VGFOA Spring Conference

Transcription

1 VGFOA Spring Conference Impact of the New Uniform Guidance on Cost Allocation Plans Nelson Clugston and Jason Jennings May 5,

2 Overview and Key Points Culmination of years of collaboration Streamline grants administration Eight (8) Federal Regulations + over 20 years of prior history of discussions with OMB Goal (1): Eliminate duplicate and conflicting provisions Goal (2): Reduce administrative burden Some recipients will have more new requirements than others 2

3 Eight Factors to Be Aware of in Uniform Guidance 1. OMB Circulars merged into Title 2 of the CFR 2. Personal Services Documentation - #1 audit finding 3. Provides for consistent treatment of cost 4. Limited departures from approved indirect cost rates 5. 10% de Minimis indirect cost rate 6. One time extension of IDC rate for up to 4 years 7. Sets standard business processes using data definitions 8. Encourages effective, modern operating environment for IT and Shared Services as well as family-friendly policies Caveat: You get what you are looking for. 3

4 Cost Principles - Subpart E Significant Changes 4

5 Overview of the Significant Changes What MAXIMUS will cover today Section Prior written approval required Section Indirect Cost Rates Section Collections of Improper Payments Section Compensation of Personal Services and Fringe Benefits Section Depreciation & Interest Section Idle Facilities/Capacity Section Audit Costs 5

6 Section Prior written approval required This is the first time the Feds actually listed the items that require prior approval. These are examples germane to you Direct charging administrative costs Compensation-fringe benefits (i) mass severance 3. Equipment and other capital expenditures Insurance and indemnification (b) (2) insuring Federal government property 5. Travel costs for officials included in General cost of government section

7 Section Indirect Cost Rates 1. Federal acceptance of approved IDC s 2. New de Minimis rate - 10% of MTDC 3. One time extension of rate - up to 4 years 4. Negotiated rates must be allowed with pass-through entities 7

8 Section Collections of Improper Payments The costs incurred by a non-federal entity to recover improper payments are allowable as either direct or indirect costs, as appropriate. 8

9 Section Compensation of Personal Services and Fringe Benefits 1. Maintain high standards of internal controls for records used to document salaries charged to federal programs 2. Must be based on records that accurately reflect the work performed. 3. Federal agencies can approve alternative methods 9

10 Section Compensation of Personal Services and Fringe Benefits Section Compensation-fringe benefits (g) Pension Plan Costs. Pension plan costs which are incurred in accordance with the established policies of the non-federal entity are allowable, provided that: 1. Such policies meet the test of reasonableness. 2. The methods of cost allocation are not discriminatory. 3. For entities using accrual based accounting, the cost assigned to each fiscal year is determined in accordance with GAAP. 4. The costs assigned to a given fiscal year are funded for all plan participants within six months after the end of that year. However, increases to normal and past service pension costs caused by a delay in funding the actuarial liability beyond 30 calendar days after each quarter of the year to which such costs are assignable are unallowable. Non-Federal entity may elect to follow the Cost Accounting Standard for Composition and Measurement of Pension Costs (48 CFR ). 10

11 Section Compensation of Personal Services and Fringe Benefits (cont.) (iv) When a non-federal entity converts to an acceptable actuarial cost method, as defined by GAAP, and funds pension costs in accordance with this method, the unfunded liability at the time of conversion is allowable if amortized over a period of years in accordance with GAAP. 11

12 Section Depreciation & Interest 1. Must use asset depreciation not use allowance 2. Allows for reimbursement of financing costs associated with patents and computer software for interest on assets purchased after January 1, Capitalization of assets must be in accordance with GAAP 12

13 Section Idle Facilities/Capacity 1. Allows for the costs of idle facilities when they occur due to fluctuations in workload shared services 2. Costs must be reasonable and allocated to all benefiting programs 13

14 Section Audit Costs 1. Internal audit costs are allowable when they support, or are related to, the Single Audit Process 2. Legislative audit costs, which are generally requested by the State and not related to the Single Audit process, are not allowable 3. Performance Auditing is not allowable 14

15 When Must You Implement Cost Principles? Section Federal agencies must implement the policies and procedures applicable to Federal awards by promulgating a regulation to be effective by December 26, 2014 unless different provisions are required by statute or approved by OMB. COFAR answers are vague on required implementation date. HHS Cost Allocation Services (CAS) interpretation is all changes must be implemented with FY 16 actual plans. 15

16 Summary and Recommendations Study the new rules. The Uniform Guidance is the most expansive grant reform since the Single Audit Act of Make sure that your costs are reasonable and allowable - study the new items of costs. Relationships matter - Start the dialogue with your federal cognizant agency early on in the process. Work with your state and local agencies to develop the best strategy for meeting the new requirements. Work with your auditors and consultants to develop a Uniform Guidance readiness strategy. 16