TLDR
The OMB Compliance Supplement is the rulebook that single auditors use to decide what to test in your federal programs. For nonprofits, it is also the most direct answer to the question 'what does our documentation need to cover?' — because the Supplement defines the compliance requirements that auditors will examine for each specific program.
The OMB Compliance Supplement is the single most useful document for understanding what a federal single audit will actually test — and therefore what your organization needs to document and maintain for each of its federal programs.
What the Compliance Supplement Does
The Supplement translates the general requirements of 2 CFR Part 200 (Uniform Guidance) into program-specific audit guidance. For each significant federal program — organized by federal agency and CFDA/Assistance Listing number — the Supplement answers four questions:
What are the applicable compliance requirements for this program?
What laws, regulations, and guidance govern those requirements?
What audit procedures should the auditor use to test compliance?
Are there any program-specific requirements beyond the 12 standard compliance areas?
The 12 standard compliance requirement areas are: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Cash Management; Eligibility; Equipment and Real Property Management; Matching, Level of Effort, and Earmarking; Period of Performance; Procurement, Suspension, and Debarment; Program Income; Reporting; Subrecipient Monitoring; and Special Tests and Provisions.
Not all 12 requirements apply to every program. For each program, the Supplement specifies which requirements are applicable (designated “A”) and which are not applicable (“N/A”). Auditors only test applicable requirements.
Why Nonprofits Should Read It
The Supplement is written for auditors, but its contents are directly relevant to the organizations being audited.
If the Supplement says that the Reporting compliance requirement for a specific program requires quarterly financial reports in a specific format, the organization must be able to demonstrate timely submission of those reports. If the Eligibility requirement for a program includes specific participant qualification criteria, the organization must have documentation showing that every person served met those criteria.
Reading the Supplement sections for your major programs — before audit fieldwork begins — reveals exactly what the auditor will examine. This allows targeted preparation rather than generalized documentation gathering.
The Annual Update and Version Control
The Supplement is updated annually. This matters because compliance requirements and audit procedures can change. A nonprofit managing a multi-year award should check the Supplement each year to identify changes in the applicable requirements for their programs.
When preparing for a single audit, confirm which version of the Supplement applies to your audit period. The version in effect during the fiscal year being audited is typically the controlling version.
See Also
Free resource
Get the 2 CFR 200 Audit Prep Checklist
A practical audit preparation checklist for federal grant recipients — organized by compliance area with notes on why auditors examine each item. Delivered by email.
Q&A
How often is the OMB Compliance Supplement updated?
The OMB Compliance Supplement is updated annually. The current year's Supplement applies to single audits with fiscal years that begin on or after its effective date. Audits covering prior periods may use the Supplement in effect during the audit period. Organizations should confirm which version of the Supplement applies to their specific audit period.
Q&A
Where can I find the current OMB Compliance Supplement?
The current OMB Compliance Supplement is available on the Office of Management and Budget's website at whitehouse.gov/omb and through the Federal Register. It is also available through the AICPA and various government auditing resource sites. The document is organized by federal agency and by CFDA/Assistance Listing number.
Q&A
Do nonprofits need to read the Compliance Supplement if they are not auditors?
Yes — with purpose. Nonprofits do not need to read the entire document, but they should read the sections covering each of their major federal programs. Those sections describe exactly what an auditor will test, which means they describe exactly what the nonprofit must be able to demonstrate. Reading the relevant Supplement sections is one of the most efficient audit preparation activities available.
Frequently asked