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

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  • Negotiated lump sum: <br /> A fixed amount may be agreed upon in lieu of a special indirect cost rate being applied to a unique contract or grant <br /> The key to successful application of this option is being able to explain why the benefits from an institution’s indirect services cannot be readily determined. <br /> Predetermined: <br /> This is a useful tool for well established organizations that have static rates. <br /> However, it may be difficult for an organization experiencing rapid growth or entering new research fields to predict these changes going forward in a meaningful way. <br /> Multi-year version of the process that exists for many organizations today <br /> Negotiated Fixed Rate and Carry Forward: <br /> allows for negotiation of a rate which is fixed for a given period. Any actual under- or over-recovery which results from the use of this rate during that period is then made up in the following period. The recovery is adjusted by adding (or subtracting) an appropriate number of percentage points to (or from) the negotiated rate in the succeeding period. <br /> has characteristics of both a provisional rate and a predetermined rate. <br /> This process must be agreed to by both parties, and any change to another method will need to be dealt with accordingly. <br /> For example, any carry-forward amount would be included in the subsequent negotiated rate. <br /> This allows less administrative burden while reducing overrun risk to the organization. <br /> This method differs from lump sum accounting and predetermined rate methods in that, under those methods, any over- or underrun of the established sum or rate will accrue to the institution without subsequent adjustment. <br /> <br /> <br />
  • One of the critical changes that has come about from the release of the Omni Circular is the more stringent requirements around sub-recipient monitoring <br /> <br /> If we take one thing away from this afternoon’s session, it should be that pass through entities are wholly responsible for their program’s sub-recipients. <br /> <br /> Essentially, if your subs do not perform compliantly – through the transitive property – and I say that jokingly, but your Organization will be found to be noncompliant with your program requirements. <br /> <br /> Going forward, Federal agencies are placing the burden of monitoring sub-recipients directly on the pass through entity. <br /> <br /> The expectations, or really requirements, that Federal agencies have are that pass through entities monitor their subs much in the same capacity that the Federal agency monitors its direct awardees <br /> <br /> This slide lists a few examples of the expanded responsibilities for pass through entities and we we will talk to in more detail throughout the next hour.
  • So, before we can even begin to think about sub-recipient monitoring activities – we need to first understand what constitutes a sub-recipient. <br /> <br /> The revised guidance does give distinguishing traits between a sub-recipient and a “contractor”. <br /> <br /> How these determinations are made will directly effect our organizations responsibilities in both complying with program requirements and applying appropriate risk mitigation strategies and how we conduct these activities. <br /> <br /> So what is a sub-recipient? In an attempt to summarize the characteristics listed – a sub-recipient is one who will be independently managing a portion of the program’s overall statement of work. Essentially, a sub is a key (and necessary) contributor to completing the program’s statement of work. <br /> <br /> These characteristics are reflective in how we mitigate risk associated with sub-recipient’s. Since they are an essential part of program execution, we need to monitor their activities (program performance and associated supporting documentation) throughout the life of their subaward – and we will talk to appropriate monitoring activities in the coming sections.
  • 1.) Micro Purchase <br /> acquisition of supplies or services which do not exceed $3,000 (*$2,000 for construction contracts subject to Davis Bacon Act) <br /> To the extent practicable, Non Federal Entity must distribute micro-purchases equitably among qualified suppliers <br /> May be awarded without soliciting competitive quotations if Non Federal entity considers price to be reasonable <br /> 2.) Small Purchase procurement <br /> Defined as those relatively simple and informal procurement methods for securing services, supplies, or other property under the Simplified acquisition threshold <br /> If used, price or rate quotations must be obtained from adequate number of qualified sources <br /> 3.) Sealed Bids <br /> Bids are publicly solicited and FFP contract awarded to responsible bidder is lowest in price (must also conform to material Ts&Cs) <br /> 4.) Competitive Proposal <br /> Used when conditions are not appropriate for sealed bids <br /> RFPs must be publicized and identify all evaluation factors and relative importance <br /> Contracts must be awarded to responsible firm most advantageous to the program (with price and other factors considered) <br /> 5.) Noncompetitive <br /> Solicitation of only one source <br /> Used only when one or more single source criteria are met (i.e., only available from single source; public emergency; expressly authorized for particular source; solicitation responses result in an inadequate competition determination)
  • Applies the more stringent standards set forth in A-102 across the board. <br /> <br /> Non-Federal entity means a state, local government, Indian tribe, institution of higher education (IHE), or nonprofit organization that carries out a Federal award as a recipient or subrecipient. <br /> <br /> Maintain oversight that ensures contractors perform in accordance with the terms, conditions and specifications of their contracts and delivery orders, similar to the FAR requirements. <br /> All procurement transactions must be conducted in a manner providing full and open competition. <br /> The non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the performance of its employees engaged in the selection, award and administration of contracts. <br /> The non-Federal entity’s procedures must avoid acquisition of unnecessary or duplicative items. <br /> The non-Federal entity must award contracts only to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed procurement. <br /> The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. <br /> The non-Federal entity alone must be responsible, for the settlement of all contractual and administrative issues arising out of procurements. <br /> Written procedures for procurement transactions: <br /> Incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. <br /> Identify all requirements which the offerors must fulfill and all other factors to be used in evaluating bids or proposals. <br /> The non-Federal entity must ensure that all prequalified lists of persons, firms, or products which are used in acquiring goods and services are current and include enough qualified sources to ensure maximum open and free competition.
  • 9.406-2(b)(1)(vi) <br /> 9.407-2(a)(8) <br /> Timely/credible evidence <br /> Decentralization a key problem <br />
  • ….of improper conduct <br /> and dedicate adequate resources to ensure business ethics and compliance programs are effectively carried out; <br /> Reviews of company business practices, procedures, policies, and internal controls -includes monitoring and auditing to detect criminal conduct and periodic evaluations of the effectiveness of the business ethics awareness and compliance program and internal system (especially if criminal conduct is detected) <br /> Include appropriate steps to design, implement, and modify the business ethics awareness and compliance program and the internal control system as necessary to reduce the risk of criminal conduct identified through this process <br /> which allows for anonymity or confidentiality, by which employees may report suspected instances of improper conduct; <br /> Improper conduct includes failing to take reasonable steps to prevent or detect improper conduct <br /> Required when Contractor has “credible” evidence that a principal, employee, agent, or subcontractor of the Contractor has committed a violation of Federal criminal law involving fraud, conflict of interest, bribery, gratuity violations in Title 18 USC or in violation of FCA <br /> <br />
  • Similarly, government contractors are required to submit certified cost and pricing data as part of an adequate estimating process to the government. <br /> <br /> TINA sweep/subrecipient certification <br /> <br /> Will manifest on Sam site similar to other entities. <br /> <br /> To assure that expenditures are proper and in accordance with the terms and conditions of the Federal award and approved project budgets, the annual and final fiscal reports or vouchers requesting payment under the agreements must include a certification, signed by an official who is authorized to legally bind the non-Federal entity. <br />
  • Policy/procedure should define TINA Applicability. Generally want to utilize FAR Table 15-2 <br /> <br /> Roles/Responsibilities may be between different functions (Contracts, estimating, compliance) <br /> <br /> Checklists ensure that the right questions are asked to applicable personnel (contracts, estimating, compliance/sourcing) to provide senior leadership level of comfort that at the time, the most current, accurate, and complete cost or pricing data has been provided <br /> <br /> Training/education to ensure senior leadership are aware of the liability (defective pricing) when certifying cost or pricing data. Additionally should provide when TINA is applicable (vs. when it is not); who is responsible for particular information (estimating vs. sourcing vs. contracts); what data is required under RFP T&Cs
  • Conflicts. Subpart B, 200.112 <br />
  • Subpart D, 200.303
  • Subpart D, 200.303

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

  • 1. 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
  • 2. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 2 Agenda  Overview & Background  Pre-Award Administrative Requirements  Post-Award Implementation Requirements  Strategic Considerations
  • 3. 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. Overview & Background
  • 4. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 4 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”
  • 5. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 5 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
  • 6. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 6 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.
  • 7. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 7 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)
  • 8. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 8 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
  • 9. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 9 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
  • 10. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 10 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.
  • 11. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 11 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
  • 12. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 12 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
  • 13. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 13 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
  • 14. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 14 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
  • 15. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 15 Tools for Tracking Non-Financial Data Demo Dynamics GP and Intacct
  • 16. 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. Pre-Award Administrative Requirements
  • 17. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 17 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.
  • 18. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 18 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.
  • 19. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 19 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.
  • 20. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 20 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
  • 21. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 21 Indirect Cost Methods
  • 22. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 22 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
  • 23. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 23 Financial Data in Dynamics GP, SL and Intacct ? Features Chart of Account Analytical Accounting SL/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
  • 24. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 24 Pros and Cons Solutions Pros Cons Chart of Account Easy to maintain (Accounting dept control over COA) No sub-ledger to manage Easy to create report using MR Can slice and dice segment for reporting Work with MR/ existing report writer Long COA Not accommodate multiple year (grant yr vs. fiscal yr) Maintain old accounts forever Data entry Unable to handle complex grant requirement (time entry, complex allocation, etc.) Analytical Accounting Shorten COA Prevent charging expenditure in excess of revenue Work with MR/ existing report writer Maintain sub-ledger / resource Separate screen for data entry Require reconciliation Additional training Additional configuration/setup Olympic Project Accounting/ Dynamics SL Shorten COA Track employee time and expense against grant Allows for sophisticated allocation Allows for sophisticated billing Sophisticated Costing – Direct/Indirect Rates Maintain sub-ledger / resource Separate screen for data entry Additional training Additional configuration/setup Has separate reporting function Intacct Project Accounting Shorten COA Track employee time and expense against grant Maintain sub-ledger / resource Require reconciliation Additional training Additional configuration/setup
  • 25. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 25 Tools for Tracking Financial Data & Reporting Demo Dynamics GP and Intacct
  • 26. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 26 Sample SEFA Report
  • 27. Government Contractors Financial & Project Management System Seminar Page 27 Post-Award Implementation Requirements
  • 28. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 28 Sub-recipient Overview Implications 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 contractor o Identifying or negotiating an appropriate sub-recipient indirect cost rate at the time of award o Ensuring “flow-down” of new requirements are included within sub agreements, as applicable o Evaluating sub-recipient risk of noncompliance and determining necessary monitoring activities – including on-site reviews o Imposing remedies for sub-recipient noncompliance, when necessary
  • 29. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 29 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; and 5. 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.
  • 30. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 30 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; and 4. Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements.
  • 31. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 31 Sub-recipient Selection & Planning What’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 award o Any additional flow-down requirements necessary for pass-through entity to meet its own responsibilities o A requirement that the sub-recipient permit access to records and financial statements through the period of performance  Consider expanded pass-through entity responsibilities o Required information to be provided to sub-recipients o Use of appropriate sub-recipient indirect cost rates o Conduct sub-recipient risk assessment
  • 32. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 32 Sub-recipient Selection & Planning Required 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 number o Federal award date o Sub-award period of performance (start and end dates) o Funding information o Federal award project description o Name of the Federal awarding agency o Catalog of Federal Domestic Assistance (CFDA) title and number o Identify if award is for Research & Development (R&D) o Indirect cost rate for the Federal award
  • 33. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 33 Sub-recipient Selection & Planning Required 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
  • 34. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 34 Sub-recipient Selection & Planning Indirect 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-recipient o 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”
  • 35. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 35 Sub-recipient Monitoring Activities Risk 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&Cs o Achieves its performance goals  Consider risk of sub-recipient noncompliance  Risk assessment is based on: o Prior/past experience with similar sub-awards o Previous audit results o Significant changes in personnel or systems o Extent and results of Federal awarding agency monitoring
  • 36. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 36 Sub-recipient Monitoring Activities Monitoring plan  Minimum monitoring activities must include: o Reviewing financial and programmatic reports o Conducting on-site reviews/audits based on risk assessment o 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
  • 37. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 37 Sub-recipient Monitoring Activities Additional considerations  Based on results of monitoring activities, pass through entities should o Provide training and technical assistance to appropriate sub-recipient staff o Determine if on-site reviews/audits necessitate adjustments to own records o 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)
  • 38. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 38 Sub-recipient Monitoring Activities Imposing specific conditions  Specific conditions can o Dictate how sub-award receives payment o Require additional reporting requirements or prior approvals o 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
  • 39. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 39 Sub-recipient Monitoring Activities Additional enforcement action  If noncompliance cannot be remedied through specific award conditions, consider more severe enforcement action, such as: o Applying temporary cash withholds o Disallowing all or part of the cost of the activity o Suspending or terminating the sub-award o Recommending the Federal awarding agency initiate suspension or debarment proceedings o Withholding future awards to the sub-recipient o Pursuing other remedies legally available
  • 40. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 40 Sub-recipient Monitoring Performance strategies  Internal: o All sub recipient monitoring task can be performed “in house” using staff o Omni-circular provides for opportunity to augment and refine existing processes to address new compliance requirements o Consider timing requirements and resource bandwidth  External: o New requirement allows for outsourced sub recipient monitoring functions o 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
  • 41. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 41 Sub-recipient Monitoring Cost 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 budgets o Ensure these are costs included in upcoming proposals  Otherwise, these costs may not be allowed as direct cost going forward
  • 42. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 42 Sub-recipient Monitoring Activities General 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 necessary o 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!
  • 43. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 43 Tracking Sub-Recipients in the Accounting System Demo Dynamics GP and Intacct
  • 44. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 44 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 Proposal 5.) Procurement by Noncompetitive Proposal • Contracting with small and minority-owned businesses.
  • 45. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 45 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.
  • 46. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 46 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 interest o 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.
  • 47. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 47 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;
  • 48. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 48 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.
  • 49. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 49 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
  • 50. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 50 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.
  • 51. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 51 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.
  • 52. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 52 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.
  • 53. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 53 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.
  • 54. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 54 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.
  • 55. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 55 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 PCI o 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.
  • 56. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 56 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.
  • 57. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 57 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.
  • 58. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 58 How Technology Can Help with Internal Control  Approval Workflow  Audit tool – Monitor and Confirm Internal Control Working  3rd Party Audit Tools  FastPath  Rockton Auditor
  • 59. Government Contractors Financial & Project Management System Seminar Page 59 Strategic Considerations
  • 60. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 60 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 entity o 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 activities o Comply with the established accounting policies and practices of the non- Federal entity.
  • 61. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 61 Changes to Selected Items of Cost  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
  • 62. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 62 Changes to Selected Items of Cost  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.
  • 63. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 63 Changes to Selected Items of Cost  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.
  • 64. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 64 Changes to Selected Items of Cost  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.
  • 65. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 65 Timekeeping Demo Intacct Timesheet System
  • 66. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 66 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
  • 67. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 67 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.
  • 68. Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications Page 68 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
  • 69. 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. Questions? Eric Sobota BDO USA, LLP (703) 770–6395 esobota@bdo.com Seth Zarny Raffa, P.C. (301) 279-6500 szarny@raffa.com Buu-Linh Tran Raffa, P.C. (301) 279-6511 btran@raffa.com