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Key Areas to Consider Regarding
Grant Compliance
Presented to the National Foundation
for Credit Counseling (NFCC)
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Wilfredo Corps, CGFM Director of Government Services
CBIZ MHM, LLC & Mayer Hoffman McCann P.C.
3 Bethesda Metro Center, Suite 600
Bethesda, MD 20814
Direct: (301) 951-3636 • [email protected]
Wilfredo is located in the Bethesda office and serves as a Director in the
Government Practice. His practice focuses on Federal, State and Local
governments. Additionally, he works with not-for-profit organizations and
higher education institutions helping them with a variety of issues, such as
developing indirect cost rate proposals, performing pre-audit surveys, etc.
Some of his Federal clients include the National Science Foundation; the
Centers for Medicare and Medicaid Services; and the Department of Housing
and Urban Development.
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AGENDA
• Key Areas within Federal Regulations
– Classification of Costs
– Allocation and Documentation of Staff
Time
• Strategies to Determine Unit Cost
• New Developments Impacting Future
Grants Administration
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Requirements
• OMB Circular A-122 (Not-For-Profit Organizations)
• Relocated to 2 CFR, Part 230
– www.whitehouse.gov/omb/circulars
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Key Areas Within Federal Regulations
• Determine Allowability, Allocability and
Reasonableness of the costs claimed.
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Classification of Costs
• Key Concepts:
– Direct costs are those that can be identified specifically
with a particular final cost objective, i.e., a particular
award, project, service, or other direct activity of an
organization.
– Indirect costs are those that have been incurred for
common or joint objectives and cannot be readily identified
with a particular final cost objective, i.e., janitorial services,
care of grounds, director’s office, general counsel, IT
services, etc.
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Assigning a Cost
• Is it allowed per Federal Regulations and awarding
agency’s terms?
• Is it reasonable? – What a prudent person would spend.
• Is it an award specific cost?
• Can it be assigned to the award relatively easily and with
a high degree of accuracy?
• Is it treated consistently as direct charges under similar
circumstances across other awards?
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Consistent Treatment of Costs
• Federal regulations (OMB Circular A-122) require that
the same type of costs be treated consistently as direct
or indirect costs.
• Consistency means that costs incurred for the same
purpose, in like circumstances, must be treated uniformly
as either direct or indirect costs.
• When a cost is charged to an award
directly, similar costs should not be
included in the indirect cost rate and
vise versa.
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Administrative and Clerical Salaries
• Typically, administrative and clerical salaries are a component of
indirect costs.
• Charging administrative and clerical salaries may be allowable
when:
– Effort can be specifically identified to an award
– The costs are specifically budgeted, justified, and approved by
the awarding agency
– The project requires significant administrative and/or clerical
support that is beyond the normal level provided to another
projects.
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Allocation and Documentation of Staff Time
• Direct allocation of salaries should only be done for staff
directly providing the services required by the award.
• Direct allocation of administrative salaries should only be
done when the services have been specifically provided
to support the award being charged.
• There should be some kind of a Personnel Activity
Report to validate the time charged.
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Personnel Activity Report
• OMB A-122, Appendix B – Selected Items of Cost,
8. Compensation for Personal Services, m. Support for
salaries and wages.
(1) Charges to awards for salaries and wages, whether
treated as direct costs or indirect costs, will be based on
documented payrolls approved by a responsible official(s)
of the organization.
The distribution of salaries and wages to awards must be
supported by personnel activity reports (PAR)….
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Personnel Activity Report (Continued)
(2) Reports must meet the following standards:
(a) The reports must reflect an after-the-fact determination
of the actual activity of each employee.
(b) Each report must account for the total activity for which
employees are compensated…
(c) The report must be signed by the employee or by a
responsible supervisory official having first hand
knowledge of the activities performed by the employee…
(d) The reports must be prepared at least monthly and
must coincide with one or more pay periods.
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Key Points – PAR
• Salary charges are always highly scrutinized
• Ensure compliance with OMB Circulars and minimize
“Audit Issues” – The certifying of the PARs must be done by somebody with suitable
means of verification
– Effort is not based on a 40 hour week, but rather on the individual’s total
time
– PARs track the reasonable approximation of actual activity on projects
not budget
– Must be well defined in your Policies and Procedures Manual
– Keep records for at least three years after the submission of the final
FFR
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Strategies to Determine Unit Cost
• Determine how many staffs are providing the required
service (i.e., how many counselors)
• Determine the amount of time devoted by them to
support the award
• Determine how much is its equivalent in dollars
• Determine how many sessions/units were provided
during that specific amount of time
• Divide the sessions/units between the dollars
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Strategies to Determine Unit Cost (Continued)
• Is it reasonable
• Is profit being made
• Is the time considered only the time devoted to providing
the services funded by the award
• Is it supported
– If yes, how
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New Developments Impacting Future Grants
Administration
• Main Impacts
• Where to find them
• OMB issued proposed rules in the federal register on
February 28 which could have wide implications.
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New Developments Impacting Future Grants
Administration (Continued)
Main Impacts:
1. Focus audit effort/oversight on higher dollar/higher risk awards:
• For entities expending 1 to 3m in fund to create a 'focused'
Single Audit; this would focus audit testing on allowable costs
and one other compliance aspect as selected by the funding
agency.
• Above that level much the same as now, subject to the other
proposed changes.
• Proposed increase in audit threshold to 1M.
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New Developments Impacting Future Grants
Administration (Continued)
Main Impacts (continued):
2. Streamlining compliance requirements:
• This would target increased testing on some aspects of
compliance, while lowering others.
• Would result in more of a risk based approach than is currently
used.
3. Strengthening audit follow up:
• Largely require more accountability for follow up among
funding agencies.
• Reports would be digitized to allow for easier access to data
for review by funders.
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New Developments Impacting Future Grants
Administration (Continued)
Main Impacts (continued):
4. Reduce pass through burden on pass through entities and sub
recipients including having the Federal agency follow up on
findings related to some sub awards avoiding duplication that often
occurs now.
5. Reform cost principles
• Merge cost principles
• For indirect costs (F&A)
– Possible mandatory flat rates
– Possible option to select flat rates
• Exploring alternatives to time and effort reporting requirements
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New Developments Impacting Future Grants
Administration (Continued)
• There are also a number of other significant changes and
suggestions being made as part of this process that, while
important, might have less pervasive applicability.
– See full test of proposed rules at:
http://www.gpo.gov/fdsys/pkg/FR-2012-02-28/pdf/2012-
4521.pdf
Federal Register/Vol. 77, No. 39, Feb 28, 2012
• While compliance with today’s rules is still required, even more
investment in changes for the future will be important for your
organization to embrace as they come.
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Conclusion
• Key Areas within Federal Regulations
– Classification of Costs
– Allocation and Documentation of Staff
Time
• Strategies to Determine Unit Cost
• New Developments Impacting Future
Grants Administration
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Questions and Comments
?
