Transcript Slide 1
Proposed OMB Uniform
Guidance: Cost Principles,
Audit, and Administrative
Requirements for Federal
Awards
National Association for State Community Services
Programs
Kevin C. Myren, C.P.A.
AGENDA
Overall Themes
Major Changes
Impact on our Work
What’s Next
Questions and Answers
Overall Themes
Overall Themes
Risk assessment
Merit/performance based
Outcomes oriented
Enhanced efficiency
◦ Eliminate ‘red tape,’ barriers and requirements
Transparent
Accountability
◦ Increase burden on state
State focus
Current business practice
Major Changes
Subchapter B – Pre-award Requirements
_.205 Agency Review of Merit of Proposals
and Risk Posed by Applicants
◦ Prior to making an award, whether competitive or
not, the Federal agency shall evaluate risks to the
program posed by each applicant
Financial stability
Quality of management systems
Ability to meet the management standards
History of performance
Reports and findings from single audits
◦ For competitive, agencies shall design and execute
a merit review process for applications
Not just continuation awards!
Subchapter E – Post Federal Award
Requirements
_.501 Subrecipient Monitoring and
Management
◦ Pass-through entity determines status
◦ Substance of relationship more important than the
form of the agreement
◦ Subrecipients:
Characteristics:
Determines who is eligible to receive Federal assistance
Has its performance measured in relation to the Federal
program
Has responsibility for adherence to Federal requirements
Uses Federal funds to carry out a program for a public
purpose, as opposed to providing goods or services
Subchapter E – Post Federal Award
Requirements
_.501 Subrecipient Monitoring and
Management, continued
◦ Contractors:
Characteristics:
Provides goods or services within normal business
operations
Provides similar goods or services to many different
purchasers
Normally operates in a competitive environment
Provides goods or services that are ancillary to the
operation of the Federal program
Is NOT subject to compliance requirements
Subchapter E – Post Federal Award
Requirements
_.501 Subrecipient Monitoring and
Management, Continued
◦ All pass-through entities shall:
Ensure subawards include:
All clauses required by Federal statute, regulation, etc.
Each administrative, national policy and program-specific
requirement
Any additional Federal requirements
A recognized indirect cost rate, negotiated rate between
pass-through and subrecipient, or de minimis rate equal
to 10% of total modified direct costs
Access to records
Closeout terms
Subchapter E – Post Federal Award
Requirements
_.501 Subrecipient Monitoring and
Management, Continued
◦ All pass-through entities shall, Continued
Inform the subrecipient of the CFFA title and number
Ensure subrecipients are aware of requirements imposed
upon them by Federal laws, regulations, and provisions
of subawards
Monitor the activities as necessary to ensure Federal
awards are used for authorized purpose, in compliance
with laws, regulations and provisions of subawards
Analyze financial and programmatic reports of subs
Follow-up and ensure subs take timely and appropriate
action on all deficiencies from audits and on-site reviews
Issue a management decision for audit findings
Subchapter E – Post Federal Award
Requirements
_.501 Subrecipient Monitoring and
Management, Continued
◦ All pass-through entities shall, Continued
◦ Depending upon pass-through entity’s assessment of risk posed by
the subrecipient, the following monitoring tools may be used to
ensure proper accountability and compliance with program
requirements and achievement of performance goals”
Performing on-site reviews of operations
Providing training and technical assistance
Arranging for agreed-upon-procedures engagements
◦ Ensure every sub is audited
◦ Consider whether adjustments are needed on pass
through books
◦
Consider taking enforcement action
Subchapter E – Post Federal Award
Requirements
_.502 Standards for Financial and Program
Management, continued
◦ Period of availability
◦ Internal Controls
Recipient shall identify Federal awards received and
expended
Must maintain internal control over Federal programs that
provides reasonable assurance that awards are managed in
compliance with laws, regulations, terms and conditions of
awards that could have a material effect on each program
Comply with laws, regulations, and the terms and
conditions of Federal awards for each of its programs
Subchapter E – Post Federal Award
Requirements
_.503 Property Standards, continued
◦ Equipment
Title vests upon acquisition in the recipient or sub
States will use, manage and dispose of equipment
acquired under an award in accordance with state laws
and procedures
Use:
Equipment shall be used for purpose as long as needed
When no longer needed, may be used in other activities
supported by a Federal agency (includes IT systems)
May use for a few, but may not compete unfairly with
private companies that provide equivalent services
May trade-in or use sales proceeds to offset cost of
replacement equipment, subject to Federal approval
Subchapter E – Post Federal Award
Requirements
_.504 Procurement Standards
◦ States will follow state policies and procedures
◦ Requirements:
Recipients use their own procurement procedures
Maintain a contract administration system
Written standards of real or apparent conflict of interest
Review proposed procurements to avoid unnecessary or
duplicative acquisitions
Encouraged to use
State and local intergovernmental agreements
Federal excess and surplus property
Value engineering
Consider contractor integrity, compliance, past
performance and technical and financial resources
Subchapter E – Post Federal Award
Requirements
_.504 Procurement Standards, continued
◦ Competition
Full and open competition
Contractors that develop specs, ect are prohibited from
proposing
Situations considered restrictive of competition
Unreasonable requirements on firms to qualify
Unnecessary experience and excessive bonding
Specifying a “brand name”
Written selection procedures
Must have a written procurement protest procedure
Subchapter E – Post Federal Award
Requirements
_.504 Procurement Standards, continued
◦ Methods of procurement:
Some form of cost or price analysis required for all
Small purchases
$150,000 or less
Price or rate quotations shall be obtained from an adequate
number of qualified sources
Sealed bids
Preferred method for procuring construction
Invitation for bids will be publicly advertised
Bids will be publicly opened
Awarded to lowest responsive and responsible bidder
Subchapter E – Post Federal Award
Requirements
_.504 Procurement Standards, continued
◦ Methods of procurement, continued
Competitive proposals
Requests for proposals will be publicized
Solicited from an adequate number of qualified sources
Written method for conducting technical evaluation
Awarded to firm whose proposal is most advantageous to
the program, with price and other factors considered
Noncompetitive proposals
Available only from a single source
Subchapter E – Post Federal Award
Requirements
_.504 Procurement Standards, continued
◦ Small, minority, women and labor surplus area firms
Affirmative steps:
Placing firms on solicitation lists
Solicited whenever they are potential sources
Dividing total requirements into smaller tasks
Requiring prime contractor to subcontract
Subchapter E – Post Federal Award
Requirements
_.505 Performance and financial Monitoring
and Reporting
◦ Collect reports electronically
◦ Shall only solicit OMB-approved data elements for
financial reporting
◦ Monitoring by recipients must cover each program,
function or activity
◦ Performance reports must include:
Comparison of actual accomplishments to award
Reason for slippage, if any
Explanation of any cost overruns or high unit cost
Subchapter F – Cost Principles
Subtitle III – Direct and Indirect Costs
_.616 Indirect (F & A) Costs,
Continued
◦ Negotiate Indirect Cost Rates
Negotiated rates shall be accepted by all Federal agencies
Any entity that has never received or does not currently have
a negotiated indirect cost rate is eligible for a de minimis
indirect cost rate of 10% of modified total direct costs
(MTDC)
May be utilized for an initial period of up to 4 years
MTDC = salaries, wages, fringe benefits, materials and supplies,
services, travel and subgrants up to the first $25,000 of each
Excluded from MTDC = equipment, capital expenditures, rent,
participant costs
All entities may apply for a one-time extension of a current
negotiated indirect cost rate for a period of up to 4 years
Subchapter F – Cost Principles
Subtitle VI – General Provisions for Selected Items of Cost
_.621 Selected Items of Cost,
Continued
◦ C – 10 Compensation – Personal Services
Reasonable – consistent with that paid for similar work
Consistent – must follow organization-wide policies/practices
Incentive compensation
Overall compensation must be reasonable
Paid or accrued pursuant to an agreement entered into in good
faith before services were rendered
Subchapter F – Cost Principles
Subtitle VI – General Provisions for Selected Items of Cost
_.621 Selected Items of Cost,
Continued
◦ C – 10 Compensation – Personal Services
Standards for Documentation of Personnel Expenses
Based on documented payrolls approved by a responsible official
No documentation outside payroll system required for employee
who works in a single indirect activity
Where employee works solely on a single Federal award, charges
will be supported by periodic certification
Certification prepared at least semi-annually AND signed by
employee or a responsible supervisory official
Reports may be integrated into payroll distribution system
No duplication necessary
Reports must be after-the-fact certification
Subchapter F – Cost Principles
Subtitle VI – General Provisions for Selected Items of Cost
_.621 Selected Items of Cost,
Continued
◦ C – 10 Compensation – Personal Services
Standards for Documentation of Personnel Expenses
Nonprofessional employees’ compensation must supported by
records indicating total hours worked
Salaries/wages for matching/cost sharing must be supported in
the same manner
Substitute system for allocating salaries/wages may be used, if
approved by the cognizant agency
Random moment sampling, “rolling” time studies, case counts, or
other quantifiable measures of employee effort
After the fact certification is still required
Subchapter F – Cost Principles
Subtitle VI – General Provisions for Selected Items of Cost
_.621 Selected Items of Cost,
Continued
◦ C – 11 Compensation – Fringe Benefits
Costs of leaves, employee insurances, pensions
Must be reasonable and required by law, entity-employee
agreement or an established policy
Leaves
Under written leave policies
Equitably allocated to all related activities
Determined by GAAP, when leave is earned
Lesser of the amount accrued or funded
Insurances and pensions must be granted under a written policy
May be assigned to cost objectives by indentifying specific
benefits to individual employees or by allocating on the basis of
entity-wide salaries and wages
Subchapter F – Cost Principles
Subtitle VI – General Provisions for Selected Items of Cost
_.621 Selected Items of Cost,
Continued
◦ C – 11 Compensation – Fringe Benefits
Insurance
Reserves under a self-insurance program for unemployment
compensation or workers’ comp are allowable
If provisions represent reasonable estimates of liabilities
However, provisions for self-insured liabilities which do not
become payable for more than one year after the provision is
made shall not exceed the present value of the liability
Automobiles
That portion of automobile costs furnished by the entity that
relates to personal use by employees is unallowable regardless
of whether the cost is reported as taxable income to the
employee
Subchapter F – Cost Principles
Subtitle VI – General Provisions for Selected Items of Cost
_.621 Selected Items of Cost,
Continued
◦ C – 11 Compensation – Fringe Benefits
Pension
Costs for a fiscal year must be funded within 6 months of fiscal
year end
Post Retirement Health
Pay-as-you-go…actual payments to beneficiaries are allowable
Actuarial cost…GAAP expense allowed, if funded in 6 months
Severance Pay
Allowable if required by law, employer-employee agreement, or
established policy
Subchapter G – Audit Requirements
Subtitle II – Audits
_.701 Audit Requirements
◦ Required for non-Federal entities that expend $750,000
or more in Federal awards in a year
Single audit unless eligible and elect program-specific audit
Program-specific audit allowable if entity has only one
Federal program
When a subrecipient and a contractor – Recipient and sub
subject to audit requirements; contractor would not
Contractor – Federal compliance conditions do NOT pass
down
For-profit subrecipients, pass through entity shall establish
requirements
Subchapter G – Audit Requirements
Subtitle III – Auditees
_.708 Auditee responsibilities
◦ The auditee shall:
Prepare appropriate financial statements
Procure or otherwise arrange for the audit
Follow up and take corrective action on audit findings
Provide the auditor with access
_.709 Auditor Selection
◦ Factors to considered in evaluating proposals for audit
services: responsiveness; relevant experience;
availability of staff with professional qualifications;
technical abilities; peer review; and, price
◦ Preparer of indirect cost proposal or cost allocation plan
can NOT perform the audit
Subchapter G – Audit Requirements
Subtitle III – Auditees
_.710 Financial Statements
◦ Auditee shall prepare:
Statement of Financial Position
Statement of Activities (results of operations/changes in NA)
Statement of Cash Flows
Schedule of expenditures of Federal Awards
_.711 Audit Findings Follow-Up
◦ Auditee shall prepare schedule of prior audit findings
◦ Auditee shall prepare Corrective Action Plan, for current
year findings
Subchapter G – Audit Requirements
Subtitle IV – Federal Agencies
_.714 Management Decision
◦ Federal agency or pass-through entity shall make
management decision on audit findings
◦ Federal agency is responsibility for coordinating a
management decision for a program
◦ Pass-through entity shall make management decision on
findings of subrecipients
◦ Management decision shall be made within 6 months of
acceptance of the audit report by the Federal
Clearinghouse
Subchapter G – Audit Requirements
Subtitle V – Auditors
_.717 Audit Findings
◦ Significant deficiencies and material weaknesses in
internal control over major programs
◦ Material noncompliance with the provisions of laws,
regulations or terms/conditions of awards over a major
◦ Known questioned costs that are greater than $25,000
Auditor should project potential error
◦ Known or likely fraud
Subchapter G – Audit Requirements
Subtitle V – Auditors
_.717 Audit Findings, Continued
◦ Elements of a finding
Federal program and Federal award identification
CFFA number and title
Criteria upon which the audit finding is based (citation)
Condition found (facts that support the deficiency)
Statement of effect
Identification of questioned cost and how computed
Information on prevalence (# of findings from # in universe)
Whether a repeat finding from a previous audit
Recommendation to prevent future occurrences
View of responsible official of the auditee
Subchapter G – Audit Requirements
Subtitle V – Auditors
_.718 Audit Documentation
◦ Must be sufficiently detailed to enable someone having
no previous connection to the audit to understand
Nature, timing and extent of audit procedures
Results of audit procedures performed and evidence
obtained
Conclusions reached on significant matters
Extent of agreement between accounting records and
audited financial statement
◦ Auditor shall retain audit documentation for 3 years after
date of issuance of the auditor’s report
Audit Requirements
Streamlining the types of compliance
requirements.
◦ Focus on areas of higher risk
◦ In:
A. Activities Allowed/Unallowed and B. Allowable
Costs/Cost Principles (combined)
C. Cash Management
E. Eligibility
L. Reporting
M. Subrecipient Monitoring
N. Special Tests and Provisions
Audit Requirements
Out:
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D. Davis-Bacon
F. Equipment and Real property Management
G. Matching, Level of Effort and Earmarking
H. Period of Availability of Federal Funds
I. Procurement and Suspension and Debarment
J. Program Income
K. Real Property Acquisition and Relocation
Assistance
Impact on our Work
Potential Impact on Our Work
Some agencies may no longer be audited
◦ $500,001 - $750,000
Some programs may not be audited
◦ Major program definition changes
Amount of dollars audited will decrease
Auditors will no longer review certain compliance
elements
Emphasis on RISK analysis
MERIT, not just continuation
Subchapter E.501 – Monitoring responsibilities
more detailed (greater emphasis)
◦ Need to use single audits
Indirect cost rates – what’s next?
Internal control section is new, what’s it mean?
Responding to the Change
Educating our recipients
◦ Communicating changes
Training
◦ Update policies and procedures
Procurement
Payroll systems
Modifying our monitoring practices
Sharing Best Practices
What’s Next
What Next……
Comments through June 2, 2013
OMB will ‘FINAL’ the document
◦ Perhaps as early as end of the year???????
Then agencies have one year to codify
◦ Put in the CFR
Then put it in the grants
Comments
Over 300 comments received by OMB
Mostly from Colleges/Universities & Native
American Tribes
General Themes:
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Lack of Privacy (Tribal Governments)
Time and effort reporting
Deadlines for reporting
Monitoring requirements are too burdensome
Indirect Cost Rates
Resources
Full text of Proposed OMB Uniform Guidance
for Federal Financial Assistance
◦ http://www.regulations.gov/#!documentDetail;D=O
MB-2013-0001-0002
CROSSWALKS from existing to proposed
guidance
◦ http://www.regulations.gov/#!docketBrowser;rpp=
25;po=0;dct=SR%252BO;D=OMB-2013-0001
Questions………………………….