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How to Draft New & Update Old Policies and Procedures
Brette Kaplan Wurzburg, Esq. Brustein & Manasevit, [email protected] www.bruman.com
Agenda Why policies and procedures are important? Logistics Differences between policies and procedures Suggested Sections
Rules and Requirements Helpful Questions to Ask
What to do with completed policies and procedures?
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Why? Single Audits Monitoring Staff Changes and Transitions Uniform Grant Guidance
3
Single Audits Auditors ask about policies and procedures
Some tests specifically require written policies and procedures
4
Single Audits Compliance Supplement, Part 6: Internal
Controls
“The A-102 Common Rule and OMB Circular A-110 … require that non-Federal entities receiving Federal awards … establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements.”
“Control activities are the policies and procedures that help ensure the management’s directives are carried out.” Clearly written & communicated5
Monitoring Policies and procedures are evidence of
compliance under all program monitoring tools
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Monitoring Compliance Supplement, Part 6: Internal
Controls, Section M. Subrecipient Monitoring
Written policies and procedures exist establishing: Communication of Federal award requirements
to subrecipients Responsibilities for monitoring subrecipients Process and procedures for monitoring Methodology for resolving findings Requirements related to subrecipient audits,
including appropriate adjustment of pass-through’s accounts
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Staff Changes and Transitions Training tool Maintain consistency
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Uniform Grant Guidance Emphasis on internal controls Written policies and procedures are required!
Written Cash Management Procedure - § 200.302(b)(6) & § 200.305
Written Allowability Procedures - § 200.302(b)(7) & Subpart E – Cost Principles
Written Conflicts of Interest Policy - § 200.318(c) Gratuities
Written Procurement Procedures - § 200.319(c) Written Method for Conducting Technical Evaluations
of Proposals and Selecting Recipients - § 200.320(d)(3)
Written Travel Policy - § 200.474(b)9
Compliant policies and procedures lead to: Administering compliant programs and
complying with grant management requirements!
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Policies vs. Procedures Both guide organization and provide
framework for actions Policies – Don’t need to be long and
complicated! Organization’s rules and guidelines to ensure
consistency and compliance How organization intends to operate Use clear, simple statements Guiding principles to help make decisions
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Policies vs. Procedures Procedures
Describe how policy is put into action Activities that produce a specific service or product
Separation of responsibility Who will do what (position, department, division)
What steps should be taken When actions are triggered Which forms or documents to use Bullet points, instructions, forms, checklists,
flowcharts, etc.
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Logistics Where to start?
For internal use of for subgrantees? Grant specific or cross cutting? Review and collect available policies and
procedures from different offices and websites If starting from scratch, get information from people who perform grant related activities
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Logistics Who should be involved?
Create a team Fiscal AND program personnel
Use team approach to capture entire grant process Everyone involved should sit in the same room to
review grant activities, decision making, job responsibilities
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Logistics Create a table of contents Assign subjects Create a timeline for completion
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Logistics How long does it take?
Depends on need Review of existing policies and procedures is less
time than starting from scratch Set deadlines for actions
Don’t get overwhelmed!
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Logistics What is the process?
Review existing policies and procedures and documentation Memos, emails, forms, job descriptions
Develop questions – Go to the source of the information needed!
Schedule interviews with relevant staff who perform the tasks related to the policies and procedures you are creating
Gather information on actual practices Draft policies and procedures Review internally with appropriate staff Revise Formally adopt and implement Train staff
Annually review and revise!
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Things to Consider Buy-in from those who will be using the
policies and procedures Review for accuracy, completeness and
compliance Adoption by board or other governing body
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Your Work is Never Done . . . Policies and procedures are only useful if they
are current, accurate and regularly used Ongoing professional development and
training What the requirements are How your organization meets the requirements
Continually review and revise Annual basis
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Resources Uniform Grant Guidance
OMB Circulars Education Department General Administrative
Regulations (EDGAR) Authorizing statute Program regulations Program guidance State and agency rules, regulations, policies
and procedures
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Types of Grants State-Administered Grants
Any grant distributed by formula to eligible States Describe the process (hint: follow the money trail)
Direct Grants Any grant other than those distributed by formula
to eligible States Review GAN for terms and conditions
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Suggested Sections Organization, Structure and Function Grant Application Process Financial Management System Procurement Inventory/Property Management Time and Effort Record Keeping/Record Retention Monitoring Audit Resolution Fiscal Requirements Programmatic Requirements
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Organization, Structure and Function
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Organization, Structure and Function Organization Chart
Offices Sections Divisions
Job Descriptions & Responsibilities
Outside entities with grant administration responsibilities MOU/MOA
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Organization, Structure and FunctionHelpful Questions to Ask Do you have an organizational chart? What are the offices, sections, divisions or
employees that have responsibility for grant administration? What are their responsibilities?
Are there any entities outside of the agency that have grant administration responsibilities? What are those responsibilities? How was relationship created? What are the
terms? MOU/MOA?
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Grant Application Process
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Grant Application Process State-Administered Grant vs. Direct Grant Decisions regarding what grants to apply for Determining organizational capacity to run a
compliant program Approvals and Authorizations After the grant is awarded
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Grant Application Process
If Pass-Through Entity: Discuss how subgrantees apply for grants Responsible for risk analysis prior to issuing
award! (Uniform Grant Guidance) Consider imposing subaward conditions if appropriate
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Grant Application Process Best Practices
Whether or not formal acceptance is required, meet with appropriate parties to be certain you want to accept the grant.
Make acceptance a conscious act. Circumstances may have changed between submission of application and notice of award
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Grant Application ProcessHelpful Questions to Ask How does the agency determine what grants
to apply for? What is the process? Who reviews and signs off on a grant
application? What happens after a grant is awarded?
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Financial Management System
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Financial Management System 34 CFR § 80.20(b)
1. Financial Reporting2. Accounting Records3. Internal Control4. Budget Control5. Allowable Cost6. Source
Documentation7. Cash Management
2 CFR § 200.302(b)
1. Identification of Awards (NEW)
2. Financial Reporting3. Accounting Records
(Source Docs)4. Internal Control5. Budget Control6. **Written Cash
Management Procedures (NEW)
7. **Written Allowability Procedures (NEW)
Written Cash Management Procedures NEW: Written Cash
Management Procedures to implement requirements of § 200.305 Payment
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Written Cash Management Procedures
For states, payments are governed by Treasury – State CMIA agreements 31 CFR Part 205
No Change
34
Written Cash Management Procedures
For all other non federal entities, payments must minimize time elapsing between draw from G-5 and disbursement (not obligation)
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Written Cash Management Procedures 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 billing3) 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
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Cash Management
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Obligation – 2 CFR 200.71 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 Promise to pay
When Obligations Are Made34 CFR 75.707 & 76.707
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If the Obligation is for… The Obligation is made…
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
Written Cash Management Procedures
Interest earned must be remitted annually to HHS
Interest amounts up to $500 may be retained by non-federal entity for administrative purposes
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Written Allowability Procedures NEW: Written
procedures for determining allowability
In accordance with Subpart E – Cost Principles & terms and conditions of federal award
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Written Allowability Procedures
Not a restatement of Subpart E But a GPS through grant development and
budget process Training tool for employees
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Cost Principles: “Factors Affecting Allowability of Costs” § 200.403
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
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Necessary Uniform Grant Guidance – no description Based on the needs of the program Expenditure benefits program Helps achieve program objective
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Necessary Consider:
Whether the cost is needed for the proper and efficient performance of the grant program
Whether the cost is identified in the approved budget or application
Whether there is an educational benefit associated with the cost
Whether the cost aligns with identified needs based on results and findings from a needs assessment
Whether cost addresses program goals and objectives and is based on program data
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Reasonable Costs § 200.404 Reasonable for the performance of the federal
award
“A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.”
Sound business practices Comparable to market prices Arm’s length bargaining
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Reasonable Costs § 200.404 Consider
Whether the cost is the 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.
Restrains or requirements imposed by factors like sound business practices; arm’s length bargaining; federal, state, and other laws and regulations; and terms and conditions of the federal award
Market prices for comparable goods or services for the geographic area
Whether individuals involved acted with prudence under the circumstances
Whether non-federal entity significantly deviated from established practices and polices regarding the incurrence of costs, which unjustifiably increase the federal award’s cost
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Practical aspects of “necessary” Do I really need this?
Surplus property/existing resources Practical aspects of “reasonable”
Is this the minimum amount I need to spend to meet my need?
Is the expense targeted to valid programmatic/administrative considerations?
Do I have the capacity to use what I am purchasing? Did I pay a fair rate? Can I prove it? If asked, would I be comfortable defending this
purchase?
Necessary & Reasonable
Allocable costs § 200.405 A cost is allocable to the federal award if the
goods or services involved are chargeable or assignable to the federal award in accordance with the relative benefit received.
The federal grant program derived a benefit in proportion to the funds charged to the program
EX: LEA purchases a computer to use 50% in a federal program and 50% in State program Can only charge half the cost to the federal
program48
Applicable credits § 200.406 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
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Adequately Documented § 200.403(g)
A state and subgrantee must keep records that show (34 CFR 76.630):
Amount of funds under grant or subgrant
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
As a Practical Matter, Ask…
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In order to determine whether federal funds may be used to purchase a specific cost, it is helpful to ask the following questions: Is the proposed cost allowable under the relevant program? Is the proposed cost consistent with an approved program plan
and budget? Is the proposed cost consistent with program specific fiscal
rules? Is the proposed cost consistent with EDGAR? Is the proposed cost consistent with special conditions imposed
on the grant (if applicable)? Is the proposed cost is consistent with the underlying needs of
the program? Does the proposed cost targeted areas of weakness? Was data
reviewed to ensure that federal funds meet areas of concern?
Financial Management System Can include Selected Items of Cost section for
frequently asked about expenses The Uniform Grant Guidance has 55 specific
items of cost - § 200.420
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Travel Costs Uniform Grant Guidance § 200.474 State Rules Agency Rules Documentation Required to be Maintained
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Financial Management System Helpful Questions to Ask What accounting systems are used? What function does each system perform? Who is responsible for managing budgets and
accounts payable? How are budgets loaded and tracked on the
system? What is the process for comparing budgets to
expenditures? How do you ensure all expenditures are
allowable?
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Financial Management System Helpful Questions to Ask What is the process for requesting budget
revisions? How do you ensure that all expenditures are
made within the period of availability? What happens to unobligated funds? Does the system interface with the
procurement and inventory systems? How are vendors paid? What is the process?
Who is involved?
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Procurement
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Procurement NEW: Uniform Grant Guidance: All nonfederal entities
must have documented procurement procedures which reflect applicable Federal, State, and local laws and regulations. § 200.318(a)
Open competition Conflict of Interest (including gratuities) Solicitation Cost/Price Analysis Vendor Selection Required Contract Provisions Contract Administration Protest Procedures
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Conflict of Interest Must maintain written standard of conduct,
including conflict of interest policy. § 200.318(c)(1) 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
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Conflict of Interest 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! § 200.318(c)(2)
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. § 200.112
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Conflict of Interest Policy Include:
Definition Chain for reporting potential conflicts
Alternate if reporting to employee involved in potential conflict
Gratuities Definitions and examples of nominal items
Recusal Sanctions Signed certification that employee received
and understands conflicts policy Training on policy
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Vendor Selection Process § 200.320
Method of procurement: NEW: Micro-purchase Small purchase procedures Competitive sealed bids Competitive proposals Noncompetitive proposals
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Vendor Selection Process: Micro-Purchase § 300.320(a)
NEW: Acquisition of supplies and services under $3,000 or less
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
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Vendor Selection Process: Small Purchase Procedures
Good or service that costs $100,000 or less (NEW: $150,000 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”
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Vendor Selection Process: Noncompetitive Proposals
Appropriate only when: The good or services is available only from a
single source (sole source) There is a public emergency The awarding agency authorizes
NEW: awarding agency or pass-through must expressly authorize noncompetitive proposals in response to written requires from nonfederal entity - § 200.320(f)(3)
After soliciting a number of sources, competition is deemed inadequate
65
Vendor Selection Process
Cannot contract with vendor who has been suspended or debarred http://www.sam.gov
Appendix II(I)
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Required Contract Provisions Nonfederal entity’s contracts must contain the
applicable provisions in Appendix II to Part 200 - § 200.326
Examples (not complete list) Remedies Termination Equal Employment Opportunity Davis-Bacon Act Debarment and Suspension
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Contract Administration § 200.318
(Changed) Nonfederal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of the contract
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Procurement:Helpful Questions to Ask What is your conflict of interest policy? What are State and/or agency-specific
requirements that must be followed? Approval for contracts? Service contracts vs. Contracts for goods? Contract thresholds and process for entering
into contracts within each threshold amount? What clauses and/or certifications must be in
each contract? How do you ensure that the terms of the
contract are met?
69
Inventory &Property Management
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Inventory/Property Management Uniform Grant Guidance § 200.313 Property Classifications
Equipment, Supplies, “Highly Walkables” Computing Devices
Inventory Procedure Loss, Damage or Theft Disposition
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Equipment and Supplies Equipment – No change in definition § 200.33 Anything that is not equipment is considered
supplies. § 200.94 “Significant Technological Devices”
NEW: Computing devices Machines used to acquire, store, analyze,
process, public data and other information electronically
Includes accessories for printing, transmitting and receiving or storing electronic information
Computing devices are supplies if less than $5,000
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Inventory/Property Management
Must have inventory management system Property records
Description, serial number or other ID, title info, acquisition date, cost, percent of federal participation, location, use and condition, and ultimate disposition
Physical inventory At least every two years
Control system to prevent loss, damage, theft All incident must be investigated
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Disposition-Equipment § 200.313 When property no longer needed, must follow
disposition rules: Transfer to another federal program Over $5,000 – pay federal share Under $5,000 – no accountability
NEW: Non-federal entity must request disposition instructions from the federal awarding agency if required by the terms of the grant
74
Inventory/Property ManagementHelpful Questions to Ask
How do you classify and define property? Equipment, supplies, etc.
What items must be inventoried and tagged? Detailed inventory records
What is the inventory process? How frequently is a physical inventory
conducted? What is the policy regarding lost, stolen or
damaged items? Are there procedures to transfer equipment
between programs? What are the disposition procedures?
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Time and Effort
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Time and Effort Uniform Grant Guidance Semiannual Certification PARs Cost Objective Reconciliations
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Time and effort (A-87 Rule)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
“Standards for Documentation of Personnel Expenses” § 200.430
NEW: Charges for salaries must be based on records that accurately reflect the work performed1. Must be supported by a system of internal
controls which provides reasonable assurance charges are accurate, allowable and properly allocated
2. Be incorporated into official records3. Reasonably reflect total activity for which
employee is compensated Not to exceed 100%
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“Standards for Documentation of Personnel Expenses” § 200.430
4. Encompass all activities (federal and non-federal)
5. Comply with established accounting polices and practices
6. Support distribution among specific activities or cost objectives
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“Standards for Documentation of Personnel Expenses” § 200.430
NEW: If records meet the standards: the non-federal entity will NOT be required to provide additional support or documentation for the work performed § 200.430(i)(2)
BUT, if “records” of grantee do not meet new standards, ED may require PARs § 200.430(i)(8) PARs are not defined!!!
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Time and EffortHelpful Questions to Ask How do you document time and effort?
Employees that work on one cost objective? Employees that work on multiple cost objectives?
Who must sign the forms? Where are the forms turned in?
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Record Keeping
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Record Keeping Uniform Grant Guidance §§ 200.333, 200.335 Statute of Limitations 3 5 years
State Policy Agency Policy
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Record Keepingo Methods for collection, transmission &
storage of information § 200.335o Whenever practicable, collect, transmit and store
federal award information in open and machine readable formatso Rather than in closed formats or on paper
o Federal agency and pass-through must always provide or accept paper versions upon request
o If paper copies are submitted, can’t require more than original and 2 copies
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Record Keepingo Methods for collection, transmission &
storage of information § 200.335 (continued)o 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.
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Record KeepingHelpful Questions to Ask
How long must records be maintained? How are records maintained?
Hard copy, electronic
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Monitoring
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Monitoring Monitoring of Agency Monitoring of Subrecipients Risk-Based Factors Onsite Reviews Remote Monitorings Desk Reviews Self-Assessments Follow-Up
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Monitoring – Risk Based Factors Examples of risk factors:
Prior experience with same or similar awards Previous monitoring findings New or changing personnel New or changing systems Amount of grant funds awarded Size of entity
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Monitoring – Reviews Notification
Who sends/receives notification How to prepare for onsite monitoring Collect and organize documents Staff contact/point person Separate room, internet access, copy machine
for monitors Make copies of all documents given to
monitors
91
Monitoring – Follow Up Report of findings
Timeframe to issue and respond Corrective Action Plan
Action steps, timeframe, staff responsible Follow up on corrective actions Closeout letter
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Monitoring and Reporting Program Performance § 200.328
NEW: Monitoring by the “Pass Through” Monitor to assure compliance with applicable
federal requirements and performance expectations are achieved
Must cover each program, function or activity (see also § 200.331)
Must submit “performance reports” at least annually
93
Requirements for Pass-Through Entities § 200.331
NEW: Depending on assessment of risk, the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals: 1. Training + technical assistance on program-
related matters2. On-site reviews3. Arranging for “agreed-upon-procedures”
engagements (described in § 200.425)
94
Monitoring Helpful Questions to Ask Process for when agency is monitored?
Notification, preparation, Responding, Follow-Up Process for monitoring subrecipients?
From notification to issuing report and Timeline Who is responsible for monitoring? Fiscal?
Programmatic? What gets monitored? How do you determine which subrecipients will be
monitored? How often does monitoring occur?
Site visits, desk reviews, self-assessments How do you ensure findings are resolved?
Corrective action plan, Closeout letter, Future monitoring95
Audit Resolution
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Audit Resolution Single Audit Uniform Grant Guidance – Subpart F Resolution of Findings Review of Subrecipients’ Single Audits
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Audit ResolutionHelpful Questions to Ask Who is responsible for overseeing single audit
compliance and resolution? What is the audit process? How are findings resolved?
Correct Action Plan, Timeline Process for reviewing subrecipients’ single
audits?
98
Programmatic Fiscal Requirements
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Programmatic Fiscal Requirements Supplement Not Supplant Maintenance of Effort Matching and Cost Sharing Hold Harmless
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Programmatic Fiscal Requirements How do you ensure compliance with
programmatic fiscal requirements? What documentation is required to be
maintained?
101
Programmatic Requirements
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Programmatic Requirements Programmatic Compliance
Application Process Allocations to subrecipients Allowable costs under the grant program Other
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Programmatic RequirementsHelpful Questions to Ask How does your agency
ensure compliance with the specific requirements of the grant program?
What resources are available to program staff to help ensure compliance?
104
After your policies and procedures are done . . .
NOW WHAT!?!
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Now What!?! Training Review and Revise Where are Policies and Procedures Located?
106
QUESTIONS?
107
~ Legal Disclaimer ~This presentation is intended solely to
provide general information and does not constitute legal advice. Attendance at the
presentation or later review of these printed materials does not create an attorney-client
relationship with Brustein & Manasevit, PLLC. 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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