2015 Compliance Supplement Implementing the Uniform Guidance

NGMA Monthly Training Luncheon Wednesday, November 12, 2014

Presented by Gil Tran & Terry Ramsey

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Learning Objectives

• Uniform Guidance timing & implementation.

• Overview of changes to the 2015 Supplement.

• Specific Changes to Part 3 and the 14 types of compliance requirements.

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Disclaimer • Discussion to provide interim information on the

process to update the 2015 Compliance Supplement for the Uniform Guidance.

• Working groups in process of making recommendations to OMB. Today’s discussion does not represent final decisions.

• Final decisions will be made after OMB’s normal Supplement vetting and clearance process and will be communicated with the issuance of the final 2015 Compliance Supplement.

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2015 Compliance Supplement

• 2015 Supplement will be used for audits performed both under Circular A-133 and the Uniform Guidance (UG) with two Part 3: – Awards under current Circulars – Awards under the Uniform Guidance

• Update process includes receiving input from Federal

agencies, non-Federal entities (NFE), auditing profession, and others.

• Plans include early Part 3 vett draft.

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OMB Uniform Guidance

• OMB issued Uniform Grant Guidance on December 26, 2013 Federal Register notice.

• Council on Financial Assistance Reform (COFAR) working with OMB on rollout and related guidance: – Two training webcasts held to date (1/2014 and 10/2014) – Frequently Asked Question document (COFAR FAQs) issued

8/2014 and titled, Frequently Asked Questions For The Office of Management and Budget’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards At 2 CFR 200 (incorporates previously FAQs)

• There is no way around it! A thorough reading of the

guidance is required to understand the changes!

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Eliminating Duplicative and Conflicting Guidance

Uniform Grant Guidance: All OMB guidance for Federal awards streamlined in Title 2 of CFR, Subtitle A, Chapter II, Part 200

Currently:

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A-21

Guidance for Federal Awards

A-110

A-87

A-122

A-89

spread over these eight circulars A-

133

A-102

A-50

Uniform Grant Guidance Effective Dates • Federal agencies must implement policies and procedures by

promulgating regulations to be effective December 26, 2014.

• Non-federal entities will need to implement the new administrative requirements and cost principles for all new Federal awards made after December 26, 2014 and funding increments after that date where Federal agencies change award terms and conditions – FAQ .110-6 - Effective Dates and Grace Period for Procurement. – FAQ .110-7 – Effective Dates and Incremental Funding. – NFE may implement entity-wide system changes to comply with the

UG without penalty.

• Audit requirements effective for fiscal years beginning on or after December 26, 2014: – No early implementation of audit provisions.

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A Closer Look at Effective Dates

• All 2014 year ends: – No impact from the UG for NFE and auditors.

• Quarters ending March 31; June 30; and Sept 30, 2015:

– NFE use new Administrative Requirements and Cost Principles for all new awards and funding increments with changed terms and conditions.

– OMB Circular A-133 Single audit requirements remain. – NFE likely have awards subject to the old requirements

and awards subject to the new requirements.

• December 31, 2015, year-ends and beyond: – New Single Audit requirements apply.

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2 CFR 200 -Basic Layout

• 6 Subparts A through F: – Subpart A, 200.XX – Acronyms & Definitions Subpart

B, 200.1XX – General – Subpart C, 200.2XX – Pre Award - Federal – Subpart D, 200.3XX – Post Award – Recipients – Subpart E, 200.4XX – Cost Principles – Subpart F, 200.5XX – Audit

• 11 Appendices - I through XI: – SF-FAC Appendix X (Data Collection Form) – Compliance Supplement Appendix XI

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Expected Supplement Changes for Uniform Guidance

• Implementation guidance. • Part 3 – 14 Types of Compliance Requirements:

– Awards under current circulars. – Awards under Uniform Guidance.

• Part 6 – Internal Controls (2016 Supplement). • Appendix III – Federal agency contacts. • Appendix VI – Program specific audit guides. • Appendix VII – Other OMB Advisories:

– Loan and loan guarantee provisions now in UG. – ARRA may be removed.

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2015 Compliance Supplement – Part 3

• Workgroups performing detailed review of Part 3: – Goal to focus on the areas of greatest risk and relieve burden. – Updates to Part 3 for changes under the Uniform Guidance:

• Subpart D—Post Federal Award Requirements. • Subpart E—Cost Principles.

– Updated compliance requirement citations, audit objectives, and suggested audit procedures.

• Types of Compliance Requirements:

– Basic overall format and structure unchanged. – No new types – possibly one to be removed.

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2015 Compliance Supplement – Part 3

• Plan to have two Part 3 sections in 2015: – Awards under Uniform Guidance requirements. – Awards prior to Uniform Guidance.

• Consistency between two Part 3 sections

where requirements are the same.

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Part 3 Revision Workgroups

1. Allowable Costs & Cost Principles.

2. Administrative requirements.

3. Program or government-wide requirements.

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14 Types by Workgroup

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A – Activities Allowed or Unallowed 1B – Allowable Costs/Cost Principles 1C – Cash Management 2D – Davis-Bacon Act 3E - Eligibility 3F – Equipment and Real Property Management 2G – Matching, Level of Effort, Earmarking 3H – Period of Performance 2I – Procurement and Suspension and Debarment 2J – Program Income 2K – Real Property Acquisition & Relocation L - Reporting 2M – Subrecipient Monitoring 2N – Special Tests and Provisions 3

200.101 Applicability Table

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Applicable Not ApplicableAdministrative Requirements Grant agreements Loans, loan guarantees

Cooperative agreements Interest subsidyInsuranceCost-reimbursement contracts under the FAR

Subrecipient Monitoring ALL

Cost Principles Grant agreements Food commoditiesCooperative agreements Fixed amount awardsCost-reimbursement contracts under the FAR

Loans, loan guarantees Interest subsidyInsurance

A – Activities Allowed or Unallowed

• Basically unchanged.

• Removed ARRA procedures.

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B – Allowable Costs/Cost Principles

• Applicability. • Source of governing requirements:

– 2 CFR 200 Subpart E. – Appendices.

• Basic guidelines. • Suggested audit procedures – Internal control. • Updated selected items of cost table.

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Selected Items of Cost

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Selected Items of Cost Exhibit 1

Selected Cost Item

Uniform Guidance General

Reference

Items of Cost

Requiring Prior

Approval

States, Local governments, & Indian Tribes

Institutions of Higher Education (IHE)

Non-Profit Organizations

Items of Cost NOT

Treated the Same

Across Non-Federal Entities

Advertising and public relations costs

§200.421 Allowable with restrictions

Allowable with restrictions

Allowable with restrictions

Advisory councils §200.422 Allowable with

restrictions Allowable with restrictions

Allowable with restrictions

Alcoholic beverages §200.423 Unallowable Unallowable Unallowable

Alumni/ae activities §200.424 Not specifically

addressed Unallowable Not specifically addressed X

Audit services §200.425 Allowable with restrictions

Allowable with restrictions

Allowable with restrictions

B – Allowable Costs/Cost Principles

• Sections: – States/local governments and Indian tribes. – Institutions of higher education (IHE). – Nonprofit organizations.

• Within sections:

– Update for Uniform Guidance – Reorganize for clarity – Reduce duplication

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Types of Compliance Requirements Administrative Requirements

C – Cash Management F – Equipment and Real Property Management H – Period of Performance I – Procurement and Suspension & Debarment J – Program Income L – Reporting M – Subrecipient Monitoring

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C – Cash Management

• Reorganized audit objectives and SAP: – Grants Agreements and Cooperative Agreements.

• States. • Non-Federal entities other than States.

– Cost reimbursement contracts under the FAR. – Loans, loan guarantees, interest subsidy, insurance – Pass-through entities.

• Added payment system examples of minimize time elapsed from draw to expenditure.

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F. Equipment & Real Property

• Organization: – States. – Non-Federal entities other than States:

• Inventory management. • Disposition of equipment. • Disposition of real property.

• Audit objectives and SAP basically unchanged.

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H. Period of Performance (POP)

• Suggested audit procedures revised to focus on areas of highest risk: – Beginning of period of performance to verify not

incurred prior to start of the POP. – Latter part of POP and verify within POP. – Obligations not liquidated (payment made) at end

of POP & verify liquidated within allowed time. – Adjustments.

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I. Procurement and Suspension and Debarment

• Organization: – Grant agreements and cooperative agreements:

• States. • Other non-Federal entities.

– Cost reimbursement contracts under the FAR. – Suspension and debarment.

• Reference to FAQ 110-6 for procurement one full year grace period.

• Removed ARRA procedures.

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Suspension and Debarment

• Three ways to comply: – Checking SAM. – Collecting certification from the entity. – Adding a clause or condition to the covered

transaction with the entity.

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J. Program Income

• Clearer compliance requirement description: – What is and is not included in program income. – Three methods:

• Deduction. • Addition. • Cost sharing or matching.

• Audit objectives and SAP basically unchanged.

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L. Reporting

• Organization: – Financial reporting – Performance and special reporting:

• Direct and material effect on program. • Capable of evaluation against objective criteria in

Federal statutes, regs, and T&C of Federal award.

• Under discussion how to handle FFATA. • Audit objectives unchanged. • SAP reorganized for clarity.

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Section 200.330 Subrecipient vs. Contractor

• Guidance on determination relocated to administrative requirements section.

• Term “contractor” replaces “vendor” • Criteria for determination basically

unchanged.

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Subrecipient Monitoring 200.331(a) Identifying the Subaward

1. Clearly identify award – list in 200.331(a)(1). 2. Identify requirements imposed so award is used in

compliance with statutes, regs, T&C. 3. Identify requirements imposed so PTE meets

responsibilities to Federal awarding agency (e.g., financial & performance reports).

4. Indirect cost rate. 5. Rights to access records.

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M. Subrecipient Monitoring

• Process: – Identify the award and applicable requirements. – Evaluate Risk. – Monitor. – Ensure accountability of for-profit subrecipients.

• More focused audit objectives. • SAP follow uniform requirements.

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Subrecipient Monitoring 200.331(b) Evaluation of Risk

• Evaluate risk of noncompliance. May consider: – Prior experience with subawards. – Results of previous audits including

whether major program. – Changes in personnel or systems. – Results of Federal monitoring.

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Subrecipient Monitoring 200.331(d) Required Monitoring Procedures

• Ensure subaward used for authorized purposes, in compliance, and performance goals are met.

• Must include: 1. Reviewing financial and performance reports

required by PTE. 2. Following up and ensuring appropriate action on

deficiencies. 3. Issuing a management decision for audit findings.

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Subrecipient Monitoring 200.331(e) Optional Tools Based on Risk

• Providing training and technical assistance. • Performing on-site reviews. • Arranging for agreed-upon procedures

engagements: – Activities allowed or unallowed. – Allowable costs/cost principles. – Eligibility. – Reporting

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Types of Compliance Requirements Program or Government-wide Requirements

D – Davis Bacon E – Eligibility G – Matching, Level of Effort, Earmarking N – Special Tests and Provisions

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D - Davis-Bacon

• Considering whether to move to N. Special Tests and Provisions.

• Removed ARRA.

• Otherwise basically unchanged.

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E. Eligibility

• Sections: – Eligibility for individuals. – Split eligibility. – Eligibility for group of individuals or service

delivery area. – Eligibility for subrecipients.

• Basically unchanged.

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G. Matching, Level of Effort, Earmarking

• Expect few changes.

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N. Special Tests and Provisions

• Removed ARRA.

• Otherwise basically unchanged.

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Your Questions

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