Embed Size (px)
Citation preview
BDO USA, LLP, a New York limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.
The Uniform (Super) CircularAlaska Government Finance Officer’s Association2015 Spring ConferenceFairbanks, Alaska
Page 2
Outline• Background • Goals of the Super Circular• What is the Super Circular?• What Does This mean for State and Local Governments?• Key Dates to Remember• The Details• Procurement• Performance, Financial Monitoring and Reporting• Subrecipient Monitoring and Management• Cost Principles• Audit Requirements
• Keys to Successful Implementation• Resources
Page 3
Why are we here today?• We (like, get, need, rely on, want more) federal funding• We need to comply with the rules and regulations that
come with federal funding • We don’t quite understand what the new rules and
regulations are• We want to play the game and play it right, so it helps if we
know the rules
• Paid trip to Fairbanks and free food!
Page 4
Background“To deliver on the promise of a 21st Century government that is more efficient, effective and transparent, the Office of Management and Budget (OMB) is streamlining the Federal government’s guidance on Administrative Requirement, Cost Principles, and Audit Requirements for Federal Awards…This reform of OMB guidance will reduce administrative burden for non-Federal entities receiving Federal awards while reducing the risk of waste, fraud and abuse”
Page 5
Background• Waste, Fraud and Abuse• This is what the Federal government is trying avoid• When making decisions regarding procurement, assigning
costs to grants, passing funds along to subrecipients….have in the back of your mind, the Feds are serious about:• Waste – Are these funds being efficiently for the right reasons?• Fraud – Is this legal? Am I following the law?• Abuse – Am I within the boundaries of the program’s rules and
guidelines? Does this action support the intent of the program?
DON’T BE ON “THE FLEECING OF AMERICA” … Brian Williams has enough things to worry about
Page 6
Goals of the Super Circular• The GOAL of the Super Circular:• Reduce administrative burden• Strengthen oversight• Focus policy to emphasize outcomes at lower cost• Reduce waste, fraud, and abuse
• KEYS to accomplishing the above goals:• Eliminating Duplicative and Conflicting Guidance
• Combining eight sets of OMB guidance into one• Focus on Performance over Compliance for Accountability
• Section 200.430 Compensation• Encouraging Efficient Use of Information Technology and Shared
Services• 200.318 General Procurement Standards; 200.319 Competition;
200.320 Methods of Procurement• Providing For Consistent and Transparent Treatment of Costs
• 200.413 Direct Costs; 200.414 Indirect Costs
Page 7
Goals of the Super Circular
• KEYS to goals, continued:• Strengthening Oversight• 200.112 Conflicts of Interest; 200.113 Mandatory
Disclosures; 200.303 Internal Controls• Targeting Audit Requirements on Risk of Waste, Fraud and Abuse
• 200.501 Audit Requirements; 200.513 Risk and Increased Accountability; 200.518 Major Program Determination
Page 8
What is the Super Circular?
• Combination of the eight previous federal regulations into comprehensive guidance which is codified at 2 Code of Federal Regulations (CFR) Part 200 (Subparts A-F)• Previous OMB Circulars combined into the Uniform Circular:
• Cost principal circulars:• A-21 (Education Institutions)• A-87 (State & Local Governments)• A-122 (Non-Profit Organizations)
• Administrative requirement circulars:• A-102 (State & Local Governments)• A-110 (Institutions of Higher Education, Hospitals, and Other Non-Profit
Organizations• Audit Guidance
• A-50 (Audit Follow-up)• A-133 (Single Audit)
• A-89 (CFDA)
Page 9
What Does This Mean for State and Local Governments?
• State and Local Governments need to be aware of the several changes• Relevant changes encompass: • Allowable costs • Procurement requirements• Sub-recipient monitoring• In-direct rates• Audit thresholds
Page 10
Key Dates to Remember:• Effective/applicability date (section 200.110)• Super Circular administrative requirements and costs
principles apply to new federal awards issued on or after December 26, 2014, as well as existing awards receiving incremental funding changes on or after this date• The Fed’s 2014 Boxing Day gift to you!
• Super Circular will not retroactively change terms and conditions for funds already received
• However, entities may make changes to their entity-wide policies (such as payroll or procurement) to comply with the Super Circular and not be penalized for doing so
• Applies to audits of fiscal years beginning on or after December 26, 2014• December 31, 2015 FYE – first round of audits under Super
Circular requirements
Page 11
Quiz Time!• Question – City of Anywhere, Alaska received a five year
grant from the Federal Aviation Administration to beef-up the fence surrounding their municipal airport. The grant was issued on December 1, 2014, and ends November 30, 2019.• Do the administrative and cost principles of 2 CFR 200 apply
to this program?• NO – the award date was prior to December 26, 2014
• Question – City of Nowhere, Alaska received a 3 year grant from the Department of Defense to install anti-submarine mines in their harbor. Grant issued September 1, 2013. On February 15, 2015, the award was increased from $10 million to $15 million• Do the administrative and cost principles of 2 CFR 200 apply
to this program?• YES – an incremental funding change occurred post December
26, 2014
Page 12
Procurement“What do you mean I didn’t procure it correctly?”• Major changes made to how an entity goes about
purchasing goods and services• Guidance found in Super Circular sections 200.318 –
200.326• Emphasis being placed on entities maintaining oversight on
the contractors they conduct business with (Section 200.318)• An entity must maintain written standards of conduct
covering conflicts of interest and governing employees engaged in the selection, award and administration of contracts• Bottom line – if a conflict of interest may exist, don’t do it!
• An entity must maintain records sufficient to detail the history of procurement• Records should support the a) method of procurement, b)
contract type, c) reasons for selection and rejection, d) basis for contract price
Page 13
Procurement• Procurement must be conducted in a manner providing full
and open competition (Section 200.319)• “Let the vendors fight it out to do business with YOU!
• What this means for you:• No RFPs of invitations for bids that include unreasonable
requirements, such as unnecessary experience, excessive bonding, noncompetitive pricing practices, specifying “brand names”• You have to be a fair and unbiased referee!
• No state or local geographical preferences (unless the applicable Federal statute expressly mandates or encourages geographic preference)• Written procedures for procurement transactions that are clear,
detailed, and not included wording that unduly restricts competition
Page 14
Procurement• There are specific methods of procurement that must be
followed (Section 200.320)• There are 5 ways to go about buying things:• (1) Procurement by micro-purchases• Less than $3,000 ($2,000 if construction-related and Davis-
Bacon Act applies)• To the extent practicable, an entity must distribute micro-
purchases equitably amount qualified suppliers• Variety is the spice of life
• We all love Costco but use Sam’s Club every now and then
• Purchases do not require competitive quotes if the entity considers the price to be reasonable
• (2) Procurement by small purchases• Between $3,000 and $150,000• Price or rate quotes must be obtained for an adequate
number of qualified sources
Page 15
Procurement• There are specific methods of procurement that must be followed
(Section 200.320)• (3) Procurement by sealed bids (formal advertising)
• Publicly solicited and a firm fixed price contract awarded to the responsive bidder who confirms will all the material terms and conditions of the bid AND IS THE LOWEST PRICE• Think Cheap!
• This is the PREFERRED method of procurement for construction• If you build it, you must seal bid it
• Must have two or more responsive bidders • No one wins by default
Page 16
Procurement• There are specific methods of procurement that must be followed
(Section 200.320)• (4) Procurement by competitive proposals
• Fixed price or cost-reimbursement type contract• Must have written method for evaluation process• Be detailed to reduce doubt
• Must be awarded to firm whose proposal is most advantageous with PRICE AND TECHINCAL QUALIFICATIONS considered• You develop the grading criteria
Page 17
Procurement• There are specific methods of procurement that must be
followed(Section 200.320)
• (5) Procurement by noncompetitive proposals• Solicitation from only one source and may be used only
when one or more of the following circumstances apply:• Item is available only from a single source• Public emergency will not permit a delay resulting from
competitive solicitation• Federal awarding agency or pass-through agency
expressly authorizes this in response to a written request• Competition is determined inadequate
Page 18
Procurement• A cost or price analysis must be performed in connection
with every purchase over $150,000 (Section 200.323)
• This includes modifications to existing contracts• Starting point for analysis = independent analysis before receiving bids or proposals• Have an idea of what you think it should cost before you start
shopping around!
• Analysis must factor in the estimated profit margin of contractor, any subcontracting costs, and surrounding geographical costs• Have an idea what a good deal is prior to shopping!
• Cost-plus or percentage of construction cost methods are not allowed
Page 19
Procurement• Specifications of proposed procurements must be available
to the Federal awarding agency or pass-through entity (Section 200.324)
• Review can take place prior to solicitation or after the solicitation process has begun•Must be ready, willing and able to show the Federal awarding agency or pass-through entity all your documents (pre-procurement review, cost estimates, RFP’s, etc.) IF• Amount exceeds $150K and is awarded without adequate
competition (only one bidder, for example)• A “brand name” is specified in the procurement• Awarded under sealed-bid procurement to a bidder that was not
the cheapest• Contract modification changes scope or increase amount by
more than $150K
Page 20
Quiz Time!• City of Somewhere, Alaska is building a new road, funded
by a DOT grant. To build the road the City needs to purchase 3 dump trucks. The City posts the requests for bids, noting the specifications required for the dump trucks and receives 3 Bids. The lowest bidder, bidder C, is a new vendor to the City. As such, the City elects to go with bidder B.• Is this allowable?• NO – Procurement by sealed bid requires that the contract
be awarded to the lowest responsive and responsible bidder• The City is also purchasing traffic cones, totaling $10,000,
in association with the project. The public works director decided against performing a cost analysis for this purchase• Is the allowable?• YES – a cost or price analysis is not required under small
purchase procedures BUT price quotes must be obtained
Page 21
Quiz Time!• City of Everywhere, Alaska hosts a chili cook-off every July
4th. The cook-off is allowable under a Federal community development grant. The total cost for all food and beverages (no alcohol, of course) was $7,000. The event organizer has always ordered everything from Costco, and plans to do the same this year.• Is this allowable?• NO – this purchase order exceeds $3,000 and requires a rate
quote from at least two sources.
• The City has another Federal grant to build a seismic research center. The specifications of the required seismometer (valued at $500,000) are very unique, and there is only one known supplier of such a machine. The City purchases the seismometer without issuing an RFP or request for bid• Is this allowable?• YES – sole sourcing is permitted if there is only one supplier
Page 22
Performance, Financial Monitoring and Reporting• The entity is responsible for oversight of the operations of
the Federal award supported activities (Section 200.328)• Monitoring by the entity must cover each program, function
and activity• Performance reports will be required • Expect quarterly reports (though some awarding agencies will
have different requirements)
• Annual reports due 90 calendar days after period end; semi-annual and quarterly reports due within 30 days of period end• Reports will outline performance, actual accomplishments significant developments, whether goals were met, etc.
Page 23
Subrecipient Monitoring and Management• Entities must make case-by-case determinations whether
each agreement made concerning disbursements of Federal program funds cast the party receiving funds as a subrecipient or contractor (Section 200.330)• Subrecipient• Funds received are considered sub-awards is for the purpose of
carrying out a portion of a Federal award• A Federal assistance relationship exists with the subrecipient• Subrecipients can perform the following:• Determine who is eligible to receive what Federal assistance• Has its performance measured in relation to whether Federal
program objectives are met• Responsible for programmatic decision making• Must adhere to applicable program requirements per grant
award• Use Federal funds to carry out a program for public purpose
NOT providing goods or services for benefit of pass-through entity
Page 24
Subrecipient Monitoring and Management• Contractors• A contract is for the purpose of obtaining goods or services for
the entity’s own use • Creates a procurement relationship• Goods or services provided within normal business
operations• Goods or services provided to many different purchasers• Normally operates in a competitive market• Goods or services provided are supplementary to the
operation of the Federal program• Not subject to program requirements as a result of the
agreement
Page 25
Subrecipient Monitoring and Management• Subrecipient or Contractor, what do I have?
•Must exercise judgment in making the decision• Substance is more important than form• All characteristics need not be present
• Up to the pass-through entity (YOU!) to make the call•Must be able to support your classification
Page 26
Subrecipient Monitoring and Management• Requirements for pass-through entities (Section 200.331)• Inform subrecipients of all requirements , regulations, and
conditions of the Federal award• Inform subrecipients that they must make records and financial
statements available to the entity and auditors• Evaluate each subrecipients’ risk of non-compliance• Monitor activities of subrecipients to ensure compliance
• Perform on-site reviews• Provide training• Review financial and programmatic reports• Initiate corrective action plans if deficiencies are discovered • Verify subrecipient is audited if they independently meet single audit
threshold• Take enforcement actions against noncompliance
Subrecipients are your responsibility – don’t turn your back on them!
Page 27
Quiz Time!• Nearby Borough, Alaska has provided the local medical
center with $1,000,000 awarded to the Borough from the Department of Health. The medical center is to use the funds for a vaccination program. The medical center assumes all responsibility for the program and acts independent of the Borough• Is the medical center a subrecipient or a vendor?• Subrecipient – the center is responsible for carrying out the
program for the purpose specified by the grant award, rather than just providing goods or services for the benefit of the Borough
• The medical center did not have a Federal single audit covering the year in which the $1,000,000 was expended. The center claims they are exempt from such requirements per Subpart F of the Super Circular• Is this correct?• NO – the center, as a subrecipient, must follow Super Circular
guidelines. • The Borough, as the pass-through entity, must verify the
subrecipient is in compliance
Page 28
Cost Principles• An entity is responsible for the efficient and effective
administration of the Federal award through the application of sound management policies (Section 200.400)• Allowable costs (200.403):• Necessary and reasonable for the performance of the Federal
award• Not be included as a cost or used to meet cost sharing or
matching requirements of other federally-financed programs• Be adequately documented• Reasonable costs (200.404)• Does not exceed what a prudent person under the same
circumstances would pay• Ordinary and necessary for operation
Page 29
Cost Principles• Allocable costs (200.405)• Incurred specifically for a federal award• When benefiting both a federal award and other project, cost
can be properly distributed and supported• Must be necessary for overall operation of entity and meets
Federal award criteria
• Costs allowable under 2 or more federal awards may be shifted between awards , but cannot be shifted merely for the purpose of avoiding restrictions or funding deficiencies• Direct costs allocation
• Costs associated with 2 or more projects or activities should be should be allocated based on proportional benefit
Page 30
Cost Principles• Direct costs (200.413)• Specifically identifiable with objective and purpose of the
Federal Award• Typically compensation and related fringe benefits for
employees working directly on Federal award project and materials• Salaries of administrative and clerical staff
• Normally treated as indirect costs however can be charged direct costs IF:• Admin staff are integral to the project• Individuals involved can be specifically identified• Costs are explicitly included in budget• Cost are not also recovered as indirect
Page 31
Cost Principles• Compensation – personal services (200.430)• Must be reasonable and consistent with that paid for similar
work • Be based on records that accurately reflect the work
performed• Be supported by system of internal control that provides
reasonable assurance that charges are accurate, allowable, and properly allocated• Incorporated into official records of the entity• Reasonably reflect total activity of the employee• Budget-based estimates ALONE DO NOT qualify as support, but
may be used on an interim basis
• Compensation - fringe benefits (200.431)• Includes – vacation, sick leave, bereavement, employee
insurance, pensions, and unemployment benefit plans
• Allowable if the following is met:• Provided under established written leave policies• Equitably allocated to all related activities• Accounting basis (cash or accrual) is consistently followed
Page 32
Quiz Time!• Faraway Borough, Alaska currently uses budget estimates
to allocate payroll and fringe costs for its health director across 4 different federal programs. The Borough has done this for years, but never conducted a time-study or performance audit to determine how accurate this method is• Is this an allowable method for charging direct costs?• NO • Budget estimates can only be used if the method can be proven
to be accurate . • Regardless if budgets are used, a system must be in place that
produces a reasonable approximation of actual activity and can be adjusted as necessary to produce final, accurate numbers
Page 33
Audit Requirements• Audit requirements(200.501)• A single or program-specific audit is required if expending
$750,000 or more during the entity’s fiscal year• Increase over the old $500,000 threshold• This is the Federal government’s way of reducing the audit
burden…from their point of view
• Federal awards received as either a recipient or subrecipient are included in the calculation; federal funds received for goods or services provided as a contractor are not
Page 34
Audit Requirements• Report Submission (Section 200.512)• Same audit and data collection form requirements apply• DCF due within 30 calendar days after audit opinion date or
nine months after fiscal year end, whichever occurs first• Reporting package must include copies of audit management
letters if requested by Federal agency or pass-through entity
• Requires submission of Single Audit reports online with safeguards to protect personal information• Protected Personally Identifiable Information (Protected PII)
(200.82)• Defined as “an individual’s first name/initial and last name in
combination with one or more of the following: SSN, DOB, place of birth, credit card number, bank account number, criminal history, education transcripts, credit scores, etc.)
• Keep it out of your published reports! (You don’t want to be the source of the next identity-theft scandal)
Page 35
Audit Requirements• Responsibilities (200.513)• Entities expending more than $50 million a year need a
cognizant agency for audit purposes• Generally the agency providing the most direct funding
• Major program determination (200.518)• Risk based-approach that also factors in program size and
total dollars tested• Low risk auditee (Section 200.520)• Meet ALL of the following for the PRIOR 2 YEARS:
• Single audits performed• Unmodified audit opinions on financial statements, Schedule of
Expenditures on Federal Awards and Federal major programs• No material weaknesses noted over internal controls under GAS and
A-133 • No going concern reported• No known or likely questioned costs over 5% of total Federal awards
expended for a Type A program
Page 36
Audit Requirements• Low risk auditee (Section 200.520)• If low risk, required minimum coverage (combined dollar amount of all
programs audited as major in current year, as a percentage of total Federal expenditures) is 20 % • Down from 25% previously
• IF a HIGH RISK auditee, required minimum coverage is 40%• Still down from 50% previously
Page 37
Keys to Successful Implementation• Review your policies and procedures!• Procurement• What are our thresholds for bids? RFPs?• Is our language for bids and RFPs super-circular compliant?• Can we justify our vendor selections?
• Costs principles• Are we charging time to grants based on actual time
worked ?(not just budgeted allocations)• Are our costs really necessary and reasonable? Do they pass
the prudent person test?• Can we properly trace costs to each project? (is our
documentation good enough?)• Are we consistent in our cost charging methodology?
Page 38
Keys to Successful Implementation• Subrecipient monitoring• Do we have any subrecipients?• Review our vendor relationships – are we passing funds along
or contracting for services?
• Review your grants• What grants do I have that are Super Circular applicable now?
• Educate your co-workers• Knowledge is power!• Let them know the consequences of non-compliance (fear is a
great motivator)
• Talk to your auditors• Will I still need a Federal single audit?• Are my controls adequate?
Page 39
Resources• Federal Register.Gov• http://www.whitehouse.gov/omb/grants_docs
