THE UGG'LY TRUTH ABOUT - ALLOWABILITY TIFFANY KESSLAR, ESQ. BRUSTEIN & MANASEVIT, PLLC WWW.BRUMAN.COM FEBRUARY 2018 - GFOAA
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THE UGG’LY TRUTH ABOUT
ALLOWABILITY
TIFFANY KESSLAR, ESQ.
BRUSTEIN & MANASEVIT, PLLC
TKESSLAR@BRUMAN.COM
WWW.BRUMAN.COM
FEBRUARY 2018
IN THE NEWS
Brustein & Manasevit, PLLC © 2018. All rights reserved. 2
IN THE NEWS
Brustein & Manasevit, PLLC © 2018. All rights reserved. 3
IN THE NEWS
Brustein & Manasevit, PLLC © 2018. All rights reserved. 4
IN THE NEWS
Brustein & Manasevit, PLLC © 2018. All rights reserved. 5
INTERNAL CONTROLS BACK TO BASICS
Brustein & Manasevit, PLLC © 2018. All rights reserved. 7
• S – chedule time to focus on compliance (Control
environment)
• I – nform staff changes (Information and
Communications)
• M – ake sure to identify trouble areas (Risk analysis)
• P – rioritize and improve weaknesses(Control activities)
• L – earn the law
• E – nforce the requirements (Monitoring)
Brustein & Manasevit, PLLC © 2018. All rights reserved. 8
INTERNAL CONTROLS
200.303
a. Non-Federal entities must establish and maintain effective internal control
over the Federal award that provides reasonable assurances that the entity
is managing the award in compliance with federal statutes, regs, and terms
of the award.
• Internal controls “should” be in compliance with:
• The U.S. Comptroller General’s Standard for Internal Controls in the
Federal Government; and
• Internal Control Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO)
9
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.
INTERNAL CONTROLS (CONT.)
200.303
b.Comply with Federal statutes, regs, and the terms and conditions of
the Federal awards.
c. Evaluate and monitor the non-Federal entity's compliance with
statutes, regs and the terms and conditions of Federal awards.
d.Take prompt action when instances of noncompliance are identified
including in audit findings.
e. Take reasonable measures to safeguard protected personally
identifiable info (PII) and other information designated or deemed
sensitive
10
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.REQUIRED CERTIFICATION 200.415
• An official authorized to legally bind the non-federal entity must
certify on annual and final fiscal reports or vouchers requesting
payment:
• “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.”
11
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.MANDATORY DISCLOSURES
200.113
• Must disclose in writing, in a timely manner:
• All violations of Federal criminal law involving fraud, bribery, or
gratuity violations potentially affecting the Federal award.
• Failure to make disclosures can result in remedies in 200.338
(remedies for noncompliance) including suspension and
debarment.
Brustein & Manasevit, PLLC © 2016. All rights reserved. 12CONFLICT OF INTEREST DISCLOSURE 200.112 The Federal awarding agency must establish conflict of interest policies for Federal awards. All non federal entities must establish conflict of interest policies, and disclose in writing any potential conflict to federal awarding agency or pass through agency in accordance with applicable Federal awarding agency policy. Brustein & Manasevit, PLLC © 2016. All rights reserved. 13
FALSE CLAIMS ACT
• Liability equals triple damages and
a penalty from $5,500 to $11,000
per claim for anyone who
knowingly submits or causes the
submission of a false or fraudulent
claim to the U.S. government
• Includes whistle-blower
incentive and protection
14
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.Brustein & Manasevit, PLLC © 2018. All rights reserved. 15
REQUIRED POLICIES AND PROCEDURES • Written Cash Management Procedure – UGG Sections 200.302(b)(6) and 200.305. • Written Allowability Procedures - UGG Section 200.302(b)(7) • Written Conflicts of Interest Policy - UGG Section 200.318(c) • Written Procurement Procedures - UGG Section 200.319(c) • Written Method for Conducting Technical Evaluations of Proposals and Selecting Recipients - UGG Section 200.320(d)(3) • Written Travel Policy - UGG Section 200.474(b) • Procedures for managing equipment - UGG Section 200.313(d) Brustein & Manasevit, PLLC © 2018. All rights reserved. 16
QUICK…WHERE ARE YOUR POLICIES AND PROCEDURES!?! Brustein & Manasevit, PLLC © 2018. All rights reserved. 17
POLICY AND PROCEDURES SUGGESTED SECTIONS
• Organization, Structure and Function
• Grant Application Process
• Financial Management System
• Allowability
• Time and Effort Documentation
• Travel
• Procurement
• Inventory/Property Management
• Record Keeping/Record Retention
• Monitoring and Audit Resolution
• Programmatic Requirements
• Notice of Nondiscrimination and Grievance
Procedures
Brustein & Manasevit, PLLC © 2018. All rights reserved. 18POLICY HOT BUTTON ISSUES
Conflict of Interest (UGG Section 200.318(c)(1))
• How do you define a conflict?
• A conflict of interest arises when any of the following has a
financial or other interest in the firm selected for award:
• Employee, officer or agent;
• Any member of that person’s immediate family;
• That person’s partner; and
• An organization which employs, or is about to employ,
any of the above or has a financial interest in the firm
selected for award.
19
Brustein & Manasevit, PLLC © 2018. All rights reserved.POLICY HOT BUTTON ISSUES
Gifts and Gratuities (UGG Section 200.318(c)(1))
• Rule: Must neither solicit nor accept gratuities, favors, or
anything of monetary value from contractors/
subcontractors.
• However, may set standards for situations in which the financial
interest is not substantial or the gift is an unsolicited item of
nominal value.
• Does your agency define a “financial interest that is not
substantial” or a “nominal value” for an unsolicited item?
Brustein & Manasevit, PLLC © 2018. All rights reserved. 20POLICY HOT BUTTON ISSUES
Reporting Conflict of Interest (UGG Section 200.318(c)(1))
• Is there a chain for reporting potential conflicts?
• Alternative if reporting to employee involved in potential conflict?
• What happens if there is a reported and/or nonreported conflict?
• Recusal
• Sanctions
• How do staff know about the requirements?
• Signed certification that employee received and understands conflicts
policy
• Training on policy
21
Brustein & Manasevit, PLLC © 2018. All rights reserved.POLICY HOT BUTTON ISSUES
Contract Administration (UGG
Section 200.318)
• How is your agency maintaining
oversight to ensure that
contractors perform in
accordance with the terms,
conditions, and specifications of
the contract?
Brustein & Manasevit, PLLC © 2018. All rights reserved. 22POLICY HOT BUTTON ISSUES
Vendor Selection Process (UGG Section 200.320)
• Are types of procurement identified?
• Is sole sourcing only used when allowable?
• The item is only available from a single source;
• There is a public emergency that will not permit delay;
• The Federal awarding agency or pass-through
expressly authorizes noncompetitive proposals in
response to a written request; or
• After soliciting a number of sources, competition is
determined inadequate.
Brustein & Manasevit, PLLC © 2018. All rights reserved. 23POLICY HOT BUTTON ISSUES
Regardless of cost, grantee must maintain effective control and
“safeguard all assets and assure that they are used solely for
authorized purposes.” (UGG Section 200.302(b)(4))
Brustein & Manasevit, PLLC © 2018. All rights reserved. 24POLICY HOT BUTTON ISSUES Travel Costs (UGG Section 200.474) • Does your agency require documentation that participation of individual in a conference is necessary for the program? • Do you charge travel on actual costs or use a per diem rate? • Are there written travel reimbursement requirements? Brustein & Manasevit, PLLC © 2018. All rights reserved. 25
POLICY AND PROCEDURES FOLLOW-UP • Make sure policies and procedures are easy to use and easy to find! • Annual training • Training for new staff • Review and revise annually Brustein & Manasevit, PLLC © 2018. All rights reserved. 26
ALLOWABILITY
FACTORS AFFECTING ALLOWABILITY OF
COSTS 200.403
All Costs Must Be:
1. Necessary, Reasonable and Allocable
2. Conform with federal law & grant terms
3. Consistent with state and local policies
4. Consistently treated
5. In accordance with GAAP
6. Not included as match
7. Adequately documented
28
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.ALLOWABILITY
• All costs must be necessary and reasonable for the
performance of the Federal award and be allocable.
UGG Section 200.403(a)
Brustein & Manasevit, PLLC © 2018. All rights reserved. 29NECESSARY • Is the cost included in your plan? • Is it aligned with the goals of the district/school? • Does your agency have the capacity to use what you are purchasing? • Is the staff knowledgeable regarding the program? Brustein & Manasevit, PLLC © 2018. All rights reserved. 30
REASONABLE • Did you pay a fair price? (UGG Section 200.404) • Was competitive procurement used? (UGG Section 200.319) • If sole sourced, what was the reasoning? (UGG Section 200.320(f)) • Public emergency? • Permitted by USDE/SEA? • No competition? • Only vendor in the world? Brustein & Manasevit, PLLC © 2018. All rights reserved. 31
ALLOCABLE
• Do you have enough time to implement the cost? (UGG Section
200.405)
• Is the program that bought the product using it?
• Is the program sharing the use of the item(s)?
• If so, how are costs being shared?
• How is the use being documented?
Brustein & Manasevit, PLLC © 2018. All rights reserved. 32TIME AND
EFFORT
DOCUMENTATION
Brustein & Manasevit, PLLC © 2018. All rights reserved. 33DOCUMENTING STAFF SALARIES
• Must document staff salaries (UGG Section
200.403(a))
• Based on records that accurately reflect the
work performed and identify the cost objective
that the employee is working on.
Brustein & Manasevit, PLLC © 2018. All rights reserved. 34SALARY DOCUMENTATION These records MUST (UGG Section 200.430(I)(1): 1.Be supported by a system of internal controls which provides reasonable assurance charges are accurate, allowable and allocable; 2.Be incorporated into official records; 3.Reasonably reflect total activity for which employee is compensated; 4.Encompass all activities (federal and non-federal); 5.Comply with established accounting polices and practices; and 6.Support distribution among specific activities or cost objectives. Brustein & Manasevit, PLLC © 2018. All rights reserved. 35
FLEXIBILITY V. INTERNAL CONTROLS
FLEXIBILITY INTERNAL CONTROLS
• Use Percentages or Hours • Accuracy
• No signature required • Reliability
• No set timeframe for • Allocability
documentation
• Official Record
• Electronic system permitted
• Meeting Accounting Policies
and Practices
Brustein & Manasevit, PLLC © 2018. All rights reserved. 36NONCOMPLIANCE
200.430(I)(8)
For a non-Federal entity where the records do not meet these
standards:
• USDE may require personnel activity reports (PARs), including
prescribed certifications or equivalent documentation that support
the records as required in this section.
• PARs are not defined!!
Brustein & Manasevit, PLLC © 2018. All rights reserved. 37AEFFA PROPOSED T&E FLEXIBILITY 1. Certification of Actual Time Worked 2. Blanket Certification 3. Official Record of Employee Activities 4. Electronic Submissions/Approvals 5. Roll-up Time and Effort Tracking 6. Allocation of Effort Using a Basis Other than Time June 15, 2016 Letter from AEFFA, located at www.bruman.com Brustein & Manasevit, PLLC © 2018. All rights reserved. 38
FINANCIAL
MANAGEMENT
CONTROLS
39
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.IDENTIFICATION OF AWARDS
200.302(B)(1)
All federal “awards” received and expended
• The name of the federal “program”
• Identification # of award
• CFDA Title and Number
• Federal Award I.D. #
• Fiscal Year of Award
• Federal Agency
• Pass-Through (If S/A)
40
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.FINANCIAL REPORTING
200.302(B)(2)
• Accurate, current, complete disclosure of
financial results of each award in accordance
with 200.327 and 200.328.
41
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.ACCOUNTING RECORDS 200.302(B)(3)
Source Documentation Must Be Kept On:
1. Federal Awards
2. Authorizations
3. Obligations
4. Unobligated balances
5. Assets
6. Expenditures
7. Income
8. Interest (Eliminated liabilities)
42
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.INTERNAL CONTROLS
200.302(B)(4)
• Effective control over and accountability for:
1. All funds
2. Property
3. Other assets
• Must adequately safeguard all assets
• Use assets solely for authorized purpose
43
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.BUDGET CONTROL
200.302(5)
• Comparison of expenditures with budget amounts for each
award
44
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.WRITTEN CASH MANAGEMENT PROCEDURES
200.302(6)
• Written Procedures to implement the requirements of
200.305 (Payment)
• Insured accounts
• Separate depository accounts NOT required
• Interest bearing (unless certain conditions)
• Interest up to $500 may be retained
• Aggregate across all federal funds
45
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.WRITTEN ALLOWABILITY PROCEDURES
200.302(B)(7)
• Written procedures for determining allowability of costs in
accordance with Subpart E – Cost Principles
• Procedures can not simply restate the Uniform Guidance Subpart E
• Should explain the process used throughout the grant development
and budget process
• Training tool and guide for employees
46
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.PROCUREMENT
47
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.PROCUREMENT STANDARDS
PROCUREMENT BY STATES GENERAL PROCUREMENT STANDARDS
200.317 200.318(A)
• Follow State law • All nonfederal entities must
have documented procurement
procedures which reflect
applicable Federal, State, and
local laws and regulations.
• Follow UGG
48
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.CONTRACT ADMINISTRATION 200.318(B)
• Nonfederal entities must
maintain oversight to ensure
that contractors perform in
accordance with the terms,
conditions, and
specifications of the contract
49
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.CONFLICT OF INTEREST
200.318(C)(1)
• Define What Conflict Is.
• What happens when there is a conflict?
• Removal?
• Reporting?
• Are gratuities permitted?
• Forms?
• Reporting?
• Violations?
• Training?
• Annual Forms or Certifications?
50
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.ORGANIZATIONAL CONFLICT OF INTEREST
200.318(C)(2)
If the non-federal entity has a parent, affiliate, or subsidiary
organization that is not a state or local government the entity must
also maintain written standards of conduct covering organization
conflicts of interest
51
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.METHODS OF PROCUREMENT
200.320
• Method of procurement:
• Micro-purchase
• Small purchase procedures
• Competitive sealed bids
• Competitive proposals
• Noncompetitive proposals
52
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.MICRO-PURCHASE
300.320(a)
• Acquisition of supplies and services under $3,500 or less.
• Updated under the Federal Acquisition Regulations (confirmed in the compliance
supplement)
• $2,000 for construction subject to the Davis-Bacon Act
• Raised to $10,000 or less for IHEs only
• May be awarded without soliciting competitive quotations if
nonfederal entity considers the cost reasonable.
• To the extent practicable must distribute micro-purchases equitably
among qualified suppliers.
53NONCOMPETITIVE PROPOSALS
200.320(F)
• Appropriate only when:
• The item is only available from a single source;
• There is a public emergency that will not permit delay;
• The Federal awarding agency or pass-through expressly authorizes
noncompetitive proposals in response to a written request from non-Federal
entity; or
• After soliciting a number of sources, competition is determined
inadequate.
54
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.SUSPENSION AND DEBARMENT APPENDIX II(H)
2 CFR PART 180 (OMB DEBARMENT SUSPENSION RULES)
• Cannot contract with vendor who has been suspended or
debarred
• Excluded Parties List System in the System for Award
Management (SAM)
• For contracts over $25,000 you must verify that the person with whom
you intend to do business is not excluded or disqualified.
• This MUST be done by either:
a. Checking SAM.gov; or
b. Collecting a certification from that person; or
c. Adding a clause or condition to the covered transaction with that person.
55
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.56
PROPERTY
MANAGEMENT
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.EQUIPMENT SUPPLIES
200.33 200.94
Equipment: tangible, nonexpendible, • All tangible personal
personal property having a useful life property other than
of more than one year and an
acquisition cost of $5,000 or more
equipment
per unit. • Computing devices
Grantee may also use its own (200.20) are supplies is
definition of equipment as long as the less than $5,000
definition would at least include all
equipment defined above.
57
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.EQUIPMENT
200.313(A) AND (C)(4)
• Conditional Title vests with the non-Federal entity.
• Cannot encumber the property without approval of Federal agency or
Pass-through agency
But
• When acquiring replacement equipment, may use the equipment to be
replaced as a trade-in or sell the property and use the proceeds to
offset the cost of the replacement property.
58
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.USE OF EQUIPMENT
200.313(C)(1) AND (2)
Equipment must be used by the Non-Federal entity in the program or
project for which it was acquired as long as needed, whether or not
the project or program continues to be supported by the Federal
award.
When no longer needed, may be used in other activities with the
following priority:
1. Projects supported by Federal awarding agency
2. Project funded by other Federal agencies
• When used it may be shared (according to the above priorities) provided such use
will not interfere with work on the original projects/programs.
• Exception – Private Schools 76.661
59
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.EQUIPMENT PROCEDURES
200.313 (D)
Procedures for managing equipment must meet the following
requirements:
1. Property records
• Description, serial number or other ID, source of funding, title, acquisition date
and cost, percent of federal participation, location, use and condition, and
ultimate disposition date including sale price
2. Physical inventory at least every two years
3. Control system to prevent loss, damage, theft
• All incident must be investigated
4. Adequate maintenance procedures
5. If authorized or required to sell property, proper sales procedures to
ensure highest possible return.
60
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.DISPOSITION
• Equipment 200.313(e) • Supplies 200.314
• When property is no longer needed in any • If there is a residual inventory of
current or previously Federally-funded unused supplies exceeding $5,000 in
supported activity: total aggregate value upon
• Nonfederal entity must request disposition termination or completion of the
instructions from the federal awarding project or program and the supplies
agency if required by the terms of the grant. are not needed for any other federal
• Otherwise, Over $5,000 – pay federal share award, must compensate the federal
• Under $5,000 – no accountability (still must government for its share.
formally dispose)
61
BRUSTEIN & MANASEVIT, PLLC © 2018. All rights reserved.DOCUMENTATION
KNOW WHERE YOUR DOCUMENTS ARE! Brustein & Manasevit, PLLC © 2018. All rights reserved. 63
HOW LONG? Retention Requirements For Records EDGAR – 2 CFR 200.333 • 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. • If educational agency, need to keep records for 5 years because of GEPA - Statute of Limitations 34 CFR 81.31(c) Brustein & Manasevit, PLLC © 2018. All rights reserved. 64
HOW MAINTAIN DOCUMENTATION? o When original records are electronic and cannot be altered, there is no need to create and retain paper copies. (UGG Section 200.335) o When original records are paper, electronic versions may be substituted through the use of duplication or other forms of electronic media provided they: o Are subject to periodic quality control reviews; o Provide reasonable safeguards against alteration; and o Remain readable. Brustein & Manasevit, PLLC © 2018. All rights reserved. 65
DOCUMENTATION HOT BUTTON ISSUES
• Are records kept by school, grant, fiscal year?
• Do you backup documentation?
• Where and how often?
• What happens when staff retire or voluntarily leave?
• What happens when staff are fired?
• What happens when a school closes?
• Staff keep documentation at home?
Brustein & Manasevit, PLLC © 2018. All rights reserved. 66Brustein & Manasevit, PLLC © 2018. All rights reserved. 67
DISCLAIMER • 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. Brustein & Manasevit, PLLC © 2018. All rights reserved. 68
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