Tiffany R. Winters, Esq. Brustein & Manasevit, PLLC twinters@bruman.com @ TRWinters www.bruman.com

1. How the Proposed OMB Super-Circular Will Change the Administration of Federal Education Grants Tiffany R. Winters, Esq. Brustein & Manasevit, PLLC twinters@bruman.com @TRWinters www.bruman.com

2. Roadmap to the Future of Federal Grants Management: The “SuperCircular”

3. Why “Supercircular”??? • Greater simplicity • Greater consistency • Obama Executive Order on Regulatory Review – 2011 • Increase efficiency • Strengthen oversight

4. Greater “simplicity” means elimination of several compliance elements in the Compliance Supplement, including: • Equipment Management • MOE/Ear-Marking • Procurement • Program Income

5. What is covered? • Administrative Requirements (A-102, A-110) • Cost Principles (A-87, A-21, A-122) • Audit Requirements (A-133, A-50)

6. Who is covered? • All non-federal entities expending federal awards

7. When is it effective? • Notice of guidelines released on • Proposed guidelines were released on 2/1/13 • Comment period closed on 06/02/13 • Over 300 comments were submitted (some over 100 pages long) • Analysis of public comments • Final guidelines released? • OMB hopes this December • Final regulation? • Not likely before 1/1/14 (includes any other EDGAR revisions) • No splitting FY

8. Can a revised EDGAR be inconsistent with Supercircular? • Yes, but federal agencies applying more restrictive requirements need OMB approval Section _.108

9. If program statute differs from Supercircular, statute governs Section _.106

10. So what is new? …50 Shades of Change

11. Federal agencies must evaluate risks to the program posed by each applicant • Financial stability • Management system • History of performance • Generally available information • Single audits • Capacity to implement programs Section _.205

12. Agencies may impose conditions on grantee based on risk assessed Section _.205

13. Performance Expectations • Award includes: timing and scope of expected performance – as related to intended outcomes Section _.404

14. Subawarding Scope of Work • Eligible recipients may perform orsubawardthe performance of all or a portion of the work Section _.501(a)

15. Pass Through Entity: case by case determination whether pass-through funds are grant or contract Section _.501(b)

16. Pass Through Agency should consider imposing risk conditions on subrecipients in noncompliance Section _.501(c)(2)

17. Pass Through Agency may impose “supplemental requirements” Section _.501(c)(4)

18. Pass Through monitoring shall include: • Analyzing financial and programmatic reports • Ensure subrecipients take timely and appropriate corrective action • Issue management decision on A-133 finding at subgrantee level • Other – as necessary Section _.501(c)(5)

19. Monitoring Tools of Pass Through • On-site reviews • Provide training and technical assistance • Arrange for “Agreed Upon Procedures” Section _.501(c)(5)

20. Risk Factors for Pass Through Monitoring • Previous audits • New subrecipients • New personnel or substantially changed system • Extent of federal monitoring Section _.501(c)(6)

21. Pass Through must conform timing of federal award cash to awards to subgrantees Federal award year July 1 to September 30 (next year) Section _.501(e)(2)

22. Financial Management Systems • Section 502 essentially same as 80.20(b) • Accurate reporting • Records identifying source and use of funds • Effective internal controls to safeguard assets • Comparison of outlays and budgets • Cash management • Written procedures for allowability, allocability and reasonableness • Source documentation Section _.502

23. Cash Management • Recipients shall maintain advances of federal funds in interest bearing accounts unless… • Recipient receives less than $120,000 in federal $ per year • Interest will not exceed $500 • Bank requires minimum balance Section _.502(e)(3)(k)

24. Cash Management • Unrecovered indirect costs may be included as match only with approval of federal agency Section _.502(f)(2)

25. Cash Management • Calculation of match based on A-110, not A-102 • Clear rules on fair market value, etc. Section _.502(f)

26. Cash Management • General rule on program income “program income shall be deducted from total allowable costs” unless federal agency allows addition Section _.502(g)

27. Cash Management • Changes to Budget – • Scope, Objective • Key person changes • Absence of manager Section _.502(h)

28. Inventory Management 2 year inventory requirement remains • Equipment • Definition same • Acquisition cost of $5,000 • Useful life greater than one year Section _.503(d)

29. Inventory Management • Use/Management/Disposition • Same as EDGAR 80.32 Section _.503(d)

30. “Costs of Computing Devices” = “Supplies” But • When no longer needed for any other federally sponsored project, recipient may • Retain them • Sell them • But compensate federal government if per unit value exceeds $5000 But • Conflicts with C-31(6) “total aggregate value” of $5000 Section _.503(e) and Section _ .620

31. Procurement Management • States must follow same procurement rules it uses for procurements from nonfederal funds • All others must follow Section 504 Section _.504

32. Procurement Management • Section 504 Procurement Standards derived from A-110, EDGAR Part 74 and A-102, EDGAR Part 80 Section _.504(d)(4)

33. Record Retention Management • Same as EDGAR: 3 years from date of submission of final expenditure report but – 5 year S/L Section _.506

34. Cost Principles – Basic Considerations • Similar to A-87 but restructured to look more like A-21 and A-122 Section _.605

35. Cost Shifting • Grantee cannot shift cost from one award to another to overcome shortfall, unless costs are allowable under both awards Section _.607(c)

36. Cost Allocation • If a cost benefits two or more projects in a proportion easily determined, cost allocated on proportional benefit Section _.607(d)

37. Cost Allocation • If proportion cannot be easily determined, allocate on any reasonable documented basis Section _.607(d)

38. Set-Asides • If program statute contains reserves, limitations, amount not used cannot be charged to other federal awards Section _.611

39. Administrative Costs • Salaries of administrative and clerical staff should be treated as indirect, unless • Services are integral to project, and • Individuals can be specifically identified, and • Costs are explicitly set out in budget, and • Costs not recovered as indirect Section _.615(d)

40. Indirect Costs • A federally approved negotiated rate shall be accepted by all federal agencies • Exception: If required by law/regulation (restricted rate) Section _.616(c)(1)

41. Indirect Costs • Pass through entities must abide by the federally recognized indirect cost rate negotiated between the federal agency and subrecipient Section _.501(c)(1)(D)

42. Indirect Costs • But if no such rate exists, the pass through must negotiate the rate, or a de minimis indirect cost rate equal to 10% of total modified direct costs (But what about restricted rates? Most LEAs have restricted rates in single digits.) Section _.616(e)

43. Time and Effort Management Major Overhaul • Eliminate reference to PARs • Now “Certified Reports” • Reports may be electronic • Semi-Annual for single cost objective - same Section _.621 C-10(9)

44. Time and Effort Management • Certified Reports on 2 or more cost objectives certified by employee or individual responsible for verification Section _.621 C-10(9)

45. Time and Effort Management All others: • After the fact, unless mutually satisfactory alternative approved by awarding agency • Certification periods cannot exceed 12 months: • Activities may be expressed as percentages Section _.621 C-10(9)

46. Time and Effort Management • At postsecondary level, “reliance may be placed on estimates in which a degree of tolerance is appropriate” Section _.621 C-10(9)

47. Time and Effort Management • No additional support other than certification is necessary Section _.621 C-10(9)

48. Time and Effort Management • Substitute systems may be used if approved by cognizant agency • Federal agencies are encouraged to approve alternative proposals based on outcomes Section _.621 C-10(9)(F)

49. Time and Effort Management • Awarding agencies may approve “blended funding” where multiple programs involved, and “performance -oriented metrics” are used Section _.621 C-10(9)(F)

50. Cost Principles Changes • Costs for services of counsel (in-house or Bruman) for administrative proceedings (OALJ) may be charged unless the ALJ imposes a “monetary penalty.” Legal expenses are allowable if the proceeding is resolved by consent or compromise. Section _.621 C-14(2)