dynamic changes occurring: omb's uniform grant guidance
TRANSCRIPT
Dynamic Changes Occurring!OMB’s Uniform Grant Guidance
August 25, 2015
Presented by:Adam Roth, StreamLink SoftwareMichelle Watterworth, Plante Moran
2Agenda
Uniform Grant Guidance issued 12/26/2013, effective 12/26/2014:
2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.• Cost principles• Administrative requirements• Audit requirements
Brief overview of the changesDiscuss Implications and practical approaches• Administrators• Auditors
UGG Expands on A-87, A133,etc.
Target Areas of Improvement from Previous Requirements• Eliminating duplicative and conflicting guidance• Focusing on performance over compliance for accountability• Encouraging efficient use of information technology and shared
services• Providing for consistent and transparent treatment of costs• Limiting allowable costs to make the best use of Federal resources• Setting standard business processes using data definitions• Encouraging non-Federal entities to have family-friendly policies• Strengthening oversight• Targeting audit requirements on risk of waste, fraud, and abuse
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Where to find them:Then & Now
Cost Principles for State, Local, and Indian Tribal Governments Section in Previous Circular Section in Uniform Grant Guidance
A. Purpose and Scope Direct and Indirect (F&A) costsB. Definitions Subpart A - DefinitionsC. Basic Guidelines Basic Considerations.D. Composition of Cost 200.402 Composition of CostsE. Direct Costs 200.413 Direct CostsF. Indirect Costs 200.414 Indirect (F&A) costsG. Interagency Services 200.417 Interagency ServiceH. Required Certifications 200.415 Required CertificationsAttachment A General Principles for Determining Allowable Costs
Subpart E - Cost Principles
Attachment B Selected Items of Cost General Provisions for Selected Items of Cost.Attachment C State/Local Wide Central Service Cost Allocation Plans
Appendix V - State/Local Government and Indian Tribe - Wide Central Service Cost Allocation Plans
Attachment D Public Assistance Cost Allocation Plans
Appendix VI - Public Assistance Cost Allocation Plans
Attachment E State and Local Indirect Cost Rate Proposals
Appendix VII - States and Local Government and Indian Tribe Indirect Cost Proposals
7Accountability of Funds
Increase recipient accountability for performance.
Required Certifications• Goal is to strengthen awardee accountability by providing explicit
and consistent language for required certifications that includes awareness of potential penalties under the False Claims Act.
Cost Accounting Standards and Disclosure Statement• Every awardee must meet the threshold in the Federal Acquisition
Regulations.• Goal is to strengthen accounting standards, while lowering the risk
of noncompliance.
8Accountability of Funds
Time and Effort Reporting Requirements• Strengthens requirements for awardees internal controls over
salaries and wages, while allowing flexibility to meet such requirements.
• Emphasizes that charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed.
9Treatment of Costs
Direct Costs• Makes consistent the guidance
that administrative costs may be treated as direct costs if the awardee demonstrates that such costs are directly allocable to a Federal award.
Indirect Costs• Provides for an indirect cost
rate of 10% of modified total direct costs to awardees that have never had a negotiated indirect cost rate.
10Allowable Costs
Acceptable costs based on program performance.
Conferences• Clarifies allowable conference spending and requires conference
hosts/sponsors to exercise judgment in ensuring that conference costs are appropriate.
Idle Facilities and Idle Capacity• Allows for the expense of idle facilities when necessary to meet
workload fluctuations of an award.
11Allowable Costs
Contingency Provisions• Provides detailed circumstances under which contingency costs
may be included in awards.
Travel Costs• Allows temporary dependent care costs that result directly from
travel to conferences and that meet specified standards.
Indirect Costs Identification and Assignment and Rate Determination for Institutions of Higher Education (IHEs)• Extends to all IHEs provisions allowing for recovery of increased
utility costs associated with research.
12Allowable Costs
Interest • Allows awardees to be reimbursed for financing costs associated
with patents and computer software capitalized in accordance with GAAP for fiscal years beginning on or after 1/1/2016.
Prior Written Approval• Provides a single comprehensive list of circumstances under which
awardees must seek prior approval from the Federal awarding agency, the cognizant agency or the pass-through entity.
• Examples could include: Travel costs of dependents, Cost of membership in any civic/community organization, Indirect costs related to severance payments, etc.
13Prohibitions/Limitations
Employee Health/Welfare Cost• Eliminates the allowance for “morale” costs.
Relocation Costs of Employees• Limits the amount of time for which a Federal award may be
charged for the costs of an employee’s vacant former home to six months.
Student Activity Costs• Limits for on student activity costs.• For example, costs incurred for intramural activities, student
publications, student clubs, and other student activities, are unallowable, unless specifically provided for in the Federal award.
14Implications to Administrators
Identify key performance metrics.• Ensure you are equipped to monitor program performance.• Be able to product standardized reports.
Eliminate/mitigate program waste.• Demonstrate change to risky programs.
Sub-Recipient Monitoring• Increased performance and cost consistency presents greater pressures on
real-time knowledge of subs
Negotiate an indirect cost rate.
15Implications to Administrators
Be familiar with the new conference spending guidelines that are applicable to your programs.
Understand which contingency costs can be included in awards.• Risky programs are more likely to have unexpected costs.• Know the circumstances under which they can be included as contingencies
to protect yourself.
Keep track of your certifications to avoid penalties.
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OMB Circular A-133Compliance Supplement 2015
OMB has released additional information related to compliance requirements of Federal Departments.
The 2015 documentation offers both an in-depth look at each department, as well as a table matrix of Types of Compliance Requirements by CFDA number.
Find more information at: http://bit.ly/compliance-supplement
For a look at the Matrix of Compliance Requirements, visit: http://bit.ly/compliance-matrix
18Audit challenges/implications
• Identifying which rules are applicable• Major program determination**• Testing compliance requirements (effective now!)• Reporting**• Other audit-related considerations
**These changes not effective until 12/31/2015 year ends
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Uniform Grant Guidance Effective Dates
Federal AgenciesBy 12/26/2014
Non-federal agenciesNew awards and funding increments made AFTER 12/26/2014
Audit requirement (Subpart F) start with 12/31/2015 year ends
Funding increments
“Where the Federal agency considers funding increments to be an opportunity to modify the terms and conditions of the federal award” (COFAR)
Potential issues for auditors and for administrators:• Funding increments received but no modification to
terms and conditions were made. Does that mean UGG does not apply?
• Fund increments received with no mention by federal agency of UGG applicability. Does that mean UGG does not apply?
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Effective Dates – Incremental funding
Effective Dates - Subawards
• Subaward effective date for applying UGG is the same as the effective date of the federal award from which the subaward is made
• Implications: • Subawards made after 12/26/2014 do not necessarily have to
comply with the UGG• To determine effective date for subawards, need to look back to
the effective date of the federal award from which the subaward is made
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Implementation of Effective Dates
What is the applicable fiscal year
end?
March, June, September 2015
Possible grantee expenditures under
UGG
Audit compliance testing under UGG for
the first time
December 2015 and after
New audit requirements apply (major program and reporting changes)
Continued compliance testing
under OLD and NEW rules
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Current Rules New Rules
• Single audit threshold
• Low risk auditee
• $500,000
• Unmodified opinion on basic FS in accordance with GAAP
• Unmodified SEFA opinion• No material weaknesses
at the basic FS level or federal programs
• No material non compliance
• No questioned costs that exceed 5%
• Timely filing with the clearing house
• $750,000
• Financial statement opinion could be on the basis of accounting required by state law
• Unmodified SEFA opinion• No material weaknesses at the
basic FS level or federal programs
• No modified opinion on compliance
• No questioned costs that exceed 5%
• Timely filing with the clearing house
• No going concern opinion
Major program selection (effective starting with 12/31/2015 year ends)
Major program selection (effective starting with 12/31/2015 year ends) 24
Current Rules New Rules
• Coverage requirements
• Type A threshold
• Risk assessment for Type As (2 year lookback)
• Low risk 25% and no low risk 50%
• $300,000
• Sig deficiency OR material weakness
• Noncompliance condition reported
• Low risk 20% and not low risk 40%
• $750,000
• Material weakness• Modified opinion• Questioned costs over 5%
25Compliance testing
• Internal control over compliance• Possible changes as a result of implementation of UGG
• Allowable costs• Procurement• Subrecipient monitoring
• Sampling challenges• Testing major programs with expenditures under both “old” rules
and “new” rules• Sampling methodology
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Compliance testing requirements
• 2015 OMB compliance supplement• Part 3.1 – Old rules• Part 3.2 – Under UGG
• Removal of 2 compliance requirements• Davis Bacon• Real property and relocation assistance
• FFATA testing removed
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Compliance testing requirements
• More significant testing changes under UGG:• Allowable cost/cost principles• Cash Management• Period of Performance (fka Period of Availability)• Procurement and Suspension and Debarment• Subrecipient Monitoring
28Allowable costs
• Changes in allowable costs due to moving from the various cost circulars to the UGG
• New/revised steps:• De minimis indirect cost rate• Improper payments focus• Time and effort testing
29Cash Management
• Need to understand the payment method or system a non-Federal entity uses
• New/revised steps• Program income• Unearned revenue• Written procedures to implement 200.305
30Period of Performance
• Previously called “Period of Availability”• Focused steps depending upon when performance period
begins• Beings during audit period• Ends during audit period
• Deleted statement about testing period of performance with the same samples used to test allowable cost/cost principles!
32Subrecipient Monitoring
• Audit steps more focused• Gain understanding• Compliance focus:
• Subaward documents• Monitoring• Required audits obtained
Audit reporting**33
Current Rules New Rules• Question costs
reporting threshold
• SEFA
• $10,0000
• Subrecipient awards are NOT required to be reported on the FACE of the SEFA. Typically reported in the footnotes.
• $25,0000
• Report subrecipient awards by grant on the FACE of the SEFA (totals by grant) and no longer in the footnotes
**Not effective until 12/31/2015 year ends
Audit reporting**34
Current Rules New Rules
• SSPAF/Corrective action plan
• Audit due dates
• Required ONLY for SECTION III findings
• Extensions allowed
• Required for both SECTION II and SECTION III findings
• Extensions NO LONGER allowed
**Not effective until 12/31/2015 year ends
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Other audit-related considerations
• May need to update testing templates for UGG and non-UGG transactions
• Auditees may not have been as proactive as necessary• Possible additional testing issues• Possible additional findings
• Federal quality study every 6 years beginning 2018• Results of reviews must be made public• Auditor focus on now to ensure audit quality
36Contact Information
Adam Roth, Founder and CEOStreamLink [email protected]
Michelle Watterworth, CPAPartnerPlante [email protected]