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Understanding OMB’s “Super Circular”—Key Takeaways for RDO’s

NADO Annual Training ConferenceOctober 18, 2016

Presented by Bob Lloyd

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OMB’s Grant Reform Initiative

• Three years in the making• Initial “trial balloons” (2/28/12)• Proposed consolidated policies (2/1/13)• Final product—2 CFR 200 (12/26/13)--- The “Super Circular”--- The “Omni-Circular”--- The “Uniform Guidance• Uniform federal agency implementation (12/26/14)

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How Does It Find Its Way to You?

• Uniform federal agency adoption--- Citations (2 CFR 200 plus specific federal agency supplemental regulations)• Inclusion in new awards issued after 12/26/14• Inclusion in old awards modified after

12/26/14

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The “Big Ticket” Reforms• Standardized federal pre-award reviews (2 CFR 200.205) and pass-

through entity due diligence (2 CFR 200.331(e))• FAPIIS (2 CFR 200.213 and Appendix II)• Revised standards for procurement of goods and services (2 CFR

200.317-326)• Reinforced policies for recognition of indirect costs (2 CFR

200.331(a)(4) and 2 CFR 200.414)• Revised cost principles (2 CFR 200.400-475)• “Quasi-uniform” time and effort reporting requirements (2 CFR

200.430(i))• “Robust” policies for subrecipient management and monitoring (2

CFR 200.330-332)

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Some Good General Advice

• There is not effective substitute for doing your homework

• Assess your policies and procedures against the Uniform Guidance and document that you did so

• Appropriately alert your people from top to bottom of the organization

• Use examples of non-compliance as incentives to “get with the program.”

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OMB Grant Reform and Subawards

• Federal recognition of the prevalence of subawards

--- Congressional program designs with heavy reliance of substate regional organizations• Consolidation of all policy related to “lower tier “

relationships in the administrative portion of the “Super Circular” (2 CFR 200, Subpart D)

• Some “protection” for subrecipients; some “exposure”

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Make Sure You’re Really a Subrecipient

• Revised policy on determination of “lower tier” relationships (2 CFR 200.330)--- Previously Section 210 of OMB Circular A-133• Pass-through entity “case-by-case” determination--- Concepts of assistance vs. procurement from federal law--- Indicative characteristics----- Not all characteristics must be present----- No “silver bullet” • Issues--- Name of the award--- Type of subrecipient organization--- Type of award “costing”--- Type of oversight----- Audit

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Be Ready for Risk Assessment

• Criteria (2 CFR 200.331(c))--- Prior performance--- Audit history--- Management personnel and systems--- Extent of federal (and other) monitoring• Timing• Possible “high risk” designation and imposition of

special conditions (2 CFR 200.207)--- Due process required

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The Subaward Agreement• Identification as a “subaward”• Data elements (2 CFR 200.331(a)(1)(i-xiii)--- Especially…the CFDA number• “Flow-through”• Required record retention and access• Close-out procedures• Additional or inconsistent requirements imposed by pass-

through entity--- “Can they do that to us?”• Contract clauses (2 CFR 200, Appendix II) do not apply to

subawards

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Indirect Cost Recognition

• 2 CFR 200.331(a)(4) and 2 CFR 200.414• Acceptance of federally negotiated rates• Rate negotiated with pass-through entity--- Applicability• Acceptance of subrecipient election of de

minimis rate• Audit of rates (per Part 3B of the OMB

Compliance Supplement)

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Fixed Amount Subawards• 2 CFR 200.332• Must be authorized by federal awarding agency• Limited to $150,000 or less• Required elements ( 2 CFR 200.201)--- Award amount based on proposed budget identifying allowable costs--- Not authorized if matching/cost sharing is required--- Payment features retain leverage--- Certification by subrecipient concerning effort or performance--- Periodic reports authorized--- Changes in key personnel require prior approval

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Payment• Misunderstanding of the term “cost reimbursement”• Longstanding federal policy re: states—OMB A-102 Common Rule, Section ___.37)• 2 CFR 200.305• Required advance• Conditions for advance--- Drawdown of immediate cash needs--- Drawdown as close as possible to time of disbursement--- Minimize time elapsing between drawdown and disbursement• Conditions for working capital advance--- One time advance; subsequent reimbursement• Conditions for reimbursement--- Construction--- Punitive

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Cost Allowability

• Subpart E, 2 CFR 200• General tests of allowability• The tests of reasonableness• Issue--- Imposition of policies of the pass-through entity----- Prior approvals----- Advance understandings

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Documentation

• Source documentation (2 CFR 200.302)• Records access and retention (2 CFR 200.333-

337)• Issue--- Required submission of documentary back-up----- Duplicate recordkeeping----- Locus of audit

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Reporting• Prime recipient reporting--- Applicability of Paperwork Reduction Act and its regulations (5 CFR 1320)• Lost in the changes (OMB Circular A-102, Section 41)• Beware of 2 CFR 200.331(a)(3)!• Issues--- More frequent--- More detailed--- Submission timing• Arguments against more frequent and detailed reporting

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Pass-through Entity Monitoring

• What to expect if they’re doing it correctly:--- Review of financial and performance reports--- Oversight of corrective action on deficiencies--- Verification of audit compliance--- Issuance of management decisions--- Consideration of possible enforcement actions--- Adjustment of records based on impact of subrecipient oversight

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Pass-through Entity Monitoring

• What to expect if they choose:--- Provision of training and technical assistance--- Performance of on-site reviews (site visits)--- Arrangement of agreed-upon procedures audits--- Other

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Close-out and Continuing Accountability

• Close out of the prime award?--- Subaward commitment = an expenditure for federal financial reporting purposes--- Handling of applicable credits• Close-out procedures--- Submission of final reports--- Settlement of award claims and payment--- Possible disposition of subaward acquired property• Matters not affected by close-out--- Records retention and access--- Subaward acquired property retained--- Federal agency and pass-through entity audit rights

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Audit

• Imposition of audit requirement--- Subpart F, 2 CFR 200• Agreed-upon procedures per 2 CFR 200.425• Required audit of pass-through entity’s award--- At their expense• Audit cost, generally• Submission of audit reporting package (2 CFR

200.512(b)—FAC only)

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Audit Resolution

• Who resolves which finding(s)?• Management decisions--- Substance----- Disallowance and other financial adjustments----- Procedural changes and other corrective actions--- Timing• Corrective action• Disagreements--- Disputes and appeals

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Taking on Any Issues• Option 1— Submit a careful written analysis• Option 2– Use surrogate(s)--- Federal awarding agency--- Authoritative sources• Option 3—Enlist similarly situated allies; Use strength in

numbers

• “Nothing personal, Sonny…only business.” ---Michael Corleone The Godfather

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Some Additional Advice

• You need a system of “effective internal control that provides reasonable assurance…”

• “Differential accountability” is possible• You don’t need awarding agency approval to take the

right steps• Look at what “they” are doing--- www.usa.gov--- www.ignet.gov