Erin Auerbach, Esq. [email protected] Brette Kaplan Wurzburg, Esq.Brustein & Manasevit, PLLC [email protected] Mike Bender, Esq. [email protected].

Erin Auerbach, Esq.

[email protected]

Brette Kaplan Wurzburg, Esq. Brustein & Manasevit, PLLC

[email protected] www.bruman.com

Mike Bender, Esq.

[email protected]

Grants Administrative Changes under the New EDGAR

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 Drafting Policies and Procedures

2

Why are these rules important?

3

Recent OIG Findings (cont.)

Progreso Independent School District Board (Texas)

The mayor, his brother, the president of the School Board, another brother, the former district risk manager, and their father, the director of maintenance and transportation at the district, were indicted for a public contracting scam.

They were sentenced to prison for extracting bribes and kickbacks from several service providers.

The now former mayor: 21 months in prison and forfeit $314,000;

The now former school board president: 71 months in prison forfeit $300,000; and

The now former district risk manager: 10 months in prison and $12,800 in restitution.

The now former district director of maintenance and transportation: 151 months in prison, was ordered to forfeit $300,000, and was ordered to pay a fine of $10,000.

One of the service providers was also sentenced to 60 months in prison. 4

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.

5

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.

6

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.

7

Recent OIG Findings (cont.) Greenville Public School District (Mississippi)

The former superintendent pled guilty to charges of bribery, kickbacks, and embezzlement.

He conspired with the owner of Teach Them To Read, Inc., a company that provided reading services for at-risk youth, to award $1.4 million in district contracts in exchange for monetary kickbacks.

The former superintendent was sentenced and the owner of the company pled guilty for their roles in this scam.

The former superintendent was sentenced to 76 months in prison and 3 years of supervised release, and he was ordered to pay more than $1.2 million in restitution.

8

Recent OIG AuditsOhio Department of Education’s Administration of RTT

Finding 1: Improve Accuracy of Reported Performance data Reported meeting target for 2011-2012, but included info after June 30, 2012

Reported meeting target but did not have any supporting documentation E.g., 76% of LEAs/charters offered new teacher program; ODE reported 100% - assumed remaining 24% did not have new teachers

9

Recent OIG AuditsOhio Department of Education’s Administration of RTT

Finding 2: Did Not Ensure LEAs Complied with Federal Fiscal Requirements Maintenance of excess cash Funds used for unallowable activities

Unused tablets reassigned to non-RTT use Salaries not benefiting RTT program Shirts, gift cards, other promo items

Costs not adequately documented Allocation of costs to incorrect grants

10

Recent OIG AuditsLos Angeles Unified School District Internal Controls over Nonpayroll Purchases

No findings!!!

11

Recent Audits

“When we had concerns regarding specific purchases under the four cost types, we asked for more information from LAUSD officials and obtained reasonable responses.”

12

The New EDGAR

13

Key Parts of the NEW EDGARTitle 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

14

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

15

Effective Dates

December 26, 2014 – Direct Grants from ED July 1, 2015 – State Administered Programs July 1, 2016 – Procurement Rules Indirect Cost Rates When Due For Renegotiation

16

Part 76State-Administered Programs

17

Allowable Costs76.530 (pg 55)

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

18

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.

19

General Administrative Responsibilities76.700 – 76.702 (pg 63)

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.

20

Cash Management

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)

This would be switched in a Reimbursement Payment Process.

21

When Obligations Are Made76.707 (pg 66)

Type of Obligation When Obligation Occurs

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

Approved Pre-Agreement Cost

On the first day of the grant or subgrant performance period.

22

When May Begin to Obligate76.708 (pg 66)

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)

23

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)

24

Obligations During Carryover76.710 (pg 67) 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.

25

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)

26

Procedures to Ensure Compliance76.770 – 76.783 (pg 68-69)

Goes beyond 2 CFR Part 200, Subpart D A State shall have procedures for reviewing and approving applications and amendments, for technical assistance, for evaluating projects and for performing other admin responsibilities the State has determined necessary. A subgrantee may request a hearing if State

has violated a State or Federal statute.

27

Part 3474USDE Adoption and Exceptions

28

USDE Adopts 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.

29

USDE Exception 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.

30

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”.

31

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”

32

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

33

The Major Changes in Federal Grants Management

1. Focus on Outcomes

2. Performance Metrics

3. Risk Assessments

4. Financial Management Policies

5. Equipment Use

6. Micro Purchases

7. Corrective Action

8. Family Friendly Policies

9. False Claims Certifications

10. Audit Thresholds

34

Major Changes (cont.)

Part 200 has a MAJOR emphasis on strengthening accountability by improving policies that protect against waste, fraud

and abuse

35

Financial Management

Controls36

Financial Management Rules200.302(b) (pg 118)

Prior Rule 80.20(b)

1.Financial Reporting

2.Accounting Records

3.Internal Control

4.Budget Control

5.Allowable Cost

6.Source Documentation

7.Cash Management

2 CFR 200.302 (b)

1.Identification of Awards (NEW)

2.Financial Reporting

3.Accounting Records (Source Docs)

4.Internal Control

5.Budget Control

6.Written Cash Management Procedures (NEW)

7.Written Allowability Procedures (NEW)

37

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)

38

Where do we put financial identification information?

“All grant recipients must have the Federal award information in their financial systems and not just on the SEFA [Schedule of Expenditures of Federal Awards].” Letter, dated June 5, 2015

39

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

40

Financial Reporting (cont.)

NEW: Performance Metrics1. Compare actual accomplishments to objectives.

(quantify to extent possible)2. Reasons goals were not met if appropriate4. Additional pertinent information (e.g. analysis and

explanation of cost overruns, high unit costs) Significant developments

a. Problems, delays. Adverse conditions that would impair ability to meet objective of the award

b. Favorable developments. Finishing sooner or at less cost

41

What performance reporting changes should we expect?None. “The program measures currently used by the Department program offices comply with the Uniform Guidance requirements.”

- June 25, 2015 FAQs

42

3) Accounting Records 200.302(b)(3) (pg 119)

Combined 80.20(b)(2) and 80.20(b)(6):

Source Documentation Must Be Kept On:1. Federal Awards2. Authorizations3. Obligations4. Unobligated balances5. Assets6. Expenditures7. Income8. Interest (New) (Eliminated liabilities)

43

4) Internal Controls200.302(b)(4) (pg 119)

Essentially same as prior 80.20(b)(3):

Effective control over and accountability for:1. All funds2. Property3. Other assets

Must adequately safeguard all assets

Use assets solely for authorized purpose

44

The Definition of Internal Controls 200.61 (pg 102)

Internal controls means a process, implemented by a non-Federal entity, designed to provide reasonable assurance regarding the achievement of objectives in the following categories:

a. Effectiveness and efficiency of operations;b. Reliability of reporting for internal and external use; andc. Compliance with applicable laws and regulations.

45

Internal Controls 200.303 (pg 119)a. 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

Controls in the Federal Government; and Internal Control Integrated Framework issued by the

Committee of Sponsoring Organizations of the Treadway Commission (COSO)

46

Internal Controls (cont.)200.303 (pg 119)

b.Comply with Federal statutes, regs, and the terms and conditions of the Federal awards.

c.Evaluate and monitor the non-Federal entity's compliance with statutes, regs and the terms and conditions of Federal awards.

d.Take prompt action when instances of noncompliance are identified including in audit findings.

e.Take reasonable measures to safeguard protected personally identifiable info (PII) and other information designated or deemed sensitive

47

Required Certification 200.415 (pg 148)

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.”

48

How often are we required to sign the required certification?

“The requirement to certify vouchers requesting payments applies to all subgrantees requesting a payment and must be provided with every request for payment under a subgrant, in the same way that the U.S. Department of Education requires all grantees and cooperative agreement recipients to certify all payment request submitted to the Department.” Letter, dated May 26, 2015

49

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

50

6) Written Cash Management Procedures 200.302(6) (pg 119)

NEW: Written Procedures to implement the requirements of 200.305

51

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)

52

Payment (cont.)200.305(b)(1)-(4) (pg 119)

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

53

Payment (cont.)200.305(b)(7)-(8) (pg 121)

NEW: Advances must be maintained in insured accounts

NEW: Pass through cannot require separate depository accounts

NEW: Accounts must be interest bearing unless:1. Aggregate federal awards under $120,0002. Account not expected to earn in excess of $500 per year3. Bank require minimum balance so high, that such account not

feasible4. A foreign gov’t or banking system prohibits or precludes

interest bearing accounts.

54

Payment (cont.)200.305(b)(9) (pg 121)

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 annually to HHS Payment Management System.

55

How do we calculate $500 of interest? Any additional interest earned over $500 must be remitted annually to HHS.

The $500 is typically applied to all grants, not applied individually per grant. Letter dated, June 11, 2015

56

7) Written Allowability Procedures200.302(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

57

Program Income 200.307 (pg 123)

Non-Federal entities are encouraged to earn income to defray program costs where appropriate. Costs of generating program income may only be deducted if:

Authorized by federal regulations or the Federal award; Costs are incidental and not charged to the Federal award.

Property from the sale of real property or equipment is not program income – apply post award property rules.

Program Income Must Be Deducted from Total Allowable Costs (except for IHEs and Research Non-profits) With prior approval may add to Federal award.

58

Subpart E – Cost Principles

59

Factors Affecting Allowability of Costs 200.403 (pg 143)

All Costs Must Be:1. Necessary, Reasonable and Allocable2. Conform with federal law & grant terms3. Consistent with state and local policies 4. Consistently treated5. In accordance with GAAP6. Not included as match7. Net of applicable credits (moved to 200.406)8. Adequately documented

60

Necessary & Reasonable

200.404 (pg 143) Consideration must be given to:

a. Whether cost is a 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;

b. The restraints or requirements imposed such as: Arms length bargaining (hint: procurement processes); Federal, state and local laws; and Terms of the grant award.

c. Market Prices for comparable goods or services in the geographical area;

d. Whether the individuals acted with prudence under the circumstances considering their responsibilities; and

e. No significant deviation from established prices.

61

Necessary & Reasonable (cont.)

Practical Questions Do I really need this? Is the expense targeted to valid programmatic/

administrative need? Is this the minimum amount I need to spend to meet

my need? Do I have the capacity to use what I am purchasing? Did I pay a fair rate? If I were asked to defend this purchase, would I be able

to?

62

Allocable 200.405 (pg 143) A cost is allocable to a Federal award or cost objective if the

goods or services involved are chargeable or assignable in accordance with relative benefits received. Incurred specifically for the award;

Benefits both award and other work and can be distributed in proportions that may be approximated using reasonable methods; and

Necessary to the overall operation of the entity and assignable to the award in accordance with this Part.

Can only charge in proportion to the value received by the program

Example: Agency purchases a computer to use 50% on the Federal grant program and 50% on a state program – can only charge half the cost to the grant.

63

Allocable Costs200.405(c) (pg 143) Any cost allocable to a particular Federal award under the

principles in Part 200 may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by Federal Statutes, regulations, or terms and conditions of the Federal awards, or for other reasons.

However, this prohibition would not preclude the non-Federal entity from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal award.

64

Allocable Costs (cont.)200.405(d) (pg 143) If a cost benefits two or more projects or activities in

proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on proportional benefit.

If cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then notwithstanding 200.405(c), the costs may be allocated or transferred to benefited projects on any reasonable documented basis.

65

Factors Affecting Allowability of Costs (cont.)200.403 (pg 119)

Be consistent with policies and procedures that apply uniformly to both federally- financed and other activities of the non-Federal entity.

Be accorded consistent treatment Can not charge cost as both direct and indirect

Be determined in accordance with GAAP Not be included as a cost or used to meet cost sharing or matching

66

Factors Affecting Allowability of Costs (cont.)200.403(g) (pg 143)

Adequately documented Amount of funds under grant 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 (see 76.730 page 68)

67

Methods for Collection, Transmission and Storage of Information 200.335 (pg 138)o NEW: When original records are electronic and cannot be

altered, there is no need to create and retain paper copies.

o When original records are paper, electronic versions may be substituted through the use of duplication or other forms of electronic media provided they:o Are subject to periodic quality control reviews, o Provide reasonable safeguards against alteration; and o Remain readable.

68

Applicable Credits 200.406 (pg 144)

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. Examples: purchase discounts, rebates or allowances,

recoveries or indemnities on losses, insurance refunds or rebates, adjustments of overpayments

69

Prior Written Approval 200.407 (pg 144)

NEW: In order to avoid subsequent disallowance: Non-Federal entity may seek prior written approval of cognizant agency (for indirect cost rate) or Federal awarding agency in advance of the incurrence of special or unusual costs

70

Direct v. Indirect Costs 200.413(c) (pg 146)

NEW: Salaries of administrative and clerical staff should be treated as “indirect” unless all of following are met:

1. Such services are integral to the activity2. Individuals can be specifically identified with

the activity3. Such costs are explicitly included in the

budget4. Costs not also recovered as indirect

71

Collection of Unallowable Costs200.410 (pg 145) NEW: Payments made for costs determined to be unallowable by either the Federal awarding agency or pass-through must be refunded (including interest) to the Federal government in accordance with instructions from the Federal agency that determined the costs are unallowable.

72

Selected Items of Cost

There are 55 specific items of cost!

Listed on page 94.

Starts at 200.420 (pg 150)

73

Selected Items of Cost ExamplesAdvertising/PR 200.421 (pg 150)

◦ Allowable for programmatic purposes including:◦ Recruitment◦ Procurement of goods◦ Disposal of materials◦ Program outreach◦ Public relations (in limited circumstances)

74

Selected Items of Cost Examples (cont.)

Alcohol 200.423 (pg 151) Not allowable

Collections of Improper Payments 200.428 (pg 152) The costs incurred by the non-Federal entity to

recover improper payments are allowable as either direct or indirect costs, as appropriate.

75

Selected Items of Cost Examples (cont.)

Conferences 200.432 (pg 158) Prior Rule: Generally allowable

Includes Meals / Conferences / Travel and Family Friendly Policies

Allowable conference costs include rental of facilities, costs of meals and refreshments, transportation, unless restricted by the federal award

NEW: Costs related to identifying, but not providing, locally available dependent-care resources

Conference hosts must exercise discretion in ensuring costs are appropriate, necessary and managed in manner than minimizes costs to federal award

76

Selected Items of Cost Examples (cont.)Conferences 200.432

ED Restrictions on Food (1) Is a working lunch necessary? (2) Is the portion of the agenda to be carried out

during lunch substantive and integral to the overall purpose of the conference or meeting?

(3) Is there a genuine time constraint that requires the working lunch?

(4) If a working lunch is necessary, is the cost of the working lunch reasonable?

(5) Has the SEA or LEA carefully documented that a working lunch is both reasonable and necessary?

77

Selected Items of Cost (cont.)

Defense and prosecution of criminal and civil proceedings, claims, appeals 200.435 Generally, legal fees to defend are unallowable

NEW: Allowable if no monetary penalty or order of corrective action; costs must be reasonable and necessary, not prohibited, and not otherwise recovered from Federal gov’t or third party

Employee health and welfare costs 200.437

Removed “morale”

Documented policies for improvement of working conditions

Entertainment Costs 200.438

Cost of entertainment are unallowable

Amusement, Diversion, Social Activities

NEW: Except where costs might otherwise be considered programmatic and are authorized or have prior written approval of the Federal awarding agency.

7878

Selected Items of Cost (cont.)

Maintenance and Repair Costs 200.452 (pg 170) Costs incurred for utilities, insurance, security,

necessary maintenance, janitorial services, repair or upkeep of buildings and equipment, which neither add to the permanent value of the property nor appreciably prolong its intended life, but keep it in efficient operating condition are allowable. If adds to permanent value, etc. must be treated as

capital expenditures and are only allowable to the extent not paid through rental or other agreement. 79

Selected Items of Cost (cont.)

Pre-award Costs 200.458 (pg 171) Those costs incurred prior to the effective date of

the Federal award directly in negotiation or anticipation of the award

Costs must be necessary for efficient and timely performance of the scope of work

Allowable to the extent they would have been allowable if incurred after the effective date and ONLY with written approval from the Federal awarding agency.

80

Selected Items of Cost (cont.)

Participant Support Costs 200.456 (pg 170) Means direct costs for stipends, travel, registration

fees paid to or on behalf of participants or trainees (but not employees) in connection with conferences, or training projects. 200.75

Allowable with prior approval of the Federal awarding agency.

Training and Education Costs 200.472 (pg 176) Costs for employee development are allowable.

81

Selected Items of Cost (cont.) Travel Costs 200.474 (Changed) (pg 176)

Travel costs may be charged on actual, per diem, or mileage basis

Travel charges must be consistent with entity’s written travel reimbursement policies

NEW: Allows costs for “above and beyond regular dependent care”

NEW: Grantee must retain documentation that participation of individual in conference is necessary for the project

Travel costs must be reasonable and consistent with written travel policy / or follow GSA 48 CFR 31.205-46(a)

82

Time and Effort

Documentation

83

Documentation for Personnel Expenses200.430(i) (pg 154)

NEW: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed.

How staff demonstrate allocability If employee paid with federal funds, then

must show that the employee worked on that specific federal program cost objective 200.403(a)

84

Who must participate?200.430(i)(1) and (i)(4) (pg 154, 155) Must be maintained for all employees whose salaries are: Paid in whole or in part with federal funds Used to meet a match/cost share requirement NOT contractors

85

The Prior A-87 Rule (SEAs and LEAs)

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)

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

86

Documentation for Personnel Expenses (cont.)200.430(i)(1) (pg 154)

NEW: These records MUST:1. 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%

87

Documentation for Personnel Expenses (cont.)200.430(i)(1) (pg 154)

4. Encompass all activities (federal and non-federal);

5. Comply with established accounting polices and practices; and

6. Support distribution among specific activities or cost objectives.

88

COFAR Comments on Part 200 Rule

By focusing more on internal controls, the rule “mitigates the risk that a non-Federal entity… will focus on prescribed procedures... which alone may be ineffective in assuring full accountability.”

Uncovering weaknesses in internal controls or instances of fraud is goal. Not audit findings.

89

Cost Objectives200.28 (pg 98)

Program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capital projects, etc.

90

Cost Objectives (cont.)200.430(i)(1)(vii) (pg 154)

More than one Federal award.A Federal award and a non-Federal award.An indirect cost activity and a direct cost activity.Two or more indirect activities that are allocated

using different allocation bases.An unallowable activity and a direct or indirect cost

activity

91

Title I, Part A LEA-level Cost Objectives LEA-level Administration (public and equitable services)

School Choice Transportation and Supplemental Education Services (SES) 20% of LEA allocation (if school(s) identified for improvement) Within the 20% - parental outreach/ admin – up to .2% of LEA allocation

Equitable Services

Professional Development 10% of LEA allocation (if LEA identified for improvement)

Professional Development 10% of each school’s Title I Part A allocation (if school is identified for

improvement)

Parental Involvement At least 1% of LEA allocation

Districtwide Initiatives

Incentives and rewards to teachers to work in Title I schools in improvement, corrective action, and restructuring no more than 5% of LEA allocation

Title I Part A Programmatic Costs92

Not Cost Objectives

Federal programs

Title I, Part A

Doing my job

ESEA

Working on initiatives and programs that benefit Title I students

Director of Federal Programs

93

Time and Effort Guidance by OCFO (pg 269)

It is possible to work on a single cost objective even if an employee works on more than one Federal award or on a Federal award and a non-Federal award.

The key to determining whether it is a single cost objective is whether the employee’s salary and wages can be supported in full from each of the Federal awards on which the employee is working or from the Federal award alone if the employee’s salary is also paid with non-Federal funds.

http://www2.ed.gov/policy/fund/guid/gposbul/time-and-effort-reporting.html

94

Use of Budget Estimates200.430(i)(1)(viii) (pg 154)

Budget estimates alone do not qualify as support for charges to Federal awards May be used for interim accounting purposes if: Produces reasonable approximations Significant changes to the corresponding work activity are identified in a timely manner

Internal controls in place to review after-the-fact interim charges based on budget estimates

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Percentages200.430(i)(1)(ix) (pg 154) NEW: Because practices vary as to the activity constituting a full workload, records may reflect categories of activities expressed as a percentage distribution of total activities.

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Compliance200.430(i)(2) (pg 155)NEW: For records which meet the standards, the non-federal entity will not be required to provide additional support or documentation for the work performed.

DOL regulations for Fair Labor Standards Act must still be met (i.e. charges must be supported by records indicating the total number of hours worked each day).

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Noncompliance200.430(i)(8) (pg 155)For a non-Federal entity where the records do not meet these standards: Federal agency may require personnel activity reports (PARs), including prescribed certifications or equivalent documentation that support the records as required in this section. PARs are not defined!!

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Reconciliation200.430(i)(1)(viii)(C) (pg 154)

NEW: All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.

99

Substitute Systems200.430(i)(5) (pg 155)

States, local governments and Indian tribes encouraged to adopt “substitute systems” if approved by cognizant agency for indirect cost. No longer applies to nonprofits.

Still acceptable to allocate sampled employees’ supervisors, clerical and support staffs, based on the result of the sampled employees.

100

Alternative Proposals200.430(i)(6) (pg 155)

NEW: Cognizant agencies for indirect costs are encouraged to accept alternative proposals based on outcomes and milestones for program performance.

These plans are acceptable as alternatives to the Part 200 standards.

101

Blended Funding200.430(i)(7) (pg 155)

A non-Federal entity may submit performance plans that incorporate funds from multiple Federal awards and account for their combined use based on performance-based metrics, if approved.

Must submit a request for a waiver that includes certain information, including the method of charging costs.

102

What does the time and effort documentation rules mean?What guidance does the Department have for the types of documentation and internal controls that are necessary to take advantage of the new flexibilities for tracking time and effort?

Substitute Systems OCFO guidance is still valid (reviewing it) This does NOT require any grantee to change their current

system for time and effort reporting. We know that each grantee’s system is unique. The new flexibilities require a strong internal controls

program to ensure accountability. FAQ E-7 through E10, dated June 25, 2015.

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Procurement104

Contract vs. Grant 200.330 (pg 135)No change from the current requirement.

Entities must clearly determine what is a subgrant and what is a contract.

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Procurement by States200.317 (pg 129)

Still provides flexibility for StatesAll other nonfederal entities follow policies and

procedures under Section 200.318-200.326.

106

General Procurement Standards 200.318(a) (pg 129) All nonfederal entities must have documented procurement procedures which reflect applicable Federal, State, and local laws and regulations.

107

Contract Administration 200.318(b) (pg 129) Nonfederal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of the contract

108

Conflict of Interest 200.318(c)(1) (pg 129)

Must maintain written standard of conduct, including conflict of interest policy.

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

109

Conflict of Interest (cont.)200.318(c)(1) (pg 129)

Must neither solicit nor accept gratuities, favors, or anything of monetary value from contractors/ subcontractors.

However, may set standards for situations in which the financial interest is not substantial or the gift is an unsolicited item of nominal value.

Standards of conduct must include disciplinary actions applies for violations.

110

Conflict of Interest (cont.)200.318(c)(2) (pg 130) NEW: 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

111

Conflict of Interest (cont.)200.112 (pg 112) The Federal awarding agency must establish

conflict of interest policies for Federal awards. 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.

112

Mandatory Disclosures200.113 (pg 113) NEW: Must disclose in writing, in a timely manner: All violations of Federal criminal law involving fraud,

bribery, or gratuity violations potentially affecting the Federal award.

Failure to make disclosures can result in remedies in 200.338 (remedies for noncompliance) including suspension and debarment.

113

Vendor Selection Process200.318(h) (pg 130) Must award contracts only to responsible contractors

possessing the ability to perform successfully: Contractor integrity Compliance with public policy Record of past performance Financial and technical resources

114

Competition200.319(a) (pg 130)

All procurement transactions must be conducted with full and open competition. Must have protest procedures to handle disputes

To eliminate unfair advantage, contractors that develop or draft specifications, requirements, statement of work, and invitations for bids or RFPs must be excluded from competing for such procurements.

115

Competition (cont.)200.319(a) (pg 130)

Situations that restrict competition:1. Unreasonable requirements on firms to qualify to do business2. Requiring unnecessary experience or excessive bonding3. Noncompetitive pricing practices4. Noncompetitive awards to consultants on retainer5. Organizational conflicts of interest (see 200.318(c)(2))6. Specifying a brand name instead of allowing “an equal”7. Any arbitrary action in the procurement process

116

Competition (cont.)200.319(b) (pg 131)

Must prohibit the use of statutorily or administratively imposed state or local geographical preferences in the evaluation of bids or proposal, except where applicable Federal statutes expressly mandate or encourage geographic preference. Does not preempt state licensing laws. Exception: architectural and engineering services (if

provides appropriate number of qualified firms).

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Competition (cont.)200.319(c) (pg 131)

Written procedures for procurement must ensure all solicitations: Incorporate a clear and accurate description of the

technical requirements for materials, product or service to be procured; and “Brand name or equivalent” may be used as needed, but the

specific features of the named brand which must be met by the offers must be clearly states

Identify all requirements which the offerors must fulfill and all other factors to be used in evaluating bids or proposals.

118

Methods of Procurement200.320 (pg 131) Method of procurement:

NEW: Micro-purchase Small purchase procedures Competitive sealed bids Competitive proposals Noncompetitive proposals

119

Micro-Purchase 300.320(a) (pg 131) NEW: Acquisition of supplies and services under $3,500

or less. $2,000 for construction subject to the Davis-Bacon Act

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.

120

Small Purchase Procedures300.320(b) (pg 131)

Good or service that costs $150,000 or less (NEW: Simplified Acquisition Threshold was raised

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”

121

Sealed Bids300.320(c) (pg 130) Over $150,000

Organization may set lower threshold

Bids are publically solicited. Appropriate when:

A complete, adequate and realistic specification or description of good or service is available;

Two or more responsible bidders are willing and able to compete effectively for the business

Selection of vendor can be made principally based on price and it’s a firm fixed price contract.

122

Competitive Proposals300.320(d) (pg 132) Over $150,000

Organization may set lower threshold

Award contract to responsible vendor whose proposal is most advantageous to the program, considering price and other factors.

Generally used when sealed bid is not appropriate.

123

Noncompetitive Proposals200.320(f) (pg 132)

Appropriate only when: The item is only available from a single source; There is a public emergency that will not permit

delay; NEW: The Federal awarding agency or pass-through

expressly authorizes noncompetitive proposals in response to a written request from non-Federal entity; or

After soliciting a number of sources, competition is determined inadequate.

124

Contract Cost and Price200.323 (pg 133)

NEW: Must perform a cost or price analysis in connection with every procurement action over $150,000, including contract modifications

Independent estimate before receiving bids or proposals. Cost analysis generally means evaluating the separate cost

elements that make up the total price (including profit) Price analysis generally means evaluating the total price

125

Suspension and DebarmentAppendix II(H) (pg 200)

Cannot contract with vendor who has been suspended or debarred Excluded Parties List System in the System for Award Management (SAM)

2 CFR Part 180 (OMB Debarment Suspension Rules) and 2 CFR 3485 (USDE Rules)

126

Suspension and Debarment2 CFR 180.300

For contracts over $25,000 you must verify that the person with whom you intend to do business is not excluded or disqualified.

This MUST be done by either:a. Checking SAM; orb. Collecting a certification from that person; orc. Adding a clause or condition to the covered

transaction with that person.

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Property Management

128

Equipment 200.33 (pg 99) Equipment: tangible, nonexpendible, personal property

having a useful life of more than one year and an acquisition cost of $5,000 or more per unit.

Grantee may also use its own definition of equipment as long as the definition would at least include all equipment defined above.

129

Supplies 200.94 (pg 106) All tangible personal property other than

equipment NEW: Computing devices are supplies is less

than $5,000

NEW: Computing devices 200.20 (pg 97) Machines used to acquire, store, analyze, process,

public data and other information electronically Includes accessories for printing, transmitting and

receiving or storing electronic information

130

Do we still need to track small and attractive Items? Maybe. Entities must maintain “effective control over, and

accountability for, all funds, property and other assets.”

Regardless of cost, grantee must maintain effective control and “safeguard all assets and assure that they are used solely for authorized purposes.” 200.302(b)(4) (pg 119)

131

Equipment200.313(a) and (c)(4) (pg 127) NEW: Conditional Title vests with the non-Federal entity.

NEW: Cannot encumber the property without approval of Federal agency or Pass-through agency

But NEW: When acquiring replacement equipment, may use the equipment to be replaced as a trade-in or sell the property and use the proceeds to offset the cost of the replacement property.

132

Use of Equipment 200.313(c)(1) and (2) (pg 127)

Equipment must be used by the Non-Federal entity in the program or project for which it was acquired as long as needed, whether or not the project or program continues to be supported by the Federal award.

When no longer needed, may be used in other activities with the following priority:1. Projects supported by Federal awarding agency2. Project funded by other Federal agencies

When used it may be shared (according to the above priorities) provided such use will not interfere with work on the original projects/programs.

Exception – Private Schools 76.661 (page 61)

133

Equipment Procedures200.313 (d) (pg 127)

Procedures for managing equipment must meet the following requirements:

1. Property records Description, serial number or other ID, source of funding, title,

acquisition date and cost, percent of federal participation, location, use and condition, and ultimate disposition date including sale price

2. Physical inventory at least every two years3. Control system to prevent loss, damage, theft

All incident must be investigated

4. Adequate maintenance procedures5. If authorized or required to sell property, proper sales

procedures to ensure highest possible return.

134

Disposition of Equipment 200.313(e) (pg 127)

When property is no longer needed in any current or previously Federally-funded supported activity, must follow disposition rules: NEW: Nonfederal entity must request disposition

instructions from the federal awarding agency if required by the terms of the grant.

Otherwise, may be retained, sold or otherwise disposed as follows: Over $5,000 – pay federal share

If equipment is sold: Federal awarding agency may permit non-Federal entity to deduct and retain $500 or 10% of the proceeds for selling and handling instructions.

Under $5,000 – no accountability (still must formally dispose)

135

Disposition of Supplies200.314 (pg 128)

If there is a residual inventory of unused supplies exceeding $5,000 in total aggregate value upon termination or completion of the project or program and the supplies are not needed for any other federal award, must compensate the federal government for its share.

136

Requirements of Pass-through Entities

137

Federal Awarding Agency Review of Risk Posed by Applicants 200.205 (pg 115)

NEW: Must have in place a framework for evaluating risks posed by applicants, which may include reviewing:1. Financial Stability

2. Quality of Management System

3. History of Performance

4. Audit Reports

5. Applicant’s ability to effectively implement program

138

Specific Conditions200.207(a) (pg 116)Federal agency or pass-through agency may impose additional Federal award conditions: Require reimbursement;

Withholding authority to proceed until evidence of acceptable performance;

Additional detailed reporting

Additional project monitoring;

Require grantee to obtain technical or management assistance; or

Establish additional prior approvals.

139

Specific Conditions (cont.)200.207(b)-(c) (pg 116)

Right to Notice:1. Nature of additional requirements, 2. Reason why imposed, 3. Nature of the action ned to remove the

requirement's; 4. Time for completing actions;5. Method for requesting reconsideration.

Specific conditions MUST be removed once corrected.

140

Requirements for Pass-through Entities 200.331 (pg 136)

NEW: All pass-through entities MUST:

a. Ensure subawards are clearly identified with specific data

b. Evaluate subrecipient’s risk of noncompliance Prior experience with same or similar subawards; Results of previous audits; Whether new personnel or new or substantially changed

systems; and Extent and results of Federal monitoring.

141141

Requirements for Pass-through Entities (cont.)200.331 (pg 137)

c. Consider imposing specific conditions

d. Monitor as necessary to ensure subaward is used for authorized purposes, which must include: Reviewing financial and programmatic reports; Ensure timely and appropriate action to correct all deficiencies; and Issue management decision for audit findings as required under

200.521.

e. Depending on assessment of risk, the following monitoring tools may be useful to ensure proper accountability and compliance with program requirements and achievement of performance goals: Training + technical assistance on program-related matters; On-site reviews; and Arranging for “agreed-upon-procedures” engagements (described in

200.425). 142142

Requirements for Pass-through Entities (cont.)200.331 (pg 137)

f. Verify subrecipients have audits as required in Subpart F

g. Consider whether results require adjustments to the pass-through entity’s own records

h. Consider taking enforcement actions 200.338.

143143

Remedies for Noncompliance200.338 (pg 139) NEW: If noncompliance can not be remedied with Specific

Conditions, the entity may take one or more of the following actions: Temporarily withhold cash payment pending correction Disallow all of part of the cost Wholly or partly suspend or terminate the Federal award (see

200.339 Termination) Initiate suspension or debarment proceedings under 2 CFR

Part 180 Withhold further Federal awards for the project or program Take other remedies that may be legally available.

144

Audit Requirements

145

Audit Requirements200.501 (pg 177)

NEW: Threshold increased to $750,000The federal agency, OIG, or GAO may arrange for audits in addition to single audit

146

Federal Agency Responsibilities 200.513 (pg 184)

NEW: The federal awarding agency must use cooperative audit resolution to improve federal program outcomesCooperative Audit Resolution: means the use of audit

follow-up techniques which promote prompt corrective action by improving communication, fostering collaboration, promoting trust and developing an understanding between the Federal agency and non-Federal entity 200.25.

147147

Audit Findings200.516 (pg 188)The auditor must report (for major programs):

Significant deficiencies and material weaknesses in internal controls

Significant instances of abuse Material noncomplianceKnown questioned costs > $25,000

Auditor will not normally find questioned costs for a program that is not audited as a “major program”NEW: But if auditor becomes aware of questioned costs

> $25,000 for non-major program, must report

148148

When will auditors start to audit using Part 200?

Beginning of grantee’ fiscal year

Uniform Guidance audit requirements apply

The First audit period subject to 2 CFR Part 200, Subpart F ends on

First Audit that is subject to the 2 CFR Part 200, Subpart F, must be submitted on

January 1, 2015

January 1, 2015 December 31, 2015

September 30, 2016

July 1, 2015 July 1, 2015 June 30, 2016 March 31, 2017

October 1, 2015

October 1, 2015

September 30, 2016

June 30, 2017

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QUESTIONS?150

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not create an attorney-client relationship with Brustein & Manasevit. 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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