The Uniform Grant Guidance (2 CFR 200), released in December 2013, replaced several Office of Management and Budget (OMB) administrative, cost and audit circulars, and as a result, it changed the way many not-for-profit organizations and universities administered their grants. New awards and funding increments to existing awards to which the federal agency modified the terms and conditions received after December 26, 2014, must follow the administrative requirements and cost principles under Uniform Grant Guidance (UGG). The new Single Audit requirements are effective for fiscal years beginning after December 26, 2014. For most not-for-profit organizations, that means the first time they will be subject to the new Single Audit requirements will be for their upcoming June 30, 2016 year-end. As not-for-profit organizations prepare for the first Single Audit under UGG, they should look over these and other lessons we learned in year one of UGG.

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Lesson 1: Internal Controls Changes Present
Opportunities for Revising Risk Management
Approach
UGG requires entities to demonstrate effective internal
controls over their federal awards. It recommends
following one of two previously established internal
controls frameworks: the Standards for Internal
Control in the Federal Government (Green Book)
issued by the Comptroller General of the United
States, or the Internal Control Integrated Framework
issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
Most organizations are finding that the internal controls
requirement does not significantly alter their approach
to oversight, but the changes have presented the
opportunity for improvements in the effectiveness
and efficiency of their internal controls approach. It
is recommended that the parties who will be involved
in the administration of federal awards review the
current system of internal controls to assess how
well the current system is operating. The reviews can
include members of the controller’s office, internal
audit, human resources and individuals that oversee
the programs funded by the federal grants. Together,
the group can identify how policies and procedures
can be strengthened and how the organization can
educate its key personnel about the importance
oversight plays in the organization’s risk management.
The Uniform Grant Guidance (2 CFR 200), released
in December 2013, replaced several Office of
Management and Budget (OMB) administrative, cost
and audit circulars, and as a result, it changed the
way many not-for-profit organizations and universities
administered their grants.
New awards and funding increments to existing
awards to which the federal agency modified the
terms and conditions received after December 26,
2014, must follow the administrative requirements and
cost principles under Uniform Grant Guidance (UGG).
The new Single Audit requirements are effective for
fiscal years beginning after December 26, 2014. For
most not-for-profit organizations, that means the
first time they will be subject to the new Single Audit
requirements will be for their upcoming June 30, 2016
year-end.
As not-for-profit organizations prepare for the first
Single Audit under UGG, they should look over these
and other lessons we learned in year one of UGG.
May 2016
Four Lessons Learned from Year One of the Uniform Grant Guidance

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Lesson 2: Meeting Procurement Standards
Requires Significant Resources
Procurement standards in UGG mirrors the language
previously used in the OMB Circular A-102 (Grants
and Cooperative Agreements with State and Local
Governments). Therefore, organizations that did
not previously follow this circular face different
procurement standards than what they had been
using. Purchases of materials and services that
cost less than $3,000 (assessed for each individual
purchase or service) are now considered micro-
purchases and have certain requirements to be met
at this acquisition level. Transactions that range from
$3,000 to $150,000 are considered small purchases.
For small purchases, organizations must solicit an
“adequate” number of quotes, which generally means
more than one quote.
Universities are especially hard hit by the change
because many had classified micro-purchases as
transactions less than $10,000. Micro-purchases
have an advantage over other types of procurement
because they can be made without conducting a
competitive bid process. Changing the threshold
means that universities and other not-for-profit
organizations with higher thresholds will now have to
solicit bids for items that previously did not have bid
requirements.
Preparing to comply with UGG procurement standards
is requiring many not-for-profits to modify policies,
redesign purchasing systems, train personnel and
bring in additional administrative support.
The OMB has recognized the challenge of the new
procurement standards and granted an extension
for organizations to prepare to meet the compliance
requirements. Federal grant recipients will have two
full fiscal years after the effective date of UGG’s
administrative requirements to comply with the
procurement standard. For example, the second full
fiscal year for an organization with a June 30 year
end would be the year ending June 30, 2017. During
the first year of the extension (i.e. June 30, 2016),
organizations will have to document whether they are
in compliance with the new or the former standard
and demonstrate that they meet that standard. For
fiscal years ending June 30, 2018, and thereafter,
organizations will have to comply with the new
standard.
Not-for-profits and universities have voiced concern
that an extension isn’t enough. Several have
requested to increase the micro-purchase threshold.
In the absence of changes from the OMB, however,
organizations should continue to work on bringing
their policies up-to-date with UGG.
Lesson 3: Subawards Require More Pre- and
Post-Award Oversight
Another change that has added additional oversight
for not-for-profits is the new standards for subrecipient
monitoring. UGG requires organizations to conduct
pre- and post-award assessments for subrecipients
of federal awards. The pre-assessment includes prior
award experience, prior audit experience, subrecipient
staffing and systems and the extent of monitoring that
will be involved. Organizations also have to perform
specificpost-awardmonitoringproceduresthatinclude
reviewing financial performance reports, verifying
Single Audit compliance and reviewing findings and
corrective actions. The previous requirements were
vague about what level of oversight and monitoring
was necessary. Although most organizations were
performing the now required pre- and post-award
monitoring requirements, the fact that these are
mandatory procedures requires organizations to
have policies and procedures in place and ensure
employees responsible for subrecipient monitoring
are properly trained in these specific requirements.

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The information in this MHM Messenger is a brief summary and may not include all the details relevant to your situation.
Please contact your MHM auditor to further discuss the impact on your audit or audit report.
Also, many organizations did not have this monitoring
documented, which we would recommend.
To address the requirements, many organizations
have had to create standard processes, risk
assessments and other templates to help with pre-
award vetting. Organizations should also continue to
educate subrecipients about their new processes and
UGG requirements so the subrecipients understand
how the UGG affects the subaward process.
Lesson 4: Internal Controls Over Compensa-
tion are Key
UGG’s documentation requirements for time and
effort reporting are less prescriptive than in previous
OMB Circulars and place more emphasis on having
internal controls over the compensation process.
Organizations must consider four standards for
personnel expenses, which are more principles-
based than rules-based criteria:
• It is based on records that accurately reflect the
work performed;
• It is supported by a system of internal control;
• It is incorporated into official records; and
• It reasonably reflects the total activity for which
the employee is compensated.
Because the guidance is less specific, organizations
have found it challenging to evaluate whether their
current procedures and controls are adequate under
the new, more relaxed, standards.
Some organizations have made no changes to their
processes and controls because they were deemed
adequate under the former, more rigorous, standards.
Others have moved to assessing compensation
charges to programs on an overall cost certification
basis, which has project managers certifying and
approving all costs charged to their program, not just
those related to payroll.
Use Your Resources
Reaching out to other organizations to discuss how
they have approached the key issues under UGG can
provide a good basis for how your organization should
adjust its current policies and procedures. Advisors
experienced with the UGG can also assist.
To learn more about the changes and the Single Audit,
please contact us. For additional UGG resources
please see below:
• Federal OMB Grant Rules Overhauled
• OMB Makes Sweeping Changes to A-133 Audit
Requirements
• OMB Grant Reform Standardizes Cost Principles
• Implementing the Uniform Grant Guidance
• Preparing for Subpart F of the Uniform Grant
Guidance
Michelle Spriggs is a Shareholder in our Not-For-
Profit & Education Practice. She can be reached at
774.206.8336 or mspriggs@cbiz.com.