The Uniform Grants Guidance - Compliance Starts Now Are You Ready?

Virginia Department of EducationRoanoke, VA  

July 2015

Leigh ManasevitBrustein & Manasevit, PLLClmanasevit@bruman.com www.bruman.com

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OMB Revised Administrative, Cost, Audit Rules Governing All

Federal Grants

Super CircularOmni Circular

Uniform Grant Guidance2 CFR Part 200 Regulations

Goals of the UGG/ Part 200 Regs 3

1. Reduce Fraud, Waste and Abuse in Federal Funds

2. Simplicity and Consistency

Created by COFAR

Council on Financial Assistance

Reform and Key Stakeholders

www.cfo.gov/cofar

Effective Dates: 4

• December 26, 2014 – Direct Grants from Federal Agencies and Indirect Cost Rates When Due for Renegotiation after this date.

• July 1, 2015 – State Administered Federal Programs

• July 1, 2016 – For Procurement Rules – ONLY if one year grace period is taken by agencies (as noted in their internal procedures).

Who is covered? 5

• All “nonfederal entities” expending federal awards. 200.69

• Some Federal agencies have applied subparts A through E to for-profit entities, foreign public entities or foreign organizations. 200.101(c)

• Audits: Subpart F applies to all as required under the Single Audit Act

What was consolidated? 6

• A-102 and A-110: Administrative Grant Rules • A-21, A-87 and A-122: Cost Principals• A-133 and A-50: Audit Rules• A-89: Catalog of Federal Domestic

Assistance

Structure of UGG/ Part 200 7

• Subpart A – Definitions• Subpart B – General Provisions• Subpart C – Pre Award Requirements• Subpart D – Post Award Requirements• Subpart E – Cost Principles• Subpart F – Audit Requirements

Applicability to Federal Awards8

• Applies to new federal awards if a federal awarding agency considers its incremental funding actions to be opportunities to change terms and conditions of previously made awards.

• Federal awarding agencies may apply UGG to the entire Federal awards that is uncommitted or unobligated as of the Federal award date or first increment after 12/26/14.

(COFAR FAQ .110-5 and .110-7 (Aug 29, 2014))

Applicability to Subawards9

• The effective date is the same as the effective date of the Federal award from which the subaward is made.

• Does not matter when the subaward is made – but the original Federal award from the Federal awarding agency.

(COFAR FAQ .110-11 (Aug 29, 2014))

Program Statutes Control 10

• If federal program statute differs from Part 200, then the Statute or Regulation governs. • 200.101(b)(3)

Federal Agency Changes 11

• All exceptions and more restrictive requirements MUST be approved by OMB. 200.102(c).

• Entities MUST check their applicable federal regulations to ensure compliance with specific agency exceptions. 200.107

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Grant Management Systems

1. Financial Management,2. Procurement, and 3. Property Standards.

Financial Management System (FMS) 13

1. NEW Identification of Federal Awards2. Financial Reporting3. Accounting Records4. Internal Control5. Budget Control6. NEW: Written Procedures to Implement CMIA7. NEW: Written Procedures to Determine Allowability!

Source Documentation (moved to 200.333 and incorporated into Accounting Records)

New: Identification of Federal Awards 14

• Accounts must be able to identify all Federal awards received and expended and the Federal programs under which they were received. 200.302(b)(1)• Must include CFDA title and number, Federal award

identification number and year• Name of Federal agency • Name of Pass-through entity, if any.

Financial Reporting 15

• Accurate, current, complete disclosure of financial results of each award• (Old) in accord with the financial reporting reqs of the

grant• (New) in accord with 200.327 and 200.328

• 200.327 – Federal awarding agency can only collect OMB approved data elements, no less than annually, no more than quarterly

• 200.328 – Non-federal entity must submit performance reports at intervals required by federal agency or pass-through. • Annual performance reports due 90 days after

reporting period; Quarterly performance reports due 30 days after reporting period

Financial Reporting (cont.) 16

Performance Metrics:1. Compare actual

accomplishments to objectives (quantify to extent possible)

2. Reasons goals were not met if appropriate

3. Additional pertinent information (e.g., analysis and explanation of cost overruns, high unit costs)

Accounting Records 17

Must identify source and application of funds (expenditure level detail) 200.302(b)(3)

Must contain information related to:• Authorizations;• Obligations 200.71;• Unobligated balances 200.98;• Assets;• Expenditures 200.34;• Income;• Interest; and• Be Supported by Source Documentation.

• Eliminated liabilities.

NEW: Internal Controls 200.303 18

• NEW: Internal controls (expanded)• The non-Federal entity must:

• Establish and maintain effective control over the federal award.

• Evaluate and monitor the non-federal entity’s compliance statutes, regulations, and terms of the federal award

• Take prompt action when instances are identified including noncompliance identified in audit findings

• Take reasonable measures to safeguard protected personally identifiable information as defined under 200.79

NEW: Required certifications 200.415 19

• NEW: Official authorized to legally bind the non-federal entity must certify on annual and final fiscal reports or vouchers requesting payment:• “By signing this report, I certify to the best of my

knowledge and belief that the report is true, complete and accurate and the expenditures, disbursements and cash receipts are for the purposes and objectives set forth in the terms and conditions of the federal award. I am aware that any false, fictitious, or fraudulent information or the omission of any material fact, may subject me to criminal civil or administrative penalties for fraud, false statements, false claims, or otherwise.”

NEW: Written Procedures on CMIA 20

• NEW: Must have Written Procedures to implement the requirements of 200.305 Payment (or the Cash Management Improvement Act (CMIA) rules)

Written Procedures on CMIA (cont.)21

• For states, payments are governed by Treasury – State CMIA agreements 31 CFR Part 205

• No Change

• For all other non-federal entities, payments methods must minimize time elapsing between draw from G-5 and disbursement (not obligation)

Written Cash Management Procedures (cont.) 22

• Written procedures must describe whether non-federal entity uses:1) Advance Payments (preferred)

• Limited to minimum amounts needed to meet immediate cash needs

2) Reimbursement• Pass-through must make payment within 30 calendar

days after receipt of the billing3) Working Capital Advance

• The pass-through determines that the non-federal entity lacks sufficient working capital Allows advance payment to cover estimated disbursement needs for initial period

Changes: Payment 200.305 23

Pass Through cannot require subgrantees maintain separate depository accounts• Subgrantee must be able to account for the receipt,

obligation and expenditureCash advances must be kept in interest bearing accounts

unless:• Entity received < $120,000 per year in Fed awards• Best interest bearing account would not earn >

$500/year• The depository would require high minimum balance• Foreign Gov or banking precludes interest bearing

accounts.Interest amounts up to $500 may be retained for

administrative expense

NEW: Written Procedures Allowable Costs 24

• Prior Rule: Must follow applicable cost principle to determine reasonableness, allowability, and allocability of all costs

• NEW: Must have Written Procedures for determining the allowability of costs in accordance with the UGG!

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ProcurementStates: 200.317

All Others: 200.318 through 200.326

Written Procedures 200.318 26

• Must have documented procurement procedures which reflect applicable Federal, State and local laws and regulations and the UGG standards.

• Can only contract with responsible contractors possessing the ability to perform successfully:• Contractor integrity• Compliance with public policy• Record of past performance• Financial and technical resources

Contract Administration 200.318(b) 27

• Nonfederal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of the contract

Conflict of Interest 200.318(c)(2) 28

• Same Conflict of Interest Standards

• NEW: If the non-federal entity has a parent, affiliate, or subsidiary organization that is not a state or local government the entity must also maintain written standards of conduct covering organization conflicts of interest

NEW: Conflict of Interest 200.112 29

• NEW: All non federal entities must establish conflict of interest policies, and disclose in writing any potential conflict to federal awarding agency in accordance with applicable Federal awarding agency policy.

NEW: Mandatory Disclosures 200.113 30

Non federal entity must disclose in writing in timely manner to federal agency or pass-through all violations of federal criminal law involving fraud, bribery or gratuity violations potentially affecting federal award

Methods of Procurement 200.320 31

• Method of procurement:• NEW: Micro-purchases (Value not to exceed $3,000)• Small purchase procedures (NEW: $150,000) 200.88• Competitive sealed bids• Competitive proposals• Noncompetitive proposals

NEW: Micro-purchases 200.320 32

• Micro-purchases must be distributed equitably among qualified suppliers, to the extent practicable.

• Micro-purchases may be awarded without soliciting competitive quotations if the non-Federal entity considers the price to be reasonable.

NEW: Methods of Procurement 200.320 33

Noncompetitive proposals appropriate only when:• The good or services is available only from a single

source (sole source)• There is a public emergency• Change: The awarding agency expressly authorizes

noncompetitive proposals in response to a written request from the non-Federal entity

• After soliciting a number of sources, competition is deemed inadequate

Cost/Price Analysis 200.323 34

• NEW: Must perform a cost or price analysis in connection with every procurement in excess of $150,000• Prior Rule: Must perform a cost or price analysis in

connection with every procurement action, including contract modifications

• Method and degree of cost or price analysis depends on the particular facts and circumstances

• Must make independent estimate before receiving bids or proposals

Contract Provisions 200.326 35

• Contracts must contain applicable provisions in Appendix II to Part 200• Suspension / Debarment

• Provisions include that a non-Federal entity must NOT contract with vendor who has been suspended or debarred• Must verify on System for Award

Management (SAM) at www.sam.gov

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Property standards

Property Definitions 37

Equipment 200.33 Tangible personal property, useful life of

more than one year, cost which equals or exceeds $5,000

Supplies 200.94 All tangible personal property other than

equipment. NEW: Computing devices are supplies if

less than $5,000 NEW: Computing Devices 200.20

Machines used to acquire, store, analyze, process, public data and other information electronically

Internal Controls 38

• Regardless of cost, grantee must maintain effective control and “safeguard all assets and assure that they are used solely for authorized purposes.” 200.302(b)(4)

Equipment 200.313 (cont) 39

NEW: The non-federal entity has conditional Title unless otherwise specified

Clarified: Shared use is allowed if such use will not “interfere”:

1st preference – projects supported by federal awarding agency

2nd preference – project funded by other federal agencies

3rd preference – use for non federally funded programs

NEW: Cannot “encumber” the property without approval of Federal agency or Pass-through agency

Equipment 200.313 (cont) 40

NEW: When grantee acquiring replacement equipment, the equipment to be replaced may be used as a “trade-in” without recourse to federal agency

NEW: Insurance Coverage 200.310 and 200.447 41

NEW: At a minimum, grantee must provide equivalent insurance coverage on equipment purchased with federal funds as provided to equipment purchased with nonfederal funds

NEW: Actual losses which could have been covered by permissible insurance are unallowable (unless provided in Federal award)

If, however, costs are not covered under nominal deductible insurance, costs are allowable

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Changes to Allowability Rules

Cost Principles: “Factors Affecting Allowability of Costs” 200.403 43

All Costs Must Be:1. Necessary, Reasonable and Allocable2. Conform with federal law & grant terms3. Consistent with state and local policies 4. Consistently treated5. In accordance with GAAP6. Not included as match7. Net of applicable credits (moved to 200.406)8. Adequately documented

New: Prior Written Approval 200.407 44

• In order to avoid subsequent disallowance:• Non-Federal entity may seek prior written

approval of cognizant agency (for indirect cost rate) or Federal awarding agency in advance of the incurrence of special or unusual costs

NEW: Direct v. Indirect Costs 200.413 45

• Salaries of administrative and clerical staff should be treated as “indirect” unless all of following are met:

1. Such services are integral to the activity2. Individuals can be specifically identified

with the activity3. Such costs are explicitly included in the

budget4. Costs not also recovered as indirect

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55 Selected items of cost

Listed in alphabetical order 200.420

Selected Items of Cost 47

Clarified: Advertising/PR 200.421◦Allowable for programmatic purposes

including:◦Recruitment◦Procurement of goods◦Disposal of materials◦Program outreach◦Public relations (in limited

circumstances)Alcohol 200.423

◦ Not allowable

Selected Items of Cost (cont.) 48• Conferences 200.432• Includes Meals / Conferences / Travel and Family

Friendly Policies• Allowable conference costs include rental of

facilities, costs of meals and refreshments, transportation, unless restricted by the federal award

• NEW: Costs related to identifying, but not providing, locally available dependent-care resources

• Conference hosts must exercise discretion in ensuring costs are appropriate, necessary and managed in manner than minimizes costs to federal award

Selected Items of Cost (cont.)

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• Travel Costs 200.474 (Changed)• Travel costs may be charged on actual, per

diem, or mileage basis• NEW: Travel charges must be consistent with

entity’s written travel reimbursement policies• NEW: Allows costs for “above and beyond

regular dependent care”• Grantee must retain documentation that

participation of individual in conference is necessary for the project

• NEW: Travel costs must be reasonable and consistent with written travel policy / or follow GSA 48 CFR 31.205-46(a)

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Time and Effort Documentation

200.430 Most flexible and most

changed Rule

Time and Effort Distribution Requirements 51

• Must be maintained for all employees whose salaries are: • Paid in whole or in part with federal funds

200.430 (i)(1)• Used to meet a match/cost share

requirement 200.430(i)(4)

Cost Objectives 52

What is a cost objective? 200.28 (slightly changed)

Program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate the measure the cost of processes, products, jobs, capital projects, etc.

NEW: “Standards for Documentation of Personnel Expenses” 200.430 53

• Charges for salaries must be based on records that accurately reflect the work performed.

1. Must be supported by a system of internal controls which provides reasonable assurance charged are accurate, allowable and properly allocated

2. Be incorporated into official records3. Reasonably reflect total activity for which employee is

compensated Not to exceed 100%

NEW: “Standards for Documentation of Personnel Expenses” 200.430 (cont)

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4.Encompass all activities (federal and non-federal)

5.Comply with established accounting polices and practices

6.Support distribution among specific activities or cost objectives

NEW: “Standards for Documentation of Personnel Expenses” 200.430 (cont)

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• NEW: Budget estimates alone do not qualify as support for charges to Federal awards 200.430(i)(1)(viii)

• NEW: Percentages may be used for distribution of total activities 200.430(i)(1)(ix)

NEW: Compliance 200.430(i)(2) 56

• NEW: For records which meet the standards, the non-federal entity will not be required to provide additional support or documentation for the work performed.

• DOL regulations for Fair Labor Standards Act must still be met (i.e. charges must be supported by records indicating the total nuber of hours worked each day).

NEW: Noncompliance 200.430(i)(8) 57

For a non-Federal entity where the records do not meet these standards:• USDE may require personnel activity reports

(PARs), including prescribed certifications or equivalent documentation that support the records as required in this section. • PARs are not defined!!

Reconciliation 200.430(i)(1)(viii)(C) 58

• NEW: All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.

Flexibility 200.430(i)(5)-(7) 59

Three Options:

•Substitute Systems• Grantees encouraged to adopt “substitute

systems” if approved by cognizant agency for indirect cost 200.430(i)(5) • This no longer applies to nonprofit

organizations (not listed under the section)

•NEW: Alternative Proposals

•NEW: Blended Funding

60Record Retention

NEW: Methods for collection, Transmission and storage of information 200.335 61

• When original records are electronic and cannot be altered, there is no need to create and retain paper copies.

• When original records are paper, electronic versions may be substituted through the use of duplication or other forms of electronic media provided they:• Are subject to periodic quality control

reviews, • Provide reasonable safeguards against

alteration; and • Remain readable.

62Requirements of pass-through entities

NEW: Federal awarding agency review of risk posed by applicants 200.205

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Federal Agencies must have in place a framework for evaluating risks before applicant receives funding

1. Financial Stability

2. Quality of Management System

3. History of Performance

4. Audit Reports

5. Applicant’s Ability to Effectively Implement Program

NEW: Monitoring and reporting program performance 200.328 64

Monitoring by the “Pass Through” Monitor to assure compliance with applicable

federal requirements and performance expectations are achieved

Must cover each program, function or activity(see also 200.331)

Must submit “performance reports” at least annually

NEW: Requirements for pass-through Entities 200.331 (cont.) 65

Depending on assessment of risk, the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals: 1. Training + technical assistance on program-related

matters2. On-site reviews3. Arranging for “agreed-upon-procedures”

engagements (described in 200.425)

Specific Conditions 200.207(a) 66

Federal agency or pass-through agency may impose additional Federal award conditions: Require reimbursement; Withholding authority to proceed until evidence of

acceptable performance; Additional detailed reporting Additional project monitoring; Require grantee to obtain technical or management

assistance; or Establish additional prior approvals.

Remedies for Noncompliance 200.338 67

• NEW: If noncompliance can not be remedied with Specific Conditions, the entity may take one or more of the following actions:• Temporarily withhold cash payment pending

correction• Disallow all of part of the cost• Wholly or partly suspend or terminate the Federal

award (see 200.339 Termination)• Initiate suspension or debarment proceedings

under 2 CFR Part 180• Withhold further Federal awards for the project or

program• Take other remedies that may be legally

available.

68Audit Requirements

Audit Requirements 200.501 69

• Audit threshold increased from $500,000 to $750,000

• The federal agency, OIG, or GAO may arrange for audits in addition to single audit 200.503

Audit Findings Follow-Up 200.511 70

• Auditees must prepare a summary schedule of prior audit findings and a corrective action plan for current year audit findings

Federal Agency Responsibilities 200.513 71

• The federal awarding agency must use cooperative audit resolution to improve federal program outcomes

• Cooperative Audit Resolution: means the use of audit follow-up techniques which promote prompt corrective action by improving communication, fostering collaboration, promoting trust and developing an understanding between the Federal agency and non-Federal entity 200.25.

Audit Findings 200.516 72

The auditor must report (for major programs):Significant deficiencies and material weaknesses in

internal controls Significant instances of abuse Material noncomplianceKnown questioned costs > $25,000

Auditor will not normally find questioned costs for a program that is not audited as a “major program”

NEW: But if auditor becomes aware of questioned costs > $25,000 for non-major program, must report

73 QUESTIONS ?

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74Disclaimer