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Overview of the Uniform Guidance 1

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Overview of the Uniform GuidanceWisconsin Head Start Association

Instructor: Maile Pa`alani, CPA, Senior Manager

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Materials/Disclaimer

Please note that these materials are incomplete without the accompanying oral comments by the trainer(s).

These materials are informational and educational in nature and represent the speakers' own views. These materials are for the purchasing agency’s use only and not for distribution outside of the agency or publishing on a public website.

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Wipfli’s Top 10 Changes

1 • Cost allocation options

2 • PARs

3 • Procurement

4 • Computers as supplies

5 • Recognition of electronic media

6 • Audit threshold changes

7 • Family friendly policies

8 • Internal controls focus in admin requirements

9 • Fund raising to support program

10 • No employee morale

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Agenda

How we got here…

Overview of 2 CFR Part 200

Subparts A – Acronyms & Definitions

Subpart B – General Provisions

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

Subpart D – Post Award Requirements

Subpart E – Cost Principles

Subpart F – Audit Requirements

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How we got here…

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OMB’s Goals

Ensure that grants are awarded based on merit Increase focus on performance outcomes Streamline rules governing the allocation of

Federal funds Better focus the Single Audit oversight tool to

reduce waste, fraud and abuse

OMB: 2 CFR Part 200 Comments, Federal Register, Vol. 78, Issue 248, December 26, 2013

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45 CFR Part 75

Administrative Requirements: A-110 Higher Ed, Hosp. and

NPOs Common Rule (A-102) UofG

Cost Principles:

A-21 Higher Ed

A-87 UofGA-122 NPOs

Single Audit Requirements:A-133 & A-50

Data Collection Requirements:

A-89

Cost principles for Hosp. & 45 CFR Part 74 Appendix E

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“The new guidance will streamline the language from 8 existing OMB circulars into 1 document” © Wipfli LLP

Major Policy Reforms

Reducing Administrative Burden and

Waste, Fraud, and Abuse

Eliminate Duplicative &

Conflicting Guidance

Focus on Performance

over Compliance

for Accountability

Encourage Efficient Use

of I.T. & Shared

Services

Provide Consistent & Transparent Treatment of

Costs

Limit Allowable

Costs. Make Best Use of

Federal Resources

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Major Policy Reforms

Reducing Administrative

Burden and Waste, Fraud,

and Abuse

Set Standard Business Processes Using Data Definitions

Encourage Non-Federal Entities to

Have Family-Friendly Policies

Strengthening Oversight

Target Audit Requirements

on Risk of Waste, Fraud,

& Abuse

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OMB Resources

• Notice of Guidance in Federal Register (Comments regarding the Summary and Description of Changes)

• Full Text of 2 CFR Part 200, OMB Uniform Guidance for Federal Financial Assistance

• FAQ’s issued July 2017• Technical amendments issued 12/19/2014• Federal departments’ implementation, Federal

Register 12/26/2014− DHHS – 45 CFR Part 75 updated 1/20/2016

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Overview 45 CFR Part 75


Table of ContentsSubpart A (75.1 & 2) – Acronyms and DefinitionsSubpart B (75.100) – General ProvisionsSubpart C (75.200) – Pre-Federal Awards

Requirements and Contents of Federal Awards

Subpart D (75.300) – Post Federal Award Regulations

Subpart E (75.400) – Cost PrinciplesSubpart F (75.500) – Audit Requirements

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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 Educational Institutions

Appendix IV. Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations

Appendix V. State/Local Government and Indian Tribe-Wide Central Service Cost Allocation Plans

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Appendices

Appendix VI. Public Assistance Cost Allocation Plans

Appendix VII. State and Local Indirect Cost Proposals

Appendix VIII. Nonprofit Organizations Exempted from Subchapter F Cost Principles

Appendix IX. Hospital Cost Principles – See 45 CFR Part 75 Appendix E Mostly R&D

Appendix X. Data Collection Form (SF-SAC)

Appendix XI. Compliance Supplement

Appendix XII. Award Terms and Condition for Recipient Integrity and Performance Matters

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Subpart A. Acronyms and Definitions


Subpart A. Acronyms & Definitions

NEW§75.1 Acronyms45 Acronyms – Examples:

• F&A – Facilities and Administration• FAR – Federal Acquisition Regulation• PII – Personally Identifiable Information• PMS – Payment Management System• PPII – Protected Personally Identifiable

Information• SAM – System for Award Management

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Subpart A. Acronyms & Definitions

§75.2 Definitions107 Definitions – Combines definitions from all prior circulars. Examples:

• Computing devices• Contract and Contractor• Fixed amount awards• Internal controls• Micro-purchase• Prior approval

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Quiz – Introduction to 45 CFR Part 75

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Select True of False for each of the following: True False

1. The term “contractor” and “subrecipient” meanthe same thing.

2. Proceeds from sale of equipment of less than $5,000 are unrestricted income.

3. Grantees can keep no more than $250 ininterest earned.

4. Non-Federal entities must comply with COSO.

5. Prior approval is required to use an asset asa trade-in.


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Subpart B. General Provisions


Federal & Additional Requirements

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Public Laws(Ex. Head Start Act)

OMB Regs. Codified(Ex. UG Admin, Cost Principles & Audit)

Code of Federal Regs. (45 CFR Part 75)

Federal Department Regs.(Ex. 45 CFR Part 1301-1305)

Spec Req. in Grant Condition (Ex. Head Start Grant Award)

Additional Guidance (Ex. Program Instructions, Information Memorandums,

Policy Clarifications)

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Structure of Federal Programs

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Congress

President

HHS

Grantee (Recipient)

Delegate (Subrecipient)

HUD Energy Labor

Office of Management and Budget (OMB)

Government Accountability Office (GAO)

Laws

Auditing Standards

Executive Orders

Uniform Guidance 1. Administrative2. Cost Principles3. Auditing

Admin & Program Regs

Grant Agreement

Delegate/Subrecipient Contract

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§75.101 Applicability(b)(1) Non-Federal entities must comply with

requirements regardless of whether the entity is a recipient or subrecipient

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Note: “Must” means “required”. “Should” means “recommended”

or “best practice”. Both terms are used in the

Guidance. from OMB webinar, January 27, 2014,

and FAQ’s issued September 2015

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NEW§75.113 Mandatory DisclosuresNon-Federal entities must disclose, in a timely manner, in writing to the awarding agency or pass-through entity all violations of Federal criminal law involving fraud, bribery or gratuity violations.

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

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Subpart C. Pre-Federal Award

§75.201 Use of grant agreements(b) NEW Fixed Amount Awards

(1)Payments based on meeting specific requirements. Accountability is based on performance and results• No review of actual costs incurred• May be awarded if the project scope is specific and

if adequate cost data is available

(2)Cannot be used in programs that require match

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Subpart D. Post-Federal Award Requirements



NEW§75.303 Internal controlsNon-Federal entity must:

(a) Establish and maintain a system of internal control that provides for reasonable assurance that the entity is managing the award in compliance with Federal statutes, regulations and the terms and conditions of the award

– Internal controls should comply with the Committee of Sponsoring Organizations of the Treadway Commission (COSO)

(b) Comply with Federal statutes, regulations and terms and conditions of the award

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NEW§75.303 Internal controlsNon-Federal entity must: (cont.)

(c)Evaluate and monitor compliance(d)Take prompt action for noncompliance(e)Take reasonable measures to safeguard

protected personally identifiable information (PPII)

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Components of Internal Control

Control environment

Risk assessment

Control activities

Information and communication

Monitoring

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§75.305 Payment(b) (1)Minimize the time between transfer of funds

and disbursement Advance payments limited to the minimumamount needed and timed with actual, immediate cash requirementsTime and amount of advances must be as close as administratively feasible to actual disbursements

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Subpart D. Post-Federal Award Requirements§75.305 Payment (cont.)(b) (5) Must disburse funds available from program income,

rebates, refunds, contract settlements, audit recoveries, and interest earned on such funds before requesting additional cash payments

(7) Advance payments must be deposited and maintained in insured accounts whenever possible

(8) Interest-bearing accounts are required for advance payments• Receive less than $120,000 in Federal awards annually• Best available account would not return interest > $500

annually NEW • Average or minimum balance requirement too high

(9) NEW Can keep up to $500 in interest. Return excess to PMS 32

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§75.306(b) Cost sharing or matching

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YES Verifiable from the recipient’s recordsYES Not included as a cost or match to any other

Federally-funded programYES Necessary and reasonable for accomplishment

of program objectives YES Allowable under grant conditions and cost

principles YES Not financed by any other Federal program,

unless authorized by Federal statute (there are 2 exceptions)

YES Provided for in the approved component plan/budget

YES Conform to other provisions of this part, as applicable.

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§75.306 Cost sharing or matching (cont.)(c) Unrecovered indirect may be included as cost sharing or

matching with prior approval(d) Value in accordance with cost principles(e) Volunteer services

– Integral and necessary– Rates for similar work in the organization or labor market– Fringe benefits can be included in the rate calculation

(f) When a 3rd party organization furnishes services of an employee – rate of pay plus paid fringe benefits

(g) Donated supplies – reasonable, fair market value

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§75.306 Cost sharing or matching (cont.)(i) Value of donated property:

(1)Must use an independent certified appraiser value donated land and buildings

(3)Must use an independent appraiser to value donated space

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Not a Real

Estate Agent

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§75.308(e) Revision of budget or program plans The Federal agency may, at its option, restrict transfer of funds among direct cost categories for cumulative transfers exceeding 10% for grants exceed the Simplified Acquisition Threshold

§75.309 Period of performanceCharge to the award only allowable costs incurred during the period of performance.

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§75.318 Real Property(a) Title vests in the non-Federal entity(c) Must obtain disposition instructions from the awarding

agency(1) Retain title after compensating the awarding agency

May sell and use proceeds to offset costs of replacement property

(2) Sell and compensate awarding agency

(3) Transfer title to the awarding agency or to third party designated by the awarding agency

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§75.320 Equipment(c) Use:

(2) User fees may be charged if appropriate when equipment is used by other programs

(3) Cannot be used to provide services for less than private companies charge

(4) Use as trade-in with prior approvalNote: 2 CFR 200 does not require prior approval for using equipment as a trade-in

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§75.320 Equipment (cont.)(e) Disposition

(1) NEW FMV $5,000 or less, prior approval not needed to dispose of and no further obligation to the awarding agency

(2) FMV greater than $5,000, must ask for instructions: • No response in 120 days, may keep or sell but must pay

awarding agency its share of proceeds of FMV

• Non-Federal entity may keep $500 of proceeds

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§75.321 Supplies(a) NEW Supplies includes computing devices

costing less than $5,000 • Residual value greater than $5,000 at completion

of project, use in other Federal programs; or compensate awarding agency and use for other purposes

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Procurement


Procurement regulations

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§75.327 General procurement standards (cont.)(2) NEW If the non-Federal entity has a parent, affiliate, or

subsidiary organization that is not a unit of government, it must also maintain written standards of conduct covering organizational conflicts of interestOrganizational conflicts of interest means because of relationships with a related organization, the non-Federal entity is unable or appears to be unable to be impartial in conducting a procurement action involving a related organization

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§75.327 General procurement standards(d) Avoid purchasing unnecessary or duplicative items. Lease

vs. purchase analysis where appropriate

(e) Encouraged to enter into state and local intergovernmental or inter-entity agreements NEW for nonprofits

(f) Encouraged to use Federal excess and surplus property NEW for nonprofits

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§75.328 Competition(a) Full and open competition consistent

with the regulations(b) NEW No state, local or tribal

preferences unless mandated by Federal statute

(c) Must have written procedures; name brands used only as a description

(d) NEW Pre-qualified contractors: Must ensure lists are current and include enough qualified sources to ensure competition

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§75.329 Methods of procurement to be followed

(a) NEW Micro-purchase:• Aggregate dollar amount per purchase not to exceed

the micro-purchase threshold ($3,000, defined at 48 CFR 2.1)

• To the extent practicable, must distribute equitably among qualified suppliers– “Practicable” means realistic, feasible, possible, doable

• May be awarded without competitive quotes if price is considered reasonable

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Micro-Purchase Example

A purchase of computer paper for $2,000 is a micro-purchase

• No rate competitive quotations are necessary for the purchase

• Written policies may dictate that the purchase is to rotate among qualified suppliers if they offer the same rates.

Source: Uniform Guidance FAQ’s, Sept. 2015

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Micro-Purchase Exercise

How will you define

“qualified” suppliers?

How will you ensure

distribution among

qualified suppliers?

How will you know a price

is “reasonable”?

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(b) Small purchase procedures:• Up to $150,000 (Simplified Acquisition Threshold)• Relatively simple and informal• Competition is required from adequate number of

qualified sources

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Sample NPO

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Amount of Purchase

Approvals Solicitation Process

Documentation of Decision

≤ $3,000 • Project Director • At the discretion of the project director

• Invoice/receipt

$3,001 ≤ $5,000 • Project Director • Select pre-qualified contractor, or

• 2 oral bids

• Memo describing oral bids, or

• Procurement checklist• Receipt/invoice

$5,001 ≤ $25,000

• Project Director and

• Div. Vice-President

• Select pre-qualified contractor, or

• RFP process

• Proposals and evaluations, or

• Purchase order• Procurement checklist

$25,001 ≤ $100,000

• Project Director• Div. Vice-President

and• Fiscal Office


• RFP process

• Proposals & evaluations, or


> $100,000 • Project Director,• Div. Vice-President,• Fiscal Office and• Treasurer (or

designee)


• RFP process

• Proposals & evaluations, or


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Greater than $150,000 (SAT), use sealed bids or competitive proposals(c) Sealed bids (preferred method for construction):

(1) Required conditions:(i) Complete, adequate and realistic specifications(ii) Two or more responsible bidders(iii) Selection can be made principally on price

(2) Requirements:(i) For units of government, bids publicly advertised(ii) Bids include all information needed for proper response(iii) For units of government, bids publicly opened (iv) Firm fixed price contract awarded(v) Bids may be rejected if there is a sound documented reason

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(d) Competitive proposals: Used when conditions not appropriate for sealed bids. Requirements:(1) RFP includes all evaluation factors and their relative

importance

(2) Proposals solicited from adequate number of sources

(3) Written method for conducting technical evaluations and for selecting contractors

(4) Contract awarded to proposer most advantageous to the program, with price and other factors considered

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Requests for Proposal Scoring

Expertise and knowledge of your industry

Demonstrated experience

Methodology for

accomplishing goals of project

Ability to meet timelines

Minority, small, women-owned business, labor surplus area if

applicable

Cost

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Determine scoring method using significant factors:

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(f) Noncompetitive proposals. Solicitation from only 1 source (sole source). Use in following circumstances:(1) Item is available only from a single source;(2) Emergency will not permit a delay resulting from a

competitive solicitation;(3) Federal awarding or pass-through agency expressly

authorizes noncompetitive proposal in response to a written request; or

(4) After solicitation, competition is determined inadequate (only 1 proposer)

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§75.330 Contracting with small and minority businesses, women’s business enterprises, and labor surplus area firms (NEW). (A labor surplus area is designated by the Dept. of Labor.)

(a) Non-federal entities must take all necessary affirmative steps to assure minority businesses, women’s business enterprises and labor surplus area firms are used when possible

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https://www.doleta.gov/programs/lsa.cfm

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§75.332 Contract cost and price (a) NEW For procurements over the SAT, must perform a cost

or price analysis before receiving bids or proposals

(b) NEW Must negotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed • This applies to purchases greater than the SAT (FAQ’s,

Sept. 2015)

(d) The cost plus a percentage of cost and percentage of construction cost methods of contracting must not be used

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45 CFR Part 75 Appendix II

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CONTRACT PROVISIONS

A. Administrative, contractual or legal remedies where contractors violate contract terms (all contracts in excess of the SAT) NEW

B. Termination for cause and convenience (contracts in excess of $10,000) NEWC. Equal Employment Opportunity (construction contracts)D. Davis-Bacon Act when required by Federal program legislation (construction in

excess of $2,000)• Copeland Anti-Kickback (construction or repair contracts in excess of $2,000)

E. Contract Work Hours and Safety Standards Act (contracts in excess of $100,000 that involve employment of mechanics or laborers)

F. Rights to Inventions Made Under a Contract or AgreementG. Clean Air Act and Federal Water Pollution Control Act (contracts and subgrants in

excess of $150,000)H. Debarment and Suspension

• Check contractors at www.sam.gov, System for Award Management, click on “Search Records”

I. Byrd Anti-Lobbying Amendment (contractors in excess of $100,000)J. Procurement of recovered materials (units of government)

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Procurement Bear Claw

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Final Advice – Procurement

Questions to ask about your procurement policies & procedures:

1. Do they make sense?2. Do they work for you?3. What about the 6:00

news?

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Performance and Financial Monitoring and Reporting



NEW§75.343 Reporting on real property

Must submit reports at least annually on the status of real property in which the Federal government retains an interest.

When the Federal interest is for a period of 15 years or more, the Federal awarding agency or pass-through entity may require the non-Federal entity to report at various multi-year frequencies.

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§75.351 Subrecipient and contractor determinations A pass-through entity must make case-by-case determinations whether each agreement it makes for the disbursement of Federal program funds casts the party receiving the funds in the role of a subrecipient or a contractor.

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Contractor or Subrecipient?

Contractor Provides goods or services

as a normal part of business Generally a for-profit

business Provides similar goods or

services to many purchasers Operates in a competitive

environment Provides ancillary goods or

services Not subject to the regulations

Subrecipient Helps carry out the program Generally another NPO Determines eligibility Performance objectives Responsible for program

decision-making Must adhere to regulations Funds used to carry out the

program rather than providing goods or services

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Source: 45 CFR 75.351

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§75.361 Retention requirements for records

• All records pertinent to an award must be retained for 3 years from the date of submission of the final report

• Must be retained through the resolution of any litigation, claim or audit that has begun before the 3 year period

• Can be extended if notified in writing

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NEW§75.363 Methods for collection, transmission and storage of information

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Should collect, transmit and store award-related information in open and machine-readable formats rather than paper.No need to print electronic records.Can scan paper records if there are quality controls, the electronic records provide reasonable safeguards against alteration and are readable.

§75.364 Access to records(c) Awarding and pass-through entities have access to records

as long as they exist


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§75.381 Closeout(a) Submit no later than 90 calendar days after the end of

the period of performance, all financial, performance and other reports required. Extensions may be approved

(b) Liquidate all obligations no later than 90 calendar days after the end of the period of performance. May be extended

(g) NEW Awarding agency should complete all closeout actions no later than 1 year after receipt and acceptance of all final reports

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§75.386 Post-Closeout adjustments and continuing responsibilities.

(a) The closeout of a Federal award does not affect any of the following. (1) The right of the Federal awarding agency or pass-through entity to

disallow costs. Awarding agency must make any cost disallowance determination and notify within the record retention period NEW

(2) The obligation of the non-Federal entity to return any funds due as a result of later refunds, corrections, or other transactions including final indirect cost rate adjustments

(3) Audit requirements (4) Property management and disposition requirements(5) Records retention requirements

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Subpart E. Cost Principles – General Provisions



• Be necessary and reasonable

• Conform to limitations

• Be consistent with other organization activities

• Be treated consistently• Be determined in accordance with generally accepted accounting

principles, as appropriate• Not be included as cost or match in any other federally funded

program (current or prior)

• Be adequately documented

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§75.403 Factors affecting allowability of costs

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NEW§75.407 Prior Written ApprovalUnder any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or nonallocability, the non-Federal entity may seek the prior written approval of the cost. The absence of prior written approval on any element of cost will not, in itself, affect the reasonableness or allocability of that element, unless prior approval is specifically required

(a) – (y) list of sections in 2 CFR Part 200 requiring prior approval

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NEW§75.410 Collection of unallowable costsCosts which are determined to be unallowable either as direct or indirect, must be refunded (including interest)

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§75.411 Adjustment of previously negotiated indirect (F&A) cost rates containing unallowable costs

If a negotiated indirect cost rate is determined to contain unallowable costs:

• The Federal government will require repayment including interest (NEW) of the unallowable costs charged to a past period

• For rates that are to be used currently or in the future unallowable costs will be removed and rates adjusted

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Subpart E. Cost Principles – Direct and Indirect

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Indirect vs. Direct

There are 2 ways to do cost allocation:

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Direct Costing Methods

Allocate costs based on relative benefit received

Charge shared costs to programs based on an

activity or non-monetary base

Indirect Cost Rate

Used to allocate indirect costs

Device for determining in a reasonable manner the

proportion of indirect costs each program should bear; a ratio of indirect costs and

a direct cost base

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Subpart E. Cost Principles – Direct and Indirect

NEW§75.412 Classification of costsThere is no universal rule for classifying certain costs as either direct or indirect (F&A) under every accounting system.

It is essential that each item of cost incurred for the same purpose be treated consistently in like circumstances either as a direct or an indirect (F&A) cost.

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Considerations…

• What about grants that disallow some costs or limit the amount of administrative costs you can charge?

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• You are required to charge all programs fairly and to follow your plan – Therefore, invoice funding sources according to grant

requirements, but charge all costs according to your plan

– Then record other revenue or move expenses to offset unallowed costs

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Subpart E. Cost Principles – Direct

§75.413 Direct Costs(c) NEW Salaries of administrative and clerical staff

should normally be treated as indirect. Direct charge only if all of the following are met:(1) Administrative or clerical services are integral to the

project,(2) Individuals involved can be specifically identified with

the project,(3) Such costs are explicitly included in the budget or have

prior written approval, and(4) The costs are not also recovered as indirect.

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Subpart E. Cost Principles – Indirect

§75.414 Indirect Costs (cont.)(g) NEW Any non-Federal entity that has a current

federally negotiated indirect cost rate may apply for a one-time extension of the rate in that agreement for a period of up to 4 years• Must be approved by a cost negotiator• If approved, may not request a rate review until

the extension ends• At end of extension, must apply for a new rate• Subsequent one-time extensions (up to 4

years) are permitted if approved

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Exercise – Indirect Cost Pool

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Item

In the indirect

cost pool

Not in the indirect

cost poolNeed more information

Salary of the accounts payable clerk

Cost of purchasing a vehicle to be used by Admin staff

Salary of the Weatherization accountant

Child care fees that were written off because the parent didn’t pay

100% of the costs of the office of the Executive Director

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Exercise – Indirect Cost Pool

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Item

In the indirect

cost pool

Not in the indirect

cost poolNeed more information

Costs of preparing a proposal for a new grant which the Organization won

Loss on a program funded by a state grant

Administrative costs in excess of 15% for the Head Start program

Worker’s comp claim paid for a former Senior Services program employee

Annual single audit fee

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Types of Indirect Rates

Predetermined – Based on estimated costs to be incurred during the rate period (may be longer than 1 year)

• A predetermined rate is firm – not subject to adjustment

• May be issued when the cost negotiator has enough information and history to confidently predict the amount of indirect costs

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Can apply the one-time extension to

this rate!

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Fixed rate with carry-forward – Based on estimated costs to be incurred during the fiscal year

• Has aspects of predetermined and provisional rates but none of their drawbacks

• Not subject to retroactive adjustment• The difference between estimated and actual

costs is carried forward to the next year• Typically given to units of government

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Provisional rate – temporary rate issued for use during the fiscal year

• Adjusted to a final rate after year-end• Typically given to nonprofits

Final rate – based on actual allowable costs and applied to the previous year

• Differences between a provisional and final rate may require adjustment to amounts charged to grants during the year

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Can apply the one-time extension

to this rate!


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Indirect Cost RatesBases:

• Modified Total Direct Costs (MTDC)– Total direct salaries and wages, applicable fringe

benefits, materials and supplies, services, travel and subawards up to the first $25,000

– Excludes equipment, capital expenditures, rental costs, participant support costs and the portion of each subaward in excess of $25,000

– This is the required base for the 10% de minimis rate

• Direct salaries and wages• Direct salaries, wages and fringe benefits

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Indirect Cost Rates

Applying an Indirect Cost Rate

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Grant period 07/01/14 - 06/30/15

Calendar Year Ended

12/31/2014 12/31/2015 Total

Direct cost base 400,000$ 500,000$ 900,000$ X X

Indirect cost rates 10.0% 15.0%

Indirect costs 40,000$ 75,000$ 115,000$

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Head Start Administrative Limits

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Revenue:Grant revenue 800,000

In-kind 200,000

Total revenue 1,000,000

Expenses:Salaries 500,000

Fringe benefits 100,000

In-kind 200,000

Other expenses 100,000

Total expenses before indirect 900,000

Net revenue before allocations 100,000

Share of Indirect Cost Pool Total Costs 15% admin limit

(rate x expense) (total Exp +

indirect) (total costs x 15%)

10% de minimis rate 90,000 990,000 148,500

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Subpart E. Cost Principles – Selected Items of Cost

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Selected Items of Cost Quiz

AllowablePrior

Written Approval

Unallowable

1. Flowers for a hospitalized employee

2. Single Audit fees for an organization that expended $600,000 in Federal funds

3. Annual membership dues for the Community Action Partnership Association

4. 2% per year use allowance on a fully-depreciated building

5. Cost of fund raising to purchase books for the Head Start program

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Selected Items of Cost Quiz

AllowablePrior

WrittenApproval

Unallowable

6. Hiring a consultant to prepare a proposal for a new federal grant

7. Alteration of facilities for a specific federal award

8. Home office workspace for an employee who lives 50 miles from your office

9. Child care for an employee who travels to attend a conference required for his/her position

10. Cost of maintaining the vacant home of a relocated employee for up to 1 year

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§ 75.420 Considerations for selected items of cost.

• Cost principles apply to direct and indirect costs

• Failure to mention a particular cost does not imply allowable or unallowable. Its treatment should be based on that of similar items

• When there is a discrepancy between the principles in 45 CFR Part 75 and the provisions of a specific Federal award, the award governs

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§75.425 Audit services • Audits in accordance with Single Audit Act are

allowable• (NEW) Single Audit costs are unallowable if the

entity doesn’t meet the Single Audit threshold of $750,0000

• Pass-through entity may charge an award for the cost of agreed-upon procedures to monitor subrecipients who are exempt from Single Audit Act– Limited in scope to activities allowed or unallowed,

allowable costs, eligibility and reporting94

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§75.430 Compensation – personal services(a) Compensation includes all remuneration paid

currently or accrued and may not be limited to salaries and wages. Allowable if:(1) Reasonable for the services rendered

(2) Adheres to entity’s written policies

(3) Is supported by documentation based on these principles

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§75.430 Compensation – personal services (cont.) (i) NEW Standards for Documentation of Personnel

Services (1) Records accurately reflect work performed

(i) Supported by a system of internal controls that assures charges are accurate, allowable and properly allocated

(ii)Part of official records of the entity(iii)Reflect total activity(iv)Include Federal and non-Federal activities(v)Comply with accounting policies(vii)Support distribution to two or more activities or cost

objectives

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§75.430 Compensation – personal services (i) NEW Standards for Documentation of Personnel

Services(1) Records accurately reflect work performed (cont.)

(viii) Budget estimates alone cannot be used as support for charges but may be used for interim accounting purposes

(A) Must be reasonable approximations(B) Significant changes must be entered in a timely

manner(C) Internal control system includes review of after-the-

fact charges and adjustments made so the final amount charged is accurate, allowable and properly allocated

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Services (cont.)(2) If records meet these standards, no additional

documentation required(3) Must comply with Dept. of Labor requirements for non-

exempt(4) Salaries and wages of employees used for in-kind must

meet same requirements(6) Cognizant agencies encouraged to approve alternative

methods based on outcomes

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Services (cont.)(7) Approved blended funding – may use a performance-

based measure. Must be approved by all funding sources– Examples of performance-based measures: child or

client counts(8) Entities who cannot meet these standards may be

required by the Federal government to maintain personnel activity reports (PARs)

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§75.430 Compensation – personal services (cont.) “While many non-Federal entities may still find that existing procedures in place such as personal activity reports and similar documentation are the best method for them to meet the internal control requirements, this final guidance does not specifically require them.

The focus in this final guidance on overall internal controls mitigates the risk that a non-Federal entity or their auditor will focus solely on prescribed procedures such as reports, certifications, or certification time periods which alone may be ineffective in assuring full accountability.”

Source: Comments to the Regulations

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NEW §75.432 ConferencesDefinition: meeting, retreat, seminar, symposium, workshop or event to disseminate technical information beyond the non-Federal entityAllowable costs (appropriate, reasonable and necessary) paid by the host:

• Facility• Speaker fees• Meals and refreshments• Local transportation• Cost of identifying but not providing dependent care

resources101 © Wipfli LLP


NEW§75.433 Contingency provisions(b) May be budgeted for foreseeable events

(construction cost, IT systems)

(c) Payments to contingency reserves are unallowable (cannot draw funds unless you have incurred an actual expense for an event you have budgeted)

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§75.434 Contributions and donations(a) Unallowable from the non-Federal entity to

entities

(d) Services donated (in-kind) must be supported by the same methods used to support the allocability of employees

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§75.434 Contributions and donations (cont.)(e) Value of donated services must be considered in

determining the indirect cost rate if:(1) Aggregate value is material; and

(2) Services are supported by a significant amount of indirect cost

(g) (2) If donations are treated as indirect, indirect cost rates will separate the value of the donations so reimbursement will not be made (that is, donated indirect is not part of the indirect cost pool)

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§75.436 Depreciation (d) (4)NEW No depreciation allowed on assets that

have outlived their useful lives• No use allowance

(d) (5) NEW If use allowance was taken on an asset not fully depreciated, you may convert to depreciation but total of both depreciation and use allowance may not exceed cost of the asset

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§75.437 Employee health and welfare costs(a) Costs in accordance with documented policies for

improvement of working conditions, employer-employee relations, health and performance are allowable• NEW Costs for improvement of morale specifically

excluded

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§ 75.439 Equipment and other capital expenditures

(b) Costs of equipment, buildings and land are allowable with prior written approval

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Note: Because these

regulations supersede other guidance, DHHS’

requirement for prior approval for equipment purchases of $25,000

or more will no longer apply.

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§ 75.442 Fund raising and investment management costs

(a) Costs of fund raising including financial campaigns, solicitation of gifts, etc., are unallowableNEW Fund raising costs for the purposes of meeting federal program objectives are allowable with prior written approval

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§ 75.453 Materials and supplies costs, including computing devices

(a) Costs for materials and supplies necessary to carry out an award are allowable

(c) NEW Charging computing devices as direct costs is allowable for devices that are essential and allocable, but not solely dedicated to the performance of the award

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NEW§ 75.460 Proposal costsProposal costs are the costs of preparing bids, proposals, or applications on potential Federal and non-Federal awards or projects.

Costs incurred in the current year of both successful and unsuccessful proposals normally should be treated as indirect (F&A) costs and allocated currently to all activities.

No proposal costs of past accounting periods will be allocable to the current period.

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§ 75.474 Travel costs(a) Costs may be charged on an actual cost basis, on

a per diem or mileage basis in lieu of actual costs incurred, or on a combination of the two, provided the method used is applied consistently

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(b) NEW Documentation must justify:(1) Participation is necessary for

the federal award; and

(2) Costs are reasonable and consistent with entity policy

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§ 75.474 Travel costs (cont.)(c) (1)NEW Temporary dependent care costs

resulting from travel to conferences are allowable provided that:(i) Costs are a direct result of travel;

(ii) Costs are consistent with the travel policy; and

(iii) Costs are temporary during the travel period

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Subpart F. Audit Requirements



The responsiveness to the request for proposal,

Relevant experience,

Availability of staff with

professional qualifications and technical

abilities,

Results of peer and external quality control

reviews, and

Price

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Auditees§ 200.509 Auditor Selection

Factors to be considered include:

45 CFR 75.509


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Auditees

§ 200.510 Financial Statements(a) The auditee must prepare financial statements

that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited

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Auditees

§ 200.510 Financial Statements (cont.)(b) Schedule of expenditures of Federal awards. The

auditee must prepare a schedule of expenditures of Federal awards for the period covered. At a minimum, the schedule must:(1) List individual Federal programs by Federal agency.

For a cluster of programs, provide the cluster name, list individual Federal programs within the cluster of programs, and provide the applicable Federal agency name

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45 CFR 75.510

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Auditees

§ 200.510 Financial Statements (cont.)(2) For Federal awards received as a subrecipient. The

name of the pass-through entity and identifying number assigned by the pass-through entity must be included

(3) Provide total Federal awards expended for each individual Federal program and the CFDA number. For a cluster of programs also provide the total for the cluster

(4) Include the total amount provided to subrecipients from each Federal program

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Auditees

§ 200.510 Financial Statements (cont.)(5) For loan or loan guarantee programs identify in the

notes to the schedule the balances outstanding at the end of the audit period. This is in addition to including the total Federal awards expended for loan or loan guarantee programs in the schedule

(6) NEW Include notes that describe that significant accounting policies used in preparing the schedule, and note whether or not the non-Federal entity elected to use the 10% de minimis cost rate as covered in §200.414 Indirect (F&A) costs

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45 CFR 75.510

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Auditees

§ 200.512 Report SubmissionGeneral. (a) (1) The audit must be completed and the data collection

form and reporting package must be submitted within the earlier of 30 calendar days after receipt of the auditor's report(s), or nine months after the end of the audit period(2) Auditee must make copies available for public inspection. Auditee and auditor must ensure that the reporting package does not include PPII

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Auditors

§ 200.516 Audit Findings(a) Audit findings reported. The auditor must report

the following as audit findings in a schedule of findings and questioned costs:(1) Significant deficiencies and material weaknesses in

internal control over major programs and significant instances of abuse relating to major programs

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45 CFR 75.516


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Auditors

§ 200.516 Audit Findings (cont.)(2) Material noncompliance with the provisions of Federal

statutes, regulations, or the terms and conditions of Federal awards related to a major program

(3) Known or likely known questioned costs that are greater than $25,000 (NEW) for a type of compliance requirement for a major program

(4) Known questioned costs that are greater than $25,000 (NEW) for a Federal program which is not audited as a major program, if the auditor becomes aware of questioned costs for such a program

12145 CFR 75.516

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Auditors§ 200.516 Audit Findings (cont.)

(5) The circumstances concerning why the auditor's report on compliance for each major program is other than an unmodified opinion

(6) Known or likely (NEW) fraud affecting a Federal award, unless such fraud is otherwise reported as an audit finding in the schedule of findings and questioned costs for Federal awards

(7) Instances where the results of audit follow-up procedures disclosed that the summary schedule of prior audit findings prepared by the auditee materially misrepresents the status of any prior audit finding

12245 CFR 75.516

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Auditors

NEW§ 200.518 Major Program DeterminationGeneral.(a) The auditor must use a risk-based approach to determine

which Federal programs are major programs

This risk-based approach must include consideration of: current and prior audit experience, oversight by Federal agencies and pass-through entities, and the inherent risk of the Federal program.

The following process must be followed:

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AuditorsNEW§ 200.518 Major Program Determination(f) Percentage of coverage –

20% of federal expenditures if low-risk auditee40% of federal expenditures if not low-risk auditee

(g) Auditor must document the risk analysis used in determining major programs

(h) When major program determination was performed and documented, the auditor judgment in applying the risk-based approach to determine major programs must be presumed correct

12445 CFR 75.518

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§ 200.521 Management DecisionGeneral(a) The management decision must clearly state whether or not

the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action

(d) Time requirements. The Federal awarding agency or pass-through entity responsible for issuing a management decision must do so within 6 months of acceptance of the audit report by the FAC. The auditee must initiate and proceed with corrective action as rapidly as possible and corrective action should begin no later than upon receipt of the audit report

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Summary and Next Steps

Develop a plan to implement the necessary

changes

Educate others in your organization

on the changes and include them

in the planning process

Watch for guidance from your funding

sources

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Wipfli’s Top 10 Changes

1 • Cost allocation options

2 • PARs

3 • Procurement

4 • Computers as supplies

5 • Recognition of electronic media

6 • Audit threshold changes

7 • Family friendly policies

8 • Internal controls focus in admin requirements

9 • Fund raising to support program

10 • No employee morale

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Questions & Discussion

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You’re Invited…..

129

Together, we make an impact! Join us, July 8 –13,2018, for the 19th Annual Wipfli National Training Conference for ways to serve your community even better. Register by Feb. 1, 2018 to receive the preregistration rate.

wipflinationalconference.com/2018© Wipfli LLP

www.wipfli.com/ngp

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