1. Jennifer Castillo, Esq. jcastillo@bruman.com Bonnie Graham, Esq. bgraham@bruman.com Brustein & Manasevit www.bruman.com October 2015 1 Grants Administrative Changes under the New EDGAR

2.  The Importance and Structure of the New Uniform Guidance  Major changes  Financial management  Allowability  Procurement  Inventory  Subrecipient monitoring  Audits  Drafting Policies and Procedures 2

4.  Northeastern University (Chicago) agreed to pay $2.7 million to cover nine years of mishandling federal research funds, in the largest-ever civil settlement with the National Science Foundation.  The university failed to provide necessary oversight, failed to pay interest due, paid salaries without required documentation, and paid expense money based on inadequate or fraudulent documentation.  Northeastern continued to engage in these practices when it knew or should have known in 2006, if not before, that the professor in charge of the grant violated NSF requirements when he submitted fraudulent claims for personal expenses.  Altogether the university approved and disbursed at least 26 advances, totaling approximately $8.4 million in NSF funds, without required verification of need and sufficient oversight. 4

5.  Over the past 5 years, the OIG has conducted 38 grant fraud investigations resulting in five prosecutions, $13.5 million in restitution and recoveries, and $15 million in civil settlements.  For example, a former executive pleaded guilty to fraud charges for misrepresenting his firm as a disadvantaged small business in order to secure more than $2.4 million in NASA security contracts. The executive was sentenced to 5 years in prison and ordered to forfeit $2.9 million in ill- gotten gains. 5

6.  Former Boeing procurement officer and others plead guilty to federal fraud charges.  In July 2014, a former Boeing procurement official was convicted of taking bribes from companies seeking to sell parts for military aircraft to Boeing in exchange for providing them with a competitor’s confidential bid information.  The official admitted to three counts of mail fraud, one count of wire fraud, and one count of currency structuring for his role in the scheme.  As part of the criminal scheme, an accomplice received confidential financial information through coded language in phone calls and e-mails and used this information to win Government contracts from Boeing worth more than $1.5 million. 6

7.  In December 2014, an OIG investigation led to the conviction of two North Dakota brothers for defrauding the Federal Crop Insurance and Federal Crop Disaster Programs.  In order to collect Federal crop insurance indemnities and Federal crop disaster benefits, the brothers perpetrated a scheme to ruin their potato crops. The brothers were sentenced to a total of 66 months’ incarceration and ordered to forfeit $932,776. 7

8.  Greenville Public School District (Mississippi)  The former superintendent pled guilty to charges of bribery, kickbacks, and embezzlement.  He conspired with the owner of Teach Them To Read, Inc., a company that provided reading services for at-risk youth, to award $1.4 million in district contracts in exchange for monetary kickbacks.  The former superintendent was sentenced and the owner of the company pled guilty for their roles in this scam.  The former superintendent was sentenced to 76 months in prison and 3 years of supervised release, and he was ordered to pay more than $1.2 million in restitution. 8

9. Formerly know as the “Uniform Grants Guidance”, the “Omni Circular” and the “Super Circular”

10.  A-21 – Cost Rules – Rules – IHEs  A-87 – Cost Rules – State / Local Gov’t  A-122 – Cost Rules – Nonprofit  A-102 – Administrative Rules State / Local Gov’t  A-110 – Administrative Rules IHEs  A-133 – Audit Rules 10

11.  Subpart A – Definitions  Subpart B – General Provisions  Subpart C – Pre Award Requirements  Subpart D – Post Award Requirements  Subpart E – Cost Principles  Subpart F – Audit Requirements 11

12. 12  Agriculture  415.1 – Competition in the awarding of discretionary grants and cooperative agreements  416.1 – Special procurement provisions  Prospective contracts cannot develop or draft specifications, requirements, statements of work, invitations for bids, RFPs, contract terms or other documents for use by a state in conducting procurement under USDA entitlement programs  Education  3474.5 – How exceptions are made to 2 CFR part 200  Secretary will consult with OMB, but not seek approval, of any exceptions to UGG  3474.10 – Clarification regarding 2 CFR 200.207  ED will continue to use the label “high risk” grantee / subgrantee to describe nonfederal entities with specific conditions

13.  NASA  1800.3 – Applicability  Extends requirements to commercial firms awarded grants and cooperative agreements by NASA when cost sharing is not required, and to foreign organizations awarded grants by NASA  If cost sharing is required, terms and conditions of 14 CFR part 1274 apply  Grants to foreign organizations are made on exceptional basis  1800.315 – Intangible property  Title to intellectual property created under a cooperative agreement by NASA or its contractors will initially vest with creating party.  NSF  Rewrote the Proposal & Award Policies & Procedures Guide (PAPPG) to conform to UGG 13

14.  December 26, 2014 – Direct Grants from Federal Agency  July 1, 2015 – State Administered Programs  July 1, 2016 – Procurement Rules  Indirect Cost Rates When Due For Renegotiation 14

15. 1. Focus on Outcomes 2. Performance Metrics 3. Risk Assessments 4. Financial Management Policies 5. Equipment Use 6. Micro Purchases 7. Corrective Action 8. Family Friendly Policies 9. False Claims Certifications 10. Audit Thresholds 15

16. Part 200 has a MAJOR emphasis on strengthening accountability by improving policies that protect against waste, fraud and abuse 16

18. Prior Rule 74.21(b) 1. Financial Reporting 2. Accounting Records 3. Internal Control 4. Budget Control 5. Written Cash Management 6. Written Allowable Cost 7. Source Documentation 2 CFR 200.302 (b) 1. Identification of Awards (NEW) 2. Financial Reporting 3. Accounting Records (Source Docs) 4. Internal Control 5. Budget Control 6. Written Cash Management Procedures 7. Written Allowability Procedures 18

19. NEW: All federal “awards” received and expended  The name of the federal “program”  Identification # of award  CFDA Title and Number  Federal Award I.D. #  Fiscal Year of Award  Federal Agency  Pass-Through (If S/A) 19

20.  Accurate, current, complete disclosure of financial results of each award in accordance with 200.327 and 200.328.  NEW: 200.327 – Federal awarding agency can only collect OMB approved data elements, no less than annually, no more than quarterly  NEW: 200.328 – Non federal entity must submit performance reports at intervals required by federal agency or pass through.  Annual performance reports due 90 days after reporting period; Quarterly performance reports due 30 days after reporting period 20

21.  NEW: Performance Metrics 1. Compare actual accomplishments to objectives. (quantify to extent possible) 2. Reasons goals were not met if appropriate 4. Additional pertinent information (e.g. analysis and explanation of cost overruns, high unit costs) Significant developments a. Problems, delays. Adverse conditions that would impair ability to meet objective of the award b. Favorable developments. Finishing sooner or at less cost 21

22. Source Documentation Must Be Kept On: 1. Federal Awards 2. Authorizations 3. Obligations 4. Unobligated balances 5. Assets 6. Expenditures 7. Income 8. Interest (New) (Eliminated liabilities) 22

23.  Effective control over and accountability for: 1. All funds 2. Property 3. Other assets  Must adequately safeguard all assets  Use assets solely for authorized purpose 23

24.  Internal controls means a process, implemented by a non-Federal entity, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: a. Effectiveness and efficiency of operations; b. Reliability of reporting for internal and external use; and c. Compliance with applicable laws and regulations. 24

25. a. Non-Federal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurances that the entity is managing the award in compliance with federal statutes, regs, and terms of the award.  NEW: Internal controls “should” be in compliance with:  The U.S. Comptroller General’s Standard for Internal Controls in the Federal Government; and  Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) 25

26. b. Comply with Federal statutes, regs, and the terms and conditions of the Federal awards. c. Evaluate and monitor the non-Federal entity's compliance with statutes, regs and the terms and conditions of Federal awards. d. Take prompt action when instances of noncompliance are identified including in audit findings. e. Take reasonable measures to safeguard protected personally identifiable info (PII) and other information designated or deemed sensitive 26

27.  NEW: An official authorized to legally bind the non- federal entity must certify on annual and final fiscal reports or vouchers requesting payment:  “By signing this report, I certify to the best of my knowledge and belief that the report is true, complete and accurate and the expenditures, disbursements and cash receipts are for the purposes and objectives set forth in the terms and conditions of the federal award. I am aware that any false, fictitious, or fraudulent information or the omission of any material fact, may subject me to criminal civil or administrative penalties for fraud, false statements, false claims, or otherwise.” 27

28.  Comparison of expenditures with budget amounts for each award 28

29.  NEW: Written Procedures to implement the requirements of 200.305 29

30. For states, payments are governed by Treasury – State CMIA agreements 31 CFR Part 205 No Change For all other non federal entities, payments must minimize time elapsing between draw from G-5 and disbursement (not obligation) 30

31.  Written procedures must describe whether non- federal entity uses: 1) Advance Payments (preferred) Limited to minimum amounts needed to meet immediate cash needs 2) Reimbursement Pass through must make payment within 30 calendar days after receipt of the billing 3) Working Capital Advance The pass through determines that the nonfederal entity lacks sufficient working capital. Allows advance payment to cover estimated disbursement needs for initial period 31

32. NEW: Advances must be maintained in insured accounts NEW: Pass through cannot require separate depository accounts NEW: Accounts must be interest bearing unless: 1. Aggregate federal awards under $120,000 2. Account not expected to earn in excess of $500 per year 3. Bank require minimum balance so high, that such account not feasible 4. A foreign gov’t or banking system prohibits or precludes interest bearing accounts. 32

33. NEW: Interest amounts up to $500 may be retained by non federal entity for administrative purposes Currently $100 for State and local Gov’ts Currently $250 for IHEs and Non-profits. NEW: Interest earned must be remitted annually to HHS Payment Management System. 33

34.  NEW: Written procedures for determining allowability of costs in accordance with Subpart E – Cost Principles  Procedures can not simply restate the Uniform Guidance Subpart E  Should explain the process used throughout the grant development and budget process  Training tool and guide for employees 34

35.  Non-Federal entities are encouraged to earn income to defray program costs where appropriate.  Costs of generating program income may only be deducted if:  Authorized by federal regulations or the Federal award;  Costs are incidental and not charged to the Federal award.  Property from the sale of real property or equipment is not program income – apply post award property rules.  Program Income Must Be Deducted from Total Allowable Costs (except for IHEs and Research Non-profits)  With prior approval may add to Federal award. 35

37. All Costs Must Be: 1. Necessary, Reasonable and Allocable 2. Conform with federal law & grant terms 3. Consistent with state and local policies 4. Consistently treated 5. In accordance with GAAP 6. Not included as match 7. Net of applicable credits (moved to 200.406) 8. Adequately documented 37

38. 38  Consideration must be given to: a. Whether cost is a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award; b. The restraints or requirements imposed such as:  Arms length bargaining (hint: procurement processes);  Federal, state and local laws; and  Terms of the grant award. c. Market Prices for comparable goods or services in the geographical area; d. Whether the individuals acted with prudence under the circumstances considering their responsibilities; and e. No significant deviation from established prices.

39. 39  Practical Questions  Do I really need this?  Is the expense targeted to valid programmatic/ administrative need?  Is this the minimum amount I need to spend to meet my need?  Do I have the capacity to use what I am purchasing?  Did I pay a fair rate?  If I were asked to defend this purchase, would I be able to?

40. 40  A cost is allocable to a Federal award or cost objective if the goods or services involved are chargeable or assignable in accordance with relative benefits received.  Incurred specifically for the award;  Benefits both award and other work and can be distributed in proportions that may be approximated using reasonable methods; and  Necessary to the overall operation of the entity and assignable to the award in accordance with this Part.  Can only charge in proportion to the value received by the program  Example: Agency purchases a computer to use 50% on the Federal grant program and 50% on a state program – can only charge half the cost to the grant.

41.  Any cost allocable to a particular Federal award under the principles in Part 200 may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by Federal Statutes, regulations, or terms and conditions of the Federal awards, or for other reasons.  However, this prohibition would not preclude the non- Federal entity from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal award. 41

42.  If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on proportional benefit.  If cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then notwithstanding 200.405(c), the costs may be allocated or transferred to benefited projects on any reasonable documented basis. 42

43. 43  Be consistent with policies and procedures that apply uniformly to both federally- financed and other activities of the non-Federal entity.  Be accorded consistent treatment  Can not charge cost as both direct and indirect  Be determined in accordance with GAAP  Not be included as a cost or used to meet cost sharing or matching

44. 44 Adequately documented  Amount of funds under grant  How the funds are used  Total cost of the project  Share of costs provided by other sources  Records that show compliance and performance  Other records to facilitate an effective audit (for ED grants, see 76.730 page 68)

45. o NEW: When original records are electronic and cannot be altered, there is no need to create and retain paper copies. o When original records are paper, electronic versions may be substituted through the use of duplication or other forms of electronic media provided they: o Are subject to periodic quality control reviews, o Provide reasonable safeguards against alteration; and o Remain readable. BRUSTEIN & MANASEVIT, PLLC 45

46. 46  Those receipts or reduction-of-expenditure type transaction that offset or reduce expense items – must be credited to the Federal award as either cost reduction or cash refund, as appropriate.  Examples: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, adjustments of overpayments

47. 47  NEW: In order to avoid subsequent disallowance:  Non-Federal entity may seek prior written approval of cognizant agency (for indirect cost rate) or Federal awarding agency in advance of the incurrence of special or unusual costs

48.  NEW: Salaries of administrative and clerical staff should be treated as “indirect” unless all of following are met: 1. Such services are integral to the activity 2. Individuals can be specifically identified with the activity 3. Such costs are explicitly included in the budget 4. Costs not also recovered as indirect 48

49.  NEW: Payments made for costs determined to be unallowable by either the Federal awarding agency or pass-through must be refunded (including interest) to the Federal government in accordance with instructions from the Federal agency that determined the costs are unallowable. 49

50. Selected Items of Cost There are 55 specific items of cost! Listed on page 94. Starts at 200.420 (pg 150)

51. Advertising/PR 200.421 (pg 150) ◦ Allowable for programmatic purposes including: ◦ Recruitment ◦ Procurement of goods ◦ Disposal of materials ◦ Program outreach ◦ Public relations (in limited circumstances) 51

52.  Alcohol 200.423 (pg 151)  Not allowable  Collections of Improper Payments 200.428 (pg 152)  The costs incurred by the non-Federal entity to recover improper payments are allowable as either direct or indirect costs, as appropriate. 52

53. 53 Conferences 200.432 (pg 158) Prior Rule: Generally allowable Includes Meals / Conferences / Travel and Family Friendly Policies Allowable conference costs include rental of facilities, costs of meals and refreshments, transportation, unless restricted by the federal award NEW: Costs related to identifying, but not providing, locally available dependent-care resources Conference hosts must exercise discretion in ensuring costs are appropriate, necessary and managed in manner than minimizes costs to federal award

54. Conferences 200.432 ED Restrictions on Food (1) Is a working lunch necessary? (2) Is the portion of the agenda to be carried out during lunch substantive and integral to the overall purpose of the conference or meeting? (3) Is there a genuine time constraint that requires the working lunch? (4) If a working lunch is necessary, is the cost of the working lunch reasonable? (5) Has the SEA or LEA carefully documented that a working lunch is both reasonable and necessary? 54

55. Defense and prosecution of criminal and civil proceedings, claims, appeals 200.435 Generally, legal fees to defend are unallowable NEW: Allowable if no monetary penalty or order of corrective action; costs must be reasonable and necessary, not prohibited, and not otherwise recovered from Federal gov’t or third party Employee health and welfare costs 200.437 Removed “morale” Documented policies for improvement of working conditions Entertainment Costs 200.438 Cost of entertainment are unallowable Amusement, Diversion, Social Activities NEW: Except where costs might otherwise be considered programmatic and are authorized or have prior written approval of the Federal awarding agency. 55

56. 56 Maintenance and Repair Costs 200.452 (pg 170) Costs incurred for utilities, insurance, security, necessary maintenance, janitorial services, repair or upkeep of buildings and equipment, which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in efficient operating condition are allowable. If adds to permanent value, etc. must be treated as capital expenditures and are only allowable to the extent not paid through rental or other agreement.

57. Pre-award Costs 200.458 (pg 171) Those costs incurred prior to the effective date of the Federal award directly in negotiation or anticipation of the award Costs must be necessary for efficient and timely performance of the scope of work Allowable to the extent they would have been allowable if incurred after the effective date and ONLY with written approval from the Federal awarding agency. 57

58. Participant Support Costs 200.456 (pg 170) Means direct costs for stipends, travel, registration fees paid to or on behalf of participants or trainees (but not employees) in connection with conferences, or training projects. 200.75 Allowable with prior approval of the Federal awarding agency. Training and Education Costs 200.472 (pg 176) Costs for employee development are allowable. 58

59. Travel Costs 200.474 (Changed) (pg 176) Travel costs may be charged on actual, per diem, or mileage basis Travel charges must be consistent with entity’s written travel reimbursement policies NEW: Allows costs for “above and beyond regular dependent care” NEW: Grantee must retain documentation that participation of individual in conference is necessary for the project Travel costs must be reasonable and consistent with written travel policy / or follow GSA 48 CFR 31.205-46(a) 59

60. Time and Effort Documentation

61.  NEW: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed.  How staff demonstrate allocability  If employee paid with federal funds, then must show that the employee worked on that specific federal program cost objective 200.403(a) 61

62.  Must be maintained for all employees whose salaries are:  Paid in whole or in part with federal funds  Used to meet a match/cost share requirement  NOT contractors 62

63. Semi-Annual Certifications  If an employee works on a single cost objective:  After the fact  Account for the total activity  Signed by employee or supervisor  Every six months (at least twice a year) Personnel Activity Report (PAR)  If an employee works on multiple cost objectives:  After the fact  Account for total activity  Signed by employee  Prepared at least monthly and coincide with one or more pay periods 63

64. Plan Confirmation  Budgeted allocations for professional/professorial staff  Updated to reflect any significant changes in actual work After-the-Fact Activity Reports  Professional/Professorial staff keep records every six months  All other employees keep monthly records  Signed by employee, principal investigator, or responsible official using suitable means of verification.  Must reflect activity applicable to each sponsored agreement and to each category needed to identify F&A costs 64  Variety of records kept in combination at least monthly. Multiple Confirmation Records

65. NEW: These records MUST: 1. Be supported by a system of internal controls which provides reasonable assurance charges are accurate, allowable and properly allocated; 2. Be incorporated into official records; 3. Reasonably reflect total activity for which employee is compensated;  Not to exceed 100% 65

66. 4. Encompass all activities (federal and non- federal); 5. Comply with established accounting polices and practices; and 6. Support distribution among specific activities or cost objectives. 66

67. By focusing more on internal controls, the rule “mitigates the risk that a non-Federal entity… will focus on prescribed procedures... which alone may be ineffective in assuring full accountability.”  Uncovering weaknesses in internal controls or instances of fraud is goal. Not audit findings. 67

68. Program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capital projects, etc. 68

69. Does it still apply?  It is possible to work on a single cost objective even if an employee works on more than one Federal award or on a Federal award and a non-Federal award.  The key to determining whether it is a single cost objective is whether the employee’s salary and wages can be supported in full from each of the Federal awards on which the employee is working or from the Federal award alone if the employee’s salary is also paid with non-Federal funds. 69 http://www2.ed.gov/policy/fund/guid/gposbul/tim e-and-effort-reporting.html

70.  Budget estimates alone do not qualify as support for charges to Federal awards May be used for interim accounting purposes if:  Produces reasonable approximations  Significant changes to the corresponding work activity are identified in a timely manner  Internal controls in place to review after-the- fact interim charges based on budget estimates 70

71.  NEW: Because practices vary as to the activity constituting a full workload, records may reflect categories of activities expressed as a percentage distribution of total activities. 71

72.  It is recognized that teaching, research, service, and administration are often inextricably intermingled in an academic setting.  When recording salaries and wages charged to Federal awards for IHEs, a precise assessment of factors that contribute to costs is therefore not always feasible, nor is it expected. 72

73.  NEW: For records which meet the standards, the non-federal entity will not be required to provide additional support or documentation for the work performed.  DOL regulations for Fair Labor Standards Act must still be met (i.e. charges must be supported by records indicating the total number of hours worked each day). 73

74.  For a non-Federal entity where the records do not meet these standards:  Federal agency may require personnel activity reports (PARs), including prescribed certifications or equivalent documentation that support the records as required in this section.  PARs are not defined!! 74

75.  NEW: All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated. 75

76.  States, local governments and Indian tribes encouraged to adopt “substitute systems” if approved by cognizant agency for indirect cost.  No longer applies to nonprofits.  Still acceptable to allocate sampled employees’ supervisors, clerical and support staffs, based on the result of the sampled employees. 76

77. NEW: Cognizant agencies for indirect costs are encouraged to accept alternative proposals based on outcomes and milestones for program performance. These plans are acceptable as alternatives to the Part 200 standards. 77

78.  A non-Federal entity may submit performance plans that incorporate funds from multiple Federal awards and account for their combined use based on performance-based metrics, if approved.  Must submit a request for a waiver that includes certain information, including the method of charging costs. 78

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80.  No change from the current requirement.  Entities must clearly determine what is a subgrant and what is a contract. 80

81. Still provides flexibility for States All other nonfederal entities follow policies and procedures under Section 200.318-200.326. BRUSTEIN & MANASEVIT, PLLC 81

82.  All nonfederal entities must have documented procurement procedures which reflect applicable Federal, State, and local laws and regulations. BRUSTEIN & MANASEVIT, PLLC 82

83.  Nonfederal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of the contract BRUSTEIN & MANASEVIT, PLLC 83

84.  Must maintain written standard of conduct, including conflict of interest policy.  A conflict of interest arises when any of the following has a financial or other interest in the firm selected for award:  Employee, officer or agent  Any member of that person’s immediate family  That person’s partner  An organization which employs, or is about to employ, any of the above or has a financial interest in the firm selected for award BRUSTEIN & MANASEVIT, PLLC 84

85.  Must neither solicit nor accept gratuities, favors, or anything of monetary value from contractors/ subcontractors.  However, may set standards for situations in which the financial interest is not substantial or the gift is an unsolicited item of nominal value.  Standards of conduct must include disciplinary actions applies for violations. BRUSTEIN & MANASEVIT, PLLC 85

86. NEW: If the non-federal entity has a parent, affiliate, or subsidiary organization that is not a state or local government the entity must also maintain written standards of conduct covering organization conflicts of interest BRUSTEIN & MANASEVIT, PLLC 86

87. The Federal awarding agency must establish conflict of interest policies for Federal awards. NEW: All non federal entities must establish conflict of interest policies, and disclose in writing any potential conflict to federal awarding agency in accordance with applicable Federal awarding agency policy. BRUSTEIN & MANASEVIT, PLLC 87

88.  NEW: Must disclose in writing, in a timely manner:  All violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award.  Failure to make disclosures can result in remedies in 200.338 (remedies for noncompliance) including suspension and debarment. 88

89.  Must award contracts only to responsible contractors possessing the ability to perform successfully:  Contractor integrity  Compliance with public policy  Record of past performance  Financial and technical resources BRUSTEIN & MANASEVIT, PLLC 89

90.  All procurement transactions must be conducted with full and open competition.  Must have protest procedures to handle disputes  To eliminate unfair advantage, contractors that develop or draft specifications, requirements, statement of work, and invitations for bids or RFPs must be excluded from competing for such procurements. BRUSTEIN & MANASEVIT, PLLC 90

91. Situations that restrict competition: 1. Unreasonable requirements on firms to qualify to do business 2. Requiring unnecessary experience or excessive bonding 3. Noncompetitive pricing practices 4. Noncompetitive awards to consultants on retainer 5. Organizational conflicts of interest (see 200.318(c)(2)) 6. Specifying a brand name instead of allowing “an equal” 7. Any arbitrary action in the procurement process BRUSTEIN & MANASEVIT, PLLC 91

92. Must prohibit the use of statutorily or administratively imposed state or local geographical preferences in the evaluation of bids or proposal, except where applicable Federal statutes expressly mandate or encourage geographic preference. Does not preempt state licensing laws. Exception: architectural and engineering services (if provides appropriate number of qualified firms). BRUSTEIN & MANASEVIT, PLLC 92

93. Written procedures for procurement must ensure all solicitations: Incorporate a clear and accurate description of the technical requirements for materials, product or service to be procured; and “Brand name or equivalent” may be used as needed, but the specific features of the named brand which must be met by the offers must be clearly states Identify all requirements which the offerors must fulfill and all other factors to be used in evaluating bids or proposals. BRUSTEIN & MANASEVIT, PLLC 93

94.  Method of procurement:  NEW: Micro-purchase  Small purchase procedures  Competitive sealed bids  Competitive proposals  Noncompetitive proposals BRUSTEIN & MANASEVIT, PLLC 94

95.  NEW: Acquisition of supplies and services under $3,000 or less.  On October 1, 2015 the micro-purchase threshold will increase to $3,500.  $2,000 for construction subject to the Davis-Bacon Act  May be awarded without soliciting competitive quotations if nonfederal entity considers the cost reasonable.  To the extent practicable must distribute micro-purchases equitably among qualified suppliers. BRUSTEIN & MANASEVIT, PLLC 95

96.  Good or service that costs $150,000 or less  (NEW: Simplified Acquisition Threshold was raised under 200.88)  Organization may set lower threshold  Must obtain price or rate quotes from an adequate number of qualified sources  “Relatively simply and informal” BRUSTEIN & MANASEVIT, PLLC 96

97.  Over $150,000  Organization may set lower threshold  Bids are publically solicited.  Appropriate when:  A complete, adequate and realistic specification or description of good or service is available;  Two or more responsible bidders are willing and able to compete effectively for the business  Selection of vendor can be made principally based on price and it’s a firm fixed price contract. BRUSTEIN & MANASEVIT, PLLC 97

98.  Over $150,000  Organization may set lower threshold  Award contract to responsible vendor whose proposal is most advantageous to the program, considering price and other factors.  Generally used when sealed bid is not appropriate. BRUSTEIN & MANASEVIT, PLLC 98

99.  Appropriate only when:  The item is only available from a single source;  There is a public emergency that will not permit delay;  NEW: The Federal awarding agency or pass-through expressly authorizes noncompetitive proposals in response to a written request from non-Federal entity; or  After soliciting a number of sources, competition is determined inadequate. BRUSTEIN & MANASEVIT, PLLC 99

100.  NEW: Must perform a cost or price analysis in connection with every procurement action over $150,000, including contract modifications  Independent estimate before receiving bids or proposals.  Cost analysis generally means evaluating the separate cost elements that make up the total price (including profit)  Price analysis generally means evaluating the total price BRUSTEIN & MANASEVIT, PLLC 100

101. BRUSTEIN & MANASEVIT, PLLC 101  Cannot contract with vendor who has been suspended or debarred  Excluded Parties List System in the System for Award Management (SAM)  2 CFR Part 180 (OMB Debarment Suspension Rules) and 2 CFR 3485 (USDE Rules)

102. BRUSTEIN & MANASEVIT, PLLC 102  For contracts over $25,000 you must verify that the person with whom you intend to do business is not excluded or disqualified.  This MUST be done by either: a. Checking System for Award Management (SAM); or b. Collecting a certification from that person; or c. Adding a clause or condition to the covered transaction with that person.

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104.  Equipment: tangible, nonexpendible, personal property having a useful life of more than one year and an acquisition cost of $5,000 or more per unit.  Grantee may also use its own definition of equipment as long as the definition would at least include all equipment defined above. BRUSTEIN & MANASEVIT, PLLC 104

105. All tangible personal property other than equipment NEW: Computing devices are supplies is less than $5,000 NEW: Computing devices 200.20 (pg 97) Machines used to acquire, store, analyze, process, public data and other information electronically Includes accessories for printing, transmitting and receiving or storing electronic information BRUSTEIN & MANASEVIT, PLLC 105

106.  Regardless of cost, grantee must maintain effective control and “ safeguard all assets and assure that they are used solely for authorized purposes.” BRUSTEIN & MANASEVIT, PLLC 106

107.  NEW: Conditional Title vests with the non-Federal entity.  NEW: Cannot encumber the property without approval of Federal agency or Pass-through agency But  NEW: When acquiring replacement equipment, may use the equipment to be replaced as a trade-in or sell the property and use the proceeds to offset the cost of the replacement property. BRUSTEIN & MANASEVIT, PLLC 107

108.  Equipment must be used by the Non-Federal entity in the program or project for which it was acquired as long as needed, whether or not the project or program continues to be supported by the Federal award.  When no longer needed, may be used in other activities with the following priority: 1. Projects supported by Federal awarding agency 2. Project funded by other Federal agencies  When used it may be shared (according to the above priorities) provided such use will not interfere with work on the original projects/programs.  Exception – Private Schools 76.661 (page 61) BRUSTEIN & MANASEVIT, PLLC 108

109. Procedures for managing equipment must meet the following requirements: 1. Property records  Description, serial number or other ID, source of funding, title, acquisition date and cost, percent of federal participation, location, use and condition, and ultimate disposition date including sale price 2. Physical inventory at least every two years 3. Control system to prevent loss, damage, theft  All incident must be investigated 4. Adequate maintenance procedures 5. If authorized or required to sell property, proper sales procedures to ensure highest possible return. BRUSTEIN & MANASEVIT, PLLC 109

110.  When property is no longer needed in any current or previously Federally-funded supported activity, must follow disposition rules:  NEW: Nonfederal entity must request disposition instructions from the federal awarding agency if required by the terms of the grant.  Otherwise, may be retained, sold or otherwise disposed as follows:  Over $5,000 – pay federal share  If equipment is sold: Federal awarding agency may permit non- Federal entity to deduct and retain $500 or 10% of the proceeds for selling and handling instructions.  Under $5,000 – no accountability (still must formally dispose) BRUSTEIN & MANASEVIT, PLLC 110

111. If there is a residual inventory of unused supplies exceeding $5,000 in total aggregate value upon termination or completion of the project or program and the supplies are not needed for any other federal award, must compensate the federal government for its share. BRUSTEIN & MANASEVIT, PLLC 111

112. 112

113. NEW: Must have in place a framework for evaluating risks posed by applicants, which may include reviewing: 1. Financial Stability 2. Quality of Management System 3. History of Performance 4. Audit Reports 5. Applicant’s ability to effectively implement program 113

114. Federal agency or pass-through agency may impose additional Federal award conditions:  Require reimbursement;  Withholding authority to proceed until evidence of acceptable performance;  Additional detailed reporting  Additional project monitoring;  Require grantee to obtain technical or management assistance; or  Establish additional prior approvals. 114

115. Right to Notice: 1. Nature of additional requirements, 2. Reason why imposed, 3. Nature of the action ned to remove the requirement's; 4. Time for completing actions; 5. Method for requesting reconsideration. Specific conditions MUST be removed once corrected. 115

116. NEW: All pass-through entities MUST: a. Ensure subawards are clearly identified with specific data b. Evaluate subrecipient’s risk of noncompliance  Prior experience with same or similar subawards;  Results of previous audits;  Whether new personnel or new or substantially changed systems; and  Extent and results of Federal monitoring. 116

117. c. Consider imposing specific conditions d. Monitor as necessary to ensure subaward is used for authorized purposes, which must include:  Reviewing financial and programmatic reports;  Ensure timely and appropriate action to correct all deficiencies; and  Issue management decision for audit findings as required under 200.521. e. Depending on assessment of risk, the following monitoring tools may be useful to ensure proper accountability and compliance with program requirements and achievement of performance goals:  Training + technical assistance on program-related matters;  On-site reviews; and  Arranging for “agreed-upon-procedures” engagements (described in 200.425). 117

118. f. Verify subrecipients have audits as required in Subpart F g. Consider whether results require adjustments to the pass-through entity’s own records h. Consider taking enforcement actions 200.338. 118

119.  NEW: If noncompliance can not be remedied with Specific Conditions, the entity may take one or more of the following actions:  Temporarily withhold cash payment pending correction  Disallow all of part of the cost  Wholly or partly suspend or terminate the Federal award (see 200.339 Termination)  Initiate suspension or debarment proceedings under 2 CFR Part 180  Withhold further Federal awards for the project or program  Take other remedies that may be legally available. 119

120. 120

121.  NEW: Threshold increased to $750,000  The federal agency, OIG, or GAO may arrange for audits in addition to single audit 121

122.  NEW: The federal awarding agency must use cooperative audit resolution to improve federal program outcomes  Cooperative Audit Resolution: means the use of audit follow-up techniques which promote prompt corrective action by improving communication, fostering collaboration, promoting trust and developing an understanding between the Federal agency and non-Federal entity 200.25. 122

123.  The auditor must report (for major programs):  Significant deficiencies and material weaknesses in internal controls  Significant instances of abuse  Material noncompliance  Known questioned costs > $25,000  Auditor will not normally find questioned costs for a program that is not audited as a “major program”  NEW: But if auditor becomes aware of questioned costs > $25,000 for non-major program, must report 123

124. Developing and revising policies and procedures 124

125.  Why policies and procedures are important?  Logistics  Suggested Sections  Rules and Requirements  Helpful Questions to Ask  What to do with completed policies and procedures? Brustein & Manasevit, PLLC 125

126.  Single Audits  Monitoring  Staff Changes and Transitions  Uniform Grants Guidance Brustein & Manasevit, PLLC 126

127.  Auditors ask about policies and procedures  Some tests specifically require written policies and procedures  E.g. Subrecipient monitoring Brustein & Manasevit, PLLC 127

128.  Compliance Supplement, Part 6: Internal Controls  “The A-102 Common Rule and OMB Circular A-110 … require that non-Federal entities receiving Federal awards … establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements.”  “Control activities are the policies and procedures that help ensure the management’s directives are carried out.”  Clearly written & communicated Brustein & Manasevit, PLLC 128

129.  Policies and procedures are evidence of compliance under all program monitoring tools Brustein & Manasevit, PLLC 129

130.  Training tool  Maintain consistency Brustein & Manasevit, PLLC 130

131.  Emphasis on internal controls  Written policies and procedures are required!  Written Cash Management Procedures - § 200.302(b)(6) & § 200.305  Written Allowability Procedures - § 200.302(b)(7)  Written Conflicts of Interest Policy - § 200.318(c)  Written Procurement Procedures - § 200.319(c)  Written Method for Conducting Technical Evaluations of Proposals and Selecting Recipients - § 200.320(d)(3)  Written Compensation and Fringe Benefits Policies - § 200.430(a), § 200.431(a), § 200.464 (Relocation costs of employees)  Written Travel Policy - § 200.474(b) Brustein & Manasevit, PLLC 131

132.  Compliant policies and procedures lead to:  Administering compliant programs and complying with grants management requirements! Brustein & Manasevit, PLLC 132

133. 133

134.  Where to start?  Review & collect available policies & procedures from different offices and websites  If starting from scratch, get information from people who perform grant related activities Brustein & Manasevit, PLLC 134

135.  Who should be involved?  Fiscal AND program staff  Use team approach to capture entire grant process  Everyone involved should sit in the same room to review grant activities, decision making, job responsibilities Brustein & Manasevit, PLLC 135

136.  What is the process?  Review existing policies and procedures  Develop questions  Schedule interviews with relevant staff  Gather information on actual practices  Draft policies and procedures  Review internally with appropriate staff  Revise  Formally adopt and implement  Train staff Annually review and revise! Brustein & Manasevit, PLLC 136

137.  How long does it take?  Depends on need  Review of existing policies and procedures is less time than starting from scratch  Set deadlines for actions Don’t get overwhelmed! Brustein & Manasevit, PLLC 137

138.  State-Administered Grants  Any grant distributed by formula to eligible States  Describe the process (hint: follow the money trail)  Direct Grants  Any grant other than those distributed by formula to eligible States  Review GAN for terms and conditions Brustein & Manasevit, PLLC 138

139. 139

140.  Organization, Structure and Function  Grant Application Process  Financial Management System  Cash Management  Allowability  Procurement  Inventory/Property Management  Time and Effort  Record Keeping/Record Retention  Monitoring  Audit Resolution  Programmatic Fiscal Requirements  Programmatic Requirements Brustein & Manasevit, PLLC 140

141. Organization, Structure and Function Brustein & Manasevit, PLLC 141

142.  Organization Chart  Offices  Sections  Divisions  Job Descriptions & Responsibilities  Outside entities with grant administration responsibilities  MOU/MOA Brustein & Manasevit, PLLC 142

143.  Do you have an organizational chart?  What are the offices, sections, divisions or employees that have responsibility for grant administration?  What are their responsibilities?  Are there any entities outside of the agency that have grant administration responsibilities?  What are those responsibilities?  How was relationship created? What are the terms?  MOU/MOA? Brustein & Manasevit, PLLC 143

144. Brustein & Manasevit, PLLC 144

145.  State-Administered Grant vs. Direct Grant  Decisions regarding what grants to apply for  Determining organizational capacity to run a compliant program  Approvals and Authorizations  After the grant is awarded Brustein & Manasevit, PLLC 145

146.  State-Administered Grant vs. Direct Grant  Decisions regarding what grants to apply for  Determining organizational capacity to run a compliant program  Approvals and authorizations  After the grant is awarded  If Pass-Through Entity:  Discuss how subgrantees apply for grants  Responsible for risk analysis prior to issuing award! (Uniform Grant Guidance) Brustein & Manasevit, PLLC 146

147.  Best Practices  Whether or not formal acceptance is required, meet with appropriate parties to be certain you want to accept the grant.  Make acceptance a conscious act. Circumstances may have changed between submission of application and notice of award Brustein & Manasevit, PLLC 147

148.  How does the agency determine what grants to apply for?  What is the process?  Who reviews and signs off on a grant application?  What happens after a grant is awarded? Brustein & Manasevit, PLLC 148

149. Financial Management System Brustein & Manasevit, PLLC 149

150.  Required Standards  (1) Identification of awards  (2) Financial reporting  (3) Accounting records  (4) Internal controls  (5) Budget control  (6) Cash management  (7) Allowable costs  Procedures  Overview of financial management / accounting system  Budget control, amendments  Maintaining accounting records  Journal voucher process  Cash management and interest remittance  Spending funds, determining allowability 150

151.  Cover timely obligations of funds: period of availability, obligations, carryover, FIFO, etc.  Process must minimize time elapsing between draw from G5 and disbursement (not obligation)  Describe payment method (advance, reimbursement, working capital) Brustein & Manasevit, PLLC 151

152.  Not just a restatement of Subpart E  Not required to list out all allowable costs  Describe budgeting and planning process for determining allowable costs  Program requirements  Identified needs  Selected item of costs  Frequently asked questions Brustein & Manasevit, PLLC 152

153.  What accounting systems are used?  What function does each system perform?  Who is responsible for managing budgets and accounts payable?  How are budgets loaded and tracked on the system?  What is the process for comparing budgets to expenditures?  How do you ensure all expenditures are allowable? Brustein & Manasevit, PLLC 153

154.  What is the process for requesting budget revisions?  How do you ensure that all expenditures are made within the period of availability?  What happens to unobligated funds?  Does the system interface with the procurement and inventory systems?  How are vendors paid? What is the process? Who is involved? Brustein & Manasevit, PLLC 154

155. Procurement Brustein & Manasevit, PLLC 155

156.  Uniform Grant Guidance: All non-federal entities must have documented procurement procedures which reflect applicable Federal, State, and local laws and regulations. § 200.318(a)  Open competition  Conflict of Interest  Solicitation  Cost/Price Analysis  Vendor Selection  Required Contract Provisions  Contract Administration  Protest Procedures Brustein & Manasevit, PLLC 156

157.  Include:  Definition (§ 200.318(c)(1))  Chain for reporting potential conflicts  Alternate if reporting to employee involved in potential conflict  Definitions and examples of nominal items  Recusal of interested parties  Sanctions  Signed certification that employee received and understands conflicts policy  Training on policy Brustein & Manasevit, PLLC 157

158.  Non-federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of the contract - § 200.318  Non-federal entity’s contracts must contain the applicable provisions in Appendix II to Part 200 - § 200.326  Examples (not complete list)  Remedies  Termination  Equal Employment Opportunity  Davis-Bacon Act  Debarment and Suspension Brustein & Manasevit, PLLC 158

159.  What is your conflict of interest policy?  What are State and/or agency-specific requirements that must be followed?  Approval for contracts?  Service contracts vs. Contracts for goods?  Contract thresholds and process for entering into contracts within each threshold amount?  What clauses and/or certifications must be in each contract?  How do you ensure that the terms of the contract are met? Brustein & Manasevit, PLLC 159

160. Inventory & Property Management Brustein & Manasevit, PLLC 160

161.  Uniform Grant Guidance § 200.313  Property Classifications  Equipment  Supplies  Computing Devices  Shared Use of Equipment  Inventory Procedure  Loss, Damage or Theft  Disposition Brustein & Manasevit, PLLC 161

162.  When property no longer needed, must follow disposition rules:  Transfer to another federal program  Over $5,000 – pay federal share  Under $5,000 – no accountability  NEW: Non-federal entity must request disposition instructions from the federal awarding agency if required by the terms of the grant Brustein & Manasevit, PLLC 162

163.  How do you classify and define property?  Equipment, supplies, etc.  What items must be inventoried and tagged?  Detailed inventory records  What is the inventory process?  How frequently is a physical inventory conducted?  What is the policy regarding lost, stolen or damaged items?  Are there procedures to transfer equipment between programs?  What are the disposition procedures? Brustein & Manasevit, PLLC 163

164. Time and Effort Brustein & Manasevit, PLLC 164

165.  Personnel activity reports or equivalent documentation –  Follow old standards: 200.430(i)(8)  Less frequently? Supervisor signature?  Allocating effort using basis other than time –  If inextricably intermingled, appropriate method to allocate using “any reasonable documented basis”: 200.405(d)  E.g., Number of accounting transactions processed?  Substitute systems –  Cognizant agency for indirect cost approval: 200.430(i)(5)  Allocating effort for supervisory, clerical and support staff –  Roll up of employee effort: 200.430(i)(5)(ii)  Statistically valid sample of employees is required Brustein & Manasevit, PLLC 165

166.  Alternative proposals based on outcomes/performance –  Federal cognizant agency approval: 200.430(i)(6)  Alternative proposals based on blended funding –  Must have blended funding plan approved by all involved federal awarding agencies: 200.430(i)(7)  Must describe how costs will be charged and relationship between charging of costs and the specific activity applicable to all fund sources  Indirect cost pool –  Employees that work on general management activities, such as accounting, payroll preparation, or personnel management may be included in indirect cost pool. Recover costs attributed to federal programs through applying rate: 200.414  Administrative and clerical staff normally treated as indirect: 200.413(c) 166

167.  How do you document time and effort?  Employees that work on one cost objective?  Employees that work on multiple cost objectives?  Who must sign the forms?  Where are the forms turned in?  How often is actual effort compared to budgeted effort?  How and when are reconciliations completed? Budget amendments? Brustein & Manasevit, PLLC 167

168. Record Keeping Brustein & Manasevit, PLLC 168

169.  Uniform Grant Guidance §§ 200.333, 200.335  Statute of Limitations  5 years  State Policy  Agency Policy Brustein & Manasevit, PLLC 169

170.  How long must records be maintained?  How are records maintained?  Hard copy, electronic  Who handles records requests?  How is personally identifiable information protected? Brustein & Manasevit, PLLC 170

171. Monitoring Brustein & Manasevit, PLLC 171

172.  Awarding Agency Monitoring  Self-Assessment  Performance and compliance  Monitoring of Subrecipients  Risk-Based Factors  Type of Monitoring:  Onsite Reviews  Remote Monitorings  Desk Reviews  Corrective Actions and Follow-Up Brustein & Manasevit, PLLC 172

173.  What are the risk factors used to determine who is monitored?  Process for when agency is monitored?  Notification, preparation, responding, follow-up  Process for monitoring subrecipients?  From notification to issuing report and timeline  Who is responsible for monitoring? Fiscal? Programmatic?  What gets monitored?  How do you determine which subrecipients will be monitored?  How often does monitoring occur?  Site visits, desk reviews, self-assessments  How do you ensure findings are resolved?  Corrective action plan, closeout letter, future monitoring Brustein & Manasevit, PLLC 173

174. Audit Resolution Brustein & Manasevit, PLLC 174

175.  Single Audit  Uniform Grant Guidance – Subpart F  Resolution of Findings  Review of Subrecipients’ Single Audits Brustein & Manasevit, PLLC 175

176.  Who is responsible for overseeing single audit compliance and resolution?  What is the audit process?  How are findings resolved?  Correct Action Plan, Timeline  Process for reviewing subrecipients’ single audits? Brustein & Manasevit, PLLC 176

177. Programmatic Fiscal Requirements Brustein & Manasevit, PLLC 177

178.  Supplement Not Supplant  Maintenance of Effort  Matching and Cost Sharing  Hold Harmless Brustein & Manasevit, PLLC 178

179.  How do you ensure compliance with programmatic fiscal requirements?  What documentation is required to be maintained? Brustein & Manasevit, PLLC 179

180. Programmatic Requirements Brustein & Manasevit, PLLC 180

181.  Programmatic Compliance  Application process  Allocations to subrecipients  Allowable costs under the grant program  Other Brustein & Manasevit, PLLC 181

182.  How does your agency ensure compliance with the specific requirements of the grant program?  What resources are available to program staff to help ensure compliance? Brustein & Manasevit, PLLC 182

183.  Buy-in from those who will be using the policies and procedures.  Review for accuracy, completeness and compliance.  Adoption by board or other governing body. 183

184. Policies and procedures are only useful if they are current, accurate and regularly used.  Ongoing professional development and training  What the requirements are, and how your organization meets the requirement.  Continually review and revise 184

186. 186 This presentation is intended solely to provide general information and does not constitute legal advice. Attendance at the presentation or later review of these printed materials does not create an attorney-client relationship with Brustein & Manasevit. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances.