Dynamic Changes Occurring!
OMB’s Uniform Grant Guidance
August 25, 2015
Presented by:
Adam Roth, StreamLink Software
Michelle Watterworth, Plante Moran
Agenda
Uniform Grant Guidance issued 12/26/2013, effective 12/26/2014:
2 CFR Part 200, Uniform Administrative Requirements, Cost Principles,
and Audit Requirements for Federal Awards.
•
•
•
Cost principles
Administrative requirements
Audit requirements
Brief overview of the changes
Discuss Implications and practical approaches
• Administrators
• Auditors
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Cost Principles and Administrative
Implications of the Uniform Grant Guidance
UGG Expands on A-87, A133,etc.
Target Areas of Improvement from Previous Requirements
• Eliminating duplicative and conflicting guidance
• Focusing on performance over compliance for accountability
• Encouraging efficient use of information technology and shared
services
• Providing for consistent and transparent treatment of costs
• Limiting allowable costs to make the best use of Federal resources
• Setting standard business processes using data definitions
• Encouraging non-Federal entities to have family-friendly policies
• Strengthening oversight
• Targeting audit requirements on risk of waste, fraud, and abuse
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Cost Principles. Summarized.
Where to find them:
Then & Now
Cost Principles for State, Local, and Indian Tribal Governments
Section in Previous Circular
A. Purpose and Scope
B. Definitions
C. Basic Guidelines
D. Composition of Cost
E. Direct Costs
F. Indirect Costs
G. Interagency Services
H. Required Certifications
Attachment A General Principles for Determining
Allowable Costs
Attachment B Selected Items of Cost
Attachment C State/Local Wide Central Service
Cost Allocation Plans
Attachment D Public Assistance Cost Allocation
Plans
Attachment E State and Local Indirect Cost Rate
Proposals
Section in Uniform Grant Guidance
Direct and Indirect (F&A) costs
Subpart A - Definitions
Basic Considerations.
200.402 Composition of Costs
200.413 Direct Costs
200.414 Indirect (F&A) costs
200.417 Interagency Service
200.415 Required Certifications
Subpart E - Cost Principles
General Provisions for Selected Items of Cost.
Appendix V - State/Local Government and Indian
Tribe - Wide Central Service Cost Allocation Plans
Appendix VI - Public Assistance Cost Allocation
Plans
Appendix VII - States and Local Government and
Indian Tribe Indirect Cost Proposals
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Accountability of Funds
Increase recipient accountability for performance.
Required Certifications
• Goal is to strengthen awardee accountability by providing explicit
and consistent language for required certifications that includes
awareness of potential penalties under the False Claims Act.
Cost Accounting Standards and Disclosure Statement
• Every awardee must meet the threshold in the Federal Acquisition
Regulations.
• Goal is to strengthen accounting standards, while lowering the risk
of noncompliance.
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Accountability of Funds
Time and Effort Reporting Requirements
• Strengthens requirements for awardees internal controls over
salaries and wages, while allowing flexibility to meet such
requirements.
• Emphasizes that charges to Federal awards for salaries and wages
must be based on records that accurately reflect the work
performed.
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Treatment of Costs
Direct Costs
• Makes consistent the guidance
that administrative costs may
be treated as direct costs if the
awardee demonstrates that
such costs are directly
allocable to a Federal award.
Indirect Costs
• Provides for an indirect cost
rate of 10% of modified total
direct costs to awardees that
have never had a negotiated
indirect cost rate.
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Allowable Costs
Acceptable costs based on program performance.
Conferences
• Clarifies allowable conference spending and requires conference
hosts/sponsors to exercise judgment in ensuring that conference
costs are appropriate.
Idle Facilities and Idle Capacity
• Allows for the expense of idle facilities when necessary to meet
workload fluctuations of an award.
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Allowable Costs
Contingency Provisions
• Provides detailed circumstances under which contingency costs
may be included in awards.
Travel Costs
• Allows temporary dependent care costs that result directly from
travel to conferences and that meet specified standards.
Indirect Costs Identification and Assignment and Rate
Determination for Institutions of Higher Education (IHEs)
• Extends to all IHEs provisions allowing for recovery of increased
utility costs associated with research.
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Allowable Costs
Interest
• Allows awardees to be reimbursed for financing costs associated
with patents and computer software capitalized in accordance with
GAAP for fiscal years beginning on or after 1/1/2016.
Prior Written Approval
• Provides a single comprehensive list of circumstances under which
awardees must seek prior approval from the Federal awarding
agency, the cognizant agency or the pass-through entity.
• Examples could include: Travel costs of dependents, Cost of
membership in any civic/community organization, Indirect costs
related to severance payments, etc.
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Prohibitions/Limitations
Employee Health/Welfare Cost
• Eliminates the allowance for “morale” costs.
Relocation Costs of Employees
• Limits the amount of time for which a Federal award may be
charged for the costs of an employee’s vacant former home to six
months.
Student Activity Costs
• Limits for on student activity costs.
• For example, costs incurred for intramural activities, student
publications, student clubs, and other student activities, are
unallowable, unless specifically provided for in the Federal award.
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Implications to Administrators
Identify key performance metrics.
• Ensure you are equipped to monitor program performance.
• Be able to product standardized reports.
Eliminate/mitigate program waste.
• Demonstrate change to risky programs.
Sub-Recipient Monitoring
• Increased performance and cost consistency presents greater pressures on
real-time knowledge of subs
Negotiate an indirect cost rate.
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Implications to Administrators
Be familiar with the new conference spending guidelines
that are applicable to your programs.
Understand which contingency costs can be included in
awards.
• Risky programs are more likely to have unexpected costs.
• Know the circumstances under which they can be included as contingencies
to protect yourself.
Keep track of your certifications to avoid penalties.
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OMB Circular A-133
Compliance Supplement 2015
OMB has released additional information related to compliance
requirements of Federal Departments.
The 2015 documentation offers both an in-depth look at each
department, as well as a table matrix of Types of Compliance
Requirements by CFDA number.
Find more information at: http://bit.ly/compliance-supplement
For a look at the Matrix of Compliance Requirements, visit:
http://bit.ly/compliance-matrix
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Audit Implications of the Uniform
Grant Guidance
Audit challenges/implications
•
•
•
•
•
Identifying which rules are applicable
Major program determination**
Testing compliance requirements (effective now!)
Reporting**
Other audit-related considerations
**These changes not effective until 12/31/2015 year
ends
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Uniform Grant Guidance
Effective Dates
Federal Agencies
By 12/26/2014
Non-federal agencies
New awards and funding increments
made AFTER 12/26/2014
Audit requirement (Subpart F)
start with 12/31/2015 year ends
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Effective Dates – Incremental
funding
Funding increments
“Where the Federal agency considers funding
increments to be an opportunity to modify the terms and
conditions of the federal award” (COFAR)
Potential issues for auditors and for administrators:
• Funding increments received but no modification to
terms and conditions were made. Does that mean
UGG does not apply?
• Fund increments received with no mention by federal
agency of UGG applicability. Does that mean UGG
does not apply?
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Effective Dates - Subawards
• Subaward effective date for applying UGG is the same as the
effective date of the federal award from which the subaward is
made
• Implications:
• Subawards made after 12/26/2014 do not necessarily have to
comply with the UGG
• To determine effective date for subawards, need to look back to
the effective date of the federal award from which the subaward
is made
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Implementation of Effective Dates
Possible grantee
expenditures under
UGG
March, June,
September 2015
Audit compliance
testing under UGG for
the first time
What is the applicable
fiscal year end?
December 2015 and
after
New audit
requirements apply
(major program and
reporting changes)
Continued compliance
testing under OLD and
NEW rules
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Major program selection
(effective starting with 12/31/2015 year ends)
Current Rules
New Rules
• Single audit
threshold
• $500,000
• $750,000
• Low risk auditee
• Unmodified opinion on
basic FS in accordance
with GAAP
• Unmodified SEFA opinion
• No material weaknesses
at the basic FS level or
federal programs
• No material non
compliance
• No questioned costs that
exceed 5%
• Timely filing with the
clearing house
• Financial statement opinion
could be on the basis of
accounting required by state
law
• Unmodified SEFA opinion
• No material weaknesses at the
basic FS level or federal
programs
• No modified opinion on
compliance
• No questioned costs that exceed
5%
• Timely filing with the clearing
house
• No going concern opinion
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Major program selection
(effective starting with 12/31/2015 year ends)
Current Rules
New Rules
• Coverage
requirements
• Low risk 25% and no
low risk 50%
• Low risk 20% and not low
risk 40%
• Type A
threshold
• $300,000
• $750,000
• Risk assessment • Sig deficiency OR
for Type As (2
material weakness
year lookback) • Noncompliance
condition reported
• Material weakness
• Modified opinion
• Questioned costs over 5%
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Compliance testing
• Internal control over compliance
• Possible changes as a result of implementation of UGG
• Allowable costs
• Procurement
• Subrecipient monitoring
• Sampling challenges
• Testing major programs with expenditures under both “old” rules
and “new” rules
• Sampling methodology
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Compliance testing requirements
• 2015 OMB compliance supplement
• Part 3.1 – Old rules
• Part 3.2 – Under UGG
• Removal of 2 compliance requirements
• Davis Bacon
• Real property and relocation assistance
• FFATA testing removed
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Compliance testing requirements
• More significant testing changes under UGG:
• Allowable cost/cost principles
• Cash Management
• Period of Performance (fka Period of Availability)
• Procurement and Suspension and Debarment
• Subrecipient Monitoring
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Allowable costs
• Changes in allowable costs due to moving from the
various cost circulars to the UGG
• New/revised steps:
• De minimis indirect cost rate
• Improper payments focus
• Time and effort testing
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Cash Management
• Need to understand the payment method or system a
non-Federal entity uses
• New/revised steps
• Program income
• Unearned revenue
• Written procedures to implement 200.305
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Period of Performance
• Previously called “Period of Availability”
• Focused steps depending upon when performance
period begins
• Beings during audit period
• Ends during audit period
• Deleted statement about testing period of performance with the
same samples used to test allowable cost/cost principles!
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Procurement and S&D
• New/revised steps
• Geographical preferences
• Other changes
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Subrecipient Monitoring
• Audit steps more focused
• Gain understanding
• Compliance focus:
• Subaward documents
• Monitoring
• Required audits obtained
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Audit reporting**
Current Rules
New Rules
• Question costs
reporting
threshold
• $10,0000
• $25,0000
• SEFA
• Subrecipient awards are • Report subrecipient
NOT required to be
awards by grant on the
reported on the FACE of
FACE of the SEFA (totals
the SEFA. Typically
by grant) and no longer
reported in the
in the footnotes
footnotes.
**Not effective until 12/31/2015 year ends
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Audit reporting**
Current Rules
New Rules
• SSPAF/
• Required ONLY for
Corrective action
SECTION III findings
plan
• Required for both
SECTION II and SECTION
III findings
• Audit due dates • Extensions allowed
• Extensions NO LONGER
allowed
**Not effective until 12/31/2015 year ends
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Other audit-related considerations
• May need to update testing templates for UGG and nonUGG transactions
• Auditees may not have been as proactive as necessary
• Possible additional testing issues
• Possible additional findings
• Federal quality study every 6 years beginning 2018
• Results of reviews must be made public
• Auditor focus on now to ensure audit quality
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Contact Information
Adam Roth, Founder and CEO
StreamLink Software
216.377.5555
aroth@streamlinksoftware.com
Michelle Watterworth, CPA
Partner
Plante Moran
248.223.3520
Michelle.Watterworth@plantemoran.com
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