Got A Federal Award? Compliance Tips Governments and Non-Profits Must Follow

Whatever the size of your federal award, your organization must comply with the Uniform Guidance along with your grant agreement. It is not always easy to know if you have federal funds in your award, since states, counties, and other non-profits can pass federal funds to your organization in their awards. The grantor is required to notify you if federal awards are in your agreement.

No matter how small the federal award you must follow the Uniform Guidance.

The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) provides the framework of financial reporting and audit procedures for recipients of federal grant awards. This article will provide some important reminders regarding your responsibilities for the management of these awards. Your organization will be responsible for adhering to Part A – Acronyms and Definitions and Part B - General Provisions. Part C are requirements that are directed to Federal Agencies and are applicable to your organization.

What Rules Should My Organization Be Following Exactly?

If your organization has received a small federal award (less than $750,000) the following sections of the Uniform Guidance apply to you:

●Part D – Post Federal Award Requirements 200.3xx
●Part E – Cost Principles 200.4xx
●Appendix for Cost Allocation

If your organization has received a larger federal award ($750,000 or more) the following sections of the Uniform Guidance apply to you:

●Part D – Post Federal Award Requirements 200.3xx
●Part E – Cost Principles 200.4xx
●Part F – Audit Requirements 200.5xx
●Appendix for Cost Allocation and Data Collection Form

What Are the Key Compliance Areas of Part D – Post Federal Award Requirements?

Part D – Post Federal Award Requirements covers a number of topics including financial management, internal controls, bonds, payment, cost sharing and matching, program income, revision of budget and program plans, property standards, procurement standards, performance and financial monitoring and reporting, sub-recipient monitoring and management, record retention and access, remedies for non-compliance, and closeout.

One key area that your organization should be focusing on is internal controls.

Your organization must establish and maintain effective internal control over the federal award that provides reasonable assurance that you are managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with guidance in “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). OMB has stated that the ‘should’ is meant to be a “best practice” and not a presumptively mandatory requirement.

What Cost Principles Should I Be Aware of in the Uniform Guidance?

Subpart E Cost Principles in the Uniform Guidance covers a number of areas including general provisions, basic considerations, collection of unallowable costs, the adjustment of previously negotiated ICR containing unallowable costs, direct and indirect costs, special considerations for states, local governments and Indian Tribes, special considerations for institutions of higher education, and general provisions for selected items of costs.

Of key importance for governments and non-profits are direct and indirect costs and general provisions for selected items of costs

What are the Principals of Direct Cost Allocation?

●The cost benefits two or more projects in proportions that can be determined.
●The costs should be allocated based on the proportional benefit.
●The costs may be allocated on any reasonable basis.
●Direct costs should be identified specifically with a final objective.
●Salaries of administrative and clerical staff should normally be treated as indirect (F&A) costs.
●Costs are not also recovered as indirect costs.

For indirect costs, the requirements for development and/or submission of indirect (F&A) cost rate proposals and cost allocation plans are contained in Appendices III-VII.

The Uniform Guidance also includes instruction on selected items of cost. 200.423 says alcoholic beverages are not permitted to be charged to federal awards. 200.430 discusses the allowability of compensation-personal services. Specific guidance on selected items of cost is in section 200.420 -200.475.

What About Audit Requirements Under the Uniform Guidance?

This section is not just for the auditors as there are auditee responsibilities spelled out in Part F – Audit Requirements that you must be responsible for. In procuring audit services, you must follow the applicable procurement standards referenced in Part E 200.317-200.326 with the goal of obtaining a high-quality audit. As part of the procurement process, you are required to request a copy of the firm’s Peer Review along with making an effort to utilize small business, minority, and women owned business enterprises. For the audit itself, you are responsible for preparing the financial statements along with preparing the SEFA. You are also responsible for proper follow-up (if there were any prior audit findings) and corrective action for any current audit findings. Lastly, you are responsible for submitting the Data Collection Form to the Federal Audit Clearinghouse. This form is due earlier of 30 days after receipt or nine months from the end of the audit period.

This summary is not intended to be a substitute for reading the applicable requirements to your organization. We recommend you review the applicable guidelines and contact your auditor with any questions.