September 9, 2014 – As we wrote in July, the U.S. Office of Management and Budget (OMB) has issued Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, which are making sweeping changes to streamline existing guidance for grantees receiving federal financial assistance. In fact, as it is implemented, it will ultimately supersede requirements from eight existing grant circulars and consolidate the streamlined guidance into one document located in Title 2 of the Code of Federal Regulations. The guidance includes the following sections:
- Subpart A – Definitions and acronyms used
- Subpart B – General provisions – purpose, applicability, and effective dates – and applicability of the various subparts outlined in chart format
- Subpart C – Administrative requirements primarily impacting federal granting agencies
- Subpart D – Administrative requirements impacting non-federal agencies, including nonprofit recipients
- Subpart E – Cost principles previously covered in Circulars A-21, A-87, and A-122
- Subpart F – Single audit requirements (previously covered in Circular A-133 for nonprofits)
What is really new and not just a consolidation?
- Subpart A uses the term “contractor,” as a replacement for the term “vendor,” which was previously only used in Circular A-133.
- Subpart D includes further guidance related to subrecipients vs. contractors
- “Program income,” which was not previously specifically defined, is also now more fully defined.
- Subpart D is of key importance to nonprofits receiving federal grants. It requires that non-federal entities establish and maintain effective internal controls, providing assurance that an entity is managing federal awards in compliance with federal statutes and regulations, and the specific terms and conditions of those awards. It specifically indicates that internal controls should be in compliance with COSO and the Government Accountability Office’s Green Book.
- Subpart D also addresses procurement standards, providing more specific guidance on five procurement methods. This is an area nonprofits should make themselves familiar with as the consolidated guidance is closer to that previously found in Circular 102 for state and local governments, than that of Circular 110 covering nonprofits. It also provides much more specific guidance on subrecipient monitoring and a pass-through entity’s responsibility for evaluating risk in this area.
- Subpart E consolidates and revises cost principles formerly found in three separate Circulars. The changes are too numerous to cover here, however the OMB has a created a useful document entitled Uniform Guidance Cost Principles Text Comparison that compares the guidance in Circulars A-21, A-87 and A-122 to the new Guidance in a side-by-side format.
- Subpart F includes changes such as raising the audit threshold of $500,000 in federal expenditures to $750,000, increasing the type A and B major program determination threshold from $300,000 to $750,000, increasing the questioned cost threshold from $10,000 to $25,000
When is all this effective?
Nonprofits will need to implement the guidance for all new federal awards and additional funding to existing awards made after Dec. 26, 2014. The audit requirements outlined in Subpart F will be effective for fiscal years beginning on or after Dec. 26, 2014.
About the Author
Karen D. Costa CPA
Karen, Assurance Services Director and Co-Leader of the Dopkins Not-for-Profit and Healthcare Teams, has lengthy experience with both for-profit and not-for-profit healthcare organizations specializing in auditing, revenue cycle consulting and certification of their Medicaid cost reports and specialized compliance audits.