The Office of Management and Budget released its 2022 Compliance Supplement on Thursday. The Compliance Supplement is the main tool that auditors use to evaluate federal programs, including federal education programs. States, districts, and colleges should become familiar with the Compliance Supplement to ensure they are meeting all program and fiscal requirements.
The Compliance Supplement includes 12 types of compliance requirements: activities allowed or unallowed and allowable costs/cost principles; cash management; eligibility; equipment/real property management; matching, level of effort, earmarking; period of performance; procurement, suspension & debarment; program income; reporting; subrecipient monitoring; and special tests and provisions. Of those 12 requirements, the U.S. Department of Education (ED) selects six for auditors to test in a given year for each federal education program. However, although auditors may not be testing all 12 requirements each year, grantees must still be in compliance on all elements.
Under the section discussing allowability for the Elementary and Secondary School Emergency Relief Fund (ESSER), the language describing what activities funds can be used for has been adjusted compared to the 2021 supplement. The 2021 Compliance Supplement indicated that funds must be used only for activities to “prevent, prepare for, and respond to the coronavirus.” The 2022 language aligns with clarifications from ED in recent months that grantees may use funding under ESSER “to support a very wide range of activities, including activities indirectly linked to the impact of COVID-19, as outlined in the ED Volume 2 COVID Handbook.”
The language surrounding time and effort requirements for education stimulus funds continues to be unclear from one year to another in the Compliance Supplement. The 2021 supplement said that time distribution records are required “for all employees including when an individual employee is splitting their time between activities that are allowable and unallowable” under stimulus programs. The 2022 supplement says that local educational agencies (LEAs) must maintain the records they normally maintain for salaries and wages, “except that LEAs must maintain time distribution records (sometimes called ‘time and effort’ reporting) if an individual employee is splitting their time between activities that may be funded under ESSER or [the Governor’s Emergency Education Relief Fund (GEER)] and activities that are not allowable under ESSER or GEER.” Given the lack of clarity surrounding the time and effort requirements, Brustein & Manasevit suggests that grantees maintain time and effort documentation, such as after-the-fact certifications, consistent with the grantee’s procedures – even for employees not splitting their time on allowable and unallowable activities (e.g., single cost objective employees).
The 2022 Compliance Supplement also adds new language regarding “minor remodeling,” saying that grantees and subgrantees may use education stimulus funds for minor remodeling “without triggering [ED’s] construction regulations in 34 CFR section 76.600 and 34 CFR sections 75.600-75.617.” This language was included in the 2021 supplement with regard to the Higher Education Emergency Relief Fund (HEERF) but had not previously been included for ESSER or GEER. The supplement provides examples of what constitutes minor remodeling, such as extension of utility lines, and that it means “minor alterations in a previously completed building.” The supplement also notes that grantees and subgrantees using stimulus funds for “minor remodeling, renovation or construction contracts that are over $2,000 and use laborers and mechanics must meet Davis-Bacon prevailing wage requirements.”
For HEERF, the supplement adds the option to use HEERF (a)(2) awards (funding designated for Historically Black Colleges and Universities, Minority Serving Institutions, Tribally Controlled Colleges, and Strengthening Institutions Programs) for construction but states that grantees must seek prior approval from ED and that funds cannot be used for construction associated with athletic facilities, sectarian instruction, or religious worship. The supplement has not been updated with the new period of performance for HEERF. In early April, ED extended the period of performance for all HEERF awards until June 30, 2023, but the compliance supplement still includes language stating that grantees must expend funds within one year “from the date when ED processed the most recent obligation of funds for each specific grant.”
Finally, similar to the 2021 Compliance Supplement, the 2022 supplement directs auditors to take a close look at noncompetitive procurements relying on the emergency exception in the Uniform Grant Guidance. However, new language is added stating that “[g]iven this [fiscal year 2022] Compliance Supplement covers grant activity from July 1, 2021 onward, it is unlikely that an institution would be able to utilize this previously-described flexibility from competitive procurement given the distance of July 1, 2021 from the beginning of the pandemic.”