Transcript Single Audits

How to Draft New & Update Old
Policies and Procedures
Brette Kaplan Wurzburg, Esq.
[email protected]
Brustein & Manasevit, PLLC
www.bruman.com
Agenda
Why policies and procedures are important?
Logistics
Differences between policies and procedures
Suggested Sections
 Rules and Requirements
 Helpful Questions to Ask
What to do with completed policies and procedures?
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Why?
Single Audits
Monitoring
Staff Changes and Transitions
Uniform Grant Guidance
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Single Audits
Auditors ask about policies and procedures
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Some tests specifically require written policies and procedures
Single Audits
Compliance Supplement, Part 6: Internal Controls
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“The A-102 Common Rule and OMB Circular A-110 …
require that non-Federal entities receiving Federal awards …
establish and maintain internal control designed to reasonably
ensure compliance with Federal laws, regulations, and program
compliance requirements.”
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“Control activities are the policies and procedures that help
ensure the management’s directives are carried out.”
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5
Clearly written & communicated
Monitoring
Policies and procedures are evidence of compliance under
all program monitoring tools
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Monitoring
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Compliance Supplement, Part 6: Internal Controls,
Section M. Subrecipient Monitoring
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Written policies and procedures exist establishing:
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Communication of Federal award requirements to
subrecipients
Responsibilities for monitoring subrecipients
Process and procedures for monitoring
Methodology for resolving findings
Requirements related to subrecipient audits, including
appropriate adjustment of pass-through’s accounts
Staff Changes and Transitions
Training tool
Maintain consistency
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Uniform Grant Guidance
Emphasis on internal controls
Written policies and procedures are required!
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Written Cash Management Procedure - § 200.302(b)(6) & §
200.305
Written Allowability Procedures - § 200.302(b)(7) & Subpart E
– Cost Principles
Written Conflicts of Interest Policy - § 200.318(c)
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Gratuities
Written Procurement Procedures - § 200.319(c)
Written Method for Conducting Technical Evaluations of
Proposals and Selecting Recipients - § 200.320(d)(3)
Written Travel Policy - § 200.474(b)
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Compliant policies and procedures lead to:
 Administering compliant programs and complying with
grant management requirements!
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Policies vs. Procedures
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Both guide organization and provide framework for
actions
Policies – Don’t need to be long and complicated!
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Organization’s rules and guidelines to ensure consistency and
compliance
How organization intends to operate
Use clear, simple statements
Guiding principles to help make decisions
Policies vs. Procedures
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Procedures
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Describe how policy is put into action
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Separation of responsibility
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Activities that produce a specific service or product
Who will do what (position, department, division)
What steps should be taken
When actions are triggered
Which forms or documents to use
Bullet points, instructions, forms, checklists, flowcharts, etc.
Logistics
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Where to start?
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For internal use of for subgrantees?
Grant specific or cross cutting?
Review and collect available policies and procedures from
different offices and websites
If starting from scratch, get information
from people who perform grant
related activities
Logistics
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Who should be involved?
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Create a team
Fiscal AND program personnel
Use team approach to capture entire grant process
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Everyone involved should sit in the same room to review grant
activities, decision making, job responsibilities
Logistics
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Create a table of contents
Assign subjects
Create a timeline for completion
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Logistics
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How long does it take?
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Depends on need
Review of existing policies and procedures is less time than
starting from scratch
Set deadlines for actions
Don’t get overwhelmed!
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Logistics
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What is the process?
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Review existing policies and procedures and documentation
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Memos, emails, forms, job descriptions
Develop questions – Go to the source of the information needed!
Schedule interviews with relevant staff who perform the tasks
related to the policies and procedures you are creating
Gather information on actual practices
Draft policies and procedures
Review internally with appropriate staff
Revise
Formally adopt and implement
Train staff
Annually review and revise!
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Things to Consider
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Buy-in from those who will be using the policies and
procedures
Review for accuracy, completeness and compliance
Adoption by board or other governing body
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Your Work is Never Done . . .
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Policies and procedures are only useful if they are current,
accurate and regularly used
Ongoing professional development and training
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What the requirements are
How your organization meets the requirements
Continually review and revise
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Annual basis
Resources
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Uniform Grant Guidance
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OMB Circulars
Education Department General Administrative
Regulations (EDGAR)
Authorizing statute
Program regulations
Program guidance
State and agency rules, regulations, policies and
procedures
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Types of Grants
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State-Administered Grants
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Any grant distributed by formula to eligible States
Describe the process (hint: follow the money trail)
Direct Grants
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Any grant other than those distributed by formula to eligible
States
Review GAN for terms and conditions
Suggested Sections
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Organization, Structure and Function
Grant Application Process
Financial Management System
Procurement
Inventory/Property Management
Time and Effort
Record Keeping/Record Retention
Monitoring
Audit Resolution
Fiscal Requirements
Programmatic Requirements
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Organization, Structure and Function
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Organization, Structure and Function
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Organization Chart
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Offices
Sections
Divisions
Job Descriptions & Responsibilities
Outside entities with grant
administration responsibilities
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MOU/MOA
Organization, Structure and Function
Helpful Questions to Ask
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Do you have an organizational chart?
What are the offices, sections, divisions or employees that
have responsibility for grant administration?
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What are their responsibilities?
Are there any entities outside of the agency that have
grant administration responsibilities?
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What are those responsibilities?
How was relationship created? What are the terms?
 MOU/MOA?
Grant Application Process
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Grant Application Process
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State-Administered Grant vs. Direct Grant
Decisions regarding what grants to apply for
Determining organizational capacity to run a compliant
program
Approvals and Authorizations
After the grant is awarded
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Grant Application Process
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If Pass-Through Entity:
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Discuss how subgrantees apply for grants
Responsible for risk analysis prior to issuing award! (Uniform
Grant Guidance)
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Consider imposing subaward conditions if appropriate
Grant Application Process
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Best Practices
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Whether or not formal acceptance is required, meet with
appropriate parties to be certain you want to accept the grant.
Make acceptance a conscious act. Circumstances may have
changed between submission of application and notice of
award
Grant Application Process
Helpful Questions to Ask
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How does the agency determine what grants to apply
for?
What is the process?
Who reviews and signs off on a grant application?
What happens after a grant is awarded?
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Financial Management System
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Financial Management System
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1.
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5.
6.
7.
34 CFR § 80.20(b)
Financial Reporting
Accounting Records
Internal Control
Budget Control
Allowable Cost
Source Documentation
Cash Management
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5.
6.
7.
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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)
Written Cash Management Procedures
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NEW: Written Cash
Management Procedures to
implement requirements of §
200.305 Payment
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Written Cash Management Procedures
For states, payments are governed by Treasury
– State CMIA agreements 31 CFR Part 205
 No Change
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Written Cash Management Procedures
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For all other non federal entities, payments
must minimize time elapsing between draw
from G-5 and disbursement (not obligation)
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Written Cash Management Procedures
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Written procedures must describe whether non-federal entity
uses:
1) Advance Payments (preferred)
•
Limited to minimum amounts needed to meet
immediate cash needs
2) Reimbursement
•
Pass through must make payment within 30 calendar
days after receipt of the billing
3) 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
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Cash Management
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Obligation – 2 CFR 200.71
 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
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Promise to pay
When Obligations Are Made
34 CFR 75.707 & 76.707
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If the Obligation is for…
The Obligation is made…
Acquisition of Property
Date of binding written commitment
Personal Services
by Employee
When services are performed
Personal Services
by Contractor
Date of binding written commitment
Travel
When travel is taken
Written Cash Management Procedures
Interest earned must be remitted annually to
HHS
 Interest amounts up to $500 may be retained
by non-federal entity for administrative
purposes
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Written Allowability Procedures
NEW: Written
procedures for
determining
allowability
 In accordance with
Subpart E – Cost
Principles & terms and
conditions of federal
award
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Written Allowability Procedures
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Not a restatement of Subpart E
But a GPS through grant development and budget process
Training tool for employees
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Cost Principles:
“Factors Affecting Allowability of Costs” § 200.403
All Costs Must Be:
1. Necessary, Reasonable and Allocable
2. Conform with federal law & grant terms
3. Consistent with state and local policies
4. Consistently treated
5. In accordance with GAAP
6. Not included as match
7. Net of applicable credits (moved to § 200.406)
8. Adequately documented
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Necessary
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Uniform Grant Guidance – no description
Based on the needs of the program
Expenditure benefits program
Helps achieve program objective
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Necessary
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Consider:
 Whether the cost is needed for the proper and efficient
performance of the grant program
 Whether the cost is identified in the approved budget or
application
 Whether there is an educational benefit associated with
the cost
 Whether the cost aligns with identified needs based on
results and findings from a needs assessment
 Whether cost addresses program goals and objectives and
is based on program data
Reasonable Costs § 200.404
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Reasonable for the performance of the federal award
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“A cost is reasonable if, in its nature and amount, it does
not exceed that which would be incurred by a prudent
person under the circumstances prevailing at the time the
decision was made to incur the cost.”
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Sound business practices
Comparable to market prices
Arm’s length bargaining
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Reasonable Costs § 200.404
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Consider
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Whether the cost is the type generally recognized as ordinary and
necessary for the operation of the non-federal entity or the proper
and efficient performance of the federal award.
Restrains or requirements imposed by factors like sound business
practices; arm’s length bargaining; federal, state, and other laws and
regulations; and terms and conditions of the federal award
Market prices for comparable goods or services for the geographic
area
Whether individuals involved acted with prudence under the
circumstances
Whether non-federal entity significantly deviated from established
practices and polices regarding the incurrence of costs, which
unjustifiably increase the federal award’s cost
Necessary & Reasonable
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Practical aspects of “necessary”
 Do I really need this?
 Surplus property/existing resources
Practical aspects of “reasonable”
 Is this the minimum amount I need to spend to meet my need?
 Is the expense targeted to valid programmatic/administrative
considerations?
 Do I have the capacity to use what I am purchasing?
 Did I pay a fair rate? Can I prove it?
 If asked, would I be comfortable defending this purchase?
Allocable costs § 200.405
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A cost is allocable to the federal award if the goods or
services involved are chargeable or assignable to the
federal award in accordance with the relative benefit
received.
The federal grant program derived a benefit in proportion
to the funds charged to the program
EX: LEA purchases a computer to use 50% in a federal
program and 50% in State program
 Can only charge half the cost to the federal program
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Applicable credits § 200.406
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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.
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Examples: purchase discounts, rebates or allowances, recoveries or
indemnities on losses, insurance refunds or rebates, adjustments of
overpayments
Adequately Documented § 200.403(g)
A state and subgrantee must keep
records that show (34 CFR 76.630):
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Amount of funds under grant or
subgrant
How the funds are used
Total cost of the project
Share of costs provided by
other sources
Records that show compliance and
performance
Other records to facilitate an effective
audit
As a Practical Matter, Ask…
In order to determine whether federal funds may be used to purchase
a specific cost, it is helpful to ask the following questions:
 Is the proposed cost allowable under the relevant program?
 Is the proposed cost consistent with an approved program plan and
budget?
 Is the proposed cost consistent with program specific fiscal rules?
 Is the proposed cost consistent with EDGAR?
 Is the proposed cost consistent with special conditions imposed on
the grant (if applicable)?
 Is the proposed cost is consistent with the underlying needs of the
program?
 Does the proposed cost targeted areas of weakness? Was data
reviewed to ensure that federal funds meet areas of concern?
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Financial Management System
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Can include Selected Items of Cost section for frequently
asked about expenses
The Uniform Grant Guidance has 55 specific items of
cost - § 200.420
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Travel Costs
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Uniform Grant Guidance § 200.474
State Rules
Agency Rules
Documentation Required to be Maintained
53
Financial Management System
Helpful Questions to Ask
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What accounting systems are used?
What function does each system perform?
Who is responsible for managing budgets and accounts
payable?
How are budgets loaded and tracked on the system?
What is the process for comparing budgets to
expenditures?
How do you ensure all expenditures are allowable?
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Financial Management System
Helpful Questions to Ask
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What is the process for requesting budget revisions?
How do you ensure that all expenditures are made within
the period of availability?
What happens to unobligated funds?
Does the system interface with the procurement and
inventory systems?
How are vendors paid? What is the process? Who is
involved?
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Procurement
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Procurement
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NEW: Uniform Grant Guidance: All nonfederal entities must have
documented procurement procedures which reflect applicable
Federal, State, and local laws and regulations.
§ 200.318(a)
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Open competition
Conflict of Interest (including gratuities)
Solicitation
Cost/Price Analysis
Vendor Selection
Required Contract Provisions
Contract Administration
Protest Procedures
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Conflict of Interest
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Must maintain written standard of conduct, including conflict
of interest policy. § 200.318(c)(1)
A conflict of interest arises when any of the following has a
financial or other interest in the firm selected for award:
 Employee, officer or agent
 Any member of that person’s immediate family
 That person’s partner
 An organization which employs, or is about to employ, any of
the above or has a financial interest in the firm selected for
award
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Conflict of Interest
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If the non-federal entity has a parent, affiliate, or
subsidiary organization that is not a state or local
government the entity must also maintain written
standards of conduct covering organization conflicts of
interest! § 200.318(c)(2)
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NEW: All non federal entities must establish conflict of
interest policies, and disclose in writing any potential
conflict to federal awarding agency in accordance with
applicable Federal awarding agency policy. § 200.112
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Conflict of Interest Policy
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Include:
 Definition
 Chain for reporting potential conflicts
 Alternate if reporting to employee involved in
potential conflict
 Gratuities
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Definitions and examples of nominal items
Recusal
Sanctions
Signed certification that employee received and
understands conflicts policy
Training on policy
Vendor Selection Process § 200.320
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Method of procurement:
 NEW: Micro-purchase
 Small purchase procedures
 Competitive sealed bids
 Competitive proposals
 Noncompetitive proposals
Vendor Selection Process:
Micro-Purchase § 300.320(a)
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NEW: Acquisition of supplies and services under $3,000 or
less
May be awarded without soliciting competitive quotations if
nonfederal entity considers the cost reasonable
To the extent practicable must distribute micro-purchases
equitably among qualified suppliers
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Vendor Selection Process:
Small Purchase Procedures
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Good or service that costs $100,000 or less
(NEW:
$150,000 under 200.88)
 Organization may set lower threshold
Must obtain price or rate quotes from an adequate number
of qualified sources
“Relatively simply and informal”
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Vendor Selection Process:
Noncompetitive Proposals
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Appropriate only when:
 The good or services is available only from a single source
(sole source)
 There is a public emergency
 The awarding agency authorizes
 NEW: awarding agency or pass-through must expressly
authorize noncompetitive proposals in response to
written requires from nonfederal entity - § 200.320(f)(3)
 After soliciting a number of sources, competition is deemed
inadequate
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Vendor Selection Process
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Cannot contract with vendor who has been
suspended or debarred
 http://www.sam.gov
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Appendix II(I)
Required Contract Provisions
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Nonfederal entity’s contracts must contain the applicable
provisions in Appendix II to Part 200 § 200.326
Examples (not complete list)
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Remedies
Termination
Equal Employment Opportunity
Davis-Bacon Act
Debarment and Suspension
Contract Administration § 200.318
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(Changed) Nonfederal entities must maintain oversight
to ensure that contractors perform in accordance with
the terms, conditions, and specifications of the
contract
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Procurement:
Helpful Questions to Ask
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What is your conflict of interest policy?
What are State and/or agency-specific requirements that
must be followed?
Approval for contracts?
Service contracts vs. Contracts for goods?
Contract thresholds and process for entering into
contracts within each threshold amount?
What clauses and/or certifications must be in each
contract?
How do you ensure that the terms of the contract are
met?
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Inventory &
Property Management
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Inventory/Property Management
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Uniform Grant Guidance § 200.313
Property Classifications
 Equipment, Supplies, “Highly Walkables”
 Computing Devices
Inventory Procedure
Loss, Damage or Theft
Disposition
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Equipment and Supplies
Equipment – No change in definition § 200.33
 Anything that is not equipment is considered supplies. §
200.94
 “Significant Technological Devices”
 NEW: Computing devices
 Machines used to acquire, store, analyze, process, public
data and other information electronically
 Includes accessories for printing, transmitting and
receiving or storing electronic information
 Computing devices are supplies if less than $5,000

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Inventory/Property Management
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Must have inventory management system
 Property records
 Description, serial number or other ID, title info,
acquisition date, cost, percent of federal participation,
location, use and condition, and ultimate disposition
 Physical inventory
 At least every two years
 Control system to prevent loss, damage, theft
 All incident must be investigated
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Disposition-Equipment § 200.313
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When property no longer needed, must follow disposition rules:
 Transfer to another federal program
 Over $5,000 – pay federal share
 Under $5,000 – no accountability
NEW: Non-federal entity must request disposition instructions
from the federal awarding agency if required by the terms of the
grant
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Inventory/Property Management
Helpful Questions to Ask
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How do you classify and define property?
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What items must be inventoried and tagged?
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Equipment, supplies, etc.
Detailed inventory records
What is the inventory process?
How frequently is a physical inventory conducted?
What is the policy regarding lost, stolen or damaged
items?
Are there procedures to transfer equipment between
programs?
What are the disposition procedures?
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Time and Effort
76
Time and Effort
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Uniform Grant Guidance
Semiannual Certification
PARs
Cost Objective
Reconciliations
77
Time and effort (A-87 Rule)
Semi-Annual Certifications

If an employee works on a single
cost objective:
 After the fact
 Account for the total activity
 Signed by employee or
supervisor
 Every six months (at least
twice a year)
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Personnel Activity Report
(PAR)

If an employee works on multiple
cost objectives:
 After the fact
 Account for total activity
 Signed by employee
 Prepared at least monthly and
coincide with one or more pay
periods
“Standards for Documentation of
Personnel Expenses” § 200.430

NEW: Charges for salaries must be based on records that
accurately reflect the work performed
1. Must be supported by a system of internal controls
which provides reasonable assurance charges are
accurate, allowable and properly allocated
2. Be incorporated into official records
3. Reasonably reflect total activity for which employee is
compensated
 Not to exceed 100%
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“Standards for Documentation of
Personnel Expenses” § 200.430
4.
5.
6.
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Encompass all activities (federal and non-federal)
Comply with established accounting polices and
practices
Support distribution among specific activities or cost
objectives
“Standards for Documentation of
Personnel Expenses” § 200.430
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NEW: If records meet the standards: the non-federal
entity will NOT be required to provide additional
support or documentation for the work performed
§ 200.430(i)(2)
BUT, if “records” of grantee do not meet new
standards, ED may require PARs
§
200.430(i)(8)
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PARs are not defined!!!
Time and Effort
Helpful Questions to Ask
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How do you document time and effort?
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Employees that work on one cost objective?
Employees that work on multiple cost objectives?
Who must sign the forms?
Where are the forms turned in?
82
Record Keeping
83
Record Keeping
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Uniform Grant Guidance §§ 200.333, 200.335
Statute of Limitations
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3 5 years
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State Policy
Agency Policy
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84
Record Keeping
o
Methods for collection, transmission & storage of
information § 200.335
o
Whenever practicable, collect, transmit and store federal award
information in open and machine readable formats
o
o
o
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Rather than in closed formats or on paper
Federal agency and pass-through must always provide or
accept paper versions upon request
If paper copies are submitted, can’t require more than original
and 2 copies
Record Keeping
o
Methods for collection, transmission & storage of
information § 200.335 (continued)
o
o
When original records are electronic and cannot be altered,
there is no need to create and retain paper copies.
When original records are paper, electronic versions may be
substituted through the use of duplication or other forms of
electronic media provided they:
o
o
o
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Are subject to periodic quality control reviews,
Provide reasonable safeguards against alteration; and
Remain readable.
Record Keeping
Helpful Questions to Ask
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How long must records be maintained?
How are records maintained?
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Hard copy, electronic
Monitoring
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Monitoring
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Monitoring of Agency
Monitoring of Subrecipients
Risk-Based Factors
Onsite Reviews
Remote Monitorings
Desk Reviews
Self-Assessments
Follow-Up
89
Monitoring – Risk Based Factors
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Examples of risk factors:
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90
Prior experience with same or similar awards
Previous monitoring findings
New or changing personnel
New or changing systems
Amount of grant funds awarded
Size of entity
Monitoring – Reviews
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Notification
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Who sends/receives notification
How to prepare for onsite monitoring
Collect and organize documents
Staff contact/point person
Separate room, internet access, copy machine for
monitors
Make copies of all documents given to monitors
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Monitoring – Follow Up

Report of findings


Corrective Action Plan



Timeframe to issue and respond
Action steps, timeframe, staff responsible
Follow up on corrective actions
Closeout letter
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Monitoring and Reporting Program
Performance § 200.328
NEW: Monitoring by the “Pass Through”
 Monitor to assure compliance with applicable federal
requirements and performance expectations are achieved
 Must cover each program, function or activity (see also
§
200.331)
 Must submit “performance reports” at least annually
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Requirements for Pass-Through Entities
§ 200.331

NEW: Depending on assessment of risk, the following
monitoring tools may be useful for the pass-through entity
to ensure proper accountability and compliance with
program requirements and achievement of performance
goals:
1. Training + technical assistance on program-related
matters
2. On-site reviews
3. Arranging for “agreed-upon-procedures” engagements
(described in § 200.425)
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Monitoring
Helpful Questions to Ask

Process for when agency is monitored?


Process for monitoring subrecipients?





From notification to issuing report and Timeline
Who is responsible for monitoring? Fiscal? Programmatic?
What gets monitored?
How do you determine which subrecipients will be
monitored?
How often does monitoring occur?


Notification, preparation, Responding, Follow-Up
Site visits, desk reviews, self-assessments
How do you ensure findings are resolved?

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Corrective action plan, Closeout letter, Future monitoring
Audit Resolution
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Audit Resolution




Single Audit
Uniform Grant Guidance – Subpart F
Resolution of Findings
Review of Subrecipients’ Single Audits
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Audit Resolution
Helpful Questions to Ask



Who is responsible for overseeing single audit
compliance and resolution?
What is the audit process?
How are findings resolved?


Correct Action Plan, Timeline
Process for reviewing subrecipients’ single audits?
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Programmatic Fiscal Requirements
99
Programmatic Fiscal Requirements




Supplement Not Supplant
Maintenance of Effort
Matching and Cost Sharing
Hold Harmless
100
Programmatic Fiscal Requirements


How do you ensure compliance with programmatic fiscal
requirements?
What documentation is required to be maintained?
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Programmatic Requirements
102
Programmatic Requirements

Programmatic Compliance




103
Application Process
Allocations to subrecipients
Allowable costs under the grant program
Other
Programmatic Requirements
Helpful Questions to Ask


How does your agency ensure
compliance with the specific
requirements of the grant
program?
What resources are available to
program staff to help ensure
compliance?
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After your policies and procedures
are done . . .
NOW WHAT!?!
105
Now What!?!



Training
Review and Revise
Where are Policies and Procedures Located?
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QUESTIONS?
107
~ Legal Disclaimer ~
This presentation is intended solely to provide general
information and does not constitute legal advice.
Attendance at the presentation or later review of
these printed materials does not create an attorneyclient 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.
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