The Uniform Grants Guidance - Compliance Starts Now Are You Ready? Virginia Department of Education Roanoke, VA July 2015 Leigh Manasevit Brustein & Manasevit, PLLC

OMB Revised Administrative, Cost, Audit Rules Governing All Federal Grants Super Circular Omni Circular Uniform Grant Guidance 2 CFR Part 200 Regulations 2

Goals of the UGG/ Part 200 Regs 3 1. Reduce Fraud, Waste and Abuse in Federal Funds 2. Simplicity and Consistency Created by COFAR Council on Financial Assistance Reform and Key Stakeholders

Effective Dates: 4 December 26, 2014 – Direct Grants from Federal Agencies and Indirect Cost Rates When Due for Renegotiation after this date. July 1, 2015 – State Administered Federal Programs July 1, 2016 – For Procurement Rules – ONLY if one year grace period is taken by agencies (as noted in their internal procedures).

Who is covered? 5 All “nonfederal entities” expending federal awards Some Federal agencies have applied subparts A through E to for-profit entities, foreign public entities or foreign organizations (c) Audits: Subpart F applies to all as required under the Single Audit Act

What was consolidated? 6 A-102 and A-110: Administrative Grant Rules A-21, A-87 and A-122: Cost Principals A-133 and A-50: Audit Rules A-89: Catalog of Federal Domestic Assistance

Structure of UGG/ Part Subpart A – Definitions Subpart B – General Provisions Subpart C – Pre Award Requirements Subpart D – Post Award Requirements Subpart E – Cost Principles Subpart F – Audit Requirements

Applicability to Federal Awards 8 Applies to new federal awards if a federal awarding agency considers its incremental funding actions to be opportunities to change terms and conditions of previously made awards. Federal awarding agencies may apply UGG to the entire Federal awards that is uncommitted or unobligated as of the Federal award date or first increment after 12/26/14. (COFAR FAQ and (Aug 29, 2014))

Applicability to Subawards 9 The effective date is the same as the effective date of the Federal award from which the subaward is made. Does not matter when the subaward is made – but the original Federal award from the Federal awarding agency. (COFAR FAQ (Aug 29, 2014))

Program Statutes Control 10 If federal program statute differs from Part 200, then the Statute or Regulation governs (b)(3)

Federal Agency Changes 11 All exceptions and more restrictive requirements MUST be approved by OMB (c). Entities MUST check their applicable federal regulations to ensure compliance with specific agency exceptions

Grant Management Systems 1.Financial Management, 2.Procurement, and 3.Property Standards. 12

Financial Management System (FMS) 13 1.NEW Identification of Federal Awards 2.Financial Reporting 3.Accounting Records 4.Internal Control 5.Budget Control 6.NEW: Written Procedures to Implement CMIA 7.NEW: Written Procedures to Determine Allowability! Source Documentation (moved to and incorporated into Accounting Records)

New: Identification of Federal Awards 14 Accounts must be able to identify all Federal awards received and expended and the Federal programs under which they were received (b)(1) Must include CFDA title and number, Federal award identification number and year Name of Federal agency Name of Pass-through entity, if any.

Financial Reporting 15 Accurate, current, complete disclosure of financial results of each award (Old) in accord with the financial reporting reqs of the grant (New) in accord with and – Federal awarding agency can only collect OMB approved data elements, no less than annually, no more than quarterly – Non-federal entity must submit performance reports at intervals required by federal agency or pass- through. Annual performance reports due 90 days after reporting period; Quarterly performance reports due 30 days after reporting period

Financial Reporting (cont.) 16 Performance Metrics: 1.Compare actual accomplishments to objectives (quantify to extent possible) 2.Reasons goals were not met if appropriate 3.Additional pertinent information (e.g., analysis and explanation of cost overruns, high unit costs)

Accounting Records 17  Must identify source and application of funds (expenditure level detail) (b)(3)  Must contain information related to: Authorizations; Obligations ; Unobligated balances ; Assets; Expenditures ; Income; Interest; and Be Supported by Source Documentation. Eliminated liabilities.

NEW: Internal Controls NEW: Internal controls (expanded) The non-Federal entity must: Establish and maintain effective control over the federal award. Evaluate and monitor the non-federal entity’s compliance statutes, regulations, and terms of the federal award Take prompt action when instances are identified including noncompliance identified in audit findings Take reasonable measures to safeguard protected personally identifiable information as defined under

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

NEW: Written Procedures on CMIA 20 NEW: Must have Written Procedures to implement the requirements of Payment (or the Cash Management Improvement Act (CMIA) rules)

Written Procedures on CMIA (cont.) 21 For states, payments are governed by Treasury – State CMIA agreements 31 CFR Part 205 No Change For all other non-federal entities, payments methods must minimize time elapsing between draw from G-5 and disbursement (not obligation)

Written Cash Management Procedures (cont.) 22 Written procedures must describe whether non- federal entity uses: 1)Advance Payments (preferred) Limited to minimum amounts needed to meet immediate cash needs 2)Reimbursement Pass-through must make payment within 30 calendar days after receipt of the billing 3)Working Capital Advance The pass-through determines that the non-federal entity lacks sufficient working capital Allows advance payment to cover estimated disbursement needs for initial period

Changes: Payment  Pass Through cannot require subgrantees maintain separate depository accounts Subgrantee must be able to account for the receipt, obligation and expenditure  Cash advances must be kept in interest bearing accounts unless: Entity received < $120,000 per year in Fed awards Best interest bearing account would not earn > $500/year The depository would require high minimum balance Foreign Gov or banking precludes interest bearing accounts.  Interest amounts up to $500 may be retained for administrative expense

NEW: Written Procedures Allowable Costs 24 Prior Rule: Must follow applicable cost principle to determine reasonableness, allowability, and allocability of all costs NEW: Must have Written Procedures for determining the allowability of costs in accordance with the UGG!

Procurement States: All Others: through

Written Procedures Must have documented procurement procedures which reflect applicable Federal, State and local laws and regulations and the UGG standards. Can only contract with responsible contractors possessing the ability to perform successfully: Contractor integrity Compliance with public policy Record of past performance Financial and technical resources

Contract Administration (b) 27 Nonfederal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of the contract

Conflict of Interest (c)(2) 28 Same Conflict of Interest Standards NEW: If the non-federal entity has a parent, affiliate, or subsidiary organization that is not a state or local government the entity must also maintain written standards of conduct covering organization conflicts of interest

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

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

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

NEW: Micro-purchases Micro-purchases must be distributed equitably among qualified suppliers, to the extent practicable. Micro-purchases may be awarded without soliciting competitive quotations if the non-Federal entity considers the price to be reasonable.

NEW: Methods of Procurement  Noncompetitive proposals appropriate only when: The good or services is available only from a single source (sole source) There is a public emergency Change: The awarding agency expressly authorizes noncompetitive proposals in response to a written request from the non-Federal entity After soliciting a number of sources, competition is deemed inadequate

Cost/Price Analysis NEW: Must perform a cost or price analysis in connection with every procurement in excess of $150,000 Prior Rule: Must perform a cost or price analysis in connection with every procurement action, including contract modifications Method and degree of cost or price analysis depends on the particular facts and circumstances Must make independent estimate before receiving bids or proposals

Contract Provisions Contracts must contain applicable provisions in Appendix II to Part 200 Suspension / Debarment Provisions include that a non- Federal entity must NOT contract with vendor who has been suspended or debarred Must verify on System for Award Management (SAM) at

Property standards 36

Property Definitions 37  Equipment  Tangible personal property, useful life of more than one year, cost which equals or exceeds $5,000  Supplies  All tangible personal property other than equipment.  NEW: Computing devices are supplies if less than $5,000  NEW: Computing Devices  Machines used to acquire, store, analyze, process, public data and other information electronically

Internal Controls 38 Regardless of cost, grantee must maintain effective control and “safeguard all assets and assure that they are used solely for authorized purposes.” (b)(4)

Equipment (cont) 39  NEW: The non-federal entity has conditional Title unless otherwise specified  Clarified: Shared use is allowed if such use will not “interfere”:  1 st preference – projects supported by federal awarding agency  2 nd preference – project funded by other federal agencies  3 rd preference – use for non federally funded programs  NEW: Cannot “encumber” the property without approval of Federal agency or Pass-through agency

Equipment (cont) 40  NEW: When grantee acquiring replacement equipment, the equipment to be replaced may be used as a “trade-in” without recourse to federal agency

NEW: Insurance Coverage and  NEW: At a minimum, grantee must provide equivalent insurance coverage on equipment purchased with federal funds as provided to equipment purchased with nonfederal funds  NEW: Actual losses which could have been covered by permissible insurance are unallowable (unless provided in Federal award)  If, however, costs are not covered under nominal deductible insurance, costs are allowable

Changes to Allowability Rules 42

Cost Principles: “Factors Affecting Allowability of Costs” 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 ) 8.Adequately documented

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

NEW: Direct v. Indirect Costs 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

55 Selected items of cost Listed in alphabetical order

Selected Items of Cost 47 Clarified: Advertising/PR ◦ Allowable for programmatic purposes including: ◦ Recruitment ◦ Procurement of goods ◦ Disposal of materials ◦ Program outreach ◦ Public relations (in limited circumstances) Alcohol ◦ Not allowable

Selected Items of Cost (cont.) 48 Conferences Includes Meals / Conferences / Travel and Family Friendly Policies Allowable conference costs include rental of facilities, costs of meals and refreshments, transportation, unless restricted by the federal award NEW: Costs related to identifying, but not providing, locally available dependent-care resources Conference hosts must exercise discretion in ensuring costs are appropriate, necessary and managed in manner than minimizes costs to federal award

Selected Items of Cost (cont.) 49 Travel Costs (Changed) Travel costs may be charged on actual, per diem, or mileage basis NEW: Travel charges must be consistent with entity’s written travel reimbursement policies NEW: Allows costs for “above and beyond regular dependent care” Grantee must retain documentation that participation of individual in conference is necessary for the project NEW: Travel costs must be reasonable and consistent with written travel policy / or follow GSA 48 CFR (a)

Time and Effort Documentation Most flexible and most changed Rule 50

Time and Effort Distribution Requirements 51 Must be maintained for all employees whose salaries are: Paid in whole or in part with federal funds (i)(1) Used to meet a match/cost share requirement (i)(4)

Cost Objectives 52 What is a cost objective? (slightly changed) Program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate the measure the cost of processes, products, jobs, capital projects, etc.

NEW: “Standards for Documentation of Personnel Expenses” Charges for salaries must be based on records that accurately reflect the work performed. 1.Must be supported by a system of internal controls which provides reasonable assurance charged are accurate, allowable and properly allocated 2.Be incorporated into official records 3.Reasonably reflect total activity for which employee is compensated  Not to exceed 100%

NEW: “Standards for Documentation of Personnel Expenses” (cont) 54 4.Encompass all activities (federal and non-federal) 5.Comply with established accounting polices and practices 6.Support distribution among specific activities or cost objectives

NEW: “Standards for Documentation of Personnel Expenses” (cont) 55 NEW: Budget estimates alone do not qualify as support for charges to Federal awards (i)(1)(viii) NEW: Percentages may be used for distribution of total activities (i)(1)(ix)

NEW: Compliance (i)(2) 56 NEW: For records which meet the standards, the non-federal entity will not be required to provide additional support or documentation for the work performed. DOL regulations for Fair Labor Standards Act must still be met (i.e. charges must be supported by records indicating the total nuber of hours worked each day).

NEW: Noncompliance (i)(8) 57  For a non-Federal entity where the records do not meet these standards: USDE may require personnel activity reports (PARs), including prescribed certifications or equivalent documentation that support the records as required in this section. PARs are not defined!!

Reconciliation (i)(1)(viii)(C) 58 NEW: All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.

Flexibility (i)(5)-(7) 59 Three Options: Substitute Systems Grantees encouraged to adopt “substitute systems” if approved by cognizant agency for indirect cost (i)(5) This no longer applies to nonprofit organizations (not listed under the section) NEW: Alternative Proposals NEW: Blended Funding

Record Retention 60

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

Requirements of pass- through entities 62

NEW: Federal awarding agency review of risk posed by applicants  Federal Agencies must have in place a framework for evaluating risks before applicant receives funding 1.Financial Stability 2.Quality of Management System 3.History of Performance 4.Audit Reports 5.Applicant’s Ability to Effectively Implement Program

NEW: Monitoring and reporting program performance Monitoring by the “Pass Through”  Monitor to assure compliance with applicable federal requirements and performance expectations are achieved  Must cover each program, function or activity(see also )  Must submit “performance reports” at least annually

NEW: Requirements for pass-through Entities (cont.) 65  Depending on assessment of risk, the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals: 1.Training + technical assistance on program-related matters 2.On-site reviews 3.Arranging for “agreed-upon-procedures” engagements (described in )

Specific Conditions (a) 66 Federal agency or pass-through agency may impose additional Federal award conditions:  Require reimbursement;  Withholding authority to proceed until evidence of acceptable performance;  Additional detailed reporting  Additional project monitoring;  Require grantee to obtain technical or management assistance; or  Establish additional prior approvals.

Remedies for Noncompliance 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 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.

Audit Requirements 68

Audit Requirements Audit threshold increased from $500,000 to $750,000 The federal agency, OIG, or GAO may arrange for audits in addition to single audit

Audit Findings Follow-Up Auditees must prepare a summary schedule of prior audit findings and a corrective action plan for current year audit findings

Federal Agency Responsibilities 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

Audit Findings  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

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