OMB`s New Uniform Requirements for Grants & Cooperative

advertisement
Prepare Your
Organization for
Major Changes to
Federal Award
Requirements
October 6, 2014
Troy Rector, CPA
Senior Manager
Not-for-Profit Group
C LARK N UBER P . S .
Agenda
• Summary and Incentives for Change
• Framework of 2 CFR 200, aka the “Super Circular”
or “Omni Circular”
• Pre-Award Requirements
• Post-Award Requirements
• Cost Principles
• Single Audit
• Resources
C LARK N UBER P . S .
Page 1
Incentives for Change
• OMB Circular A-133, Audits of States, Local
Governments and Non-Profit Organizations, was
issued under the Single Audit Act of 1984
• Some amendments to the Single Audit Act in 1996
C LARK N UBER P . S .
Page 2
A Lot Has Changed Since Then:
• 1984 Top Music Hits
– “Ghostbusters” Ray Parker, Jr.
– “Purple Rain” Prince
– “Thriller” Michael Jackson
• 1984 Top TV Shows
– Dallas
– Cheers
– 60 Minutes
• 1984 Statistics
– World population: 4.769 B (as of July 2013 - 7.151 B)
– Nobel peace prize: Desmond Tutu
– Bell phone conglomerate was broken up
• (we still used pay phones)
C LARK N UBER P . S .
Page 3
Federal Spending:
Financial Assistance and Procurement
$1,200
(in billions $)
$1,000
$537
$800
$432
$537
$541
$346
$600
$264
$400
$200
$206
$612
$406
$450
$490
$419
2002
2004
2006
2008
$559
$295
$2000
www.fedspending.org
Grants
2010
2011
Contracts
C LARK N UBER P . S .
Page 4
Complexity:
Standardization Lacking
• 2,199 Federal assistance programs are currently
listed in the Catalog of Federal Domestic
Assistance
• 63 Federal agencies administer Federal
programs
• OMB deals with 700 different application forms
alone
C LARK N UBER P . S .
Page 5
Framework – USG Instrumental Entities
• OMB Office of Federal Financial Management
• Federal Awarding Agencies
• Council on Federal Assistance Reform (COFAR)
– Formed in October 2011
– COFAR replaces two Federal boards
– Consists of:
• Controller of the OMB
• Senior policy officials from 8 Federal agencies providing
the largest $ assistance
• Senior policy official from 1 additional agency (2-year
term)
C LARK N UBER P . S .
Page 6
Because We Knew You’d Ask….
•
•
•
•
•
•
•
•
•
Department of Agriculture
Department of Education
Department of Energy
Department of Health and Human Services
Department of Homeland Security
Department of Housing and Urban Development
Department of Labor
Department of Transportation
National Science Foundation, FY2012 - 2014
C LARK N UBER P . S .
Page 7
Objectives of Change and Policy Reform
•
•
•
•
•
•
•
Unify
Clarify
Simplify
Standardize
Leverage technology
Shift focus to outcomes
Minimize waste, fraud and abuse
C LARK N UBER P . S .
Page 8
Framework – Guidance
Administrative Circulars: A-89,
A-102, A-110
Cost Circulars: A-21,
A-87, A-122
Audit Circulars:
A-133, A-50
C LARK N UBER P . S .
Page 9
2 CFR 200 – Uniform Administrative
Requirements, Cost Principles, and Audit
Requirements for Federal Awards
• Subchapter A – Acronyms and Definitions
• Subchapter B – General Provisions
• Subchapter C – Pre-Award Federal Requirements and
Contents of Federal Awards
• Subchapter D – Post Federal Award Requirements
• Subchapter E – Cost Principles
• Subchapter F – Audit Requirements
• Appendices
• Bonus – the Preamble
The Guidance can be found at: https://federalregister.gov/a/a2013-30465
C LARK N UBER P . S .
Page 10
To WHOM Does it Apply?
•
•
•
•
•
State and Local Governments
Institutes of Higher Education
Not-for-Profit Organizations
Subrecipients
Not Included:
– Commercial and foreign entities (discretionary except for
Subchapter F )
C LARK N UBER P . S .
Page 11
To WHAT Does it Apply?
• Direct federal awards and cooperative
agreements
• Pass-through awards
• Procurement contracts under grants
• There are some exceptions
– these are discussed in sections 200.101 and
200.102 of the CFR
C LARK N UBER P . S .
Page 12
WHEN Does it Apply?
Date
Item
12/26/13
Becomes applicable to Federal agencies
6/30/14
Federal agencies must submit to OMB their drafts for
implementing the changes
12/26/14
Federal agencies’ regulations are uniformly effective for
all federal awards or funding increments issued after this
date*
* - Effective date of Procurement requirements delayed
until first full fiscal year that begins on or after December
26, 2014 [FAQ 8-29-14]
12/26/14
New single audit changes for fiscal years beginning after
12/26/14
C LARK N UBER P . S .
Page 13
Pre-Award Requirements
C LARK N UBER P . S .
Page 14
Pre-Award Requirements and Contents of
Federal Awards Significant Changes
Subpart C
• 200.201 – Use of Grant Agreements, (Including Fixed
Amount Awards), Cooperative Agreements, and
Contracts
– Specifically addresses “fixed amount awards” that rely more on
performance than compliance for accountability
– See OMB M-13-17 (Evidence and Innovation Agenda)
• 200.202 – Requirement to Provide Public Notice of
Federal Financial Assistance Programs
– New requirement for the Federal agency to identify whether the
award is subject to Single Audit
– Name of CFDA will not be changed at this point
C LARK N UBER P . S .
Page 15
Subpart C, Continued
• 200.203 – Notices of Funding Opportunities
– Competitive awards
– General rule – minimum of 60 days
– Some exceptions, but in no case shorter than 30 days
• 200.204 – Federal Awarding Agency Review of Merit
Proposals
– Competitive awards
– Must design and perform a merit review process separate
from the financial risk review
C LARK N UBER P . S .
Page 16
Subpart C, Continued
• 200.205 – Federal Awarding Agency Review of Risk
Posed by Applicants
– Federal agencies are required to use information available
through any OMB-designated repositories:
• Single Audit reports, FAPIIS, D&B, “Do Not Pay”
– Must create a “framework” for reviewing risk
• Competitive awards
• Conditions of the award may be adjusted to match the
assessed level of risk.
– See 200.207
C LARK N UBER P . S .
Page 17
Subpart C, Continued
• 200.207 – Specific Conditions
– Has been expanded to include a list of examples of specific
conditions that may be applied to an award by either the
Federal agency or pass-through entity
• Certain approvals, additional financial reporting, etc.;
however,
• Must provide the nature of, reason for, action required,
timeline allowed, and method for requesting
reconsideration
• 200.210 – Information Contained in a Federal Award
– a(14) – Identification of R&D awards
C LARK N UBER P . S .
Page 18
Post-Award Requirements
C LARK N UBER P . S .
Page 19
Post Federal Award Requirements:
Overview
• Converges requirements from OMB Circulars A-110
and A-102, mostly keeping provisions from OMB
Circular A-110
• Largest impact of new requirements is located in a
small number of areas for NFP’s
• Remember use of “must” and “should”
Oversight
C LARK N UBER P . S .
Page 20
Post Federal Award Requirements:
Major Changes
• New sections added
–
–
–
–
Mandatory disclosure
Performance management
Internal controls
Subrecipient monitoring and management
• Significant changes from existing guidance
– Procurement (NFP’s, IHE’s)
– Financial and performance reporting
– Record retention and access
C LARK N UBER P . S .
Page 21
Internal Controls:
Overview
• OMB Directive
– Mitigate the risk of fraud, waste and abuse
• “Internal Control” not previously mentioned – use of
term “controls” was used throughout
• Explicit mention now made in new section titled
Internal Controls [200.303]
• References several sources of Internal Control
guidance with which the system of internal controls
should be in compliance
C LARK N UBER P . S .
Page 22
Internal Controls:
What is the “Must”?
Entity must:
• Establish and maintain effective internal controls over Federal
awards
• Comply with terms and conditions applicable to the Federal
award and other applicable laws and regulations
• Evaluate and monitor the non-Federal entity’s compliance with
Federal awards
• Take prompt action when issues of noncompliance are identified
• Take reasonable measures to ensure the protection of
personally identifiable information
C LARK N UBER P . S .
Page 23
Internal Controls:
Internal Control Guidance
• ‘‘Internal Control Integrated Framework’’, issued by
the Committee of Sponsoring Organizations of the
Treadway Commission (COSO)
• ‘‘Standards for Internal Control in the Federal
Government’’ issued by the Comptroller General of
the United States [Green Book]
– Issued September 10, 2014 and significantly expanded from
prior version
– Adopted from COSO Framework and adapted for
government environment
– Grant compliance not explicitly addressed
C LARK N UBER P . S .
Page 24
Internal Controls:
Considerations
• How are your internal controls (not necessarily same
as processes) documented?
• Challenge of “reasonable assurance”
– matter of auditor judgment
• COSO frame work already evaluated as part of the
Single Audit
• Part 6 of the 2015 OMB Compliance Supplement
expected to incorporate the Green Book and changes
in COSO framework
C LARK N UBER P . S .
Page 25
Subrecipient Monitoring [200.330 - 200.332]:
Overview
• Requirements based on existing guidance - nothing
new?
– OMB Circular A-133
– OMB Compliance Supplement
•
•
•
•
What are the “musts”?
Subrecipient vs. Contractor determination
Subaward agreement contract provisions
Monitoring of subrecipients
C LARK N UBER P . S .
Page 26
Subrecipient Monitoring:
The List of “Musts”
• All pass through entities must:
– Subaward agreement requirements including Federal
indirect cost recovery (terms and conditions)
– Evaluate subrecipient’s risk
– Consider imposing specific subaward conditions [200.207]
– Monitor the activities of the subrecipient
– Depending on the subrecipient risk assessment, perform
such other monitoring procedures (monitoring tools listed)
– Verify that every subrecipient is audited
– Consider results of subrecipient audits and monitoring on
the pass through entity’s records
– Consider taking enforcement action on subrecipient
[200.338]
C LARK N UBER P . S .
Page 27
Subrecipient Monitoring:
What Monitoring is Required?
• Monitoring of the subrecipient must:
– Review financial and programmatic reports required by the
pass through entity
– Ensure deficiencies identified through audits, on-site reviews
and other means are followed up on timely
• Risk assessment is key in determining level of further
monitoring [200.331(b)]
• Optional monitoring tools [200.331(e)]:
– Provide technical training and assistance
– On-site reviews
– Arrange Agreed Upon Procedure Engagements (allowable
audit costs [200.425])
C LARK N UBER P . S .
Page 28
Subrecipient Monitoring:
Considerations
• Evaluate current system of internal controls
over subrecipient monitoring to ensure the
“musts” are performed
• Audit “verification”
– Knowing pass through entity’s responsibility for
follow up
– Full audit reports to now be available
• “It didn’t happen if it wasn’t documented”
C LARK N UBER P . S .
Page 29
Procurement [200.317 – 200.326]
Overview
• Language taken from governmental
administrative requirements as noted in OMB
Circular A-102 (large number of “musts”)
• Previous requirements applicable to NFP’s
and IHE’s were minimum standards w/ new
requirements more proscriptive
• Applicable to procurements of goods and
services under Federal awards
• Focus to mitigate risk of fraud, waste and
abuse – “oversight”
C LARK N UBER P . S .
Page 30
Procurement:
Key Changes for NFP’s and IHE’s
• Methods of procurement covering all
procurements
• Noncompetitive procurements
• Procurement records to be maintained for all
procurements
• Prohibits geographical preference and trumps
State or local laws
• Encouraged use language will be new
C LARK N UBER P . S .
Page 31
Procurement:
Procurement Methods [200.320]
The entity must use one of the following procurement
procedures:
• Procurements by micro-purchases (new for gov’t entities)
–
–
Purchase <$3k
Competitive quotations not necessary if price is determined to be
reasonable
• Procurement by small purchase procedures
–
–
•
Simplified Acquisition Threshold (currently $150k)
Price or rate quotations must be obtained by an adequate # of
qualified sources
Procurement by sealed bid (formal advertising)
–
Construction contracts
• Procurement by competitive proposals
C LARK N UBER P . S .
Page 32
Procurement:
Noncompetitive Procurements
• Existing requirements for NFP/IHE’s required
documents to be available for review (if requested) for
noncompetitive bids greater than small purchase
threshold
• Noncompetitive procurements may only be used when
one or more of the following circumstances apply:
– Item is available only from a single source
– Public exigency or emergency will not permit delay from
competitive proposal process
– After solicitation of a number of sources, competition is
determined inadequate
– Awarding agency expressly authorizes noncompetitive upon
written request
C LARK N UBER P . S .
Page 33
Procurement:
Considerations
• Compare new requirements to existing,
written procurement policies and procedures
(if any)
• Evaluate existing circumstances which
noncompetitive procurements were utilized
• Consider entity-wide change provision of the
Super Circular’s effective date
C LARK N UBER P . S .
Page 34
Financial and Performance Reporting
[200.327 – 200.328]
• Financial Reporting
–
–
OMB-approved data elements for collection of
financial information
No less frequently than annually nor more
frequently than quarterly except under unusual
circumstances
• Monitoring and Reporting Program
Performance
–
–
–
Expanded with increased focus on reporting of
program performance
Non-construction performance reports
Construction performance reports
C LARK N UBER P . S .
Page 35
Methods for Collection, Transmission and
Storage of Information [200.335]
• Whenever practical, store documents in open
and machine readable formats
• Federal or pass through agencies must still
accept paper versions (for example, reports)
• Consideration of original, electronic versions
• Quality Control over electronically stored data
C LARK N UBER P . S .
Page 36
Cost Principles
C LARK N UBER P . S .
Page 37
Cost Principles:
Key Changes
• Language converged from existing cost
principles (except for hospitals)
• Prior written approval
• Time and effort reporting
• Indirect cost recovery
• Other selected items of cost
C LARK N UBER P . S .
Page 38
Cost Principles:
The Convergence
• The “best of” language picked from each of OMB
Circulars A-87, A-122 and A-21
– General tests of allowability remain unchanged
• Certain industry specific costs (student activities,
costs of government added)
• For many selected items of costs, guidance
enhanced but principle not necessarily changed
• Hospital cost principles
– Located in Appendix IX
– To be updated at later date
C LARK N UBER P . S .
Page 39
Cost Principles:
Prior Written Approval [200.407]
• Consideration of advanced approval from cognizant
Federal agency or Federal awarding agency
• Comprehensive list of selected items of cost where
prior written approval is needed
C LARK N UBER P . S .
Page 40
Standards for Documentation of Personnel Expenses:
Overview [200.430]
• Comparison to existing cost circulars (A-122, A-87,
A-21)
• Motivators for change
• Key element:
– System of internal control that provides reasonable
assurance charges are accurate, allowable and properly
allocated
• Expected impact to existing processes
C LARK N UBER P . S .
Page 41
Standards for Documentation of Personnel Expenses:
The Requirements
• System of internal control providing reasonable
assurance charges are accurate, allowable and
allocable
• Records incorporated into official records of entity
• Reasonably reflect total activity for which employee is
compensated
• Encompass all activities
• Comply with entity’s policies and procedures
• Support allocations (exemption for 100% indirect)
• Budget estimates for interim accounting purposes
C LARK N UBER P . S .
Page 42
Standards for Documentation of Personnel Expenses:
What’s Not Included?
• Certifications
– Annual
– Semi-annual
• Personnel activity reports
– Only mentioned in context of what may be required if
standards are not met
• “After-the-fact determination”
C LARK N UBER P . S .
Page 43
Standards for Documentation of Personnel Expenses:
Other Considerations
• Existing requirement intact for nonexempt employees
• Existing requirement intact to support wages claimed
for meeting cost sharing or matching requirements
• Approval of “alternative proposals” by the entity’s
Cognizant Federal agency for indirect costs
• Federal awards of similar purpose activity or
instances of approved blended funding
C LARK N UBER P . S .
Page 44
Standards for Documentation of Personnel Expenses:
Special Considerations for SLG’s and IHE’s
• State and Local Governments and Indian Tribes
– Availability of substitute systems previously available in A-87
continues in new requirements
• Institutions of Higher Education
–
–
–
–
–
–
–
–
Areas requiring special consideration
Salary basis
Intra-IHE consulting
Extra service pay
Periods outside the academic year
Part-time faculty
Sabbatical leave costs
Salary rates for non-faculty members
C LARK N UBER P . S .
Page 45
Indirect Cost Recovery:
Overview
• Final outcome in Super Circular different from ANPR
and Proposed Guidance
• Focus of new Circular on ensuring adequate indirect
cost recovery
• Guidance on indirect cost procedures located in
separate appendices for Nonprofit Organizations,
Institutions of Higher Education and States and Local
Government and Indian Tribe
C LARK N UBER P . S .
Page 46
Indirect Cost Recovery:
Federally Negotiated IDC Rates [200.414(c)]
• Negotiated rate must be accepted unless cap on
indirect recovery required by statute or approved by
Federal agency head or designee
– Federally agency approval, policies and general decision
making criteria for lowered IDC recovery must be made
publicly available
– Indirect cost reimbursement policy to be included in the Notice
of Funding Opportunity
• May apply for an extension of previously negotiated
rate for up to 4 years
– Impact on settlement of provisional and fixed carryforward
rates?
C LARK N UBER P . S .
Page 47
Indirect Cost Recovery:
Entities w/o Federally Negotiated IDCR
• Lack of direct relationship with Federal awarding
agency
• Options for indirect cost recovery
– Negotiate IDCR with pass through entity using guidelines of
this Part
– Indefinite application of “de minimis” indirect cost rate of 10%
of Modified Total Direct Costs (MTDC) with no reconciliation
to actual costs
• Impact on pass through agencies
– Negotiation capacity
– Required use of existing Federal agency methods (DHHS,
DOL)
C LARK N UBER P . S .
Page 48
Indirect Cost Recovery:
Other
• Institutions of Higher Education (IHE)
– Threshold requiring Cost Accounting Standards coverage raised to
$50M in Federal Awards
• State and Local Governments (Tribes not included)
– Required to complete Indirect Cost Rate Proposal if charging
indirect costs but not required to submit and negotiate IDCR if
Federal assistance < $35M
• Guidance in Subpart E and appendices remain
significantly the same
– General direct and indirect cost classification
– Consistency provisions still apply
• Selected items of costs required to be treated as
indirect or conditions for including as direct
C LARK N UBER P . S .
Page 49
Allowable Costs:
Other Selected Items of Cost
•
•
•
•
•
•
•
•
•
•
•
Bonding
Compensation – fringe benefits
Conferences
Contingency provisions
Depreciation
Employee Health and Welfare Costs
Exchange rates
Interest costs
Proposal costs
Intellectual property (software)
Supplies – computing devices
C LARK N UBER P . S .
Page 50
Single Audit
(fka A-133 Audit)
C LARK N UBER P . S .
Page 51
Subpart F: Audit, Threshold Changes
• 200.501 – Audit Requirements
– Threshold increased to $750k from $500k in federal expenditures
during the fiscal year
• 200.518 Major Program Determination – Type A Program
Determination
• Percentage of coverage rule
– Reduced to 20% / 40%
– From 25% / 50%
C LARK N UBER P . S .
Page 52
Subpart F: Audit, (more significant changes)
• 200.516 – Audit Findings
– Questioned costs threshold for reporting is $25k, increased
from the current $10k
• Note this is both “known” and “likely”
• 200.510 – Financial Statements
– New disclosure for whether or not the non-Federal entity
elected to use the 10% de minimis cost rate (200.414)
C LARK N UBER P . S .
Page 53
Subpart F: Audit (changes to audit coverage)
• 200.512 – Report Submission
– Audit package will be publicly available
– Indian tribes may “opt out” of publishing through the FAC
• Opting out is NOT the default
– New FAC Submission Website
• Remember to set up your account
• Number of Compliance Requirements
– Was NOT reduced and will remain at 14 for now
– COFAR recommended a separate process for evaluation to
avoid creating unintended consequences, i.e., increased
administrative burden
– 2015 OMB Compliance supplement to be issued August
2014 for public comment
C LARK N UBER P . S .
Page 54
Current Action Steps
• Take the deep dive
– User friendly
• Communicate proposed uniform guidance to internal
stakeholders
• Understand required compliance policies and procedures
and update existing to incorporate OMB circular
references and related compliance requirements
– will need to be updated
• Develop an implementation plan based on a discussion of
the impact of key provisions
– (compensation costs, procurement, indirect cost recovery)
• Obtain training to supplement your internal work
C LARK N UBER P . S .
Page 55
Resources
•
OMB
–
•
Federal Register and Preamble
–
•
https://harvester.census.gov/facides/(S(dgs1qw3wrpggtiy2k1arfjok))/acco
unt/login.aspx
OMB M 13-17 (Evidence and Innovation Agenda)
–
•
http://www.whitehouse.gov/omb/grants_docs
Federal Audit Clearinghouse Internet Data Entry System
–
•
https://cfo.gov/cofar/
Includes webcasts and FAQs
Crosswalk
–
•
https://federalregister.gov/a/2013-30465
COFAR
–
–
•
http://www.whitehouse.gov/omb/financial_default/
http://www.whitehouse.gov/sites/default/files/omb/memoranda/2013/m-13-17.pdf
Clark Nuber
–
www.clarknuber.com
C LARK N UBER P . S .
Page 56
Questions, Comments, Other
Considerations
Thank You
Troy Rector, Senior Manager
trector@clarknuber.com
425.990.7603
C LARK N UBER P . S .
Page 57
Download