Uniform Guidance Update

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National Head Start Association 44 th Annual Head Start Conference and Expo April 7 10, 2017 Nashville, TN Hyatt Regency Chicago Uniform Guidance Update Sunday, April 9, 2017 4:00 pm 5:00 pm

1 National Head Start Association 44 th Annual Head Start Conference and Expo April 7 10, 2017 Nashville, TN Hyatt Regency Chicago Uniform Guidance Update Sunday, April 9, :00 pm 5:00 pm Presented by: Denes L. Tobie, CPA, Partner NONPROFIT AND GOVERNMENT PRACTICE Reproduction or use of any training materials in this manual, except within a participant s agency without express written permission is prohibited by copyright law.

Uniform Guidance Update Trainer: Denes L.

that these materials are incomplete without the

These materials are informational and educational in

These materials are for the purchasing agency s use only

2 Uniform Guidance Update Trainer: Denes L. Tobie, CPA, Partner 1 Materials/Disclaimer Please note that these materials are incomplete without the accompanying oral comments by the trainer(s). These materials are informational and educational in nature and represent the speakers' own views. These materials are for the purchasing agency s use only and not for distribution outside of the agency or publishing on a public website. 2 Uniform Guidance Update 1

Who needs to be involved? How will you document changes, train staff & implement?

3 Outcomes Explore the new regulations: Similarities and differences from the current regulations Your next steps: What must change for your organization? Who needs to be involved? How will you document changes, train staff & implement? 3 Agenda Why the Changes Structure of 2 CFR Part 200 What s Changed 4 Uniform Guidance Update 2

4 2 CFR Part 200 Administrative Requirements: A-110 Higher Ed, Hosp. and NPOs Common Rule (A-102) UofG Cost Principles: A-21 Higher Ed A-87 UofG A-122 NPOs Single Audit Requirements: A-133 & A-50 Data Collection Requirements: A-89 Pending Further Review Cost principles for Hosp. & 45 CFR Part 74 Appendix E The new guidance streamlines the language from 8 existing OMB circulars into 1 document 5 Major Policy Reforms Eliminate Duplicative & Conflicting Guidance Limit Allowable Costs. Make Best Use of Federal Resources Reducing Administrative Burden and Waste, Fraud, and Abuse Focus on Performance over Compliance for Accountability Provide Consistent & Transparent Treatment of Costs Encourage Efficient Use of I.T. & Shared Services 6 Uniform Guidance Update 3

Major Policy Reforms Set Standard Business Processes Using Data

Reducing Administrative Burden and Waste, Fraud, and Abuse Encourage

Oversight 7 Table of Contents Subpart A (200.

5 Major Policy Reforms Set Standard Business Processes Using Data Definitions Target Audit Requirements on Risk of Waste, Fraud, & Abuse Reducing Administrative Burden and Waste, Fraud, and Abuse Encourage Non-Federal Entities to Have Family- Friendly Policies Strengthening Oversight 7 Table of Contents Subpart A ( ) Acronyms & Definitions Subpart B ( ) General Provisions Subpart C ( ) Pre Federal Award Requirements Subpart D ( ) Post Federal Awards Requirements Subpart E ( ) Cost Principles Subpart F ( ) Audit 8 Uniform Guidance Update 4

6 Subpart A. Acronyms and Definitions Definitions Combines definitions from all prior circulars. Examples: Computing devices & 23 Contract and Contractor Internal controls Micro-purchase Personally Identifiable Information Protected PII 45 CFR Part Uniform Guidance Update 5

7 Subpart B. General Provisions Purpose Uniform administrative requirements, cost principles and audit requirements Federal awarding agencies must not impose additional or inconsistent requirements 12 Uniform Guidance Update 6

8 Applicability (b)(1) Non-Federal entities must comply with requirements regardless of whether the entity is a recipient or subrecipient Note: Must means required. Should means recommended or best practice. Both terms are used in the Guidance. From OMB webinar, January 27, 2014, and FAQ s issued November Effect on other issuances All administrative requirements, program manuals, handbooks and other non-regulatory materials must be superseded upon implementation of this Part 14 Uniform Guidance Update 7

9 &.110 Review & Effective Date Review Date OMB will review this part at least every 5 years after 12/26/2013 Effective Date Federal awarding agencies must implement effective 12/26/2014 Audit requirements effective for fiscal years beginning after 12/26/2014 Non-Federal entities may delay implementation of procurement standards for 2 fiscal years 15 Subpart C. Pre-Federal Award Requirements and Contents of Federal Awards 16 Uniform Guidance Update 8

10 Federal awarding agency review of risk posed by applicants (c) (1) Financial stability (2) Quality of management systems (3) History of performance (4) Reports and findings from audits (5) Ability to effectively implement requirements 17 Subpart D. Post-Federal Award Requirements 18 Uniform Guidance Update 9

200.301 Performance measurement Relate financial data to performance accomplishments Provide cost information to demonstrate cost effective practices

303 Internal controls Non-Federal entity must: (a) Establish internal controls (should comply with COSO)* (b) Comply with federal statutes, regulations, and

11 Performance measurement Relate financial data to performance accomplishments Provide cost information to demonstrate cost effective practices Awarding agency to provide clear performance goals, indicators and milestones Internal controls Non-Federal entity must: (a) Establish internal controls (should comply with COSO)* (b) Comply with federal statutes, regulations, and terms & conditions (c) Evaluate & monitor compliance (d) Take prompt action for noncompliance (e) Take reasonable measures to safeguard PPII * Committee of Sponsoring Organizations of the Treadway Commission 20 Uniform Guidance Update 10

200.305 Payment (b) (8) Interest-bearing accounts are required for advance payments (9) NEW Can keep up to $500 in

306 Cost sharing or matching (b) (1) Verifiable from records (2) Not match for other Federal awards (3) Necessary

12 Payment (b) (8) Interest-bearing accounts are required for advance payments (9) NEW Can keep up to $500 in interest. Return excess to PMS Cost sharing or matching (b) (1) Verifiable from records (2) Not match for other Federal awards (3) Necessary and reasonable (4) Allowable under cost principles (5) Not Federal funds unless allowed by statute (6) In the approved budget (7) Conform to other provisions as applicable 22 Uniform Guidance Update 11

200.313 Equipment (e) Disposition (1) NEW FMV $5,000 or less, prior approval not needed to dispose of and no further obligation to the awarding agency (2) FMV greater than $5,000, must ask for

13 Equipment (e) Disposition (1) NEW FMV $5,000 or less, prior approval not needed to dispose of and no further obligation to the awarding agency (2) FMV greater than $5,000, must ask for instructions No response in 120 days, may keep or sell but must pay awarding agency its share of proceeds of FMV Non-Federal entity may keep $500 of proceeds 45 CFR Part Supplies (a) NEW Supplies includes computing devices costing less than $5,000 Residual value greater than $5,000 at completion of project, use in other Federal programs; or compensate awarding agency and use for other purposes 45 CFR Part Uniform Guidance Update 12

14 Subpart D. Post-Federal Award Requirements General procurement standards (a) Must use its own documented procurement procedures which reflect applicable laws and regulations (c) (1)Must maintain written standards of conduct covering conflicts of interest ***NOTE*** A grace period will be granted for two full fiscal years after the effective date of the Uniform Guidance. This applies only to procurement. 45 CFR Part General procurement standards (d) Avoid purchasing unnecessary or duplicative items. Lease vs. purchase analysis where appropriate (e) Encouraged to enter into state and local intergovernmental or inter-entity agreements NEW for nonprofits (f) Encouraged to use Federal excess and surplus property NEW for nonprofits 45 CFR Part Uniform Guidance Update 13

200.319 Competition (a) Full and open competition (b) NEW No geographic preferences unless

NEW Pre-qualified contractors: Must ensure lists are current and include enough qualified

15 Competition (a) Full and open competition (b) NEW No geographic preferences unless mandated by statute (c) Must have written procedures; name brands used only as a description (d) NEW Pre-qualified contractors: Must ensure lists are current and include enough qualified sources to ensure competition 45 CFR Part FAQs from COFAR August Uniform Guidance Update 14

16 Methods of procurement to be followed (a) NEW Micro-purchase: Aggregate dollar amount per purchase < $3,000 Distribute equitably among qualified suppliers, to the extent practical May be awarded without competitive quotes if price is reasonable (b) Small purchase procedures: Up to $150,000 - Simplified Acquisition Threshold (SAT) Relatively simple and informal Competition is required from adequate number of qualified sources. 45 CFR Part Methods of procurement to be followed Greater than $150,000 (SAT), use sealed bids or competitive proposals (c) Sealed bids: The award will be made on the basis of price and other priced-related factors, and It is not necessary to conduct discussions with the responding offerors about their bids (c) Competitive proposals: Used when conditions not appropriate for sealed bids. Contract awarded to proposer most advantageous to the program, with price and other factors considered 45 CFR Part Uniform Guidance Update 15

17 Methods of procurement to be followed (f) Noncompetitive proposals. Solicitation from only 1 source (sole source). Use in following circumstances: (1) Item is available only from a single source; (2) Emergency will not permit a delay resulting from a competitive solicitation; (3) Federal awarding or pass-through agency expressly authorizes noncompetitive proposal in response to a written request; or (4) After solicitation, competition is determined inadequate (only 1 proposer) 45 CFR Part Contracting with small and minority businesses, women s business enterprises, and labor surplus area firms * (NEW). (a) Non-federal entities must take all necessary affirmative steps to assure minority businesses, women s business enterprises and labor surplus area firms are used when possible * Note: A labor surplus area is designated by the Dept. of Labor. 45 CFR Part Uniform Guidance Update 16

18 Contract cost and price (a) NEW For procurements over the Simplified Acquisition Threshold, must perform a cost or price analysis before receiving bids or proposals (b) NEW Must negotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed Note: COFAR has clarified this to apply only for procurement greater than the SAT. (FAQs, September 2015) 45 CFR Part Requirements for pass-through entities (a) List of required information for every subaward, including: 1. Federal Award Identification (13 items required to be disclosed) 2. All requirements, regulations and terms/conditions of the award 3. Any additional requirements imposed by pass-thru entity 4. NEW An approved federally recognized indirect cost rate negotiated between the subrecipient and the Federal government or, if no such rate exists, either a rate negotiated between the pass-through entity and the subrecipient, or a de minimis indirect cost rate of 10% of MTDC 5. Must allow access to records 6. Terms and conditions of closeout 45 CFR Part Uniform Guidance Update 17

200.335 NEW Methods for collection, transmission and storage of information Should collect, transmit and store award-related information in open and machine-readable formats rather than paper No need

19 NEW Methods for collection, transmission and storage of information Should collect, transmit and store award-related information in open and machine-readable formats rather than paper No need to print electronic records Can scan paper records if there are quality controls, the electronic records can t be changed and are readable 45 CFR Part Subpart E. Cost Principles General Provisions 36 Uniform Guidance Update 18

20 Prior Written Approval Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or nonallocability, the non-federal entity may seek the prior written approval of the cost. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required (a) (y) list of sections in 2 CFR Part 200 requiring prior approval Direct Costs (a) Direct costs are those that can be easily and accurately assigned to a specific award (c) NEW Salaries of administrative and clerical staff should normally be treated as indirect. Direct charge only if all of the following are met: (1)Integral to the project, (2)Specifically identified with the project, (3)Explicitly included in the budget or have prior written approval and, (4)Not recovered as indirect. 38 Uniform Guidance Update 19

21 Indirect Costs (f) NEW Any non-federal entity that has never negotiated an IDCR may elect to charge a de minimis rate of 10% of modified total direct costs (MTDC) which may be used indefinitely Indirect Costs (g) NEW Any non-federal entity that has a federally negotiated indirect cost rate may apply for a onetime extension of the current negotiated indirect cost rate for a period of up to 4 years Must be approved by a cost negotiator If approved, may not request a rate review until the extension ends At end of extension, must apply for a new rate 40 Uniform Guidance Update 20

22 Compensation personal services (i) NEW Standards for Documentation of Personnel Services (1) Records accurately reflect work performed (i) Supported by a system of internal controls that assures charges are accurate, allowable and properly allocated (ii) Part of official records of the entity (iii) Reflect total activity (iv) Include Federal and non-federal activities (v) Comply with accounting policies (vii)support distribution to two or more activities or cost objectives Compensation personal services (i) NEW Standards for Documentation of Personnel Services (1) Records accurately reflect work performed (cont.) (vii) Budget estimates alone cannot be used as support for charges but may be used for interim accounting purposes (A) Must be reasonable approximations (B) Significant changes must be entered in a timely manner (C) Internal control system includes review of after-thefact charges and adjustments made so the final amount charged is accurate, allowable and properly allocated 42 Uniform Guidance Update 21

23 Compensation personal services (i) NEW Standards for Documentation of Personnel Services (cont.) (7) Approved blended funding may use a performancebased measure. Must be approved by all funding sources Examples of performance-based measures: child or client counts (8) Entities who cannot meet these standards may be required by the Federal government to maintain personnel activity reports (PARs) Compensation personal services While many non-federal entities may still find that existing procedures in place such as personal activity reports and similar documentation are the best method for them to meet the internal control requirements, this final guidance does not specifically require them. The focus in this final guidance on overall internal controls mitigates the risk that a non-federal entity or their auditor will focus solely on prescribed procedures such as reports, certifications, or certification time periods which alone may be ineffective in assuring full accountability. from Comments to the Regulations 44 Uniform Guidance Update 22

24 Conferences Definition: meeting, retreat, seminar, symposium, workshop or event to disseminate technical information beyond the non-federal entity Allowable costs (appropriate, reasonable and necessary) paid by the host: Facility Speaker fees Meals and refreshments Local transportation Cost of identifying but not providing dependent care resources Contingency provisions (b) May be budgeted for foreseeable events (construction cost, IT systems) (c) Payments to contingency reserves are unallowable (cannot draw funds unless you have incurred an actual expense for an event you have budgeted) 46 Uniform Guidance Update 23

25 Depreciation (d) (4) NEW No depreciation allowed on assets that have outlived their useful lives No use allowance NEW If use allowance was taken on an asset not fully depreciated, you may convert to depreciation but total of both depreciation and use allowance may not exceed cost of the asset Employee health & welfare costs (a) Costs in accordance with documented policies for improvement of working conditions, employeremployee relations, health and performance are allowable NEW Costs for improvement of morale specifically excluded 48 Uniform Guidance Update 24

200.439 Equipment / other capital expenditures (b) Costs of equipment, buildings and land are allowable with prior written approval 49 200.

26 Equipment / other capital expenditures (b) Costs of equipment, buildings and land are allowable with prior written approval Fund raising and investment management costs (a) Costs of fund raising including financial campaigns, solicitation of gifts, etc., are unallowable NEW Fund raising costs for the purposes of meeting federal program objectives are allowable with prior written approval 50 Uniform Guidance Update 25

27 Proposal costs Proposal costs are the costs of preparing bids, proposals, or applications on potential Federal and non- Federal awards or projects. Costs incurred in the current year of both successful and unsuccessful proposals normally should be treated as indirect (F&A) costs and allocated currently to all activities. No proposal costs of past accounting periods will be allocable to the current period Travel costs (c) (1)Temporary dependent care costs resulting from travel to conferences are allowable provided that: (i) Costs are a direct result of travel; (ii) Costs are consistent with the travel policy; and (iii) Costs are temporary during the travel period 52 Uniform Guidance Update 26

Subpart F. Audit Requirements 53 200.501 Audit Requirements (a) Audit required.

28 Subpart F. Audit Requirements Audit Requirements (a) Audit required. A non-federal entity that expends $750,000 (NEW) or more during the non-federal entity's fiscal year in Federal awards must have a single or program-specific audit 54 Uniform Guidance Update 27

29 Audit Findings (3) Known or likely known questioned costs that are greater than $25,000 (NEW) for a type of compliance requirement for a major program (4) Known questioned costs that are greater than $25,000 (NEW) for a Federal program which is not audited as a major program, if the auditor becomes aware of questioned costs for such a program (6) Known or likely (NEW) fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards 55 Top 10 Changes 1 Cost allocation options 2 PARs 3 Procurement 4 Computers as supplies 5 Recognition of electronic media 6 Audit threshold changes 7 Family friendly policies 8 Internal controls focus in admin requirements 9 Fund raising to support program 10 No employee morale 56 Uniform Guidance Update 28

Summary and Next Steps Learn what new regulations and changes from the current regulations will impact your agency Develop a plan to implement the necessary changes Educate others in your

30 Summary and Next Steps Learn what new regulations and changes from the current regulations will impact your agency Develop a plan to implement the necessary changes Educate others in your organization on the changes and include them in the planning process Watch for guidance from your funding sources 57 Connect with me: Bring Wipfli to You: Tammy T. Jelinek tjelinek@wipfli.com My Wipfli Access to our experts: Regulation questions Audit Process Human Resource Technology Leadership 58 Uniform Guidance Update 29

Do You Get Federal Funds? Find out What s Changing with Uniform Guidance

Do You Get Federal Funds? Find out What s Changing with Uniform Guidance Minnesota Council of Nonprofits 2015 MCN Annual Conference October 1 2, 2015 St. Paul, MN St. Paul RiverCentre Find out What s Changing with Uniform Guidance Thursday, October 1, 2015 3:45 pm 5:00 pm Presented