Uniform Guidance and DOL Exceptions PRIOR APPROVAL

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1 The Uniform Guidance contains 25 prior approval areas and DOL s exceptions add one additional prior approval. Additionally, DOL s exceptions place parameters around prior approval requirements, including submission of requests and what form prior approval takes. For Federal awards from the Department of Labor, the non-federal entity* must request prior written approval not less than 30 days before the requested action is to occur. Unless otherwise noted in the Grant Award, the Grant Officer is the only official with the authority to provide prior written approval (prior approval). Items included in the statement of work or budget as awarded does not constitute prior approval. Formula grant recipients: Please review the terms and conditions of your grant agreement to determine if the prior approval authority has been passed to the Governor. If no such language exists in the grant agreement or grant modification requires prior approval, the following will apply: Discretionary grant recipients: Please note the items previously required for prior approval have changed and these changes apply to any new funds awarded through an existing grant or new grant after December 26, Please refer to the terms and conditions of your grant agreement. Below is a table that lists the prior approval conditions in the Uniform Guidance (2 CFR 200) and DOL Exceptions (2 CFR 2900). Following the table is a more extensive description of each of these prior approval conditions. Citation Section Title Prior Approval Condition Prior approval requests Submit 30 days prior to effective date Prior written approval Only a grant officer has the authority to approve a written request. Inclusion of items in SOW or budget does not constitute prior approval Student activity costs Are generally prohibited, but prior written approval for activities that meet a program requirement Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts For fixed amount awards: Changes in principal investigator, project leader, project partner, or scope of effort Specific conditions Federal Awarding or pass-through agency may impose additional specific award conditions as needed Program income Not applicable to DOL grants since DOL requires grantees to account for program income on the addition basis Cost sharing or matching To claim unrecovered indirect costs. (Must account for cost sharing / match s as they are expended (2 CFR ) Program income Not applicable to DOL grants since DOL requires grantees to account for program income on the addition basis Revision of budget and program plans Prior approval from Federal awarding agency for budget and program plan revisions. Approval of award budget does not constitute prior approval (2 CFR ) Real Property Must request disposition instructions Equipment Encumbering; Disposition instructions if required by terms and conditions of Federal award Fixed amount awards Subawards based on fixed amounts up to the Simplified Acquisition Threshold. 1 P a g e

2 Direct costs Direct charging of salaries of administrative and clerical staff Compensation personal services Institutions of Higher Education: Incidental activities, salary basis, consulting arrangements Compensation fringe benefits: severance pay for abnormal or mass severance States, local governments and Indian tribes: Substitute processes for allocating salaries and wages to Federal awards. Federal awards of similar purpose: To account for their combined use based on performance-oriented metrics. Not allowable unless receiving prior approval to charge as indirect cost, as appropriate Entertainment costs Not allowable unless authorized in approved budget or prior written approval of Federal awarding agency Equipment and other capital expenditures Unallowable as direct charges unless receiving prior written approval for capital expenditures for: General purpose equipment, buildings and land; Special purpose equipment over $5000; Improvements to land, buildings, or equipment which increase their value or useful life Fines, penalties, damages and other settlements Costs resulting from non-federal entity violations of law or regulations Fund raising and investment management costs Fund raising costs for the purpose of meeting Federal program objectives Goods or services for personal use Cost of housing, housing allowances, and personal living expenses Insurance and indemnification Insurance for risk of loss or damage to Federal government property Organization costs Organization costs Participant support costs Costs for participants and trainees in connection with conferences and training projects. Note: Supportive services as defined in WIOA do not require prior approval Pre-award costs Costs incurred prior to effective date of the Federal award Rearrangement and reconversion costs Cost of normal and ordinary rearrangement or alteration of facilities charged as direct costs Selling and marketing costs Cost of selling or marketing any products or services charged as direct costs Travel costs Individuals whose costs are otherwise not allowable to Federal awards because they are included as part of the general cost of government. Appendix III, Negotiated Fixed Rates and Carry- Changes to carry-forward provision for indirect costs. Section C.5 Forward Provisions Exchange rates Not applicable because ETA grants do not have foreign operations Taxes (including Value Added Tax) Not applicable because ETA grants do not have foreign operations. 2 P a g e

3 DOL Exceptions * 2 CFR Non-Federal Entity In the DOL, Non-Federal entity means a state, local government, Indian tribe, institution of higher education (IHE), for-profit entity, foreign public entity, foreign organization or nonprofit organization that carries out a Federal award as a recipient or subrecipient.(see 2 CFR ). 2 CFR Prior approval requests In addition to the guidance set forth in 2 CFR (c), for Federal awards from the Department of Labor, the non- Federal entity must request prior approval actions at least 30 days prior to the effective date of the requested action. 2 CFR Prior written approval (prior approval) In addition to the guidance set forth in 2 CFR , for Federal awards from the Department of Labor, the non- Federal entity must request prior written approval which should include the timeframe or scope of the agreement and be submitted not less than 30 days before the requested action is to occur. Unless otherwise noted in the Grant Award, the Grant Officer is the only official with the authority to provide prior written approval (prior approval). Items included in the statement of work or budget as awarded does not constitute prior approval. 2 CFR Student activity costs In the Department of Labor, the provision of 2 CFR apply unless the activities meet a program requirement and have prior written approval from the Federal awarding agency Student activity costs. Costs incurred for intramural activities, student publications, student clubs, and other student activities, are unallowable, unless specifically provided for in the Federal award Uniform Guidance 2 CFR Prior Written Approval (Prior Approval) Below is a list of the (25) circumstances in which non-federal entities must obtain prior written approval from the Federal awarding agency. 3 items identified in bold were added to the list as part of the December 19, 2014 Federal Register. 2 items identified in underline are also addressed in the exceptions for DOL at 2 CFR and 2 CFR Section Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts 3 P a g e

4 (b) (5) Fixed amount awards. Changes in principal investigator, project leader, project partner, or scope of effort must receive the prior written approval of the Federal awarding agency or pass-through entity. Section Cost sharing or matching, (2 CFR ) (c) Unrecovered indirect costs, including indirect costs on cost sharing or matching may be included as part of cost sharing or matching only with the prior approval of the Federal awarding agency. Note: The amount of unrecovered indirect costs that can be used for match is limited to the negotiated indirect cost rate, and the administrative portion of the unrecovered indirect costs are limited by administration cost limitations imposed by the statue or program regulations. Section Revision of budget and program plans (2 CFR ) (b)recipients are required to report deviations from budget or project scope or objective, and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with this section. (c)(1)for non-construction Federal awards, recipients must request prior approvals from Federal awarding agencies for one or more of the following program or budget-related reasons: (i)change in the scope or the objective of the project or program (even if there is no associated budget revision requiring prior written approval). (ii)change in a key person specified in the application or the Federal award. (iii)the disengagement from the project for more than three months, or a 25 percent reduction in time devoted to the project, by the approved project director or principal investigator. (iv)the inclusion, unless waived by the Federal awarding agency, of costs that require prior approval in accordance with Subpart E Cost Principles of this Part or 45 CFR Part 75 Appendix IX, Principles for Determining Costs Applicable to Research and Development under Awards and Contracts with Hospitals, or 48 CFR Part 31, Contract Cost Principles and Procedures, as applicable. (v)the transfer of funds budgeted for participant support costs as defined in Participant support costs to other categories of expense. (vi)unless described in the application and funded in the approved Federal awards, the subawarding, transferring or contracting out of any work under a Federal award, including fixed amount subawards as described in Fixed amount subawards. This provision does not apply to the acquisition of supplies, material, equipment or general support services. 4 P a g e

5 (vii)changes in the approved cost-sharing or matching provided by the non- Federal entity. No other prior approval requirements for specific items may be imposed unless a deviation has been approved by OMB. See also Exceptions and Prior written approval (prior approval). (viii)the need arises for additional Federal funds to complete the project. (e)the Federal awarding agency may, at its option, restrict the transfer of funds among direct cost categories or programs, functions and activities for Federal awards in which the Federal share of the project exceeds the Simplified Acquisition Threshold and the cumulative amount of such transfers exceeds or is expected to exceed 10 percent of the total budget as last approved by the Federal awarding agency. The Federal awarding agency cannot permit a transfer that would cause any Federal appropriation to be used for purposes other than those Section Real Property (c) Disposition. When real property is no longer needed for the originally authorized purpose, the non-federal entity must obtain disposition instructions from the Federal awarding agency or pass-through entity. Section Equipment (a) Title (2)Title must vest in the non-federal entity subject to the [non-federal entity Not encumber[ing] the property without approval of the Federal awarding agency or pass-through entity. (c)use (1)Equipment must be used by the non-federal entity in the program or project for which it was acquired as long as needed, whether or not the project or program continues to be supported by the Federal award, and the non-federal entity must not encumber the property without prior approval of the Federal awarding agency. (e)disposition When original or replacement equipment acquired under a Federal award is no longer needed for the original project or program or for other activities currently or previously supported by a Federal awarding agency, except as otherwise provided in Federal statutes, regulations, or Federal awarding agency disposition instructions, the non- Federal entity must request disposition instructions from the Federal awarding agency if required by the terms and conditions of the Federal award. 5 P a g e

6 Section Fixed amount awards With prior written approval from the Federal awarding agency, a pass- through entity may provide subawards based on fixed amounts up to the Simplified Acquisition Threshold, provided that the subawards meet the requirements for fixed amount awards in Use of grant agreements (including fixed amount awards), cooperative agreements, and contracts. Section Direct costs (c)the salaries of administrative and clerical staff should normally be treated as indirect (F&A) costs. Direct charging of these costs may be appropriate only if all of the following conditions are met: (1) Administrative or clerical services are integral to a project or activity; (2) Individuals involved can be specifically identified with the project or activity; (3) Such costs are explicitly included in the budget or have the prior written approval of the Federal awarding agency; and (4) The costs are not also recovered as indirect costs. Section Compensation personal services: (h)institutions of higher education (IHEs). (1) Certain conditions require special consideration and possible limitations in determining allowable personnel compensation costs under Federal awards. Among such conditions are the following: (ii)incidental activities. Incidental activities for which supplemental compensation is allowable under written institutional policy (at a rate not to exceed institutional base salary) need not be included in the records described in paragraph (i)) of this section to directly charge payments of incidental activities, such activities must either be specifically provided for in the Federal award budget or receive prior written approval by the Federal awarding agency. (2) Salary basis. Charges for work performed on Federal awards by faculty members during the academic year are allowable at the IBS [institutional base salary] rate. Except as noted in paragraph (h)(1)(ii) of this section, in no event will charges to Federal awards, irrespective of the basis of computation, exceed the proportionate share of the IBS for that period. This principle applies to all members of faculty at an institution. IBS is defined as the annual compensation paid by an IHE for an individual s appointment, whether that individual s time is spent on research, instruction, administration, or other activities. IBS excludes any income that an individual earns outside of duties performed for the IHE. Unless there is prior approval by the Federal awarding agency, charges of a faculty member s salary to a Federal award must not 6 P a g e

7 exceed the proportionate share of the IBS for the period during which the faculty member worked on the award. (3) Intra-Institution of Higher Education (IHE) consulting. Intra-IHE consulting by faculty is assumed to be undertaken as an IHE obligation requiring no compensation in addition to IBS. However, in unusual cases where consultation is across departmental lines or involves a separate or remote operation, and the work performed by the faculty member is in addition to his or her regular responsibilities, any charges for such work representing additional compensation above IBS are allowable provided that such consulting arrangements are specifically provided for in the Federal award or approved in writing by the Federal awarding agency. (i)standards for Documentation of Personnel Expenses (5) For states, local governments and Indian tribes, substitute processes or systems for allocating salaries and wages to Federal awards may be used in place of or in addition to the records described in paragraph (1) if approved by the cognizant agency for indirect cost. Such systems may include, but are not limited to, random moment sampling, rolling time studies, case counts, or other quantifiable measures of work performed. (7) For Federal awards of similar purpose activity or instances of approved blended funding, a non- Federal entity may submit performance plans that incorporate funds from multiple Federal awards and account for their combined use based on performance-oriented metrics, provided that such plans are approved in advance by all involved Federal awarding agencies. Section Compensation fringe benefits (i) Severance Pay (2) Costs of severance payments are divided into two categories as follows: (ii)measurement of costs of abnormal or mass severance pay by means of an accrual will not achieve equity to both parties. Thus, accruals for this purpose are not allowable. However, the Federal government recognizes its obligation to participate, to the extent of its fair share, in any specific payment. Prior approval by the Federal awarding agency or cognizant agency for indirect cost, as appropriate, is required. 7 P a g e

8 Section Entertainment costs Costs of entertainment, including amusement, diversion, and social activities and any associated costs are unallowable, except where specific costs that might otherwise be considered entertainment have a programmatic purpose and are authorized either in the approved budget for the Federal award or with prior written approval of the Federal awarding agency. Section Equipment and other capital expenditures (a)the following rules of allowability must apply to equipment and other capital expenditures: (1)Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the Federal awarding agency or pass- through entity. (2)Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5,000 or more have the prior written approval of the Federal awarding agency or pass-through entity. (3)Capital expenditures for improvements to land, buildings, or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior written approval of the Federal awarding agency, or pass-through entity. Section Fines, penalties, damages and other settlements Costs resulting from non-federal entity violations of, alleged violations of, or failure to comply with, Federal, state, tribal, local or foreign laws and regulations are unallowable, except when incurred as a result of compliance with specific provisions of the Federal award, or with prior written approval of the Federal awarding agency. Section Fund raising and investment management costs (a)costs of organized fund raising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred to raise capital or obtain contributions are unallowable. Fund raising costs for the purposes of meeting the Federal program objectives are allowable with prior written approval from the Federal awarding agency. 8 P a g e

9 Section Goods or services for personal use (b)costs of housing (e.g., depreciation, maintenance, utilities, furnishings, rent), housing allowances and personal living expenses are only allowable as direct costs regardless of whether reported as taxable income to the employees. In addition, to be allowable direct costs must be approved in advance by a Federal awarding agency. Section Insurance and indemnification (b)(2)costs of insurance or of contributions to any reserve covering the risk of loss of, or damage to, Federal government property are unallowable except to the extent that the Federal awarding agency has specifically required or approved such costs. Section Memberships, subscriptions, and professional activity costs (c)costs of membership in any civic or community organization are allowable with prior approval by the Federal awarding agency or pass- through entity. Section Organization costs Costs such as incorporation fees, brokers fees, fees to promoters, organizers or management consultants, attorneys, accountants, or investment counselor, whether or not employees of the non-federal entity in connection with establishment or reorganization of an organization, are unallowable except with prior approval of the Federal awarding agency. Section Participant support costs Participant support costs as defined in Participant support costs are allowable with the prior approval of the Federal awarding agency Participant support costs. Participant support costs means direct costs for items such as stipends or subsistence allowances, travel allowances, and registration fees paid to or on behalf of participants or trainees (but not employees) in connection with conferences, or training projects. Note: The above cite ( ) is not intended to infer that supportive services, as defined in Section 3, item (59) of the Workforce Innovation and Opportunity Act (WIOA), and cited below, require prior approval; they do not. 9 P a g e

10 SUPPORTIVE SERVICES. The term supportive services means services such as transportation, child care, dependent care, housing, and needs-related payments, that are necessary to enable an individual to participate in activities authorized under this Act. [Emphasis added.] The non-federal entity should have sufficient policy and procedures to ensure that supportive services are paid only after determining and documenting that such costs are necessary to enable an individual to participate in activities authorized under this Act and are reasonable in their amount and duration. Section Pre-award costs Pre-award costs are those incurred prior to the effective date of the Federal award directly pursuant to the negotiation and in anticipation of the Federal award where such costs are necessary for efficient and timely performance of the scope of work. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. Section Rearrangement and reconversion costs (a)costs incurred for ordinary and normal rearrangement and alteration of facilities are allowable as indirect costs. Special arrangements and alterations costs incurred specifically for a Federal award are allowable as a direct cost with the prior approval of the Federal awarding agency or pass-through entity. Section Selling and marketing costs Costs of selling and marketing any products or services of the non-federal entity (unless allowed under Advertising and public relations.) are unallowable, except as direct costs, with prior approval by the Federal awarding agency when necessary for the performance of the Federal award. Section Travel costs (a)...notwithstanding the provisions of General costs of government, travel costs of officials covered by that section are allowable with the prior written approval of the Federal awarding agency or pass-through entity when they are specifically related to the Federal award. Note: The prior approval provision is only for individuals whose costs are otherwise not allowable to Federal awards because they are included as part of the general cost of government 10 P a g e

11 (c)(2)travel costs for dependents are unallowable, except for travel of duration of six months or more with prior approval of the Federal awarding agency. Appendix III, Section C.5 - Negotiated Fixed Rates and Carry-Forward Provisions...Unrecovered amounts under lump-sum agreements or cost-sharing provisions of prior years must not be carried forward for consideration in the new rate negotiation. There must, however, be an advance understanding in each case between the institution and the cognizant agency for indirect costs as to whether these differences will be considered in the rate negotiation rather than making the determination after the differences are known. Further, institutions electing to use this carry-forward provision may not subsequently change without prior approval of the cognizant agency for indirect costs. Note: While not a prior approval requirement for a specific action or item of costs, the Uniform Guidance does provide the Federal Awarding or pass-through agency with the ability to impose additional prior approvals, as follows: Section Specific conditions (a)the Federal Awarding or pass-through agency may impose additional specific award conditions as needed [when risk assessment, non-compliance, performance issues, or general irresponsibility so dictates]... (b)these additional Federal award conditions may include... (6)Establishing additional prior approvals. Uniform Guidance Prior Approval Requirements not Applicable to ETA Grants Section Program income (e) (2) Addition. With prior approval of the Federal awarding agency, program income may be added to the Federal award by the Federal agency and the [IHE and non-profit research institutions]. The program income must be used for the purposes and under the conditions of the Federal award. NOTE: This prior approval requirement is not applicable to DOL grants since DOL requires grantees to account for program income on the addition basis. 11 P a g e

12 Section Exchange rates (b)the non-federal entity is required to make reviews of local currency gains to determine the need for additional federal funding before the expiration date of the Federal award. Subsequent adjustments for currency increases may be allowable only when the non-federal entity provides the Federal awarding agency with adequate source documentation from a commonly used source in effect at the time the expense was made, and to the extent that sufficient Federal funds are available. NOTE: Exchange rates are not applicable because ETA grants do not have foreign operations. Section Taxes (including Value Added Tax) (c)value Added Tax (VAT)... Foreign tax refunds or applicable credits under Federal awards refer to receipts, or reduction of expenditures, which operate to offset or reduce expense items that are allocable to Federal awards as direct or indirect costs. To the extent that such credits accrued or received by the non-federal entity relate to allowable cost, these costs must be credited to the Federal awarding agency either as costs or cash refunds. If the costs are credited back to the Federal award, the non- Federal entity may reduce the Federal share of costs by the amount of the foreign tax reimbursement, or where Federal award has not expired, use the foreign government tax refund for approved activities under the Federal award with prior approval of the Federal awarding agency. NOTE: Foreign tax refunds are not applicable because ETA grants do not have foreign operations. 12 P a g e