required to be posted to the institution’s website prior to June 30, 2020.
  • The extent of testing performed by auditors will vary based on the underlying makeup of the expenditures. If CFDA 84.425 expenditures are required to be audited in fiscal years after 2020, there will likely be additional testing required. This is primarily related to the reports submitted during the institution’s fiscal year and to the earmarking requirement (that no less than 50% of funds received under Section 18004(a)(1) of the CARES Act were to be used to provide emergency financial aid grants).

Auditees should read the entire HEERF section to understand the areas of compliance that will be subject to external audit.

The Addendum was issued with no consideration of any changes to these federal programs that will result from the Consolidated Appropriations Act, 2021 (a COVID-19 relief bill). For example, the new legislation extended the period for spending under the Coronavirus Relief Fund program established by the CARES Act to Dec. 31, 2021. This extension is granted at the federal level, but funds passed through to institutions from states will not automatically be granted an extension. Another example is that additional funds will be administered by the Department of Education through the HEERF program, which the Department of Education is calling HEERF II. HEERF II will be an extension of the CARES Act HEERF program but comes with additional terms and conditions. We expect additional guidance from the federal agencies administering the programs, as well as OMB, as to the impact of program changes on future audits.

As you navigate the complexities of your federal funding, including HEERF II and other additional funding, we’re here and ready to help. Please don’t hesitate to reach out.

Related Thinking

Empty school desks
November 25, 2020

Preparing for disruption: Strategic planning for higher education

Article 5 min read
View of an empty parking lot with business buildings nearby.
October 30, 2020

Higher education: COVID-19/CARES Act guidance

White Paper 15 min read
Woman sitting at her desk using a laptop computer petting her pet cat.
August 11, 2020

Higher Ed: Are you prepared? Cybersecurity and IT tips for current times

Webinar 45 min watch