Key Areas to Consider Regarding Grant Compliance

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Key Areas to Consider Regarding Grant Compliance

  1. 1. Key Areas to Consider Regarding Grant Compliance Presented to the National Foundation for Credit Counseling (NFCC)
  2. 2. Wilfredo Corps, CGFM Director of Government Services CBIZ MHM, LLC & Mayer Hoffman McCann P.C. 3 Bethesda Metro Center, Suite 600 Bethesda, MD 20814 Direct: (301) 951-3636 • WCorps@cbiz.comWilfredo is located in the Bethesda office and serves as a Director in theGovernment Practice. His practice focuses on Federal, State and Localgovernments. Additionally, he works with not-for-profit organizations andhigher education institutions helping them with a variety of issues, such asdeveloping indirect cost rate proposals, performing pre-audit surveys, etc.Some of his Federal clients include the National Science Foundation; theCenters for Medicare and Medicaid Services; and the Department of Housingand Urban Development. 1
  3. 3. AGENDA• Key Areas within Federal Regulations – Classification of Costs – Allocation and Documentation of Staff Time• Strategies to Determine Unit Cost• New Developments Impacting Future Grants Administration 2
  4. 4. Requirements• OMB Circular A-122 (Not-For-Profit Organizations)• Relocated to 2 CFR, Part 230 – www.whitehouse.gov/omb/circulars 3
  5. 5. Key Areas Within Federal Regulations• Determine Allowability, Allocability and Reasonableness of the costs claimed. 4
  6. 6. Classification of Costs• Key Concepts: – Direct costs are those that can be identified specifically with a particular final cost objective, i.e., a particular award, project, service, or other direct activity of an organization. – Indirect costs are those that have been incurred for common or joint objectives and cannot be readily identified with a particular final cost objective, i.e., janitorial services, care of grounds, director’s office, general counsel, IT services, etc. 5
  7. 7. Assigning a Cost• Is it allowed per Federal Regulations and awarding agency’s terms?• Is it reasonable? – What a prudent person would spend.• Is it an award specific cost?• Can it be assigned to the award relatively easily and with a high degree of accuracy?• Is it treated consistently as direct charges under similar circumstances across other awards? 6
  8. 8. Consistent Treatment of Costs• Federal regulations (OMB Circular A-122) require that the same type of costs be treated consistently as direct or indirect costs.• Consistency means that costs incurred for the same purpose, in like circumstances, must be treated uniformly as either direct or indirect costs.• When a cost is charged to an award directly, similar costs should not be included in the indirect cost rate and vise versa. 7
  9. 9. Administrative and Clerical Salaries• Typically, administrative and clerical salaries are a component of indirect costs.• Charging administrative and clerical salaries may be allowable when: – Effort can be specifically identified to an award – The costs are specifically budgeted, justified, and approved by the awarding agency – The project requires significant administrative and/or clerical support that is beyond the normal level provided to another projects. 8
  10. 10. Allocation and Documentation of Staff Time• Direct allocation of salaries should only be done for staff directly providing the services required by the award.• Direct allocation of administrative salaries should only be done when the services have been specifically provided to support the award being charged.• There should be some kind of a Personnel Activity Report to validate the time charged. 9
  11. 11. Personnel Activity Report• OMB A-122, Appendix B – Selected Items of Cost, 8. Compensation for Personal Services, m. Support for salaries and wages. (1) Charges to awards for salaries and wages, whether treated as direct costs or indirect costs, will be based on documented payrolls approved by a responsible official(s) of the organization. The distribution of salaries and wages to awards must be supported by personnel activity reports (PAR)…. 10
  12. 12. Personnel Activity Report (Continued) (2) Reports must meet the following standards: (a) The reports must reflect an after-the-fact determination of the actual activity of each employee. (b) Each report must account for the total activity for which employees are compensated… (c) The report must be signed by the employee or by a responsible supervisory official having first hand knowledge of the activities performed by the employee… (d) The reports must be prepared at least monthly and must coincide with one or more pay periods. 11
  13. 13. Key Points – PAR• Salary charges are always highly scrutinized• Ensure compliance with OMB Circulars and minimize “Audit Issues” – The certifying of the PARs must be done by somebody with suitable means of verification – Effort is not based on a 40 hour week, but rather on the individual’s total time – PARs track the reasonable approximation of actual activity on projects not budget – Must be well defined in your Policies and Procedures Manual – Keep records for at least three years after the submission of the final FFR 12
  14. 14. Strategies to Determine Unit Cost• Determine how many staffs are providing the required service (i.e., how many counselors)• Determine the amount of time devoted by them to support the award• Determine how much is its equivalent in dollars• Determine how many sessions/units were provided during that specific amount of time• Divide the sessions/units between the dollars 13
  15. 15. Strategies to Determine Unit Cost (Continued)• Is it reasonable• Is profit being made• Is the time considered only the time devoted to providing the services funded by the award• Is it supported – If yes, how 14
  16. 16. New Developments Impacting Future GrantsAdministration• Main Impacts• Where to find them• OMB issued proposed rules in the federal register on February 28 which could have wide implications. 15
  17. 17. New Developments Impacting Future GrantsAdministration (Continued)Main Impacts:1. Focus audit effort/oversight on higher dollar/higher risk awards: • For entities expending 1 to 3m in fund to create a focused Single Audit; this would focus audit testing on allowable costs and one other compliance aspect as selected by the funding agency. • Above that level much the same as now, subject to the other proposed changes. • Proposed increase in audit threshold to 1M. 16
  18. 18. New Developments Impacting Future GrantsAdministration (Continued)Main Impacts (continued):2. Streamlining compliance requirements: • This would target increased testing on some aspects of compliance, while lowering others. • Would result in more of a risk based approach than is currently used.3. Strengthening audit follow up: • Largely require more accountability for follow up among funding agencies. • Reports would be digitized to allow for easier access to data for review by funders. 17
  19. 19. New Developments Impacting Future GrantsAdministration (Continued)Main Impacts (continued):4. Reduce pass through burden on pass through entities and sub recipients including having the Federal agency follow up on findings related to some sub awards avoiding duplication that often occurs now.5. Reform cost principles • Merge cost principles • For indirect costs (F&A) – Possible mandatory flat rates – Possible option to select flat rates • Exploring alternatives to time and effort reporting requirements 18
  20. 20. New Developments Impacting Future GrantsAdministration (Continued) • There are also a number of other significant changes and suggestions being made as part of this process that, while important, might have less pervasive applicability. – See full test of proposed rules at: http://www.gpo.gov/fdsys/pkg/FR-2012-02-28/pdf/2012- 4521.pdf Federal Register/Vol. 77, No. 39, Feb 28, 2012 • While compliance with today’s rules is still required, even more investment in changes for the future will be important for your organization to embrace as they come. 19
  21. 21. Conclusion• Key Areas within Federal Regulations – Classification of Costs – Allocation and Documentation of Staff Time• Strategies to Determine Unit Cost• New Developments Impacting Future Grants Administration 20
  22. 22. Questions and Comments ? 21

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