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The Office of Management and Budget (OMB) released the final 2021 Compliance Supplement  on August 13. The publication adds five and deletes four programs and provides updates on Coronavirus Aid, Relief, and Economic Security (CARES) Act programs addressed in the 2020 Compliance Supplement Addendum.


In its efforts to reduce compliance areas, the 2021 Supplement continues with a risk-based data driven approach to compliance. The Federal Register notice indicates that comments on the Supplement can be submitted through August 30. Comments received will only be considered for next year’s (2022) Compliance Supplement.


The 2021 Supplement is effective for audits of fiscal years beginning after June 30, 2020, and it supersedes the 2020 Compliance Supplement (dated August 2020) and its Addendum (dated December 2020). In addition to usual additions, deletions, and modifications of the prior year’s Supplement, the publication continues the OMB mandate adopted in the 2019 Compliance Supplement that requires each federal agency to limit the number of compliance requirements subject to audit to six, with the exception of the Research and Development cluster.

Higher Education Emergency Relief Fund (HEERF)

Explanations of the Education Stabilization Funds under the Coronavirus Aid, Relief, and Economic Security (CARES) Act, the Coronavirus Response and Relief Supplemental Appropriations (CRRSAA) Act, and the American Rescue Plan (ARP) Act is in Part 4 of the Supplement, under section 84 (Department of Education). Section 2, within section 84, identifies the objectives and compliance requirements of subprograms focused on higher education, including HEERF programs. Department of Education FAQs and webinars addressing HEERF are referenced in Section 2.

Indirect Costs and HEERF

Section 2 of the 2021 Supplement (page 1127 of the PDF) makes clear that reasonable direct administrative costs and indirect costs at an institution’s approved negotiated indirect cost rate may be charged against Assistance Listing (formerly CFDA) 84.425F (the Institutional portion) and that an institution may not apply an indirect cost rate to its estimated amount of lost revenue (emphasis added). Further, no administrative costs and no indirect costs are allowed to be charged against Assistance Listing 84.425E (the Student Aid Portion), as CARES Act Section 18004(c), CRRSAA Section 314 (c)(3), and ARP 2003 require that these funds be used to provide emergency financial aid grants to students. All administrative costs must be reasonable and necessary and conform to Cost Principles described in 2 CFR Part 200 Subpart E of the Uniform Guidance.

Changes from 2020

All 2021 changes from the 2020 Compliance Supplement are included in Appendix V or in the Matrix of Compliance Requirement reflected in Part 2 of the 2021 Supplement. Due to the length and relatively late release of the 2021 Supplement, colleges and universities are advised to consult with their external auditors as soon as reasonably possible.


Sue Menditto

Senior Director, Accounting Policy


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