Federal Issues, (SWCAP/Cost Principles Uniform Guidance)

Transcription

1 2019 NASC Annual Conference Federal Issues, (SWCAP/Cost Principles Uniform Guidance) March 22, 2018 Nelson Clugston, MAXIMUS Marcie Handy, UT 1 MORE RESPONSIBILITIES LESS DOLLARS When the Federal Government adopted the new Uniform Grant Guidance (UGG) back in 2015, state, local and postsecondary grant administrators were promised a dramatically simplified, consistent, and transparent set of rules to manage federal grant resources. So how has that worked out for you? With all these changes and new administrative burdens impacting federal grants, the only certainties here in Washington are less federal personnel to provide guidance, and less funding available at the state, local and postsecondary levels to carry out these grant responsibilities. 2

2 Agenda Pensions and GASB 68 Unused Leave Costs for Separating Employees Software Capitalization Auditor Costs Timely SWCAP Negotiation? Discussion and Questions 3 Services and Fringe Benefits 4

3 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 ). 5 Services and Fringe Benefits (cont.) (6)(ii) Pension costs calculated using an actuarial cost-based method recognized by GAAP are allowable for a given fiscal year if they are funded for that year within six months after the end of that year. Costs funded after the six month period (or a later period agreed to by the cognizant agency for indirect costs) are allowable in the year funded. The cognizant agency for indirect costs may agree to an extension of the six month period if an appropriate adjustment is made to compensate for the timing of the charges to the Federal Government and related Federal reimbursement and the non-federal entity's contribution to the pension fund. Adjustments may be made by cash refund or other equitable procedures to compensate the Federal Government for the time value of Federal reimbursements in excess of contributions to the pension fund. 6

4 Services and Fringe Benefits (cont.) HHS Agreements Language During our review of your central service cost allocation plan, it was disclosed that the State's actuarially determined pension contributions exceeded the Governmental Accounting Standards Board (GASB) Statement No. 68 calculated pension expense. However, 2 CFR (g)(3) only allows pension plan costs determined in accordance with GAAP (i.e., GASB 68). The Office of Management and Budget (OMB) is aware of the issue and is currently considering revising the regulations. Therefore, we reserve the right to make an adjustment to the billed pension costs to disallow the pension contributions in excess of the GASB 68 calculated pension expense, if OMB does not revise the regulation or issue an exception. 7 Services and Section Fringe Benefits (cont.) 8

5 Section Compensation ofpersonal Services and Section Fringe Benefits (cont.) Actual Contributions VS GASB 68 Pension Expense (expressed in thousands) Fiscal Year ARC Contributions GASB 68 Expense Over/(Under) 2015 $ $ $ $ $ $ $ $ ($13.054) 9 Services and Section Fringe Benefits (cont.) January CAS requires ARC contributions to be reported separately from GASB 68 pension expense for billed services (Federal (A-87) reconciliation worksheets). Utah used a separate fund for GASB 68 adjustments. Utah will need to answer the following for CAS: What is the total GASB 68 pension expense (FY2015)? What is the ARC amount (FY2015)? What is the total actual contribution (FY2015)? 10

6 Section Compensation ofpersonal Services and Section Fringe Benefits (cont.) Utah implemented GASB 75 (OPEB) in FY2017 The OPEB will also have the same consequences from the UG regulations as GASB 68 (pensions) Actual Contributions VS GASB 75 OPEB Expense (expressed in thousands) Fiscal Year 2017 ADC Contributions GASB 75 Expense Over/(Under) State Employee $ $8.609 $ Elected Official $1.388 $.806 $.582 Total $ $9.415 $ Services and Fringe Benefits Section Unused Leave Costs for Separating Employees Fringe Benefits and Indirect Costs ** Will the COFAR consider deleting the requirement in sections (b)(3)(i) and (e)(3) that fringe benefits be charged as indirect costs when the non-federal entity is using a cash basis of accounting? Yes. Based on the COFAR s recommendation, OMB issued a technical correction in December 2014 of the Uniform Guidance implementing regulations to delete the requirement that indirect costs be used to charge payments of unused leave, worker s compensation, unemployment compensation, severance pay, and similar employee benefits. 12

7 Services and Fringe Benefits (cont.) Section Unused Leave Costs for Separating Employees Charging Payments of Unused Leave to Employees Terminating or Retiring * In accordance with section (b)(3)(i), can the state, local and Indian Tribal governments using the cash basis of accounting with unfunded/unrecorded leave liabilities charge unused leave (payments to employees that retire or are terminated) directly to Federal programs? No. Charging all unused leave costs for separating employees in the same manner as it had charged the employees salary costs (i.e., directly to the activities on which the employees were working at the time of their separation) would result in inequitable distribution of the unused leave costs, because the leave costs were accumulated over the entire period of employment while working on various programs. 13 Services and Section Fringe Benefits (cont.) Utah uses 4 termination pools or funds to payout unused leave costs (except OPEB) Use a payroll rate charged against agencies budgets Operates on a pay-as-you-go (cash basis) Included in SWCAP for years (fringe benefit list) Recently began preparing Federal reconciliation worksheets Recently began using trust funds 14

8 Section Depreciation & Interest Equipment. Equipment means tangible personal property (including information technology systems) having a useful life of more than one year and a perunit acquisition cost which equals or exceeds the lesser of the capitalization level established by the non-federal entity for financial statement purposes, or $5, Information technology systems. Information technology systems means computing devices, ancillary equipment, software, firmware, and similar procedures, services (including support services), and related resources. See also Computing devices and Equipment 15 Section Depreciation & Interest Capital assets. Capital assets means tangible or intangible assets used in operations having a useful life of more than one year which are capitalized in accordance with GAAP. Capital assets include: (a) Land, buildings (facilities), equipment, and intellectual property (including software) whether acquired by purchase, construction, manufacture, lease-purchase, exchange, or through capital leases; Depreciation. (a) Depreciation is the method for allocating the cost of fixed assets to periods benefitting from asset use. The non-federal entity may be compensated for the use of its buildings, capital improvements, equipment, and software projects capitalized in accordance with GAAP, provided that they are used, needed in the non-federal entity's activities, and properly allocated to Federal awards. Such compensation must be made by computing depreciation. 16

9 Section Depreciation & Interest Utah s response to CAS: July 2017 COFAR (FAQs) : Clarifies that capitalization level of $5,000 applies to purchased software. Internally developed software must be capitalized in accordance with GAAP. GASBIG , question & 7.9.8: Clarifies that Statement 34 does not prescribe a minimum level for the capitalization of assets and different types of assets may have different capitalization thresholds. 17 Section Single Audit Costs 1. Internal audit costs are allowable when they support, or are related to, the Single Audit Process The costs must be appropriately allocated to an indirect cost pool 2. Legislative audit costs, which are generally requested by the legislature and not related to the Single Audit process, are not allowable 3. Performance Auditing is not allowable 18

10 Section Single Audit Costs Legislative Auditor (performance audits) Used to be included in our Section I SWCAP 19 SWCAP Issues Timely SWCAP Negotiation Does anyone get timely negotiation? Some states are 3 years late No pattern in who is timely who is not 20

11 SWCAP Issues Utah - Timely SWCAP Negotiation Appendix V to Part 200 F.2. Reviewed, negotiated, and approved timely. Reviewed within 6 months of receipt. Historically, able to submit SWCAP within 3 months of December 31 deadline. Always encouraged to submit subsequent SWCAP after previous SWCAP was approved. Last 2 years SWCAP has been delayed review process more complex (GASB 68, software issues, etc.) 21 DISCUSSION AND QUESTIONS 22