1. Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards 2 C.F.R. Part 200 “Super Circular” National Homeland Security Conference San Antonio, TX June 9, 2015 1

2. Stacey Street Director of Grant Operations FEMA Grant Programs Directorate Stacey.street@fema.dhs.gov Office: 202.786.9728 Mobile: 202.230.9364 2 Ryan Corle Attorney Advisor for Protection and National Preparedness Grant Programs Directorate FEMA Office of Chief Counsel ryan.corle@fema.dhs.gov Office: 202.786.9587 Mobile: 202.262.6531

3. What is the purpose of this Presentation?  The Presentation will provide an introduction to 2 C.F.R. Part 200, the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, informally referred to as the Super Circular.  This presentation is not an exhaustive list of all requirements in 2 C.F.R. Part 200 and you are encouraged to review the regulation in full.  For specific questions about the meaning or interpretation of the new provisions of 2 C.F.R. Part 200, please contact your Program Analyst or other FEMA point of contact for your award. 3

4. 2 C.F.R. Part 200 Resources FEMA Grants Information: http://www.fema.gov/grantshttp://www.fema.gov/grants DHS Adopted Interim Final Rule: http://www.regulations.gov/#!documentDetail;D=HHS_FRDOC_0001- 0564 http://www.regulations.gov/#!documentDetail;D=HHS_FRDOC_0001- 0564 Full Text of 2 C.F.R. Part 200: http://www.ecfr.gov/cgi-bin/text- idx?tpl=/ecfrbrowse/Title02/2cfr200_main_02.tplhttp://www.ecfr.gov/cgi-bin/text- idx?tpl=/ecfrbrowse/Title02/2cfr200_main_02.tpl Crosswalk of Changes: http://www.whitehouse.gov/omb/grants_docshttp://www.whitehouse.gov/omb/grants_docs Council on Financial Assistance Reform Frequently Asked Questions: https://cfo.gov/cofar/ https://cfo.gov/cofar/ 4

5. What is 2 C.F.R. Part 200?  An OMB reform of regulations that apply to Federal financial assistance that streamlines the language from eight existing OMB circulars into one consolidated set of guidance in the Code of Federal Regulations– informally referred to as the “Super Circular.”  OMB intends for implementation of 2 C.F.R. Part 200 to reduce administrative burden and the risk of waste, fraud and abuse for the approximately $600 billion per year awarded in Federal financial assistance. The intended result is that more Federal dollars will be reprogramed to support the mission, new entities will be able to compete and win awards, and a stronger framework will be put in place to provide key services to American citizens.  Intended to make compliance less burdensome for recipients of Federal financial assistance and reduce the number of audit findings that result more from unclear guidance than actual non-compliance.  Aimed at eliminating duplicative or almost duplicative language in order to clarify where policy is substantively different across types of entities, and where it is not. 5

6. Which Legacy Circulars are Consolidated ? Grants Management A-89, Federal Domestic Assistance Program Information A-102, Grant Awards and Cooperative Agreements with State and Local Governments (44 C.F.R. Part 13) A-110, Uniform Administrative Requirements for Awards and Other Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations (2 C.F.R. Part 215) Cost Principles A-21, Cost Principles for Educational Institutions (2 C.F.R. Part 220) A-87, Cost Principles for State, Local and Indian Tribal Governments (2 C.F.R. Part 225) A-122, Cost Principles for Non- Profit Organizations (2 C.F.R. Part 230) Audit A-133, Audits of States, Local Governments and Non-Profit Organizations Sections of A-50 related to audits performed under Subpart F—Audit Requirements 6

7. What is 2 C.F.R. Part 200?  2 C.F.R. Part 200 provides the foundational requirements for the administration of FEMA grants and financial assistance (e.g., how financial assistance is awarded, managed, audited, and closed-out). 2 C.F.R. Part 200 does NOT change the programmatic substance of FEMA’s disaster and non-disaster grant programs.  For example, 2 C.F.R. Part 200 does not change:  Eligibility criteria for disaster assistance  FEMA’s disaster declaration criteria  FEMA’s disaster grant appeals process  Eligibility criteria for HSGP, EMPG, THSGP, National Earthquake Hazard Reduction Program, National Dam Safety Program, and other non-disaster grants  The statutory purposes and objectives of any FEMA assistance program  The statutorily allowable costs and activities under any FEMA assistance program 7

8. What Awards will 2 C.F.R. Part 200 apply to?  2 C.F.R. Part 200 will apply to all new non-disaster grant awards FEMA makes on or after December 26, 2014.  2 C.F.R. Part 200 will apply to all disaster grant awards FEMA makes for emergency or major disaster declarations issued on or after December 26, 2014.  2 C.F.R. Part 200 will not apply retroactively to existing awards, with two exceptions.  The Audit Requirements in Subpart F will apply to all Single Audit Act audits performed for any recipient or subrecipient fiscal year that begins on or after December 26, 2014. This includes audits performed under existing awards.  OMB has stated that recipients and subrecipients who wish to implement entity-wide system changes to comply with the new regulations after the effective date will not be penalized for doing so. 8

9. What is in 2 C.F.R. Part 200?  2 C.F.R. Part 200 consists of 6 different subparts and 11 appendices: Subpart A – Acronyms and Definitions Subpart B – General Provisions Subpart C – Pre-Federal Award Requirements and Contents of Federal Awards Subpart D – Post Federal Award Requirements Subpart E – Cost Principles Subpart F – Audit Requirements 9

10. What Kind of Recipients Must Follow 2 C.F.R. Part 200?  2 C.F.R. Part 200 applies to awards of Federal financial assistance to all “non-Federal entities”  “Non-Federal entities” are states, local governments, Indian tribes, institutions of higher education, or nonprofit organizations that carry out Federal awards. The definition does not include individuals.  Additionally, FEMA may apply Subparts A through E of 2 C.F.R. Part 200 to for-profit entities  This is different from the old system, which had specific circulars for different kinds of entities 10

11. 2 C.F.R. Part 200 is more than just a consolidation of the existing financial assistance circulars 2 C.F.R. Part 200 contains substantive changes - review it carefully 11

12. How is FEMA Implementing 2 C.F.R. Part 200?  DHS refers back to 2 C.F.R. Part 200 for citations.  All Notice of Funding Opportunities, award packages, and the FEMA-State Agreement will reflect the necessary changes.  For more information on how FEMA’s specific grant programs are implementing the guidance, please visit www.fema.gov/grantswww.fema.gov/grants 12

13. Substantive Changes from 44 C.F.R. Part 13 Subpart A – Acronyms and Definitions There are 98 terms that have specific defined meanings in 2 C.F.R. Part 200. Make sure to consult these definitions – many of which are new – when reviewing the rest of the regulation. Examples of new terms: RecipientFederal financial assistance SubrecipientFixed amount awards Pass-through entityGrant agreement Federal awarding agencyNon-Federal entity Federal awardPerformance goal Federal award datePeriod of performance 13

14. Substantive Changes from 44 C.F.R. Part 13 Subpart B – General Provisions § 200.101(b)(1) Applicability to different types of Federal awards. The terms and conditions of Federal awards (including this part) flow down to subawards to subrecipients unless a particular section of this part or the terms and conditions of the Federal award specifically indicate otherwise. This means that non-Federal entities must comply with requirements in this part regardless of whether the non-Federal entity is a recipient or subrecipient of a Federal award. 14

15. Substantive Changes from 44 C.F.R. Part 13 § 200.112 Conflict of Interest The Federal awarding agency must establish conflict of interest policies for Federal awards. The non-Federal entity must disclose in writing any potential conflict of interest to the Federal awarding agency or pass-through entity in accordance with applicable Federal Awarding agency policy Note: This requirement deals with avoiding conflicts of interest in the actual award process – that is the process FEMA uses to make a Federal award, or the process a pass-through entity uses to make a subaward. It does not deal with avoiding conflicts of interest in the awarding of contracts. The requirements for avoiding conflicts of interest in contracting are dealt with in the Procurement Standards located at 2 C.F.R. §§ 200.317 – 200.326. 15

16. Substantive Changes from 44 C.F.R. Part 13 §200.113 Mandatory disclosures The non-Federal entity or applicant for a Federal award must disclose, in a timely manner, in writing to the Federal awarding agency or pass-through entity all violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award 16

17. Substantive Changes from 44 C.F.R. Part 13 Subpart C – Pre-Federal Award Requirements and Contents of Federal Awards §200.203 Notices of Funding Opportunities For competitive grants and cooperative agreements, FEMA must announce specific funding opportunities by providing the listed required information. FEMA will announce FY 2015 non-disaster grants using the NOFO template required by the DHS Division of Financial Assistance Policy and Oversight, which meets the requirements of this section. §200.204 Federal awarding agency review of merit proposals For competitive grants and cooperative agreements, unless prohibited by Federal statute, FEMA must design and execute a merit review process for applications. What this process is, and what it will entail for specific programs, will be described in the FY 2015 NOFOs for those programs. 17

18. Substantive Changes from 44 C.F.R. Part 13 §200.205 Federal awarding agency review of risk posed by applicants Before making any awards, FEMA must review information available though OMB designated repositories of government wide eligibility qualifications or financial integrity information. For competitive grants or cooperative agreements, FEMA must have in place a framework for evaluating the risks posed by applicants before they receive Federal awards. This framework will be described in the NOFOs for individual programs §200.207 Specific Conditions Based on FEMA’s review of merit proposals and risk, FEMA may impose special conditions on awards. Conditions may include additional project monitoring, financial reporting, establishing additional prior approvals, etc. OMB has removed the requirement to designate a recipient “high-risk” before imposing such additional conditions 18

19. Substantive Changes from 44 C.F.R. Part 13 §200.308 Revision of Budget and program plans This section sets the prior approval requirements for changes or deviations from approved budgets. Many of these prior approval requirements can be waived, but the requirements can no longer be waived for construction projects. Examples of Prior Approval Requirements: Change in Scope of the Project Change in Key Personnel Inclusion of Costs that Require Prior Approval Under the Cost Principles Changes in Approved Cost Sharing or Matching The Making of Fixed Amount Subawards 19

20. Substantive Changes from 44 C.F.R. Part 13 §200.309 Period of Performance A non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity In terms of timing, two types of costs can be charged to a Federal award: 1.Approved pre-award costs; and 2.Costs incurred during the award’s stated period of performance. All other costs, in terms of timing, are not allocable to the award, and may not be charged to it. 20

21. Substantive Changes from 44 C.F.R. Part 13 Property Standards There are several updates and new sections on the use and management of grant funded real property, equipment, and supplies. Review them carefully. §200.310 Insurance coverage §200.311 Real Property §200.312 Federally-owned and exempt property §200.313 Equipment §200.314 Supplies §200.315 Intangible property §200.316 Property trust relationship 21

22. Substantive Changes from 44 C.F.R. Part 13 Procurement The contracting requirements remain similar to those in 44 C.F.R. Part 13, but with some changes. States will continue to follow the same policies and procedures they use for non-Federal procurements. States must also now include the required clauses in §200.326 and follow requirements on recovered materials. All other recipients and subrecipients must follow the requirements of §§200.318 through 200.326 Local governments and Indian tribes will follow procurement methods under the new regulation that are similar to the old regulations at 44 C.F.R. § 13.36(b) – (i). The new requirements will require non-profits, universities, and hospitals to change their past practices, and they may need technical assistance. 22

23. Substantive Changes from 44 C.F.R. Part 13 §200.110 Effective/applicability date. For the procurement standards in §§200.317-200.326, non-Federal entities may continue to comply with the procurement standards in previous OMB guidance (superseded by this part as described in §200.104) for one additional fiscal year after this part goes into effect. If a non-Federal entity chooses to use the previous procurement standards for an additional fiscal year before adopting the procurement standards in this part, the non-Federal entity must document this decision in their internal procurement policies. 23

24. Substantive Changes from 44 C.F.R. Part 13 §200.319 Competition All procurement transactions must be conducted in a manner providing full and open competition consistent with the standards of 2 C.F.R. Part 200. There is a new clarification: In order to ensure objective contractor performance and eliminate unfair competitive advantage, contractors that develop or draft specifications, requirements, statements of work, and invitations for bids or requests for proposals must be excluded from competing for such procurements. 24

25. Substantive Changes from 44 C.F.R. Part 13 §200.320 Methods of Procurement to be Followed There is a new procurement method – micropurchases – for acquisitions of supplies or services which do not exceed $3000 in the aggregate (or $2000 for acquisitions for construction subject to Davis-Bacon). Such purchases may be awarded without soliciting competitive quotations where the non-Federal entity considers the price to be reasonable. Micropurchases must be distributed equally among qualified suppliers, to the extent practicable. Procurement by small purchase procedures, sealed bids, competitive proposals, and noncompetitive proposals (where authorized by the regulation) remain allowable methods of procurement. 25

26. Substantive Changes from 44 C.F.R. Part 13 §200.331 Requirements for Pass-Through Entities A new requirement sets forth the responsibilities for pass-through entities with regard to their subrecipients. Generally, there are seven requirements: 1.Ensure that subawards contain the required information; 2.Evaluate each subrecipient for noncompliance with Federal statutes, etc. to determine appropriate monitoring; 3.Consider imposing specific subaward conditions, if appropriate; 4.Monitor the activities of the subrecipient; 5.Verify that every subrecipient is audited as required by Subpart F; 6.Consider whether subrecipient audit results or monitoring require adjustment of the pass-through entity’s own records; 7.Consider taking enforcement action against noncompliant subrecipients. 26

27. Substantive Changes from 44 C.F.R. Part 13 §200.331 Requirements for Pass-Through Entities (continued) 1.Ensure that subawards contain the required information; Examples of required information: Federal award identification information (DUNS, Period of Performance, Amount of Subaward, etc.) All requirements imposed by the pass-through on the subrecipient so that the award is used in accordance with its terms and conditions Any additional requirements that the pass-through entity imposes on the subrecipient so that the pass-through entity may meet its own responsibilities to the Federal awarding agency Appropriate terms and conditions regarding the closeout of the subaward 27

28. Substantive Changes from 44 C.F.R. Part 13 §200.331 Requirements for Pass-Through Entities (continued) 2.Evaluate each subrecipient for noncompliance with Federal statutes, etc. to determine appropriate monitoring; (b) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include consideration of such factors as: (1) The subrecipient's prior experience with the same or similar subawards; (2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F—Audit Requirements of this part, and the extent to which the same or similar subaward has been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). 28

29. Substantive Changes from 44 C.F.R. Part 13 §200.331 Requirements for Pass-Through Entities (continued) 3. Consider imposing specific subaward conditions, if appropriate; (c) Consider imposing specific subaward conditions upon a subrecipient if appropriate as described in §200.207 Specific conditions. Examples: Requiring more frequent or detailed financial reports Establishing additional prior approvals Requiring additional project monitoring Requiring payments as reimbursements rather than advances 29

30. Substantive Changes from 44 C.F.R. Part 13 §200.331 Requirements for Pass-Through Entities (continued) 4.Monitor the activities of the subrecipient; (d) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include: (1) Reviewing financial and performance reports required by the pass-through entity. (2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and other means. (3) Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the pass-through entity as required by §200.521 Management decision. 30

31. Substantive Changes from 44 C.F.R. Part 13 §200.331 Requirements for Pass-Through Entities (continued) 4.Monitor the activities of the subrecipient; (e) Depending on the pass-through entity's assessment of risk posed by the subrecipient (as described in paragraph (b) of this section), 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: (1) Providing subrecipients with training and technical assistance on program-related matters; and (2) Performing on-site reviews of the subrecipient's program operations; (3) Arranging for agreed-upon-procedures engagements as described in §200.425 Audit services. 31

32. Substantive Changes from 44 C.F.R. Part 13 §200.331 Requirements for Pass-Through Entities (continued) 7.Consider taking enforcement action against noncompliant subrecipients. (h) Consider taking enforcement action against noncompliant subrecipients as described in §200.338 Remedies for noncompliance of this part and in program regulations. Examples: Temporarily withhold payments Disallow costs Wholly or partially suspend or terminate the subaward 32

33. Substantive Changes from 44 C.F.R. Part 13 §200.332 Fixed Amount Subawards With prior written approval from the Federal awarding agency, a pass- through entity may provide subawards based on fixed amounts up to the Simplified Acquisition Threshold Fixed amount awards means a type of grant agreement under which the Federal awarding agency or pass-through entity provides a specific level of support without regard to actual costs incurred under the Federal award. This type of Federal award reduces some of the administrative burden and record-keeping requirements for both the non-Federal entity and Federal awarding agency or pass-through entity. Accountability is based primarily on performance and results. A fixed amount award cannot be used in programs which require mandatory cost sharing or match. 33

34. Substantive Changes from 44 C.F.R. Part 13 §200.338 Remedies for Noncompliance If a non-Federal entity fails to comply with Federal statutes, regulations or the terms and conditions of award, the Federal agency or pass-through entity may impose additional conditions on the award (See §200.207). If those additional conditions do not remedy the non-compliance, additional remedies are available, including: Temporarily withholding cash payments Disallowing costs Wholly or partially suspending or terminating the award Suspension or debarment proceedings Withholding further Federal awards for the project or program Any other remedies legally available. 34

35. Substantive Changes from 44 C.F.R. Part 13 §200.339 Termination The Federal Award may be terminated in whole or in part: If a non-Federal entity fails to comply with the terms and conditions of the award For cause With the consent of the non-Federal entity By the non-Federal entity, if they send written notification setting forth the reasons for termination, the effective date, and the portion to be terminated in the case of partial termination. The award may be wholly terminated where the Federal awarding agency or pass-through entity determines an award modified by a partial termination will not accomplish the purposes for which it was made. 35

36. Substantive Changes from 44 C.F.R. Part 13 §200.340 Notification of Termination Requirement The Federal Agency or pass-through entity must provide to the non- Federal entity a notice of termination. §200.341 Opportunities to Object, Hearings and Appeals Upon taking any remedy for non-compliance, the Federal awarding agency must provide the non-Federal entity an opportunity to object and provide information and documentation challenging the suspension or termination action in accordance with written processes and procedures published by the Federal awarding agency. Any requirements for hearings, appeals, or other administrative proceedings to which the non-Federal entity is entitled under any applicable statute or regulation must be complied with. 36

37. Substantive Changes from 44 C.F.R. Part 13 §200.343 Closeout The Federal agency or pass-through entity will close out the Federal award when it determines that all applicable administrative actions and all required work of the Federal award have been completed by the non-Federal entity. The Federal awarding agency or pass-through entity should complete all closeout actions for Federal awards no later than one year after receipt and acceptance of all required final reports. But The non-Federal entity must submit, no later than 90 calendar days after the end date of the period of performance, all financial, performance, and other reports as required by the terms and conditions of the Federal award. NEW: This requirement imposes a responsibility on recipients to closeout subawards when they are completed. 37

38. Substantive Changes from 44 C.F.R. Part 13 §200.333 Retention Requirements for Records Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report. New Exception: When the non-Federal entity is notified in writing by the Federal awarding agency, cognizant agency for audit, oversight agency for audit, cognizant agency for indirect costs, or pass-through entity to extend the retention period, non-Federal entities must keep records for more than the three year period. 38

39. Substantive Changes from 44 C.F.R. Part 13 §200.344 Post-Closeout Adjustments and Continuing Responsibilities The right of the Federal awarding agency or pass-through entity to disallow costs and recover funds on the basis of a later audit or other review. The Federal awarding agency or pass-through entity must make any cost disallowance determination and notify the non-Federal entity within the record retention period. Note some recipient and subrecipient responsibilities continue post-close out: Property management and disposition requirements Records retention requirements Audit requirements Responsibility to return funds, in certain circumstances 39

40. Substantive Changes from Cost Principle Circulars Subpart E – Cost Principles §200.401 Application The consolidated cost principles are applied to awards to all non-Federal entities. But, there are two exceptions: 1.Subpart E does not apply to Federal awards to Hospitals – See Appendix IX – Hospital Cost Principles. The Appendix references 45 C.F.R. Part 75, Appendix E (currently located at 45 C.F.R. Part 75, Appendix IX); and 2.Subpart E likely does not automatically apply to Federal awards to for- profit entities, who follow the principles at 48 C.F.R. 31.2. But, FEMA may, as a term and condition of award, apply Subpart E to for-profit entities. 40

41. Substantive Changes from Cost Principle Circulars Subpart E – Cost Principles The cost principles are broken into six major parts: 1.General Provisions 2.Basic Considerations (e.g. allowability, reasonableness, allocability, etc.) 3.Direct and Indirect Costs 4.Special Considerations for States, Local Governments and Indian Tribes 5.Special Considerations for Institutions of Higher Education 6.General Provisions for Selected Items of Cost 41

42. Substantive Changes from Cost Principle Circulars Subpart E – Cost Principles General Provisions for Selected Items of Cost: The Cost Principles still provide specific guidance for certain types of costs. Examples include: Advertising and public relations Audit services Conferences Compensation – personal services Compensation – fringe benefits Entertainment costs Goods or services for personnel use Maintenance and repair costs Training and education costs Travel Costs 42

43. Substantive Changes from Circular A-133 Subpart F – Audit Requirements NEW - A non-Federal entity that expends $750,000 or more during the non- Federal entity’s fiscal year in Federal awards must have a single or program- specific audit conducted for that year. NEW – For audits of non-Federal entity fiscal years that begin on or after December 26, 2014, non-Federal entities will follow the requirements of Subpart F, regardless of the award date of the Federal awards included in the audit 43

44. Hypothetical The State of Glacier receives an FY 2015 HSGP award on June 27, 2015 in the amount of $1,200,000. The award has a two year period of performance. The State of Glacier has a fiscal year that begins on January 1. For Glacier’s 2015 fiscal year, Glacier is trying to figure out whether it needs to perform an audit under 2 C.F.R. Part 200, Subpart F because of its FY 2015 HSGP award. Question: Does the State of Glacier need to perform a Subpart F audit for its 2015 fiscal year? Why or why not? 44

45. Hypothetical Over the years, the State of Everglades has been the recipient of many Federal awards. In FY 2013, Everglades received an award from DOJ with a 3 year period of performance for $1,200,000. In FY 2014, Everglades received a $4,000,000 award from HHS with a four year period of performance. Finally, In FY 2015, Everglades received multiple awards from FEMA, a HSGP award for $1,000,000 and an EMPG award for $500,000, both with two year periods of performance. Everglades has a fiscal year that begins on January 1 and is trying to determine whether it needs to complete an audit under 2 C.F.R. Part 200, Subpart F for its 2015 fiscal year. On January 1, 2016, Everglades reviews its books and determines that it spent the following from its Federal awards in 2015: 100,000 from the DOJ award, $1,000,000 from the HHS award, $50,000 from the HSGP award, and $250,000 from the EMPG award Question: Does the State of Everglades need to perform a Subpart F audit for its 2015 fiscal year? Why or why not? 45

46. Questions? 46