2014-06-17 Raffa BDO Managing U.S. Federal Awards

BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.

Managing U.S. Federal Awards:Internal Control Requirements & Accounting System Implications

Presented By:Eric Sobota, Partner (BDO USA, LLP)

Sokhar Chan, Manager (BDO USA, LLP)Seth Zarny, Partner (Raffa, P.C.)

Buu-Linh Tran, Manager (Raffa, P.C.)

June 17, 2014

Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications

Agenda

Overview & Background Pre-Award Administrative Requirements Post-Award Implementation Requirements Strategic Considerations


Overview & Background


Development

In 2009, President Obama issued Executive Order 13520

declared a focus on reducing improper payments government-wide and eliminating waste and fraud

January 18, 2011, the President issued Executive Order 13563,

directed all executive agencies to review their regulations, and determine if they were “tailor[ed]... to impose the least burden on society”

In an accompanying memorandum, the White House stated that “Executive Order 13563...requires retrospective analysis of existing significant rules and greater coordination across agencies to simplify and harmonize redundant, inconsistent, or overlapping requirements, thus reducing costs”


Development

On February 28, 2012, OMB published an Advance Notice of Proposed Guidance (ANPG) in the Federal Register

Proposed the consolidation of cost accounting principles, but did not propose to consolidate the various administrative requirements unique to each category of recipient

On February 1, 2013, OMB issued the draft text of the Supercircular, currently designated as OMB-2013- 0001-0002

OMB also published a 15-page summary and discussion document in the Federal Register setting forth a history

Over 300 individuals and institutions submitted comments by the June 2, 2013 deadline

The rule issued December 26, 2013 and will be fully implemented by December 26, 2014

OMB will integrate the new rule into Title 2 of the Code of Federal Regulations


Overview December 26, 2013 OMB issued Uniform

Administrative Requirements, Cost Principles, and Administrative Requirements for Federal Awards Consolidates regulations to provide consistent guidance for grant

recipients and issuers

Changes and consolidations include: Provides a single resource for requirements that apply to all

recipients, eliminating the requirement for grants professionals to cross-reference between multiple resources;

Includes new measures designed to ensure merit-based grant awards and identify problems early in the process;

Introduces more formal requirements for certification of compliance and disclosure of noncompliant or criminal acts;

Attempts to streamline and standardize the cost principles in many ways, including new options for the recovery of indirect costs.


Implementation - Key Dates

Standards that apply directly to Federal agencies are already effective on 12/26/13.

Federal agencies will simultaneously implement regulations applicable to recipients.

Individual Federal agencies currently required to implement “SuperCircular” with regulations to be effective by 12/26/14. Required to submit draft implementing regulations to

OMB by 6/26/14. Administrative requirements and costs principles apply to

new grant awards and additional (incremental) funding made after 12/26/2014.

Audit requirements in Subpart F will apply to audits of FY beginning on or after December 26, 2014 Audit threshold change (FY beginning after 12/26/14)


Cost and Audit Principles

Effective 12/31/2014 farewell to the following:• Administrative Requirements in A-102 and A-110

• Cost Principles in OMB Circulars A-21, A-87 and A-122 (limited variations by entity type)

• Audit Policies OMB Circulars A-133 for audit provisions

• Federal Program Information Requirements in OMB Circular A-89

• OMB’s Directive on Federal Agency Assistance Program Announcements


New Guidance

Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (also known as the “SuperCircular” and the “Omni-Circular”)

New Guidance broken out into six(6) subparts and several appendices: Subpart A – Acronyms and Definitions Subpart B – General Provisions Subpart C – Pre-Award Federal Requirements and

Contents of Federal Awards Subpart D – Post Federal Award Requirements Subpart E- Cost Principles Subpart F – Audit Requirements

Specific elements of costs are addressed further in Appendix III for Educational Institutions and Appendix IV for Nonprofit Organizations


Significant Features

Imposes common requirements for both administrative and accounting functions

Supersedes Circulars A-89, A-102, and A-110 for administrative requirements

Provides across-the-board deadlines and thresholds for notice requirements, small purchase limits

Requires new quality control and efficiency measures Significant new guidance for Federal grants personnel

Consolidates Circulars A-87, A-21, and A-122 setting forth the cost principles governing the use of Federal grant funds for state and local public agencies, higher education institutions and nonprofit organizations not covered by the other circulars.

All of these entities must now refer to the consolidated terms of the Supercircular.


What Are Requirements for Grant Management System?

Tracking pre-award process (process for grant application) Tracking grant dollars Monitor Grant Spending - Avoid over spending Allocate IDC Financial Reporting – maintaining grant reports/ donor

reports Grants – Tracking non financial information & managing

grant information Robust Reporting – Ability to drill down


How can Technology Help?

Intacct Project Accounting/ User Defined Fields Microsoft dynamics GP Grants Management/Extender Microsoft Dynamics SL – Project/grants – allocations,

modifier SharePoint Financial System(s) Custom application/ Database MS Excel / Word


Field Offices – Other Factors

People (Priorities/culture/authorities) Technical challenges Different Processes Multicurrency Different systems Locations Support/ Financial Reporting

Reporting to necessary stakeholders (Board of directors, Donors, executives, program managers, grants managers, etc.)

Nonprofits must account for: Funds, Grants, Projects, Programs, and More

Documentation


What Types of Data Are Tracked?

Non-Financial Pre-award Process & Related Information Awarded Information including

- Contractor/ Sub-Recipient, sub-recipient IDC, track compliance - IDC - Matching Requirements - Reporting Requirements/ schedule

Manage Grant Life Cycle

Financial Linking grants to financial transactions Financial Reporting (PL by Grant, SEFA) IDC calculation


Tools for Tracking Non-Financial Data

Demo Dynamics GP and Intacct


Pre-Award Administrative Requirements


Reforms to Administrative Requirements

Pre-Award Requirements (§200.200-211) For all awards, Federal agency must consider government-wide

“eligibility qualification or financial integrity information,” such as FAPIIS, Dun & Bradstreet, “Do Not Pay,” and List of Excluded Parties.

“For competitive grants and cooperative agreements,” Federal agency must publicly announce funding opportunities, including: Specific eligibility information and “merit review process”

including “criteria and process to be used to evaluate applications;”

Available for at least 60 calendar days (no less than 30 days);

Framework for evaluating risks posed by applicants (including performance of other awards and audit reports).

Suggests these provisions be used for non-competitive awards too.

“Fixed Amount Awards” available.


Direct Costs

Allows for direct charging of administrative and clerical salaries if all of the following conditions are met: Integral to a project or activity; Individuals can be specifically identified; Such costs are explicitly included in the budget or have the

prior written approval of the Federal awarding agency; and The costs are not also recovered as indirect costs.


Indirect Cost Rates

Negotiated rates accepted by all Federal awarding agencies A different rate may be used when required by Federal

statute/regulation, or when approved by a Federal agency. May apply for a one-time extension of a current negotiated

indirect cost rates for a period of up to four years. Any non-Federal entity that has never received a negotiated

indirect cost rate, (exceptions in Appendix VII) may elect to charge a de minimis rate of 10% of MTDC which may be used indefinitely.

Award levels for Federal awards will not be adjusted throughout the “life” of the award due to changes in negotiated rates Negotiated rates include final, fixed and predetermined

rates.


Indirect Cost Methods

Negotiated Lump Sum for Indirect Costs Method may be used for self-contained, off-campus or

primarily subcontracted activities where the benefits of the overall indirect activities cannot be determined.

In lieu of detailed cost information, can negotiate a fixed amount per agreement for indirect costs.

Predetermined Rates for Indirect Costs Permanent rate established for a specified current or future

period and is not subject to adjustment. Negotiated Fixed Rates and Carry-Forward

Provisions Allows a fixed rate for one fiscal year or longer and apply an

adjustment for over/under billing to the next fixed rate negotiation


Indirect Cost Methods


How Are Financial Data Tracked?

Intacct Dimensions Project Accounting Modules

Dynamics GP Chart of account (COA) – Track grant activities through segment

of COA Analytical Accounting (AA) – Dimensions Olympic – Use project to track grant transactions

Dynamics SL Project Accounting Series Cost Allocations Project, Tasks, Account Category Indirect & Direct Rates, Provisional/Actual


Financial Data in Dynamics GP, SL and Intacct ?Features Chart of Account Analytical

AccountingSL/Olympic Intacct

1.Track grant transactions X X X X

2. Track grant budgets for fiscal and grant period

X X X X

3. Prevent or provide warning when expenditure exceed grant revenue

X X (SL)

4. Track employee time against grant X X (Only w/ Project)

5. Track employee expense against grant (web-based application)

X X (only w/ Project)

6. Bill against the grant X X X X (only w/ Project)

7. Management Reporter (FRx)/ Financial Reports by Project

X X X

8. Smartlist X X X

9. SSRS/ Custom report X X X X

10. Cost Allocations Moderate Moderate Extensive Moderate


Pros and Cons

Solutions Pros Cons

Chart of Account

Easy to maintain (Accounting dept control over COA)No sub-ledger to manageEasy to create report using MRCan slice and dice segment for reportingWork with MR/ existing report writer

Long COANot accommodate multiple year (grant yr vs. fiscal yr)Maintain old accounts foreverData entryUnable to handle complex grant requirement (time entry, complex allocation, etc.)

Analytical Accounting

Shorten COA Prevent charging expenditure in excess of revenueWork with MR/ existing report writer

Maintain sub-ledger / resourceSeparate screen for data entryRequire reconciliationAdditional trainingAdditional configuration/setup

Olympic Project Accounting/Dynamics SL

Shorten COA Track employee time and expense against grantAllows for sophisticated allocationAllows for sophisticated billingSophisticated Costing – Direct/Indirect Rates

Maintain sub-ledger / resourceSeparate screen for data entryAdditional trainingAdditional configuration/setupHas separate reporting function

Intacct Project Accounting

Shorten COA Track employee time and expense against grant

Maintain sub-ledger / resourceRequire reconciliationAdditional trainingAdditional configuration/setup


Tools for Tracking Financial Data & Reporting



Sample SEFA Report

Government Contractors Financial & Project Management System Seminar

Post-Award Implementation Requirements


Sub-recipient OverviewImplications for pass-through entities

One of the most significant changes is the more stringent requirements for sub-recipient monitoring

Examples of expanded pass-through entity responsibilities include:o Requirement for consistent practice to distinguish sub-recipient

from contractoro Identifying or negotiating an appropriate sub-recipient indirect

cost rate at the time of awardo Ensuring “flow-down” of new requirements are included within

sub agreements, as applicableo Evaluating sub-recipient risk of noncompliance and

determining necessary monitoring activities – including on-site reviews

o Imposing remedies for sub-recipient noncompliance, when necessary


Sub-recipient or Contractor… What’s the difference?

Sub-recipient:o A sub-recipient “uses the Federal funds to carry out a

program for a public purpose specified in authorizing statute”o Characteristics which support classification of the non-

Federal entity (NFE) as a sub-recipient includes when the NFE:1. Determines who is eligible to receive what Federal assistance;2. Has its performance measured in relation to whether objectives

of a Federal program were met;3. Has responsibility for programmatic decision making;4. Responsible for adherence to applicable Federal program

requirements specified in the Federal award; and5. In accordance with its agreement, uses Federal funds to carry out

a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity.


Sub-recipient or Contractor…What’s the difference? - (cont’d)

Contractor:o A contract is for the purpose of obtaining goods and services

for the non-Federal entity’s own use and creates a procurement relationship with the contractor

o Characteristics indicative of a relational between a NFE and a contractor are when the NFE who is receiving federal funds:1. Provides similar goods or services to many different purchasers;2. Normally operates in a competitive environment;3. Provides goods or services that are ancillary to the operation of the

Federal program; and4. Is not subject to compliance requirements of the Federal program

as a result of the agreement, though similar requirements.


Sub-recipient Selection & PlanningWhat’s required?

Establish formal process to properly structure sub-recipient agreements. Be sure to include:o All flow-down requirements necessary to ensure

appropriate sub-recipient use of Federal awardo Any additional flow-down requirements necessary for pass-

through entity to meet its own responsibilitieso A requirement that the sub-recipient permit access to

records and financial statements through the period of performance

Consider expanded pass-through entity responsibilitieso Required information to be provided to sub-recipientso Use of appropriate sub-recipient indirect cost rateso Conduct sub-recipient risk assessment


Sub-recipient Selection & PlanningRequired information Must clearly identify every sub-award to the sub-

recipient and must include the following information at the time of the sub-award:o Federal Award Identification and Federal Award

Identification Number (FAIN)o Sub-recipient name and DUNS numbero Federal award dateo Sub-award period of performance (start and end dates)o Funding informationo Federal award project descriptiono Name of the Federal awarding agencyo Catalog of Federal Domestic Assistance (CFDA) title and

numbero Identify if award is for Research & Development (R&D)o Indirect cost rate for the Federal award


Sub-recipient Selection & PlanningRequired information – (cont’d)

Changes to data elements previously provided must be reflected in subsequent sub-award modifications

Should some of the required information not be available at the time of award, pass-through entity may include the best information available to describe the Federal award and sub-award


Sub-recipient Selection & PlanningIndirect cost rate Consider if sub-recipient has an approved/federally

recognized indirect cost rate

If no such rate exists, consider alternative options:o Negotiate rate with sub-recipiento Use de minimis rate of 10% of modified total direct cost

(MTDC)o Utilize fixed amount sub-awards

Requires prior written approval from the Federal awarding agency

May only be used when total sub-award value does not exceed the Simplified Acquisition Threshold (i.e. $150,000)

Must consider requirements of section 200.201 “Use of grant agreements (including fixed amount awards) cooperative agreements, and contracts”


Sub-recipient Monitoring ActivitiesRisk assessment Sub-recipient monitoring plan must ensure that the

sub-award:o Is used only for authorized purposes o Is in compliance with Federal statutes/regulations & sub-

award T&Cso Achieves its performance goals

Consider risk of sub-recipient noncompliance

Risk assessment is based on:o Prior/past experience with similar sub-awardso Previous audit resultso Significant changes in personnel or systemso Extent and results of Federal awarding agency monitoring


Sub-recipient Monitoring ActivitiesMonitoring plan Minimum monitoring activities must include:

o Reviewing financial and programmatic reportso Conducting on-site reviews/audits based on risk assessmento Conducting follow-up reviews to ensure timely completion of

corrective actions required to address deficiencies – as identified through on-site reviews, audits, or other means

o Issuing a management decision for audit findings pertaining to the Federal award

o Verifying that each sub-recipient receive completed audits, as required

Design of monitoring plan will vary based on sub-recipient risk assessment:o i.e., more stringent monitoring plan is required for high risk

sub-recipients


Sub-recipient Monitoring ActivitiesAdditional considerations

Based on results of monitoring activities, pass through entities shouldo Provide training and technical assistance to appropriate sub-

recipient staffo Determine if on-site reviews/audits necessitate adjustments to

own recordso Consider taking enforcement action against noncompliant sub-

recipients

If sub-recipient noncompliance is determined, pass through entities may apply enforcement action through specific conditions (§200.207)

If noncompliance cannot be remedied through specific conditions, more severe enforcement action may be taken (§200.338)


Sub-recipient Monitoring ActivitiesImposing specific conditions

Specific conditions cano Dictate how sub-award receives payment o Require additional reporting requirements or prior approvalso Require sub-recipient obtain technical or management

assistance

When imposed, specific conditions must be clearly communicated to sub-recipients

Any specific conditions must be promptly removed once corrected


Sub-recipient Monitoring ActivitiesAdditional enforcement action If noncompliance cannot be remedied through

specific award conditions, consider more severe enforcement action, such as:o Applying temporary cash withholdso Disallowing all or part of the cost of the activityo Suspending or terminating the sub-awardo Recommending the Federal awarding agency initiate

suspension or debarment proceedingso Withholding future awards to the sub-recipiento Pursuing other remedies legally available


Sub-recipient MonitoringPerformance strategies

Internal:o All sub recipient monitoring task can be performed “in house”

using staffo Omni-circular provides for opportunity to augment and refine

existing processes to address new compliance requirementso Consider timing requirements and resource bandwidth

External:o New requirement allows for outsourced sub recipient

monitoring functionso Considered an allowable direct cost provided that agreed upon

procedures are: Conducted in accordance with Generally Accepted Government

Auditing Standards (GAGAS) Paid for and arranged by the pass-through entity Limited in scope to specific compliance requirements


Sub-recipient MonitoringCost recovery strategies

Limited cost recovery afforded through an indirect rate o Only first $25,000 of sub-recipient costs receive indirect cost

allocation

New guidance allows for outsourced sub-recipient monitoring costs to be recovered directly to awards

Organizations who plan to outsource sub-recipient monitoring must:o Determine the mechanics and allocate costs prior to finalizing

budgetso Ensure these are costs included in upcoming proposals

Otherwise, these costs may not be allowed as direct cost going forward


Sub-recipient Monitoring ActivitiesGeneral best practices Sub-recipient monitoring procedures should include:

o Informing your sub-recipient of pertinent information o Ensuring your sub-recipients are receiving audits when

necessaryo Reviewing financial and programmatic reports

Reconcile the sub-recipient's budgeted expenditures to actual expenditures

Perform an on-site visit to the sub recipient to review financial and programmatic records and observe operations

Desk review - review financial and program reports submitted by sub recipients for allowable use of the grant funds.

o Establishing a tracking system to assure timely submission of required reporting

o Having a 2nd party within your organization periodically review the adequacy of sub recipient monitoring for all programs

o Document! Document! Document!


Tracking Sub-Recipients in the Accounting System



Procurement

Methods of Procurement to be followed (§200.320)1.) Procurement by Micro Purchase (<$3,000*)- “may be awarded without soliciting competitive quotations

if Non Federal entity considers price to be reasonable.”2.) Procurement by Small Purchase Procedures (<$150,000)- “price or rate quotations must be obtained from adequate

number of qualified sources.”3.) Procurement by Sealed Bids (formal advertising)4.) Procurement by Competitive Proposal5.) Procurement by Noncompetitive Proposal

• Contracting with small and minority-owned businesses.


Procurement Procurement by Noncompetitive Proposal

Limit Sole Source Procurements to the following situations: The item is available only from a single source; The public exigency or emergency for the requirement

will not permit a delay resulting from competitive solicitation;

The Federal awarding agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from the non-Federal entity; or

After solicitation of a number of sources, competition is determined inadequate.


Procurement Procurement Standards for “non-Federal

entities” (§200.317-326) Requires a formal, almost FAR-like process, presumably to

ensure the most efficient use of grant dollars.o Procedure must be “documented”o Must provide “full and open competition”o Must perform “cost or price analysis” o Must consider conflicts of interesto Award only to “responsible” contractors

Records must be maintained to document the history/rationale of the procurement.

Prohibits state or local geographical preferences. Must use one of 5 procurement methods (§200.320)

o Less formal methods OK if under the Federal “Simplified Acquisition Threshold” of $150,000.


Procurement Effective Procurement Systems

Maintain adequate descriptions of the system including policies, procedures, and purchasing practices that comply with applicable laws, regulations, and contract terms and conditions;

Mitigate against conflicts of interest; Ensure applicable flow down clauses and terms and

conditions are included in contracts, as required to execute the requirements of the award;

Clearly define lines of authority and responsibility within the system;

Ensure procurements are based on authorized requisitions;


Reforms to Other Administrative Requirements Effective Procurement Systems (continued)

Define contractor evaluation criteria and methods for determining source selection;

Perform timely cost/price analysis and technical evaluations to determine cost/price is fair and reasonable;

Maintain documentation which details the complete and accurate history of the purchase transaction to support method, contractor selected/basis of award, and reasonableness of cost/price;

Implement strong contractor monitoring and management of controls;

Ensures effective and efficient procurement of required quality supplies and services at reasonable cost/price from responsible and reliable sources.

Address adequate competition.


Procurement Implications in the Accounting System

Purchasing Module GP/ SL – Business Portal/ PO Intacct - Purchasing

3rd Party Solutions eRequester ReQlogic Docassist

Features include: RFQ, RFP Requisition / approval Documentation (include policies and procedures) Price Analysis


Reforms to Other Administrative Requirements Mandatory disclosures (§200.113)

Recipients and sub-recipients 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 potentially affecting the Federal award.”

Failure to make “required disclosures” can result in remedies in §200.338, including withholding of payments, disallowance, and suspension/debarment from future awards.

This disclosure requirement is narrower than the so-called “mandatory disclosure” rule under the FAR.

§200.113 requires disclosure of violation of federal criminal law – higher standard of proof and intent requirement.

FAR rule, on other hand, is triggered if the contractor has “credible evidence” of violation of Federal criminal law, violation of civil False Claims Act, or significant overpayment.

But, some agencies are already moving closer to FAR rule and may take this as cue to do more.


Reforms to Other Administrative Requirements Mandatory disclosures – effective practices

Set standards and establish procedures to facilitate timely discovery of improper conduct;

Assign responsibility at a sufficiently high level to ensure business ethics and compliance programs are effectively carried out;

Conduct periodic reviews to ensure compliance with code of business ethics and conduct;

Establish processes to periodically assess the risk of criminal conduct (or other conduct subject to reporting requirements);

Establish an effective internal reporting mechanism (e.g., hotline) which allows for anonymity or confidentiality, by which employees may report suspected instances of improper conduct;

Define disciplinary action for improper conduct; Establish a process to consider making appropriate and

timely disclosure, in writing, to applicable agency OIG or pass-through entity.


Reforms to Other Administrative Requirements Certification Requirements For Recipients

(§200.415) ‘‘By signing this report, I certify to the best of my knowledge

and belief that the report is true, complete, and accurate, and the expenditures, disbursements and cash receipts are for the purposes and objectives set forth in the terms and conditions of the Federal award.”

“I am aware that any false, fictitious, or fraudulent information, or the omission of any material fact, may subject me to criminal, civil or administrative penalties for fraud, false statements, false claims or otherwise.”

Potential civil and criminal liabilities (including the Civil False Claims Act) could be applied to the individual and the organization.

Organization also subject to remedies for non-compliance under §200.338.


Reforms to Other Administrative Requirements

Effective Certification Controls Process by which the Organization reviews records to

determine if more current, accurate, and complete cost data is reasonably available and should be disclosed to the Government.

If discovered, additional cost data must be provided to the Government with the executed Certificate.

Identify and disclose assumptions and limitations in data. The impact/effect of the new cost data on proposal cost should

also be provided to the Government. Typically occurs after budget agreement, but prior to contract

award.

Best Practices Establish policy/procedures on certification execution; Clearly define roles and responsibilities within the process; Create checklist with signatory authority/responsibilities; Develop training program to educate team members; and Obtain similar certifications from subrecipients and consider

remedies.


Oversight Conflicts of Interest

Two types of Conflict of Interest: Organizational Conflict of Interest (OCI) - arises when, because of

other relationships or circumstances, a contractor may be unable, or potentially unable, to render impartial advice or assistance to the government, the contractor’s objectivity in performing the work is or might be impaired, and/or the contractor would have an unfair competitive advantage.

Personal Conflict of Interest (PCI) - Personal Conflicts of Interests is a situation in which a covered employee has a financial interest, personal activity, or relationship that could impair the employee’s ability to act impartially and in the best interest of the Government.

Requirement: Agencies required to develop conflicts of interest policies for

“Federal awards,” including subawards; Not limited to procurement transactions. Required to disclose conflicts to agency/non-federal entity.


Oversight Effective processes

Establish methods to identify and evaluate potential conflicts of interest as early as possible in the acquisition or subaward process;

Establish responsible party for monitoring potential conflict of interest

Screen covered employees for PCIo Require Disclosure of Interest Statement

- Updated when personal or financial interest changes and no less than annually

Maintain written standards of conduct covering conflicts of interest.

Develop training to promote awareness and reinforce disclosure requirements; and

Define disciplinary action, if PCI is violated; Establish process to disclosure to CO, in writing, any “potential

violation conflict of interest” and demonstrate corrective actions.


Oversight Internal Control Requirements

Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award;

Comply with Federal statutes, regulations, and the terms and conditions of the Federal awards;

Evaluate and monitor the non-Federal entity's compliance with statute, regulations and the terms and conditions of Federal awards;

Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings;

Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive.


Oversight

Internal Control best practices Design and document effective practices within policies and

procedures; Establish independent monitoring practices to ensure actual

practices are consistent with documented processes, including review of established policies and procedures;

Establish reporting requirements for potential noncompliance, including recommended corrective action plans and milestones for implementing corrective actions;

Develop and provide training to applicable personnel.


How Technology Can Help with Internal Control

Approval Workflow Audit tool – Monitor and Confirm Internal

Control Working 3rd Party Audit Tools

FastPath Rockton Auditor

Government Contractors Financial & Project Management System Seminar

Strategic Considerations


Changes to Selected Items of Cost

Compensation for Personal Services (200.430) Sets forth documentation standards for time recording and

labor expense; Charges to Federal awards for salaries and wages must be

based on records that accurately reflect the work performed. These records must: o Be supported by a system of internal control which provides

reasonable assurance that the charges are accurate, allowable, and properly allocated;

o Be incorporated into the official records of the non-Federal entityo Reasonably reflect the total activity for which the employee is

compensated by the non-Federal entity not exceeding 100% of compensated activities;

o Encompass both federally assisted and all other activitieso Comply with the established accounting policies and practices of

the non-Federal entity.



Compensation for Personal Services Previously, grantees maintained written records of

employees’ activities to document an employee’s time as an allowable cost

Specific support for salaries and wages included: After-the-fact determination of actual activity for each

employee, not the budgeted amount Total Activity for which employees were compensated Signed by individual employees or responsible supervisor

with firsthand knowledge; and Prepared at least monthly to coincide with one ore more

pay periods



Compensation for Personal Services New guidance provides that the grantee must meet broad

objectives for allowability and specific time and effort documentation is not required. Must be reasonable for the services rendered and conform

to the established written policy Charges to the Federal awards for salaries and wages must

be based on records that accurately reflect the work performed

Records must meet the documentation standards set forth in 200.430.

Budget estimates continue to be insufficient support for charges, however, it does allow non-federal entities to make interim charges based on budget estimates as long as final adjustments to charges are made to ensure that any amounts charged to Federal awards is accurate.



Compensation for Personal Services Uncertainty around Acceptable Type of Documentation

Allows grantees to use their own system of internal controls to document compensation costs

Continues to require an after-the-face review of “records that accurately reflect the work performed”

Potential for audit questioned costs Further guidance will be available in June 2014

Exchange Rates (200.440)• Cost increases for fluctuations in exchange rates are

allowable costs subject to the availability of funding, and prior approval by the Federal awarding agency.



Equipment (200.439) and Materials and Supplies (200.453)• Cost of certain computing devices are allowable as direct cost

supplies.• Charge and treat computing devices not considered

depreciable assets based on capitalization policy as direct costs.

• Must follow practices for allocability of direct versus indirect costs.

Depreciation (200.436)• All references to use allowances have been eliminated. • Organizations that have facilities that they own and are old

will have an issue with this as there is no use allowance anymore.


Timekeeping

Demo Intacct Timesheet System


A-133 Audit Considerations

Increase to $750,000 from $500,000 in the dollar threshold for the A-133 audit Still required to make records available for review or audit by

appropriate officials of Federal agencies, pass-through entities and the GAO.

Level of oversight needed for other provisions that would fall below the new threshold: Pre-award review of risks, Standards for financial and program management, Sub recipient monitoring


Considerations The guidance provides flexibility and new

options for the recovery of indirect costs Consider new options which may offer significant advantages

Take action: Perform gap assessment of current processes to uniform

guidance Compliance polices are critical

Conflicts of Interest, ethics and compliance, and consider internal reporting policies.

Procurement – document process, rationale, and consideration of price/cost.

Internal training. Subawards

Address award process and effective monitoring/oversight. Address changes to cost principles.


Next Steps

Review Uniform Requirements Including the commentary from Council on Governmental

Relations (COGR). Note the key dates and begin preparing

Attend additional training sessions, roundtable events Non-Federal entities who implement entity-wide system

changes to comply with guidance after the effective date will not be penalized.

Monitor OMB and Federal agency actions


Questions?

Eric SobotaBDO USA, LLP(703) 770–[email protected]

Seth ZarnyRaffa, P.C.(301) [email protected]

Buu-Linh TranRaffa, P.C.(301) [email protected]

2014-06-17 Raffa BDO Managing U.S. Federal Awards

Education

Transcript of 2014-06-17 Raffa BDO Managing U.S. Federal Awards