Implementation tips: Federal uniform grant guidance

It’s a new world of grant management for recipients of federal awards. They are operating under the changed framework of rules for awards received on or after Dec. 26, 2014. The new guidance — Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance) — has several purposes:
  • Reduce administrative burden associated with grants management
  • Eliminate duplicative and conflicting guidance
  • Provide for consistent and transparent treatment of costs
  • Strengthen oversight
  • Reduce the risk of fraud, waste and abuse

The Uniform Guidance supersedes and streamlines requirements from the Office of Management and Budget (OMB) Cost Circulars A-21, A-87 and A-122; administrative rules in OMB Circulars A-102 and A-110; and audit requirements outlined in OMB Circulars A-50 and A-133. It consolidates these circulars into a format that aims to improve both clarity and accessibility.

As your organization considers its own implementation plan, see the following tips to guide you through your process.

Tip 1: Actually read the Uniform Guidance.
As daunting as it may seem, there is no substitute for going straight to the source. Familiarize yourself with the structure and content of the Uniform Guidance. Pay particular attention to Subparts D and E, which outline both new and existing administrative rules and cost principles.

Of particular interest: Cost principles
Subpart E of the Uniform Guidance outlines 55 items of cost, strengthens language under certain cost categories for clarification and adds new categories of costs. For example, new provisions have been added for family-friendly travel and social media. Some costs may be allowable, but only with the awarding agency’s advanced approval.

Tip 2: Review your own internal chart of accounts against Subpart E.
Ensure all allowable items of cost are captured and all disallowed costs are ineligible for coding to federal awards. To the extent costs may need preapproval from a granting agency, plan ahead for those approvals by asking for them in your grant applications.

Of particular interest: Compensation — personal services
As opposed to the prescriptive rules in the OMB Circulars for supporting the cost of personal services, the new Uniform Guidance is principles-based instead of rules-based. The OMB was concerned that recipients, in their effort to conform with the old rules, had processes in place that appeared on the surface to be compliant, but in reality were not supported by a well-designed system of internal controls. Because of that concern, the Uniform Guidance specifies that personnel expenses charged to federal awards must be recorded within a system of internal control that provides reasonable assurance the charges are accurate, allowable and properly allocated. Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed.

Tip 3: Maintain a written policy for compensation practices.
Maintaining written policies will be new to many organizations. In developing such documentation, consider not only operational processes such as payroll and compensation, but also common control matters such as cost transfers between awards, guidance to employees for correcting errors on submitted time sheets, the timeline for submission of all time reports, and an outline of the review and approval process.

Of particular interest: Indirect cost rates
These rules are among the more popular changes introduced. Federal agencies must now accept the federally negotiated indirect cost rate of an organization unless there is an exception by statute or regulation. Organizations that do not have or never have had a federally negotiated indirect cost rate may use a de minimis flat rate of 10% if it is used consistently for all federal awards. This de minimis rate can be used indefinitely or until an organization wishes to negotiate an indirect cost rate. Similarly, pass-through entities are required to accept an approved federally recognized indirect cost rate of a subrecipient; if a rate does not exist, the pass-through entity must either negotiate one or allow a de minimis rate of 10%. To reduce the administrative burden, organizations with federally negotiated rates can receive an extension of the current rate with no further negotiation for a period of up to four years, with possible renegotiation.

Tip 4: Decide now which route to take for indirect cost rates.
If you do not want the administrative burden of negotiating a first-time rate, the 10% de minimis option might be attractive. Current applications for grants and budgeting should reflect your choice in this regard. Pass-through entities and subrecipients should ensure that subaward agreements and budgets are reflective of these changes.

Of particular interest: Subrecipient monitoring
Pass-through entities making subawards to subrecipients may have historically struggled to find the regulations applicable to their responsibilities toward subrecipients. Much of the historical guidance was included in OMB Circular A-133 — the audit guidance instead of the administrative circulars. Guidance has been consolidated and moved to Subpart D, focused on administrative requirements. Additions to existing rules about elements of subcontracts and monitoring include not only the indirect cost rates provision, but also a requirement for pass-through entities to conduct a risk assessment of subrecipients and include in the assessment information about the nature and amount of monitoring performed. In adding this requirement, the OMB acknowledges that not all subrecipients are created equal and the level of monitoring needs to be tailored to the specific risks of that subrecipient. For example, if a subrecipient is new to administering federal awards, has new personnel, or has substantially changed systems, the level of monitoring may be more robust than for a subrecipient that has a long history of administering federal awards successfully and consistent personnel and procedures. The single audit previously undergone under OMB Circular A-133 by some subrecipients may no longer be required, given the increased audit threshold from $500,000 to $750,000 of federal expenditures.

Tip 5: Tailor monitoring.

Acceptable monitoring could include in-person site visits, desk reviews or agreed-upon procedures performed by an auditor, among other strategies.
Pass-through organizations should start developing risk assessment criteria for subrecipients and craft their monitoring procedures based on the results of those risk assessments. To the extent reviewing OMB Circular A-133 audit results was part of their monitoring procedures, pass-through entities must now consider other methods of monitoring for subrecipients no longer subject to a single audit.

Of particular interest: Procurement standards
Nonprofit organizations and higher education institutions previously covered under OMB Circular A-110 will find the procurement requirements much more prescriptive. The Uniform Guidance specifies that procurement policies be documented and include written standards of conduct for conflicts of interest and the performance of employees engaged in the selection, award and administration of contracts. Further, organizations must use one of five stipulated methods of procurement.

Tip 6: Create or update documented procurement policies.
If your organization doesn’t have documented procurement policies, it should create them. If your organization does have them, they should be updated to include the five methods of procurements and other details such as standards of conduct, as outlined in the Uniform Guidance. For common types of procurements — e.g., those made with a purchase card or P-card — consider aligning purchase limits to the new micropurchase threshold.

Of particular interest: Single audits
In addition to the increased single audit threshold, several other changes to the audit rules impact recipients:

To the extent a recipient receives audit findings, the corrective action plan (CAP) will have to be presented in a document separate from the auditor’s findings. This differs from the guidance in OMB Circular A-133, which did not specify the form of the CAP. Further, both the CAP and summary schedule of prior audit findings must address findings related not only to the federal awards, but also to findings related to the financial statements required to be reported in accordance with Generally Accepted Government Audit Standards issued by the U.S. comptroller general. Single audit submissions to the Federal Audit Clearinghouse will now make public the entire Single Audit Package, not just the Data Collection Form.

Tip 7: Consider reputational and reporting concerns.
Put mechanisms in place to make sure that management teams and governing boards are aware of the public nature of their single audit reports. Have plans ready in the event that your institution needs to respond to any public questions that may come from reviewing the data and any audit findings. Finally, ensure that no protected personally identifiable information is included in your submission.

Plan your implementation and prepare staff

For the best shot at successful adoption, ensure that senior management is aware of and supports your implementation plan. Include a representative cross-section of financial, programmatic and compliance personnel on the implementation team, and provide training to staff who need to be aware of the new rules, policies and procedures.

See and search for Uniform Guidance.

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