The new “Super Circular” from the OMB provides Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Many of the requirements became effective December 26, 2014.
The “new and improved” guidance for Federal awards was designed to provide streamlined guidance in one location, consolidation and uniformity of guidance previously spread over eight circulars and a focus on outcomes over compliance.
The uniform guidance provides a de minimis indirect cost rate of 10% of Modified Total Direct Cost (MTDC), requires pass-through entities to provide an indirect cost rate to subrecipients and allows alternate methods of accounting for salaries and wages based on achievement of performance outcomes. It also raises the audit threshold from $500,000 to $750,000 and has an increased focus on internal controls, effective for 12/31/15 fiscal year-ends and beyond.
Effective dates:
1. Federal agencies must implement policies and procedures effective 12/26/14.
2. Non-federal entities must implement the new administrative requirements and Cost Principles for all new federal awards made after 12/26/14 and to additional funding to existing awards made after that date.
3. Audit requirements are effective for years beginning on or after 12/26/14.
Key Changes in the Administrative Guidance:
- The financial management system must include identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received. This information should include the Catalog of Federal Domestic Assistance (CFDA) number, the Federal award identification number, year, award agency and pass through entities, if applicable.
- There are specific requirements for the financial management system, including the requirement to have written procedures to implement the cash management requirements and for determining the allowability of costs in accordance with the cost principles. Written procedures are required if grant advances are received. Otherwise, the reimbursement method will be used.
- Cost sharing and matching issues are addressed, including in-kind contributions.
- Program income is normally used to defray the cost of the program. If not indicated by the federal awarding agency in the award terms, program income must be deducted from total allowable costs.
- There are specific rules regarding budget revisions and procurement, including the identification of small purchases and how to handle sealed bids. For compliance with the procurement changes, there is a full one year grace period.
- There are also specific rules regarding monitoring and reporting. Performance reporting will now include comparing accomplishments to the objectives and must contain reasons goals were not met.
- The new guidance on how to monitor subrecipients includes expanded definitions to identify a subrecipient versus a contractor. When there is non-compliance, there may be stricter consequences, including the possibility the grant award may be suspended or future awards disallowed.
- While there are a number of changes, having all of the guidance in one location should make the process of grant compliance much improved.
Resources / Links for Information on Uniform Guidance for Federal Awards:
Various Uniform Grant Guidance documents
Register for future announcements on upcoming webcasts of Council of Financial Assistance Reform (COFAR)
Archived AICPA Government Audit Quality Center (GAQC) Web events on OMB A-133
Access COFAR FAQ document issued 8/29/14