Transcript Not-For-Profit Leadership Summit XIII

An Overview of the New OMB Uniform
Grant Guidance
May 4, 2015
Not-For-Profit Leadership Summit XIII
Presented by the Westchester Community Foundation and the United Way of Westchester and Putnam
Today’s presenters
Bob Vanni, Senior Consultant for Government Relations
Nonprofit Coordinating Committee of New York (NPCC)


Formerly, Vice President, General Counsel and Secretary of
The New York Public Library, Astor, Lenox and Tilden
Foundations
Currently serves on the Board of PILnet, The Global Network
for Public Interest Law
1
Today’s presenters
Tom Sneeringer, Partner
McGladrey LLP




Over 20 years of experience focused on nonprofit
organizations
Author and host of McGladrey’s Annual Federal Grants
Management Update Webinar (August)
National Speaker on Federal Grants Management Topics
Champion for Use of the COSO Model of Internal Controls by
the Nonprofit Sector
2
Learning objectives
After completing this program, you should:
 Know where to obtain access to the new uniform
requirements
 Know when you will need to start applying the new
requirements
 Know how the new requirements will likely impact
your grant management activities
 Know where you can find additional information to
help you implement the new requirements
3
An Overview of the New OMB
Uniform Grant Guidance
4
Background/History
 OMB Circulars Issued for Nonprofits to
manage Federal awards
-
OMB Circular A-21 (cost principles for higher
education) issued in 1958
OMB Circular A-110 (administrative
requirements) issued in 1976
OMB Circular A-122 (cost principles for all other
nonprofit organizations) issued in 1980
OMB Circular A-133 (Audits) issued in 1990
All of the above have been incrementally
updated over the years
5
UGG reform history
Feb 2012:
Advance
Notice of
Proposed
Guidance
(public
comments)
Nov 2009:
Executive
Order:
Reduce
Improper
Payments
Feb 2011:
Presidential
Memo:
Reduce
Administrative
Burden
Dec
2013:
Final
Uniform
Guidance
Feb 2013:
Notice of
Proposed
Guidance
(public
comments)
6
OMB – Uniform Grant Guidance (UGG)



OMB issued Uniform Administrative Requirements,
Cost Principles, and Audit Requirements for Federal
Awards on December 26, 2013
Final Rule issued on December 19, 2014, with an
effective date of December 26, 2014
The UGG replaces/consolidates eight previously
issued OMB Circulars, including A-21, A-110, A-122
and A-133
7
OMB - Uniform Grant Guidance (UGG)


Management responsible for implementation
OMB resources that auditees (and auditors) should:
-
-
-
Access all the various UGG documents at:
http://www.whitehouse.gov/omb/grants_docs
Go to the COFAR Mailing List link to register and receive
future announcements, information on upcoming webcasts,
and other COFAR resources
Access an archive of an OMB Web event and related
presentation materials covering the contents of the various
Subparts and requirements
Access a COFAR FAQ document titled, Frequently Asked
Questions for New Uniform Guidance at 2 CFR 200
8
Provided to You Today
 National Council of Nonprofits whitepaper:
Nonprofits and the New OMB Uniform
Guidance – Know Your Rights …. And How
to Protect Them
 McGladrey whitepaper: An overview of the
new Uniform Grant Guidance
 COFAR FAQ document (updated November
2014)
9
OMB – Uniform Grant Guidance (UGG)
 Effective Dates:
-
Non-federal entities will need to implement the new
administrative requirements and Cost Principles for
all new federal awards made after December 26,
2014, and to additional funding to existing awards
(referred to as funding increments) made after that
date.
•
-
Audit requirements effective for fiscal years
beginning on or after December 26, 2014.
•
-
Non-Federal entities wishing to implement entity-wide
system changes to comply with the guidance after
December 26, 2014, will not be penalized for doing so
Not permitted to early implement any of the audit
provisions
One year deferral for the procurement rules
10
2 CFR 200 – Basic layout

6 Subparts A through F
-
-

Subpart A, 200.XX – Acronyms & Definitions (new)
Subpart B, 200.1XX – General (new)
Subpart C, 200.2XX – Pre Award – Federal (Old=A-110)
Subpart D, 200.3XX – Post Award – Recipients (Old=A110)
Subpart E, 200.4XX – Cost Principles (Old=A-122)
Subpart F, 200.5XX – Audit (Old=A-133)
11 Appendices - I through XI
11
Key Points

Use of “should” and “must”
-
Should = best practices or recommended approach
Must = required
 Vendor vs. Contractor (200.23)
-
See page 5 of COFAR FAQ document
The term "vendor" as used in Circular A-133 (in
contrast to a subrecipient) is no longer used. The
term "contractor" is defined in this section and
will be used instead of "vendor" going forward
12
Key Points

Personally Identifiable Information (PII) (200.79) and
Protected Personally Identifiable Information (PPII)
(200.82) – These terms are now defined for first time.
-
-
The definitions are important to auditors and auditees as single
audit reporting packages submitted under the new guidance will
be publically available (with exceptions for Indian tribes) and the
UGG states that auditors and auditees must ensure that no
protected PII is included in their respective parts of the reporting
package
Discussed on page 3 of McGladrey whitepaper
13
Key Points

Conflict of interest – NEW! (200.112)
-

Federal agencies must establish Conflict of Interest (COI)
policies
Grantees must disclose in writing any potential COI
Discussed on page 11 of COFAR FAQ document
Mandatory disclosures (200.113)
-
Grantees and applicants must disclose all violations of
federal criminal law potentially affecting the federal award
(e.g., fraud, bribery or gratuity violations)
14
Key Points
Internal control clarification (200.303)


The non-Federal entity must: (a) Establish and maintain
effective internal control over the Federal award that
provides reasonable assurance that the non-Federal entity is
managing the Federal award in compliance with Federal
statutes, regulations, and the terms and conditions of the
Federal award. These internal controls should be in
compliance with guidance in “Standards for Internal Control in
the Federal Government” [Green Book] issued by the
Comptroller General of the United States and the “Internal
Control Integrated Framework”, issued by the Committee of
Sponsoring Organizations of the Treadway Commission
(COSO).
Discussed on page 13 of COFAR FAQ document
15
Five components of internal control
- Adapted from COSO cube by AuditWatch
Key Points
Procurement Standards (200.317 – 200.326)
 Five procurement methods outlined (The “Bear
Claw”)
-


Micro-purchases (< $3,000)
Small purchase ($3,000 - $150,000)
Sealed bids (as appropriate)
Competitive proposals (as appropriate)
Noncompetitive proposals (as appropriate)
New concepts for Nonprofits (similar to old
state/local government rules)
All auditees should review these changes carefully
to determine the impact on their procurement
procedures, in particular those relating to
procurement card programs
17
Key Points
Procurement Standards (200.317 – 200.326)
(Continued)

Discussed on pages 15 and 16 of COFAR FAQ document
 One-year deferral in place on the
procurement rules – one year from the first
day of organization’s fiscal year after
12/26/14
-
12/31 year-end = 1/1/16
3/31 year-end = 4/1/16
6/30 year-end = 7/1/16
9/30 year-end = 10/1/16
18
Key Points

Subrecipient vs. Contractor (200.330)
-
Guidance on determination relocated to administrative
requirements section
Term “contractor” replaces “vendor”
•

Discussed on page 4 of the McGladrey
whitepaper
Requirements for pass-through entities (200.331)
-

Criteria for determination basically unchanged
Discussed on pages 17 and 18 of COFAR FAQ document
Fixed amount subawards (200.332)
-
Allowed with permission under certain circumstances
Discussed on page 18 of COFAR FAQ document
19
Key Points

Fixed amount awards and Cost Principles (200.400
and 200.401)
-

Nonprofits can keep a “profit” on such awards
Cost principles used as a guide in pricing of such awards
Discussed on page 19 of COFAR FAQ document
Direct and Indirect Costs (200.412 – 200.415)
-
-
Federal agencies will have to accept a non-federal entity’s
negotiated indirect cost rate unless statute or regulation
allows for an exception or agency head approves
10% “de minimis” rate (total modified direct costs) available
for those recipients that never had an official rate
Discussed on page 20 of COFAR FAQ document
20
Key Points

Compensation – Personal services (200.430)
-
-
Purpose was to reduce the administrative burden of
documenting time and effort
More principles based
Less prescriptive on documentation and places more
emphasis on internal controls over personnel-related costs
However, there is a requirement that charges must be
based on records that accurately reflect the work
performed and there are requirements for such
records
Will allow entities to replace detailed time-and-effort reports
with performance-based reporting (based on milestones).
• The appropriate agency will have to approve the use of
such an approach, but entities could use performanceoriented metrics to account for multiple awards and
their combined use.
21
Key Points
Audit Requirements
 Revisions focus audit on risk
-
Increases audit threshold.
Strengthens risk-based approach to determine Major
Programs.
Provides for greater transparency of audit results.
Strengthens agency use of the single audit process.
Provides for public outreach to focus Compliance
Supplement on requirements of highest risk.
22
Audit Requirements
Basic Structure of Single Audit Process Unchanged










Audit threshold (200.501).
Subrecipient vs. Contractor (200.501(f) & 200.330).
Biennial (200.504) & Program-specific (200.507) audits.
Non-Federal entity selects auditor (200.509).
Auditee prepares financial statements & SEFA(200.510).
Audit follow-up & corrective action(200.511 & 200.521).
9 month due date (set in law) (200.512(a)).
Reporting to Federal Audit Clearinghouse (200.512).
Major programs determined based on risk (200.518).
Compliance Supplement overall format (Appendix XI).
23
Single audit threshold

Increase audit threshold from $500,000 to $750,000
-
Based on single audits submitted to the FAC there could
be approximately 5,000 fewer entities subject to a single
audit, but there would only be a reduction in dollars
covered of less than 1/2 percent
24
Type A threshold

Groupings are based on dollars — Type A programs
are those above the dollar threshold, Type B are
those below
-
The minimum threshold is increased from $300,000 to
$750,000.
Thresholds increase when amounts expended in excess of
$25 million.
25
Percentage of coverage requirement
 Minimum coverage required as follows:
Type of Auditee
Current
New
Not Low Risk
50%
40%
Low Risk
25%
20%
4
4
26
Low-risk auditee
Current (must meet all) :

Single audits performed on
annual basis

Auditor’s opinions on financial
statements and SEFA unqualified

No material weakness under
requirements of GAGAS

In either of preceding two years,
none of Type A programs had:
Material weakness
Noncompliance with
material effect
Known or likely questioned
costs that exceed 5% of
total federal awards
expended for a Type A
program
New:

Single audits performed on
annual basis

Auditor’s opinions on financial
statements and SEFA unmodified

No going concern opinion

No material weakness under
requirements of GAGAS

In either of preceding two audit
periods, none of Type A
programs had:
Material weakness
Modified opinion on
compliance
Known or likely questioned
costs that exceed 5% of
total federal awards
3
expended for a Type A
program
27
Single audit – Future enhancements –
From the OMB


Included language to allow for future combining of
the audit reporting and the data collection form if
permitted under auditing standards and the
approved FAC data collection (200.515(e)).
Single audit resolution project currently under
supervision of COFAR is aimed at improving
coordination for cross-cutting findings and improving
transparency of management decisions.
28
OMB – Uniform Grant Guidance – Action items
 Auditee education:
-
Auditees need to start planning now!
Consider…
•
•
•
Have you read the new guidance?
Do you have a plan to become compliant?
How are you going to be addressing the new rules for
1.
2.
3.
4.
5.
•
•
•
Procurement,
Allocating indirect costs,
Time and effort reporting,
Subrecipient monitoring,
Internal control?
Is senior management involved?
Are you aware of available resources?
How are you planning to train staff?
29
Q&A and Workshop Discussion
30
This document contains general information, may be based on authorities that are subject to change, and is not a substitute for professional advice
or services. This document does not constitute assurance, tax, consulting, business, financial, investment, legal or other professional advice, and
you should consult a qualified professional advisor before taking any action based on the information herein. McGladrey LLP, its affiliates and
related entities are not responsible for any loss resulting from or relating to reliance on this document by any person.
McGladrey LLP is an Iowa limited liability partnership and the U.S. member firm of RSM International, a global network of independent accounting,
tax and consulting firms. The member firms of RSM International collaborate to provide services to global clients, but are separate and distinct legal
entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party.
McGladrey®, the McGladrey logo, the McGladrey Classic logo, The power of being understood®, Power comes from being understood®, and
Experience the power of being understood® are registered trademarks of McGladrey LLP.
© 2013 McGladrey LLP. All Rights Reserved.
McGladrey LLP
800.274.3978
www.mcgladrey.com