February 17, 2017 by Toni Nelson
Purchasing and Contracting
My December blog titled Federal Single Audit and the New Uniform Guidance gave rise to the fact that more than just a few of you receive federal awards, meaning numerous local government entities have already been impacted by this change. For those already receiving federal awards, it’s crucial that you update policies and procedures for a successful audit. For those of you considering federal awards for future projects, the time to update policies and procedures is now.
In the December Part 1 blog, I focused on Subpart D–Standards for Financial and Program Management and sections 303, 305, 318, and 320 of Title 2 of the Code of Federal Regulations 200 (2 CFR 200). If you have not read Part 1 of this series on the new uniform guidance, please do because it contains information on the internal control requirements and probable policy updates.
Part 2 will focus on select parts of Subpart E–Cost Principles, which consists of:
The objective is not to review each of these areas but to highlight items that are significantly different from previous guidance. You will note that there are subsections related to different entity types, such as tribal governments and education. Under the new uniform guidance, several circulars have been combined with the intent to streamline the federal grant process. Be careful that you only consider subsections that are applicable to your entity type (local government). However, areas such as the direct and indirect costs found in subpart sections 2 CFR 200.412-414 apply to all entities and will require both review and consideration. Keep in mind that internal controls are a key component of the new uniform guidance. Additionally, in this cost section you will find the new certification requirement in 2 CFR 200.415.
With the implementation of the new uniform guide, there is a new certification requirement found in subsection 200.415 (a) that reads:
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, which reads as follows: “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. (U.S. Code Title 18, Section 1001 and Title 31, Sections 3729-3730 and 3801-3812).”
This new requirement states that anyone who signs a grant reimbursement request must be able to “legally bind” the entity that they represent. To implement this new requirement will depend upon organizational size and hierarchy, whether your organization has current policies that delegate this authority, and/or whether your council or commissioners will be required to adopt a resolution that authorizes a specific individual for this task (e.g., Mayor, City Manager, City Administrator, Public Works Director, Finance Director, etc.).
Included in the State Department of Transportation’s Local Agency Guidelines (LAG) is the new guidance needed to meet this requirement. It became effective on December 1, 2016 for all progress submittals to WSDOT.
The new uniform guidance requires written procedures for determining whether a cost is allowable in accordance with Subpart E—Cost Principles, and subsection 2 CFR 200.403 provides criteria for costs to be considered allowable. Though most of the criteria provided in this subsection is considered basic, these are concepts that should be included in your policy to demonstrate that your organization has written procedures to ensure compliance with the new uniform guidance. For example, 2 CFR 200.403 (d) states that costs must:
Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
This criteria both speaks to the objective of the new uniform guidance, which is to reduce the risk of fraud, waste, and abuse of federal funds, and demonstrates the fair and uniform application of allowable costs.
Steps to Assure Compliance
Step #1 – Review your purchasing and procurement policies and update where needed. Many of you adopted your policies long before the new guidance was released. Audits starting with fiscal period 2015 were subject to the new uniform guidance and, as a result, several entities received exit comments or management letters on the necessity to update procurement policies.
Step #2 – Attend a training class. SAO has been conducting Federal Grant Requirements & Management classes across the state to assist jurisdictions with meeting these new uniform guidance requirements. Classes began in 2016 and there are two scheduled for 2017.
You can register through WFOA's Non-Conference training site.
Seeking Sample Policies
We have been asked for samples of policies that have been updated to conform to the new uniform guidance but have not yet received any. If you have updated your policy, please forward it to MRSC so that we may share it with others.
If you need assistance with the new guidelines, contact Toni Nelson at firstname.lastname@example.org. Don’t let changes to the federal award audit catch you by surprise!