TC Summary of UG and Action Plan

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Office of Grants & Contracts Accounting

Office of Grants & Contracts Accounting

Office of the Controller

Uniform Plan

TC summary of UG and Action Plan

Date: December 16, 2014

To: Project Investigators and Administrators
From: John L. Hernandez, Director of Grants and Contracts
Re: Uniform Guidance

The Office of Management and Budget (OMB) has combined many federal circulars, including A-21, A-110, and A-133 into a single guidance document that can be used by all agencies.  This combined document is known as "Uniform Guidance" or OMB A-81.The new regulations will become effective on December 26, 2014.  These guidelines are for all federal awards received by Teachers College.  Federal agencies are currently developing their implementation plans under this guidance and these new regulations (NSF, NIH, and USDE are the only federal agencies that completed their regulations).  

Attached is a checklist of Teachers College action plan.  You can also click on this link from the OMB website at Federal Register dated December 26, 2013 which documents all the new changes.  Since the link is about a 100 pages long, we have also provided a summary of the new regulations.


Teachers College has summarized these reforms into three main categories:

1) Administrative Requirements:

Sub-Recipient/ Contractor Determination 

The College must make case-by-case determinations whether outside support provided to a PI establishes the party receiving the funds in the role of a sub-recipient or a contractor.

  • Characteristics which support the classification of the non-federal entity as a sub-recipient include:                          
  1. Has performance measured as to whether objectives of a federal program were met
  2. Has responsibility for programmatic decision making
  3. Is responsible for adherence to applicable federal program requirements
  4. Uses the federal funds to carry out a program for a public purpose
  5. Sub-recipient is eligible to receive federal assistance

 

  • Characteristics indicative of a procurement relationship between the non-federal  entity and a contractor:
  1. Provides the goods and services within normal business  operations
  2. Provides similar goods or services to many different purchases
  3. Normally operates in a competitive environment
  4. Provides goods or services that are ancillary to the operation of a federal program
  5. Is not subject to compliance requirements of a federal program

For each sub-award recipient, Teachers College must inform the sub-recipient  of the grant CFDA title and number, award name and number, award year, if the award is research and development and name of federal granting agency as well as other related information.

 

Sub-recipient Selection & Monitoring

Teachers College must evaluate each sub-recipient’s risk of noncompliance for the purpose of determining to whom a sub award should be granted.  Evaluation may include:

  • Prior experience with similar sub-awards
  • Results of previous audits
  • Whether sub-recipient has new personnel and new or substantially changed systems
  • The extent of federal awarding agency monitoring, if the sub-recipient has direct awards with agencies.

Monitoring activities must include:

  • Reviewing financial and programmatic reports required by pass-through entity
  • Following up on corrective action
  • Issuing management decisions
  • Examination of audit reports for single audit entities

Based on risk assessment, the following monitoring tools may be used:

  • Providing training to sub-recipients
  • Performing on-site reviews
  • Arranging for agreed-upon procedures engagement

Procurement Standards

Non-federal entities must maintain conflict of interest policies as well as written policies on organizational conflict of interests.  Conflict of interest now extends to the purchase of goods and services and subcontracts.

Records must be maintained to sufficiently detail the history of procurements.

There should be full and open competition and the following practices are restricted:

  • Unreasonable requirements to qualify to do business
  • Unnecessary experience and excessive bonding
  • Noncompetitive pricing practices between firms/affiliates companies
  • Noncompetitive awards to consultants on retainer
  • Specify only brand names

Teachers College must provide documentation that minority businesses, women’s business enterprises, and labor surplus firms are used when possible.

Non-federal entities must adhere to the following guidelines when procuring goods or services within the following dollar thresholds:

  • Micro-purchase (<$3,000) - These purchases may be awarded without soliciting competitive quotations if Teachers College considers the price to be reasonable.
  • Small purchase (>$3,000 < $150,000) – Must have 2 bids.  Non-competitive bid process allowed under limited circumstances.
  • Purchases > $150,000 – Must use a competitive or seal bid process with at least 2 bids.  Non-competitive bid process allowed under limited circumstances.

The following are descriptions of each of the methodologies described for procurement within their respective dollar thresholds:

  • Competitive proposals - This process is conducted with more than one source submitting an offer, and either a fixed price or cost reimbursement type contract is awarded for the purchase of goods or services.  It is generally used when price is one of several factors utilized in determining the successful proposal.    The following requirements apply:
  1. Requests for proposals must be publicized and identify all evaluation factors and their relative importance.  Any response to publicized requests for proposals must be considered to the maximum extent practical.
  2. Proposals must be solicited from an adequate number of qualified sources.
  3. Teachers College must have a written method for conducting technical evaluations of the proposals received and for selecting recipients.
  4. Contracts must be awarded to the responsible firm whose proposal is most advantageous to the program, with price and other factors considered.

 

  • Noncompetitive proposals  - Procurement through solicitation of a proposal from only one source may be used only when one or more of the following circumstances apply:
  1. The item is available only from a single source.
  2. The public urgent or emergency for the requirement will not permit a delay resulting from competitive solicitation.
  3. The federal agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from Teachers College.
  4. After solicitation of a number of sources, competition is determined inadequate.

 

  • Sealed Bids - Bids are publicly solicited and a firm fixed price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming to all the material terms and conditions of the invitation for bids, is the lowest in price.  Sealed bids are often utilized for construction projects but may be utilized for the purchase of goods as well.  In order for the sealed bidding to be feasible, the following conditions should be present:
  1. A complete adequate and realistic specification or purchase description is available.
  2. Two or more responsible bidders are willing and able to compete effectively for the business.
  3. This procurement lends itself to a firm fixed price contract and the selection of the successful bidder can be made principally on the basis of price.

The following requirements apply:

  1. The invitation for bids must be publicly advertised and bids must be solicited from an adequate number of known suppliers, providing them sufficient response time prior to the date set for opening the bids.
  2. These bids must include any specifications and pertinent attachments, must define the items or services in order for the bidder to properly respond.
  3. All bids will be publicly opened at the time and place prescribed in the invitation for bids.
  4. A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder.  Where specified in bidding documents, factors such as discounts, transportation cost, and life cycle costs must be considered in determining which bid is lowest.  Payment discounts will only be used to determine the low bid when prior experience indicates that such discounts are usually taken advantage of.
  5. Any or all bids may be rejected if there is a sound documented reason.

OMB-81 calls for the performance of a cost price analysis.  Further guidance is needed to determine exact implementation but the following has been established:

  1. Performed in connection with every procurement action in excess of the Simplified Acquisition Threshold (above $150,000) including contract modification
  2. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation
  3. The entity must make independent estimates before receiving bids or proposals

Performance Measurement

 Teachers College must relate financial data to the performance accomplishments of an award.  Recipients must also provide cost information to demonstrate cost-effective practices.  The intent is to help awarding agencies improve program outcomes, share lessons learned, and spread the adoption of best practices.

Mandatory Disclosure

Teachers College must disclose all violations of federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the federal award.  Failure to make the required disclosures can result in suspension and/or debarment from federal grants.

Greater focus on Internal Controls

Teachers College must establish and maintain effective internal controls over federal awards to provide reasonable assurance that awards are being managed in compliance with laws and regulations.  Non-federal entities and their auditors will need to exercise judgment in determining the most appropriate and cost effective internal control in a given circumstance.  Non-federal entities must also take measures to safeguard personally identifiable information.

Cost Sharing

Voluntary committed cost sharing cannot be used as a factor during the merit review of application or proposals, but may be considered if it is both in accordance with the federal awarding agency regulations and specified in a notice of funding opportunity.  Voluntary committed cost sharing is not expected under federal research proposals.

2) Cost Principles

Facilities and Administrative Costs (Indirect Costs)

Under the new guidance, federal agencies and pass-through entities must accept a negotiated indirect cost rate if one exists, or negotiate a rate in accordance with federal guidelines.  There are exceptions when a statute or regulation requires it, or if the head of the agency approves it based on publicly documented justification.

  • Non-federal entities that have never had a negotiated indirect cost rate may use a rate of 10 percent of modified total direct costs.
  • Entities with an approved federally negotiated indirect cost rate can now apply for a one-time extension of up to four years without further negotiation.

Administrative Salary Direct Costs

In certain circumstances, administrative costs can be charged directly when there is prior approval and the costs are specifically allocated to one award.  Administrative and clerical staff salaries are normally treated as indirect costs, but direct charging may be appropriate if:

  • The service are integral to a project or activity
  • Individuals involved can be specifically identified with the project or activity
  • Costs are explicitly included in the budget or have prior written approval of the awarding agency
  • The costs are not also recovered as indirect costs

Compensation (Time & Effort Reporting)

To prevent duplicating efforts in entities that have good internal controls, the final guidance allows for alternatives to the current reporting requirements for salaries and wages.  Auditors must test these internal controls.  Federal agencies can also now approve alternative accounting methods for salaries and wages based on the achievement of performance outcomes. This includes areas that blend from multiple programs.

Charges must be based on records that accurately reflect the work performed and must:

  • Be supported by a system of internal controls which provides reasonable assurance that the charges are accurate, allowable and properly allocated
  • Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities
  • Comply with the established accounting policies and practices of the non-federal entity
  • 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

Budget estimates (estimates determined before services performed) alone do not qualify as support for charges to federal awards, but may be used for interim accounting purposes, provided that:

  • System for estimating must produce “reasonable approximations” of activity actually performed
  • Significant changes in work activity (as defined in written policies) are identified and entered into records timely
  • Must be a process to review the charges made based on budget and adjustments after the fact so that  the final amount charged to the federal award is accurate, allowable, and properly allocated

Other important guidance:

  • Cost share salaries must be documented in the same manner as direct charged compensation
  • When records do not meet the standards, the federal government may require personnel activity reports, prescribed certifications, or equivalent documentation
  • Guidance allows entities to replace detailed time & effort reports with performance-based reporting that is based on milestones. For this to happen:

                  -The appropriate agency will have to approve the use of such an approach

                  -Entities could use performance-based metrics to account for multiple awards

Materials and Supplies

Materials and supplies used for the performance of a federal award are typically charged as direct costs.  Going forward, computer equipment can be charged as direct costs if they are essential and allocable, but not solely dedicated to the performance of a federal award.

Publication and Printing Costs

The non-federal entity may charge the federal award before closeouts of publication of sharing of research results if the costs are not incurred during the period of performance of the federal award.

Cost Accounting Standards and Disclosure Statement

Currently, when institutions’ awards total $25 million or more, they must comply with the Federal Acquisition Regulation (FAR) Cost Accounting Standards (CAS) and file a disclosure statement.  OMB has set the new threshold at $50, million, consistent with FAR requirements.

3) Audit Requirements

Several changes will impact how organizations are audited for federal awards:

Audit Threshold:

  • OMB raised the single audit threshold to $750,000, up from the existing $500,000 threshold. 
  • Increased Type A threshold: a new table (section 200.518) simplifies the Type A/Type B determination.  For those organizations with federal expenditures below $25 million, the threshold is increased from $300,000 to $750,000
  • Increased Type B threshold: Programs that exceed 25% of the Type A threshold For those organizations with federal expenditures below $25 million, the threshold is increased from $100,000 to $187,500

High Risk Type A

OMB made changes to the A-133 guidance relating to high/low risk Type A programs.  Now, to be considered low risk, the program must have not internal control deficiencies identified as material weaknesses, a modified opinion on compliance, or known or likely questioned costs that exceed five percent of the total federal awards expended for the program.  The requirement that a Type A program must be audited as a major program in at least one of the two most recent audit periods remains in guidance.

High Risk Type B

The uniform guidance simplifies the criteria for considering high risk Type B programs as “major”.  The risk assessment will be based on the current guidance’s general criteria.  The only single criterion that would automatically result in an assessment of high risk for a Type B program would be a material weakness or compliance problems.  The final guidance reduces the number of high-risk Type B programs to be audited to a least ¼ of the number of low-risk Type A programs. This is a decrease from at least ½ the number of low-risk Type A programs in the existing guidance.  In addition, the final guidance uses a flat 25% of the Type A program threshold to identify small Type B programs that would not be assessed for risk.  The final guidance encourages auditors to audit different high-risk Type B programs each year.  These changes should result in fewer programs being selected as “major”

“Percentage of Coverage” Rule

The Single Audit Act requires the auditor to test a minimum percentage of total federal awards expended as major programs.  The new percentage of coverage rule decreases the level from 25 percent to 20 percent of total federal awards expended from low-risk auditees and from 50 percent to 40 percent for all others.

Questioned Costs Reporting

 Increases the threshold for reporting known or likely questioned costs from $10,000 to $25,000.

Low-Risk Auditee Criteria

Auditees that meet all of the following conditions for each of the preceding two audits periods qualify as low-risk auditees:

  • Single audits were performed annually.  This includes submitting in a timely manner the data collection form and the reporting package to the Federal Audit Clearinghouse.  Entities that have biennial audits do not qualify as low-risk auditees
  • ·The auditor’s opinion on whether the financial statements were prepared in accordance with GAAP (or a basis of accounting required by state law) and the auditor’s in relation to opinion on the schedule of expenditures of awards were unmodified
  • There were no General Accepted Governmental Accounting Standards (GAGAS) material weaknesses
  • The auditor did not report a substantial doubt the auditee’s ability to continue as a going concern
  • In either of the preceding two years, none of the Type A programs had internal control deficiencies identified as material weaknesses, questioned costs that exceed five percent, or a modified opinion on a major program in the auditor’s report

 

 

The following are key actions which the College must take in order to comply with this new guidance and College policies.  More detail of the criteria to be utilized in various checklists can be found in the summary of the legislation prepared by the Grants and Contracts Office which is also attached to this e-mail or in the full legislation which can be found on the OMB website at   Federal Register dated December 26, 2013.

 

 

Action Item

Responsible Departments

  1. Develop a check list of criteria to be utilized in determining sub award recipients versus contractor designation for federal grants. 

Office of Sponsored Programs and Principal Investigators

  1. Develop a checklist to review the risk of noncompliance with federal regulations prior to the College awarding a subcontract.  This checklist should be accompanied by relevant documentation (i.e. sub-recipient single audit reports)                                                                                                                   

Office of Sponsored Programs, Principal Investigators and Office of Grants and Contracts

  1. The College must accept the federal indirect cost rate of all sub award recipients.   If the sub award recipient does not have a federal indirect cost rate, 10% should be utilized.  Conversely, the College must always utilize its federal indirect cost rate (69.1% of salary and wages) when receiving a federal sub-award.

Budgets for future grant proposals must be developed with these assumptions.

Office of Sponsored Programs, Principal Investigators and Office of Grants and Contracts

  1. Establish procedures and document compliance that the following was performed for purchases on federal grants within the following dollar thresholds: 
  • Micro Purchases <$3K – Ensure price is fair and reasonable.  No competitive bid process necessary
  • Small Purchases $3K<$150K- Three bids needed.  Non-competitive bid process allowed under limited circumstances.
  • Purchases >$150K- Competitive bid process consisting of 2 bids (if available).  Sealed bid process for construction.  Non-competitive bid process allowed under limited circumstances.

Develop cost price analysis procedures.

Teachers College must also provide documentation that minority businesses, women’s business enterprises, and labor surplus firms are used when possible.

Purchasing

  1. Ensure there is a clear relationship between financial data and performance monitoring in progress reports.

 

Office of Sponsored Programs and Principal Investigators

  1. Develop a check list of criteria to be utilized in determining on-going compliance by sub award recipients for federal grants.  This checklist should be completed annually for each sub –award recipient and be accompanied by relevant documentation (i.e. sub-recipient single audit reports) along with documentation of site visits.

Office of Grants and Contracts and Principal Investigators

  1. Develop a process to query and monitor Conflict of Interest as it relates to procurement and sub-recipients.  This monitoring should include those employees with authority to approve vendors and subcontractors on a federal grant or contract

General Counsel

 

 

There are numerous new guidelines and reinforcements of existing standards set forth by the Uniform Guidance.  Some key aspects of the guidance to consider when applying for federal grants and ensuring on going compliance are:

  • Voluntary cost share is prohibited from being a determining factor utilized by federal agencies when awarding funds.
  • Administrative salaries may be charged to a federal grant if they have prior approval by the granting agency, can be specifically identified with the project or activity and not already recovered as an indirect cost.  This is the College’s current practice.
  • Computers are now an allowable direct charge to grants and contracts.
  • Publication costs are allowable after the end of the grant until closeout.
  • There are various options for time and effort reporting.  The College is not currently contemplating changing it‘s time and effort reporting process as it is acceptable under the new guidance.
  • Extensive new guidance on the level and type of testing required in the College’s single audit (formerly A-133).  This needs to be considered only by the College’s external auditors and the Controller’s Office.