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Changes under the New EDGAR: Grants Administrative

Explore the major changes in the new EDGAR regulations for grants administration, including financial management, allowability, procurement, inventory, subrecipient monitoring, and audits. Learn from recent OIG findings and cases of embezzlement in educational and nonprofit organizations.

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Changes under the New EDGAR: Grants Administrative

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  1. Grants Administrative Changes under the New EDGAR Tiffany R. Winters, Esq. Bonnie Little Graham, Esq. Brustein & Manasevit, PLLC www.bruman.com February 2015

  2. Agenda • The Importance and Structure of the New EDGAR • Part 76 • Part 3474 • Part 200 • Major changes • Financial management • Allowability • Procurement • Inventory • Subrecipient monitoring • Audits

  3. Why are these rules important?

  4. Recent OIG FindingsSemiannual Reports No.68 and 69 Plano Independent School District (Texas) • Between 2004 and 2013, former manager and security and fire system security support specialist (and two coconspirators) set up two fake companies that were allegedly maintaining fire safety systems and security systems. • They generated fraudulent invoices and submitted them to district for payment. • The official used his position to approve the fraudulent invoices knowing that services and products were never provided or delivered. • They embezzled $2.5 Million

  5. Recent OIG Findings (cont.) Beaumont Independent School District (Texas) • Former finance director and comptroller had the authority to conduct wire transfers of district money without notifying anyone. They transferred over $4 Million in 18 separate wire transfers to bank accounts in their names and other accounts under their controls. • They were sentenced for stealing more than $4 Million.

  6. Recent OIG Findings (cont.) Shorewood School District (Wisconsin) • A former Shorewood School District administrative assistant was sentenced to prison for stealing more than $310,000 in Federal special education funds. • Over a 13-year period, the administrative assistant created bogus purchase orders to use school district funds for vacations and household items. • The woman was sentenced to serve a year and a day in prison and 2 years of supervised release, and she was ordered to pay more than $310,000 in restitution.

  7. Recent OIG Findings (cont.) Nonprofit Center for Independent Living (Florida) • The former executive director of the Center for Independent Living of Southwest Florida was sentenced to 39 years in prison for stealing more than $900,000 intended for the nonprofit center, which provided services to people with disabilities in a number of Florida counties. • The former official used the money to fund an extravagant lifestyle that included international travel. • The center closed in 2011 due to a lack of operational funds.

  8. Recent OIG Findings (cont.) Midwestern Intermediate Unit IV (Pennsylvania) • The former executive director pled guilty to program fraud. • During her tenure, the former executive director charged more than $71,000 on the agency’s American Express card on questionable purposes, including restaurant meals, DVD rentals, and department store purchases that she misrepresented were business-related, when in fact they were not.

  9. Recent OIG Findings (cont.) Nia Community Public Charter School (Washington, D.C.) • The cofounder and former executive director was sentenced to 9 months in prison and 3 years of supervised release, and she was ordered to pay more than $40,000 in restitution and forfeit about $29,000 for embezzlement. • From March 2008 through August 2008, the former official signed five checks totaling more than $29,000 on the charter school’s account for her own personal use. • After leaving the charter school, she was hired as an assistant director at the Cody Development Center in Virginia, where she was provided with a government purchase card for buying work-related items. She used the purchase card to buy nearly $12,000 in unauthorized gift cards.

  10. The New EDGAR

  11. Key Parts of the NEW EDGAR • Title 34 • Part 75 – Direct Grant Programs • Part 76 – State-Administered Programs • Part 77 – Definitions • Part 81 – General Education Provisions Act (GEPA) • Title 2 • Part 200 – Cost/Administrative/Audit Rules • Part 3474 – USDE Exceptions – Adopts Part 200 • Part 3485 – Nonprocurement Debarment and Suspension • Incorporates 2 CFR Part 180, OMB’s Guidelines on Debarment and Suspension

  12. Prior Rules (Incorporated Into the NEW EDGAR) • A-21 – Cost Rules – Rules – IHEs • A-87 – Cost Rules – State / Local Gov’t • A-122 – Cost Rules – Nonprofit • A-102 – Administrative Rules State / Local Gov’t • A-110 – Administrative Rules IHEs • A-133 – Audit Rules

  13. Effective Dates • December 26, 2014 – Direct Grants from ED • July 1, 2015 – State Administered Programs • July 1, 2016 – Procurement Rules (One Year Grace Period for IHEs and Nonprofits ONLY) • Indirect Cost Rates When Due For Renegotiation

  14. Part 76State-Administered Programs

  15. Allowable Costs76.530 (pg55) • The general principles to be used in determining costs applicable to grants is 2 CFR Part 200 Subpart E • Prohibited: • Use of funds for religion 76.532 • Real property and construction (unless authorized) 76.533

  16. Indirect Cost Rates76.560 – 76.569 (pg 56 – 58) Incorporates language from 2 CFR Part 200 Includes information on Restricted indirect cost rate and how to calculate the rate.

  17. General Administrative Responsibilities76.700 – 76.702 (pg63) Incorporates 2 CFR Part 200 Subpart D A State and subgrantee must comply with the State plan, applicable statutes, regulations, etc. A state and subgrantee shall use fiscal control and fund accounting procedures that insure proper disbursement of and accounting for federal funds.

  18. Cash Advance Payment Process Obligation Liquidation Drawdown Payment Obligation = Means orders placed for property and services, contracts and subawards made and similar transactions during a given period that require payment during the same or a future period. 200.71 (pg 104) Cash Management This would be switched in a Reimbursement Payment Process.

  19. When Obligations Are Made76.707 (pg 66)

  20. Formula Grants: Grantees and subgrantees may begin to obligate funds when: When the awarding agency approves application; or Awarding agency determines application is “substantially approvable” Reimbursement subject to final approval. Discretionary Grants: When subgrant is made. However, pre-agreement costs are permissible (reference to 2 CFR Part 200) When May Begin to Obligate76.708 (pg 66) 20

  21. Obligations During Carryover76.709 (pg 66) • Funds may be obligated during the carryover period of one additional fiscal year. • Tydings Amendment • Allows extra year to obligate funds • Does not apply to all grants • Under Tydings, funds are available for 24-27 months: • 12-15 months under the grant award (July 1, 2014 – September 30, 2015) • Plus 12 months (carryover period) (October 1, 2015 – September 30, 2016)

  22. Obligations During Carryover76.710 (pg67) • Carryover funds must be used in accordance with the Federal statute and regulation that apply and are in effect for the carryover period and any state plan or application required. 22

  23. Records76.730 (pg 68) • A State and subgrantee shall keep records that fully show: • The amount of funds; • How funds were used; • Total cost of the project; • Share of the cost provided from other sources; and • Other records to facilitate an effective audit. • References throughout new reporting requirements on financial management in 2 CFR 200.302 (performance reporting)

  24. Part 3474USDE Adoption and Exceptions

  25. USDEAdopts Part 200 with Exceptions3474.1 (pg 230) NEW: USDE Adopts Part 200 into EDGAR • Except for 2 CFR 200.102(a) and 2 CFR 200.207(a). Thus, this part gives regulatory effect to the OMB guidance and supplements the guidance as needed for the Department.

  26. USDEException to 200.102(a)3474.5 (pg 230) • Under Part 200 the authority for granting exceptions to regulations vested in OMB • But “Department of Education Organization Act” 20 U.S.C. 3472 does not permit Secretary to delegate “exceptions” to OMB. • Therefore, Secretary will consult within OMB. • In the interest of maximum uniformity, exceptions from the requirements of this part will be permitted only in unusual circumstances.

  27. USDE Exception to 200.2073474.10 (pg 230) Clarification regarding 2 CFR 200.207. • Retained “High-Risk” Language • Previously Under 74.14 and 80.12 • The Secretary or a pass-through entity may, in appropriate circumstances, designate the specific conditions established under 2 CFR 200.207 as “high-risk conditions” and designate a non-Federal entity subject to specific conditions established under §200.207 as “high-risk”.

  28. Part 200Uniform Administrative Req, Cost Principles, and Audits for Federal Awards Formerly know as the “Uniform Grants Guidance”, the “Omni Circular” and the “Super Circular”

  29. The New 2 CFR Part 200(pg 92-94) • 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

  30. The Major Changes in Federal Grants Management • Focus on Outcomes • Performance Metrics • Risk Assessments • Financial Management Policies • Equipment Use • Micro Purchases • Corrective Action • Family Friendly Policies • False Claims Certifications • Audit Thresholds

  31. Major Changes (cont.) Part 200 has a MAJOR emphasis on strengthening accountability by improving policies that protect against waste, fraud and abuse

  32. Financial Management Controls

  33. Financial Management Rules200.302(b) (pg 118) Prior Rule 80.20(b) 2 CFR 200.302 (b) Identification of Awards (NEW) Financial Reporting Accounting Records (Source Docs) Internal Control Budget Control Written Cash Management Procedures (NEW) Written Allowability Procedures (NEW) • Financial Reporting • Accounting Records • Internal Control • Budget Control • Allowable Cost • Source Documentation • Cash Management

  34. 1) Identification of Awards200.302(b)(1) (pg 118) 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)

  35. 2) Financial Reporting200.302(b)(2) (pg 118) • Accurate, current, complete disclosure of financial results of each award in accordance with 200.327 and 200.328. • NEW: 200.327 – Federal awarding agency can only collect OMB approved data elements, no less than annually, no more than quarterly • NEW: 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

  36. Financial Reporting (cont.) • NEW: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) Significant developments • Problems, delays. Adverse conditions that would impair ability to meet objective of the award • Favorable developments. Finishing sooner or at less cost

  37. 3) Accounting Records 200.302(b)(3) (pg119) Combined 80.20(b)(2) and 80.20(b)(6): • Source Documentation Must Be Kept On: • Federal Awards • Authorizations • Obligations • Unobligated balances • Assets • Expenditures • Income • Interest (New) (Eliminated liabilities)

  38. 4) Internal Controls200.302(b)(4) (pg119) Essentially same as prior 80.20(b)(3): • Effective control over and accountability for: • All funds • Property • Other assets • Must adequately safeguard all assets • Use assets solely for authorized purpose

  39. Internal Controls 200.303 (pg 119) • Non-Federal entities must establish and maintain effective internal control over the Federal award that provides reasonable assurances that the entity is managing the award in compliance with federal statutes, regs, and terms of the award. • NEW: Internal controls “should” be in compliance with: • The U.S. Comptroller General’s Standard for Internal Control Integrated Framework; and • Internal Control Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)

  40. Internal Controls (cont.)200.303 (pg 119) • Comply with Federal statutes, regs, and the terms and conditions of the Federal awards. • Evaluate and monitor the non-Federal entity's compliance with statutes, regsand the terms and conditions of Federal awards. • Take prompt action when instances of noncompliance are identified including in audit findings. • Take reasonable measures to safeguard protected personally identifiable info (PII) and other information designated or deemed sensitive

  41. Required Certification 200.415 (pg148) • NEW: An 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.”

  42. 5) Budget Control200.302(5) (pg 119) • Same as current rule 80.20(b)(4) • Comparison of expenditures with budget amounts for each award

  43. 6) Written Cash Management Procedures 200.302(6) (pg 119) • NEW: Written Procedures to implement the requirements of 200.305

  44. Payment200.305 (a) and (b) (pg 119) • For states, payments are governed by Treasury – State CMIA agreements 31 CFR Part 205 • No Change • For all other non federal entities, payments must minimize time elapsing between draw from G-5 and disbursement (not obligation)

  45. Payment (cont.)200.305(b)(1)-(4) (pg 119) • 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 nonfederal entity lacks sufficient working capital. Allows advance payment to cover estimated disbursement needs for initial period

  46. Payment (cont.)200.305(b)(7)-(8) (pg121) • NEW:Advances must be maintained in insured accounts • NEW:Pass through cannot require separate depository accounts • NEW: 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 • A foreign gov’t or banking system prohibits or precludes interest bearing accounts.

  47. Payment (cont.)200.305(b)(9) (pg121) • NEW: Interest amounts up to $500 may be retained by non federal entity for administrative purposes • Currently $100 for State and local Gov’ts • Currently $250 for IHEs and Non-profits. • NEW: Interest earned must be remitted annuallyto HHSPayment Management System.

  48. 7) Written AllowabilityProcedures200.302(b)(7) (pg 119) • NEW: Written procedures for determining allowability of costs in accordance with Subpart E – Cost Principles • Procedures can not simply restate the Uniform Guidance Subpart E • Should explain the process used throughout the grant development and budget process • Training tool and guide for employees

  49. Subpart E – Cost Principles

  50. Factors Affecting Allowability of Costs 200.403 (pg143) 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

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