1. Time & Effort Under the New Uniform Guidance Steven Spillan, Esq.

2. Agenda The Structure of the New Uniform Guidance Cost Principles
Time & Effort
Old Rules under the OMB Circulars
Common Findings
New Flexibility under Part 200
New standards
Supported by a System of Internal Control
What now?

3. The New Uniform Guidance
2 C.F.R. Part 200
The New Uniform Guidance

4. Prior Rules (Incorporated Into the NEW UGG)
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

5. Effective Dates December 26, 2014 – Direct Grants
July 1, 2015 – State Administered Programs
July 1, 2016 – Procurement Rules (Two Year Grace Period)
Indirect Cost Rates – When Due For Renegotiation

6. The New 2 CFR Part 200 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

7. Subpart E of Part 200
Cost Principles

8. Factors Affecting Allowability of Costs 200.403
All Costs Must Be:
Necessary, Reasonable, and Allocable
Conform with federal law & grant terms
Consistent with state and local policies
Consistently treated
In accordance with GAAP
Not included as match
Net of applicable credits (moved to )
Adequately documented

9. Direct v. Indirect Costs 200.413(c)
NEW: Salaries of administrative and clerical staff should be treated as “indirect” unless all of following are met:
Such services are integral to the activity
Individuals can be specifically identified with the activity
Such costs are explicitly included in the budget
Costs not also recovered as indirect

10. Collection of Unallowable Costs 200.410
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.

11. OMB Circular A-122
The Old Rule

12. Time & Effort (Old A-122 Rule)
Personnel Activity Report
After-the-activity report
Account for the total activity
Signed by employee or supervisor with first hand knowledge
Prepared at least monthly and coincide with one or more pay periods

13. Common Audit Findings (under old rule)
Not “After-the Fact”
No affirmation
The form should say that the distribution of activity represents a reasonable estimate of the actual work performed by the employee during the periods covered by the reports.
No printed name or title of supervisor
How do we know they are a supervisor and have first hand knowledge?

14. Common Audit Findings, cont’d.
Pre-populated Forms
Does not account for total time employee is compensated
Example – totals 50%
Example – totals 200%
Does not identify cost objective
Federal Programs

15. 2 C.F.R. § (i)
New Rules

16. Documentation for Personnel Expenses 200.430(i)
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 (a)

17. Who must participate? 200.430(i)(1) and (i)(4)
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

18. Does “X” Employee have to keep time and effort records?
Is she/he an employee?
Yes
Is she/he paid with federal funds?
T&E Required No
Salary used for match?
No T&E Required
No T&E Required
I don’t know
Ask HR

19. Documentation for Personnel Expenses, cont’d. 200.430(i)(1)
NEW: These records MUST:
Be supported by a system of internal controls which provides reasonable assurance charges are accurate, allowable, and properly allocated;
Be incorporated into official records;
Reasonably reflect total activity for which employee is compensated;
Not to exceed 100%

20. Documentation for Personnel Expenses, cont’d. 2 200.430(i)(1)
Encompass all activities (federal and non-federal);
Comply with established accounting polices and practices; and
Support distribution among specific activities or cost objectives.

21. COFAR Comments on Part 200 Rule
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.

22. Cost Objectives
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.

23. Cost Objectives, cont’d. 200.430(i)(1)(vii)
More than one Federal award.
A Federal award and a non-Federal award.
An indirect cost activity and a direct cost activity.
Two or more indirect activities that are allocated using different allocation bases.
An unallowable activity and a direct or indirect cost activity

24. Allocable Costs (c)
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.

25. Allocable Costs, cont’d. 200.405(d)
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 (c), the costs may be allocated or transferred to benefited projects on any reasonable documented basis.

26. Use of Budget Estimates 200.430(i)(1)(viii)
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

27. Reconciliation 200.430(i)(1)(viii)(C)
NEW: All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.

28. Percentages 200.430(i)(1)(ix)
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.

29. Alternative Proposals 200.430(i)(6)
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.

30. Compliance (i)(2)
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).

31. Noncompliance (i)(8)
For a non-Federal entity where the records do not meet these standards:
HHS 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!!

32. Internal Controls 200.302(b)(4)
Essentially same as prior 80.20(b)(3):
Effective control over and accountability for:
All funds
Property
Other assets
Must adequately safeguard all assets
Use assets solely for authorized purpose

33. The Definition of Internal Controls 200.61
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:
Effectiveness and efficiency of operations;
Reliability of reporting for internal and external use; and
Compliance with applicable laws and regulations.

34. Internal Controls
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 Control Integrated Framework; and
Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)

35. Internal Controls, cont’d. 200.303
Comply with Federal statutes, regs, and the terms and conditions of the Federal awards.
Evaluate and monitor the non-Federal entity's compliance with statutes, regs and the terms and conditions of Federal awards.
Take prompt action when instances of noncompliance are identified including in audit findings.
Take reasonable measures to safeguard protected personally identifiable info (PII) and other information designated or deemed sensitive

36. What Now?

37. Moving Forward No Frame of Reference: No common audit findings
Little/no guidance
Chance of feds requiring PARS
Advice: Just Wait…

38. QUESTIONS?

39. ~ Legal Disclaimer ~
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.

40. CIL-NET Attribution
Support for development of this technical assistance information was provided by the Department of Health and Human Services, Administration for Community Living under grant number 90TT No official endorsement of the Department of Health and Human Services should be inferred. Permission is granted for duplication of any portion of this information, providing that the following credit is given to the project: Developed as part of the IL-NET, an ILRU/NCIL/APRIL National Training and Technical Assistance Program.