How to Draft New & Update Old Policies and Procedures Brette Kaplan Wurzburg, Esq. Brustein & Manasevit, PLLC bwurzburg@bruman.com www.bruman.com

Agenda Why policies and procedures are important? Logistics Differences between policies and procedures Suggested Sections Rules and Requirements Helpful Questions to Ask What to do with completed policies and procedures?

Why? Single Audits Monitoring Staff Changes and Transitions Uniform Grant Guidance

Single Audits Auditors ask about policies and procedures Some tests specifically require written policies and procedures

Single Audits Compliance Supplement, Part 6: Internal Controls “The A-102 Common Rule and OMB Circular A-110 … require that non-Federal entities receiving Federal awards … establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements.” “Control activities are the policies and procedures that help ensure the management’s directives are carried out.” Clearly written & communicated

Monitoring Policies and procedures are evidence of compliance under all program monitoring tools Handout: Document Request List

Monitoring Compliance Supplement, Part 6: Internal Controls, Section M. Subrecipient Monitoring Written policies and procedures exist establishing: Communication of Federal award requirements to subrecipients Responsibilities for monitoring subrecipients Process and procedures for monitoring Methodology for resolving findings Requirements related to subrecipient audits, including appropriate adjustment of pass-through’s accounts

Staff Changes and Transitions Training tool Maintain consistency

Uniform Grant Guidance Emphasis on internal controls Written policies and procedures are required! Written Cash Management Procedure - § 200.302(b)(6) & § 200.305 Written Allowability Procedures - § 200.302(b)(7) & Subpart E – Cost Principles Written Conflicts of Interest Policy - § 200.318(c) Gratuities Written Procurement Procedures - § 200.319(c) Written Method for Conducting Technical Evaluations of Proposals and Selecting Recipients - § 200.320(d)(3) Written Travel Policy - § 200.474(b) UGG guise into effect for new funding after December 26, 2014

Compliant policies and procedures lead to: Administering compliant programs and complying with grant management requirements!

Policies vs. Procedures Both guide organization and provide framework for actions Policies – Don’t need to be long and complicated! Organization’s rules and guidelines to ensure consistency and compliance How organization intends to operate Use clear, simple statements Guiding principles to help make decisions

Policies vs. Procedures Describe how policy is put into action Activities that produce a specific service or product Separation of responsibility Who will do what (position, department, division) What steps should be taken When actions are triggered Which forms or documents to use Bullet points, instructions, forms, checklists, flowcharts, etc.

Logistics Where to start? For internal use of for subgrantees? Grant specific or cross cutting? Review and collect available policies and procedures from different offices and websites If starting from scratch, get information from people who perform grant related activities

Logistics Who should be involved? Create a team Fiscal AND program personnel Use team approach to capture entire grant process Everyone involved should sit in the same room to review grant activities, decision making, job responsibilities

Logistics Create a table of contents Assign subjects Create a timeline for completion Handout: Table of Contents

Logistics How long does it take? Depends on need Review of existing policies and procedures is less time than starting from scratch Set deadlines for actions Don’t get overwhelmed!

Logistics What is the process? Review existing policies and procedures and documentation Memos, emails, forms, job descriptions Develop questions – Go to the source of the information needed! Schedule interviews with relevant staff who perform the tasks related to the policies and procedures you are creating Gather information on actual practices Draft policies and procedures Review internally with appropriate staff Revise Formally adopt and implement Train staff Annually review and revise!

Things to Consider Buy-in from those who will be using the policies and procedures Review for accuracy, completeness and compliance Adoption by board or other governing body

Your Work is Never Done . . . Policies and procedures are only useful if they are current, accurate and regularly used Ongoing professional development and training What the requirements are How your organization meets the requirements Continually review and revise Annual basis

Resources Uniform Grant Guidance OMB Circulars Education Department General Administrative Regulations (EDGAR) Authorizing statute Program regulations Program guidance State and agency rules, regulations, policies and procedures

Types of Grants State-Administered Grants Direct Grants Any grant distributed by formula to eligible States Describe the process (hint: follow the money trail) Direct Grants Any grant other than those distributed by formula to eligible States Review GAN for terms and conditions

Suggested Sections Organization, Structure and Function Grant Application Process Financial Management System Procurement Inventory/Property Management Time and Effort Record Keeping/Record Retention Monitoring Audit Resolution Fiscal Requirements Programmatic Requirements

Organization, Structure and Function

Organization, Structure and Function Organization Chart Offices Sections Divisions Job Descriptions & Responsibilities Outside entities with grant administration responsibilities MOU/MOA

Organization, Structure and Function Helpful Questions to Ask Do you have an organizational chart? What are the offices, sections, divisions or employees that have responsibility for grant administration? What are their responsibilities? Are there any entities outside of the agency that have grant administration responsibilities? What are those responsibilities? How was relationship created? What are the terms? MOU/MOA?

Grant Application Process

Grant Application Process State-Administered Grant vs. Direct Grant Decisions regarding what grants to apply for Determining organizational capacity to run a compliant program Approvals and Authorizations After the grant is awarded

Grant Application Process If Pass-Through Entity: Discuss how subgrantees apply for grants Responsible for risk analysis prior to issuing award! (Uniform Grant Guidance) Consider imposing subaward conditions if appropriate

Grant Application Process Best Practices Whether or not formal acceptance is required, meet with appropriate parties to be certain you want to accept the grant. Make acceptance a conscious act. Circumstances may have changed between submission of application and notice of award Handout: Initial Grants Management Meeting

Grant Application Process Helpful Questions to Ask How does the agency determine what grants to apply for? What is the process? Who reviews and signs off on a grant application? What happens after a grant is awarded? Handout: Setting Up the Grant Budget

Financial Management System

Financial Management System 34 CFR § 80.20(b) Financial Reporting Accounting Records Internal Control Budget Control Allowable Cost Source Documentation Cash Management 2 CFR § 200.302(b) Identification of Awards (NEW) Financial Reporting Accounting Records (Source Docs) Internal Control Budget Control **Written Cash Management Procedures (NEW) **Written Allowability Procedures (NEW)

Written Cash Management Procedures NEW: Written Cash Management Procedures to implement requirements of § 200.305 Payment

Written Cash Management Procedures For states, payments are governed by Treasury – State CMIA agreements 31 CFR Part 205 No Change

Written Cash Management Procedures For all other non federal entities, payments must minimize time elapsing between draw from G-5 and disbursement (not obligation)

Written Cash Management Procedures Written procedures must describe whether non-federal entity uses: Advance Payments (preferred) Limited to minimum amounts needed to meet immediate cash needs Reimbursement Pass through must make payment within 30 calendar days after receipt of the billing Working Capital Advance The pass through determines that the nonfederal entity lacks sufficient working capital Allows advance payment to cover estimated disbursement needs for initial period

Cash Management Obligation – 2 CFR 200.71 Orders placed for property and services, contracts and subawards made, and similar transactions during a given period that require payment during the same or a future period Promise to pay Liquidation, Drawdown, Payment (Payment then Drawdown if reimbursement method) Formula Grants: Grantees and subgrantees may begin to obligate funds the later of the 2 dates: When the awarding agency approves application; or Awarding agency determines application is “substantially approvable” Reimbursement subject to final approval.

When Obligations Are Made 34 CFR 75.707 & 76.707 If the Obligation is for… The Obligation is made… Acquisition of Property Date of binding written commitment Personal Services by Employee When services are performed by Contractor Date of binding written commitment Travel When travel is taken Part 75 governs direct grant programs Part 76 governs state-administered programs

Written Cash Management Procedures Interest earned must be remitted annually to HHS Interest amounts up to $500 may be retained by non-federal entity for administrative purposes

Written Allowability Procedures NEW: Written procedures for determining allowability In accordance with Subpart E – Cost Principles & terms and conditions of federal award

Written Allowability Procedures Not a restatement of Subpart E But a GPS through grant development and budget process Training tool for employees

Cost Principles: “Factors Affecting Allowability of Costs” § 200.403 All Costs Must Be: Necessary, Reasonable and Allocable Conform with federal law & grant terms Consistent with state and local policies Consistently treated In accordance with GAAP Not included as match Net of applicable credits (moved to § 200.406) Adequately documented Handout: Determining Allowability

Necessary Uniform Grant Guidance – no description Based on the needs of the program Expenditure benefits program Helps achieve program objective

Necessary Consider: Whether the cost is needed for the proper and efficient performance of the grant program Whether the cost is identified in the approved budget or application Whether there is an educational benefit associated with the cost Whether the cost aligns with identified needs based on results and findings from a needs assessment Whether cost addresses program goals and objectives and is based on program data

Reasonable Costs § 200.404 Reasonable for the performance of the federal award “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.” Sound business practices Comparable to market prices Arm’s length bargaining

Reasonable Costs § 200.404 Consider Whether the cost is the type generally recognized as ordinary and necessary for the operation of the non-federal entity or the proper and efficient performance of the federal award. Restrains or requirements imposed by factors like sound business practices; arm’s length bargaining; federal, state, and other laws and regulations; and terms and conditions of the federal award Market prices for comparable goods or services for the geographic area Whether individuals involved acted with prudence under the circumstances Whether non-federal entity significantly deviated from established practices and polices regarding the incurrence of costs, which unjustifiably increase the federal award’s cost

Necessary & Reasonable Practical aspects of “necessary” Do I really need this? Surplus property/existing resources Practical aspects of “reasonable” Is this the minimum amount I need to spend to meet my need? Is the expense targeted to valid programmatic/administrative considerations? Do I have the capacity to use what I am purchasing? Did I pay a fair rate? Can I prove it? If asked, would I be comfortable defending this purchase?

Allocable costs § 200.405 A cost is allocable to the federal award if the goods or services involved are chargeable or assignable to the federal award in accordance with the relative benefit received. The federal grant program derived a benefit in proportion to the funds charged to the program EX: LEA purchases a computer to use 50% in a federal program and 50% in State program Can only charge half the cost to the federal program

Applicable credits § 200.406 Those receipts or reduction-of-expenditure type transaction that offset or reduce expense items – must be credited to the Federal award as either cost reduction or cash refund, as appropriate. Examples: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, adjustments of overpayments

Adequately Documented § 200.403(g) A state and subgrantee must keep records that show (34 CFR 76.630): Amount of funds under grant or subgrant How the funds are used Total cost of the project Share of costs provided by other sources Records that show compliance and performance Other records to facilitate an effective audit

As a Practical Matter, Ask… In order to determine whether federal funds may be used to purchase a specific cost, it is helpful to ask the following questions: Is the proposed cost allowable under the relevant program? Is the proposed cost consistent with an approved program plan and budget? Is the proposed cost consistent with program specific fiscal rules? Is the proposed cost consistent with EDGAR? Is the proposed cost consistent with special conditions imposed on the grant (if applicable)? Is the proposed cost is consistent with the underlying needs of the program? Does the proposed cost targeted areas of weakness? Was data reviewed to ensure that federal funds meet areas of concern? In order to determine whether federal funds may be used to purchase a specific cost, it is helpful to ask the following questions:   Is the proposed cost allowable under the relevant program? Is the proposed cost consistent with an approved program plan and budget? Is the proposed cost consistent with program specific fiscal rules? Is the proposed cost consistent with EDGAR? Is the proposed cost consistent with special conditions imposed on the grant (if applicable)? As a practical matter, [insert staff member(s)] should also consider whether the proposed cost is consistent with the underlying needs of the program. Also, funds should be targeted to address areas of weakness, as necessary. To make this determination, [insert staff member(s)] should review data when making purchases to ensure that federal funds to meet these areas of concern.

Financial Management System Can include Selected Items of Cost section for frequently asked about expenses The Uniform Grant Guidance has 55 specific items of cost - § 200.420

Travel Costs Uniform Grant Guidance § 200.474 State Rules Agency Rules Documentation Required to be Maintained

Financial Management System Helpful Questions to Ask What accounting systems are used? What function does each system perform? Who is responsible for managing budgets and accounts payable? How are budgets loaded and tracked on the system? What is the process for comparing budgets to expenditures? How do you ensure all expenditures are allowable?

Financial Management System Helpful Questions to Ask What is the process for requesting budget revisions? How do you ensure that all expenditures are made within the period of availability? What happens to unobligated funds? Does the system interface with the procurement and inventory systems? How are vendors paid? What is the process? Who is involved?

Procurement

Procurement NEW: Uniform Grant Guidance: All nonfederal entities must have documented procurement procedures which reflect applicable Federal, State, and local laws and regulations. § 200.318(a) Open competition Conflict of Interest (including gratuities) Solicitation Cost/Price Analysis Vendor Selection Required Contract Provisions Contract Administration Protest Procedures

Conflict of Interest Must maintain written standard of conduct, including conflict of interest policy. § 200.318(c)(1) A conflict of interest arises when any of the following has a financial or other interest in the firm selected for award: Employee, officer or agent Any member of that person’s immediate family That person’s partner An organization which employs, or is about to employ, any of the above or has a financial interest in the firm selected for award

Conflict of Interest If the non-federal entity has a parent, affiliate, or subsidiary organization that is not a state or local government the entity must also maintain written standards of conduct covering organization conflicts of interest! § 200.318(c)(2) NEW: All non federal entities must establish conflict of interest policies, and disclose in writing any potential conflict to federal awarding agency in accordance with applicable Federal awarding agency policy. § 200.112

Conflict of Interest Policy Include: Definition Chain for reporting potential conflicts Alternate if reporting to employee involved in potential conflict Gratuities Definitions and examples of nominal items Recusal Sanctions Signed certification that employee received and understands conflicts policy Training on policy

Vendor Selection Process § 200.320 Method of procurement: NEW: Micro-purchase Small purchase procedures Competitive sealed bids Competitive proposals Noncompetitive proposals

COFAR guidance. Gill Tran presentations. In the meat of the paw were the general standards (i.e., documented policies, full and open competition, conflict of interest, documentation) and each toe of the claw contained the different types of procurements — micropurchases, small purchases, sealed bids, competitive proposals and sealed bids.

Vendor Selection Process: Micro-Purchase § 300.320(a) NEW: Acquisition of supplies and services under $3,000 or less May be awarded without soliciting competitive quotations if nonfederal entity considers the cost reasonable To the extent practicable must distribute micro-purchases equitably among qualified suppliers

Vendor Selection Process: Small Purchase Procedures Good or service that costs $100,000 or less (NEW: $150,000 under 200.88) Organization may set lower threshold Must obtain price or rate quotes from an adequate number of qualified sources “Relatively simply and informal”

Vendor Selection Process: Noncompetitive Proposals Appropriate only when: The good or services is available only from a single source (sole source) There is a public emergency The awarding agency authorizes NEW: awarding agency or pass-through must expressly authorize noncompetitive proposals in response to written requires from nonfederal entity - § 200.320(f)(3) After soliciting a number of sources, competition is deemed inadequate

Vendor Selection Process Cannot contract with vendor who has been suspended or debarred http://www.sam.gov Appendix II(I)

Required Contract Provisions Nonfederal entity’s contracts must contain the applicable provisions in Appendix II to Part 200 - § 200.326 Examples (not complete list) Remedies Termination Equal Employment Opportunity Davis-Bacon Act Debarment and Suspension

Contract Administration § 200.318 (Changed) Nonfederal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of the contract

Procurement: Helpful Questions to Ask What is your conflict of interest policy? What are State and/or agency-specific requirements that must be followed? Approval for contracts? Service contracts vs. Contracts for goods? Contract thresholds and process for entering into contracts within each threshold amount? What clauses and/or certifications must be in each contract? How do you ensure that the terms of the contract are met? Handout: Spending Grant Funds (Non-Personnel) Procurement process chart

Inventory & Property Management

Inventory/Property Management Uniform Grant Guidance § 200.313 Property Classifications Equipment, Supplies, “Highly Walkables” Computing Devices Inventory Procedure Loss, Damage or Theft Disposition

Equipment and Supplies Equipment – No change in definition § 200.33 Anything that is not equipment is considered supplies. § 200.94 “Significant Technological Devices” NEW: Computing devices Machines used to acquire, store, analyze, process, public data and other information electronically Includes accessories for printing, transmitting and receiving or storing electronic information Computing devices are supplies if less than $5,000

Inventory/Property Management Must have inventory management system Property records Description, serial number or other ID, title info, acquisition date, cost, percent of federal participation, location, use and condition, and ultimate disposition Physical inventory At least every two years Control system to prevent loss, damage, theft All incident must be investigated

Disposition-Equipment § 200.313 When property no longer needed, must follow disposition rules: Transfer to another federal program Over $5,000 – pay federal share Under $5,000 – no accountability NEW: Non-federal entity must request disposition instructions from the federal awarding agency if required by the terms of the grant

Inventory/Property Management Helpful Questions to Ask How do you classify and define property? Equipment, supplies, etc. What items must be inventoried and tagged? Detailed inventory records What is the inventory process? How frequently is a physical inventory conducted? What is the policy regarding lost, stolen or damaged items? Are there procedures to transfer equipment between programs? What are the disposition procedures? Handout: Property Management (Just an excerpt. Doesn’t include disposal or what happens when items or lost, damaged or stolen)

Time and Effort

Time and Effort Uniform Grant Guidance Semiannual Certification PARs Cost Objective Reconciliations

Time and effort (A-87 Rule) Semi-Annual Certifications Personnel Activity Report (PAR) If an employee works on a single cost objective: After the fact Account for the total activity Signed by employee or supervisor Every six months (at least twice a year) If an employee works on multiple cost objectives: After the fact Account for total activity Signed by employee Prepared at least monthly and coincide with one or more pay periods

“Standards for Documentation of Personnel Expenses” § 200.430 NEW: Charges for salaries must be based on records that accurately reflect the work performed Must be supported by a system of internal controls which provides reasonable assurance charges are accurate, allowable and properly allocated Be incorporated into official records Reasonably reflect total activity for which employee is compensated Not to exceed 100%

“Standards for Documentation of Personnel Expenses” § 200.430 Encompass all activities (federal and non-federal) Comply with established accounting polices and practices Support distribution among specific activities or cost objectives

“Standards for Documentation of Personnel Expenses” § 200.430 NEW: If records meet the standards: the non-federal entity will NOT be required to provide additional support or documentation for the work performed § 200.430(i)(2) BUT, if “records” of grantee do not meet new standards, ED may require PARs § 200.430(i)(8) PARs are not defined!!!

Time and Effort Helpful Questions to Ask How do you document time and effort? Employees that work on one cost objective? Employees that work on multiple cost objectives? Who must sign the forms? Where are the forms turned in?

Record Keeping

Record Keeping 3 5 years Uniform Grant Guidance §§ 200.333, 200.335 Statute of Limitations 3 5 years State Policy Agency Policy

Record Keeping Methods for collection, transmission & storage of information § 200.335 Whenever practicable, collect, transmit and store federal award information in open and machine readable formats Rather than in closed formats or on paper Federal agency and pass-through must always provide or accept paper versions upon request If paper copies are submitted, can’t require more than original and 2 copies

Record Keeping Methods for collection, transmission & storage of information § 200.335 (continued) When original records are electronic and cannot be altered, there is no need to create and retain paper copies. When original records are paper, electronic versions may be substituted through the use of duplication or other forms of electronic media provided they: Are subject to periodic quality control reviews, Provide reasonable safeguards against alteration; and Remain readable. In accordance with the May 2013 Executive Order on Making Open and Machine Readable the New Default for Government Information,

Record Keeping Helpful Questions to Ask How long must records be maintained? How are records maintained? Hard copy, electronic

Monitoring

Monitoring Monitoring of Agency Monitoring of Subrecipients Risk-Based Factors Onsite Reviews Remote Monitorings Desk Reviews Self-Assessments Follow-Up

Monitoring – Risk Based Factors Examples of risk factors: Prior experience with same or similar awards Previous monitoring findings New or changing personnel New or changing systems Amount of grant funds awarded Size of entity

Monitoring – Reviews Notification How to prepare for onsite monitoring Who sends/receives notification How to prepare for onsite monitoring Collect and organize documents Staff contact/point person Separate room, internet access, copy machine for monitors Make copies of all documents given to monitors

Monitoring – Follow Up Report of findings Corrective Action Plan Timeframe to issue and respond Corrective Action Plan Action steps, timeframe, staff responsible Follow up on corrective actions Closeout letter

Monitoring and Reporting Program Performance § 200.328 NEW: Monitoring by the “Pass Through” Monitor to assure compliance with applicable federal requirements and performance expectations are achieved Must cover each program, function or activity (see also § 200.331) Must submit “performance reports” at least annually

Requirements for Pass-Through Entities § 200.331 NEW: Depending on assessment of risk, the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals: Training + technical assistance on program-related matters On-site reviews Arranging for “agreed-upon-procedures” engagements (described in § 200.425)

Monitoring Helpful Questions to Ask Process for when agency is monitored? Notification, preparation, Responding, Follow-Up Process for monitoring subrecipients? From notification to issuing report and Timeline Who is responsible for monitoring? Fiscal? Programmatic? What gets monitored? How do you determine which subrecipients will be monitored? How often does monitoring occur? Site visits, desk reviews, self-assessments How do you ensure findings are resolved? Corrective action plan, Closeout letter, Future monitoring Handout: Monitoring and Internal Audit

Audit Resolution

Audit Resolution Single Audit Uniform Grant Guidance – Subpart F Resolution of Findings Review of Subrecipients’ Single Audits

Audit Resolution Helpful Questions to Ask Who is responsible for overseeing single audit compliance and resolution? What is the audit process? How are findings resolved? Correct Action Plan, Timeline Process for reviewing subrecipients’ single audits?

Programmatic Fiscal Requirements

Programmatic Fiscal Requirements Supplement Not Supplant Maintenance of Effort Matching and Cost Sharing Hold Harmless Handout: Programmatic Fiscal Requirements

Programmatic Fiscal Requirements How do you ensure compliance with programmatic fiscal requirements? What documentation is required to be maintained?

Programmatic Requirements

Programmatic Requirements Programmatic Compliance Application Process Allocations to subrecipients Allowable costs under the grant program Other

Programmatic Requirements Helpful Questions to Ask How does your agency ensure compliance with the specific requirements of the grant program? What resources are available to program staff to help ensure compliance?

After your policies and procedures are done . . . NOW WHAT!?!

Now What!?! Training Review and Revise Where are Policies and Procedures Located?

QUESTIONS?

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