Common Pitfalls in Grants Management
Transcript of Common Pitfalls in Grants Management
Common Pitfalls in Grants ManagementMay 18, 2021
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Today’s Presenters
Julie Murdock, CPA, [email protected]
Kelsey [email protected]
Shauna Woody-Coussens, CFEManaging [email protected]
Teresa Seymour, CPASenior [email protected]
Danny Martinez, CPA, CGFM®
Managing [email protected]
AgendaOverview – Compliance Resources
Overview – Internal Control Over
Compliance
Common Pitfalls Identified During
COVID-Related Grants Management3
Overview –Compliance Resources
COVID-19 Funding Subject to Single AuditYES› Provider Relief Fund, Health and Human
Services (HHS) – 93.498*
› Coronavirus Relief Fund, Treasury – 21.019
› Education Stabilization Fund, Education –84.425
› Coronavirus Emergency Supplemental Funding Program, Justice – 16.034
› Disaster Assistance Loans, SBA – 59.008
› COVID-19 Telehealth Program, Federal Communications Commission – 32.006
NO› Paycheck Protection Program, Small Business
Administration (SBA) – 59.073
› Coronavirus Food Assistance Program (CFAP), Agriculture – 10.130
› Coronavirus Relief – Pandemic Relief for Aviation Workers, Treasury – 21.018
*As of February 16, 2021
*For-profit subject to compliance audit
COVID-19 Funding Subject to Single AuditYES› COVID-19 Testing for the Uninsured, HHS –
93.461
› Grants for New and Expanded Services under the Health Center Program, HHS – 93.527
› Emergency Grants to Address Mental and Substance Use Disorders During COVID-19, HHS – 93.665
› COVID-19 Testing for Rural Health Clinics, HHS – 93.697
› Disaster Assistance Loans (Economic Injury Disaster Loans) – 59.008
NO› Economic Injury Disaster Loan Emergency
Advance, SBA – 59.072
› OED Resource Partners Training Portal (RPTP), SBA – 59.074
*As of February 16, 2021
Multiple Layers of Complex Regulations
Federal requirements (Uniform Guidance)
Departmental requirements (HHS, DOL, DOJ)
Grant requirements (Notice of award)
SAM.govResource
OMB Compliance Supplement
• Issued August 2020
2020 Compliance Supplement
• Intended to cover new COVID-19 federal programs• Issued December 22, 2020
2020 Compliance Supplement Addendum
Uniform Guidance Update
• Published August 13, 2020• Effective as of November 12, 2020• Except for 200.216 & 200.340, effective August 13, 2020
Uniform Guidance final revisions
Overview – Internal Control Over Compliance
Compliance Requirements› Activities Allowed or Unallowed (A)› Allowable Costs/Cost Principles (B)› Cash Management (C)› Eligibility (E)› Equipment & Real Property Management (F)› Matching, Level of Effort, Earmarking (G)› Period of Performance (H)› Procurement & Suspension & Debarment (I)› Program Income (J)› Reporting (L)› Subrecipient Monitoring (M)› Special Tests & Provisions (N)
Compliance Supplement dictates which requirements auditors test, but auditee must comply with all, as applicable
Complete testing requirements for all COVID-19 funding has not yet been published
Internal Control
Best practice per UG is for internal controls to be compliant with guidance in either
• “Standards for Internal Control in the Federal Government” (the Green Book) issued by the Comptroller General of the United States
• “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)
Internal Control
Part 6 of Compliance Supplement
• Summary of the requirements for internal control for both nonfederal entities receiving federal awards & auditors performing Single Audits
• Background discussion on important internal control concepts• Appendices that include illustrations of entitywide internal controls
over federal awards & internal controls specific to each type of compliance requirement
Compliance Supplement:
Part 6 Control
Activities Example
Example Internal Controls – Cost Principles
Control environment – Personnel are
properly trained on their responsibilities
Risk assessment –Management identifies key compliance
objectives for compliance
requirements
Control activities –Supervisors review &
approve invoices, cost allocations,
efforts of personnel, fringe benefits &
indirect charges, for allowability,
adherence to cost principles, accuracy,
& completeness
Information & communication – Financial & programmatic systems
accurately capture, process, & timely report
pertinent information
Monitoring activities –Qualified & competent
personnel monitor control activities
Example Internal Controls – Cost Principles
› Consider consistency of processes & controls over differing grant funding sources
• Federal• State, county, city• Corporate• Foundation
Different Funding Mechanisms
Common PitfallsIdentified DuringCOVID-RelatedGrants Management
› Importance of a comprehensive needs assessment• Collaborate with your community
› Get the biggest bang for your buck through collaboration & cooperation
• Look at both your organization entity’s need & community needs› Consult stakeholders when determining your funding plan
• Prioritize fiscal stability & returning to work
#1 – Lack of an Organization/Community Needs Assessment
#2 – Not Understanding Procurement Requirements› Understanding procurement requirements
• Current thresholds• Noncompetitive proposal
› Policies & procedures • Not updated for Uniform Guidance requirements • Only partially address the requirements• Include small & minority business & women-owned business enterprises
provisions
#2 – Not Understanding Procurement Requirements› Documentation of grace period adoption› Lack of sufficient documentation
• Procurement method used• Vendor/contractor selection rationale• Agreements with the vendor/contractor do not address the contract
provision requirements of Uniform Guidance• Lack of documentation for cost price analysis
#2 – Not Understanding Procurement Requirements
› Lack of communication & coordination with other departments
• Decentralized• Varying policies by department • Staff knowledge & training • Monitoring
› Suspension & debarment checks• https://www.sam.gov/SAM
Procurement – Allowable MethodsMicropurchases – Aggregate dollar amount doesn’t exceed the micropurchase threshold
• Price must be considered reasonable
Small purchase – Purchases above the micropurchase threshold but below the Simplified Acquisition Threshold (SAT) as defined by the Federal Acquisition Regulation (FAR)
• Price or rate quotes must be obtained from more than one qualified source
Sealed bids – Purchases greater than the SAT
• Bids publicly solicited & fixed-price contract is awarded to bidder with lowest price
Procurement – Allowable Methods
Competitive proposals – When sealed bids aren’t appropriate
• Requests for proposal (RFP) must be publicized (solicited from an adequate number of qualified sources) & identify all evaluation factors & relative importance
• Entity must have written method for evaluating & selecting recipients
Noncompetitive proposals – When item is available only from one source, in a public emergency, or competition is deemed inadequate
#3 – Struggle Following Various Reporting Requirements
› Understanding various reporting requirements
› Timeliness › Method to track deadlines› Accuracy of financial & performance
reports› FFATA› Data collection form filing› Closeout
#4 – Unfamiliarity with Eligibility Requirements & Documentation› Complexity
› Supporting documentation
› Incorporating certifications in the application process
› Anticipation of outcomes/performance reporting metrics
› Who is responsible?
› Subrecipient: A nonfederal entity that receives a subaward for the purpose of carrying out part of a federal award. The subaward creates a federal assistance relationship with the subrecipient (See 2 CFR 200.93 & .330 (a) of the Uniform Guidance)
› Contractor: A nonfederal entity that receives a contract for the purpose of providing goods & services for the awarding nonfederal entity’s own use. The contract creates a procurement relationship with the contractor. The Uniform Guidance replaced the term “Vendor” with “Contractor” (See 2 CFR 200.22 & .330 (b) of the Uniform Guidance)
#5 – Not Knowing if You Have a Subrecipient or Contractor Relationship
› Decision-making authority
› Nature of award
› Award risk
› Criteria for selection
› Entity’s business environment
Subrecipient Versus Contractor Determination
#6 – Understanding Responsibility when Passing Money to Subrecipients› Assessment of subrecipients’ ability to administer prior to
entering into arrangement› Risk assessment
• Not performed• Incomplete• Inadequate
› Contract requirements excluded from contracts with subrecipients
#6 – Understanding Responsibility when Passing Money to Subrecipients› Appropriateness of monitoring procedures performed
• Request supporting documentation• Timeliness of invoicing• Agreed-upon procedures
› Timely addressing known issues• Staff turnover• Audit findings
› Varying requirements between nonprofits, universities, & states
Subrecipient Monitoring: Pass-Through Entity Requirements
Determine if subrecipient or
contractor
Clearly identify subawards to subrecipients
Consider results of subrecipient audits
Provide certain subaward
information at time of subaward
Evaluate each subrecipient’s risk of noncompliance
Consider imposing specific subaward
conditionsMonitor activities of subrecipients
Verify subrecipient audited
Consider taking enforcement action for noncompliant
subrecipients
› Unallowable direct costs• Insufficient support for direct costs• Improper period of performance• Food & meals charged to grant when not allowable
› Misallocation of costs• Between direct & indirect costs• Between grants
› Not using latest guidance or FAQ
#7 – Evolving Guidance Causing Confusion Around Allowable Costs
Cost Principles – Basic Considerations› Necessary & reasonable for the performance of the federal award› Allocable under the principles in 2 CFR Part 200, Subpart E*› In accordance with policies & procedures (for both federally funded & other)› Treated consistently as other costs incurred for the same purpose in like
circumstances › In accordance with generally accepted accounting principles (GAAP)› Not included as a cost or used to meet cost-sharing or matching requirements
of any other federally financed program in either the current or a prior period**› Adequately documented
*Each agency has slightly differing requirements**Consider PPP Loans
Payroll Costs› Manual nature of time & effort tracking› Payroll reported based on actual effort
• Understanding time versus effort
› 100% of effort tracked & included in calculation› Evaluate how your organization performs time & effort
calculations
Payroll Costs› Time sheet
• Timely submissions
• Accurate submissions
• Proper approvals
› Calculation errors• Human error
• PTO considerations
• Application of benefits
• Salary cap limitations
• Proper cutoff (period of availability)
› Understanding difference between an external audit & a desk review or other monitoring/site visit
› Financial statement deficiencies & material weakness may result in Single Audit findings
› Not using or understanding compliance supplement› Schedule of expenditures of federal awards
• Inaccurate • Incomplete• What is not there? • Management’s responsibility
#8 – Preparing for an External Audit vs. a Desk Review
› Understanding complexity of identifying the source of funding (federal, state, local)
› Avoid double dipping
#9 – Waterfall/Cascade
#10 – Not Knowing What or How to Reconcile Information
Reconciling Items • Timing differences• Subrecipients paid versus
subrecipient expense• Program income• Matching• Rejected costs• Variances between accrual
estimates & actual
When to Reconcile• Cumulative & by period at
month, quarter, & annual for › Grant reporting year-end› Your year-end› Calendar year-end› Total grant project-end
Bonus Material
Best Practices for Compliance› Focus on internal control systems
• Checklists
• Review requirements
• Use of technology & systems
› Policies & procedures› Staff training & education› Understanding by staff of roles &
responsibilities› Adequate resources
Tips for AuditeesGather & summarize grant information
• Grant award documentation, including terms & conditions• CFDA number for each federal award
Review written policies & procedures
• Allowability of costs• Cash management• Procurement• Subrecipient monitoring
Tips for AuditeesGather records
• Expenditure justification, including identification of contractors (procurement records) & capital purchases
• Financial & performance reports
Re-review compliance requirements for common issues• Avoid double dipping; reclassification of costs between programs looks
suspicious• Net applicable credits (purchase discounts, rebates & refunds, contract
settlements, etc.) against expenditures
Resources
• Uniform Guidance• AICPA GAQC• Compliance Supplement• www.beta.sam.gov• BKD's COVID-19 Resource Center• http://www.gao.gov/yellowbook• https://harvester.census.gov/facweb
For more information, please visit BKD's COVID-19 Resource Center atbkd.com/covid-19-resource-center
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