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What Higher Education Institutions Should Know About the 2021 Compliance Supplement

Written by Billy Minch on August 18, 2021

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Nonprofit organizations and governmental entities that administer or receive federal financial assistance are all familiar with the Compliance Supplement, a guide published each year by the Office of Management and Budget (OMB). This essentially provides a roadmap to guide auditors in performing Single Audits.

The New Compliance Supplement Has Been Released

On August 13, 2021, the OMB officially released the 2021 Compliance Supplement, which replaces the 2020 Supplement (issued in August 2020) and its Addendum (issued in December 2020). As with past Supplements, the 2021 edition includes the expected list of new programs (there are five), deleted programs (there are four) and provides updates on other programs.

According to the federal register, “the 2021 Supplement is a continuation of efforts to maximize the value of grant funding by applying a risk-based, data-driven framework that balances compliance requirements with demonstrating successful results.”

Consistent with the past two years, the 2021 Supplement allows for a maximum of six compliance areas for most programs (Research and Developments excluded). As in the past, the changes from the 2020 Supplement are summarized in Appendix V (page 1742 of the PDF), or if you prefer a matrix presentation, in Part 2 of the document. One interesting change you will immediately notice in this year’s Supplement is the usage of “Assistance Listing” instead of “CDFA.”

Highlights for Higher Education Institutions

Here, we’ve included some interesting reminders and other takeaways relating to the Department of Education  (ED)’s section on relief provided by the Education Stabilization Fund (ESF) to higher education institutions, more commonly known as Higher Education Emergency Relief Fund grants (HEERF I, HEERF II and HEERF III).

  • ESF awards include 22 subprograms, each with its own funding requirements and compliance requirements (Page 1097 of the PDF). The compliance supplement is broken into two sections:
    • Section 1 includes subprograms generally focused on primary and secondary education.
    • Section 2 includes subprograms focused on higher education, including:
      • 84.425E HEERF Student Aid Portion
      • 84.425F HEERF Institutional Portion
      • 84.425J HEERF Historically Black Colleges and Universities (HBCUs)
      • 84.425K HEERF Tribally Controlled Colleges and Universities (TCCUs)
      • 84.425L HEERF Minority Serving Institutions (MSIs)
      • 84.425M HEERF Strengthening Institutions Program (SIP)
      • 84.425N HEERF Fund for the Improvement of Postsecondary Education (FIPSE) Formula Grant
      • 84.425S HEERF Supplemental Assistance to Institutions of Higher Education (SAIHE) Program
  • Unlike in 2020, Section 2 of the 2021 Supplement includes updates for changes related to the latest round of higher education funding (American Rescue Plan Act). So, while there will be additional guidance coming in an addendum for Section 1 programs, we do not anticipate changes for the HEERF programs.
  • 84.425 Education Stabilization Fund programs, which include all HEERF programs, have been identified as “higher risk” by ED for major program determination purposes. This combined with the requirement that all 84.425 programs must be evaluated together, make it likely that 84.425 will be considered a major program for 2021.
  • ESF grants ARE NOT considered a part of the Student Financial Assistance cluster of programs for major program determination, so it is possible (even likely), that your auditors will select both Financial Aid and HEERF as major programs in 2021.
  • For 2021 Schedule of Expenditures of Federal Awards (SEFA) and Data Collection Form reporting, institutions will need to identify the individual subprograms the funds were expended under. (For example, even though all HEERF grants fall under the same Assistance Listing number, you would list 84.425E,F,J,K,L,M,N and S on separate lines in the SEFA.)
  • The reporting components auditors will likely be looking for in testing HEERF funding include:
    • For HEERF 1, annual reporting on the HEERF Data Collection Form (due to ED on February 8, 2021)
    • Quarterly student aid reporting meeting the various applicable deadlines established by the ED
    • Quarterly public reporting for institutional portion 84.425F and other subprograms as applicable (Quarterly public reporting for 84.425F must be “conspicuously posted on the institution’s primary website on the same page the reports of the IHE’s activities as to the emergency financial aid grants to students (Student Aid Portion) are posted.”)
  • The allowable cost discussion in Section 2 clarifies that reasonable direct administrative costs and indirect costs may be charged against program 84.425F (the institutional portion); however, “an institution may not apply an indirect cost rate to its estimated amount of lost revenue.”
  • Throughout Section 2, the OMB has included links to ED’s FAQs, webinars and other documents specifically related to HEERF, which can be helpful in locating the precise ED publication addressing a specific compliance requirement.

How To Use the Compliance Supplement for Your Institution

The 2021 Compliance Supplement includes over 1,700 pages of great information about many federal grants.

Unless you are an auditor, I cannot honestly recommend reading it from digital cover to cover. If, however, you are interested in reading about the background and compliance requirements of a particular program (for example HEERF) or cluster of programs (such as the ED’s Title IV programs) to prepare for your audit, or evaluate internal controls, I highly recommend taking a few minutes to do so.

Additional Resources and Assistance for Higher Education Institutions

As always, if you have questions about Single Audits, HEERF, Title IV or other federal programs, or any of the topics described above, please reach out directly to your Warren Averett advisor, or you can ask a member of our team to reach out to you.

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