Gold Bar With US Dollars Feature
Checklist

Uniform Grant Guidance Checklist

by Grant Lam

The Office of Management and Budget (OMB) issued massive reform surrounding the administration of federal funds and that reform is known as the Uniform Grant Guidance (“Guidance”). The objectives of the Guidance are to eliminate unnecessary and burdensome administrative requirements, operate with a smarter, more risk-based approach, strengthen the accountability surrounding federal dollars and ensure that the federal government is bearing their fair share of the costs.

There are three primary categories of the reform:

  1. Administration Requirements
  2. Cost Principles
    Both the Administrative Requirements and the Cost Principles changes took effect for any new federal awards entered into after December 26, 2014, and for any existing awards that received incremental funding and had a change to the terms and conditions made after December 26, 2014.
  3. Single Audits

The Single Audit threshold has been increased from $500,000 to $750,000, effective for fiscal years ending December 31, 2015 and later.

All federal grant recipients need to understand the changes introduced by the Guidance and evaluate how it impacts their organizations; you should take an inventory of your awards and identify which awards are under the new Guidance and which are still under the previous circulars. By effectively implementing the guidance, you not only comply with the new rules and regulations, but also ensure that you are getting your fair share of reimbursement. If you do not understand and effectively implement the Guidance, you may put your organization out of compliance, which may jeopardize your potential for future funding.

In order to effectively implement the reform it will take the collaborative efforts of the federal funding agencies, grant recipients and accountants. Below, we’ve created a checklist to help you effectively implement the new Guidance.

Must vs. Should

When reading through the Guidance, make note that the term “must” is a steadfast requirement. and the term “should” is used to indicate best practices or recommended approaches, but not necessarily a strict requirement. If you do not implement a certain “should” requirement, ensure your alternative approach is in compliance within the spirit of the requirement.

 

Topic

Changes & New Concepts

Implementation Best Practices

Internal Controls

MUST understand the compliance requirements applicable to each award and have internal controls established such that the compliance requirements are being adhered to.

MUST take prompt action on audit findings.

MUST have controls to safeguard personal and sensitive information.

Your internal controls SHOULD be in compliance with guidance in the Green Book or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

 

Review all federal awards and identify the compliance requirements that are applicable to each award.

Ensure you have established and documented internal controls over applicable compliance requirements. 

Follow up with the federal funding agency or your auditor issuing the finding to understand the nature of the finding, remediate the finding and implement controls so that the finding is not repeated.

Identify materials such as client or participant files that include personal and sensitive information.

Ensure controls are in place that reasonably safeguards this information.

For electronic records, perform an assessment of your IT infrastructure to ensure strong cybersecurity.

Understand the concepts included in the Green Book and/ or COSO and consider structuring your internal control environment in accordance with one of these frameworks.

 

Subrecipient Monitoring

Pass Through Entities (PTEs) MUST include specific information in the subaward including CFDA #, DUNS #, federal program name, indirect cost rate information, and terms and conditions for closing out award

PTEs MUST perform a risk evaluation of the subrecipient

 

Review all subawards and ensure it includes the required information. Issue an addendum if necessary to get the required information in the subaward.

Evaluate the subrecipient’s experience with federal awards, the results of past audits and external federal monitoring, and whether there have been significant changes in personnel or systems.

Document the results of the risk evaluation.

Tailor your level of subrecipient monitoring based on the results of the risk evaluation.

 

Compensation

Have an established written payroll policies.

The new Guidance is less prescriptive on documentation and steadfast requirements and allows you more flexibility in accounting for compensation. However, the Guidance places an emphasis on having sound controls over payroll and requires that compensation be based on records that accurately reflect the work performed.

 

 

 

If you don’t have a written policy surrounding your payroll practices, work with your management and team to establish such a policy.

Ensure your federal payroll activity confirms to the written policy.

Ensure controls are in place over payroll such that only the time spent on federal awards is charged to the award.

Make sure your records are accurate and clearly track the work performed on an award.

If your current payroll system has passed audit inspection and you have a system in place that is working, do not significantly change the process; use this as an opportunity to improve effectiveness and efficiency. Identify and eliminate any procedures or documentation that were previously performed and maintained because the guidance required it, but it did not add value.

 

Indirect Costs

Federal funding agencies and pass through entities MUST accept a federally negotiated indirect cost rate.

The Guidance provides a de minimus indirect cost rate of 10% of MTDC (modified total direct costs) to entities who have never had a negotiated indirect cost rate

Allows for one-time extension without further negotiation of a federally approved rate up to four years

 

Understand your right to be reimbursed your fair share of costs and be assertive in establishing your right to be fairly compensated.

If denied the use of your federally approved rate or forced to take a reduced rate, ask for a written explanation and take it up the chain of command.

Weigh the pros and cons of accepting the 10% rate versus developing and negotiating a rate. A 10% indirect cost rate is fairly low compared to the indirect costs of most organizations. It may be worth your while to develop and negotiate for a higher rate as it will reap its benefit in the future.

Evaluate whether or not you have an indirect rate that enables you to fairly recoup your costs.

If you do have a fair rate, consider extending it rather than having to spend time developing and negotiating a new rate.

 

Procurement

MUST maintain a written conflict of interest policy.

MUST use one of the five methods of procurement.

Due to the magnitude of the change and additional requirements introduced, the OMB has granted a full one-year grace period.

Make sure you have adopted a written conflict of interest policy.

If it does not exist, work with your management to adopt such a policy.

Ensure employees are aware of the policy.

1)   Micro purchases: Used for purchases under $3,000 and requires to extent possible, distribute purchases  amongst vendors

2)   Small purchases: Used for purchases under $150,000 and requires that price quotes be obtained from reasonable number of sources

3)   Sealed bids: Used for purchases over $150,000 and requires public solicitation with a firm fixed price contract awarded to the responsible bidder with the lowest price.

4)   Competitive proposals: Similar to sealed bids. Used when sealed bids aren’t practical.

5)   Noncompetitive proposals (sole source): Used to secure services from only one source and allowed under certain circumstances, i.e. when item is only available from a single source

Determine if it would be practical to implement the new procurement standards now or deferring for next year. 

If deferring, document that election.

Single Audit

The Single Audit threshold has been increased from $500,000 to $750,000.

 The Single Audit changes take effect for fiscal years ending December 31, 2015 and later.

Take into consideration the new $750,000 threshold as you budget your federal spending for the year. You may avoid having a Single Audit if federal expenditures are below the new threshold.

 

A lot of work by a lot of people went into creating the Guidance. Now the challenging part is effectively implementing the reform and carrying out the Guidance in the way it was intended. This is the most significant reform to the federal funding rules in about 20 years. It may take another 20 years for a reform of this magnitude to occur. The time is now to understand the Uniform Guidance and take action.

August 26, 2015

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Grant Lam - Partner, Audit - San Francisco CA
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