TECHNOLOGY MANAGEMENT FORUM FINANCE, TALENT AND TECHNOLOGY MANAGEMENT FORUM

Federal Government Grants: Is My Organization Ready?

Rebecca Field, CPA, CISA, CRISC Manager, Grant Compliance Services ClifronLarsonAllen LLP

Federal Grants: Pros Monetary rewards Diversified and possibly steady funding source Easier to raise money from other government and private sources Credibility and public exposure Further mission of organization Impact communities

Federal Grants: Cons Proposals can require significant time and effort Grants are competitive Grant may be reimbursement basis, so could be hard for cash-strapped organizations Strict compliance requirements May require additional personnel and resources to properly manage Noncompliance could require returning fundsh

Federal Grants Recognize difference between “Easy Money” and “Free Money” Federal grants have large number of compliance requirements Designed to help prevent grant fraud and misuse Generally, benefits far outweigh the frustrations. Consider the fact that you can receive funds to help individuals in your community, the red tape and bureaucracy is more or less a minor inconvenience. Ultimately your organization must be the one to decide if a government grant is the right opportunity.

Sources of Requirements Federal / State Statues and Regulations Terms and Conditions of federal awards 2 CFR Part 200 “The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards” Referred to as “Uniform Guidance”

Uniform Guidance Split into 6 Subparts: Subpart A – Acronyms and Definitions Subpart B – General Provisions Subpart C - Pre Federal Award Requirements Subpart D – Post Federal Award Requirements Subpart E – Cost Principles Subpart F – Audit Requirements

Administrative Requirements Standards for Financial and Program Management Property Standards Procurement Standards Performance and Financial Monitoring and Reporting Subrecipient Monitoring and Management Record Retention and Access

Financial Management System Must include records documenting compliance Must allow for the preparation of required reports Must allow for the tracing of funds to a level of expenditures to show that they have been used according to grant terms and conditions Requires written procedures for determining the allowability of costs

Financial Management System Generally does not require a new or “fancier” software system Most nonprofit accounting systems can meet the requirements of a compliance financial management system Grant expenditures can be done within the general ledger, with specific account codes / cost centers If extensive recording has to be done outside of the accounting software, may need to upgrade

Procurement Standards Uniform Guidance expanded requirements from previous regulation (Circular A-110), specifically around competition Organization must have written procurement policies in place Uniform Guidance allows for 5 methods of procuring goods and services

Procurement Standards Allowable methods of procurement:

Procurement Standards Micro-Purchase < $3,500, No quotations, Equitable distributions Small Purchases Up to $150,000, Rate quotations needed from at least 2 sources, No cost or price analysis Sealed Bids > $150,000, Generally for Construction projects, Price is a major factor Competitive Proposals > $150,000, RFP with evaluation methods Sole Source Unique, Public emergency, Authorized by agency or pass through entity, No competition

Procurement Standards Organizations Must: Take all necessary affirmative steps to assure that minority businesses, women’s business enterprises, and labor surplus area firms are used when possible Engage in full and open competition Perform a cost or price analysis when purchase in excess of Simplified Acquisition Threshold (Currently at $150,000) Keep Procurement records must be maintained sufficiently to detail the history of all procurements

Procurement Standards Individual Conflict of Interest Policies need to be in place Organizational Conflict of Interest also needs to be in place Can not procurement with a parent, affiliate, or subsidiary organization because relationship is unable or appears to be unable to be impartial

Subrecipient Monitoring Subaward purpose of carrying out a portion of a federal award and creates a federal assistance relationship Subrecipient determines eligibility, has performance measured in relation to objectives of program, has responsibility for programmatic decision making; and uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity.

Subrecipient Monitoring Contract is for the purpose of obtaining goods and services for the non-federal entity’s own use and creates a procurement relationship Contractor provides the goods and services normally, provides similar goods or services to many different purchasers; provides goods or services that are ancillary to the operation of the Federal program and is not subject to compliance requirements of the Federal program

Subrecipient Monitoring Subaward must contain specific information as outlined in UG Federal Award identification Requirements so that federal award is used in accordance with terms and conditions of original federal award Description of performance or financial reports due Indirect cost rate – either an approved rate, negotiated rate, or deminimis rate Appropriate terms and conditions concerning closeout of the subaward

Subrecipient Monitoring Pass-through entities must evaluate each subrecipient's risk of noncompliance by performing a risk assessment prior experience results of previous audits new personnel or new or substantially changed systems extent and results of Federal awarding agency monitoring

Subrecipient Monitoring Risk Assessment must be documented. Subrecipient Risk Assessment Matrix: http://claconnect.com/Nonprofit/Uniform-Grant-Guidance-Workbook-Subrecipient-Risk-Assessment.aspx Results of risk assessment determine what type of monitoring should be performed on sub-recipient

Subrecipient Monitoring Pass-through entities must monitor activities of the subrecipient: Reviewing financial and programmatic reports Verify that audit is being performed (if necessary) and following up on audit findings and deficiencies Issuing management decision on audit findings

Subrecipient Monitoring Additional monitoring tools that may be used depending on risk assessment of sub-recipient: Providing training and technical assistance On-site reviews of program operations Arranging for agreed upon procedures

Time and Effort Reporting Charges must be based on records that accurately reflect the work performed and must: Be supported by a system of internal controls which provides reasonable assurance that the charges are accurate, allowable and properly allocated Reasonably reflect the total activity for which the employee is compensated Comply with the established accounting policies and practices of the non-federal entity Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one federal award

Time and Effort Reporting Budget estimates may be used for interim accounting purposes, provided that: System for estimating must produce “reasonable approximations” of activity actually performed Significant changes in work activity) are identified and entered into records timely Must be a process to review the charges made based on budget and adjustments after the fact

Time and Effort Reporting When records do not meet the standards, federal government may require personnel activity reports, including prescribed certifications, or equivalent documentation Need to determine what is appropriate for your employees working on federal awards – not all individuals working on federal grants have the same situation

Required Policies Charging of Costs Policy Payment and Billing Policy Procurements Standards Policy Conflicts of Interest Policies

Best Practice Policies Financial Management Systems Policy Documentation of Internal Controls Cost Sharing and Matching Policy Program Income Policy Budget and Program Revisions Policy Property and Equipment Standards Policy Monitoring and Reporting Subrecipient Procedures Policy Record Retention Policy Grant Award and Closeout Policy

Readiness Assessments Greater Twin Cities United Way 2012 Performed Federal Grants Readiness Assessment Met with personnel Reviewed current procedures and processes Compared to Federal requirements Delivered Readiness Assessment Report Decided to search out opportunities commensurate with current mission and impact areas Obtained large grant from Corporation for National and Community Service

Grants Management Best Practices

Grant Compliance Accounting Responsibility of all departments involved Procurement / Purchasing Contract / Legal Program Personnel

Grants Management Develop checklists Document compliance requirements Obtain proper training Read through Uniform Grant Guidance Read through grant agreement for terms and conditions

Grant Compliance Resources CLA Grant Compliance Services: http://claconnect.com/Nonprofit/Grant-Compliance-Services-for-Nonprofits-Higher-Education-Government.aspx CLA Grant Compliance Reading Room (Resources) http://claconnect.com/Nonprofit/Resources-to-Ease-the-Burden-of-Grant-Compliance.aspx

Questions?