The Compliance Supplement is a key tool for auditors when performing Single Audits under Uniform Guidance. But thanks to the key changes in the 2019 version, it is now an extremely helpful tool for auditees too.
The Supplement details the compliance areas that are subject to testing by the auditor. The most significant change for 2019 is that the American Institute of Certified Public Accountants’ (AICPA) Government Audit Quality Center worked collaboratively with the Office of Management and Budget (OMB) to overhaul Part 6, Internal Control. The result is an extensive matrix of suggested internal controls by compliance area and broken out by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework.
Part 6 can be a useful tool for auditees who are building or looking to strengthen their internal controls over their federal grant environment. The 2018 version of the supplement did not include a Part 6, but instead, referenced the 2017 Supplement for internal control guidance. That guidance was useful, but it was not broken out by compliance area and provided some basic best practices. The overhaul in the 2019 version is a deep dive into internal control with detailed suggestions of steps to implement.
For example, the 2017 Supplement mentions under the Control Activities section: “Adequate segregation of duties is provided between performance, review, and recordkeeping of a task.” The 2019 version has an entire appendix dedicated to control activities and the type of suggestions are much more detailed, as noted in the Activities Allowed or Unallowed section: “Management identifies and puts into effect actions needed to carry out specific responses to risks identified in the risk assessment process such as miscoding, inappropriate cost transfers, budget overages, segregation of duties concerns, unauthorized changes to system configurations, fraud, unauthorized payments, etc.”
While there are other significant changes to the Supplement, the Part 6 overhaul has the greatest potential to be useful to auditees.
The AICPA broke out the 2019 Supplement into smaller documents that are easily searchable, or you can view the full document on the OMB website. If you have any questions or need audit or consulting services around Uniform Guidance, please contact Carol Barnard at 301.231.6200.