1. Allowability, Time & Effort Under the New EDGAR
Steven Spillan, Esq.
Brustein & Manasevit, PLLC
Spring Forum 2016
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Agenda
Cost Principles
Allowability
Time & Effort
New Flexibility under Part 200
What now?
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Cost Principles
Subpart E of Part 200
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4. 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 )
Adequately documented
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5. Direct v. Indirect Costs 200.413(c)
Salaries of administrative and clerical staff should be treated as “indirect” unless all of following are met:
Such services are integral to the activity
Individuals can be specifically identified with the activity
Such costs are explicitly included in the budget
Costs not also recovered as indirect
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6. Collection of Unallowable Costs 200.410
Payments made for costs determined to be unallowable by either the Federal awarding agency or pass-through must be refunded (including interest) to the Federal government in accordance with instructions from the Federal agency that determined the costs are unallowable.
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Time & Effort
2 C.F.R. § (i)
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8. Documentation for Personnel Expenses 200.430(i)
NEW: Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed
How staff demonstrate allocability
If employee paid with federal funds, then must show that the employee worked on that specific federal program cost objective (a)
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9. Who must participate? 200.430(i)(1) and (i)(4)
Must be maintained for all employees whose salaries are:
Paid in whole or in part with federal funds
Used to meet a match/cost share requirement
NOT contractors
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10. Does “X” Employee have to keep time and effort records?
Is she/he an employee?
Yes
Is she/he paid with federal funds?
T&E Required No
Salary used for match?
No T&E Required
No T&E Required
I don’t know
Ask HR
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11. Documentation for Personnel Expenses (cont.) 200.430(i)(1)
NEW: These records 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%
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12. Documentation for Personnel Expenses (cont.) 200.430(i)(1)
Encompass all activities (federal and non- federal);
Comply with established accounting policies and practices; and
Support distribution among specific activities or cost objectives.
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13. COFAR Comments on Part 200 Rule
By focusing more on internal controls, the rule “mitigates the risk that a non-Federal entity… will focus on prescribed procedures... which alone may be ineffective in assuring full accountability.”
Uncovering weaknesses in internal controls or instances of fraud is goal. Not audit findings.
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Cost Objectives
Program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capital projects, etc.
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15. Cost Objectives (cont.) 200.430(i)(1)(vii)
More than one Federal award
A Federal award and a non-Federal award
An indirect cost activity and a direct cost activity
Two or more indirect activities that are allocated using different allocation bases
An unallowable activity and a direct or indirect cost activity
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Allocable Costs (c)
Any cost allocable to a particular Federal award under the principles in Part 200 may not be charged to other Federal awards to overcome fund deficiencies, to avoid restrictions imposed by Federal Statutes, regulations, or terms and conditions of the Federal awards, or for other reasons.
However, this prohibition would not preclude the non-Federal entity from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal award.
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17. Allocable Costs (cont.) 200.405(d)
If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost should be allocated to the projects based on proportional benefit.
If cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then notwithstanding (c), the costs may be allocated or transferred to benefited projects on any reasonable documented basis.
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18. Use of Budget Estimates 200.430(i)(1)(viii)
Budget estimates alone do not qualify as support for charges to Federal awards. May be used for interim accounting purposes if:
Produces reasonable approximations
Significant changes to the corresponding work activity are identified in a timely manner
Internal controls in place to review after-the-fact interim charges based on budget estimates
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19. Reconciliation 200.430(i)(1)(viii)(C)
NEW: All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.
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20. Percentages 200.430(i)(1)(ix)
NEW: Because practices vary as to the activity constituting a full workload, records may reflect categories of activities expressed as a percentage distribution of total activities.
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21. Substitute Systems 200.430(i)(5)
States, local governments and Indian tribes encouraged to adopt “substitute systems” if approved by cognizant agency for indirect cost.
No longer applies to nonprofits.
Still acceptable to allocate sampled employees’ supervisors, clerical and support staffs, based on the result of the sampled employees.
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22. Alternative Proposals 200.430(i)(6)
NEW: Cognizant agencies for indirect costs are encouraged to accept alternative proposals based on outcomes and milestones for program performance.
These plans are acceptable as alternatives to the Part 200 standards.
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Compliance (i)(2)
NEW: For records which meet the standards, the non-federal entity will not be required to provide additional support or documentation for the work performed.
DOL regulations for Fair Labor Standards Act must still be met (i.e. charges must be supported by records indicating the total number of hours worked each day).
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Noncompliance (i)(8)
For a non-Federal entity where the records do not meet these standards:
USDE may require personnel activity reports (PARs), including prescribed certifications or equivalent documentation that support the records as required in this section.
PARs are not defined!!
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What Now?
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Moving Forward
No Frame of Reference:
No common audit findings
Little/no guidance
Chance of ED requiring PARS
Advice: Just Wait…
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~ Legal Disclaimer ~
This presentation is intended solely to provide general information and does not constitute legal advice or a legal service.  This presentation does not create a client-lawyer relationship with Brustein & Manasevit, PLLC and, therefore, carries none of the protections under the D.C. Rules of Professional Conduct.  Attendance at this presentation, a later review of any printed or electronic materials, or any follow-up questions or communications arising out of this presentation with any attorney at Brustein & Manasevit, PLLC does not create an attorney-client relationship with Brustein & Manasevit, PLLC.  You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances.
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