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Road Map to the future of Federal Grants Management: The
“SuperCircular”
Leigh M. Manasevit, Esq.Brustein & Manasevit, [email protected]
www.bruman.com 1
PAFPCAPRIL 2013
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Why “Supercircular”???
1. Greater simplicity2. Greater consistency3. Obama Executive Order on
Regulatory Review – 2011 • Increase efficiency • Strengthen oversight
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• Greater “simplicity” means elimination of several compliance elements in the Compliance Supplement, including:1. Equipment Management2. MOE/Ear-Marking3. Procurement4. Program Income
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What is covered?1. Administrative Requirements
(A-102, A-110)2. Cost Principles (A-87, A-21, A-
122)3. Audit Requirements (A-133)
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Who is covered?• All non-federal entities
expending federal awards
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When is it effective?• NPRM – 2/1/13• Close of comment period 05/02/13• Analysis of public comment• Final regulation – not likely before
1/1/14• EDGAR revisions – within one year
of final regulation ?• No splitting FY
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Can a revised EDGAR be inconsistent with Supercircular?
• Yes, but federal agencies applying more restrictive requirements need OMB approval
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If program statute differs from Supercircular,
statute governs
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So what is new?…50 Shades of Change
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1. Federal agencies must evaluate risks to the program
posed by each applicant
a) Financial stabilityb) Management systemc) History of performanced) Generally available informatione) Single auditsf) Capacity to implement programs
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2.Agencies may impose conditions on grantee based on risk assessed
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3.Performance Expectations
• Award includes: timing and scope of expected performance – as related to intended outcomes
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4.Subawarding Scope of Work
• Eligible recipients may perform or subaward the performance of all or a portion of the work
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5. Pass Through Entity: case by case
determination whether pass-through funds are
grant or contract
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6. Pass Through Agency should consider imposing
risk conditions on subrecipients in noncompliance
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7.Pass Through Agency may impose
“supplemental requirements”
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8. Pass Through monitoring shall include:
a)Analyzing financial and programmatic reports
b)Ensure subrecipients take timely and appropriate corrective action
c) Issue management decision on A-133 finding at subgrantee level
d)Other – as necessary
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9.Monitoring Tools of Pass Through
a)On-site reviewsb)Provide training and technical
assistancec) Arrange for “Agreed Upon
Procedures”
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10. Risk Factors for Pass Through Monitoring
a)Previous auditsb)New subrecipientsc) New personnel or substantially
changed systemd)Extent of federal monitoring
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11. Pass Through must conform timing of
federal award cash to awards to subgrantees
20
Federal award year July 1 to September 30 (next year)
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12. Financial Management Systems
• Section 502 essentially same as 80.20(b)
a) Accurate reportingb) Records identifying source and use of
fundsc) Effective internal controls to safeguard
assetsd) Comparison of outlays and budgetse) Cash managementf) Written procedures for allowability,
allocability and reasonablenessg) Source documentation 21
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13. Cash Management• Recipients shall maintain advances
of federal funds in interest bearing accounts unless…a)Recipient receives less than
$120,000 in federal $ per yearb)Interest will not exceed $500c)Bank requires minimum balance
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14. Cash Management• Unrecovered indirect costs may
be included as match only with approval of federal agency
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15. Cash Management• Calculation of match based on A-
110, not A-102• Clear rules on fair market value,
etc.
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16. Cash Management• General rule on program income
“program income shall be deducted from total allowable costs” unless federal agency allows addition
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17. Cash Management• Changes to Budget – oScope, Objective oKey person changesoAbsence of manager
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18. Inventory Management
2 year inventory requirement remains
• Equipment• Definition same
a)Acquisition cost of $5,000b)Useful life greater than one
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19. Inventory Management
• Use/Management/DispositionoSame as EDGAR 80.32
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20. “Costs of Computing Devices” = “Supplies”But
When no longer needed for any other federally sponsored project, recipient maya) Retain themb) Sell them
But compensate federal government if per unit value exceeds $5000
But Conflicts with C-31(6) “total
aggregate value” of $5000 29
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21. Procurement Management
• States must follow same procurement rules it uses for procurements from nonfederal funds
• All others must follow Section 504
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22. Procurement Management
• Section 504 Procurement Standards derived from A-110, EDGAR Part 74 and A-102, EDGAR Part 80
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23. Record Retention Management
• Same as EDGAR: 3 years from date of submission of final expenditure report BUT – 5 year S/L
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24. Cost Principles – Basic Considerations
• Similar to A-87 but restructured
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25. Cost Shifting• Grantee cannot shift cost from
one award to another to overcome shortfall, unless costs are allowable under both awards
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26. Cost Allocation• If a cost benefits two or more
projects in a proportion easily determined, cost allocated on proportional benefit
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27. Cost Allocation• If proportion cannot be easily
determined, allocate on any reasonable documented basis
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28. Set-Asides• If program statute contains
reserves, limitations, amount not used cannot be charged to other federal awards
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29. Administrative Costs
• Salaries of administrative and clerical staff should be treated as indirect, unless
a) Services are integral to project, andb) Individuals can be specifically
identified, andc) Costs are explicitly set out in
budget, and d) Costs not recovered as indirect
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30. Indirect Costs• A federally approved negotiated
rate shall be accepted by all federal agenciesoException: If required by
law/regulation (restricted rate)
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31. Indirect Costs• Pass through entities must abide
by the federally recognized indirect cost rate negotiated between the federal agency and subrecipient
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32. Indirect Costs• But if no such rate exists, the
pass through must negotiate the rate, or a de minimis indirect cost rate equal to 10% of total modified direct costs (But what about restricted rates? Most LEAs have restricted rates in single digits.)
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33. Time and Effort Management
MAJOR OVERHAUL• Eliminate reference to PARs• Now “Certified Reports”• Reports may be electronic• Semi-Annual for single cost
objective - same
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34. Time and Effort Management
• Certified Reports on 2 or more cost objectives certified by employee or individual responsible for verification
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35.Time and Effort Management
All others:• After the fact, unless mutually
satisfactory alternative approved by awarding agency
• Certification periods cannot exceed 12 months:
• Activities may be expressed as percentages
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36. Time and Effort Management
• At postsecondary level, “reliance may be placed on estimates in which a degree of tolerance is appropriate
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37. Time and Effort Management
• No additional support other than certification is necessary
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38. Time and Effort Management
• Substitute systems may be used if approved by cognizant agency
• Federal agencies are encouraged to approve alternative proposals based on outcomes
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39. Time and Effort Management
• Awarding agencies may approve “blended funding” where multiple programs involved, and “performance -oriented metrics” are used
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40. Cost Principles Changes
• Costs for services of counsel (in-house or Bruman) for administrative proceedings (OALJ) may be charged unless the ALJ imposes a “monetary penalty.” Legal expenses are allowable if the proceeding is resolved by consent or compromise.
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41. Cost Principles Changes
• Cost of MeetingsoCosts from meetings and conferences “beyond the recipient entity” are allowable
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42. Cost Principles Changes
• Travel CostsoGrantee must retain
documentationa)Participation of individual is
necessary to the federal awardb)Costs are reasonable and
consistent with entity’s established travel policy
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43. Cost Principles Changes
TravelIf no institutional travel policy, GSA rates apply
- 48 CFR 31.205-46(a)
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44. Single Audits• Single Audit Threshold is raised
from $500,000 in federal annual expenditures to $750,000
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45. Audit Follow-Up• Federal awarding agencies shall
use “cooperative audit resolution mechanisms” to improve federal program outcomes through better audit resolution, follow-up and corrective action
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46. Cooperation Audit Resolution
• Improve communication, foster collaboration, promote trust, develop understanding between auditor and auditee
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47. Cooperative Audit Resolution
• This approach is based upon “Federal Agencies offering appropriate amnesty for past noncompliance when audits show prompt corrective action”
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48. Agency Determination Letters
• The federal agency or pass-through entity may request additional information from auditee as a way of mitigating disallowed costs
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49. Time Requirements
• The federal agency or pass-through shall make the determination within six months of the acceptance of the audit report
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50. Audit Findings• The auditor shall report known
questioned costs greater than $25,000 for major programs
• If not a major program (auditor normally will not find questioned costs) but if auditor becomes aware of questioned costs greater than $25,000 for non-major programs – must report
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Questions?
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Disclaimer
This presentation is intended solely to provide general information and does not constitute legal advice. Attendance at the
presentation or later review of these printed materials does not create an
attorney-client relationship with Brustein & Manasevit, PLLC. You should not take
any action based upon any information in this presentation without first consulting legal counsel familiar with your particular
circumstances.
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