T HE W ESLEY P EACHTREE G ROUP, CPAs Helping to Build Stronger Institutions for the Next Generation HISTORICALLY BLACK COLLEGES AND UNIVERSITIES TITLE

THE WESLEY PEACHTREE GROUP, CPAsHelping to Build Stronger Institutions for the Next Generation

HISTORICALLY BLACK COLLEGES AND UNIVERSITIES

TITLE III PROGRAMS

2015 TECHNICAL ASSISTANCE WORKSHOP

UNIFORM GRANT GUIDANCE(2 CFR, CHAPTERS I & II, PART 200, ET. AL.)

Presented By:

KEITH X. TERRELL, CPA, Cr.FA, FCPA, CGMASENIOR VICE PRESIDENT

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A. Understand which prior OMB Circulars were consolidated into the Uniform Grant Guidance (UGG).

B. Know the applicable effective dates for UGG.

C. Become familiar with the significant changes made within UGG.

D. Know what to expect with your first audit under UGG.

E. Become aware of other possible changes that are on the horizon.

WHAT WILL BE YOUR TAKEAWAYS?

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1. Eliminating duplicative and conflicting guidance.

2. Focusing on performance (Not just on compliance)

3. Encouraging efficient use of information technology and shared services.

4. Providing for consistent and transparent treatment of costs.

5. Limiting allowable costs to make best use of Federal resources.

6. Setting standard business processes using data definition.

7. Encouraging non-Federal entities to have family-friendly policies.

8. Strengthening oversight.

9. Targeting audit requirements on risk of waste, fraud and abuse.

THE OBJECTIVE OF THIS REFORM

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Subpart A – Acronyms and Definitions

Subpart B – General Provisions

Subpart C – Pre-Federal Award Requirements and Contents of Federal Awards

Subpart D – Post-Federal Award Requirements

Subpart E – Cost Principles

Subpart F – Audit Requirements

UGG LAYOUT

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Throughout, both “should” and “must” are used “Must” means “required” “Should” indicates best practices or recommended

approach

SUBPART B: GENERAL PROVISIONS(1 OF 6)

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Two new requirements that strengthen oversight:

The Federal awarding agency must establish conflict of interest policies for their Federal awards. The non-Federal entity must disclose in writing any potential conflict of interest to the Federal awarding agency (or pass-through entity) in accordance with applicable Federal awarding agency policy. (Employee and Company level)

Non-Federal entities (and applicants) must disclose all violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award.


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Effective and applicability dates of UGG:

The effective date of UGG for Federal entities was December 26, 2013 which is the official publication date.

Federal agencies had one year after the publication date to implement the new regulations which was December 26, 2014.

The administrative requirements and costs principles will apply to new Federal awards or additional funding on existing awards issued on or after December 26, 2014.


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Effective and applicability dates of UGG: (Continued)

Existing awards will continue to be governed by the regulations in place at the time of the award.

The audit requirements are effective for all fiscal years beginning on or after December 26, 2014 (fiscal year ending June 30, 2016 for most of you).

Early implementation of UGG is not allowed.


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UGG supersedes and streamlines requirements from OMB Circulars:

A-21 (Cost Principles for Educational Institutions)

A-50 (Audit Follow-Up)

A-87 (Cost principles for State, Local and Indian Tribal Government)

A-89 (Federal Domestic Assistance Program Information)

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UGG supersedes and streamlines requirements from OMB Circulars: (Continued)

A-102 (Grants and Cooperative Agreements with State and Local Governments)

A-110 (Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals and Other Non-Profits)

A-122 (Cost principles for Non-Profit Organizations)

A-133 (Audits of States, Local Governments and Non-Profit Organizations)

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Pertinent Sections (Brief Summary):

200.201, Use of grant agreements, cooperative agreements & contracts

200.203, Notices of funding opportunities

200.204, Federal agency review of merit

200.205, Federal agency review of risk

200.206, Standard application requirements

200.210, Information contained in a federal award

SUBPART C: PRE-FEDERAL AWARD REQUIREMENTS AND CONTENTS OF

FEDERAL AWARDS

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There were many areas that did not change with UGG but the most notable ones that did were:

Performance measurement Internal control – COSO Framework Procurement Direct costs Indirect costs Time and effort reporting Audit requirements Sub-recipient monitoring

SIGNIFICANT CHANGES SUBPARTS D,E & F

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Federal awarding agencies must require recipients to use OMB-approved standard government-wide information collections to provide financial and performance information.

Recipients must be required to relate financial data to performance accomplishments, and must also provide cost information to demonstrate cost effective practices.

The Federal awarding agencies are required to provide recipients with clear performance goals, indicators, and milestones.

PERFORMANCE MEASUREMENT

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To be effective, this requires that each of the five components of internal control and relevant principles is present and functioning, and that the five components are operating together in an integrated manner.

1. Control Environment – The control environment is the set of standards, processes, and structures that provide the basis for carrying out internal control across the organization. The control environment comprises the integrity and ethical values of the organization.

2. Risk Assessment – Risk is defined as the possibility that an event will occur and adversely affect the achievement of objectives. Risk assessment Involves a dynamic and iterative process for identifying and assessing risks to the achievement of objectives. Risk assessment forms the basis for how risks will be managed.

3. Control Activities – Control activities are the actions established through policies and procedures that helps ensure that management’s directives to mitigate risks to the achievement of objectives are carried out.

INTERNAL CONTROL – COSO FRAMEWORK

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4. Information and Communication – Information is necessary for the entity to carry out internal control responsibilities to support the achievement of its objectives. Communication is the continual, iterative process of providing, sharing, and obtaining necessary information.

Internal communication ‐ the means by which information is disseminated throughout the organization, flowing up, down, and across the entity.

External communication – twofold; it enables inbound communication of relevant external information, and it provides information to external parties in response to requirements and expectations. i.e.; invoicing and payment provisions in awards.

5. Monitoring Activities – Ongoing evaluations, separate evaluations, or some combination of the two are used to ascertain whether each of the five components of internal control, including controls to effect the principles within each component, is present and functioning.

INTERNAL CONTROL – COSO FRAMEWORK

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The non-Federal entity must use one of the following methods of procure-ment as follows:

1. Micro-purchases (purchases do not exceed $3,000 or $2,000 if for construction)

Try to distribute distribute equitable between qualified suppliers.

May be awarded without soliciting competitive quotations.

2. Small Purchases

Cost less than Simplified Acquisition Threshold (SAT) of $150,000.

Obtain price or quotes from an adequate number of sources.

PROCUREMENT (1 OF 3)

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The non-Federal entity must use one of the following methods of procure-ment as follows: (Continued)

3. Sealed Bids (Formal Advertising) – Exceeds SAT

Bids are publicly solicited. Awarded to bidder whose bid is the lowest in price.

4. Competitive Proposal (RFP must be publicized) – Exceeds SAT

Fixed price or cost reimbursement. Awarded to bidder whose proposal is most

advantageous to the program after considering price and other factors.

PROCUREMENT (2 OF 3)

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The non-Federal entity must use one of the following methods of procure-ment as follows: (Continued)

5. Non-competitive Proposal

Used only when items are available from a single source.

Public emergency. Federal agency expressly authorizes non-competitive

proposal. Competition is determined to be inadequate.

PROCUREMENT(3 OF 3)

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Prior written approval needed in advance of incurring special and unusual costs.

Salaries of administrative and clerical staff are generally indirect costs except if all of the following conditions apply:

1. Administrative and clerical services are integral to the project or activity;

2. Individual involved can be specifically identified with the project or activity;

3. Such costs are explicitly included in the budget or have prior approval from the Federal awarding agency; and

4. The costs are not also recovered as indirect costs.

DIRECT COSTS

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Negotiated indirect costs rates must be accepted by all Federal agencies unless statute or regulation allows for an exception or agency head approves.

Any non-Federal entity that has never negotiated an indirect cost rate may elect to charge a de minimis rate of 10% which may be used indefinitely.

Any non-Federal entity that has a Federally negotiated indirect cost rate may apply for a one-time extension for a period up to four years. If granted, a new rate review will not be allowed until the extension period is over.

At the end of four years, the non-Federal entity must re-apply to negotiate a new rate.

INDIRECT COSTS

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Time and effort reporting has plagued many institutions including erroneous reporting and improper allocation of salaries. The OMB UGG requires:

1. Charges for salaries must be based on records that accurately reflect the work performed. Their records must:

Be supported by a system of internal controls which provides reasonable assurance charges are accurate, allowable and properly allocated.

TIME AND EFFORT REPORTING(1 OF 3)

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Reasonably reflect the total activity for which the employee is compensated by non-Federal entity, not exceeding 100%.

Encompass all activities (Federal and non-Federal).

Comply with established accounting policies and practices.

Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award.


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2. Budget estimates alone will not be sufficient. (Often based on grant budget or percentage allocation on Personnel Action Form)

3. Percentages may be used for distribution of total activities.

4. Time and Effort Reports are an integral part of ensuring records meet new standards especially for those employees working on multiple cost objectives.


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AUDIT REQUIREMENTS(1 OF 9)

Old Audit Requirement New Audit Requirement

Single Audit Threshold - $500,000 Single Audit Threshold - $750,000

Minimum Type A Program Determination Threshold - $300,000

Minimum Type A Program Determination Threshold - $750,000

Threshold for reporting questioned costs - $10,000

Threshold for reporting questioned costs - $25,000

Risk Assessment Threshold for Type B Programs - $100,000

Risk Assessment Threshold for Type B Programs – 25% of Type A Threshold

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Federal Awards Expended Type A/B Threshold

> $750,000 but < $25 Million $750,000

> $25 Million but < $100 Million .03 X Federal Awards Expended

> $100 Million but < $1 Billion $3 Million

> $1 Billion but <$10 Billion .003 X Federal Awards Expended

> $10 Billion but < $20 Billion $30 Million

> $20 Billion .0015 X Federal Awards Expended

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Major Program Determination Thresholds:



Single audits were performed annually

Single audits were performed annually including submitting the data collection form and reporting package to FAC within the timeframe specified

There were no material weaknesses in internal controls over financial reporting

No change

Criteria for a Low-Risk Auditee

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Opinion on the financial statements and schedule of expenditures of Federal awards were unqualified

Opinion on whether the financial statements were prepared in accordance with GAAP or, a basis of accounting required by state law and the schedule of expenditures of Federal awards were unmodified

Criteria for a Low-Risk Auditee – (Continued)

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Not applicable under OMB Circular A-133 (New Requirement)

There is no going concern opinion on the audited financial statements

There were no material weaknesses in internal controls over compliance

No change

Opinion on compliance for major programs must be unmodified

No change


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Known or likely questioned costs does not exceed 5% of the total Federal award expended for a Type A program during the audit period

No change

Audit Coverage Thresholds:

Low Risk Auditee – 25%Non-Low Risk Auditee – 50%

Audit Coverage Thresholds:

Low Risk Auditee – 20%Non-Low Risk Auditee – 40%


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Has Federal and pass-through oversight – Judgment

No change

Results of audit follow-up not progressive – Judgment

No change

Changes in program personnel or system - Judgment

No change

Audited within previous two years No Change

No material weakness over compliance No Change

No modified opinion over compliance No Change

No questioned costs > 5% of Federal awards expended

No Change

Type B programs with larger Federal awards expended

No change

Criteria for Program Risk Assessments

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50% of all High Risk Type B Programs but not more than Low Risk Type A Programs;

or

1 High Risk Type B Program for 1 Low Risk Type A Program

25% of Low Risk Type A Programs for High Risk Type B Programs

Criteria for Swapping High Risk Type B Programs for Low Risk Type A Programs

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The compliance supplement is published annually with changes under a separate process.

As such, the 14 compliance requirements including activities allowed; allowable costs; cash management; Davis-Bacon Act; eligibility; equipment; matching, level of effort, earmarking; period of availability; procurement, suspension, debarment; program income; real property; reporting; sub-recipient monitoring; and special tests and provisions will be consolidated (reduced) in the new compliance supplement to be issued soon. Only real property and relocation program requirement is slated to be deleted.

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Old Compliance Requirements Proposed Compliance Requirements

Activities allowed or unallowed (A) Consolidate into B

Allowable costs/cost principles (B) Allowable costs/cost principles/activities (B)

Cash management (C) Cash management (C)

Davis-Bacon Act (D) Consolidate into N

Eligibility (E) Eligibility (E)

Equipment and real property management (F)

Consolidate into B

Matching, level of effort and earmarking (G) Consolidate into B

Period of availability of Federal funds (H) Consolidate into B

Procurement and suspension and debarment (I)

Consolidate into B

Program income (J) Consolidate into N

Real property and relocation assistance (K) Delete

Reporting (L) Reporting (L)

Sub-recipient monitoring (M) Sub-recipient monitoring (M)

Special tests and provisions (N) Special tests and provisions (N)

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SUB-RECIPIENT MONITORING(1 OF 6)

A. Evaluate each sub-recipient’s risk of noncompliance with Federal statues, regulations and terms and conditions of the sub-award.

Risk factors to consider are:

1.Prior experience with same or similar sub-award2.Results of previous audits3.Whether they have new personnel or new or

substantially changed systems4.Results of Federal monitoring (if they receive Federal

awards directly)

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B. Consider imposing specific sub-award conditions upon the sub-recipient, if appropriate, such as:

Shift to reimbursement basis awards Withhold authority to proceed pending acceptable

performance Require additional, more detailed financial reports Require additional project monitoring Require additional technical and management assistance Establish additional prior approvals

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C. Monitor the activities of the sub-recipient as necessary including:

1. Reviewing financial and programmatic reports required by the pass-through entity

2. Ensuring timely and appropriate action on all deficiencies

3. Issuing a management decision for audit findings pertaining to the Federal award provided to the sub-recipient

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D. Depending on the pass-through entity’s assessment of risk posed by the sub-recipient, consider the following monitoring tools:

1. Provide sub-recipient with training and technical assistance on program-related matters

2. Perform on-site reviews of the sub-recipients operations

3. Arrange for agreed-upon procedures engagement performed in accordance with GAGAS, paid for and arranged by pass-through entity and limited in scope to one or more of the following: Allowable or unallowable activities or costs, eligibility and reporting

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E. Verify that every sub-recipient is audited as required by the thresholds (minimally $750,000 spent in Federal awards) established in the new UGG

F. Consider whether the results of the sub-recipient’s audits, on-site reviews or other monitoring indicate conditions that necessitate adjustments to the pass-through entity’s own records

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G. Consider taking enforcement action against noncompliant sub-recipients such as:

Temporarily withhold cash payments pending correction of the deficiency

Disallow all or part of the cost of the activity or action not in compliance

Wholly or partly suspend or terminate the Federal award Initiate suspension or debarment proceedings Withhold further Federal awards for the project or

program Take other remedies that may be legally available

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QUESTIONS?

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THANK YOU!

WEBSITE FOR UGG (2 CFR, CHAPTERS I & II, PART 200, ET. AL.):

HTTP://WWW.GPO.GOV/FDSYS/PKG/FR-2013-12-26/PDF/2013-30465.PDF

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T HE W ESLEY P EACHTREE G ROUP, CPAs Helping to Build Stronger Institutions for the Next Generation HISTORICALLY BLACK COLLEGES AND UNIVERSITIES TITLE