uniform guidance presentation - jeremy dunn (qc …...presentation; it is not a complete record of...

Uniform Guidance

© Elliott Davis Decosimo, LLC © Elliott Davis Decosimo, PLLC

Jeremy DunnSenior ManagerNovember 4, 2015

This material was used by Elliott Davis Decosimo during an oral presentation; it is not a complete record of the discussion. This presentation is for informational purposes and does not contain or convey specific advice. It should not be used or relied upon in regard to any particular situation or circumstances without first consulting the appropriate advisor. No part of the presentation may be circulated, quoted, or reproduced for distribution without prior written approval from Elliott Davis Decosimo.


• December 26, 2013 - Office of Management and Budget (OMB) issued guidance that makes

significant changes to federal grants management

• Uniform Guidance AKA Super Circular - Streamlines requirements and supersedes eight existing OMB Circulars

• Changes - In response to the administrative burden of the existing procurement

standards

• Language revisions - To require "oversight" rather than a "system" to ensure that contractors

comply with contract terms

Uniform Guidance


• Objective – Reducing Administrative Burden and Waste, Fraud and Abuse

- 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 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

Uniform Guidance


• This uniform guidance codifies the following circulars into the Code of Federal Regulations:

- Administrative Requirements• A-102, Grants and Cooperative Agreements with State and Local Governments• A-110, Uniform Administrative Requirements for Grants and Other Agreements

with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations• A-89, Catalog of Federal Domestic Assistance

- Cost Principles• A-21, Cost Principles for Educational Institutions• A-87, Cost Principles for State, Local, and Indian Tribal Governments• A-122, Cost Principles for Non-Profit Organizations

- Audit Requirements• A-133, Audits of States, Local Governments, and Non-Profit Organizations• A-50, Audit Follow-up

Codification


• Organization - 2 CFR 200- 200.XX – Definitions- 200.1XX – General Provisions- 200.2XX – Pre Award Requirements- 200.3XX – Post Award Requirements- 200.4XX – Cost Principles- 200.5XX – Audit Requirements

Codification


• For Recipients:The new administrative requirements and cost principles apply to all new federal awards and incremental funding received on December 26, 2014 and after. • For Auditors:For fiscal years beginning before December 26, 2014 we must use the appropriate compliance supplement for our compliance testing based on date of the award. ie. 6/30/2015 auditsThe new single audit requirements apply to audits of fiscal years beginning on or after December 26, 2014. ie. 6/30/2016

Effective Dates


• Direct Costs - Administrative costs may be charged directly when they are specifically allocated to one

award, with prior approval from the awarding agency. The approval may be obtained after the initial budget approval.

• Indirect costs - Approved indirect cost rates may be extended on a one-time basis without further

negotiation, for up to four years. De Minimis rate of 10%.

• Salaries and Wages - Old guidance did not consider technology. Time sheets and activity reports were

required. New guidance allows for electronic reports and other systems to be used to track salaries and wages as long as good internal controls are in place.

• Allowable costs- Costs for conferences, morale, relocations, student activities, etc. allowable costs are

more clearly defined.

Streamlining Effects


• Internal Controls- CFR 200.303 – The non-Federal Entity Must:

• Establish and maintain effective internal control of the Federal award that provides reasonable assurance that the non-Federal entity is managing the aware in compliance with statutes, regulations, and terms and conditions of the award

• Comply with Federal statutes, regulations, and terms and conditions of the award• Evaluate and monitor the non-Federal entity’s compliance with statute, regulations,

and the terms and conditions of the award• Take prompt action when instances of noncompliance are identified including

noncompliance identified in audit findings

- Appear to be most concerned about three areas• Subrecipients• Procurement• Time and effort reporting

Major Changes to Administrative Requirements


• Subrecipient vs. Contractor- Subaward

• An award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a federal program. A subaward my be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract.

- Contract• A legal instrument by which a nonfederal entity purchases property or services

needed to carry out the project or program under a federal award. The term does not include a legal instrument, even if the nonfederal entity considers it a contract, when the substance of the transaction meets the definition of a federal award or subaward.



• Subrecipients- A risk assessment must be performed

• Prior award experience• Prior audit experience• Extent of any federal or pass-through entity monitoring

- Award agreement must contain• Subrecipient name and DUNS number• Federal award identification number• Subaward period of performance start and end date• Amount of funds obligated to the subrecipient• Total amount of federal award• Name of federal awarding agency, pass-through entity and contact info for

awarding official• CFDA # and name• Identification of whether the award is R&D• Indirect cost rate information



• Subrecipients- Oversight- 6 mandatory steps provided in UG• Review financial and performance reports• Verify single audit compliance• Ensure corrective action on any deficiencies (regardless of

how they are identified)• Issue management decisions on relevant subrecipient audit

findings• Consider whether audit results or other factors affect the

pass-through entities records• Consider any needed enforcement activities



• Subrecipients- Supplement monitoring, UG also suggests:• Site visits• Agreed upon procedures• Or other steps

- Also the passthrough entity must retain subrecipientreport submissions for 3 years from the date of receipt



• Procurement changes- Prior to the UG no general standard related to

conflicts of interest existed. - Now non-federal entities must maintain written

conflict of interest standards covering employees who deal with procurement contracts and if it has a related nongovernmental organization it must also maintain written standards covering organizational conflicts of interest.

•Appendix II – Contract Provision for Non-Federal Entity Contracts Under Federal Awards



• Procurement methods- Micro-purchases- Small purchase procedures- Sealed bids- Competitive proposals- Non-competitive proposals

• Threshold for small purchase procedure raised to $150,000



• Allowability was more clearly defined- Necessary- Reasonable- Allocable- Conform to imposed limitations- Consistent with organizational policies uniformly applied to all

activities- Consistently treated- Determined in accordance with GAAP- Not charges anywhere else- Adequately documented

Major Cost Principle Changes


• Regarding reasonableness, consider:- Ordinary and necessary expense- Use of sound business practices- Arm’s length bargaining- Adherence to federal, state, and local laws and regulations- Facts and circumstances surrounding the cost- Unjustified exceptions

• May seek prior written approval of the cognizant agency for indirect costs or federal awarding agency in advance for incurrence of special or unusual costs.

Major Cost Principle Changes


• Review of Risk - Recipients to be evaluated for financial stability; the quality of management systems;

performance history; reports and findings from audits; and ability to effectively implement statutory, regulatory, or other broad compliance requirements

• Procurement standards - Emphasis on policies to prevent conflicts of interest and protect the integrity of

procurements under federal awards

• Performance Measurement - Recipients will be required to provide financial information demonstrating cost-effective

practices

• Internal Controls - Institutions must establish and maintain effective internal controls over federal awards

• Personal info protection - Nonfederal entities must take reasonable measures to safeguard protected personally

identifiable information

New Requirements for Recipients


• Thresholds- The single audit threshold will increase to $750,000 from $500,000 - Audit oversight over 99.7 percent of federal award dollars and 81 percent of

the entities subject to the requirement - Audit oversight will be eliminated for approximately 5,000 of the 37,500

entities that currently undergo a single audit

• Findings - The types of findings reported in the Schedule of Findings and Questioned

Costs will remain substantially the same- The threshold for reporting questioned costs, will increase from $10,000 to

$25,000

Single Audit Changes


Major Program Determination


• High Risk Type A Programs - To be considered low-risk, the program must have not had: • Internal control deficiencies identified as material weaknesses • A modified opinion on compliance• Known or likely questioned costs that exceed five percent of the total

federal awards expended for the program

• High Risk Type B Programs- A material weakness finding will be the primary trigger for high risk- The number of high-risk Type B’s to be audited will reduced from ½ to

¼ the number of low-risk Type A’s - The Type B threshold to be omitted for risk assessment will be a flat

25 percent of the Type A threshold - The threshold to not perform risk assessment on Type B’s increases

from 100,000 to 187,500

Major Program Determination


• Low-Risk Auditee - Must meet the following conditions for the two prior audit periods to

qualify as low-risk: • Single audits were performed annually • Audit opinion on the financial statements and the schedule of

expenditures of awards were unmodified • No material weakness findings• No substantial doubt about the auditee's ability to continue as a going

concern• No material weaknesses, questioned costs that exceeded five percent or a

modified opinion on a major program

• Percentage of Coverage rule - The minimum percentage of total federal awards to be tested as

major programs will decrease:• 25% to 20% for low-risk auditees• 50% to 40% for all others

Low-Risk Criteria


Questions?


Jeremy DunnEmail: [email protected]: 704-808-5219Website: www.elliottdavis.com

Elliott Davis Decosimo ranks among the top 30 CPA firms in the U.S. With seventeen offices across seven states, the firm provides clients across a wide range of industries with smart, customized solutions. Elliott Davis Decosimo is an independent firm associated with Moore Stephens International Limited, one of the world's largest CPA firm associations with resources in every major market around the globe. For more information, please visit elliottdavis.com.


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