The Uniform Grant Guidance: Background, Financial Management and Allowability Changes

1. The Uniform Grant Guidance: Background, Financial Management and Allowability Changes Presented by: Leigh Manasevit, Esq. lmanasevit@bruman.com Brustein & Manasevit, PLLC Fall Forum 2014

2. Reasons for the Change? • Simplicity • Consistency • Obama Executive Order on Regulatory Review • Increase Efficiency • Strengthen Oversight Brustein & Manasevit, PLLC

3. Who crafted the changes? • “COFAR” • Council on Financial Assistance Reform, and • Key Stakeholders • www.cfo.gov/cofar Brustein & Manasevit, PLLC

4. Who is covered? • All “nonfederal entities” expending federal awards Brustein & Manasevit, PLLC

5. What is included? • A-102: Administrative Rules - State/Local • Part 80 – EDGAR • A-110: Administrative Rules - Postsecondary and Nonprofits • Part 74 – EDGAR • A-87: Cost Rules - State/Local • A-21: Cost Rules - Postsecondary • A-122: Cost Rules - Nonprofits • A-133: Audit Rules Brustein & Manasevit, PLLC

6. Key Dates: Brustein & Manasevit, PLLC

7. Date of Applicability of Revised Rules • Guidance applies to all new awards and incremental funding made on or after 12/26/2014 • OMB stated on 12/20/13 All additions after December 26, 2014 ? ? ? Brustein & Manasevit, PLLC

8. COFAR Updates – FAQs - August 29, 2014 • Applies to new federal awards if a federal awarding agency considers its incremental funding actions to be opportunities to change terms and conditions of previously made awards. • Federal awarding agencies may apply the Uniform Guidance to the entire Federal awards that is uncommitted or unobligated as of the Federal award date or first increment after 12/26/14. Brustein & Manasevit, PLLC

9. COFAR Updates – FAQs - August 29, 2014 (cont.) • What about subawards? • The effective date is the same as the effective date of the Federal award from which the subaward is made. • Does not matter when the subaward is made – but the original Federal award from the Federal awarding agency. • There Is a Procurement “Grace Period” of 1 year. Brustein & Manasevit, PLLC

10. Inconsistency Between Program Statute and Guidance • If federal program statute differs from Uniform Grant Guidance, then statute/regulation governs. Brustein & Manasevit, PLLC

11. A Significant Change • Shift from focus on compliance to focus on PERFORMANCE!!! Brustein & Manasevit, PLLC

12. Performance • Auditors (A-133 + Federal OIG) and Monitors (Federal and State Pass-Through) must look more to “outcomes” than to “process” Brustein & Manasevit, PLLC

13. Most Significant Change ??? • The Uniform Grant Guidance has a MAJOR emphasis on “strengthening accountability” by improving policies that protect against waste, fraud and abuse Brustein & Manasevit, PLLC

14. New: Required Certifications 200.415 • NEW:Official authorized to legally bind the non-federal entity must certify on annual and final fiscal reports or vouchers requesting payment: • “By signing this report, I certify to the best of my knowledge and belief that the report is true, complete and accurate and the expenditures, disbursements and cash receipts are for the purposes and objectives set forth in the terms and conditions of the federal award. I am aware that any false, fictitious, or fraudulent information or the omission of any material fact, may subject me to criminal, civil or administrative penalties for fraud, false statements, false claims, or otherwise.” Brustein & Manasevit, PLLC

15. 2 CFR Part 200 Structure of Uniform Grant Guidance (p. 78608) Brustein & Manasevit, PLLC

16. Uniform Grant Guidance Sections (p. 78608) • Subpart A – Definitions • Subpart B – General Provisions • Subpart C – Pre Award Requirements • Subpart D – Post Award Requirements • Subpart E – Cost Principles • Subpart F – Audit Requirements Brustein & Manasevit, PLLC

17. Key Definitions (Examples) • Cognizant Agency for Audit 200.18 (78611) • Cognizant Agency for Indirect 200.19 (78611) • Cooperative Audit Resolution 200.25 (78612) • Improper Payment 200.53 (78614) • Internal Control Over Compliance 200.62 (78615) • Major Program 200.65 (78615) • Modified Total Direct Cost 200.68 (78615) • Non-Federal Entity 200.69 (78615) Brustein & Manasevit, PLLC

18. 200.302(b) (NEW) Identification of Awards Financial Reporting Accounting Records (Source Docs) Internal Control Budget Control (NEW) Written Cash Management Procedures (NEW) Written Allowability Procedures Financial Management Changes Brustein & Manasevit, PLLC

19. Identification of Awards (New) • All federal “awards” received and expended • The name of the federal “program” • Identification of award • CFDA Title and Number • Federal Award I.D. # • Fiscal Year of Award • Federal Agency • Pass-Through (If S/A) Brustein & Manasevit, PLLC

20. Financial Reporting New shift to OMB approved performance metrics Brustein & Manasevit, PLLC

21. Financial Reporting (cont.) • Accurate, current, complete disclosure of financial results of each award • (Old) in accord with the financial reporting reqs of the grant • (New) in accord with 200.327 and 200.328 • 200.327 – Federal awarding agency can only collect OMB approved data elements, no less than annually, no more than quarterly • 200.328 – Non-federal entity must submit performance reports at intervals required by federal agency or pass-through. • Annual performance reports due 90 days after reporting period; Quarterly performance reports due 30 days after reporting period Brustein & Manasevit, PLLC

22. Financial Reporting (cont.) Performance Metrics: • Compare actual accomplishments to objectives (quantify to extent possible) • Reasons goals were not met if appropriate • Additional pertinent information (e.g., analysis and explanation of cost overruns, high unit costs) Brustein & Manasevit, PLLC

23. Financial Reporting (cont.) • OMB Allows ED to waive “performance metrics” not required. • How will ED reconcile performance metrics with accountability/performance indicators of ESEA, IDEA, CTE, AEFLA Brustein & Manasevit, PLLC

24. Accounting Records (Source Documentation) Combines current requirements: • Source Documentation Must Be Kept On: • Federal Awards • Authorizations • Obligations • Unobligated balances • Assets • Expenditures • Income • Interest (New) (Eliminated liabilities) Brustein & Manasevit, PLLC

25. Internal Controls Essentially same as current requirements: • Effective control over and accountability for: • All funds • Property • Other assets • Must adequately safeguard all assets • Use assets solely for authorized purpose Brustein & Manasevit, PLLC

26. Internal Controls (cont.) • Cross reference 200.303 (New) • Internal Controls must ensure compliance with federal statutes, regs, terms of the award • Entities must: • Evaluate and monitor compliance; • Take prompt action when instances of noncompliance are identified; and • Safeguard protected personally identifiable information (PII) Brustein & Manasevit, PLLC

27. Budget Control • Same as current rules • Comparison of expenditures with budget amounts for each award Brustein & Manasevit, PLLC

28. Written Cash Management Procedures (New) • Written Procedures to implement the requirements of 200.305 Brustein & Manasevit, PLLC

29. Written Cash Management Procedures (cont.) • For states, payments are governed by Treasury – State CMIA agreements 31 CFR Part 205 • No Change • For all other non-federal entities, payments methods must minimize time elapsing between draw from G-5 and disbursement (not obligation) Brustein & Manasevit, PLLC

30. Written Cash Management Procedures (cont.) • Written procedures must describe whether non-federal entity uses: • Advance Payments (preferred) • Limited to minimum amounts needed to meet immediate cash needs • Reimbursement • Pass-through must make payment within 30 calendar days after receipt of the billing • Working Capital Advance • The pass-through determines that the non-federal entity lacks sufficient working capital Allows advance payment to cover estimated disbursement needs for initial period Brustein & Manasevit, PLLC

31. Written Cash Management Procedures (cont.) • Advances must be maintained in insured accounts • Pass-through cannot require separate depository accounts • Accounts must be interest bearing unless: • Aggregate federal awards under $120,000 • Account not expected to earn in excess of $500 per year • Bank require minimum balance so high, that such account not feasible Brustein & Manasevit, PLLC

32. Written Cash Management Procedures (cont.) • Interest earned must be remitted annually to HHS • Interest amounts up to $500 may be retained by non-federal entity for administrative purposes • Currently $250 for IHEs and NonProfits and $100 for State and local governments Brustein & Manasevit, PLLC

33. Written Allowability Procedures (New) • Written procedures for determining allowability of costs in accord with Subpart E – Cost Principles (see p. 78639 – 78662) Brustein & Manasevit, PLLC

34. Factors Affecting Allowability of Costs 200.403 All Costs Must Be: • Necessary, Reasonable and Allocable • Conform with federal law & grant terms • Consistent with state and local policies • Consistently treated • In accordance with GAAP • Not included as match • Net of applicable credits (moved to 200.406) • Adequately documented Brustein & Manasevit, PLLC

35. Applicable Credits 200.406 • Those receipts or reduction-of-expenditure type transaction that offset or reduce expense items – must be credited to the Federal award as either cost reduction or cash refund, as appropriate. • Examples: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, adjustments of overpayments Brustein & Manasevit, PLLC

36. Profit 200.400(g) Non-federal entities may not earn or keep any profit resulting from federal financial assistance, unless expressly authorized by the terms and conditions of the federal award. Brustein & Manasevit, PLLC

37. Prior Written Approval 200.407 • NEW: In order to avoid subsequent disallowance: • Non-federal entity may seek prior written approval of cognizant agency (for indirect cost rate) or Federal awarding agency in advance of the incurrence of special or unusual costs Brustein & Manasevit, PLLC

38. Program Income 200.307 • Non-Federal entities are encouraged to earn income to defray program costs where appropriate. • Costs of generating program income may only be deducted if: • Authorized by federal regulations or the federal award; • Costs are incidental and not charged to the federal award. • Property from the sale of real property or equipment is not program income – apply post award property rules. • NEW: Program Income Must Be Deducted from Total Allowable Costs • With prior approval may dd to Federal Award. Brustein & Manasevit, PLLC

39. Direct v. Indirect Costs 200.413 • NEW: Salaries of administrative and clerical staff should be treated as “indirect” unless all of following are met: • Such services are integral to the activity • Individuals can be specifically identified with the activity • Such costs are explicitly included in the budget • Costs not also recovered as indirect Brustein & Manasevit, PLLC

40. Contract vs. Grant 200.330 • No change from the current requirement. • Entities must clearly determine what is a subgrant and what is a contract. • Note the difference!! Brustein & Manasevit, PLLC

41. Selected Items of Cost The Uniform Grant Guidance has 55 specific items of cost! 200.420 Brustein & Manasevit, PLLC

42. Selected Items of Cost Examples • Alcohol 200.423 • Not allowable • Advertising/PR 200.421 (Clarified) • Allowable for programmatic purposes including: • Recruitment • Procurement of goods • Disposal of materials • Program outreach • Public relations (in limited circumstances) Brustein & Manasevit, PLLC

43. Selected Items of Cost (cont.) • Collections of Improper Payments 200.428 (New) • The costs incurred by the non-Federal entity to recover improper payments are allowable as either direct or indirect costs, as appropriate. Brustein & Manasevit, PLLC

44. Selected Items of Cost (cont.) • Entertainment Costs 200.438 (Clarified) • Cost of entertainment are unallowable • Amusement, Diversion, Social Activities • Except where costs might otherwise be considered programmatic and are authorized or have prior written approval of the federal awarding agency. • Fines, Penalties, Damages and other Settlements 200.441 • If related to violation, alleged violation or failure to comply with Federal, state, tribal, local or foreign law and regulations then unallowable. • Except with prior written approval of federal awarding agency. Brustein & Manasevit, PLLC

45. Selected Items of Cost (cont.) • Travel Costs 200.474 (Changed) • Prior rule: allowable with certain restrictions • Travel costs may be charged on actual, per diem, or mileage basis • Travel charges must be consistent with entity’s written travel reimbursement policies • Grantee must retain documentation that participation of individual in conference is necessary for the project • Travel costs must be reasonable and consistent with written travel policy/or follow GSA 48 CFR 31.205-46(a) Brustein & Manasevit, PLLC

46. Disclaimer This presentation is intended solely to provide general information and does not constitute legal advice or a legal service.  This presentation does not create a client-lawyer relationship with Brustein & Manasevit, PLLC and, therefore, carries none of the protections under the D.C. Rules of Professional Conduct.  Attendance at this presentation, a later review of any printed or electronic materials, or any follow-up questions or communications arising out of this presentation with any attorney at Brustein & Manasevit, PLLC does not create an attorney-client relationship with Brustein & Manasevit, PLLC.  You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances. Brustein & Manasevit, PLLC