in-depth review of omb’s new “super circular” (2 cfr part ... · • full text of 2 cfr part...

In-Depth Review of OMB’s NEW “Super Circular” (2 CFR Part 200) 1

© Wipfli LLP 1

In-Depth Review of OMB’s NEW“Super Circular” (2 CFR Part 200)

Trainers: Denes L. Tobie, CPA, PartnerTammy T. Jelinek, MBA, Senior Manager

© Wipfli LLP

© Wipfli LLP

Training Agenda

Monday, March 30, 20159:00 a.m. – Noon – General Provisions and Administrative Requirements*

Noon – 1:30 p.m. – Lunch (on your own) 1:30 p.m. – 5:00 p.m. – OMB Cost Principles, and Cost Allocation*

Tuesday, March 31, 2015

9:00 a.m. – Noon – Selected Items of Cost and Audit Requirements*

Depending on the material, there will be a 20-minute break or two 10-minute breaks in the morning and afternoon.

2


© Wipfli LLP

Download the Training Materials

Materials are located here:

https://gfp.wipfli.com/materials/DC033015/

Please note: These materials are incomplete without the accompanying oral comments by the trainer(s). These materials are informational and

educational in nature and represent the speakers' own views. These materials are for the purchasing agency’s use only and not for distribution

outside of the agency or publishing on a public website.

3

© Wipfli LLP

Outcomes

• Understand the new regulations– Similarities and differences from the current

regulations

• Get hands-on experience

• Your next steps– What must change for your organization?

– Who needs to be involved?

– How will you document changes, train staff & implement?

4


© Wipfli LLP

Agenda

• History

• Overview of 2 CFR Part 200

• Subparts A – Acronyms & Definitions

• Subpart B – General Provisions

• Subpart C – Pre-Federal Award Requirements and Contents of Federal Awards

• Subpart D – Post Award Requirements

• Subpart E – Cost Principles

• Subpart F – Audit Requirements

5

© Wipfli LLP

History – How did we get here?

• OMB guidance – 1970s

• OMB Circular 102, State and Local Governments – 1971– Became the Common Rule in the 1980s

• OMB Circular A-110, Institutions of Higher Education, Hospitals, and Other Non-profit Organizations – 1976– Revised in 1988 and 1993

6


© Wipfli LLP

History – How did we get here?

• Single Audit Act, OMB Circular A-133 –proposed in 1993, finalized in 1997

• 3 sets of cost circulars reissued in 2004– OMB Circular A-21 (2 CFR Part 220) for Colleges

and Universities

– OMB Circular A-87 (2 CFR Part 225) for Units of Government

– OMB Circular A-122 (2 CFR Part 230) for Nonprofit Organizations

7

© Wipfli LLP

New Regulations

OMB’s Goals:• Ensure that grants are awarded based on merit

• Increase focus on performance outcomes

• Streamline rules governing the allocation of Federal funds

• Better focus the Single Audit oversight tool to reduce waste, fraud and abuse

– OMB: 2 CFR Part 200 Comments, Federal Register, Vol. 78, Issue 248, December 26, 2013

8


© Wipfli LLP

Major Policy Reforms

Reducing Administrative

Burden and Waste, Fraud,

and Abuse

Eliminate Duplicative &

Conflicting Guidance

Focus on Performance

over Compliance

for Accountability

Encourage Efficient Use

of I.T. & Shared

Services

Provide Consistent & Transparent Treatment of

Costs

Limit Allowable

Costs. Make Best Use of

Federal Resources

9

© Wipfli LLP

Major Policy Reforms

Reducing Administrative

Burden and Waste, Fraud,

and Abuse

Sett Standard Business

Processes Using Data Definitions

Encourage Non-Federal

Entities to Have Family-

Friendly Policies

Strengthening Oversight

Target Audit Requirements

on Risk of Waste, Fraud,

& Abuse

10


© Wipfli LLP

2 CFR Part 200

Administrative Requirements:

A-110 Higher Ed, Hosp. and

NPOs

Common Rule (A-102) UofG

Cost Principles:

A-21 Higher Ed

A-87 UofG

A-122 NPOs

Single Audit Requirements:

A-133 & A-50

Data Collection Requirements:

A-89

Pending Further Review Cost principles for Hosp. & 45 CFR Part 74 Appendix E

11

“The new guidance will streamline the language from 8 existing OMB circulars into 1 document”

© Wipfli LLP

OMB Resources

• Notice of New Guidance in Federal Register (Summary and Description of Changes)

• Full Text of 2 CFR Part 200, OMB Uniform Guidance for Federal Financial Assistance

• Crosswalk from existing to new guidance

• Crosswalk from proposed guidance to predominant source in existing guidance

12


© Wipfli LLP

OMB Resources

• Administrative Requirements Text Comparison

• Cost Principles Text Comparison

• Audit Requirements Text Comparison

• Definitions Text Comparisons

• FAQ’s issued November 2014

• Technical amendments issued 12/19/2014

• Federal departments’ implementation, Federal Register 12/26/2014

− DHHS – 45 CFR Part 75

• Source: http://www.whitehouse.gov/omb/grants_docs

13

© Wipfli LLP

Table of Contents

Subpart A (200.000) – Acronyms and Definitions

Subpart B (200.100) – General Provisions

Subpart C (200.200) – Pre-Federal Awards Requirements and Contents of Federal Awards

Subpart D (200.300) – Post Federal Award Regulations

Subpart E (200.400) – Cost Principles

Subpart F (200.500) – Audit Requirements

14


© Wipfli LLP

Appendices

Appendix I. Full Text of Notice of Funding Opportunity

Appendix II. Contract Provisions for Non-Federal Entity Contracts Under Federal Awards

Appendix III. Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Educational Institutions

Appendix IV. Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations

Appendix V. State/Local Government and Indian Tribe-Wide Central Service Cost Allocation Plans

15

© Wipfli LLP

Appendices

Appendix VI. Public Assistance Cost Allocation Plans

Appendix VII. State and Local Indirect Cost Proposals

Appendix VIII. Nonprofit Organizations Exempted from Subchapter F Cost Principles

Appendix IX. Hospital Cost Principles – See 45 CFR Part 74 Appendix E (not updated)

Appendix X. Data Collection Form (SF-SAC)

Appendix XI. Compliance Supplement

16


© Wipfli LLP 17

Subpart A. Acronyms and Definitions

© Wipfli LLP

© Wipfli LLP

Subpart A. Acronyms & Definitions

NEW§200.0 Acronyms

44 Acronyms – Examples:• COG – Council of Governments

• FAR – Federal Acquisition Regulation

• FR – Federal Register

• PMS – Payment Management System

• SAM – System for Award Management

• SNAP – Supplemental Nutrition Assistance Program

18


© Wipfli LLP


NEW§200.0 Acronyms

44 Acronyms – Examples: (cont.)• F&A – Facilities and Administration

• PII – Personally Identifiable Information

• PTE – Pass-through Entity

• VAT – Value Added Tax

19

© Wipfli LLP


§200.1 – 99 Definitions

98 Definitions – Combines definitions from all prior circulars. Examples:

• §200.20 Computing devices

• §200.22 & 23 Contract and Contractor

• §200.45 Fixed amount awards

• §200.48 General purpose equipment

• §200.56 Indirect (F&A) costs

• §200.61 Internal controls

20


© Wipfli LLP


§200.1 – 99 Definitions

Examples: (cont.)• §200.62 Internal controls over compliance

requirements for Federal awards

• §200.67 Micro-purchase

• §200.79 Personally Identifiable Information

• §200.82 Protected PII

• §200.94 Supplies

21

© Wipfli LLP

Quiz – Introduction to 2 CFR Part 200

22


© Wipfli LLP

Quiz – Introduction to 2 CFR Part 200

23

© Wipfli LLP 24

Subpart B. General Provisions

© Wipfli LLP


© Wipfli LLP

Federal Requirements

25

Public Lawspassed by Congress and signed by the President become part of the

United States Code

Federal Regulations

from Federal Departments to implement the laws (programs) are found in the

Code of Federal Regulations

Uniform Guidance, 2 CFR Part 200from the Office of Management and Budget

is incorporated (codified) into administrative regulations from each Federal Department.

Specific Requirementsapplicable to a recipient would be incorporated into a

grant condition

Additional guidance from Federal agencies could be

program instructions,

information memorandums,

technical assistance guides, etc.

© Wipfli LLP


§200.100 Purpose• Uniform administrative requirements, cost

principles and audit requirements

• Federal awarding agencies must not impose additional or inconsistent requirements

26


© Wipfli LLP


§200.101 Applicability

(b)(1) Non-Federal entities must comply with requirements regardless of whether the entity is a recipient or subrecipient…

Note: “Must” means “required”. “Should” means “recommended” or “best practice”. Both terms are used in the Circular.

from OMB webinar, January 27, 2014, and FAQ’s issued November 2014

27

© Wipfli LLP


§200.105 Effect on Other Issuances

All administrative requirements, program manuals, handbooks and other non-regulatory materials must be superseded upon implementation of this Part.

This means DHHS Grants Policy Statement and similar documents will be superseded.

28


© Wipfli LLP


§200.109 Review DateOMB will review this part at least every 5 years after 12/26/2013.

§200.110 Effective DateFederal awarding agencies must implement effective 12/26/2014.

Audit requirements effective for fiscal years beginning after 12/26/2014.

Non-Federal entities may delay implementation of procurement standards for 1 fiscal year

29

© Wipfli LLP


NEW§200.113 Mandatory Disclosures

Non-Federal entities must disclose, in a timely manner, in writing to the awarding agency or pass-through entity all violations of Federal criminal law involving fraud, bribery or gratuity violations.

30


© Wipfli LLP 31

Subpart C. Pre-Federal Award Requirements and Contents of Federal Awards

© Wipfli LLP

© Wipfli LLP

Subpart C. Pre-Federal Award

§200.203 Notice of Funding Opportunities• Provides a standard set of data elements to be

provided in all Federal notices of funding opportunities

• Standardizes information announced for funding opportunities

• Requires Federal agencies to leave notices open for at least 30 days

32


© Wipfli LLP

Subpart C. Pre-Federal Award

§200.205 Federal awarding agency review of risk posed by applicants

(c) Federal awarding agency review of risk posed by applicants(1)Financial stability

(2)Quality of management systems

(3)History of performance

(4)Reports and findings from audits

(5)Ability to effectively implement requirements

33

© Wipfli LLP 34

Subpart D. Post-Federal Award Requirements

© Wipfli LLP


© Wipfli LLP


§200.301 Performance measurement• Relate financial data to performance

accomplishments

• Provide cost information to demonstrate cost effective practices

• Awarding agency to provide clear performance goals, indicators and milestones

35

© Wipfli LLP


§200.302 Financial Management(b) Financial management system must:

(1) Identify funds received and expended

(2) Disclose accurate, current and complete financial results

(3) Identify source and application of funds

(4) Provide effective controls and accountability for funds, property and other assets

(5) Compare budget to actual results

(6) Provide for written procedures for payment requirements

(7) Provide for written procedures for determining allowabilityof costs

36


© Wipfli LLP


NEW§200.303 Internal controls

Non-Federal entity must:(a) Establish and maintain a system of internal control that

provides for reasonable assurance that the entity is managing the award in compliance with Federal statutes, regulations and the terms and conditions of the award

– Internal controls should comply with the Committee of Sponsoring Organizations of the TreadwayCommission (COSO)

(b) Comply with Federal statutes, regulations and terms and conditions of the award

37

© Wipfli LLP


NEW§200.303 Internal controls

Non-Federal entity must: (cont.) (c)Evaluate and monitor compliance

(d)Take prompt action for noncompliance

(e)Take reasonable measures to safeguard PPII

38


© Wipfli LLP

Components of Internal Control

1. Control environment

2. Risk assessment

3. Control activities

4. Information and communication

5. Monitoring

39

© Wipfli LLP

1. Control Environment

• Integrity & ethical values of management

• Commitment to competence

• Board oversight & interaction w/auditors

• Management philosophy regarding risk

• Organizational structure

• Assignment of authority & responsibility

• Human resource policies

40


© Wipfli LLP 41

Control Environment

• Character, integrity & ethical values

• Consciousness of the organization

• “Tone at the top”

• Competence of people and management

• Accountability, attention, and direction

• Oversight

• Structure, authority and responsibility

Tools & Methods to Achieve

• Mission statement

• Ethics statement, code of conduct

• Standing board committees with charters

• Tenure and depth of senior management

• Training to support assigned duties

• Formal job descriptions

• Segregate incompatible activities

COSO Objectives

© Wipfli LLP

2. Risk Assessment

Organization’s identification and analysis of relevant risks in relation to achievement of objectives, such as:

• Changes in regulations

• New personnel

• New systems or technology

• Rapid growth or downsizing

• New programs, grants, services

42


© Wipfli LLP

Risk Assessment

43

•Establish objectives, including how risks should be managed, entity and activity objectives

•Establish and maintain an effective process to identify, analyze, and manage risks relevant reliable financial statements (both internal and external)

• Identify, analyze, and manage change

•Develop mechanisms to anticipate, identify, and react to routine events or activities that affect achievement of entity or activity-level objectives


• Business plans & budgets with realistic goals

• Review & update strategic plans

• Document & communicate risk

• Involve staff with collective knowledge of areas in risk assessment & business planning

• Sr. management report on risk management to the audit committee or board

• Work with auditors and other outside experts on changes in accounting or regulation

COSO Objectives

© Wipfli LLP

3. Control Activities

Policies and procedures to help ensure that management directives are carried out

• Physical controls (facilities)• Information processing (e.g. check accuracy,

completeness & authorization of transactions)• Performance reviews (e.g. budget to actual)• Segregation of duties

44


© Wipfli LLP 45

Control Activities

• Policies and procedures to carry out management directives

• Controls address risks

• Controls throughout the organization at all levels and in all functions

• Action taken on exceptions

• Design and effectiveness of controls

• Controls over technology


• Monitoring

• Policy

• Segregation of duties

• Verification

• System access

• System automation

• Board oversight

• Review & reconciliation

• Authorization

COSO Objectives

© Wipfli LLP

4. Information and Communication

Methods and records used to record, process, summarize, and report transactions and to maintain accountability over assets, liabilities, and net assets

• Accounting records• Accounting processing• Financial reporting process• Communication of employee duties and

responsibilities• Disaster recovery• Includes IT controls

46


© Wipfli LLP 47

Information and Communication

• Information identified, captured, and communicated

• Communicate internally and externally

• Report operational, financial, and compliance information

• Communicate seriousness of control responsibilities

• Enable upwards communication


• Accounting updates and company handbook

• Employee orientation on ethics and values

• Record retention period that follows all applicable laws

• Determine the information needed or desired

• Period-end reporting deadlines

• Whistleblower hotline

COSO Objectives

© Wipfli LLP

5. Monitoring

Assessing the quality of internal control performance over time, including taking corrective action, using:

• Internal audit• External audit• Special assessments of internal controls• Input from personnel• Input from third parties (e.g. donors, grantors,

vendors, etc.)

48


© Wipfli LLP 49

Monitoring

• Conduct ongoing evaluations

• Ensure internal control deficiencies are reported

• Detect and resolve control deficiencies


• Internal audit

• Investigate complaints

• Understand employee perceptions

• Employees acknowledge compliance with the code of conduct

• Require signatures to verify performance of significant controls

• Checklists, questionnaires, or programs

COSO Objectives

© Wipfli LLP


§200.305 Payment

(b) (1)Minimize the time between transfer of funds and disbursement

(2)(i) Advance payments limited to the minimumamount needed and timed with actual, immediate cash requirements

Time and amount of advances must be as close as administratively feasible to actual disbursements

50


© Wipfli LLP


§200.305 Payment (cont.)(b) (5) Must disburse funds available from program income,

rebates, refunds, contract settlements, audit recoveries, and interest earned on such funds before requesting additional cash payments

(7) Banks(i) Federal and pass-through agencies must not

require separate depository accounts

(ii) Insured accounts are required for advance payments

(8) Interest-bearing accounts are required for advance payments

(9) NEW Can keep up to $500 in interest. Return excess to PMS

51

© Wipfli LLP


§200.306 Cost sharing or matching

(b)(1) Verifiable from records

(2) Not match for other Federal awards

(3) Necessary and reasonable

(4) Allowable under cost principles

(5) Not Federal funds unless allowed by statute

(6) In the approved budget

(7) Conform to other provisions as applicable

52


© Wipfli LLP


§200.306 Cost sharing or matching (cont.)(c) Unrecovered indirect may be included as cost sharing or

matching

(d) Value in accordance with cost principles

(e) Volunteer services– Integral and necessary

– Rates for similar work in the organization or labor market

– Fringe benefits can be included in the rate calculation

(f) Employer provided services – rate of pay plus paid fringe benefits

(g) Donated supplies – reasonable, fair market value

(h) Land and buildings – independent appraisal for space

53

© Wipfli LLP


§200.306 Cost sharing or matching (cont.)

(i) Value of donated property:(1)Must use an independent certified appraiser

value donated land and buildings

(3)Must use an independent appraiser to value donated space

(j) Fair market value of goods and services must be documented by the same methods used internally

54


© Wipfli LLP


§200.307 Program Income

(a) Encouraged to earn income to defray program costs

(d) Proceeds from sale of real property, equipment or supplies are not program income

(e) Use of program income:(1) Deduct from project costs is the default

(2) Prior approval required to add to the award

(3) Prior approval required to treat program income as match

55

© Wipfli LLP


§200.307 Program Income (cont.)

(f) After the end of the period of performance, no requirements for program income

Prior language: “After the end of the project period”

56


© Wipfli LLP


§200.308 Revision of budget or program plans

(a) Project budget must relate to performance

57

© Wipfli LLP


§200.308 Revision of budget or program plans

(c) Prior approval required for:(1) Change in scope

(2) Change in key person

(3) Disengagement of project leader for more than 3 months or a 25%reduction in time

(4) Costs requiring prior approval

(5) Transfer of funds for participant support costs (training costs has been removed)

(6) Subawarding any part of a Federal grant

(7) Changes in the amount of the approved match provided by the non-Federal entity

(8) Need for additional Federal funding

58


© Wipfli LLP


§200.308 Revision of budget or program plans (cont.)

(e) The Federal agency may, at its option, restrict transfer of funds among direct cost categories for cumulative transfers exceeding 10% for grants exceed the Simplified Acquisition Threshold

§200.309 Period of performance

Charge to the award only allowable costs incurred during the period of performance.

59

© Wipfli LLP


§200.311 Real Property(a) Title vests in the non-Federal entity

(c) Must obtain disposition instructions from the awarding agency

(1) Retain title after compensating the awarding agency May sell and use proceeds to offset costs of replacement property

(2) Sell and compensate awarding agency

(3) Transfer title to the awarding agency or to third party designated by the awarding agency

60


© Wipfli LLP


§200.313 Equipment(a) Conditional title vests in the non-Federal entity

(c) Use:(1) Use in program during the period of performance

– Prior approval to encumber

– When not needed, use in the following priorities:

(i) Other projects funded by the same Federal agency

(ii) Projects funded by other Federal agencies

61

© Wipfli LLP


§200.313 Equipment

(c) Use: (cont.)(2) User fees may be charged if equipment is used by

other programs

(3) Cannot be used to provide services for less than private companies charge

(4) NEW Use as trade-in without prior approval

62


© Wipfli LLP


§200.313 Equipment (cont.)

(d) Management of equipment:(1) Property records:

• Description

• Serial number or other identification number

• Source of funding

• Who holds title

• Acquisition date

• Cost

• Percentage of Federal participation

• Location, use and condition

• Disposal data

63

© Wipfli LLP


§200.313 Equipment

(d) Management of equipment: (cont.)(2) Physical inventory every 2 years

(3) Control system to prevent loss, damage or theft

(4) Adequate maintenance procedures

(5) Proper sales procedures must be used

64


© Wipfli LLP


§200.313 Equipment (cont.)

(e) Disposition

(1) NEW FMV $5,000 or less, prior approval not needed to dispose of and no further obligation to the awarding agency

(2) FMV greater than $5,000, must ask for instructions:

• No response in 120 days, may keep or sell but must pay awarding agency its share of proceeds of FMV

• Non-Federal entity may keep $500 of proceeds

65

© Wipfli LLP


§200.314 Supplies

(a) NEW Supplies includes computing devices costing less than $5,000 • Residual value greater than $5,000 at completion

of project, use in other Federal programs; or compensate awarding agency and use for other purposes

§200.315 Intangible property(b) May copyright or patent

(d) Federal awarding agency has the right to obtain, reproduce, publish or otherwise use

66


© Wipfli LLP

Procurement regulations

67

© Wipfli LLP


§200.318 General procurement standards

(a) Must use its own documented procurement procedures which reflect applicable laws and regulations

(c) (1)Must maintain written standards of conduct covering conflicts of interest

***NOTE*** A grace period will be granted for one full fiscal year after the effective date of the Uniform Guidance

68


© Wipfli LLP


§200.318 General procurement standards (cont.)(2) NEW If the non-Federal entity has a parent, affiliate, or

subsidiary organization that is not a state, local government, or Indian tribe, must also maintain written standards of conduct covering organizational conflicts of interest

Organizational conflicts of interest means because of relationships with a parent company, affiliate, or subsidiary organization, the non-Federal entity is unable or appears to be unable to be impartial in conducting a procurement action involving a related organization

69

© Wipfli LLP


§200.318 General procurement standards

(d) Avoid purchasing unnecessary or duplicative items. Lease vs. purchase analysis where appropriate

(e) Encouraged to enter into state and local intergovernmental or inter-entity agreements NEW for nonprofits

70


© Wipfli LLP


§200.318 General procurement standards (cont.)

(f) Encouraged to use Federal excess and surplus property NEW for nonprofits

(g) Encouraged to use value engineering in construction projects. (Analysis of each contract item to ensure overall lower cost) NEW for nonprofits

(h) Award contracts to responsible contractors. Consider integrity, compliance with public policy, records of past performance and financial and technical resources

71

© Wipfli LLP


§200.318 General procurement standards (cont.)

(i) Maintain records with rationale for the method of procurement, selection of contract type, contractor selection and basis for price

(j) NEW May use time and materials contract in some situations

(k) Non-federal entity is responsible for settlement of all contractual and administrative issue

72


© Wipfli LLP


§200.319 Competition(a) Full and open competition

(b) NEW No geographic preferences unless mandated by statute

(c) Must have written procedures; name brands used only as a description

(d) NEW Pre-qualified vendors: Must ensure lists are current and include enough qualified sources to ensure competition

73

© Wipfli LLP


§200.320 Methods of procurement to be followed

(a) NEW Micro-purchase:• Aggregate dollar amount per purchase < $3,000

Distribute equitably among qualified suppliers

• May be awarded without competitive quotes

(b) Small purchase procedures:• Up to $150,000 (Simplified Acquisition Threshold)

• Relatively simple and informal

• Competition is required from adequate number of qualified sources

74


© Wipfli LLP


Greater than $150,000 (SAT), use sealed bids or competitive proposals

(c) Sealed bids:(1) Required conditions:

(i) Complete, adequate and realistic specifications

(ii) Two or more responsible bidders

(iii) Selection can be made principally on price

(2) Requirements:(i) For units of government, bids publicly advertised

(ii) Bids include all information needed for proper response

(iii) For units of government, bids publicly opened

(iv) Firm fixed price contract awarded

(v) Bids may be rejected if there is a sound documented reason

75

© Wipfli LLP

Sealed Bids

Use sealed bids when:• The award will be made on the basis of price

and other priced-related factors, and

• It is not necessary to conduct discussions with the responding offerors about their bids

From 48 CFR Part 6.401, Federal Acquisition Regulations

76


© Wipfli LLP



(d) Competitive proposals: Used when conditions not appropriate for sealed bids. Requirements:(1) Bids publicly advertised

(2) Bids solicited from adequate number of sources

(3) Written method for conducting technical evaluations and for selected contractors

(4) Contract awarded to proposer most advantageous to the program, with price and other factors considered

77

© Wipfli LLP



(f) Noncompetitive proposals. Solicitation from only 1 source (sole source). Use in following circumstances:

(1) Item is available only from a single source;

(2) Emergency will not permit a delay resulting from a competitive solicitation;

(3) Federal awarding or pass-through agency expressly authorizes noncompetitive proposal in response to a written request; or

(4) After solicitation, competition is determined inadequate (only 1 proposer)

78


© Wipfli LLP


§200.321 Contracting with small and minority businesses, women’s business enterprises, and labor surplus area firms (NEW). (A labor surplus area is designated by the Dept. of Labor.)

(a) Non-federal entities must take all necessary affirmative steps to assure minority businesses, women’s business enterprises and labor surplus area firms are used when possible

79

© Wipfli LLP


§200.323 Contract cost and price

(a) NEW For procurements over the Simplified Acquisition Threshold, must perform a cost or price analysis beforereceiving bids or proposals

(b) NEW Must negotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed

(c) The cost plus a percentage of cost and percentage of construction cost methods of contracting must not be used

80


© Wipfli LLP

Procurement Bear Claw

81

© Wipfli LLP

Large NPO ( > $200,000,000)

82

Amount of Purchase

Approvals Solicitation Process

Documentation of Decision

≤ $3,000 • Project Director • At the discretion of the project director

• Invoice/receipt

$3,001 ≤ $5,000 • Project Director • Select pre-qualified vendor, or

• 2 oral bids

• Memo describing oral bids, or

• Procurement checklist• Receipt/invoice

$5,001 ≤ $25,000

• Project Director and

• Div. Vice-President

• Select pre-qualified vendor, or

• RFP process

• Proposals and evaluations, or

• Purchase order• Procurement checklist

$25,001 ≤ $100,000

• Project Director• Div. Vice-President

and• Fiscal Office


• RFP process

• Proposals & evaluations, or


> $100,000 • Project Director,• Div. Vice-President,• Fiscal Office and• Treasurer (or

designee)


• RFP process

• Proposals & evaluations, or


SAMPLE


© Wipfli LLP


§200.324 Federal awarding agency or pass-through entity review

(b) Non-Federal entity may be asked to provide procurement documents if:

(1) Procurement procedures fail to comply with OMB standards;

(2) Procurement exceeds the small purchase threshold and is awarded without competition;

(3) Procurement exceeds the small purchase threshold and specified a brand name product;

(4) Procurement exceeds the small purchase threshold and is awarded to other than the lowest bidder under a sealed bid; or

(5) A contract modification changes the scope to exceed the small purchase threshold

83

© Wipfli LLP

2 CFR part 200 Appendix II

84

Appendix II. CONTRACT PROVISIONSA. Administrative, contractual or legal remedies where contractors violate

contract terms (all contracts in excess of $150,000) NEW

B. Termination for cause and convenience (contracts in excess of $10,000) NEW

C. Equal Employment Opportunity

D. Davis-Bacon Act when required by Federal program legislation (construction in excess of $2,000)

E. Contract Work Hours and Safety Standards Act (construction in excess of $100,000; or others involving mechanics or laborers in excess of $2,500)

F. Rights to Inventions Made Under a Contract or Agreement

G. Clean Air Act and Federal Water Pollution Control Act (contracts and subgrants in excess of $150,000)

H. Debarment and Suspension

Check vendors at www.sam.gov, System for Award Management, click on “Search Records”

I. Anti-Lobbying (contractors in excess of $100,000)

J. Procurement of recovered materials (units of government)


© Wipfli LLP

Exercise – Procurement

Improve our sample policy• Identify what’s wrong or doesn’t make sense

• List what you would add based on the new regulations

85

© Wipfli LLP 86

Performance and Financial Monitoring and Reporting

© Wipfli LLP


© Wipfli LLP


§200.327 Financial reporting

Awarding agency may solicit only the standard, OMB-approved government-wide data. elements for collection of financial information.

No less frequently than annually nor more frequently than quarterly except in unusual circumstances.

87

© Wipfli LLP


§200.328 Monitoring and reporting program performance

(a) Non-Federal entity must monitor its activities to assure compliance with Federal requirements and that performance goals are being achieved

(b) (1)Annual reports due 90 calendar days after the reporting period; quarterly or semiannual reports due 30 calendar days after the reporting period

88


© Wipfli LLP


§200.328 Monitoring and reporting program performance (cont.)

(d) The non-Federal entity must inform the Federal awarding agency or pass-through entity as soon as the following types of conditions become known:

(1) Problems, delays, or adverse conditions which will materially impair the ability to meet the objective of the Federal award

89

© Wipfli LLP


§200.328 Monitoring and reporting program performance (cont.)

(2) Favorable developments which enable meeting time schedules and objectives sooner or at less cost than anticipated or producing more or different beneficial results than originally planned

(e) The Federal awarding agency may make site visits as warranted by program needs

90


© Wipfli LLP


NEW§200.329 Reporting on real propertyThe Federal awarding agency or pass-through entity must require a non-Federal entity to submit reports at least annually on the status of real property in which the Federal government retains an interest, unless the Federal interest in the real property extends 15 years or longer.

In those instances where the Federal interest attached is for a period of 15 years or more, the Federal awarding agency or pass-through entity, at its option, may require the non-Federal entity to report at various multi-year frequencies.

91

© Wipfli LLP


§200.330 Subrecipient and contractor determinations

A pass-through entity must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor.

92


© Wipfli LLP


§200.330 Subrecipient and contractor determinations (cont.)

(a) Characteristics which support the classification of as subrecipient include when the non-Federal entity:

(1) Determines who is eligible to receive what Federal assistance;

(2) Has its performance measured in relation to whether objectives of a Federal program were met;

(3) Has responsibility for programmatic decision making;

(4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and

(5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity

93

© Wipfli LLP



(b) Characteristics indicative of a procurement relationship between the non-Federal entity and a contractor are when the non-Federal entity receiving the Federal funds: (1) Provides the goods and services within normal business

operations;

(2) Provides similar goods or services to many different purchasers;

(3) Normally operates in a competitive environment;

(4) Provides goods or services that are ancillary to the operation of the Federal program; and

(5) Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons

94


© Wipfli LLP



(c) Use of judgment in making determination. In determining whether an agreement between a pass-through entity and another non-Federal entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the agreement. All of the characteristics listed above may not be present in all cases

95

© Wipfli LLP


§200.331 Requirements for pass-through entities(a) List of required information for every subaward, including:

1. Federal Award Identification (13 items required to be disclosed)

2. All requirements, regulations and terms and conditions of the award

3. Any additional requirements imposed by the pass-thru entity

4. NEW An approved federally recognized indirect cost rate negotiated between the subrecipient and the Federal government or, if no such rate exists, either a rate negotiated between the pass-through entity and the subrecipient , or a de minimis indirect cost rate of 10% of MTDC

5. Must allow access to records

6. Terms and conditions of closeout

96


© Wipfli LLP


§200.331 Requirements for pass-through entities (cont.)

(b) Evaluate subrecipient’s risk of noncompliance: (1) The subrecipient's prior experience with the same or similar

subawards;

(2) The results of previous audits including whether or not the subrecipient receives a Single Audit and the extent to which the same or similar subaward has been audited as a major program;

(3) Whether the subrecipient has new personnel or new or substantially changed systems; and

(4) The extent and results of Federal awarding agency monitoring

97

© Wipfli LLP



(c) Consider imposing specific subaward conditions upon a subrecipient if appropriate

(d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes

98


© Wipfli LLP



Pass-through entity monitoring of the subrecipient must include:

(1) Reviewing financial and performance reports required by the pass-through entity

(2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient

(3) Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient

99

© Wipfli LLP



(e) The following monitoring tools may be useful to ensure proper accountability and compliance:

(1) Providing subrecipients with training and technical assistance on program-related matters; and

(2) Performing on-site reviews of the subrecipient's program operations;

(3) Arranging for agreed-upon-procedures engagements

100


© Wipfli LLP



(f) Verify that every subrecipient is audited as required when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the Single Audit threshold

(g) Consider whether the results of the subrecipient's audits, on-site reviews, or other monitoring indicate conditions that necessitate adjustments to the pass-through entity's own records

(h) Consider taking enforcement action against noncompliant subrecipients

101

© Wipfli LLP


NEW§200.332 Fixed amount subawards

• Pass-through entity may provide fixed amount subawards

• Require prior approval from the Federal awarding agency

• Can be made up to $150,000 (SAT)

102


© Wipfli LLP


§200.333 Retention requirements for records

• All records pertinent to an award must be retained for 3 years from the date of submission of the final report

• Must be retained through the resolution of any litigation, claim or audit that has begun before the 3 year period

• Can be extended if notified in writing

103

© Wipfli LLP


NEW§200.335 Methods for collection, transmission and storage of informationShould collect, transmit and store award-related information in open and machine-readable formats rather than paper.

No need to print electronic records.

Can scan paper records if there are quality controls, the electronic records can’t be changed and are readable.

104


© Wipfli LLP


§200.336 Access to records

(c) Awarding and pass-through entities have access to records as long as they exist

§200.337 Restrictions on public access to records

The Freedom of Information Act does not apply to records under a non-Federal entity’s control.

Unless required by statute, non-Federal entities are not required to permit public access to their records.

105

© Wipfli LLP

Records Retention

Best Practices:• Sort out and dispose of the records you don’t

need to keep

• Identify permanent records

• Keep everything else the length of time required by your state for HR records – This is usually the longest time requirement (often 7

years)

• Consider scanning

106


© Wipfli LLP


§200.343 Closeout(a) Submit no later than 90 calendar days after the end of

the period of performance, all financial, performance and other reports required. Extensions may be approved

(b) Liquidate all obligations no later than 90 calendar days after the end of the period of performance. May be extended

(g) NEW Awarding agency should complete all closeout actions no later than 1 year after receipt and acceptance of all final reports

107

© Wipfli LLP


§200.344 Post-Closeout adjustments and continuing responsibilities.

(a) The closeout of a Federal award does not affect any of the following.

(1) The right of the Federal awarding agency or pass-through entity to disallow costs and recover funds on the basis of a later audit or other review. Awarding agency must make any cost disallowance determination and notify within the record retention period NEW

(2) The obligation of the non-Federal entity to return any funds due as a result of later refunds, corrections, or other transactions including final indirect cost rate adjustments

(3) Audit requirements

(4) Property management and disposition requirements

(5) Records retention

108


© Wipfli LLP 109

Subpart E. Cost Principles – General Provisions

© Wipfli LLP

© Wipfli LLP


§200.400 Policy Guide

The non-Federal entity:

(a) Is responsible for efficient and effective administration

(b) Is responsible for complying with agreements, objectives and terms and conditions

(c) Is responsible for its form of organization and management techniques

(d) Has operations consistent with cost principles

(e) Applies accounting on a consistent basis

(g) May not earn or keep profit unless explicitly authorized

110


© Wipfli LLP


§200.401 Application

These principles must be used in determining the allowable costs of work performed by the non-Federal entity under federal awards.

§200.402 Composition of costs

The total cost of a Federal award is the sum of the allowable direct and allocable indirect costs less any applicable credits.

111

© Wipfli LLP


§200.403 Factors affecting allowability of costs(a) Be necessary and reasonable

(b) Conform to limitations

(c) Be consistent with other organization activities

(d) Be treated consistently

(e) Be determined in accordance with generally accepted accounting principles, as appropriate

(f) Not be included as cost or match in any other federally funded program (current or prior)

(g) Be adequately documented

112


© Wipfli LLP


§200.404 Reasonable Costs

A cost is reasonable if, in its nature or amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs.

Guidelines for determining reasonable cost:a) Whether the cost is ordinary and necessary for operation of the

organization or the proper and efficient performance of the award

b) The restraints imposed by such factors as: sound business practices, arms length bargaining, federal state and other laws and regulations, and terms and conditions of the Federal award

c) Market prices for comparable goods or services for the geographic area

d) Whether the individuals concerned acted with prudence in the circumstances

e) Significant deviations from the established practices and policies regarding the incurrence of costs

113

© Wipfli LLP


§200.405 Allocable Costs

(a) A cost is allocable to a particular Federal award or cost objective, if the goods or services involved are chargeable or assignable to that Federal award in accordance with the relative benefits received

(1) Is incurred specifically for the award;

(2) Benefits both the award and other work and can be distributed in proportions that may be approximated using reasonable methods and

(3) Is necessary to the overall operation of the organization and is assignable in part to the Federal award in accordance with the principles in this subpart

114


© Wipfli LLP


§200.405 Allocable Costs (cont.)

(b) All activities which benefit from the non-Federal entity's indirect cost, including unallowable activities and donated services, will receive an appropriate allocation of indirect costs

(c) Any cost allocable to an Federal award 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

115

© Wipfli LLP


§200.405 Allocable Costs (cont.)

(d) Direct cost allocation principles

If a cost benefits two or more projects or activities in proportions that can be easily determined, the cost should be allocated to the projects based on the proportional benefit

If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then the costs may be allocated on any reasonable documented basis

116


© Wipfli LLP


§200.406 Applicable Credits(a) Must be credited to the award as cost reduction or

refund, depending on the credit• Examples: purchase discounts, rebates, insurance

refunds, etc.

117

© Wipfli LLP


NEW§200.407 Prior Written ApprovalUnder any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or nonallocability, the non-Federal entity may seek the prior written approval of the cost. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required

(a) – (y) list of sections in 2 CFR Part 200 requiring prior approval

118


© Wipfli LLP


NEW§200.410 Collection of unallowable costs

(a) Costs which are determined to be unallowable either as direct or indirect, must be refunded (including interest)

119

© Wipfli LLP


§200.411 Adjustment of previously negotiated indirect (F&A) cost rates containing unallowable costs

If a negotiated indirect cost rate is determined to contain unallowable costs:

• The Federal government will require repayment including interest (NEW) of the unallowable costs charged to a past period

• For rates that are to be used currently or in the future unallowable costs will be removed and rates adjusted

120


© Wipfli LLP 121

Subpart E. Cost Principles – Direct and Indirect

© Wipfli LLP

© Wipfli LLP


NEW§200.412 Classification of costs

There is no universal rule for classifying certain costs as either direct or indirect (F&A) under every accounting system.

It is essential that each item of cost incurred for the same purpose be treated consistently in like circumstances either as a direct or an indirect (F&A) cost.

122


© Wipfli LLP


§200.413 Direct Costs(a) Direct costs are those that can be easily and

accurately assigned to a specific award

123

© Wipfli LLP


§200.413 Direct Costs(c) NEW Salaries of administrative and clerical staff

should normally be treated as indirect. Direct charge only if all of the following are met:(1) Administrative or clerical services are integral to the

project,

(2) Individuals involved can be specifically identified with the project,

(3) Such costs are explicitly included in the budget or have prior written approval, and

(4) The costs are not also recovered as indirect.

124


© Wipfli LLP


§200.414 Indirect Costs(c) Negotiated rate must be accepted by all Federal

agencies

(d) Pass-through are subject to the requirements in §200.331

(e) Appendix IV Cost allocation plans for nonprofits; Appendix V & VI Cost allocation plans for units of government

125

© Wipfli LLP


§200.414 Indirect Costs (cont.)(f) NEW Any non-Federal entity that has never

negotiated an IDCR may elect to charge a de minimis rate of 10% of modified total direct costs (MTDC) which may be used indefinitely

126


© Wipfli LLP


§200.414 Indirect Costs (cont.)(g) NEW Any non-Federal entity that has a current

federally negotiated indirect cost rate may apply for a one-time extension of the rates in that agreement for a period of up to 4 years

• Must be approved by a cost negotiator

• If approved, may not request a rate review until the extension ends

• At end of extension, must apply for a new rate

• Subsequent one-time extensions (up to 4 years) are permitted if approved

127

© Wipfli LLP


§200.415 Required CertificationsThe annual and final fiscal reports or vouchers requesting payment must include a certification signed by an official who is authorized to legally bind the entity attesting to the following:

“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.”

128


© Wipfli LLP

Indirect Cost Rates

General formula:• Indirect cost pool ÷ Base = ICR

Costs in the indirect cost pool are:• Allowable, and

• Benefit ALL programs

• NOT in the pool: capital expenditures, losses on awards, unallowable costs, and expenditures that benefit some but not all programs

129

© Wipfli LLP

Exercise – Indirect Cost Pool

130

Item

In the indirect

cost pool

Not in the indirect

cost poolNeed more information

Salary of the accounts payable clerk

Cost of purchasing a vehicle to be used by Admin staff

Salary of the Head Start accountant

Child care fees that were written off because the parent didn’t pay

100% of the costs of the office of the Executive Director


© Wipfli LLP

Exercise – Indirect Cost Pool

131

Item

In the indirect

cost pool

Not in the indirect

cost poolNeed more information

Costs of preparing a proposal for a new grant which the Organization won

Loss on a program funded by a state grant

Administrative costs in excess of 15% for the Head Start program

Worker’s comp claim paid for a former Senior Services program employee

Annual single audit fee

© Wipfli LLP

Indirect Cost Rates

Negotiation and Approval of Rates• Apply to the appropriate cognizant agency for

indirect costs– The cognizant agency is usually the Federal

agency from which an entity receives the largest amount of Federal funds

• Indirect cost rate proposal– Based on most recent audited financial statements

adjusted for anticipated changes

– Details of the indirect cost pool

– Base

– Calculation of the requested rate132


© Wipfli LLP

Indirect Cost Rates

Bases:• Modified Total Direct Costs (MTDC)

– Total direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel and subawards up to the first $25,000

– Excludes equipment, capital expenditures, participant support costs and the portion of each subaward in excess of $25,000

– This is the required base for the 10% de minimis rate

• Direct salaries and wages

• Direct salaries, wages and fringe benefits

133

© Wipfli LLP

Indirect Cost Rate Example – Total Direct Costs

Indirect Costs = $ 1,000,000 (Total Shared Costs Benefiting all Programs)

÷

Base = $10,000,000(Modified Total Direct Costs)

Rate = 10%

134


© Wipfli LLP

Indirect Cost Rate Example – Total Direct Costs

How to use the rate:• Head Start total direct costs = $2,300,000

• Head Start’s share of indirect = $2,300,000 x 10% = $230,000

• Fundraising total direct costs = $100,000

• Fundraising’s share of indirect =

$100,000 x 10% = $10,000

135

© Wipfli LLP

Head Start Administrative Limits

136

Revenue:Grant revenue 1,000,000 In-kind 250,000 Total revenue 1,250,000 Expenses:Personnel 500,000 Fringe benefits 100,000 In-kind 250,000 Other expenses 255,000 Total expenses 1,105,000 Net Revenue before IDCR 145,000

Share of Indirect Cost

Pool Total Costs

15% Admin Limit HS Admin

(Appropriate Exp X rate)

(Total Exp + Indirect)

(Total costs X 15%)

(15% limit -Indirect)

20% IDCR Salaries 100,000 1,205,000 180,750 80,750 17% IDCR Salaries & fringe 102,000 1,207,000 181,050 79,050 13% IDCR MTDC 143,650 1,248,650 187,300 43,650 10% IDCR de minimis 110,500 1,215,500 182,300 71,800


© Wipfli LLP

Types of Rates

Predetermined – Based on estimated costs to be incurred during the rate period (may be longer than 1 year)

Fixed rate with carry-forward – Based on estimated costs to be incurred during the fiscal year

Provisional rate – temporary rate issued for use during the fiscal year

Final rate – based on actual allowable costs and applied to the previous year

137

© Wipfli LLP

Indirect Cost Rates

§200.414(c)(1)

An approved indirect cost rate must be accepted by federal funding sources

NEW§200.331 Requirements for pass-through entities – required information

(4) An approved federally recognized indirect cost rate negotiated between the subrecipient and the Federal government or, if no such rate exists, either a rate negotiated between the pass-through entity and the subrecipient, or a de minimis indirect cost rate (10% based on MTDC)

138


© Wipfli LLP

Direct Costing Plans

Identify the costs to be allocated and measures of activity that will fairly allocate the costs

• Examples:– Number of miles driven to allocate costs of a shared

vehicle– Number of meals served to allocate costs of food

preparation– Number of square feet occupied to allocate building

and maintenance costs, including the janitorial staff

139

© Wipfli LLP 140

Subpart E. Cost Principles – Selected Items of Cost

© Wipfli LLP


© Wipfli LLP

Selected Items of Cost Quiz

AllowablePrior

Written Approval

Unallowable

1. Flowers for a hospitalized employee

2. Single Audit fees for an organization that expended $600,000 in Federal funds

3. Annual membership dues for the National Head Start Association

4. 2% per year use allowance on a fully-depreciated building

5. Cost of fund raising to purchase books for the Head Start program

141

© Wipfli LLP

Selected Items of Cost Quiz

AllowablePrior

WrittenApproval

Unallowable

6. Hiring a consultant to prepare a proposal for a new federal grant

7. Alteration of facilities for a specific federal award

8. Home office workspace for an employee who lives 50 miles from your office

9. Child care for an employee who travels to attend a conference required for his/her position

10. Cost of maintaining the vacant home of a relocated employee for up to 1 year

142


© Wipfli LLP


§ 200.420 Considerations for selected items of cost.

• Cost principles apply to direct and indirect costs

• Failure to mention a particular cost does not imply allowable or unallowable. Its treatment should be based on that of similar items

• When there is a discrepancy between the principles in 2 CFR Part 200 and the provisions of a specific Federal award, the award governs

143

© Wipfli LLP


§200.421 Advertising and Public Relations

(a) Advertising – magazines, newspapers, radio and television, direct mail, exhibits, electronic transmittals

(b) Allowable advertising:(1) Recruitment of personnel

(2) Procurement of goods and services

(3) Disposal of scrap or surplus material

(4) Program outreach necessary for the award

144


© Wipfli LLP


§200.421 Advertising and Public Relations (cont.)

(c) Public relations – community relations maintaining the image of the entity, promoting understanding by the community

(d) Allowable public relations:(1) Specifically required by the award

(2) Communicating accomplishments of the award

(3) Conducting general liaison such as funding opportunities

145

© Wipfli LLP


§200.421 Advertising and Public Relations (cont.)

(e) Unallowable:(2) Meetings and conventions, including displays, meeting

rooms, salaries

(3) Promotional items and memorabilia

(4) Advertising and public relations designed solely to promote the entity

146


© Wipfli LLP


§200.425 Audit services • Audits in accordance with Single Audit Act are

allowable

• (NEW) Audit costs are unallowable if the entity doesn’t meet the Single Audit threshold of $750,0000

• Pass-through entity may charge an award for the cost of agreed-upon procedures to monitor subrecipients who are exempt from Single Audit Act– Limited in scope to activities allowed or unallowed,

allowable costs, eligibility and reporting

147

© Wipfli LLP


§ 200.426 Bad debts.

Bad debts are unallowable.

Collection costs and legal fees arising from bad debts are also unallowable.

148


© Wipfli LLP


§ 200.427 Bonding costs

Bonding costs are allowable:

• If required by an award, charge the award

• If for general operations, charge as an indirect cost

149

© Wipfli LLP


NEW§ 200.428 Collections of improper payments

Costs to recover improper payments are allowable as direct or indirect, as appropriate.

Amounts collected must be used in accordance with cash management standards (used before Federal funds).

150


© Wipfli LLP


§200.430 Compensation – personal services

(a) Compensation includes all remuneration paid currently or accrued and may not be limited to salaries and wages. Allowable if:(1) Reasonable for the services rendered

(2) Adheres to entity’s written policies

(3) Is supported by documentation based on these principles

151

© Wipfli LLP


§200.430 Compensation – personal services (cont.)

(b) Must be reasonable – consistent with that paid for similar work, or comparable to that paid for similar work in the community

(d) Allowable compensation for certain employees is subject to a ceiling in accordance with statute

(f) Incentive pay for cost reduction, efficient performance, suggestion awards, etc. allowable if an agreement was in place before the work was performed

152


© Wipfli LLP



(i) NEW Standards for Documentation of Personnel Services (1) Records accurately reflect work performed

(i) Supported by a system of internal controls that assures charges are accurate, allowable and properly allocated

(ii)Part of official records of the entity

(iii)Reflect total activity

(iv)Include Federal and non-Federal activities

(v)Comply with accounting policies

(vii)Support distribution to two or more activities or cost objectives

153

© Wipfli LLP



(i) NEW Standards for Documentation of Personnel Services(1) Records accurately reflect work performed (cont.)

(vii)Budget estimates alone cannot be used as support for charges but may be used for interim accounting purposes

(A) Must be reasonable approximations

(B) Significant changes must be entered in a timely manner

(C) Internal control system includes review of after-the-fact charges and adjustments made so the final amount charged is accurate, allowable and properly allocated

154


© Wipfli LLP



(i) NEW Standards for Documentation of Personnel Services (cont.)

(2) If records meet these standards, no additional documentation required

(3) Must comply with Dept. of Labor requirements for non-exempt

(4) Salaries and wages of employees used for in-kind must meet same requirements

(6) Cognizant agencies encouraged to approve alternative methods based on outcomes

155

© Wipfli LLP



(i) NEW Standards for Documentation of Personnel Services (cont.)

(7) Approved blended funding – may use a performance-based measure. Must be approved by all funding sources

– Examples of performance-based measures: child or client counts

(8) Entities who cannot meet these standards may be required by the Federal government to maintain personnel activity reports (PARs)

156


© Wipfli LLP



“While many non-Federal entities may still find that existing procedures in place such as personal activity reports and similar documentation are the best method for them to meet the internal control requirements, this final guidance does not specifically require them.

The focus in this final guidance on overall internal controls mitigates the risk that a non-Federal entity or their auditor will focus solely on prescribed procedures such as reports, certifications, or certification time periods which alone may be ineffective in assuring full accountability.”

from Comments to the Regulations

157

© Wipfli LLP


§200.431 Compensation – fringe benefits

(a) Allowable if reasonable and required by law or entity policy

(b) (3) Leave accounting methods:(i) Cash basis – recognize when taken and paid

– Payments for unused leave when an employee terminates are allowable in the year of payment

(ii) Accrual basis – allowable costs are the lesser of the amount accrued or the amount funded

158


© Wipfli LLP


§200.431 Compensation – fringe benefits (cont.)

(e) (3) Actual claims paid to or on behalf of employees or former employees for workers' compensation, unemployment compensation, severance pay, and similar employee benefits (e.g., post-retirement health benefits), are allowable in the year of payment provided that the entity follows a consistent costing policy

159

© Wipfli LLP



(f) AutomobilesPersonal use of organization vehicles:– Unallowable as charges to Federal grants even if

reported on a W-2

160


© Wipfli LLP



(i) Severance Pay – allowable if required:a. By law;

b. Employer-employee agreement;

c. Established policy that constitutes an implied agreement; or

d. Circumstances of the particular employment.

161

© Wipfli LLP


NEW §200.432 Conferences

Definition: meeting, retreat, seminar, symposium, workshop or event to disseminate technical information beyond the non-Federal entity

Allowable costs (appropriate, reasonable and necessary) paid by the host:

• Facility

• Speaker fees

• Meals and refreshments

• Local transportation

• Cost of identifying but not providing dependent care resources

162


© Wipfli LLP


NEW§200.433 Contingency provisions

(b) May be budgeted for foreseeable events (construction cost, IT systems)

(c) Payments to contingency reserves are unallowable (cannot draw funds unless you have incurred an actual expense for an event you have budgeted)

163

© Wipfli LLP


§200.434 Contributions and donations

(a) Unallowable from the non-Federal entity to entities

(b) Donated property and services cannot be charged to an award but may be claimed as in-kind

(d) Services donated (in-kind) must be supported by the same methods used to support the allocabilityof employees

164


© Wipfli LLP


§200.434 Contributions and donations (cont.)

(e) Value of donated services must be considered in determining the indirect cost rate if:(1) Aggregate value is material; and

(2) Services are supported by a significant amount of indirect cost

(g) (2) If donations are treated as indirect, indirect cost rates will separate the value of the donations so reimbursement will not be made (that is, donated indirect is not part of the indirect cost pool)

165

© Wipfli LLP


§ 200.435 Defense and prosecution of criminal and civil proceedings, claims, appeals and patent infringements

In general, allowability of legal fees in defense of criminal, civil or administrative proceedings depends on the result

• Fees are allowable:

– With a result of a favorable outcome

– If approved in a settlement with the federal government

– Condition of the award

Otherwise unallowable, including appealing a federal agency decision

166


© Wipfli LLP


§200.436 Depreciation

(d) (4)NEW No depreciation allowed on assets that have outlived their useful lives

• No use allowance

• NEW If use allowance was taken on an asset not fully depreciated, you may convert to depreciation but total of both depreciation and use allowance may not exceed cost of the asset

167

© Wipfli LLP


§200.436 Depreciation (cont.)

(e) Must maintain adequate records• Must take a physical inventory at least once every two

years

• NEW May use statistical sampling to take inventories

• Adequate documentation of depreciation must be maintained

168


© Wipfli LLP


§200.437 Employee health and welfare costs

(a) Costs in accordance with documented policies for improvement of working conditions, employer-employee relations, health and performance are allowable• NEW Costs for improvement of morale specifically

excluded

169

© Wipfli LLP


§ 200.438 Entertainment Costs

Costs of entertainment are unallowable, except:

When entertainment has a programmatic purpose and is authorized either in the approved budget* or with prior written approval

* Note this is one of a few places in these regulations where an approved budget provides approval.

170


© Wipfli LLP


§ 200.439 Equipment and other capital expenditures

(b) Costs of equipment, buildings and land are allowable with prior written approval

Note: Because these regulations supersede other guidance, DHHS’ requirement for prior approval for equipment purchases of $25,000 or more will no longer apply.

171

© Wipfli LLP


§ 200.442 Fund raising and investment management costs

(a) Costs of fund raising including financial campaigns, solicitation of gifts, etc., are unallowable

NEW Fund raising costs for the purposes of meeting federal program objectives are allowable with prior written approval

172


© Wipfli LLP


§ 200.445 Goods or services for personal use

(a) Costs of goods or services for personal use areunallowable regardless of whether the cost is reported as taxable income to the employee

(b) Costs of housing and personal living expenses are only allowable as direct costs and must be approved in advance

173

© Wipfli LLP


§ 200.447 Insurance and indemnification

(a) Costs of insurance required or approved and maintained pursuant to the Federal award are allowable

(c) Actual losses which could have been covered by permissible insurance (through a self-insurance program or otherwise) are unallowable

174


© Wipfli LLP


§ 200.449 Interest

(a) Costs incurred for interest on borrowed capital, temporary use of endowment funds, or the use of the non-Federal entity's own funds, however represented, are unallowable

• Financing costs (including interest) to acquire, construct, or replace capital assets are allowable, subject to certain conditions

• Note – Overall, the regulations for interest were simplified

• Some programs require prior approval for charging interest to grants

175

© Wipfli LLP


§ 200.452 Maintenance and repair costs

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 are allowable.

176


© Wipfli LLP


§ 200.453 Materials and supplies costs, including computing devices

(a) Costs for materials and supplies necessary to carry out an award are allowable

(b) NEW Charging computing devices as direct costs is allowable for devices that are essential and allocable, but not solely dedicated to the performance of the award

177

© Wipfli LLP


§ 200.454 Memberships, subscriptions, and professional activity costs

(a) Costs of membership in business, technical, and professional organizations are allowable

(c) Prior approval required for membership in civic or community organizations

(e) Membership in organizations whose primary purpose is lobbying are unallowable

178


© Wipfli LLP


§ 200.456 Participant support costs

Participant support costs are allowable with prior approval of the Federal awarding agency.

179

© Wipfli LLP


NEW§ 200.460 Proposal costs

Proposal costs are the costs of preparing bids, proposals, or applications on potential Federal and non-Federal awards or projects.

Costs incurred in the current year of both successful and unsuccessful proposals normally should be treated as indirect (F&A) costs and allocated currently to all activities.

No proposal costs of past accounting periods will be allocable to the current period.

180


© Wipfli LLP


§ 200.464 Relocation costs of employees

(a) Employee relocation costs are allowable provided:(1) The move benefits the employer

(2) Reimbursement is in accordance with an established written policy

(3) Reimbursement does not exceed the employee’s actual expenses

181

© Wipfli LLP


§ 200.464 Relocation costs of employees (cont.)

(b) Relocation costs are limited to:

(1) Transportation

(2) Finding a new home

(3) Closing costs of disposition of the employee’s former home

(4) Continuing costs of ownership of the former home for up to 6 months NEW

(5) Other necessary and reasonable costs such as costs of canceling an unexpired lease (limited to 3 times the monthly rental) and transportation of personal property

182


© Wipfli LLP


§ 200.465 Rental costs of real property and equipment

(a) Rental costs are allowable to the extent that rates are reasonable. Rental arrangements should be reviewed periodically to determine if circumstances have changed and other options are available

183

© Wipfli LLP


§ 200.465 Rental costs of real property and equipment (cont.)

(b) Rental costs under "sale and lease back" arrangements are allowable only up to the amount that would be allowed had the organization continued to own the property

(c) Rental costs under "less-than-arm's-length" leases are allowable only up to the amount that would be allowed had title to the property vested in the organization

A less-than-arm's-length lease is one under which one party to the lease agreement is able to control or substantially influence the actions of the other

184


© Wipfli LLP



Such leases include, but are not limited to those between:

(1) Divisions of the non-Federal entity;

(2) The non-Federal entity under common control through common officers, directors, or members; and

(3) The non-Federal entity and a director, trustee, officer, or key employee of the non-Federal entity or an immediate family member, either directly or through corporations, trusts, or similar arrangements in which they hold a controlling interest

185

© Wipfli LLP



(4) Family members include one party with any of the following relationships to another party:

(i) Spouse, and parents thereof;

(ii) Children, and spouses thereof;

(iii) Parents, and spouses thereof;

(iv) Siblings, and spouses thereof;

(v) Grandparents and grandchildren, and spouses thereof;

(vi) NEW Domestic partners and parents thereof, including domestic partners of any individual in 2 through 5 of this definition; and

(vii) NEW Any individual related by blood or affinity whose close association with the employee is the equivalent of a family relationship

186


© Wipfli LLP



(5) Rental costs under capital leases are allowable only up to the amount that would be allowed had the non-Federal entity purchased the property on the date the lease agreement was executed. GAAP must be used to determine whether a lease is a capital lease

(6) (NEW) The rental of any property owned by any individuals or entities affiliated with the non-Federal entity for purposes such as home office workspace is unallowable

187

© Wipfli LLP


§ 200.471 Termination costs

(a) Costs of items usable in other work not allowable

(d) Rental costs under unexpired leases are generally allowable if:(1) The amount is reasonable

(2) Effort is made to terminate, assign or otherwise reduce the cost

(e) Settlement expense including accounting, legal, clerical or similar costs are generally allowable

188


© Wipfli LLP


§ 200.472 Training and education costs.

The cost of training and education provided for employee development is allowable.

189

© Wipfli LLP


§ 200.474 Travel costs

(a) Costs may be charged on an actual cost basis, on a per diem or mileage basis in lieu of actual costs incurred, or on a combination of the two, provided the method used is applied consistently

(b) NEW Documentation must justify:(1) Participation is necessary for the federal award; and

(2) Costs are reasonable and consistent with entity policy

190


© Wipfli LLP


§ 200.474 Travel costs (cont.)

(c) (1)NEW Temporary dependent care costs resulting from travel to conferences are allowable provided that:(i) Costs are a direct result of travel;

(ii) Costs are consistent with the travel policy; and

(iii) Costs are temporary during the travel period

191

© Wipfli LLP


§ 200.474 Travel costs (cont.)

(d) Commercial airfare:(1) Costs in excess of the basic least expensive

unrestricted class are unallowable except when they would:

(i) Require circuitous routing;

(ii) Require travel during unreasonable hours;

(iii) Excessively prolong travel;

(iv) Result in additional costs; or

(v) Not be adequate for traveler’s medical needs (medical needs must be documented)

192


© Wipfli LLP


§ 200.475 Trustees

Travel and subsistence costs of trustees (or directors) at educational institutions and nonprofit organizations are allowable.

193

© Wipfli LLP 194

Subpart F. Audit Requirements

© Wipfli LLP


© Wipfli LLP


§ 200.501 Audit Requirements

(a) Audit required.

A non-Federal entity that expends $750,000 (NEW) or more during the non-Federal entity's fiscal year in Federal awards must have a single or program-specific audit

195

© Wipfli LLP


§ 200.501 Audit Requirements (cont.)

(c) Program-specific audit election

When an auditee expends Federal awards under only one Federal program (excluding R&D) and the Federal program's statutes, regulations, or the terms and conditions of the Federal award do not require a financial statement audit of the auditee, the auditee may elect to have a program-specific audit

196


© Wipfli LLP


§ 200.501 Audit Requirements (cont.)

(d) NEW Exemption when Federal awards expended are less than $750,000

A non-Federal entity that expends less than $750,000 during the non-Federal entity's fiscal year in Federal awards is exempt from Federal audit requirements for that year, but records must be available for review or audit by appropriate officials of the Federal agency, pass-through entity, and Government Accountability Office (GAO)

197

© Wipfli LLP


Auditees

§ 200.508 Auditee Responsibilities(a) Procure or otherwise arrange for the audit required by this

Part and ensure it is properly performed and submitted when due

(b) Prepare appropriate financial statements, including the schedule of expenditures of Federal awards

(c) Promptly follow up and take corrective action on audit findings, including preparation of a summary schedule of prior audit findings and a corrective action plan

(d) Provide the auditor with access to personnel, accounts, books, records, supporting documentation, and other information as needed for the auditor to perform the audit

198


© Wipfli LLP


Auditees

§ 200.509 Auditor Selection(a) Auditor procurement. The auditee must:

• Follow the procurement standards and consider:– The objective is to obtain high-quality audits

– The objectives and scope of the audit must be made clear

– The non-Federal entity must request a copy of the audit organization's peer review report which the auditor is required to provide under GAGAS

199

© Wipfli LLP


Auditees

§ 200.509 Auditor SelectionFactors to be considered include:

• The responsiveness to the request for proposal,

• Relevant experience,

• Availability of staff with professional qualifications and technical abilities,

• Results of peer and external quality control reviews, and

• Price

200


© Wipfli LLP


Auditees

§ 200.510 Financial Statements

(a) The auditee must prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited

The financial statements must be for the same organizational unit and fiscal year that is chosen to meet the requirements of this Part

201

© Wipfli LLP


Auditees

§ 200.510 Financial Statements (cont.)

(b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of Federal awards for the period covered. At a minimum, the schedule must:

(1) List individual Federal programs by Federal agency. For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name

202


© Wipfli LLP


Auditees

§ 200.510 Financial Statements (cont.)

(2) For Federal awards received as a subrecipient. The name of the pass-through entity and identifying number assigned by the pass-through entity must be included

(3) Provide total Federal awards expended for each individual Federal program and the CFDA number. For a cluster of programs also provide the total for the cluster

(4) Include the total amount provided to subrecipients from each Federal program

203

© Wipfli LLP


Auditees

§ 200.510 Financial Statements (cont.)(5) For loan or loan guarantee programs identify in the

notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule

(6) NEW Include notes that describe that significant accounting policies used in preparing the schedule, and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in §200.414 Indirect (F&A) costs

204


© Wipfli LLP


Auditees

§ 200.512 Report SubmissionGeneral.

(1) The audit must be completed and the data collection form and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period

(2) Auditee must make copies available for public inspection. Auditee and auditor must ensure that the reporting package does not include PPII

205

© Wipfli LLP


Auditors

§ 200.516 Audit Findings

(a) Audit findings reported. The auditor must report the following as audit findings in a schedule of findings and questioned costs:(1) Significant deficiencies and material weaknesses in

internal control over major programs and significant instances of abuse relating to major programs

206


© Wipfli LLP


Auditors

§ 200.516 Audit Findings (cont.)

(2) Material noncompliance with the provisions of Federal statutes, regulations, or the terms and conditions of Federal awards related to a major program

(3) Known or likely known questioned costs that are greater than $25,000 (NEW) for a type of compliance requirement for a major program

(4) Known questioned costs that are greater than $25,000 (NEW) for a Federal program which is not audited as a major program, if the auditor becomes aware of questioned costs for such a program

207

© Wipfli LLP


Auditors

§ 200.516 Audit Findings (cont.)(5) The circumstances concerning why the auditor's report

on compliance for each major program is other than an unmodified opinion

(6) Known or likely (NEW) fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards

(7) Instances where the results of audit follow-up procedures disclosed that the summary schedule of prior audit findings prepared by the auditee materially misrepresents the status of any prior audit finding

208


© Wipfli LLP


Auditors

NEW§ 200.518 Major Program Determination

General.

(a) The auditor must use a risk-based approach to determine which Federal programs are major programs

This risk-based approach must include consideration of: current and prior audit experience, oversight by Federal agencies and pass-through entities, and the inherent risk of the Federal program.

The following process must be followed:

209

© Wipfli LLP


Auditors

NEW§ 200.518 Major Program Determination (cont.)

Step 1 – Identify Type A programs.

• $750,000 for federal awards expended between $750,000 and $25 million

• 3% of federal awards between $25 and $100 million

• Higher tiers for larger expenditures

• Any program not a Type A is a Type B

• Specific calculations for loan and loan guarantee programs

• Specific calculations for biennial audits

210


© Wipfli LLP


Auditors

NEW§ 200.518 Major Program Determination

Step 2 – Identify Type A programs that are low risk

Step 3 – Identify Type B programs (but no more than ¼ of the number of low risk A’s) that are high risk (only required to perform risk assessments of Type B’s that exceed 25% of a Type A)

Step 4 – Choose as major:

• All A’s not low risk

• All B’s identified as high risk

• Any other programs necessary to meet % of coverage rule.

211

© Wipfli LLP


Auditors

NEW§ 200.518 Major Program Determination(f) Percentage of coverage –

20% of federal expenditures if low-risk auditee

40% of federal expenditures if not low-risk auditee

Auditor must document the risk analysis used in determining major programs

When major program determination was performed and documented, the auditor judgment in applying the risk-based approach to determine major programs must be presumed correct

212


© Wipfli LLP


Auditors

§ 200.519 Criteria for Federal Program Risk

General.

(a) The auditor's determination should be based on an overall evaluation of the risk of noncompliance occurring that could be material to the Federal program

(b) Current and prior audit experience

(1) Weaknesses in internal control over Federal programs

(2) Prior audit findings

(3) Federal programs not recently audited as major programs

213

© Wipfli LLP


Auditors

§ 200.519 Criteria for Federal Program Risk(cont.)

(c) Oversight by Federal agencies and pass-through entities

(1) Results of recent monitoring or other reviews.

(2) Federal agencies, with the concurrence of OMB, may identify Federal programs that are higher risk

(d) Inherent risk of the program(1) The nature of a Federal program

(2) The phase of a Federal program in its life cycle at the Federal agency and at the auditee

(4) Type B programs with larger Federal awards expended would be of higher risk than programs with substantially smaller Federal awards expended

214


© Wipfli LLP


Auditors

§ 200.520 Criteria for a Low-Risk Auditee

An auditee that meets all of the following conditions for each of the preceding two audit periods must qualify as a low-risk auditee.

(a) Single audits were performed on an annual basis

(b) The auditor's opinion on whether the financial statements were prepared in accordance with GAAP, and the auditor's opinion on the schedule of expenditures of Federal awards were unmodified

215

© Wipfli LLP


Auditors

§ 200.520 Criteria for a Low-Risk Auditee(cont.)

(c) There were no deficiencies in internal control which were identified as material weaknesses

(d) The auditor did not report a substantial doubt about the auditee's ability to continue as a going concern

216


© Wipfli LLP


Auditors

§ 200.520 Criteria for a Low-Risk Auditee(cont.)

(e) None of the Federal programs had audit findings from any of the following in either of the preceding two audit periods in which they were classified as Type A programs

(1) Internal control deficiencies that were identified as material weaknesses

(2) A modified opinion on a major program in the auditor's report on major programs

(3) Known or likely questioned costs that exceeded five percent of the total Federal awards expended for a Type A program during the audit period

217

© Wipfli LLP


§ 200.521 Management Decision

General

(a) The management decision must clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action

(d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within six months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report

218


© Wipfli LLP

Summary and Next Steps

• Learn what new regulations and changes from the current regulations will impact your agency

• Develop a plan to implement the necessary changes

• Educate others in your organization on the changes and include them in the planning process

• Watch for guidance from your funding sources

219

© Wipfli LLP

Wipfli’s Top 10 Changes

1. Cost allocation options

2. PARs

3. Procurement

4. Computers as supplies

5. Recognition of electronic media

6. Audit threshold changes

7. Family friendly policies

8. Internal controls focus in admin requirements

9. Fund raising to support program

10. No employee morale

220


© Wipfli LLP

www.wipfli.com

221

Regulation questionsAudit

ProcessHuman Resource

TechnologyLeadership

Evaluation:

Thank You!

Connect with us:www.linkedin.com/in/denestobie

www.linkedin.com/in/tammyjelinek

www.facebook.com/WipfliNGP

@TammyJelinek

Bring Wipfli to You:Tammy T. Jelinek

[email protected]

My Wipfli – Access to our experts:

www.wipfli.com/mywipfli

in-depth review of omb’s new “super circular” (2 cfr part ... · • full text of 2 cfr part...

Documents