2 CFR Part 200: Administering Your Grants and Subgrants Under the Uniform Guidance

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Introductions April Bolton-Smith U.S. Department of Education David Downey, Ellen Safranek

U.S. Department of Education 2 CFR Part 200: Administering your grants and subgrants under the Uniform Guidance U.S. Department of Education

Agenda Review the goals of the Uniform Guidance Note the timeline – when changes impact your grant Highlight the key changes in the Uniform Guidance Understand the risk assessment responsibilities grantees have in monitoring subgrantees Assess your organization’s audit readiness Identify resources for further technical assistance and training This presentation highlights key elements necessary to form a solid understanding of the Uniform Guidance, which is in title 2 of the Code of Federal Regulations (CFR) Part 200. Throughout this presentation, we will refer to the following regulations: 2 CFR Part 200 (Uniform Guidance) Other Parts of 2 CFR Title 34 of the CFR Parts 74 through 77, Parts 79 through 82; Parts 84 through 86, and Parts 97 through 99 (also referred to as the Education Department General Administrative Regulations (EDGAR)).   Key takeaways from this PowerPoint The Uniform Guidance is designed to streamline the requirements of using Federal grant funds, increase the efficiency and effectiveness of those funds, and increase accountability for the use of those funds. The Department has taken many steps preparing for the Uniform Guidance: Regulatory updates: Amended the EDGAR and program regulations to conform to Uniform Guidance Non-regulatory updates: Currently revising internal directives and handbooks to reflect Uniform Guidance System updates: G5 has changed attachments to reflect Uniform Guidance, other changes coming The Uniform Guidance Subparts follow the life cycle of a grant. Through this presentation, we will show some of what has changed and what remains the same. Timeline: 2015 is a transition year as we move into full implementation of the Uniform Guidance. Resources that can provide ongoing support when implementing the Uniform Guidance: The Council On Financial Assistance Reform (COFAR) website Office of Management and Budget (OMB) website Your Department grant program officer The Department’s indirect cost group

Authorities to consider when using 2 CFR Part 200 “This guidance does not change or modify any existing statute or guidance otherwise based on any existing statute.” The quote comes from the UG summary statement on the Federal Register site https://www.federalregister.gov/articles/2013/12/26/2013-30465/uniform-administrative-requirements-cost-principles-and-audit-requirements-for-federal-awards: The Uniform Guidance does not supersede: Program laws and regulations. Other Federal statutes (ADA, for example) It does replace EDGAR parts 74 and 80 and six OMB Circulars. EDGAR part 77 has been updated to reflect the new definitions. See the Webcast for Grantees (May 27, 2015) at http://www2.ed.gov/policy/fund/guid/uniform-guidance/index.html for more information.

Tools of the Trade Legislation Regulations EDGAR 2 CFR Part 200 Grant Award Notification (GAN) Your state plan/approved Application

EDGAR Education Department General Administrative Regulations 34 CFR Parts74 and 80 no longer in effect Part 75 continues to apply to discretionary grants Part 76 continues to apply to state-administered grants Visit www.ED.gov to access EDGAR

Timeline for 2 CFR Part 200 Uniform Guidance (2 CFR Part 200) applies to: New and Continuation grants awarded on or after December 26, 2014 Funds carried over into a new fiscal year or continuation grant starting on or after December 26, 2014 Previously awarded grants still follow old regs. Audits, procurement, and indirect costs follow different schedules. See our FAQs and those specific courses for specifics on the timelines. A forward funded project will be subject to the old rules until the award is closed. No organization will be penalized for complying with the Uniform Guidance early; although audits must follow the prescribed timeline.

From Circulars to the Uniform Guidance Grants made prior to 12/26/2014 Grants made on or after 12/26/2014 Circulars A-89, A-102, A-110 Uniform Guidance Subparts B, C and D Circulars A-21, A-87, A-122 Uniform Guidance Subpart E Circulars A-133, A-50 Uniform Guidance Subpart F EDGAR Parts 75 to 99 EDGAR Parts 75-79 and 81-99 EDGAR Parts 74 and 80 Become part of the Uniform Guidance This slide shows the where the requirements from each of the 8 circulars and EDGAR are now located. Having all eight OMB circulars compiled into one place eases burden, eliminates potential duplicative or conflicting requirements, and establishes consistent and transparent treatment of costs. The circulars which addressed risk assessment and risk mitigation most were: A-133 - Audits of States, Non-Profits, and Local Organizations A-50 - provides the policies and procedures for use by executive agencies when considering reports issued by the Inspectors General (IGs), other executive branch audit organizations, the General Accounting Office (GAO), and non-Federal auditors where follow-up is necessary Subpart F includes the audit information. Additional information on risk is now found mainly in Subpart C; while subaward monitoring and management is found in Subpart D. More specific locations later in the presentation.

2 CFR Part 200 Table of Contents Subpart A – Acronyms and Definitions Subpart B – General Provisions Subpart C – Pre-Award Requirements Subpart D – Post-Award Requirements Subpart E – Cost Principles Subpart F – Audit Requirements The Department is ahead of the curve with regard to many of the new Uniform Guidance requirements. The most important thing to remember is that while there are important changes, most of the substance within the requirements have not changed. Some changes reflected in the Uniform Guidance (e.g., merit-based selection of discretionary grantees, risk assessment of potential grantees, and Cooperative Audit Resolution) are already being done by the Department. The Uniform Guidance has the mostly the same grant management, cost principles, and audit requirements as existed before ED adopted the Uniform Guidance, with a few new rules. Think of it as a move from one house to another. The rooms look nicer and are more organized but most of the furniture was just moved from the old house to the new house. Part 200 has the same grant management, cost principles, and audit requirements with just a few new rules.   Subpart A, Acronyms and Definitions: Definitions include some new words and some that had been previously defined in EDGAR Parts 74 and 80. The Department amended EDGAR Part 77 to include definitions previously found in parts 74 and 80, but not included in 2 CFR Part 200.   Subpart B, General Provisions: The General Provisions establishes a single set of rules for governmental, non-governmental, and post-secondary entities and includes directions to Federal agencies.  Subpart C, Pre-Federal Award Requirements and Contents of Federal Awards: Pre-award requirements previously found in EDGAR Parts 74 and 80 can be found here. The Department has already implemented most of the requirements for discretionary grants, as per EDGAR Parts 75 and 76. Subpart D, Post Award Requirements: Post-award requirements previously found in EDGAR Parts 74 and 80 can be found here, and establishes a single set of rules for governments, nonprofits, and post-secondary institutions , and for-profit agencies.  

2 CFR Part 200 Table of Contents Appendices III-V and VII – Indirect Cost/Cost Allocation Plans Appendix XI – Compliance Supplement Additional ED guidance found in 2 CFR 3474 ED will continue to use the high risk designation under 2 CFR 3474.10(b) and use the standards in the Uniform Guidance to impose specific or high risk conditions, as appropriate, on grants. Subpart E, Cost Principles: Cost principles establishes a single set of rules that apply to all types of grantees and subgrantees. If a specific cost principle has unique requirement for one or two types of non-Federal entities, those unique requirements are stated in that cost principle.   Subpart F, Audit Requirements: Audit requirements includes information previously found in OMB Circular A-133. The key change is the increased threshold for required single audits, from $500,000 in Federal funds to $750,000 in Federal funds. Appendices III through V and VII: Indirect Costs and Cost Allocation Plans. Appendix XI: Compliance Supplement.

Department’s Exceptions Under 2 CFR 3474.5, the Secretary of Education can make exceptions from part 200 for classes of Federal awards or non-Federal entities after consulting with OMB. See 2 CFR 200.102(a) 2 CFR 200.102(a) was amended to authorize the Secretary to grant exceptions to the regulations after consultation with OMB. This is consistent with how former Parts 74 and 80 handled exceptions. The Department’s exception is based on the Department of Education Organization Act’s requirement that the Secretary can delegate authority only to employees of the Department.

Department’s Use of High Risk Although the Uniform Guidance authorizes specific conditions to address risk, it does not use the term “high risk.” The Department will continue to use the high risk designation under 2 CFR 3474.10(b). The Department will use the standards in the Uniform Guidance to impose specific or high risk conditions, as appropriate, on grants. The Department used both former EDGAR 74.14 and 80.12 to impose high risk designations on specific grants and specific grantees. The standards and procedures for imposing specific or special conditions under 2 CFR 200.205 and 200.207 are nearly identical to those in former Parts 74 and 80. In adopting the Uniform Guidance, the Department clarified that it and SEAs will now use the standards in 2 CFR 200.205 and the procedures in 2 CFR 200.207 to impose specific or high risk conditions on grants and grantees, depending on the circumstances in each case. The text of 2 CFR 3474.10 states:   Clarification regarding 2 CFR 200.207.The Secretary or a pass-through entity may, in appropriate circumstances, designate the specific conditions established under 2 CFR 200.207 as “high-risk conditions” and designate a non-Federal entity subject to specific conditions established under §200.207 as “high-risk”.

Key Changes in Post-Award Activities Increased flexibilities and responsibilities for you, our grantees: Greater emphasis on internal controls to ensure compliance and fiscal responsibility Enhanced oversight requirements of sub-recipients and contracts which include risk assessment and use of monitoring tools Greater focus on performance expectations and results Before implementation of 2 CFR Part 200, internal controls were covered extensively in the audit requirements of OMB Circular A-133. In contrast, the grant management requirements in EDGAR Parts 74 and 80 barely used the term internal controls at all (Part 74 used “internal control” zero times and Part 80 used the term only once).   The management requirements in Uniform Guidance, 2 CFR Part 200, Subpart D now elevate and highlight the importance of internal controls throughout the financial management process. See definitions of ”internal controls” and “internal control over compliance requirements for Federal awards.” See, for example, 2 CFR 200.302 (financial management), 200.303 (internal controls), and 200.306 (cost sharing or matching). 2 CFR Part 200 emphasizes internal controls and while recipients have always been responsible for ensuring compliance with program and administrative regulations, the additional flexibilities provided in the Uniform Guidance necessitate proper internal controls for grantees to demonstrate the efficacy of their systems to ensure compliance with program and administrative requirements. This is critical because recipients must have procedures to account for Federal and matching/cost-sharing funds for compensation for employee services; and real, personal, and intellectual property that was purchased or developed under a grant or cooperative agreement. 2 CFR Part 200 specifically requires pass-through grantees (SEAs under State-Administered programs) to exercise the same kind of oversight over their sub-recipients as Federal agencies must exercise over their grantees. The Department has already increased its focus on performance expectations for its discretionary grantees, so the emphasis in the Uniform Guidance on performance should not new to most the Department grantees.

Internal Controls Overview Internal Controls give reasonable assurance that the organization will achieve its objectives through Effective and efficient operations Reliable reporting Compliance with applicable laws and regulations

Internal Controls Overview Processes by which you assure objectives are achieved efficiently, effectively, and with reliable, compliant reporting: A Control Environment that sets the tone for the organization. A Risk Assessment process that involves the identification and analysis of relevant risks.

Internal Control Overivew Control Activities that include the policies and procedures that help ensure management directives are carried out and documented. Information and Communication systems or processes that support the exchange of information. Monitoring processes used to assess the quality of internal control performance over time.

Internal Controls Questions Answer Yes or No: Does your organization’s internal controls limit the chances of waste, fraud and abuse of Federal funds to a level that gives you confidence?

Key Changes in Post-Award Activities, (cont’d) Expanded Authorities are still there, just moved to 2 CFR 200.308: Pre-award costs allowable up to 90 days before award without prior approval Extension one time, up to 12 months without prior approval “Carry forward” of unobligated balances – Already required for ED grantees under statutes and regulations in EDGAR Parts 75 and 76 Budget transfers Pre-award costs: Project costs incurred 90-days before Federal award are allowable without prior approval.   Extension: One-time, no-cost extension up to 12 months is allowable. Additionally, in certain cases the Department still authorizes no-cost extensions for discretionary grants if extensions are not authorized under 2 CFR Part 200. See EDGAR 75.261. Carry forward unobligated balances: The Department already requires carry-over of funds under EDGAR Parts 75 and 76 for discretionary and State-administered grants, respectively. Budget Transfers: The Department is authorized to limit certain transfers if Federal share exceeds the simplified acquisition threshold. NOTE: Department regulations limiting recovery of indirect costs that exceed statutory or regulatory caps still apply.

Key Changes to Procurement §200.317-328 Increased responsibilities for the Department and pass-through entities: New requirements for oversight of procurement dollars are found at 2 CFR 200.324 and include such changes as: The entity must make available, upon request, technical specifications on proposed procurements to ensure the item or service is the one being proposed for acquisition. The entity must make pre-procurement process documents available if certain conditions exist. Optional grace period extended to two years If a Federal agency or pass-through entity questions whether a proposed procurement is for a good or service specified in a request for proposal (RFP), they may ask a grantee to produce technical specifications for review. Additionally, a grantee must make pre-procurement documents available if: The entity’s procurement procedures do not meet the standards established in 2 CFR Part 200; The procurement exceeds the Simplified Acquisition Threshold; and: The contract will be awarded without competition or there is only one bidder; The RFP specifies a “brand name” product; or The contract is not awarded to the apparent lowest bidder; A proposed contract modification changes the scope of the contact or increases the cost of the contract by more than the Simplified Acquisition Threshold.

§200.317 Procurement by states States must use the same procurement procedures when using Federal or non-federal funds. States will comply with §200.322 Procurement of recovered materials. All others grantees and subgrants must follow sections 200.318 through 200.326.

§200.318 General procurement Standards Non-Federal entities must: Use own documented procurement procedures, Maintain oversight to ensure contractor compliance, and Maintain written standards of conduct covering, conflicts of interest—real and or perceived—for staff engaged in the selection, awarding or the administration of a contract.

Procurement Grace Period Timeline Award Start* Uniform Guidance Start Optional Procurement Two YearGrace Period end date 1/1/2015 12/31/2015 7/1/2015 (SEA) 7/1/2015 N/A 8/15/2015 (LEA) 8/15/2015 8/14/2017 10/1/2014 10/1/2015 (NCC) 9/30/2017 10/1/2015 10/1/2015 (New) * Award date or start of FY for formula grants; Assumes either continuation or new award will be made at the end of the one year period. Each agency has established its own timelines for implementation. At ED, we require that all new grants and continuation grants awarded after 12/26/2014, be subject to the new regulations. However, nothing prohibits a grantee from implementing the Uniform Guidance earlier (except the audits, Subpart F), but the grantee needs to communicate to you if they want to implement these regulations early. For some discretionary grants that were funded up-front, it is possible that we might see a few instances of administrative actions or supplements being governed by the old rules. Grace period: A grace period can be given to entities required to change procurement policies. This is not required. States continue to follow state law and procedures rather than the UG. Therefore, states are not being required to change their procurement standards and procedures and have no option of a grace period. FROM COFAR Q and A: Will the Federal government provide a grace period after the effective date for non-Federal entities to comply with the procurement standards in the Uniform Guidance? Yes, for one full fiscal year after the effective date of the Uniform Guidance. In general non-Federal entities must comply with the terms and conditions of their Federal award, which will specify whether the Uniform Guidance applies. However, in light of the new procurement standards, for procurement policies and procedures, for the non-Federal entity’s first full fiscal year that begins on or after December 26, 2014, the non-Federal entity must document whether it is in compliance with the old or new standard, and must meet the documented standard. For example, the first full fiscal year for a non-Federal entity with a June 30th year end would be the year ending June 30, 2016. The Single Audit Compliance Supplement will instruct auditors to review procurement policies and procedures based on the documented standard. For future fiscal years, all non-Federal entities will be required to comply fully with the uniform guidance.

Procurement Question Answer Yes or No: Is your organization ready to implement the Uniform Guidance requirements for procurement?

Risk Management Cycle Risk Identification Continuous Improvement Risk Assessment Risk Mitigation Risk Information Sharing Continuous Improvement The risk management cycle is pictured on the slide. The risk management cycle is a framework for continuous discovery, analysis, action, and improvement. Risk identification identifies where the risk may come from, for example: an entity’s poor internal controls resulting in unallowable costs and poor fiscal management; an entity’s lack of staff expertise resulting in poor project performance; or other factors, such as a large homeless population resulting in irregular participation of students. A program office should consider the biggest risks to this program from grantees and Review each entity’s current and prior fiscal, audit, management, and performance data from a variety of sources. Risk assessment considers the relevance, importance, incidence, and manageability of information related to grantee performance and financial operations. It is up to the program to determine if a risk beyond the grantee’s control is relevant to consider. A program office should: Determine the potential impact of the severity, repetition, and/or relevance of identified risks on an entity’s performance. Establish a rating system based on those criteria to determine if risk is low or high or somewhere in between. See GB 14-06 and 14-03 for definitions for formula and discretionary, respectively Risk mitigation is taking appropriate action to address potential problems, including imposing the appropriate types and levels of requirements and provides appropriate types of monitoring and levels of technical assistance: specific conditions (see 2 CFR 200.207) high risk designation (see 2 CFR 3474.10) monitoring plans for individual grantees. Risk information sharing is capturing and disseminating information discovered and “lessons learned” - Enter required risk data for all entities into appropriate ED data systems: G5 RMS/OCFO (?) sharing sites for risk and audits, respectively FAPIIS – future requirement Continuous improvement is the integration of “lessons learned” into ongoing risk management practices. Evaluate annually the risk management process to identify its strengths and weaknesses and refine ED’s capability to reduce risk throughout the grant process. Throughout the entire cycle, every decision at every step must be documented.

Key Changes: Risk-Based Monitoring Increased responsibilities for pass-through entities: 2 CFR 200.331 (b) Pass-through entities must evaluate each sub- recipient’s risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for the purpose of determining the appropriate monitoring actions. Risk Assessment does not have to be completed before sub-awards are made, but recipients can decide to make assessments before making the sub-awards. Some State grantees have expressed concern that they will have to assess risks of sub-grantees before sub-grants are awarded. However, it’s important to note that this risk assessment does not have to be done before making sub-grants. Rather, the risk assessment is designed to inform grantee monitoring, not deciding to make awards. While States have discretion to conduct risk assessments before making sub-grants, the Department does not expect States to do so during the first year of implementation of 2 CFR Part 200 and, in any case, 2 CFR Part 200 does not require States to conduct risk assessments before granting the award.

Key Changes: Risk-Based Monitoring Increased responsibilities for pass-through entities: Considerations: Prior experience with the same or similar sub-award History of audits New personnel or new systems Relevant Federal monitoring

Key Changes: Risk-Based Monitoring(cont.) Increased responsibilities for pass-through entities: Under 2 CFR 200.331 (d) Pass-through entity monitoring must include: Review of financial and performance reports Issue management decisions for audit findings on subrecipients Ensure that the subrecipients take timely, appropriate action to cure deficiencies  While these requirements are more clearly stated in 2 CFR Part 200, these oversight responsibilities are the same as those that existed under EDGAR former Part 80 and OMB Circular A-133.

Key Changes: Risk-Based Monitoring(cont.) Under 2 CFR 200.331 (e) Pass-through entity must assess risk to determine monitoring approach. Monitoring may include – Provide training and technical assistance Perform an on-site review of entity’s program operations Arrange for agreed-upon-procedures for Audit services Again, while these monitoring approaches are stated more explicitly than EDGAR former Part 80, these are not new responsibilities.

Overview (2 CFR 200.331) Grantees, as pass-through entities, must: Assess risk of subrecipients. (§200.331(b)) Monitor to ensure the subaward is used appropriately and in compliance with the award and all associated regulations. The monitoring plan should be based on the results of the risk assessment. (§200.331(d)) The risk assessment and monitoring should address both financial and programmatic considerations. The Uniform Guidance does not specify when a risk assessment must be completed. A grantee can complete a risk assessment before making a subgrant if it chooses, but it is not required. A grantee may find it prudent to do so for certain programs or certain subawards; for example, to identify situations where specific conditions are needed. There is a tendency to think about risk and control environments to be matters of fiscal compliance.  And, while that is important, there is also a risk that programs will fail to accomplish their programmatic goals. Therefore, risk and monitoring must look at successful programmatic implementation in addition to fiscal compliance.

Other Pass-through Requirements The pass-through entity must provide specific information in the subaward (§200.331 (a)), including but not limited to: Federal award identification, e.g., DUNS number Indirect cost rate Requirements imposed by the pass-through entity Requirement to provide access to records for audit Although we are focusing this class on risk, the second part of the title is subaward management. Your grantees and you should be aware of the requirements for award notification to their subgrantees. See our FAQs for more information.

Risk and Subaward Question On a scale of 1 to 5, with 5 being excellent and 1 being poor, rate your organization’s current risk assessment tools.

Key Changes Cost Principles

Department and Grantees: Reminder Basic standards for allowability remain the same: Necessary Reasonable Allocable Documented New flexibility: If a grant is funded by multiple programs or agencies, recipients can request authority to use same accounting code for costs that are allowable under all programs/agencies. This is called “blended” funding under 2 CFR 200.430(i)(7). All agencies must agree to special charging of “blended” funds.

Cost Principles: Allowability (§200.403) General Considerations in Determining Allowability: Is the cost reasonable and necessary for the program? Is the expense in compliance with laws, regulations and grant terms? To what extent is the expense allocable to the grant? Is the cost adequately documented? Is it consistent with grantee rules that apply to both Federally funded and non-Federally funded activities? Consider these questions when deciding if a cost is allowable and consult the specific items of cost found in §§200.420 through 200.475.

Cost Principles: Reasonable (§200.404) “A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost.” Consideration: Do sound business practices support the expenditure? More questions to consider: What is reasonable? Is the cost ordinary and necessary? Has proper consideration been given to factors such as arm’s-length bargaining, sound business practices, other Federal requirements? Are the costs comparable to market prices for comparable goods or services in the geographic area? [This concept is important for areas with a higher cost of living, including those grantees in which geographical remoteness may affect availability and price… Example rural areas, territories, outlying areas, and freely associated states.] Have all concerned acted with prudence, considering their responsibilities to the organization, community, and others? Does it adhere to established practices and policies?

Cost Principles: Allocable Costs (§200.405) Allocable means the good or service can be assigned to an award or cost objective in accordance with the relative benefit achieved. (d) If a cost benefits two or more projects, activities, or programs in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on the proportional benefit. The concept of allocability is an important one for awarding agencies in providing fiscal oversight. You may frequently work in collaboration with other Federal or State-funded agencies, or non-profit organizations. As such, you may share resources with those other agencies, programs, and organizations, and it is important that the portion of shared resources supported with our grants is consistent with the amount of benefit that you receive. In other words, the costs should be charged in proportion to the benefits received. Allocating employee time among multiple cost objectives is another example of allocability. The note in “d” - In some instances, you may seek to use grant funds to pay for goods or services that are less readily assignable to the your objectives under the grant, and for which the benefit to the program is more difficult to establish. These costs would be included in the indirect costs, rather than direct.  

Monetary Road Map Clear, concise, and detailed Consistent with institutional policy Meets federal requirements Aligned with GPRA Revised within scope of project Achieve project goals

Time and Work Distribution: Flexible and Accountable New flexibility: “system of internal controls” for documenting personnel compensation Requirements for personnel compensation are found at 2 CFR 200.430-431. Federal agencies may approve alternative accounting methods for blended funds. Alternate accounting processes are allowable for sampling in- time distribution reporting. Historically time and distribution has been a key area of audit findings. Prior to the Uniform Guidance, the Department identified procedures for time and effort tracking, which included time distribution systems. Those procedures are found on the Department’s Web site and are still valid. The Uniform Guidance offers additional options, including sampling systems. ED is working to develop ED-specific guidance on sampling systems. Grantees are welcome to contact the Department to work collaboratively towards the development of less burdensome time and effort tracking systems.

Cost Principles: Notable Changes 2 CFR 200.407 lists 22 prior approval requirements. However, some pre-approvals were missed, so check specific cost principles before assuming that they don’t require prior approval. New Requirements: Certifications are required for fiscal reports, payment requests, and indirect cost proposals Limited dependent care costs related to conferences Does not override the Department guidance regarding conferences Direct charging of materials and supplies Computer equipment <$5,000 specifically treated as supply Certifications: Certifications are not new, but each certification now states that false and fraudulent certified documents are subject to civil and criminal liability for the recipient and the individual certifier. Please note that the certifications required prior to the Department’s adoption of 2 CFR Part 200 were also subject to civil and criminal liability. The only difference is that now certifiers are clearly informed of that liability in the certification language.   Dependent care: The host of a conference may expend grant funds to locate child-care providers. Grantees that send participants to conference may charge their grants for the additional child-care cost that are above the attendant’s normal child-care costs. The Uniform Guidance does not affect or override the Department’s conference guidance regarding keeping costs to a minimum. Direct charge of materials and supplies: The cost principles now state that the cost of computers that do not exceed the equipment threshold of the recipient or $5,000, whichever is lower, are supplies. Therefore, purchase of computers that do not exceed the threshold are to be considered supply costs, not equipment costs. We note that this cost principle does not establish new policy; it just clarifies the current cost principles regarding supplies and equipment.

Key Changes Audit Requirements

Key Changes in Audit Requirements Threshold for a required Single Audit has increased to $750,000. Questioned costs <$25,000 are no longer required to be reported. Fewer audits and findings have monitoring implications. Audits must be submitted electronically to the Federal Audit Clearinghouse and made available to all funding agencies. States will continue to resolve sub-recipient audits. The higher audit threshold will mean increased monitoring for grantees and sub-grantees/recipients that expend less than $750,000 per year in Federal funds. The Department and will identify and use other resources to assess risk and develop monitoring procedures for those entities that no longer meet the threshold for a single audit. The Uniform Guidance no longer requires auditors to report questioned costs of less than $25,000 (2 CFR 200.516(a)(3)). However, may still auditors report questioned costs of lesser amounts. Generally, if an auditor makes a finding on a questioned cost, the Department will resolve the finding, regardless of the amount. Currently the Department is assessing the need to have a policy based on the increased questioned cost threshold and is developing monitoring procedures to ensure that grantees properly account for grant funds, regardless of the level of expenditures for a particular cost item. Submission to Federal Audit Clearinghouse (FAC) is the responsibility of the auditee, who must ensure no protected personally identifiable information is included.

Timeline: Audits Audit requirements apply to the first fiscal year beginning after December 26, 2014 Work with your auditor to ensure that he or she is prepared to address and report on the new requirements. Example: A state’s fiscal year begins July 1, 2015. The state’s fiscal year ends on June 30, 2016. You must submit your audit within 9 months, by March 31, 2017 in this example. The Uniform Guidance applies to audits for fiscal years beginning on or after December 26, 2014.

Common Audit Exceptions Missing time and effort reports Poor record-keeping Failure to obtain prior approval Incorrect indirect cost rates Unallowable costs Lack of internal controls

Key Changes Indirect Costs

Timeline: Indirect Cost Indirect Cost requirements apply to the first fiscal year beginning after December 26, 2014. Work with your cognizant agency to ensure your indirect cost rate proposal reflects decisions appropriate for your program Example: The grantee fiscal year ends June 30, 2015. Your rate proposal is 6 months after the end of the current fiscal year, due December 31, 2015. Requests for extensions must be submitted 60 days prior to the due date of proposal submission, or October 31, 2015 in this example.

Key Changes in Indirect Costs Flexibility for new Grantees: de minimis rate of 10% MTDC Under §§76.561 and 76.561 procedures, States and LEAs not eligible De minimus rate not to be confused with Department’s temporary rate of 10% direct salaries and wages New grantees that have never had rate have option to negotiate ICR and use temporary rate OR to use de minimis rate BUT Grants subject to “supplement not supplant” must use restricted rate Training grants must use 8% MTDC rate under §75.562 New flexibility: New grantees that have never received a grant from the Federal government may opt to use a de minimis rate of 10% MTDC (no need to negotiate) unless certain factors are present:   LEAs are not eligible under the Department regulations and procedures. The grant is awarded under a program that requires use of a restricted indirect cost rate, because this would require negotiation of a restricted rate. The grant is awarded under a training-grant program, thereby requiring grantees to use a rate of 8% MTDC. The Department’s temporary rate is still available to those grantees that do not have indirect cost rates but want to negotiate a rate. Rules on temporary rates can be found in EDGAR 75.560(c) and (d). The Department is in the process of revising the budget form used in discretionary grant applications to clearly describe the indirect cost rate options available to new grantees under the Uniform Guidance and EDGAR.

Key Changes in Indirect Costs (cont’d) New flexibility: Grantees with a negotiated rate may apply for an extension of up to 4 years. Reduces the requirement to renegotiate annually Requests for extensions must be submitted 4 months after the end of the grantee’s fiscal year (60 days earlier than due date for indirect cost proposals) Recipients are required to submit their indirect cost rate proposals within six months of the end of a recipient’s fiscal year.   If a recipient wants to extend its indirect cost rate for up to four additional fiscal years, the recipient must submit its request to extend the rate at least 60 days prior to the day when the recipients’ indirect cost rate proposal is due to its cognizant agency. This means extension requests must be submitted within four months after the end of the recipient’s fiscal year.

Points to Consider Document all project activities and expenditures— track any matching funds Check grant terms, conditions and grant award attachments for possible exceptions Read the “Fine Print” on the GAN When in doubt, call your Program Officer or state contact

Federal Awardee Performance and Integrity Information System (FAPIIS) You should know … the Department will be reporting more information about your performance: Government-wide system will include performance data for Federal grants and contracts. FAPIIS includes data from agency grant systems and debarment and suspension information. Federal and pass-through agencies will have to consider FAPIIS data when making Federal awards. FAPIIS system is still being developed. Visit the FAPIIS website, FAPIIS Website. Grantees already have to assess sub-grantees under the debarment and suspension requirements in 2 CFR Part 180, as adopted by the Department at 2 CFR Part 3485. Similarly, grantees and sub-grantees have to assess contractors and ensure those contractors assess their subcontractors under those same debarment and suspension requirements.   The establishment and use of FAPIIS is the next step in implementation of the Federal Funding Accountability and Transparency Act, including amendments to FFATA made by Duncan Hunter National Defense Authorization Act for Fiscal Year 2009. In response, the COFAR has started drafting new guidance that is expected to be published either late FY15 or early FY16.

ED Concerns Large amounts of unobligated funds at the end of the budget period Excessive or infrequent drawdown of funds Project goals not met

Indicators of Success Annual substantial progress met GPRA indicators met Recordkeeping & fiscal accountability

Resources Back at the Office Your Department program officer or State The Department’s one-stop shop for information: Uniform Guidance One-Stop Shop at ED.gov Includes links to COFAR and OMB Includes links to EDGAR, including former Parts 74 and 80 Email questions to: uniformgrantguidanceimplementation@ed.gov First and foremost, grantees should contact their program officer for instruction on administering a grant. Additional resources are found on the Department’s one-stop shop for Uniform Guidance. Questions can be submitted to the Department’s Uniform Guidance email address.