Changes to Federal Programs & Single Audits (A-87, A-21, A-122, A-102, A-110, A-89, A-133 & A-50) The New OMB Uniform Guidance Presenter Richard Cunningham Quality Assurance & Technical Specialist Center for Audit Excellence State of Ohio Auditor s Office 2 1
Agenda Background Effective Dates Roadmap of New Requirements Federal Exceptions Granted 3 4 2
Background Advance Notice of Grants Reform Issued Feb. 2012 Proposed OMB Uniform Guidance Issued Jan. 2013 Final Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Issued Dec. 26, 2013 5 Background Frequently Asked Questions - Issued 2/12/14 - Updated 8/29/14 - Updated 11/2014 - Updated 9/10/15 Joint Interim Final Rule Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards - Published by each federal agency - Published 12/19/14 - Effective 12/26/14 - Technical corrections - 60 day comment period 6 3
Background 7/22/2015 Duncan Hunter Act Section 872 - Appendix XII added - Other sections amended Joint Interim Final Rule Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards - Correcting amendments issued on 9/10/15 - Effective immediately 7 8 4
General Information Where can I find the Uniform Guidance? http://www.ecfr.gov/cgi-bin/textidx?tpl=/ecfrbrowse/title02/2cfr200_main_0 2.tpl Does this apply to me? Yes if you receive or audit ANY federal grants! 9 General Information What is the effective date? Federal Agencies were required to adopt the guidance and implement the requirements to be effective by 12/26/14 All Federal Agencies were directed to implement the guidance in unison to provide for a smooth transition for entities that are required to comply This occurred in the Joint Interim Final Rule published on 12/19/14 10 5
General Information What is the effective date? (cont d) Non-Federal entities: Administrative requirements and cost principles apply to new awards and to additional funding to existing awards (funding increments) made after 12/26/14 This does not retroactively change the terms and conditions for funds a non-federal entity already received prior to that date Existing Federal awards will continue to be governed by the terms and conditions of the Federal award 11 General Information What is the effective date? (cont d) Non-Federal Entities - Audit Requirements are effective for fiscal years beginning on or after 12/26/14 For fye 12/31 entities, audit requirements would be effective for the 1/1/15 12/31/15 fiscal year For fye 6/30 entities, audit requirements would be effective for the 7/1/15 6/30/16 fiscal year Audit requirements cannot be early implemented 12 6
General Information What is the effective date? (cont d) OMB clarified in their 9/10/15 FAQ s & implemented into Final Rule 200.110: Allowing a grace period of 2 full fiscal years after the effective date for non-federal entities to comply with the new procurement standards. If the grace period is used, the non-federal entity must document this decision in their internal procurement policies. 13 General Information What is the effective date? (cont d) OMB clarified in their 8/29/14 FAQ s: Existing negotiated indirect cost rates will remain in place until they are due to be renegotiated. 14 7
General Information What is the effective date? (cont d) OMB clarified in their 8/29/14 FAQ s: Q: How does the new Uniform Guidance apply to Federal awards made prior to 12/26/14 when some subawards are made prior to 12/26/14 and others are made after 12/26/14? A: The effective date of the Uniform Guidance for subawards is the same as the effective date of the federal award from which the subaward is made. The requirements for a subaward, no matter when made, flow from the requirements of the original Federal award from the Federal awarding agency. 15 General Information What is the effective date? (cont d) OMB FAQ.110-7: The new rules apply as of the Federal award date (see 200.39) to new awards AND (will cover the rest on slide 24) 2 CFR 200.39 Federal award date means the date when the Federal award is signed by the authorized official of the Federal awarding agency. 16 8
General Information What is the effective date? (cont d) For example: USDE awards a new $1 million grant to ODE on 12/1/14; and ODE subsequently awards $500,000 to LSD s on 12/23/14, and awards the remaining $500,000 to LSD s on 12/28/14; then All of the LSD s receiving the subawards will be following the old Administrative Requirements & Cost Principles because the federal agency awarded the grant prior to 12/26/14. The LSD s and their auditors will not know the date the Federal agency awarded the grant to ODE and therefore, which guidance the grant falls under unless ODE provides that info to them. 17 General Information What is the effective date? (cont d) It is therefore IMPERATIVE (and required) that pass-through agencies include information in federal grant award documents indicating which guidance the award falls under (UG or old OMB Circulars). And for audit, non-federal entities, will be required to identify the transactions that fall under each grant, and the guidance applicable to that grant (UG or old OMB Circulars) 18 9
General Information What is the effective date? (cont d) OMB clarified in their August 2014 (and updated in Nov. 2014) FAQ s: The new rules apply as of the Federal award date (see 200.39) to new awards AND, for agencies that consider incremental funding actions on previously made awards to be opportunities to change award terms and conditions, the first funding increment issued on or after 12/26/14..For Federal awards made with modified award terms and conditions at the time of incremental funding actions, Federal awarding agencies may apply the Uniform Guidance to the entire Federal award that is uncommitted or unobligated as of the Federal award date of the first increment received on or after 12/26/14. 19 General Information What is the effective date? (cont d) Example: Original grant was signed by the federal awarding agency prior to 12/26/14 Original grant did not contain language that the award was subject to regulations as may be amended Incremental funding action, signed on 2/1/15 Incremental funding action did not include any changes to the terms & conditions (no mention of 2 CFR 200, Uniform Guidance, etc.) No other documents related to this grant were received by the grantee indicating the UG applied to it Is this incremental funding action subject to the old OMB circulars (A- 87 & A-102) or to the new UG? 20 10
General Information Applicability Several exceptions to parts of the UG are listed in 200.101 for certain entitlement, formula and block grant programs Certain programs are only required to follow some of the UG provisions, including pre-award provisions 9/10/15 changes included revisions to this table. Summarized table.101 on next slide 21 Applicable Not Applicable Administrative Req s Grant agreements Loans, loan guarantees Cooperative agreements Interest Subsidy Internal Controls & Subrecipient Monitoring ALL Insurance Cost-reimbursement contracts under the FAR Cost Principles Grant agreements Food commodities Cooperative agreements Cost-reimbursement contracts under the FAR Fixed amount awards Loans, loan guarantees Interest subsidy Insurance Audit ALL except Fixed price contracts and subcontracts under FAR 22 11
Roadmap Cost Principles Administrative Requirements Audit Requirements Uniform Guidance 23 Roadmap New Uniform Guidance 24 12
Roadmap Uniform Guidance Part II Major Policy Reforms Chapter II OMB Guidance Part 200 Subpart A 200.0 200.99 - Acronyms & Definitions Subpart B 200.100 200.113 - General Provisions» i.e. authorities, effective/applicability date, conflict of interest Subpart C 200.200 200.213 - Pre-Federal Award Requirements and Contents of Federal Awards» i.e. use of grant agreements, cooperative agreements and contracts, special conditions, public access to federal award information 25 Roadmap Uniform Guidance Part II Major Policy Reforms Chapter II OMB Guidance Part 200 (cont d) Subpart D 200.300 200.345 - Post Federal Award Requirements» i.e. standards for financial and program management; property standards; procurement standards; performance and financial monitoring and reporting; subrecipient monitoring and management; record retention and access; remedies for noncompliance; closeout; postcloseout adjustments and continuing responsibilities; collection of amounts due 26 13
Roadmap Uniform Guidance Part II Major Policy Reforms Chapter II OMB Guidance Part 200 (cont d) Subpart E 200.400 200.475 - Cost Principles» Formerly A-87 (A-21 and A-122)» i.e. general provisions; basic considerations; direct and indirect costs; special considerations for local gov s; general provisions for selected items of cost Subpart F 200.500 200.521 - Audit Requirements» i.e. auditee responsibilities; federal agency responsibilities; auditor responsibilities; management decisions 27 Roadmap Uniform Guidance Part II Major Policy Reforms Chapter II OMB Guidance Part 200 (cont d) Appendices: Appendix I Full Text of Notice of Funding Opportunity Appendix II Contract Provisions for Non-Federal Entity Contracts Under Federal Awards Appendix III - Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (IHEs) Appendix IV - Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations Appendix V State/Local Governmentwide Central Service Cost Allocation Plans 28 14
Roadmap Uniform Guidance Part II Major Policy Reforms Chapter II OMB Guidance Part 200 (cont d) Appendices: Appendix VI - Public Assistance Cost Allocation Plans Appendix VII States and Local Government and Indian Tribe Indirect Cost Proposals Appendix VIII - Nonprofit Organizations Exempted From Subpart E Cost Principles of Part 200 Appendix IX - Hospital Cost Principles Appendix X Data Collection Form Appendix XI - Compliance Supplement Appendix XII Award Term & Condition for Recipient Integrity and Performance Matters NEW July 2015 29 30 15
Subpart B 200.100 200.113 - General Provisions Conflict of Interest Federal awarding agencies must establish conflict of interest policies for their federal awards Non-federal entities must disclose in writing any potential conflict of interest to the Federal awarding agency (or pass-through entity) in accordance with the federal awarding agency policy Mandatory Disclosures Non-federal entities must disclose all violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award 31 Subpart C 200.200 200.213 - Pre-Federal Award Requirements and Contents of Federal Awards Streamlined guidance to federal agencies on information required to be provided to non-federal entities Determining the instrument to be used - Grant agreements - Cooperative agree. - Contract - Fixed Amt. Awards Standard formats to announce funding opportunities Fed s required to consider risk posed by each applicant prior to making award - Financial stability - Prior performance - Mgmt. systems 32 16
Subpart C 200.200 200.213 - Pre-Federal Award Requirements and Contents of Federal Awards Fixed Amount Awards (200.45 & 200.201) A type of grant agreement under which the Federal awarding agency or pass-through entity provides a specific level of support without regard to actual costs incurred under the Federal award. Accountability is based primarily on performance and results. Project scope is specific Payments are based on meeting specific requirements of the Federal award Cannot be used in programs that require mandatory cost sharing or match 33 Subpart D 200.300 200.345 - Post Federal Award Requirements Requires non-federal entities to have effective internal controls over federal awards and mentions 2 best practices: GAO s Green Book COSO s Internal Control Framework 34 17
Subpart D 200.300 200.345 - Post Federal Award Requirements Written procedures required for: Cash management, based on the requirements of section 200.305 payment Determining the allowance of costs in accordance with Subpart E Cost Principles and the terms & conditions of the federal award Method for conducting technical evaluation of proposals received and for selecting recipients for procurement by competitive proposals 35 Subpart D 200.300 200.345 - Post Federal Award Requirements Interest: Up to $500 per year may be kept for administrative expenses Formerly this amount was $100 36 18
Subpart D 200.300 200.345 - Post Federal Award Requirements (cont d) Explicit information on what info must be included by a passthrough entity in its subawards at the time subaward is made Federal award identification number (FAIN) All requirements imposed by the pass-through entity Certain indirect cost information Access requirements Terms & conditions surrounding closeout Federal award date of award to the recipient by the federal agency EDITED 9/10/15 Amt. of federal funds obligated by this action by the pass-through entity to the subrecipient EDITED 9/10/15 Tot. amount of the fed. Award committed to the subrecipient by the passthrough entity EDITED 9/10/15 Name of federal awarding agency, pass-through entity and contact info. for awarding official of the pass-through entity EDITED 9/10/15 37 Subpart D 200.300 200.345 - Post Federal Award Requirements (cont d) Pass-through entity s responsibility to evaluate each subrecipients risk and develop appropriate subrecipient monitoring in response to the assessed risk 38 19
Subpart D 200.300 200.345 - Post Federal Award Requirements Subrecipient v/s contractor determinations Pass-through agency is, ultimately, responsible for making this determination now 39 Subpart D 200.300 200.345 - Post Federal Award Requirements (cont d) Supplies Computing devices (<$5K) are now included as supplies But when charging as a direct cost, must be essential and allocable, (but not solely dedicated) to the performance of the Federal award 40 20
Subpart D 200.300 200.345 - Post Federal Award Requirements (cont d) States continue to follow their own policies The new procurement standards for all other non- Federal entities adopt the majority of the language used from Circular A-102. There were some changes though, so carefully review to determine the impact on your procurement procedures. 41 Subpart D 200.300 200.345 - Post Federal Award Requirements (cont d) One new item to review is micro-purchases for acquisition of supplies or services if aggregate amount does not exceed $3,500 - The threshold is set by the Federal Acquisition Regulation, and therefore may change. - The P.O. s may be awarded without soliciting any competitive quotations if the non-federal entity considers the cost to be reasonable. - The non-federal entity must, to the extent practicable, distribute these purchases among qualified suppliers. 42 21
43 Subpart E 200.400 200.475 - Cost Principles Time & Effort Carefully read and analyze this section Principles based, not rules based anymore requires judgment 44 22
Time & Effort Requires entities to comply with a stringent framework of internal control objectives and requirements for documenting personnel expenses. However, it gives entities the ability to implement the internal control systems and business processes that best fit their needs. 45 Time & Effort Key sentences in 200.430 Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities 46 23
Time & Effort - For a non-federal entity where the records do not meet the standards described in this section, the Federal government may require personnel activity reports, including prescribed certifications, or equivalent documentation that support the records as required in this section. 47 Subpart E 200.400 200.475 - Cost Principles Employee Benefits New 9/10/15 FAQ s:.431-1 OMB deleted the requirement that indirect costs be used to charge payments of unused leave, worker s compensation, unemployment compensation, severance pay, and similar employee benefits. 48 24
Subpart E 200.400 200.475 - Cost Principles Direct Costs Clarifies that salaries of administrative and clerical staff may be treated as direct costs if: The services are integral to a project or activity The individuals involved can be identified as specifically with the project or activity The costs are included expressly in the budget or have the prior written approval of the federal awarding agency, AND The costs are not recovered as indirect costs 49 Subpart E 200.400 200.475 - Cost Principles Audit Costs New 9/10/15 FAQ s:.425-1 & -5 Internal audit costs.425-2 Financial statements audit costs when also subject Single Audit.425-3 Performance audit costs.425-4 Financial statement audit costs when exempt from Single Audit 50 25
Subpart E 200.400 200.475 - Cost Principles Indirect Costs Requires federal agencies to accept a non-federal entity s negotiated indirect cost rate Existing negotiated indirect cost rates will remain in place until they are due to be re-negotiated. 51 Subpart E 200.400 200.475 - Cost Principles Indirect Costs Any non-federal entity that has a current federally negotiated indirect cost rate may apply for a one-time extension of the rates in that agreement for a period of up to four years. If an extension is granted the non-federal entity may not request a rate review until the extension period ends. At the end of the 4-year extension, the non- Federal entity must re-apply to negotiate a rate. Subsequent one-time extensions (up to four years) are permitted if a renegotiation is completed between each extension request. 52 26
Subpart E 200.400 200.475 - Cost Principles Indirect Costs Provides for a de minimis indirect cost rate of 10% of modified total direct costs for entities that have never had a negotiated indirect cost rate. 53 Indirect Cost clarifications in FAQ s: Entities will not be forced to establish an indirect cost rate if they feel it is not necessary It also is not permissible for pass-through entities to force or entice a proposed subrecipient without a negotiated rate to accept less than the de minimis rate. 54 27
Subpart E 200.400 200.475 - Cost Principles Prior Approval Provides a list of circumstances under which entities need to seek prior approval from the Federal awarding agency including: Pre-award costs Additions to program income or the use of program income to meet a cost sharing or matching requirement Changes in scope or objectives of a project/program Subcontract of work under the award not previously approved 55 Subpart E 200.400 200.475 - Cost Principles Encouraging Non-Federal Entities to Have Family- Friendly Policies Travel costs section provides that temporary dependent care costs above and beyond regular dependent care that directly results from travel to conferences is allowable provided that: The costs are a direct result of the individuals travel for the federal award; The costs are consistent with the non-federal entity s documented travel policy for all entity travel; Are only temporary during the travel period. 56 28
Subpart E 200.400 200.475 - Cost Principles Annual and final fiscal reports or vouchers requesting payment Certified by: An official who is authorized to legally bind the non-federal entity. Cost allocation plans or indirect cost rate proposals Certified by: An individual at a level no lower than VP or CFO 57 Subpart F 200.500 200.521 - Audit Requirements Increase in Single Audit Threshold Maintains oversight on over 99.7% of the dollars currently subject to Single Audit Reduces audit burden for approximately 5,000 entities 58 29
Subpart F 200.500 200.521 - Audit Requirements 1 new criteria: In the prior 2 audit periods, the auditor did not report a substantial doubt about the auditee s ability to continue as a going concern. 1 modified criteria: In the prior 2 audit periods, the auditor s opinion on whether the financial statements were prepared in accordance with GAAP, or a basis of accounting required by state law, and the auditor s inrelation-to opinion on the SEFA were unmodified. 59 AOS interprets sections OAC 117-2-03 to mean that since there is no requirement in Ohio law prohibiting any entity from filing GAAP statements, then auditors can only consider entities for low-risk auditee status for single audit purposes if they have audited GAAP financial statements in the prior 2 audit periods. 60 30
Subpart F 200.500 200.521 - Audit Requirements Not Low-Risk Auditee Old (Current) 50% New 40% Low-Risk Auditee Old (Current) 25% New 20% 61 Subpart F 200.500 200.521 - Audit Requirements For loan & loan guarantees, now required to identify in the notes to the SEFA loan balances outstanding at the end of the audit period - This is in addition to including the total federal awards expended for loan or loan guarantees in the SEFA 62 31
Subpart F 200.500 200.521 - Audit Requirements SEFA notes required to include whether or not nonfederal entity elected to use the 10% de minimis cost rate SEFA is now required to include the total amount provided to subrecipients from each Federal program. - Previously this was only required to the extent practical Corrective Action Plan (CAP) & Summary Schedule of Prior Audit Findings - Must include GAGAS findings 63 Subpart F 200.500 200.521 - Audit Requirements Auditors and auditees must ensure reports do not include protected personally identifiable information (PII) and sign a statement stating such on the DCF. 64 32
SS # Passport # Clearances Bank Numbers Biometrics Date and Place of Birth Mothers Maiden Name Criminal, Medical, & Financial Records Educational Transcripts Credit Card # 4/28/2016 Subpart F 200.500 200.521 - Audit Requirements What is Protected PII? A persons first name, or first initial & last name in combination with: This does NOT include PII that is required by law to be disclosed. 65 Section 200.509(b) For Nonfederal entities - if an auditor prepares an auditee s indirect cost proposal or cost allocation plan (CAP), that same auditor may not be hired to perform its single audit if the auditee s indirect costs recovered during the prior year exceeded $1 million. 66 33
Must Best Practices Should Requirements Recommended Approaches 67 Federal Exceptions Granted OMB adopted the UG in 2 CFR Part 200 Each Federal Agency adopted the UG in their own section of code OMB granted exceptions to certain federal agencies to change parts of the UG in their own section of code This was only granted where the changes were consistent with existing federal agency policy Appendix II of the 2015 OMB CS reflects where each federal agency adopted the UG https://www.whitehouse.gov/sites/default/files/omb/assets/ OMB/circulars/a133_compliance/2015/app_2.pdf Then look exact section up on http://www.ecfr.gov A list of the exceptions granted is at https://cfo.gov/cofar/ 68 34
Changes to Federal Programs & Single Audits Center For Audit Excellence 88 East Broad Street Columbus, Ohio 43215 Richard Cunningham rlcunningham@ohioauditor.gov 69 88 E. Broad St. Columbus, Ohio 43215 Phone: (800) 282-0370 Fax: (614) 466-4490 E-mail: ContactUs@OhioAuditor.gov 70 www.ohioauditor.gov 35