Date post: | 18-Jan-2015 |
Category: |
Education |
Upload: | raffa-learning-community |
View: | 137 times |
Download: | 1 times |
BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.
Managing U.S. Federal Awards:Internal Control Requirements & Accounting System Implications
Presented By:Eric Sobota, Partner (BDO USA, LLP)
Sokhar Chan, Manager (BDO USA, LLP)Seth Zarny, Partner (Raffa, P.C.)
Buu-Linh Tran, Manager (Raffa, P.C.)
June 17, 2014
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 2
Agenda
Overview & Background Pre-Award Administrative Requirements Post-Award Implementation Requirements Strategic Considerations
BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.
Overview & Background
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 4
Development
In 2009, President Obama issued Executive Order 13520
declared a focus on reducing improper payments government-wide and eliminating waste and fraud
January 18, 2011, the President issued Executive Order 13563,
directed all executive agencies to review their regulations, and determine if they were “tailor[ed]... to impose the least burden on society”
In an accompanying memorandum, the White House stated that “Executive Order 13563...requires retrospective analysis of existing significant rules and greater coordination across agencies to simplify and harmonize redundant, inconsistent, or overlapping requirements, thus reducing costs”
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 5
Development
On February 28, 2012, OMB published an Advance Notice of Proposed Guidance (ANPG) in the Federal Register
Proposed the consolidation of cost accounting principles, but did not propose to consolidate the various administrative requirements unique to each category of recipient
On February 1, 2013, OMB issued the draft text of the Supercircular, currently designated as OMB-2013- 0001-0002
OMB also published a 15-page summary and discussion document in the Federal Register setting forth a history
Over 300 individuals and institutions submitted comments by the June 2, 2013 deadline
The rule issued December 26, 2013 and will be fully implemented by December 26, 2014
OMB will integrate the new rule into Title 2 of the Code of Federal Regulations
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 6
Overview December 26, 2013 OMB issued Uniform
Administrative Requirements, Cost Principles, and Administrative Requirements for Federal Awards Consolidates regulations to provide consistent guidance for grant
recipients and issuers
Changes and consolidations include: Provides a single resource for requirements that apply to all
recipients, eliminating the requirement for grants professionals to cross-reference between multiple resources;
Includes new measures designed to ensure merit-based grant awards and identify problems early in the process;
Introduces more formal requirements for certification of compliance and disclosure of noncompliant or criminal acts;
Attempts to streamline and standardize the cost principles in many ways, including new options for the recovery of indirect costs.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 7
Implementation - Key Dates
Standards that apply directly to Federal agencies are already effective on 12/26/13.
Federal agencies will simultaneously implement regulations applicable to recipients.
Individual Federal agencies currently required to implement “SuperCircular” with regulations to be effective by 12/26/14. Required to submit draft implementing regulations to
OMB by 6/26/14. Administrative requirements and costs principles apply to
new grant awards and additional (incremental) funding made after 12/26/2014.
Audit requirements in Subpart F will apply to audits of FY beginning on or after December 26, 2014 Audit threshold change (FY beginning after 12/26/14)
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 8
Cost and Audit Principles
Effective 12/31/2014 farewell to the following:• Administrative Requirements in A-102 and A-110
• Cost Principles in OMB Circulars A-21, A-87 and A-122 (limited variations by entity type)
• Audit Policies OMB Circulars A-133 for audit provisions
• Federal Program Information Requirements in OMB Circular A-89
• OMB’s Directive on Federal Agency Assistance Program Announcements
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 9
New Guidance
Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (also known as the “SuperCircular” and the “Omni-Circular”)
New Guidance broken out into six(6) subparts and several appendices: Subpart A – Acronyms and Definitions Subpart B – General Provisions Subpart C – Pre-Award Federal Requirements and
Contents of Federal Awards Subpart D – Post Federal Award Requirements Subpart E- Cost Principles Subpart F – Audit Requirements
Specific elements of costs are addressed further in Appendix III for Educational Institutions and Appendix IV for Nonprofit Organizations
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 10
Significant Features
Imposes common requirements for both administrative and accounting functions
Supersedes Circulars A-89, A-102, and A-110 for administrative requirements
Provides across-the-board deadlines and thresholds for notice requirements, small purchase limits
Requires new quality control and efficiency measures Significant new guidance for Federal grants personnel
Consolidates Circulars A-87, A-21, and A-122 setting forth the cost principles governing the use of Federal grant funds for state and local public agencies, higher education institutions and nonprofit organizations not covered by the other circulars.
All of these entities must now refer to the consolidated terms of the Supercircular.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 11
What Are Requirements for Grant Management System?
Tracking pre-award process (process for grant application) Tracking grant dollars Monitor Grant Spending - Avoid over spending Allocate IDC Financial Reporting – maintaining grant reports/ donor
reports Grants – Tracking non financial information & managing
grant information Robust Reporting – Ability to drill down
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 12
How can Technology Help?
Intacct Project Accounting/ User Defined Fields Microsoft dynamics GP Grants Management/Extender Microsoft Dynamics SL – Project/grants – allocations,
modifier SharePoint Financial System(s) Custom application/ Database MS Excel / Word
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 13
Field Offices – Other Factors
People (Priorities/culture/authorities) Technical challenges Different Processes Multicurrency Different systems Locations Support/ Financial Reporting
Reporting to necessary stakeholders (Board of directors, Donors, executives, program managers, grants managers, etc.)
Nonprofits must account for: Funds, Grants, Projects, Programs, and More
Documentation
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 14
What Types of Data Are Tracked?
Non-Financial Pre-award Process & Related Information Awarded Information including
- Contractor/ Sub-Recipient, sub-recipient IDC, track compliance - IDC - Matching Requirements - Reporting Requirements/ schedule
Manage Grant Life Cycle
Financial Linking grants to financial transactions Financial Reporting (PL by Grant, SEFA) IDC calculation
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 15
Tools for Tracking Non-Financial Data
Demo Dynamics GP and Intacct
BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.
Pre-Award Administrative Requirements
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 17
Reforms to Administrative Requirements
Pre-Award Requirements (§200.200-211) For all awards, Federal agency must consider government-wide
“eligibility qualification or financial integrity information,” such as FAPIIS, Dun & Bradstreet, “Do Not Pay,” and List of Excluded Parties.
“For competitive grants and cooperative agreements,” Federal agency must publicly announce funding opportunities, including: Specific eligibility information and “merit review process”
including “criteria and process to be used to evaluate applications;”
Available for at least 60 calendar days (no less than 30 days);
Framework for evaluating risks posed by applicants (including performance of other awards and audit reports).
Suggests these provisions be used for non-competitive awards too.
“Fixed Amount Awards” available.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 18
Direct Costs
Allows for direct charging of administrative and clerical salaries if all of the following conditions are met: Integral to a project or activity; Individuals can be specifically identified; Such costs are explicitly included in the budget or have the
prior written approval of the Federal awarding agency; and The costs are not also recovered as indirect costs.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 19
Indirect Cost Rates
Negotiated rates accepted by all Federal awarding agencies A different rate may be used when required by Federal
statute/regulation, or when approved by a Federal agency. May apply for a one-time extension of a current negotiated
indirect cost rates for a period of up to four years. Any non-Federal entity that has never received a negotiated
indirect cost rate, (exceptions in Appendix VII) may elect to charge a de minimis rate of 10% of MTDC which may be used indefinitely.
Award levels for Federal awards will not be adjusted throughout the “life” of the award due to changes in negotiated rates Negotiated rates include final, fixed and predetermined
rates.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 20
Indirect Cost Methods
Negotiated Lump Sum for Indirect Costs Method may be used for self-contained, off-campus or
primarily subcontracted activities where the benefits of the overall indirect activities cannot be determined.
In lieu of detailed cost information, can negotiate a fixed amount per agreement for indirect costs.
Predetermined Rates for Indirect Costs Permanent rate established for a specified current or future
period and is not subject to adjustment. Negotiated Fixed Rates and Carry-Forward
Provisions Allows a fixed rate for one fiscal year or longer and apply an
adjustment for over/under billing to the next fixed rate negotiation
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 21
Indirect Cost Methods
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 22
How Are Financial Data Tracked?
Intacct Dimensions Project Accounting Modules
Dynamics GP Chart of account (COA) – Track grant activities through segment
of COA Analytical Accounting (AA) – Dimensions Olympic – Use project to track grant transactions
Dynamics SL Project Accounting Series Cost Allocations Project, Tasks, Account Category Indirect & Direct Rates, Provisional/Actual
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 23
Financial Data in Dynamics GP, SL and Intacct ?Features Chart of Account Analytical
AccountingSL/Olympic Intacct
1.Track grant transactions X X X X
2. Track grant budgets for fiscal and grant period
X X X X
3. Prevent or provide warning when expenditure exceed grant revenue
X X (SL)
4. Track employee time against grant X X (Only w/ Project)
5. Track employee expense against grant (web-based application)
X X (only w/ Project)
6. Bill against the grant X X X X (only w/ Project)
7. Management Reporter (FRx)/ Financial Reports by Project
X X X
8. Smartlist X X X
9. SSRS/ Custom report X X X X
10. Cost Allocations Moderate Moderate Extensive Moderate
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 24
Pros and Cons
Solutions Pros Cons
Chart of Account
Easy to maintain (Accounting dept control over COA)No sub-ledger to manageEasy to create report using MRCan slice and dice segment for reportingWork with MR/ existing report writer
Long COANot accommodate multiple year (grant yr vs. fiscal yr)Maintain old accounts foreverData entryUnable to handle complex grant requirement (time entry, complex allocation, etc.)
Analytical Accounting
Shorten COA Prevent charging expenditure in excess of revenueWork with MR/ existing report writer
Maintain sub-ledger / resourceSeparate screen for data entryRequire reconciliationAdditional trainingAdditional configuration/setup
Olympic Project Accounting/Dynamics SL
Shorten COA Track employee time and expense against grantAllows for sophisticated allocationAllows for sophisticated billingSophisticated Costing – Direct/Indirect Rates
Maintain sub-ledger / resourceSeparate screen for data entryAdditional trainingAdditional configuration/setupHas separate reporting function
Intacct Project Accounting
Shorten COA Track employee time and expense against grant
Maintain sub-ledger / resourceRequire reconciliationAdditional trainingAdditional configuration/setup
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 25
Tools for Tracking Financial Data & Reporting
Demo Dynamics GP and Intacct
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 26
Sample SEFA Report
Government Contractors Financial & Project Management System SeminarPage 27
Post-Award Implementation Requirements
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 28
Sub-recipient OverviewImplications for pass-through entities
One of the most significant changes is the more stringent requirements for sub-recipient monitoring
Examples of expanded pass-through entity responsibilities include:o Requirement for consistent practice to distinguish sub-recipient
from contractoro Identifying or negotiating an appropriate sub-recipient indirect
cost rate at the time of awardo Ensuring “flow-down” of new requirements are included within
sub agreements, as applicableo Evaluating sub-recipient risk of noncompliance and
determining necessary monitoring activities – including on-site reviews
o Imposing remedies for sub-recipient noncompliance, when necessary
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 29
Sub-recipient or Contractor… What’s the difference?
Sub-recipient:o A sub-recipient “uses the Federal funds to carry out a
program for a public purpose specified in authorizing statute”o Characteristics which support classification of the non-
Federal entity (NFE) as a sub-recipient includes when the NFE:1. Determines who is eligible to receive what Federal assistance;2. Has its performance measured in relation to whether objectives
of a Federal program were met;3. Has responsibility for programmatic decision making;4. Responsible for adherence to applicable Federal program
requirements specified in the Federal award; and5. In accordance with its agreement, uses Federal funds to carry out
a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 30
Sub-recipient or Contractor…What’s the difference? - (cont’d)
Contractor:o A contract is for the purpose of obtaining goods and services
for the non-Federal entity’s own use and creates a procurement relationship with the contractor
o Characteristics indicative of a relational between a NFE and a contractor are when the NFE who is receiving federal funds:1. Provides similar goods or services to many different purchasers;2. Normally operates in a competitive environment;3. Provides goods or services that are ancillary to the operation of the
Federal program; and4. Is not subject to compliance requirements of the Federal program
as a result of the agreement, though similar requirements.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 31
Sub-recipient Selection & PlanningWhat’s required?
Establish formal process to properly structure sub-recipient agreements. Be sure to include:o All flow-down requirements necessary to ensure
appropriate sub-recipient use of Federal awardo Any additional flow-down requirements necessary for pass-
through entity to meet its own responsibilitieso A requirement that the sub-recipient permit access to
records and financial statements through the period of performance
Consider expanded pass-through entity responsibilitieso Required information to be provided to sub-recipientso Use of appropriate sub-recipient indirect cost rateso Conduct sub-recipient risk assessment
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 32
Sub-recipient Selection & PlanningRequired information Must clearly identify every sub-award to the sub-
recipient and must include the following information at the time of the sub-award:o Federal Award Identification and Federal Award
Identification Number (FAIN)o Sub-recipient name and DUNS numbero Federal award dateo Sub-award period of performance (start and end dates)o Funding informationo Federal award project descriptiono Name of the Federal awarding agencyo Catalog of Federal Domestic Assistance (CFDA) title and
numbero Identify if award is for Research & Development (R&D)o Indirect cost rate for the Federal award
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 33
Sub-recipient Selection & PlanningRequired information – (cont’d)
Changes to data elements previously provided must be reflected in subsequent sub-award modifications
Should some of the required information not be available at the time of award, pass-through entity may include the best information available to describe the Federal award and sub-award
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 34
Sub-recipient Selection & PlanningIndirect cost rate Consider if sub-recipient has an approved/federally
recognized indirect cost rate
If no such rate exists, consider alternative options:o Negotiate rate with sub-recipiento Use de minimis rate of 10% of modified total direct cost
(MTDC)o Utilize fixed amount sub-awards
Requires prior written approval from the Federal awarding agency
May only be used when total sub-award value does not exceed the Simplified Acquisition Threshold (i.e. $150,000)
Must consider requirements of section 200.201 “Use of grant agreements (including fixed amount awards) cooperative agreements, and contracts”
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 35
Sub-recipient Monitoring ActivitiesRisk assessment Sub-recipient monitoring plan must ensure that the
sub-award:o Is used only for authorized purposes o Is in compliance with Federal statutes/regulations & sub-
award T&Cso Achieves its performance goals
Consider risk of sub-recipient noncompliance
Risk assessment is based on:o Prior/past experience with similar sub-awardso Previous audit resultso Significant changes in personnel or systemso Extent and results of Federal awarding agency monitoring
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 36
Sub-recipient Monitoring ActivitiesMonitoring plan Minimum monitoring activities must include:
o Reviewing financial and programmatic reportso Conducting on-site reviews/audits based on risk assessmento Conducting follow-up reviews to ensure timely completion of
corrective actions required to address deficiencies – as identified through on-site reviews, audits, or other means
o Issuing a management decision for audit findings pertaining to the Federal award
o Verifying that each sub-recipient receive completed audits, as required
Design of monitoring plan will vary based on sub-recipient risk assessment:o i.e., more stringent monitoring plan is required for high risk
sub-recipients
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 37
Sub-recipient Monitoring ActivitiesAdditional considerations
Based on results of monitoring activities, pass through entities shouldo Provide training and technical assistance to appropriate sub-
recipient staffo Determine if on-site reviews/audits necessitate adjustments to
own recordso Consider taking enforcement action against noncompliant sub-
recipients
If sub-recipient noncompliance is determined, pass through entities may apply enforcement action through specific conditions (§200.207)
If noncompliance cannot be remedied through specific conditions, more severe enforcement action may be taken (§200.338)
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 38
Sub-recipient Monitoring ActivitiesImposing specific conditions
Specific conditions cano Dictate how sub-award receives payment o Require additional reporting requirements or prior approvalso Require sub-recipient obtain technical or management
assistance
When imposed, specific conditions must be clearly communicated to sub-recipients
Any specific conditions must be promptly removed once corrected
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 39
Sub-recipient Monitoring ActivitiesAdditional enforcement action If noncompliance cannot be remedied through
specific award conditions, consider more severe enforcement action, such as:o Applying temporary cash withholdso Disallowing all or part of the cost of the activityo Suspending or terminating the sub-awardo Recommending the Federal awarding agency initiate
suspension or debarment proceedingso Withholding future awards to the sub-recipiento Pursuing other remedies legally available
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 40
Sub-recipient MonitoringPerformance strategies
Internal:o All sub recipient monitoring task can be performed “in house”
using staffo Omni-circular provides for opportunity to augment and refine
existing processes to address new compliance requirementso Consider timing requirements and resource bandwidth
External:o New requirement allows for outsourced sub recipient
monitoring functionso Considered an allowable direct cost provided that agreed upon
procedures are: Conducted in accordance with Generally Accepted Government
Auditing Standards (GAGAS) Paid for and arranged by the pass-through entity Limited in scope to specific compliance requirements
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 41
Sub-recipient MonitoringCost recovery strategies
Limited cost recovery afforded through an indirect rate o Only first $25,000 of sub-recipient costs receive indirect cost
allocation
New guidance allows for outsourced sub-recipient monitoring costs to be recovered directly to awards
Organizations who plan to outsource sub-recipient monitoring must:o Determine the mechanics and allocate costs prior to finalizing
budgetso Ensure these are costs included in upcoming proposals
Otherwise, these costs may not be allowed as direct cost going forward
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 42
Sub-recipient Monitoring ActivitiesGeneral best practices Sub-recipient monitoring procedures should include:
o Informing your sub-recipient of pertinent information o Ensuring your sub-recipients are receiving audits when
necessaryo Reviewing financial and programmatic reports
Reconcile the sub-recipient's budgeted expenditures to actual expenditures
Perform an on-site visit to the sub recipient to review financial and programmatic records and observe operations
Desk review - review financial and program reports submitted by sub recipients for allowable use of the grant funds.
o Establishing a tracking system to assure timely submission of required reporting
o Having a 2nd party within your organization periodically review the adequacy of sub recipient monitoring for all programs
o Document! Document! Document!
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 43
Tracking Sub-Recipients in the Accounting System
Demo Dynamics GP and Intacct
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 44
Procurement
Methods of Procurement to be followed (§200.320)1.) Procurement by Micro Purchase (<$3,000*)- “may be awarded without soliciting competitive quotations
if Non Federal entity considers price to be reasonable.”2.) Procurement by Small Purchase Procedures (<$150,000)- “price or rate quotations must be obtained from adequate
number of qualified sources.”3.) Procurement by Sealed Bids (formal advertising)4.) Procurement by Competitive Proposal5.) Procurement by Noncompetitive Proposal
• Contracting with small and minority-owned businesses.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 45
Procurement Procurement by Noncompetitive Proposal
Limit Sole Source Procurements to the following situations: The item is available only from a single source; The public exigency or emergency for the requirement
will not permit a delay resulting from competitive solicitation;
The Federal awarding agency or pass-through entity expressly authorizes noncompetitive proposals in response to a written request from the non-Federal entity; or
After solicitation of a number of sources, competition is determined inadequate.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 46
Procurement Procurement Standards for “non-Federal
entities” (§200.317-326) Requires a formal, almost FAR-like process, presumably to
ensure the most efficient use of grant dollars.o Procedure must be “documented”o Must provide “full and open competition”o Must perform “cost or price analysis” o Must consider conflicts of interesto Award only to “responsible” contractors
Records must be maintained to document the history/rationale of the procurement.
Prohibits state or local geographical preferences. Must use one of 5 procurement methods (§200.320)
o Less formal methods OK if under the Federal “Simplified Acquisition Threshold” of $150,000.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 47
Procurement Effective Procurement Systems
Maintain adequate descriptions of the system including policies, procedures, and purchasing practices that comply with applicable laws, regulations, and contract terms and conditions;
Mitigate against conflicts of interest; Ensure applicable flow down clauses and terms and
conditions are included in contracts, as required to execute the requirements of the award;
Clearly define lines of authority and responsibility within the system;
Ensure procurements are based on authorized requisitions;
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 48
Reforms to Other Administrative Requirements Effective Procurement Systems (continued)
Define contractor evaluation criteria and methods for determining source selection;
Perform timely cost/price analysis and technical evaluations to determine cost/price is fair and reasonable;
Maintain documentation which details the complete and accurate history of the purchase transaction to support method, contractor selected/basis of award, and reasonableness of cost/price;
Implement strong contractor monitoring and management of controls;
Ensures effective and efficient procurement of required quality supplies and services at reasonable cost/price from responsible and reliable sources.
Address adequate competition.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 49
Procurement Implications in the Accounting System
Purchasing Module GP/ SL – Business Portal/ PO Intacct - Purchasing
3rd Party Solutions eRequester ReQlogic Docassist
Features include: RFQ, RFP Requisition / approval Documentation (include policies and procedures) Price Analysis
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 50
Reforms to Other Administrative Requirements Mandatory disclosures (§200.113)
Recipients and sub-recipients must disclose, “in a timely manner,” in writing to the awarding agency or pass-through entity “all violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award.”
Failure to make “required disclosures” can result in remedies in §200.338, including withholding of payments, disallowance, and suspension/debarment from future awards.
This disclosure requirement is narrower than the so-called “mandatory disclosure” rule under the FAR.
§200.113 requires disclosure of violation of federal criminal law – higher standard of proof and intent requirement.
FAR rule, on other hand, is triggered if the contractor has “credible evidence” of violation of Federal criminal law, violation of civil False Claims Act, or significant overpayment.
But, some agencies are already moving closer to FAR rule and may take this as cue to do more.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 51
Reforms to Other Administrative Requirements Mandatory disclosures – effective practices
Set standards and establish procedures to facilitate timely discovery of improper conduct;
Assign responsibility at a sufficiently high level to ensure business ethics and compliance programs are effectively carried out;
Conduct periodic reviews to ensure compliance with code of business ethics and conduct;
Establish processes to periodically assess the risk of criminal conduct (or other conduct subject to reporting requirements);
Establish an effective internal reporting mechanism (e.g., hotline) which allows for anonymity or confidentiality, by which employees may report suspected instances of improper conduct;
Define disciplinary action for improper conduct; Establish a process to consider making appropriate and
timely disclosure, in writing, to applicable agency OIG or pass-through entity.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 52
Reforms to Other Administrative Requirements Certification Requirements For Recipients
(§200.415) ‘‘By signing this report, I certify to the best of my knowledge
and belief that the report is true, complete, and accurate, and the expenditures, disbursements and cash receipts are for the purposes and objectives set forth in the terms and conditions of the Federal award.”
“I am aware that any false, fictitious, or fraudulent information, or the omission of any material fact, may subject me to criminal, civil or administrative penalties for fraud, false statements, false claims or otherwise.”
Potential civil and criminal liabilities (including the Civil False Claims Act) could be applied to the individual and the organization.
Organization also subject to remedies for non-compliance under §200.338.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 53
Reforms to Other Administrative Requirements
Effective Certification Controls Process by which the Organization reviews records to
determine if more current, accurate, and complete cost data is reasonably available and should be disclosed to the Government.
If discovered, additional cost data must be provided to the Government with the executed Certificate.
Identify and disclose assumptions and limitations in data. The impact/effect of the new cost data on proposal cost should
also be provided to the Government. Typically occurs after budget agreement, but prior to contract
award.
Best Practices Establish policy/procedures on certification execution; Clearly define roles and responsibilities within the process; Create checklist with signatory authority/responsibilities; Develop training program to educate team members; and Obtain similar certifications from subrecipients and consider
remedies.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 54
Oversight Conflicts of Interest
Two types of Conflict of Interest: Organizational Conflict of Interest (OCI) - arises when, because of
other relationships or circumstances, a contractor may be unable, or potentially unable, to render impartial advice or assistance to the government, the contractor’s objectivity in performing the work is or might be impaired, and/or the contractor would have an unfair competitive advantage.
Personal Conflict of Interest (PCI) - Personal Conflicts of Interests is a situation in which a covered employee has a financial interest, personal activity, or relationship that could impair the employee’s ability to act impartially and in the best interest of the Government.
Requirement: Agencies required to develop conflicts of interest policies for
“Federal awards,” including subawards; Not limited to procurement transactions. Required to disclose conflicts to agency/non-federal entity.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 55
Oversight Effective processes
Establish methods to identify and evaluate potential conflicts of interest as early as possible in the acquisition or subaward process;
Establish responsible party for monitoring potential conflict of interest
Screen covered employees for PCIo Require Disclosure of Interest Statement
- Updated when personal or financial interest changes and no less than annually
Maintain written standards of conduct covering conflicts of interest.
Develop training to promote awareness and reinforce disclosure requirements; and
Define disciplinary action, if PCI is violated; Establish process to disclosure to CO, in writing, any “potential
violation conflict of interest” and demonstrate corrective actions.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 56
Oversight Internal Control Requirements
Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award;
Comply with Federal statutes, regulations, and the terms and conditions of the Federal awards;
Evaluate and monitor the non-Federal entity's compliance with statute, regulations and the terms and conditions of Federal awards;
Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings;
Take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 57
Oversight
Internal Control best practices Design and document effective practices within policies and
procedures; Establish independent monitoring practices to ensure actual
practices are consistent with documented processes, including review of established policies and procedures;
Establish reporting requirements for potential noncompliance, including recommended corrective action plans and milestones for implementing corrective actions;
Develop and provide training to applicable personnel.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 58
How Technology Can Help with Internal Control
Approval Workflow Audit tool – Monitor and Confirm Internal
Control Working 3rd Party Audit Tools
FastPath Rockton Auditor
Government Contractors Financial & Project Management System SeminarPage 59
Strategic Considerations
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 60
Changes to Selected Items of Cost
Compensation for Personal Services (200.430) Sets forth documentation standards for time recording and
labor expense; Charges to Federal awards for salaries and wages must be
based on records that accurately reflect the work performed. These records must: o Be supported by a system of internal control which provides
reasonable assurance that the charges are accurate, allowable, and properly allocated;
o Be incorporated into the official records of the non-Federal entityo Reasonably reflect the total activity for which the employee is
compensated by the non-Federal entity not exceeding 100% of compensated activities;
o Encompass both federally assisted and all other activitieso Comply with the established accounting policies and practices of
the non-Federal entity.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 61
Changes to Selected Items of Cost
Compensation for Personal Services Previously, grantees maintained written records of
employees’ activities to document an employee’s time as an allowable cost
Specific support for salaries and wages included: After-the-fact determination of actual activity for each
employee, not the budgeted amount Total Activity for which employees were compensated Signed by individual employees or responsible supervisor
with firsthand knowledge; and Prepared at least monthly to coincide with one ore more
pay periods
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 62
Changes to Selected Items of Cost
Compensation for Personal Services New guidance provides that the grantee must meet broad
objectives for allowability and specific time and effort documentation is not required. Must be reasonable for the services rendered and conform
to the established written policy Charges to the Federal awards for salaries and wages must
be based on records that accurately reflect the work performed
Records must meet the documentation standards set forth in 200.430.
Budget estimates continue to be insufficient support for charges, however, it does allow non-federal entities to make interim charges based on budget estimates as long as final adjustments to charges are made to ensure that any amounts charged to Federal awards is accurate.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 63
Changes to Selected Items of Cost
Compensation for Personal Services Uncertainty around Acceptable Type of Documentation
Allows grantees to use their own system of internal controls to document compensation costs
Continues to require an after-the-face review of “records that accurately reflect the work performed”
Potential for audit questioned costs Further guidance will be available in June 2014
Exchange Rates (200.440)• Cost increases for fluctuations in exchange rates are
allowable costs subject to the availability of funding, and prior approval by the Federal awarding agency.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 64
Changes to Selected Items of Cost
Equipment (200.439) and Materials and Supplies (200.453)• Cost of certain computing devices are allowable as direct cost
supplies.• Charge and treat computing devices not considered
depreciable assets based on capitalization policy as direct costs.
• Must follow practices for allocability of direct versus indirect costs.
Depreciation (200.436)• All references to use allowances have been eliminated. • Organizations that have facilities that they own and are old
will have an issue with this as there is no use allowance anymore.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 65
Timekeeping
Demo Intacct Timesheet System
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 66
A-133 Audit Considerations
Increase to $750,000 from $500,000 in the dollar threshold for the A-133 audit Still required to make records available for review or audit by
appropriate officials of Federal agencies, pass-through entities and the GAO.
Level of oversight needed for other provisions that would fall below the new threshold: Pre-award review of risks, Standards for financial and program management, Sub recipient monitoring
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 67
Considerations The guidance provides flexibility and new
options for the recovery of indirect costs Consider new options which may offer significant advantages
Take action: Perform gap assessment of current processes to uniform
guidance Compliance polices are critical
Conflicts of Interest, ethics and compliance, and consider internal reporting policies.
Procurement – document process, rationale, and consideration of price/cost.
Internal training. Subawards
Address award process and effective monitoring/oversight. Address changes to cost principles.
Managing U.S. Federal Awards: Internal Control Requirements & Accounting System ImplicationsPage 68
Next Steps
Review Uniform Requirements Including the commentary from Council on Governmental
Relations (COGR). Note the key dates and begin preparing
Attend additional training sessions, roundtable events Non-Federal entities who implement entity-wide system
changes to comply with guidance after the effective date will not be penalized.
Monitor OMB and Federal agency actions
BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. BDO is the brand name for the BDO network and for each of the BDO Member Firms.
Questions?
Eric SobotaBDO USA, LLP(703) 770–[email protected]
Seth ZarnyRaffa, P.C.(301) [email protected]
Buu-Linh TranRaffa, P.C.(301) [email protected]