The Office of Management and Budget (OMB) issued final guidance on December 26 that makes sweeping changes to federal grants management. The “Super Circular” supersedes eight existing OMB circulars and concludes a two-year effort by OMB and the Council on Financial Assistance Reform (COFAR).
The intent of the reforms is to streamline guidance relating to federal awards in order to ease the administrative burden for grantees, eliminate unnecessary and duplicative requirements, and strengthen the oversight of the more than $500 billion in federal awards expended annually.
The final guidance applies to entities for fiscal years beginning on or after Dec. 26, 2014. This means that for audit purposes, colleges and universities with calendar year-ends will implement these requirements for their 2015 year-ends. Those with June 30 (or other) fiscal year-ends will implement the requirements for FY16.
Provisions that are not audit-related will take effect on Dec. 27, 2014, for new awards, re-awards, or new drawdowns of funds from existing awards. This means that institutions for a period of time may be operating under different sets of rules for different awards. Grantees are free to voluntarily apply the new rules to earlier awards in advance of the effective date.
A number of reforms included in the uniform guidance may be of interest to business officers.
Administrative Requirements
Federal agencies and pass-through entities will be required to evaluate the risk associated with a potential recipient before making awards. In addition, certain conditions may require a federal awarding agency to review the merit and risks associated with potential awards and impose conditions on the nonfederal entity when necessary.
Further, institutions are now required to establish and maintain effective internal controls over federal awards, complying with guidance in (1) “Standards for Internal Control in the Federal Government,” issued by the U.S. Comptroller General, and (2) the “Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
A new procurement method—micro purchases—was added to the uniform guidance, and applies to supplies or services purchases not exceeding an aggregate dollar amount of $3,000. These purchases may be awarded without soliciting competitive quotes, if the institution considers the price reasonable.
Cost Principles
The final guidance more clearly allows for administrative costs to be charged directly to the awarding agency when such costs are specifically allocated to one award, and the institution has prior agency approval.
Language in the uniform guidance provides that “any nonfederal entity that has never had a negotiated indirect-cost rate may use a de minimis rate of 10 percent of modified total direct costs.” Entities that have established an approved federally negotiated indirect-cost rate “can apply for a one-time extension without further negotiation, subject to the approval of the federal agency.” The extension can last up to four years.
Under the guidance, all higher education institutions have now been extended the provisions that allow for the recovery of utility costs associated with research.
When it comes to compliance with the Federal Acquisition Regulation (FAR) Cost Accounting Standards (CAS) and the related filing of disclosure statements, OMB continues to see these requirements as crucial in mitigating waste, fraud, and abuse. However, understanding that the source of burden on higher education institutions likely occurs when the institution crosses the current awards threshold of $25 million for the first time, OMB has set the new threshold at $50 million, consistent with FAR requirements.
Audit Requirements
The final guidance increases the single audit threshold to $750,000. OMB estimates this will maintain single audit oversight over 99.7 percent of the federal award dollars. This could affect institutions, however, in the form of increased subrecipient monitoring, as subrecipients may no longer be required to have a single audit.
The types of findings reported in the Schedule of Findings and Questioned Costs remained the same in the uniform guidance, although the threshold for reporting questioned costs was raised from $10,000 to $25,000.
Additionally, OMB made some changes to risk determinations and the process of distinguishing between Type A and Type B programs.
OMB had eliminated half of the compliance supplement requirements in the proposed guidance. But for various reasons, the proposed changes were not reflected in the final guidance, although a preview of the modified 2015 requirements is expected to appear in the 2014 supplement.
Further Resources
NACUBO has provided additional analysis on the administrative requirements, cost principles, and audit requirements included in the Super Circular that is posted on the Grants Management Web page.
Crosswalks to and from sources in the new and existing guidance, as well as text comparisons, are available on the COFAR Web site.
NACUBO CONTACT Bryan Dickson, policy analyst, 202.861.2505