1. How To Ensure Your Agency Has A Strong Subrecipient Monitoring System Jennifer S. Mauskapf, Esq. jmauskapf@bruman.com Brustein & Manasevit, PLLC Fall Forum 2015

2. AGENDA What is a pass-through entity? New responsibilities for pass-through entities under the UGG: Required Information in Subaward Notifications Risk assessment Enhanced monitoring/performance metrics Enforcement Internal Controls 2 Brustein & Manasevit, PLLC © 2015. All rights reserved.

3. What is a pass-through entity? Brustein & Manasevit, PLLC © 2015. All rights reserved.

4. Definitions 200.74, Pass-through entity - non-Federal entity that provides a subaward to a subrecipient to carry out part of a Federal program. 200.93, Subrecipient - a non-Federal entity that receives a subaward from a pass-through entity to carry out part of a Federal program. 200.23, Contractor (replaces term “vendor” (used in A-133)) – means an entity that receives a contract. 4 Brustein & Manasevit, PLLC © 2015. All rights reserved.

5. How a does a pass- through entity’s responsibilities change under the Uniform Grant Guidance? Brustein & Manasevit, PLLC © 2015. All rights reserved.

6. Types of Grant Agreements 200.201, Pass-through entity must decide on the appropriate instrument for the Federal award: Grant agreement Cooperative agreement Contract Fixed amount awards (New) (See 200.332 and 200.45) Requires prior approval from Federal awarding agency Payments are based on meeting specific requirements of the Federal Award Accountability is based on performance and results Award amount is negotiated using cost principles as a guide up to $150,000 (Simplified Acquisition Threshold) No governmental review of the actual costs incurred Significant changes must receive prior written approval from the awarding entity 6 Brustein & Manasevit, PLLC © 2015. All rights reserved.

7. Determination of Nature of Funding 200.330 SubawardContract Allowable activities based on applicable statute, local plan, State rules Management rules Applicable OMB Circular; and State law/policies and procedures Allowable activities based on terms and conditions of contract Management rules Terms of the contract; and State contract law Must make a case-by-case determination whether each agreement casts the party as a subrecipient or contractor. Look at the nature of the relationship. It does not matter what the agreement is called. 7 Brustein & Manasevit, PLLC © 2015. All rights reserved.

8. Subaward vs. Contract Subrecipients 200.330(a) Must determine who is eligible to participate in a federal program Has its performance measured against whether the objectives of the federal program are met Is responsible for programmatic decision making Is responsible for complying with federal program requirements Uses the federal funds to carry out a program as compared to providing goods or services for a program 8 Brustein & Manasevit, PLLC © 2015. All rights reserved.

9. Subaward vs. Contract (cont.) Contractor 200.330(b) Provides the goods and services within normal business operations Provides similar goods or services to many different purchasers Operates in a competitive environment Provides goods or services that are ancillary to the operation of the federal program Is not subject to compliance requirements of the federal program 9 Brustein & Manasevit, PLLC © 2015. All rights reserved.

10. OMB/COFAR shifted many new responsibilities to the pass- through 10 Brustein & Manasevit, PLLC © 2015. All rights reserved.

11. 1. Subaward Notifications – Information Requirements Brustein & Manasevit, PLLC © 2015. All rights reserved.

12. Information that Must be Included in Subawards (200.331(a)) 1. Federal award identification information: i.Subrecipient name (must match registered unique entity identifier) ii.Subrecipient unique entity identifier iii.Federal Award Identification Number (FAIN) iv.Federal Award Date 12 Brustein & Manasevit, PLLC © 2015. All rights reserved.

13. Information that Must be Included in Subawards (200.331(a)) v.Period of performance start and end dates vi.Amount of federal funds ‘obligated by this action’ vii.Total amount of federal funds ‘obligated to the subrecipient’ viii.Total amount of the federal award ix.Federal award project description (FFATA) 13 Brustein & Manasevit, PLLC © 2015. All rights reserved.

14. Information that Must be Included in Subawards (200.331(a)) x.Name of federal awarding agency, pass- through entity, and contact official xi.CFDA Number and Name xii.Is the award for “research and development” xiii.The indirect cost rate 14 Brustein & Manasevit, PLLC © 2015. All rights reserved.

15. Information that Must be Included in Subawards (200.331(a)) 2. Requirements of the federal grant imposed upon subrecipient 3. Any additional requirements imposed by the pass- through (e.g., identification of any required financial and performance reports) 15 Brustein & Manasevit, PLLC © 2015. All rights reserved.

16. Information that Must be Included in Subawards (200.331(a)) 4. Approved indirect cost rate for subrecipient 5. Required assurance from subgrantees that access will be provided to records and financial statements 6. Appropriate terms and conditions concerning closeout of the subaward 16 Brustein & Manasevit, PLLC © 2015. All rights reserved.

17. 2. New Risk Management Requirements for Pass- Through Entities Brustein & Manasevit, PLLC © 2015. All rights reserved.

18. Pass-Through Entity Risk Management Requirements (200.331(b))  Pass-through must evaluate each subrecipient’s risk of noncompliance for purposes of determining appropriate monitoring  Timing: before applicant receives funding?? 18 Brustein & Manasevit, PLLC © 2015. All rights reserved.

19. Pass-Through Entity Risk Management Requirements (200.331(b)) Risk Factors may include consideration of: 1.Subrecipient’s prior experience with the grant program 2.Results of previous audits 3.New personnel or substantially changed systems 4.Results of federal monitoring 19 Brustein & Manasevit, PLLC © 2015. All rights reserved.

20. Specific Subaward Conditions 200.331(b) & 200.207 Pass-through must consider imposing additional federal award conditions, if appropriate, such as:  Require reimbursement;  Withhold funds until evidence of acceptable performance;  More detailed reporting;  Additional monitoring;  Require grantee to obtain technical or management assistance; or  Establish additional prior approvals. 20 Brustein & Manasevit, PLLC © 2015. All rights reserved.

21. The ED/RMS Approach: Entity Risk Report (ERR) ERR = ED Pre-Award Risk Assessment Rubric Incorporates information from multiple data sources (data driven decision-making) Focuses on both compliance and performance, working to incorporate more focus on performance Used by both RMS and OIG RMS uses ERR looking forward OIG uses ERR looking backward 21 Brustein & Manasevit, PLLC © 2015. All rights reserved.

22. ED/RMS Approach—Risk Factors Repeat findings Program Specific Findings $ amount of questioned costs as % of award Missing audit(s) Adverse/disclaimed opinion of financial statements Going concern statement (financial stability/bankruptcy) Poor financial management Substandard performance 22 Brustein & Manasevit, PLLC © 2015. All rights reserved.

23. ED/RMS Approach—Scoring/Color Key ColorDescription RED Significant indication of potential risk: increased monitoring or special conditions may be appropriate YELLOW Elevated indication of potential risk: increased monitoring may be appropriate GREEN Low indication of potential risk: routine monitoring may be appropriate BLUE No data available: increased or routine monitoring may be appropriate 23 Brustein & Manasevit, PLLC © 2015. All rights reserved.

24. The ED/RMS Approach: Entity Risk Report (ERR) ERR is ED’s Risk Assessment Rubric Incorporates information from multiple data sources (data driven decision-making) SEAAdmin. Risk Score Financial Risk Score Suspected Late Audit State Audit? Internal Control Risk Score SEA A 250NY110 SEA B 2502011Y35 SEA C 22550NY135 SEA D 2502012Y65 SEA E 500NY70 24 Brustein & Manasevit, PLLC © 2015. All rights reserved.

25. The ED/RMS Approach: ED Clarifiers re: ERR Not a decision or scoring tool Not designed to deny awards Highlights evidence of potential risks in implementing grant Helps identify conditions that can help make awarding of grant more successful Need to incorporate better program performance data Program Reviews Performance Reports Education Statistics Reporting 25 Brustein & Manasevit, PLLC © 2015. All rights reserved.

26. 3. New Enhanced Monitoring/ Performance Metrics Brustein & Manasevit, PLLC © 2015. All rights reserved.

27. Monitoring Requirements (200.331(d)) Pass-through must monitor its subrecipients to assure compliance and performance goals are achieved 27 Brustein & Manasevit, PLLC © 2015. All rights reserved.

28. Monitoring Requirements (200.331(d)) Monitoring must assure compliance and performance goals are achieved Must include: 1.Review financial and programmatic reports 2.Ensure corrective action 3.Issue a “management decision” on audit findings 28 Brustein & Manasevit, PLLC © 2015. All rights reserved.

29. Performance Reports Required 200.328(b)(2)  “Performance reports” required to be submitted  at least annually  using “OMB-approved government-wide standard information collections” 29 Brustein & Manasevit, PLLC © 2015. All rights reserved.

30. Measuring Performance: “Performance Metrics” 200.328 “Performance reports” must include: 1.Comparing actual accomplishments to the objectives established by the federal award a.Where accomplishments can be quantified, a computation of the cost may be required b.May require performance trend data 30 Brustein & Manasevit, PLLC © 2015. All rights reserved.

31. Measuring Performance: “Performance Metrics” 200.328 (cont.) 2.The reasons why established goals were not met, if appropriate 3.Additional pertinent information including, when appropriate, analysis and explanation of cost overruns or high unit costs 4.Significant developments a.Problems, delays, adverse conditions b.Favorable developments 31 Brustein & Manasevit, PLLC © 2015. All rights reserved.

32. Monitoring Tool Recommendations (200.331(e))  Depending on assessment of risk, the following monitoring tools may be useful: 1.Training + technical assistance on program- related matters 2.On-site reviews 3.Arranging for “agreed-upon-procedures” engagements 32 Brustein & Manasevit, PLLC © 2015. All rights reserved.

33. Audit Resolution (200.331(e)) Pass-through must verify all required subrecipients have single audits Audit threshold raised from $500K (A-133 circular) to $750K (Uniform Grant Guidance) – Places greater burden on pass-through 33 Brustein & Manasevit, PLLC © 2015. All rights reserved.

34. Issuance of Management Decisions 200.521 Management Decision must state: Whether audit finding sustained Reasons for decision Expected auditee action If corrective action not yet complete, timetable Must be issued within six months of acceptance of the audit report Corrective action must begin immediately 34 Brustein & Manasevit, PLLC © 2015. All rights reserved.

35. Changes to Compliance Supplement Requirements? Uniform Grant Guidance NPRM (February 1, 2013) proposed reduction in number of types of compliance requirements in the compliance supplement Many pass-throughs opposed this reduction because of burden on them Outcome? 35 Brustein & Manasevit, PLLC © 2015. All rights reserved.

36. Compliance Requirements 12 areas of concern that auditors are directed to look for when completing Single Audits Eliminated “Davis-Bacon Act” and “Real Property Acquisition and Relocation Assistance” If “deleted” from certain programs’ Single Audit requirements, pass-through entities still responsible for ensuring compliance 36 Brustein & Manasevit, PLLC © 2015. All rights reserved.

37. 200.331(g) Pass-through must adjust its own financial records based on audits, monitoring, on- site reviews 37 Brustein & Manasevit, PLLC © 2015. All rights reserved.

38. 4. Enforcement (new for IHEs, Hospitals and Non-Profits) Brustein & Manasevit, PLLC © 2015. All rights reserved.

39. 200.331(h) Pass-throughs must consider taking enforcement action based on noncompliance Temporarily withhold cash payments pending correction Disallow all or part of the cost Wholly or partly suspend the award Recommend to federal awarding agency suspension/debarment Withhold further federal awards Other remedies that may be legally available 39 Brustein & Manasevit, PLLC © 2015. All rights reserved.

40. 200.339 The pass-through may terminate the award for “cause,” notice and opportunity for hearing (200.340 and 200.341) 40 Brustein & Manasevit, PLLC © 2015. All rights reserved.

41. Internal Controls 41 Brustein & Manasevit, PLLC © 2015. All rights reserved.

42. Important Internal Controls Oversight responsibility for subrecipient monitoring is tied very closely to internal controls that nonfederal entities, including pass-through entities, are required to have in place. This includes having: well-trained and knowledgeable staff members; sufficient resources (financial and staffing) dedicated to subrecipient monitoring; 42 Brustein & Manasevit, PLLC © 2015. All rights reserved.

43. Internal Controls (Cont.) oversight managers with knowledge to identify the most appropriate methods/tools and extent of monitoring to be used (§200.331(e)(1)); indicators to help identify risks from outside factors that may affect a subrecipient’s performance (those related to economic conditions, political changes, regulatory changes or unreliable information) (§200.331(b)); 43 Brustein & Manasevit, PLLC © 2015. All rights reserved.

44. Internal Controls (Cont.) official written policies and procedures (e.g., methodology for resolving findings of noncompliance or internal control weaknesses) (§§200.303; 200.331(e)); Follow-up processes to ensure timely appropriate actions are taken or completed on a subrecipient’s reported deficiencies (§200.331(d)(2)); and Reviews of the subrecipient’s financial and programmatic reports (§200.331(d)(1)). 44 Brustein & Manasevit, PLLC © 2015. All rights reserved.

45. 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. 45 Brustein & Manasevit, PLLC © 2015. All rights reserved.