Federal Single Audit and the New Uniform Guidance, 2 CFR 200
December 2, 2016
Category: Purchasing and Contracting
Local governments across Washington State have been recipients of a variety of federal awards and some have also had a federal single audit this year as a result of those awards. These federal awards are now subject to revised audit standards and, as a result, we have been receiving inquiries about what these changes are and requests for information to assist with compliance.
Federal awards for local government were previously audited under the provisions of Circular No. A-87, A-102 and A-133. The new guidance, “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards,” published in Title 2 of the Code of Federal Regulations (2 CFR 200), supersedes requirements from these circulars and consolidates them into a streamlined format to improve transparency. Federal awards made after December 26, 2014 will now be subject to this new guidance.
Read Part 2 of this 2-part series: The New Uniform Guidance, 2 CFR 200 – Part 2
What is the Focus of the New Uniform Guidance?
The Office of Management and Budget (OMB) places considerable emphasis on written policies and procedures that are intended to reduce the risk of fraud, waste, and abuse of federal funds. The OMB’s uniform guidance requires that non-federal entities have certain written policies and procedures surrounding the management of federal awards.
Many of you already have policies and procedures in place but these may need updating to comply with the new uniform guidance (2 CFR 200). In particular, policies regarding procurement, purchasing, and grant and contract management should be reviewed for compliance. Here is a list of specific areas to examine.
The new guidance emphasizes written, effective internal controls. 2CFR 200.303 requires that the recipient establish and maintain effective internal controls that provides reasonable assurance that the federal award is being managed in compliance with all federal regulations and with the terms and conditions of the award. Additionally, compliance must be evaluated and monitored. To meet this requirement, we recommend written documentation and checklists.
The standard requires that internal controls adopted should be in compliance with Government Accountability Office Standards for Internal Control in the Federal Government (the Green Book) and the Committee of Sponsoring Organizations of the Treadway Commission’s (COSO) Internal Control—Integrated Framework. Local governments will need to reference these internal control standards.
As part of the internal control framework (2 CRF 200.303 (e)), entities are now required to safeguard personally identifiable information. The uniform guidance states:
Take reasonable measures to safeguard protected, personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, state, local, and tribal laws regarding privacy and obligations of confidentiality.
This new compliance requirement under the Uniform Guidance will need to be incorporated into the financial policies of your jurisdiction.
It’s important to note that policies and procedures for internal controls will vary depending upon the number of employees, types of activities, and level of risk. The size of your entity will have an impact on the controls that can be implemented. If you have concerns about compliance be sure to discuss it with your local audit team.
Advance Payments and Reimbursements
2 CFR 200.305 requires written procedures that address collecting payments of federal funds and specific requirements associated with interest earnings that may be realized on advance payments. Policies should discuss how an entity will minimize the time between draws and actual disbursements (see specific requirements in 2 CFR 200.302(b)(6)).
While the uniform guidance requires written procedures for determining whether a cost is allowable (see 2 CRF 200.403), the standard assumes an entity already has policies and procedures over disbursements. What the guidance is really looking for is documented internal control procedures that show how compliance will be assured through ongoing monitoring.
Conflicts of Interest
2 CFR 200.318 requires that conflicts of interest be written into policies that govern both employees who work directly with the award as well as anyone involved in the procurement process across the entity. The regulation reads: “no employee, officer, or agent may participate in the selection, award, or administration of a contract supported by a federal award if he or she has a real or apparent conflict of interest.” It’s important to note that potential conflict of interest extends beyond the individual employee to include that person’s immediate family members, partner, and other employers.
Further, individuals involved in the procurement process cannot accept gratuities, favors, or anything of a monetary value from contractors or parties to subcontracts. Local governments should adopt a gift acceptance policy that speaks to de minimis and unsolicited gifts, as well as disciplinary actions for violations of this policy.
One of the most significant changes to the new guidance is that the procurement process now requires policies and standards of conduct (see 2 CFR 200.320). Local governments that currently do not have purchasing and/or procurement policies in place will need to adopt them. (See our Sample Document Library for sample policies.)
While there were significant changes to the thresholds and appropriate processes for each of the five procurement methods, bid laws and thresholds in Washington State are fairly stringent, meaning Washington cities, towns, and counties with existing procurement policies should not have to update this section. However there is an exception for public works contracts that are $150,000 or greater that may require some change. Additionally, code or 1st class cities with a population greater than 20,000 will need to review policies for compliance with the new regulations.
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