Navigating the OMB Super Circular &

Navigating the OMB Super Circular &
CSBG Standards from a Legal Perspective Region 8 & 10 Conference May 13, 2014 Eleanor Evans, Esq. CAPLAW (617) © 2014 Community Action Program Legal Services, Inc.

Navigating the OMB Super Circular
© 2014 Community Action Program Legal Services, Inc.

What Is the Super Circular?
Office of Management and Budget uniform guidance that supersedes Grant administrative circulars A-110 and A-102 Cost principle circulars A-122, A-87, A-21 Audit circulars A-133 and A-50 Circular A-89 (catalogue of federal financial assistance) Codified at 2 C.F.R. Part 200 Each federal agency will adopt by regulation Uniform guidance to supersede A-21 (cost principles for EIs), A-87 (cost principles for states), A-110 (admin requirements for EIs, hospitals, nonprofits), A-122 (cost principles for nonprofits), A-89 (catalog of federal financial assistance), A-102 (grants and coop agreements with states), A-133 (audit principles for states and nonprofits), A-50 (audit follow-up). © 2014 Community Action Program Legal Services, Inc.

© 2014 Community Action Program Legal Services, Inc.
What Was the Process? Feb. 28, 2012 Advance Notice of Proposed Guidance Feb. 1, 2013 Notice of Proposed Guidance Comment period Final guidance issued Dec. 26, 2013 Nov. 23, 2009 Executive Order on Reducing Improper Payments Feb. 28, 2011 Presidential Memorandum on Administrative Flexibility, Lower Costs, and Better Results for State, Local, and Tribal Governments OMB has explained that “the President directed OMB to work with Executive Branch agencies; state, local and tribal governments; and other key stakeholders to evaluate potential reforms to Federal grant policies.” See FAQ on Super Circular. © 2014 Community Action Program Legal Services, Inc.

When Will It Go into Effect?
Federal agencies have 6 months from Dec. 26, 2013 to release regulations based on 2 C.F.R. Part 200 Federal agencies must implement Super Circular by promulgating regs to be effective by Dec. 26, 2014 Super Circular will apply to new awards and additional funding to existing awards made after Dec. 26, 2014 Audit requirements will apply to audits of fiscal years that start on or after Dec. 26, 2014 OMB plans to publish the 2014 Single Audit Compliance supplement in April 2014 © 2014 Community Action Program Legal Services, Inc.

Subpart A - Definitions
§ § Combines definitions from administrative requirements found primarily in A and A-102 and the cost principles outlined in A-122. Contains new terms The following slides examine a selection of definitions © 2014 Community Action Program Legal Services, Inc.

Non-Federal Entity A state, local government, Indian tribe, institution of higher education (IHE), or nonprofit organization that carries out a federal award as a recipient or subrecipient © 2014 Community Action Program Legal Services, Inc.

Recipient A non-federal entity that receives a federal award directly from a federal awarding agency to carry out an activity under a federal program The term recipient does not include subrecipients © 2014 Community Action Program Legal Services, Inc.

Subrecipient A non-federal entity that receives a subaward from a pass-through entity to carry out part of a federal program A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency Does not include an individual who is a beneficiary of a federal program © 2014 Community Action Program Legal Services, Inc.

Fixed Amount Awards A grant award where funding source provides a specific level of support without regard to actual costs incurred. This is a performance and results- oriented grant. Rules concerning fixed amount awards are in § and § Fixed amount awards do not permit grantees to earn a profit. © 2014 Community Action Program Legal Services, Inc.

The Word “Should” Not in the definitions “Should” in the in regulations indicates a best practice suggestion The FAQ released by Council on Federal Assistance Reform (COFAR) on Feb. 12, 2014 explain that the word “should”, which is used throughout the regulations, does not signify “must.” Grantees are not necessarily required to comply with these recommendations. Link to 2/14/14 COFAR FAQ: content/uploads/2013/01/2-C.F.R.-200-FAQs pdf © 2014 Community Action Program Legal Services, Inc.

Subpart B - General Provisions

Purpose Federal awarding agencies must not impose additional or inconsistent requirements Except as provided in (Exceptions) and (Information contained in a federal award) or unless specifically required by a federal statute, regulation or Executive Order © 2014 Community Action Program Legal Services, Inc.

Applicability Super Circular requirements apply to federal agencies that make federal awards to non-federal entities Terms and conditions of federal awards (including Super Circular) flow down to subawards to subrecipients unless a particular section of the Super Circular or the terms and conditions of the federal award specifically indicate otherwise Nonfederal entities must comply with Super Circular regardless of whether they are recipients or subrecipients Also a section on how Super Circular applies to federal award of cost-reimbursement contract under the FAR © 2014 Community Action Program Legal Services, Inc.

Applicability (cont.) Pass-through entities must comply with: § – Subrecipient and contractor determinations § – Requirements for pass-through entities § – Fixed amount subawards But they are not required to comply with any requirements in Super Circular directed towards federal awarding agencies unless Super Circular or terms and conditions of federal award require otherwise © 2014 Community Action Program Legal Services, Inc.

Applicability (cont.) These provisions § – Requirement to provide public notice of federal financial assistance programs § – Subrecipient and contractor determinations § – Requirements for pass-through entities § – Fixed amount subawards are the only Super Circular provisions that apply to the following programs: © 2014 Community Action Program Legal Services, Inc.

Applicability (cont.) Block grants authorized under Omnibus Reconciliation Act of 1981, including: CSBG LIHEAP Social Services Preventive Health and Health Services Alcohol, Drug Abuse, and Mental Health Services Maternal and Child Health Services States’ program of CDBG awards for small cities Elementary and Secondary Education Alcohol and Drug Abuse Treatment and Rehabilitation Mental Health Service for the Homeless © 2014 Community Action Program Legal Services, Inc.

Applicability (cont.) Federal awards authorized under the Child Care and Development Block Grant Act of 1990 Child Care and Development Block Grant Child Care Mandatory and Matching Funds of the Child Care and Development Fund © 2014 Community Action Program Legal Services, Inc.

Applicability (cont.) Only § (Requirement to provide public notice of federal financial assistance programs) applies to: Entitlement programs, such as: Medicaid TANF Child and Adult Care Food Program Summer Food Service Program for Children Commodity Assistance Non-discretionary federal awards under the following programs: Special Supplemental Nutrition Program for Women, Infants and Children (WIC) The Emergency Food Assistant Programs Commodity Supplemental Food Program © 2014 Community Action Program Legal Services, Inc.

Exceptions Except for Subpart F – Audit Requirements, OMB may grant exceptions for classes of federal awards or non-federal entities subject to the requirements of the Super Circular, when not prohibited by statute, but will do so only in unusual circumstances Federal awarding agency or cognizant agency for indirect costs may authorize exceptions on a case-by-case basis except where otherwise required by law or where OMB or other approval required © 2014 Community Action Program Legal Services, Inc.

Exceptions (cont.) Federal awarding agency may apply more restrictive requirements to a class of federal awards or non-federal entities when approved by OMB, required by federal statutes or regulations except for requirements of Subpart F – Audit Requirements Federal awarding agency may apply less restrictive requirements when making fixed amount awards except for requirements imposed by statute or in Subpart F – Audit Requirements © 2014 Community Action Program Legal Services, Inc.

Exceptions (cont.) OMB will approve new strategies for federal awards on a case-by-case basis when proposed by the federal awarding agency in accordance with OMB guidance to develop additional evidence relevant to addressing important policy challenges or to promote cost-effectiveness in and across federal programs © 2014 Community Action Program Legal Services, Inc.

200.105 Effect on Other Issuances
All federal agency administrative requirements, program manuals, handbooks and other non-regulatory materials that are inconsistent with the requirements of the Super Circular will be superseded upon implementation of Super Circular by the federal agency Except as required by statute or authorized as an exception by OMB © 2014 Community Action Program Legal Services, Inc.

Inquiries Federal agencies are to direct inquiries to OMB Non-federal entities are to direct inquires to their federal awarding agency, cognizant agency for indirect costs, cognizant or oversight agency for audit, or pass-through entity as appropriate © 2014 Community Action Program Legal Services, Inc.

Conflicts of Interest The funding source must establish conflict of interest policies for federal awards Grantees must disclose any potential conflicts in writing to the federal awarding agency or pass-through entity (e.g., state) in accordance with federal awarding agency policy © 2014 Community Action Program Legal Services, Inc.

200.113 Mandatory Disclosures
Non-federal entity or applicant for federal award must disclose, in a timely manner, in writing to the federal awarding agency or pass-through entity, all violations of federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the federal award © 2014 Community Action Program Legal Services, Inc.

Subpart C - Pre-Award Requirements

200.203 Notice of Funding Opportunities
Requires standard format for funding announcements Requires funding source specify criteria and process to be used in evalauting applications Funding opportunities must generally be open for at least 60 days, and never less than 30 days © 2014 Community Action Program Legal Services, Inc.

200.204 & 200.205 Review of Merit and Risk
For competitive awards, federal awarding agency must use review applications based on merit Federal awarding agency must also review risks associated with a potential award Must review info available through OMB-designated repositories of governmentwide eligibility information (e.g., Federal Awardee Performance and Integrity Information System, Dun and Bradstreet, and “Do Not Pay”) © 2014 Community Action Program Legal Services, Inc.

Specific Conditions Federal awarding agency or pass-through entity may impose specific conditions based on federal awarding agency review of risk posed by applicants, when an applicant or recipient has a history of failure to comply with terms and conditions of federal award, or failure to meet expected performance goals, or is not otherwise responsible Section provides non-exhaustive list of examples of specific conditions (e.g., requiring reimbursements rather than advances, more detailed financial reports, or T&TA) © 2014 Community Action Program Legal Services, Inc.

200.207 Specific Conditions (cont.)
Federal awarding agency or pass-through entity must notify applicant or non-federal entity: Nature of additional requirements Reason why they are being imposed Action needed to remove them, if applicable Time allowed for completing those actions Method for requesting reconsideration of additional requirements Any special conditions must be promptly removed once the conditions that prompted them have been corrected © 2014 Community Action Program Legal Services, Inc.

200.208 Certifications and Representations
Generally certifications and representations are to be submitted on an annual basis, however submission may be required more frequently if the non-federal entity fails to meet an a award requirement © 2014 Community Action Program Legal Services, Inc.

200.211 Public Access to Federal Award Info
All applicable federal awards must be announced publicly and published on a publicly available designated government website As of now this information will be on © 2014 Community Action Program Legal Services, Inc.

Subpart D - Post-Award Requirements
Important changes to internal controls, real property, equipment, storage of information, and post-closeout. Procurement provisions found in §§ are new for nonprofits and outline specific procurement methods that must be followed © 2014 Community Action Program Legal Services, Inc.

200.301 Performance Measurement
When applicable, recipients must provide cost information to demonstrate cost effective practices (e.g., through unit cost data) Recipients’ performance should be measured in a way that will help the federal awarding agency and other non-federal entities to improve program outcomes, share lessons learned, and spread the adoption of promising practices © 2014 Community Action Program Legal Services, Inc.

Financial Management Emphasizes that state and other non-federal entities’ financial management systems, including records documenting compliance with federal statutes, regulations and award terms and conditions, must be sufficient to permit the preparation of required reports and tracing of funds to a level of expenditures adequate to establish that funds have been used according to federal statutes, regs and award terms and conditions © 2014 Community Action Program Legal Services, Inc.

200.302 Financial Management (cont.)
Among other things, non-federal entity’s financial management system must provide for identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received Federal program and federal award identification must include, as applicable, CFDA title and number, federal award ID number and year, name of the federal agency, and name of the pass-through entity, if any © 2014 Community Action Program Legal Services, Inc.

Internal Controls Non-federal entities must: Establish and maintain effective internal control that provides reasonable assurance that they are managing federal award in compliance with federal statutes, regs and award terms and conditions Internal controls should comply with “Standards for Internal Control in the Federal Government” (U.S. Comptroller General) and “Internal Control Integrated Framework” (Committee of Sponsoring Organizations of the Treadway Commission, or COSO) Comply with and evaluate and monitor their compliance with federal statutes, regs and award terms and conditions © 2014 Community Action Program Legal Services, Inc.

200.303 Internal Controls (cont.)
Non-federal entities must: Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings Take reasonable measures to safeguard protected personally identifiable information and other designated sensitive information. © 2014 Community Action Program Legal Services, Inc.

200.79 Personally Identifiable Information (PII)
Information that can be used to distinguish or trace an individual’s identity, either alone or when combined with other personal or identifying information that is linked or linkable to a specific individual …. © 2014 Community Action Program Legal Services, Inc.

200.306 Cost Sharing or Matching
Shared costs, matching funds and contributions must be accepted as part of non-federal entity’s cost sharing or matching when various criteria are met, including: They are not paid by the federal government under another federal award, except where the federal statute authorizing a program specifically provides that federal funds made available for such program can be applied to matching or cost sharing requirements of other federal programs © 2014 Community Action Program Legal Services, Inc.

and Real Property Except as otherwise provided by federal statutes or by the federal awarding agency, encumbering title of real property not permitted. See § Grantee must submit a report at least annually on the status of real property in which the federal government has an interest. Where the interest extends 15 years or more the funding source may allow reporting at various multiyear frequencies. See § © 2014 Community Action Program Legal Services, Inc.

Equipment Equipment may be encumbered with prior approval Disposition instructions are needed only if required by the terms of the award. Otherwise items of equipment with a current per-unit FMV of $5000 or less may be retained, sold, or disposed of with no further obligation to the federal awarding agency Rules on disposition on higher valued equipment are similar to current rules © 2014 Community Action Program Legal Services, Inc.

Supplies All tangible personal property other than that defined as “Equipment” A computing device is a supply if the acquisition cost is less than the lesser of the capitalization level established by the non-federal entity for financial statement purposes or $5,000, regardless of the length of its useful life © 2014 Community Action Program Legal Services, Inc.

200.318 General Procurement Standards
Grantees are required to maintain written standards of conduct that cover conflicts of interest. Conflict of interest policy must also cover parent, affiliate, and subsidiary. Grantees also encouraged to enter into state/local intergovernmental or inter-entity agreements to share goods and services. Records must also detail the history of procurement and the rationale for the method of procurement, selection of contract type, contractor selection/rejection, and basis for contract price. Much of language in this section is based on old A-110 language. © 2014 Community Action Program Legal Services, Inc.

Competition All procurement transactions must be conducted in a manner providing full and open competition But cost or price analysis no longer required for every procurement transaction May not apply state or local geographic preferences, except where required or encouraged by federal statute © 2014 Community Action Program Legal Services, Inc.

200.320 Methods of Procurement
Rules now outline specific methods of procurement and requirements for each method: Micro-purchases for $0 - $3000 Small purchases for Simplified Acquisition Threshold of $150,000 or less. Price and rate quotes must be obtained. Sealed bids Competitive proposals Non-competitive proposals (sole source) © 2014 Community Action Program Legal Services, Inc.

Micropurchase A purchase of supplies or services using simplified acquisition procedures, the aggregate amount of which does not exceed the micro-purchase threshold Threshold set by 48 C.F.R. Subpart 2.1 (Definitions in Federal Acquisition Regulation (FAR)) Currently $3,000, but adjusted periodically for inflation © 2014 Community Action Program Legal Services, Inc.

200.88 Simplified Acquisition Threshold
The dollar amount below which a non-federal entity may purchase property or services using small purchase methods Non-federal entities adopt small purchase procedures in order to expedite the purchase of items costing less than the simplified acquisition threshold Set by 48 C.F.R. Subpart 2.1 (Definitions for FAR) Currently $150,000, but adjusted periodically for inflation © 2014 Community Action Program Legal Services, Inc.

Procurement Standards
Cost or price analysis is required for any procurement in excess of the Simplified Acquisition Threshold ($150,000). See § (a) Non-federal entity must take all necessary affirmative steps to assure that minority businesses, women’s business enterprises and labor surplus firms are used when possible. See § Current A-110 language requires “positive efforts” © 2013 Community Action Program Legal Services, Inc.

Procurement Standards
Profit must be negotiated as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed (sealed bids, competitive proposals, and non-competitive procurement) . See § (b) Non-federal entity must make certain information and records regarding its procurement procedures available to the federal awarding agency or pass-through entity upon request for pre-procurement review. See § © 2013 Community Action Program Legal Services, Inc.

200.331 Requirements for Pass-Through Entities
Pass-through entities must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes certain specified information at time of the subaward and to notify subrecipient of any changes in a subaward modification Notably, required info includes (among other things): An approved federally recognized indirect cost rate negotiated between the subrecipient and the federal government, or if no such rate exists, either a rate negotiated between the pass-through entity and the subrecipient or a de minimis indirect cost rate © 2014 Community Action Program Legal Services, Inc.

200.414(f) De Minimis Indirect Cost Rate
Any non-federal entity that has never received a negotiated indirect cost rate may elect to charge a de minimis rate of 10% of modified total direct costs which may be used indefinitely If chosen, must be used consistently for all federal awards until the non-federal entity chooses to negotiate for a rate, which it may do at any time © 2014 Community Action Program Legal Services, Inc.

200.68 Modified Total Direct Costs
All direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and subawards and subcontracts up to the first $25K of each subaward or subcontract (regardless of the period of subawards and subcontracts under the award) Does not include equipment, capital expenditures, … rental costs, … and the portion of each subaward and subcontract that exceeds $25K Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs © 2014 Community Action Program Legal Services, Inc.

200.331 Requirements for Pass-Through Entities (cont.)
Pass-through entities also required to: Evaluate subrecipient’s risk of noncompliance for purposes of determining appropriate subrecipient monitoring Consider imposing specific subaward conditions if appropriate Monitor subrecipient’s activities as necessary to ensure it is used for authorized purposes and in compliance with federal statutes, regs and terms and conditions of subaward, and that performance goals are achieved (suggests certain monitoring tools, such as T&TA, onsite reviews etc.) © 2014 Community Action Program Legal Services, Inc.

200.331 Requirements for Pass-Through Entities (cont.)
Pass-through entities also required to: Verify that every subrecipient is audited as required by Subpart F – Audit Requirements where subrecipient’s federal awards expended during a fiscal year exceed audit threshold Consider whether results of subrecipient’s audits, on-site reviews or other monitoring indicate conditions that necessitate adjustments to pass-through entity’s records Consider taking enforcement action against noncompliant subrecipients © 2014 Community Action Program Legal Services, Inc.

Record Retention and Access
Electronic storage of records is now permitted and encouraged. When original records are electronic and cannot be altered there is no need to create and retain paper copies. See § No federal awarding agency may place restrictions on the non-federal entity that limit public access to the records of the non-federal entity pertinent to a federal award, except for PII and certain other situations. See § Period for which federal agencies may disallow costs after award closeout is now limited to the 3-year record retention period. See § But federal government may collect amounts due to it at any time. See § © 2014 Community Action Program Legal Services, Inc.

Enforcement and Appeals
Federal awarding agency and pass-through entity remedies for noncompliance specified in § Circumstances in which award may be terminated (including by pass-through entity) specified in § Federal awarding agency or pass-through entity must comply with any requirements for hearings, appeals or other administrative proceedings to which the non-federal entity is entitled under any statute or regulation applicable to the action involved. See § © 2014 Community Action Program Legal Services, Inc.

Subpart E – Cost Principles

200.400 Policy Guide Awardees responsible for:
Administering award efficiently and effectively using sound management practices Recognition of each entities unique combination of staff, facilities and experience Complying with funding source requirements Maintaining internal accounting policies and practices consistent with cost principles Supporting costs charged with adequate documentation Not earning or keeping any profit unless expressly authorized by award terms & conditions The cost principles part of the Super Circular begins with a Policy Guide which is general, introductory language that is mostly from OMB Circulars A-87 and A-21 and new for nonprofits previously covered by OMB Circular A This language sets the tone for the revised cost principles and emphasizes the implementation of a framework to better mitigate the risk of waste, fraud and abuse. All non-federal entities will be responsible for: Administering Federal funds efficiently and effectively using sound management practices; Complying with funding source requirements; Maintaining internal accounting policies and practices consistent with cost principles; Supporting costs charged with adequate documentation; and Not earning or keeping any profit unless expressly authorized by award terms & conditions. The Policy Guide explains that the cognizant agency for indirect costs is charged with generally assuring that a non-federal entity is applying the cost principles on a consistent basis. The definition of cognizant agency for indirect costs is included in the new definitions section of the Super Circular and refers to the Federal agency responsible for reviewing, negotiating, and approving cost allocation plans or indirect cost proposals on behalf of all Federal agencies. The Policy Guide also assumes that most non-federal entities have been following the principles set forth in the Super Circular and the continued application of such should not require any significant changes in internal accounting policies and practices. Moreover, in recognizing each entity’s unique combination of staff, facilities and experience, the Policy Guide refrains from dictating the exact organizational and management techniques necessary to meet the cost principle requirements © 2014 Community Action Program Legal Services, Inc. © 2014 Community Action Program Legal Services, Inc. 63

Cost Principles: Basic Considerations
Similar to the individual OMB Circulars, the Super Circular describes the general factors that all non-federal entities must consider when determining if and how a cost may be paid for with federal funds. One major change to these factors, which will be discussed in greater detail below, is the treatment of indirect costs. © 2014 Community Action Program Legal Services, Inc.

Allocable Costs Still may not shift costs to overcome funding deficiencies or avoid restrictions; however, costs that are allowable under two or more federal awards may be shifted if permitted by existing federal statutes, regulations or award terms and conditions Even though both nonprofit and public CAAs still may not shift costs to overcome funding deficiencies or avoid restrictions, the Super Circular permits costs that are allowable under two or more federal awards to be shifted if allowed by existing federal statutes, regulations or award terms and conditions. Still consider relative benefit received when allocating costs. Head Start and Childcare partnerships seem like a prime candidate because they fall under the same department. © 2014 Community Action Program Legal Services, Inc.

Allocable Costs Direct cost allocation principles: If a cost benefits two or more projects or activities: in determinable proportions, cost should be allocated based on proportional benefit in non-determinable proportions, costs may be allocated or transferred on any reasonable documented basis Equipment or other capital assets costs are assignable to the authorizing federal award regardless of the use when no longer needed for original purposes Another change for both nonprofit and public CAAs is the addition of direct cost allocation principles. These principles clarify how a CAA allocates direct costs. Under the Super Circular, if a cost benefits two or more projects or activities: in determinable proportions, cost should be allocated based on proportional benefit in non-determinable proportions, costs may be allocated or transferred on any reasonable documented basis. Costs associated with equipment or other capital assets are assignable to the authorizing federal award regardless of how they are used when they are no longer needed for their original purposes. Able to allocate direct costs when proportions are non-determinable -- allows for more flexibility so you could allocate to program based on square foot © 2014 Community Action Program Legal Services, Inc.

200.407 Prior Written Approval
Now grouping of all prior approval requirements in one regulation Absence of prior approval will not affect reasonableness or allocability determination unless prior approval was specifically required The Super Circular now groups all prior approval requirements in one regulation; making it easier for a non-federal entity to determine if prior approval from a funding source is required before a certain action may be taken regarding a particular cost. Preamble: list of prior approval included to ensure requirements are transparent and to reduce burden Obtained typically when reasonableness and allocability of items of cost are difficult to determine © 2014 Community Action Program Legal Services, Inc.

200.411 Adjustment of Previously NICR Containing Unallowable Costs
Generally, unallowable costs included in NICR must be adjusted and/or a refund made: Not a reopening of the rate negotiation Future – unallowable costs removed, rates adjusted Past – cash refund (including interest) issued If provisional or fixed rates, adjustments will be made when rates finalized Current – adjustment made or refund issued New for both nonprofit and public CAAs is the treatment of unallowable costs included in negotiated indirect cost rates (NICR). The Super Circular explains that a NICR must be adjusted and/or a refund made if an unallowable cost is included in the rate. Adjustments are not considered to be a reopening of the rate negotiation. Adjustment of previously negotiated (F&A) cost rates containing unallowable costs Addition to A-122 & A-87 (in A-21) – generally if unallowable costs included in NICR then rate must be adjusted and/or refund made, if applicable If NICR based on a proposal that included unallowable costs as specified by federal statute, reg or T&C or not allocable to federal award, then NICR must be adjusted no matter the type or a refund must be made. This is not considered a reopening of the rate negotiation NICRs covering future periods must remove unallowable costs and adjust rates NICRS covering past periods will result in a cash refund (including interest) to the fed. Gov’t. If past periods covered by provisional or fixed rates, adjustments will be made when rates finalized to avoid duplicate recovery of unallowable costs by fed gov’t NICRS covering current periods will result in an adjustment or refund as required by the cognizant agency for indirect cost Amount or proportion of unallowable costs included in each year’s rate will be assumed to be the same as the amount or proportion of the unallowable costs in the base year proposal used to establish the rate © 2014 Community Action Program Legal Services, Inc.

Direct Costs Salaries of administrative and clerical staff will be treated as indirect (F&A) costs Direct charging allowed if: Costs integral to a project or activity; Individuals involved specifically identified with the project or activity; Costs explicitly included in budget or prior written approval received; and Costs not recovered as indirect A significant change for both nonprofit and public CAAs is the added requirement to treat salaries of administrative and clerical staff as indirect (F&A) costs unless certain conditions are met. Direct charging of such costs is only allowed if all of the following exist: Administrative or clerical services are integral to a project or activity; Individuals involved can be specifically identified with the project or activity; Such costs are explicitly included in the budget or have the prior written approval of the federal awarding agency; and The costs are not also recovered as indirect costs This language was added to address an ongoing inconsistency in the definition of direct costs which required administrative costs to be charged indirectly but otherwise provided that costs are direct when they may be specifically allocated to one award, regardless of what activities they support. The language helps clarify when a cost which is administrative in nature may be treated as a direct cost rather than as an indirect cost. Preamble: Charging of salaries of administrative and clerical staff language added to address an ongoing inconsistency in the definition of direct costs which required admin costs to be charged indirectly but otherwise provided that costs are direct when they may be specifically allocated to one award, regardless of what activities they support. COFAR feels language clarifies conditions for allowability (receipt of prior federal awarding agency approval) while providing flexibility in project management (approval allowed after initial budget approved) WIPFLI comments: This means that admin and clerical staff will most likely be in the indirect cost pool so they will be allocated on performance measures (e.g. number of transactions) © 2014 Community Action Program Legal Services, Inc.

Indirect (F&A) Costs Negotiated rates must be accepted by all Federal awarding agencies Different rates permitted only when required by Federal law or approved by Federal agency Must notify OMB of approved deviations Federal agency must make publicly available deviation policies, procedures and general decision-making criteria Notice of funding opportunities must include indirect cost rate reimbursement, matching or cost share policies In an effort to encourage a more transparent and consistent approach to indirect costs, OMB made several key changes to the way entities treat such costs. New for both nonprofit and public CAAs is the requirement that NICRs must be accepted by all Federal awarding agencies. A Federal agency may only use different negotiated rates when required by Federal statute or regulation or when approved by the Federal agency head based on documented justification. The Federal agency must notify OMB of approved deviations and make publicly available policies, procedures and general decision making criteria to justify deviations. Preamble: Purpose is to make indirect costs more transparent and consistent. To encourage consistent application of NICR, regs articulate conditions under which the federal awarding agency may use a different rate. Indirect (F&A) costs Some language similar to OMB A-122 – definitions of facilities and administration, examples of indirect costs are the same Almost all new for A-87 Addition to A-122 is the explanation that “identification with a Federal award rather than the nature of the goods and services involved is the determining factor in distinguishing direct from indirect (F&A) costs of Federal awards” Addition to A-122 – negotiated rates must be accepted by all Federal awarding agencies. May only use different negotiated rates when required by Federal statute or regulation or approved by Federal agency head based on documented justification. Must notify OMB of approved deviations. Federal agency must make publicly available policies, procedures and general decision making criteria to justify deviations Notice of funding opportunities must include policies relating to indirect cost rate reimbursement, matching or cost share Development and submission of indirect cost rate proposals and cost allocation plans contained in Appendices for public and private CAAs appears to be same as what was required in A-87 and A-122 – See Appendix IV for nonprofit orgs & Appendix V for state/local gov’ts © 2014 Community Action Program Legal Services, Inc.

Indirect (F&A) Costs If never received NICR may elect to charge a de minimis 10% rate and use indefinitely Methodology must be used consistently for all federal awards until choose to negotiate which may do at any time If have NICR, may apply for one time extension for up to four years Extension subject to review and approval May not request rate review until end of extension period Must re-apply to negotiate rate Moreover, nonprofit CAAs that have never received a NICR now have the option to charge a de minimis rate of 10% of modified total direct costs (MTDC), which may be used indefinitely. It is important to note that MTDC is still defined as all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and subawards and subcontracts up to the first $25,000 of each subaward or subcontract (regardless of the period of performance of the subawards and subcontracts under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward and subcontract in excess of $25,000. If a nonprofit chooses the de minimus rate, methodology regarding the charging of direct and indirect costs must be used consistently for all federal awards until the nonprofit CAA chooses to negotiate for a rate which it may apply to do at any time. OMB chose a 10% de minimis rate because without an analysis of actual costs it felt that it was best to stay at a conservative level to minimize the possibility that the federal government would over reimburse for these costs. 2 C.F.R. § Additionally, if a public or nonprofit CAA has a NICR, it may apply for a one time extension of that rate for up to four years. Extension are subject to review and approval and, if applied, an entity may not request a rate review until the end of an extension period at which time it must re-apply to negotiate a rate. The extension period was limited to up to four years to ensure rates continue to be based on actual costs Preamble: COFAR chose to stay with 10% de minimis rate because w/out an analysis of actual costs it felt that it was best to stay at a conservative level to minimize possibility that the federal gov’t would over reimburse for these costs. Decides to limit NICR extension period to 4 years to ensure rates continue to be based on actual costs Another notable addition that applies to nonprofit CAAs (not applicable to state and local governments, including public CAAs) is a clarification regarding how to identify indirect costs. The Super Circular explains that a determining factor in distinguishing direct and indirect costs is the identification of a cost with a federal award rather than with the nature of the goods and services involved. Thus, a cost that is identified with a federal award, such as compensation for an employee who facilitates a job training program funded with CSBG dollars, would more than likely be considered a direct cost where as a cost associated with a good or service, such as a copier that is used by multiple programs funded by different sources, would more than likely be an indirect cost. © 2014 Community Action Program Legal Services, Inc.

Pass-through Entity A non-federal entity that provides a subaward to a subrecipient to carry out part of a federal program, § Pass-through entities must provide subrecipients with certain specified information, including (among other things): An approved federally NICR between the subrecipient and the federal gov't, or if no such rate exists, either a rate negotiated between the pass-through entity and the subrecipient or a de minimis indirect cost rate, § (a)(4) Pass-through entities must comply with: § – Subrecipient and contractor determinations § – Requirements for pass-through entities § – Fixed amount subawards But they are not required to comply with any requirements in Super Circular directed towards federal awarding agencies unless Super Circular or terms and conditions of federal award require otherwise Pass-through entities also required to: An approved federally recognized indirect cost rate negotiated between the subrecipient and the federal gov't, or if no such rate exists, either a rate negotiated between the pass-through entity and the subrecipient or a de minimis indirect cost rate, 2 C.F.R. § (a)(4) Evaluate subrecipient’s risk of noncompliance for purposes of determining appropriate subrecipient monitoring Consider imposing specific subaward conditions if apprMonitor subrecipient’s activities as necessary to ensure it is used for authorized purposes and in compliance with federal statutes, regs and terms and conditions of subaward, and that performance goals are achieved (suggests certain monitoring tools, such as T&TA, onsite reviews etc.) opriate Verify that every subrecipient is audited as required by Subpart F – Audit Requirements where subrecipient’s federal awards expended during a fiscal year exceed audit threshold Consider whether results of subrecipient’s audits, on-site reviews or other monitoring indicate conditions that necessitate adjustments to pass-through entity’s records Consider taking enforcement action against noncompliant subrecipients © 2014 Community Action Program Legal Services, Inc.

200.415 Required Certifications
Expenditure certification required to assure payments are proper and in accordance with: Award terms and conditions Approved project budgets Annual and final fiscal reports or vouchers requesting payment under the agreement Must be signed by an official authorized to legally bind entity Sample certification language included in regulation The concept of providing certifications regarding expenditures and indirect costs is not a new one for entities previously covered by OMB Circular A-87 but is for those nonprofit CAAs previously covered by OMB Circular A All non-federal entities must now obtain the following two certifications: (1) one assures that expenditures are proper and in accordance with the terms and conditions of the Federal award and approved project budgets, annual and final fiscal reports, or vouchers request payments and (2) the other certifies that cost allocation plans or indirect cost rate proposals accurately reflect the treatment of costs by the non-federal entity Language for the first of these two certifications is in the regulations. The certification must be signed by an official who is authorized to legally bind the non-federal entity. Section Required Certifications Language similar to A-87 New to A-122 Certification required to assure that expenditures are proper and in accordance with the terms and conditions of the Federal award and approved project budgets, the annual and final fiscal reports or vouchers requesting payment under the agreement Must be signed by an official who is authorized to legally bind the non-federal entity Sample certification language included in regulations © 2014 Community Action Program Legal Services, Inc.

200.415 Required Certifications
Cost allocation plan or indirect cost rate proposal certification must be: Maintained on file On forms in the appendices Signed by an individual no lower than VP or CFO If don’t elect 10% rate or submit a certified rate or plan proposal, Federal gov’t may disallow all indirect costs or unilaterally establish a plan or rate The language for the second certification is located in the cost principles appendix that applies to a specific non-federal entity. This certification must be signed on behalf of the non-federal entity by an individual at a level no lower than vice president or chief financial officer and may either be submitted to Federal cognizant agency for indirect costs or maintained on file by the non-Federal entity. If an entity neither elects the 10% de minimis rate nor submits a certified rate or plan proposal, the federal government may either disallow all indirect costs or unilaterally establish a plan or rate. Section Required Certifications Certification of cost allocation plan or indirect cost rate proposal required Must be maintained on file by non-Federal entity Must use Certificate of Cost Allocation Plan or Certificate of Indirect Costs located in the Appendices Must be signed by an individual no lower than VP or CFO of the non-federal entity If entity neither elects 10% de minimus NICR nor submits a certified rate or plan proposal, Federal gov’t may either disallow all indirect costs or unilaterally establish a plan or rate If plan or rate unilaterally established by Fed gov’t, such will be set to ensure that potentally unallowable costs will not be reimbursed © 2014 Community Action Program Legal Services, Inc.

Cost Principles: Selected Items of Cost
The Super Circular reaffirms that all items not specifically covered in the selected items of cost are subject to the basic considerations analysis and that the selected items of cost regulations should be read as a guiding framework for all specific discussions of cost © 2014 Community Action Program Legal Services, Inc.

200.421 Advertising and Public Relations
Includes program outreach as an allowable advertising cost The Super Circular slightly expands the kind of advertising costs that will be considered allowable for non-federal entities covered by both OMB Circular A-87 and A When referring to the allowability of advertising costs that are incurred for other specific purposes necessary to meet the requirements of the Federal award, the Super Circular now specifically includes program outreach as one of those costs. © 2014 Community Action Program Legal Services, Inc.

Audit Services Unallowable audit services costs include audits: Not conducted in accordance with Single Audit requirements and That fall below the Single Audit threshold Costs of financial statement audits, when don't currently have a federal award, may be included in indirect cost proposal or cost allocation plan’s indirect cost pool Previously for non-federal entities covered by both OMB Circular A-87 and A-122, the provisions regarding which audit services costs may be paid for with federal funds focused on allowable costs associated with such services rather than unallowable costs. The Super Circular, however, specifically designates costs associated with the following types of audits as unallowable: (1) audits not conducted in accordance with Single Audit requirements and (2) audits that fall below the Single Audit threshold. For all non-federal entities, the Super Circular also offers additional information as to which audit services costs are allowable and how such costs should be treated. The comments to Super Circular note that language from the past, allowing other audit costs if included in an approved cost allocation plan, an indirect cost proposal or as an approved direct cost, had been in place for years (in all three circulars) and is inconsistent with the Single Audit Act. That language has been replaced to specifically allow costs of financial statement audits, when an entity is not currently receiving a federal award, to be included in an indirect cost proposal or cost allocation plan’s indirect cost pool. The thought supporting the inclusion of these audits is that they may be useful to the Federal agency negotiation of an indirect cost rate and do not appear to conflict with the Single Audit Act. These financial statement audits will most likely apply when a CAA’s subawardee does not qualify for an audit under the Single Audit Act. Preamble: COFAR noted that language from the past (allowing other audit costs if included in an approved cost allocation plan, an indirect cost proposal or as an approved direct cost) had been in place for years (in all three circulars) and is inconsistent with the Single Audit Act. COFAR thus replaced it with “cost of financial statement audit for entities that do not currently have a federal award” language because these audits may be useful to the Federal agency negotiation of an indirect cost rate and COFAR does not believe they conflict with the Single Audit Act Financial statement audits most likely applies when a subaward not qualify for single audit, probably aimed at cities © 2014 Community Action Program Legal Services, Inc.

Audit Services Pass-through entities may charge for cost of agreed- upon-procedures to monitor subrecipients exempted from Single Audit Act as long as: Conducted in accordance with GAGAS, Paid for and arranged by pass-through entity, and Limited in scope to one or more of the following: Activities allowed or unallowed, Allowable costs/cost principles, Eligibility, and Reporting Pass-through entities may now also charge for the cost of agreed-upon-procedures to monitor subrecipients exempted from the Single Audit Act as long as such procedures are: Conducted in accordance with Generally Accepted Government Auditing Standards (GAGAS), Paid for and arranged by the pass-through entity, and Limited in scope to one or more of the following: activities allowed or unallowed, allowable costs/cost principles, eligibility, and reporting. © 2014 Community Action Program Legal Services, Inc.

200.428 Collections of Improper Payments
Costs incurred to recover improper payments are allowable as either direct or indirect costs, as appropriate Amounts collected may be used in accordance with cash management standards set forth in § discussing payments § addresses minimizing the time elapsing between the transfer of funds New to all non-federal entities is the allowability of costs, as either direct or indirect charges, incurred to recover improper payments, as appropriate. Improper payments is a newly defined term included in the definitions section of the Super Circular and refers to any payment that should not have been made or that was made in an incorrect amount (including overpayments and underpayments) pursuant to a legal requirement (i.e, statute, contract, etc.). Improper payments also include any duplicative payments or payments to an ineligible party, for an ineligible good or service, for a good or service not received (except for such payments where authorized by law), that do not account for credit for applicable discounts, and that a reviewer is unable to determine if it is proper because of insufficient or lack of documentation. Amounts collected may be used in accordance with cash management standards set forth in the uniform administrative requirements section of the Super Circular addressing payments (§ ). This section is cross referenced because it describes the collection of improper payments when time elapses between the collection of funds from entities and their expenditures. Preamble: Added cross reference to payments because describes the collection of improper payments when time elapses between the collection of funds from entities and their expenditures Section Payments (Similar to current rules, except non-federal entities now permitted to retain up to $500 per year in interest on advances). talks about minimizing the time elapsing between the transfer of funds from the US Treasury or pass through entity and the disbursement by the non-federal entity whether the payment is made by electronic fund transfer or issuance or redemption of checks, warrants or payment by other means. This includes paying the non-federal entity in advance as long as it maintains or demonstrates a willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-federal entity and financial managements systems that meet the standards for fund control and accountability © 2014 Community Action Program Legal Services, Inc.

200.430 Compensation – Personal Services
Additional allowability requirement for compensation: appointment (hire) must be made in accordance with the entity’s rules and policies and any applicable federal laws Removal of language requiring prior approval from awarding agency for overtime, extra-shift and multi- shift premiums payments Even though language from both OMB Circulars A-87 and A-122 serve as the basis for this section, multiple, key changes were made in the Super Circular that impact how both public and nonprofit CAAs assess, track and allocate employee compensation costs. The Super Circular preamble explains that changes to this section are in response to feedback that the current process is extremely administratively burdensome and does not allow for advances in technology, record keeping and internal controls, which enable entities to document costs in increasingly efficient and sophisticated ways. The revised Super Circular requirements strive to provide a higher degree of accountability without burdensome process requirements. An example of this for nonprofit CAAs is the removal of language previously in OMB Circular A-122 requiring prior approval from an awarding agency to charge to a federal award overtime, extra-shift and multi-shift premiums payments. A change applicable to both nonprofit and public CAAs is the consideration of an additional factor when determining if the total compensation of an employee is allowable. The new factor to consider is whether the hiring of the employee is in accordance with an entity’s rules or written policies and meets applicable Federal requirements. The other factors that were previously considered and still must be assessed are whether compensation is (1) reasonable for the services rendered and conforms to the established written policy of the entity and (2) determined and supported by standards of documentation set forth in Super Circular, when applicable. May include nepotism policy, hiring policy etc. © 2014 Community Action Program Legal Services, Inc.

Outside employment for professional services analysis: Must follow written outside employment policies for professional services If none exist or fail to adequately define permissible extent of work, federal gov’t may require work on federal awards allocated between non-federal activities and non organizational professional activities If arrangement deemed excessive or inconsistent with award COI terms and conditions, awarding agency will negotiate arrangements on a case-by-case basis Also, outside employment was never addressed by either OMB Circular A-87 or A122. However, the Super Circular now requires an entity to follow its written policies regarding outside employment for professional services if such arrangements are not specifically authorized by a Federal award. If none exist, or the current policy fails to adequately define the permissible extent of work or other non-organizational activities for extra outside pay, the federal government may require that work performed by such employees on Federal awards be allocated between non-federal entity activities and non-organizational professional activities. If a federal awarding agency considers the arrangement to be excessive or inconsistent with the federal awards conflict of interest terms and conditions, appropriate arrangements governing compensation will be negotiated on a case-by-case basis. This provision does not appear apply to more general outside employment policies but is addressing situations where an employee is performing professional services similar to the job he/she is performing for the CAA, i.e., a CFO performing accounting/tax services for CAA clients after working hours. The concern seems to be with ensuring that the grant is properly charged and that CAA employee’s time spent performing working for his/her personal benefit is not charged to a federal award. Not apply to more general outside employment policies – really looking at situations where employee is performing services similar to the job he/she is performing for CAA, i.e., CFO performing accounting/tax services for CAA employees. Concern with ensuring that grant is properly charged. © 2014 Community Action Program Legal Services, Inc.

Charges must be based on records accurately reflecting work performed If meet following standards, no additional documentation required: Supported by system of internal control Incorporated in official records Reasonably reflect the total compensated activity Encompass all activities – federal and non federal Comply with established accounting practices and policies Support distribution of employee’s salary among specific activities or cost objective One of the most dramatic changes to all of the circulars is the documentation required to support employee salaries and wages. The Preamble explains that the long term goal is to tie the justification for salaries to achievement of programmatic objectives rather than measurement of effort (hours) expended. Less focus is placed on documentation and more attention is given to weaknesses in internal control systems or instances of fraud. Charges for employee compensation still must be based on records accurately reflecting work performed. However, no specific documentation is required. Rather, as long as the public and nonprofit CAAs’ records meet the following standards, no additional documentation will be required: Supported by system of internal control -- which provides reasonable assurance that the charges are accurate, allowable and properly allocated Incorporated in official records; Reasonably reflect the total compensated activity; Encompass all activities – federal and non federal; Comply with established accounting practices and policies; and Support distribution of employee’s salary among specific activities or cost objective -- if employee works on more than one federal award, federal/non federal awards, direct/indirect activities, two more indirect activities using different allocation bases or indirect/direct activity and an unallowable activity Preamble: Changes in response to feedback that current process extremely administratively burdensome and not allow for advances in technology, record keeping and internal controls, which allow entities to document costs in increasingly efficient and sophisticated ways Change to provide higher degree of accountability w/out burdensome process requirements Long term goal is to tie justification for salaries to achievement of programmatic objectives rather than measurement of effort (hours) expended COFAR believes that the new salary support requirements require entities to comply with a stringent framework of internal control objectives/requirements and to this end, interim charges based on budget estimates must be adjusted via the entity’s system of internal controls so that the final amount charged is proper Less focus on documentation, more on weaknesses in internal control systems or instances of fraud. Such focus provides greater accountability, guidance not specifically require PARs COFAR recommends that charges to federal award be based on records that accurately reflect work performed OVERALL TAKEAWAY: entities have clear high standards for maintaining strong system of internal controls and additional flexibility in processes used to meet these standards. © 2014 Community Action Program Legal Services, Inc.

If use budget estimates (estimates determined before services are performed) must: Have system that produces reasonable approximation of actual activity Enter significant changes into records in a timely manner Follow processes to review after-the-fact interim charges to estimate and ensure final amount charged is accurate, allowable and properly allocated Budgets estimates (estimates determined before services are performed) still do not qualify as support for charges to a Federal award but now may be used for interim accounting purposes by nonprofit CAAs as they have been previously used by public CAAs pursuant to Circular A-87. If budget estimates are used, the public and nonprofit CAA must: Have a system that produces a reasonable approximation of actual activity; Enter significant changes into records in a timely manner; and Follow processes to review after-the-fact interim charges to estimates and ensure that the final amount charged is accurate, allowable and properly allocated. Compensation – personal services If use budget estimates (estimates determined before the services are performed) then must: Have system for establishing the estimates produces reasonable approximation of the activity actually performed Identify and enter into records in a timely manner significant changes in the corresponding work activity (as defined by written policies). Note that short term fluctuations between workload categories need not be considered as long as the distribution f salaries and wages is reasonable over the longer term Have system of internal controls that includes processes to review after the fact interim charges to a federal award based on budget estimates. Note that all necessary adjustment must be made such that the final amount charged to the federal award is accurate, allowable and properly allocated. © 2014 Community Action Program Legal Services, Inc.

For blended funding: May account for combined use based on performance metrics if all involved federal awarding agencies approve Must submit request for waiver of standards based on documentation that: Describes method of charging costs, Relates charging of costs to a specific activity applicable to all funding sources and Is based on quantifiable measures of the activity in relation to time charged For the first time, the cost principles address blended funding in the Super Circular. For awards of similar purpose activity or approved blended funding, the non-federal entity may submit performance plans that incorporate funds from multiple federal awards and account for their combined used based on performance – oriented metrics as long as the plans are approved in advance by all federal awarding agencies involved. Entities must submit a request for waiver of the documentation standards. The waiver must be based on documentation that describes the method of charging costs, relates the charging of costs to the specific activity that is applicable to all fund sources and is based on quantifiable measures of the activity in relation to time the charged. © 2014 Community Action Program Legal Services, Inc.

200.431 Compensation – Fringe Benefits
Cost of fringe benefits for leave (annual, FMLA, sick, holidays, court, military, administrative, etc.) allowable if: Provided for under established written leave polices, Equitably allocated to all related activities including federal awards, and Accounting basis (cash or accrual) selected for costing each type is consistently followed Following OMB Circular A-87’s lead, the Super Circular more clearly establishes the allowability of different types of fringe benefits expenses. General language new to nonprofit CAAs explains that the cost of fringe benefits is allowable provided the benefits are reasonable and required by law, employee agreement or an established policy. The Super Circular also specifically sets forth the following criteria that must be met for leave fringe benefits (annual, FMLA, sick, holidays, court, military, administrative, etc.) to be allowable: Benefits are provided for under established written leave polices; Costs are equitably allocated to all related activities including federal awards; and Accounting basis (cash or accrual) selected for costing each type is consistently followed -- Note when use cash basis for accounting, cost is recognized in the period leave taken and paid for and payments for unused leave when employee retires or terminates employment are allowable as indirect costs in the year of payment. Accrual basis may only be used for the types of leave for which a liability as defined by GAAP exists when leave is earned and allowable leave costs are the lesser of the amount accrued or funded. New to A-122 & A-87 – fringe benefits may be assigned to cost objectives by identifying specific benefits to specific individual employees or by allocating on the basis of entity-wide salaries and wages of the employees receiving benefits. When allocation method used, separate allocations must be made to selective groupings of employees unless can show no significant differences for different groups Also new to nonprofit CAAs is language originally from OMB Circular A-87 which permits costs of pension plans and post-retirement health plans (PRHP) to be computed using a pay-as-you-go method or an acceptable actuarial cost method in accordance with established written policies. The regulation specifically describes how each of these methods would work in relation to each plan Costs of pension plans and post-retirement health, post (PRHP) may be computed using a pay-as-you-go method or an acceptable actuarial cost method in accordance with established written policies Regulation describes how each of these method would work in relation to each plan Preamble: Added clarity regarding application of GAAP to entities using accrual based accounting Positive reaction to inclusion of family-related leave among examples of allowable leave Updated to be more contemporary in terms of types of leave offered © 2014 Community Action Program Legal Services, Inc.

Conferences Cost of identifying, but not providing, locally available dependent-care resources are allowable Conference hosts/sponsors must exercise discretion and judgment in ensuring that conference costs are appropriate, necessary and managed in a manner that minimizes costs to the award The Super Circular offers some additional guidance for both public and nonprofit CAAs as to how conference hosts/sponsors manage conference costs. In an attempt to promote family-friendly practices, the Super Circular allows costs associated with identifying, but not providing, locally available dependent care resources to be charged to a federal grant. Moreover, to establish clearer limits around conference spending, the Super Circular requires conference hosts/sponsors to exercise discretion and judgment in ensuring that conference costs are appropriate, necessary and managed in a manner that minimizes costs to the federal award. Preamble: Tightened language so entities have clear limits around conference spending which should appropriately limit the costs © 2014 Community Action Program Legal Services, Inc.

200.433 Contingency Provisions
Contingency reserves still unallowable Some contingency amounts allowed to be explicitly included in budget estimates to extent they are necessary to improve the precision of those estimates Estimates must be based on broadly accepted cost estimating methodologies and accepted by funding source Even though contingency reserves are generally still unallowable, the Super Circular now allows nonprofit and public CAA to explicitly include some contingency amounts in budget estimates to the extent they are necessary to improve the precision of those estimates. Contingency amount estimates must be based on broadly accepted cost estimating methodologies, specified in the Federal Award budget documentation and accepted by the Federal awarding agency. Generally, CAAs will still not be able to building contingency reserves from year to year but may build-up contingency funds within a given grant year if the CAA anticipates have unforeseen costs during the year. If a CAA decides to include contingency funds in the budget for a grant year, it should review its contingency amounts periodically throughout the year. If it seems as if the contingency funds may not be used, then a CAA should consider a budget adjustment which may require obtaining awarding agency approval depending on the amount, type, etc. revision sought. NOTE: For actual costs to be allowable, must comply with super circular requirements (i.e., be allowable, occur w/in performance period, etc.), be necessary and reasonable for proper and efficient accomplishment of project or program objective and be verifiable from records. Can’t build up from year to year but may build up contingency if you may have such costs during the year. Should check part way through the year and if it is looking as if you may not use the contingency funds, then should consider a budget adjustment which you may need to receive approval for, depending on the amount, type, etc. Contingency – costs associated with possible events arising from causes the precise outcome of which is interminable at the time of estimate and the experiences shows will likely result, in aggregate, in additional costs for the approved activity or project Preamble: COFAR believes language provides sufficient controls to federal agencies to manage awards. Notes that (1) though a diversity of techniques are available to establish contingency estimates, the est. must be based on broadly-accepted cost estimating methodologies; (2) budgeted amts would be explicitly subject to agency approval at time of award; (3) funds not be drawn down except in accordance with provisions of cost principles and (4) actual costs incurred must be verifiable from entity’s records. Ensuring actual costs verifiable from entity’s records is sufficient for tracking use of such funds as they would not be charged as “contingency funds” specifically but according to the cost category they would naturally fall in. © 2014 Community Action Program Legal Services, Inc.

200.434 Contributions and Donations
Depreciation on donated assets is permitted as long as the donated property is not counted towards cost sharing or matching The treatment of contributions and donations to nonprofit and public CAAs is basically the same under the Super Circular as it was under OMB Circulars 122 and 87. One notable change is that now depreciation on donated assets is permitted as long as the donated property is not counted towards cost sharing or matching. Preamble: Clarified depreciation of donated assets Section Contributions and donations New to A-87 & A-122 – Depreciation on donated assets is permitted as long as the donated property is not counted towards cost sharing or matching Combines A-87 & A-122 © 2014 Community Action Program Legal Services, Inc.

Depreciation No more use allowance When replacing use allowance with depreciation method, depreciation must be computed as if asset has been depreciated over its entire life Charges must be supported by adequate property records and physical inventories (taken at least every 2 yrs) to ensure assets useable, used and needed Must maintain records showing that adequate depreciation taken The use allowance option previously available under OMB Circulars A-87 and A-122 is not in the Super Circular. When replacing use allowance with the depreciation method, depreciation must be computed as if an asset has been depreciated over its entire life (i.e., from date acquired to date of disposal or withdrawal from services). The total amount of depreciation (including imputed depreciation covering the period prior to conversion from the use allowance) may not exceed the total acquisition cost of the asset. Additional, new requirements for both public and nonprofit CAAS that must be met for depreciation charges to be allowable include: (1) supporting charges with adequate property records and physical inventories (taken at least every 2 yrs) to ensure assets useable, used and needed and (2) maintaining records showing the amount of depreciation taken each period. (The Super Circulars mirror most of the requirements in both OMB Circulars A-87 and A-122 for how nonprofit and public CAAs compute depreciation for third party donations which must be based on the acquisition cost (i.e., its fair market value (FMV) at the time of donation) of the asset. However, the Super Circular adds an additional factor to consider. When determining the acquisition cost, entities must now exclude any asset acquired solely for the performance of a non-Federal award. The other preexisting exclusions include: the cost of land, any costs of building and equipment borne or donated by the federal government, and any costs of buildings and equipment contributed by or for the entity or where law or an agreement prohibit recovery.) © 2014 Community Action Program Legal Services, Inc.

200.437 Employee Health and Welfare Costs
Employee morale cost removed The Super Circular removed morale costs from the allowable employee health and welfare costs because it found that such costs are difficult to distinguish from entertainment costs and potentially result in opportunities for waste, fraud and abuse. Preamble: Removed morale because difficult to distinguish from entertainment costs and potentially result in opportunities for waste, fraud and abuse Section Employee health and welfare costs New to A-87 & A-122 – employee morale costs removed New to A-87 & A-122 – losses from operating food services allowable under certain conditions, language from A-21 © 2014 Community Action Program Legal Services, Inc.

Entertainment Costs Entertainment costs (includes amusement, diversion and social activities) are allowable if: Have a programmatic purpose and Are authorized either in the approved budget or with prior written approval from federal agency Generally, entertainment costs (includes amusement, diversion, social activities and any associated costs) are still unallowable. However, the Super Circular includes language not previously in OMB Circulars A-87 and A-122 which allows specific entertainment costs to be charged to a federal award if they: (1) have a programmatic purpose and (2) are authorized either in the approved budget or with prior written approval from the federal awarding agency. © 2014 Community Action Program Legal Services, Inc.

200.439 Equipment and Other Capital Expenditures
Removed language stating that equipment and other capital expenditures are unallowable as indirect costs If instructed by federal awarding agency to dispose of or transfer equipment, then cost of such disposal or transfer is allowable The Super Circular removed language previously applicable to both public and nonprofit CAAs which stated that equipment and other capital expenditures are unallowable as indirect costs. Moreover, now public and nonprofit CAAs may charge the cost of disposing or transferring equipment to a federal award if the federal awarding agency issues disposal or transfer instructions. Equipment and other capital expenditures Mostly mirrors A-87 & A-122 New to A-87 & A-122 – removed language stating that equipment and other capital expenditures are unallowable as indirect costs New to A-87 & A-122 – if instructed by federal awarding agency to dispose of or transfer equipment, then cost of such disposal or transfer is allowable © 2014 Community Action Program Legal Services, Inc.

200.441 Fines, Penalties, Damages and Other Settlements
Other settlement costs and damages resulting from violations of, alleged violations of or failure to comply with laws and regs are unallowable except when incurred as a result of compliance with Federal award provisions or with prior written approval from the awarding agency New for nonprofit CAAs but not public ones is the inclusion of other settlement costs and damages arising out of certain situations as unallowable costs except when incurred as a result of compliance with Federal award provisions or with prior written approval from the awarding agency. The certain situations include costs resulting from violations of, alleged violations of or failure to comply with all types of laws. Fines, penalties, damages and other settlements Addition of “settlements” and "damages" new to A-122, mirrors A-87 language Applies to other settlement and damage costs resulting from violations of, alleged violations of or failure to comply with Federal laws Must read in connection with insurance provision – appears that now not able to pay for settlement costs that are beyond insurance coverage © 2014 Community Action Program Legal Services, Inc.

200.422 Fundraising and Investment Management Costs
Fundraising costs for meeting federal program objectives are allowable with prior written approval Investment counsel and staff costs (currently unallowable) are allowable when associated with investments covering pension, self insurance or other funds which include federal participation Now both nonprofit CAAs and public CAAs can charge fundraising costs incurred for meeting federal program objectives to a federal award if prior written approval from the Federal awarding agency is received. Also new for both entities is the allowability of costs related to the physical custody and control of monies and securities. Nonprofit CAA, like public CAAs under OMB Circular A-87, will now be able to charge investment counsel and staff costs (generally unallowable) to a federal award when such costs are associated with investments covering pension, self insurance or other funds which include federal participation. Rules tightened up for fiduciary duties © 2014 Community Action Program Legal Services, Inc.

200.447 Insurance & Indemnification
Reserves covering the risk of loss or damage to Federal property, to the extent that entity is liable for such loss or damage, are unallowable unless specifically required or approved Reserves for self–insurance programs (worker’s comp, unemployment insurance, severance pay) still allowable but more criteria to meet Insurance refunds must be credited against insurance costs in the year the refund is received Key changes to the allowability of insurance costs mostly apply to nonprofit CAAs and are based in OMB Circular A-87. One such change is that reserves covering the risk of loss or damage to Federal property, to the extent that the entity is liable for such loss or damage, are no longer allowable unless they are specifically required or approved. Moreover, reserves for self –insurance programs (worker’s comp, unemployment insurance, severance pay) are allowable subject to: The type and extent of coverage, rates and premiums having been allowed if insurance (including reinsurance) had been purchased to cover the risks; Earnings or investment income on reserves being credited to those reserves; Contributions to reserves being based on sound actuarial principles using historical experience and reasonable assumptions with reserve levels analyzed and updated at least biennially; Accounting records, actuarial studies and cost allocations (or billings) recognizing any significant differences due to types of insured risk and losses generated by an entity’s various insured activities; and Refunds (including earned or imputed interest) being made to the Federal government for its share of funds are transferred from a self-insurance reserve to other accounts (e.g., general fund or unrestricted account). Additionally, for insurance costs to be allowable, insurance refunds, if received, must be credited against such costs in the year the refund is received. © 2014 Community Action Program Legal Services, Inc.

Interest Includes general statement that “financing costs (including interest) to acquire, construct, or replace capital assets are allowable, subject to the conditions in this section” The Super Circular streamlines the requirements from OMB Circulars A-122 and A-87 regarding the allowability of interest costs. The section now begins with the general statement that financing costs (including interest) to acquire, construct, or replace capital assets are allowable, subject to the followings conditions: © 2014 Community Action Program Legal Services, Inc.

Interest Following conditions must be considered when determining allowability of interest: Entity uses capital assets for federal award Facilities/equip. costs limited to FMV via unrelated party Financing obtained via an arm’s length transaction Interest costs result from least expensive financing alternative Interest costs expensed/capitalized in accordance with GAAP Earnings generated by investment of borrowed funds used to offset current interest costs Conditions for debt arrangements over $1 million to purchase or construct facilities are followed Interest from fully depreciated asset is unallowable The Super Circular streamlines the requirements from OMB Circulars A-122 and A-87 regarding the allowability of interest costs. The section now begins with the general statement that financing costs (including interest) to acquire, construct, or replace capital assets are allowable, subject to the followings conditions: The entity uses the capital assets in support of the Federal award; Facilities and equipment costs are limited to fair market value (FMV)available from an unrelated third party; Financing is obtained via an arm’s-length transaction (i.e., a transaction with an unrelated third party); Interest cost claims are limited to the least expensive financing alternative (e.g., if a capital lease is determined to be less costly than purchasing through debt financing, then reimbursement must be limited to the amount of interest determined if leasing had been used); Interest costs are expensed/capitalized in accordance with General Accepted Accounting Procedures (GAAP); Earnings generated by the investment of borrowed funds is used to offset current allowable interest costs, whether that cost is expensed or capitalized; Conditions for debt arrangements over $1 million to purchase or construct facilities are followed, unless the entity makes an initial equity contribution of 25% or more; and Interest from fully depreciated asset are treated as unallowable. The applicable dates for public CAAs, states and local governments is the same as it was in OMB Circular 87 – for interest cost to be allowable for buildings it must have been incurred after October 1, 1980 and for land and equipment after September 1, For nonprofit CAAs, the applicable date is the same as it was in OMB Circular A-122 – for interest cost to be allowable it must have been incurred in connection with the acquisitions of capital assets after September 29, 1995. © 2014 Community Action Program Legal Services, Inc.

200.451 Losses on Other Awards or Contracts
Any excess costs over authorized funding levels transferred from any award or contract to another award or contract is unallowable All losses are not allowable indirect costs and are required to be included in the appropriate indirect cost rate base for allocation to indirect costs This section is completely new for entities previously covered by OMB Circular A-87 and partially new for entities previously covered by OMB Circular A-122. For all entities (and new for OMB Circular A-87 entities), any excess costs over income under any other award or contract of any nature are unallowable. New for both A-122 and A-87 entities is the treatment of these excess costs. Excess costs over authorized funding levels may not be transferred from any award or contract to another award or contract. Also, all losses are not allowable indirect costs and are required to be included in the appropriate indirect cost rate base to be allocated to indirect costs. Losses on other awards or contracts All new to A-87, language mostly from A-122 (and A-21) New to A-122 – any excess costs over authorized funding levels transferred from any award or contract to another award or contract is unallowable. All losses are not allowable indirect costs and are required to be included in the appropriate indirect cost rate base for allocation to indirect costs. © 2014 Community Action Program Legal Services, Inc.

200.454 Memberships, Subscriptions & Professional Activity Costs
Costs of membership in organizations whose primary purpose is lobbying are unallowable New for OMB Circular A-122 entities is the unallowability of membership costs in organizations whose primary purpose is lobbying. This language is from OMB Circular A-87 and the Super Circular tweaked the language so that it no longer refers to organizations “substantially engaged” in lobbying to organizations whose “primary purpose” is lobbying. © 2014 Community Action Program Legal Services, Inc.

Proposal Costs Proposal costs include: Preparing bids, proposals, or applications on potential Federal/non-Federal awards or projects, including development of support data Successful and unsuccessful bids Current costs treated as indirect (F&A) and allocated to all entity activities No past proposal costs will be allocable to current accounting period A welcome addition to the Super Circular for nonprofit CAAs is the allowability of proposal costs of the current accounting period of both successful and unsuccessful bids and proposals. This new language for nonprofits is mostly from OMB Circular A-87. Proposal costs include the cost of preparing bids, proposals, or applications on potential Federal and non-Federal awards or projects, including the development of data necessary to support the bids or proposals. Such costs should be treated as indirect (F&A) costs and allocated currently to all activities of the entity. No proposal costs of past accounting periods will be allocable to the current period. A change for A-87 entities is the removal of the option to charge proposal costs directly with funding source prior approval. 45 C.F.R (HHS Codification of OMB Circular A-110) OMB Circular A-122 does not cover the treatment of bid and proposal costs or independent research and development costs. The following rules apply to these costs for nonprofit organizations subject to that Circular. Bid and proposal costs. Bid and proposal costs are the immediate costs of preparing bids, proposals, and applications for Federal and non-Federal awards, contracts, and other agreements, including the development of scientific, cost, and other data needed to support the bids, proposals, and applications. Bid and proposal costs of the current accounting period are allowable as indirect costs. Bid and proposal costs of past accounting periods are unallowable in the current period. However, if the recipient's established practice is to treat these costs by some other method, they may be accepted if they are found to be reasonable and equitable. Bid and proposal costs do not include independent research and development costs covered by paragraph (b)(2) of this section, or pre-award costs covered by OMB Circular A-122, Attachment B, paragraph 33 and Sec (d)(1). © 2014 Community Action Program Legal Services, Inc.

200.462 Rearrangement and Reconversion Costs
Must charge costs incurred for ordinary and normal rearrangement and alteration of facilities as indirect May now charge costs for special arrangements and alterations specifically for an award as direct Must still obtain prior approval from federal awarding agency but now have option of obtaining from pass- through entity The Super Circular, unlike OMB Circulars A-87 and A-122, sets forth how rearrangement and reconversion costs are to be treated, i.e., either as direct or indirect costs. All entities are required to charge costs incurred for ordinary and normal rearrangement and alteration of facilities as indirect costs and those incurred for special arrangements and alterations as a direct cost if prior approval to do so is received. The Super Circular now enables entities to obtain prior approval for the charging of direct costs from a pass-through as well as from the federal awarding agency. Rearrangement and reconversion costs New to A-87 & A-122 – required to charge costs incurred for ordinary and normal rearrangement and alteration of facilities as indirect costs and required to charge special arrangements and alterations costs incurred specifically as a direct cost (still need to get prior approval from federal awarding agency – new may also get from pass-through entity) © 2014 Community Action Program Legal Services, Inc.

Termination Costs Removed indirect costs related to salaries and wages from the list of allowable settlement expenses Termination costs are those that arise when a Federal award has been terminated. The treatment of such costs under the Super Circular mostly mirrors the provisions in OMB Circulars A-87 and A One notable change for nonprofits is the removal of the allowability of indirect costs related to salaries and wages incurred as settlement expenses. Preamble: Removed reference to indirect costs because commenters were concerned that the citation would be misinterpreted as somehow limiting the allowable indirect costs to only a portion of termination costs – COFAR agreed Termination costs Mostly same as A-122 & A-87 New to A-122 – removed from A-122 the allowability of indirect costs related to salaries and wages incurred as settlement expenses. Normally, such indirect costs shall be limited to fringe benefits, occupancy cost, and immediate supervision © 2014 Community Action Program Legal Services, Inc.

200.472 Training & Education Costs
Now just says that the cost of training and education provided for employee development is allowable This section is from OMB Circular A-87 and has been completely overhauled in a positive way for nonprofit CAAs. The Super Circular removes all of the prior, extensive analysis regarding the allowability of training and education costs for nonprofit CAAs. Now the cost of training and education provided for employee development is allowable. Even though some commenters believe this language to be too open-ended, COFAR believes that the basic considerations for allowability provide adequate restrictions that will appropriately limit the risk of waste, fraud and abuse. Preamble: COFAR not believe the language to now be too open-ended; rather believes that the basic considerations for allowability provide adequate restrictions that will appropriately limit the risk of waste, fraud and abuse © 2014 Community Action Program Legal Services, Inc.

Travel Costs Per diem rates still a default if no acceptable travel policy in place Method(s) used for charging costs must be in accordance with written travel reimbursement policy To charge travel costs directly to a Federal award documentation must justify that: Participation is necessary to the Federal award; and Costs are reasonable and consistent with established travel policy The allowability of travel costs is mostly based on language from OMB Circular A-87. For both public and nonprofit CAAs, the federal government per diem rates are still a default if no acceptable travel policy is in place. One new change for nonprofit CAAs is the additional requirement that method(s) used for charging travel costs must be in accordance with an entity’s written travel reimbursement policy. A new change for both public and nonprofit CAAs is the requirement that, to charge lodging and subsistence costs to a federal award, documentation must justify that: (1) participation of the individual is necessary to the Federal award; and (2) costs are reasonable and consistent with the entity’s established travel policy. Travel Costs Mirrors A-87 New to A-122 –Per diem rates still a default when no policy is in place. Rather, the emphasis is on (these factors, execept for the last one were in A-122): (1) applying the method used (actual, per diem or both) to an entire trip and not to selected days of the trip; (2) ensuring that the charges are consistent with those normally allowed in like circumstances in your non-federally funded activities and (3) following your written travel reimbursement policies. New – to charge travel costs directly to a Federal award must documentation justify that: (1) participation of the individual is necessary to the Federal award; and (2) the costs are reasonable and consistent with your established travel policy. © 2014 Community Action Program Legal Services, Inc.

Travel Costs May use federal funds to cover temporary dependent care costs that directly result from travel to conferences as long as the costs are: A direct result of the individual’s travel for the award, Consistent with documented travel policy, and Only temporary during the travel period Travel costs for dependents are unallowable Except for travel for 6 months or more with prior approval from federal awarding agency The Super Circular also promotes its effort to support family friendly policies by adding the option of using federal funds to cover temporary dependent care costs that directly result from travel to conferences as long as the costs are: A direct result of the individual’s travel for the award, Consistent with documented travel policy, and Only temporary during the travel period. Travel costs for dependents are unallowable except for travel for 6 months or more with prior approval from a Federal awarding agency. Preamble: New dependent care language allows for individuals to better balance their responsibilities to both their families and the federal award Travel Costs New to A-87 & A-122 – temporary dependent care costs – OMB Circular A-122 does not specifically address whether travel costs for dependents of board members traveling to conferences or costs associated with caring for a board member’s dependent while he/she attends a conference may be paid for with federal funds. Super Circular permits dependent care costs when certain factors are met and specifically prohibits dependent travel costs except in extended travel situations (duration is for six months or longer) with funding source approval. Under the Super Circular (again, not in effect until the end of this year), grantees may use federal funds to cover dependent care costs that directly result from travel to conferences as long as the costs are: (i) a direct result of the individual’s travel for the Federal grant; (ii) consistent with the grantee’s documented travel policy; and (iii) only temporary during the travel period. It appears that dependent care costs are considered to be those costs associated with caring for an individual’s dependent while that individual attends a conference for the grantee. The definition of dependent excludes adult children unless they are “permanently and totally disabled” which means that the adult child is unable to engage in any substantial gainful activity because of a medically determinable physical or mental impairment. The impairment is expected to result in death or has lasted (or can be expected to last) for a continuous period of 12 months or more. Documentation supporting the existence of the impairment must be provided. See 26 U.S.C. § 152 (c)(3)(B) © 2014 Community Action Program Legal Services, Inc.

Subpart F – Audit Requirements

Audit Requirements Threshold for Single Audit requirement raised to $750,000. § See table in § with threshold values to determine where federal programs fall in terms of risk and required audit level. Determination of Type A programs will now be based on higher value of $750,000. To qualify for low-risk status, grantee must use GAAP unless another basis is required by state law. § © 2014 Community Action Program Legal Services, Inc.

Audit Requirements The threshold for reporting questioned costs has been raised to $25,000 for major programs. § All audits will be available for public inspection on the internet, on the website of the Federal Audit Clearinghouse. § If additional audits required then fed. awarding agency or state gov. must first review the Federal Audit Clearinghouse for existing audits and rely on the information there to the extent possible. § © 2014 Community Action Program Legal Services, Inc.

Audit Requirements Audit due dates that fall on Saturday, Sunday, or Federal holiday, are due the following business day. § In addition to the sanctions provided for under A for noncompliance with audit requirements the federal agency or state may now also initiate suspension or debarment proceedings. §§ , When selecting an auditor, the grantee must also review peer review reports. § Sanctions outlined in A-133: (1) withholding a portion of the federal award, (2) withholding or disallowing OH costs, (3) suspending federal awards until the audit is conducted, and (4) termination. © 2014 Community Action Program Legal Services, Inc.

CSBG Organizational Standards from a Legal Perspective

Background Administration CSBG budget language
Organizational Standards Center of Excellence grant to nat’l Community Action Partnership Also, Urban Institute contract for performance standards and ROMA Next Generation grant - NASCSP CAA network input Pilot testing in states Submission to OCS, including implementation recommendations Proposed CSBG reauthorization legislation

CSBG Organizational Standards
56 standards developed by CSBG Organizational Standards Center of Excellence (COE) and issued in proposed form by federal Office of Community Services (OCS) OCS draft information memorandum (IM) /OSCOE/csbg_organizational_standards_im_draft.pdf Standards established to ensure CAAs have capacity to provide high-quality services to low-income individuals & communities Draft IM: OCS expects states to report on establishment and implementation of standards no later than FY2016 States to work with CAAs to increase accountability Comments were due April 25, 2014 © 2014 CAPLAW and Community Action Partnership

CSBG Organizational Standards
Organized into three thematic groups Maximum Feasible Participation Consumer input and involvement Community engagement Community assessment Vision and Direction Organizational leadership Board governance Strategic planning Operations and Accountability Human resource management Financial operations and oversight Data and analysis © 2014 CAPLAW and Community Action Partnership

Objectives of Organizational Standards
Current iteration - not “excellence” but minimum threshold for compliance and monitoring by states National standard or state-by-state adoption? Next step – one to five scale CAAs would use for self –improvement States would use for training and technical assistance, recommendations for best practices OCS would like to use as basis for competition if legislative change

Implementation of Standards
Voluntary Adoption By CAAs By States Follow state law on adoption of rules and regulations Incorporate as standards into contracts Provide sufficient lead time Provide training and technical assistance OCS role in encouraging adoption Information Memorandum Mandatory Adoption Congress would need to amend federal CSBG Act © 2013 Community Action Program Legal Services, Inc.

Some Leadership Standards
4.1 Board has reviewed mission statement in last 5 years and assured that: Mission addresses poverty; and Programs and services are in alignment with mission 4.4 Written succession plan is in place for CEO/ED, approved by Board, that contains procedures for covering emergency/unplanned, short-term absence of 3 months or less, and outlines process for filling a permanent vacancy (Private CAAs) Public CAAs: Adhere to local government policies re interim appointments and filling permanent positions

Some Governance Standards
5.1 Board is structured in compliance with CSBG Act: At least one third democratically-selected representatives of low-income community; One-third local elected officials (or their representatives); and Balance from major groups and interests in community 5.2 Board has written procedures that document democratic selection process for low-income board members adequate to assure that they are representative of low-income community

Some Governance Standards
5.3 Bylaws have been reviewed by an attorney within past 5 years 5.4 Documentation that board members receive and review bylaws at least every two years 5.5 Board meets in accordance with frequency and quorum requirements and fills board vacancies as set out in bylaws 5.6 Each board member has signed conflict of interest policy within past 2 years 5.8 Board members provided with training on duties and responsibilities within past 2 years

Some Human Resources Standards
7.1 The CAA has written personnel policies reviewed by attorney and approved by Board within past 5 years (private CAA) 7.2 The CAA makes available Employee Handbook (or personnel policies in cases without a Handbook) to all staff and notifies staff of any changes 7.4 Board conducts performance appraisal of CEO/Executive Director within each calendar year (private CAA)

Some Human Resources Standards
7.5 Board reviews and approves CEO/Executive Director compensation within every calendar year Public CAA – Compensation of CAA Department head is made available according to local government procedure 7.7 The CAA has a whistleblower policy approved by Board within past 5 years Public CAA – Provides copy of any existing local government agency whistleblower policy to tripartite board at time of orientation © 2013 Community Action Program Legal Services, Inc.

Using Legal Resources: Attorneys
Knowledgeable local counsel is essential Procurement process Key areas of expertise: Employment and labor law Nonprofit organizations Real estate and contract law Attorney on board of directors, or as consultant to board, required for Head Start grantees Understand contract and billing structure Pro bono services

Legal Resources: Training and Policies
Use attorneys or other qualified professional to conduct training on human resources issues For example, discrimination, sexual harassment, wage and hour law Consider in-person on-site or off-site training, videos, online training, webinars, newsletters CAPLAW website has many free recorded webinars and content on HR issues Communicate training throughout organization Use attorneys to review or draft and update personnel policies Attorneys to draft and update personnel policies: Consistent with federal and state law Understandable Reflects current practice

Legal Resources: Monitoring
Use attorneys and other experts to prepare for key reviews, like Head Start Seek advice of attorneys in responding to monitoring and audit findings, cost disallowances Attorneys may be able to provide specific authority for your position and assist in persuasive arguments

Using Legal Resources: Nonprofit Status and Bylaws
Legal advice in in creating structure, and ensuring compliance with law, for new ventures and affiliations New legal entities, preserving tax-exempt status, mergers Determine status of existing grants Legal review of bylaws and board policies Organizational standards: every 5 years Update to be consistent with new laws Bring into line with changing practices and operations of CAA Review board size and structure Conflict of interest and whistleblower policies Nonprofit status – Determine status of existing grants Bylaws – Keep up with changing technology

Ensuring Compliance: What Else?
Tone at the top Oversight role of board Culture of compliance Board and ED setting the right tone by word and example Systems are set up, implemented, followed, and monitored Written policies Competent auditors Assigning responsibility Holding staff accountable

Some Relevant CAPLAW Resources
Visit Exemplary Legal Practices and Policies Guidebook Top-Notch CAA Toolkit: Governance and Financial Issues CAPLAW Bylaws Toolkit Employer Smarts program

Navigating the OMB Super Circular &

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