Key Takeaways From the 2024 Compliance Supplement

Navigating the complex landscape of federal compliance can be daunting for government entities and not-for-profits receiving federal funding. The U.S. Office of Management and Budget (OMB) recently released the 2024 Compliance Supplement, which finalizes some previously proposed changes and brings significant updates that aim to streamline processes and enhance accountability. Here are eight key takeaways that entities should be aware of in 2024 and beyond.

1. Increased Audit Thresholds

One of the most notable changes is the increase in the Uniform Guidance audit threshold. Previously set at $750,000, the threshold has now been raised to $1 million. This means that entities expending less than $1 million in federal awards within a fiscal year are no longer required to undergo a single audit. Additionally, the Type A program classification threshold has been increased to $1 million, applicable to awards expended up to $34 million. This change aims to reduce the audit burden on smaller entities and focus resources on larger programs with higher risk profiles.

2. Revised Indirect Cost Rates

The de minimis indirect cost rate, which allows entities to recover a portion of their indirect costs without negotiating a rate, has been increased from 10% to 15%. This adjustment is designed to provide additional financial relief to entities, helping them cover more of their overhead expenses related to federal programs. It is crucial for entities to review their current indirect cost rate agreements and consider whether opting for the de minimis rate is beneficial under the new guidelines.

3. Updated Equipment and Supply Thresholds

The thresholds for equipment and supplies have also been updated. The new threshold for equipment and supply purchases has been raised from $5,000 to $10,000. This change simplifies the procurement process for entities by reducing the administrative burden associated with smaller purchases, allowing for more efficient management of federal funds.

4. Enhanced Cybersecurity Requirements

New requirements related to cybersecurity measures have been introduced. Given the increasing threat of cyberattacks, entities must now implement and document robust cybersecurity controls to protect sensitive data associated with federal programs. These measures are critical to ensure the integrity and security of financial and programmatic information.

5. Program-Specific Updates

Several frequently audited major programs have undergone significant updates, including the following:

• • • Education Stabilization Fund (ESF – 84.425): Now classified as a normal-risk program with minor changes
    • Child Nutrition Cluster: Revised descriptions for allowable costs and updated eligibility guidance
    • Coronavirus State and Local Fiscal Recovery Funds (CSLFRF – 21.027): Significant updates reflecting the latest Treasury FAQs and maintaining its higher-risk designation
    • Supportive Housing for the Elderly (Section 202): Expanded allowable activities and regulatory updates
    • Student Financial Assistance Cluster: New requirements for Pell Grants for incarcerated individuals and updates to special reporting requirements

6. Clarification on Improper Payments

Payments that lack sufficient documentation are now to be treated as improper payments. This clarification underscores the importance of maintaining thorough and accurate documentation for all expenses related to federal awards. Entities must ensure that they have robust record-keeping practices in place to avoid the risk of improper payments, which can lead to significant financial penalties and increased scrutiny.

7. Procurement Changes Under the Build America, Buy America Act

The new audit procedures introduced by the Build America, Buy America Act (BABA) require entities to provide documentation supporting contractor compliance with BABA provisions. This entails ensuring that all procurement processes and contracts align with the requirements to prioritize American-made goods and materials, thereby supporting domestic manufacturing and job creation.

8. Federal Audit Clearinghouse Transition and Submission Due Dates

The transition of the Federal Audit Clearinghouse to the General Services Administration introduced a new submission approach, necessitating staff education. Notably, there are no current submission waivers in effect. The single audit submission due date remains the earlier of nine months after the end of the audit period or 30 calendar days after the auditor’s report is received. This change requires entities to adapt to new submission processes while adhering to existing deadlines, emphasizing the need for timely and accurate report submissions.

The 2024 Compliance Supplement highlights the evolving landscape of federal compliance, with increased thresholds and enhanced requirements aimed at improving efficiency and accountability. These changes, while designed to streamline processes, also introduce new challenges and responsibilities for entities receiving federal funds. Connect with your KSM advisor or contact us to learn more about how we can support your federal compliance needs and help you achieve your organizational goals.