Presented by: Stacia Davis Le Blanc, Esquire My Grant Lawyer PLLC ©2012 Stacia Le Blanc. All rights...

Presented by: Stacia Davis Le Blanc, Esquire

My Grant Lawyer PLLC©2012 Stacia Le Blanc. All rights reserved.

©2012 Stacia Le Blanc. All rights reserved.

A Division of Thompson Media Group

Stacia Davis Le Blanc, Esq.

Founder, My Grant Lawyer PLLC providing grant compliance advice, audit defense, and training.

Former Partner in Feldesman Tucker Leifer Fidell LLP Federal Grants Practice Group

Long and distinguished career in the Office of General Counsel within the U.S. General Services Administration and the Department of Commerce, primarily serving in the position of Chief, Federal Assistance Law Division.

Recognized national leader in federal grant law, providing training to grantees and subgrantees, several Congressional committees, grants officers, program officers, and contracting officers

Speaker for the National Grants Management Association, National Grants Partnership, Federal Publications Seminars, Thompson Publishing, Performance Institute, and Federal Bar Association.

[email protected] K Street, Suite 300Washington, DC 20006(202) 600-7687©2012 Stacia Le Blanc. All rights

reserved. 2

mailto:[email protected]

mailto:[email protected]

This presentation has been prepared as a service to the grants management community.

This is designed to assist you in developing and implementing effective practices with respect to the terms and conditions of your federal awards and subawards.

The materials are being issued with the understanding that the author is not engaged in rendering legal or other professional services.

If legal advice or other expert assistance is required, the services of a competent professional should be sought.

©2012 Stacia Le Blanc. All rights reserved. 3

What audit reforms are included What cost principle reforms are discussed What administrative requirements are

affected How will grant reform be implemented What is reaction by grants community What is the Council on Financial Assistance

Reform (COFAR) Updates on the latest legislative proposals


Source: 77 Federal Register 11778 (Tuesday, February 28, 2012) ◦ www.whitehouse.gov/.../fr-notice-grant-reform-2012.pdf

WHY? ◦Improper Payments◦Presidential Memo on Administrative

Flexibility, Lower Costs, and Better Results for State, Local and Tribal Governments

◦Commitment to increase effectiveness and efficiency of Federal Programs


http://www.whitehouse.gov/.../fr-notice-grant-reform-2012.pdf

Address ongoing and emerging risks to program outcomes and integrity

Eliminate unnecessary and duplicative requirements

Collaboration with Federal and non-Federal partners

Standardize information collections across agencies

Adopt risk-based model for Single Audits Approaches to determine and monitor Federal

funds


Outcome will be proposed rule this year to be published in Federal Register

Who is impacted?◦ State, local, tribal governments◦ Universities◦ Nonprofit organizations◦ Hospitals

What is impacted?◦ Consolidation of guidelines into Title 2 of CFR◦ All cost principles including FAR contracts

(Exception: Cost Accounting Standards at 48 CFR 9903.201)◦ Single Audit Act requirements◦ Administrative Requirements◦ A-21,A-87,A-110, A-122, A-89,A-102,A-133,A-50, 45 CFR 74 (Cost Principles for Hospitals)


Regulatory Reform – each agency must tailor its regulations to impose the least burden on society, consistent with obtaining regulatory objectives, costs of regulations (E.O. 13579)

Eliminate:◦ Unnecessary rules◦ Overly burdensome requirements◦ Duplicative requirements◦ Low-priority recordkeeping◦ Roadblocks to performance◦ Red tape◦ Prevent payment errors, waste, fraud, and abuse of tax

dollars spent


Council on Financial Assistance Reform 10 Members:

◦ OMB, HHS, Agriculture, Education, Energy, Homeland Security, HUD, Labor, Transportation

◦ One rotating member from other agencies (NSF)◦ Input from states and research universities

OMB Memorandum ◦ http://

www.whitehouse.gov/sites/default/files/omb/memoranda/2012/m-12-01.pdf

◦Government Accountability and Transparency Board (GATB)

Eliminated CFO Council and Grants Committee


http://www.whitehouse.gov/sites/default/files/omb/memoranda/2012/m-12-01.pdf




Raise threshold from $500,000 to $1 million $1 million to $3 million – focused audit

reviewing only 2 compliance requirements for major programs◦ Allowable/Unallowable costs and agency choice

More than $3 million – full A-133 audit Shift agency oversight focus


Compliance Supplement Focus◦ Review universal compliance requirements with

focus on those that address improper payments, fraud, waste, abuse and program performance

◦ Streamline other elements◦ Increased testing, larger sample sizes, lower

levels of materiality◦ Such as: allowable or unallowable activities and

costs, eligibility, reporting, selection of subrecipients and subrecipient monitoring, special tests and provisions, period of availability of Federal funds, compliance of procurement with suspension and debarment policies


Compliance Supplement Optional Tests◦ Smaller sample size◦ Higher levels of materiality◦ Agency focus instead of “universal” requirements

Result◦ Reduce audit burden◦ Ensure accountability◦ Eliminate secondary items unrelated to integrity◦ Agencies can cut back specific requirements◦ Limits the information sent to agencies


Strengthen guidance on audit follow-up◦ Designate senior official to oversee process◦ Implement audit-risk metrics – timeliness, number of

audits that did not have “unqualified” opinion, repeat audit findings

Encourage cooperative audit resolution◦ Agency proactive approach to resolving weaknesses

and deficiencies Digitize reports into searchable database to

increase utility to agencies and prime recipients Collaborative approach – mediation, informal

assistance to resolve findings


Reduce burdens on pass-through entities:◦ Agencies conduct follow-up of subawards (where

recipient and subrecipient) regarding financial or internal control systems not specific to program delivery Eliminates duplicative work by pass-through entity Simplifies for subrecipient, no duplicate negotiation Not significant increase to federal agency – subject

to agency management decisions and process and federal contact appointed

Pass-through focuses on program delivery and follow up on financial and control issues


Questions OMB Asks:How important are A-133 audits?What impact do these changes make on subrecipient monitoring?Should threshold be raised?What compliance requirements are most essential to mitigating waste, fraud, abuse?What tools or processes should be implemented to better coordinate oversight across government and pass thru entities?


A-21, A-87, A-122, Hospitals2 CFR parts 220, 225, 230


Consolidate the cost principles into one document with some variations by entity

Utilize flat indirect cost rate as option to negotiated rate◦ Mandatory flat rate discounted from current rate◦ Recipient option flat or negotiated◦ Rate good for 4 years with limited documentation◦ Or raised with full documentation

HHS Division of Cost Allocation◦ List flat rates by entity type◦ CASE-covered contracts remain negotiated rate


Reduce administrative burden on recipients, subrecipients, and federal agencies◦ Eliminate need to justify, negotiate, document

Reduce indirect cost expenses to agencies OMB will work with stakeholders to find the

right algorithms Would there be rise in indirect costs if

recipients would be able to choose? OMB wants to overall reduce indirect costs

to government


Time and Effort Reporting-Salaries and Wages◦ Explore alternative mechanisms◦ Document allowability and allocability◦ 3 Pilots by:

Federal Demonstration Project Labor Workforce Innovation fund Education Request for Ideas

Substantial reductions in administrative burden Enhance compliance and stewardship Work with Inspector Generals and other

stakeholders to develop auditable and accountable information


Utility Cost Adjustment for research universities of 1.3% indirect costs◦ 65 universities and extend to others◦ Naval Research and HHS DCA◦ Plan to reduce utility costs over time◦ Cost studies to reduce consumption and

standardize◦ Impact: raising indirect cost reimbursements by

$80 million per year


Directly charge administrative support◦ Project-specific activities◦ Managing harmful substances◦ Data and image management◦ Complex project management and security◦ Directly allocable to award◦ No net cost increase◦ Provide clarity on allowable costs are charged


Include computing devices as direct cost◦ Less than equipment threshold◦ Document in budget as separate line-item◦ Eliminate prior approvals◦ Require increased inventorying controls

Threshold of unused supplies at $5000◦ Cost principles match A-110 and A-102◦ Maintain for use on other federal awards if

allocable to original award when purchased◦ Minimize confusion about disposal or re-

expensing of unused inventories at closeout


Eliminate requirements to conduct studies of cost reasonableness at research facilities◦ Reduce paperwork with minimal use

Eliminate restrictions on use of indirect costs recovered for depreciation or use allowances◦ Reduce paperwork with minimal use Eliminate lease-purchase analysis for interest

costs and notice to agency when relocating federally sponsored activities from facility financed by debt

◦ Reduce paperwork with minimal use


Eliminate “help-wanted” advertising Allow contingency funds for certain awards

◦ IT systems, construction of facility or instrument◦ Conform to standard project management◦ Comply with Generally Accepted Accounting

Principles (GAAP) – risk-adjusted total cost estimate

◦ Cannot rebudget out of these funds◦ Encourage shared IT services


Increase Cost Accounting Standards Board minimum threshold for disclosure statements from $25 million to $50 million◦ Remove Exhibit A of Circular A-21

Allow excess or idle capacity for certain facilities◦ Data centers, telecommunications and public

safety facilities◦ Need excess capacity◦ Provide multi-year plan for reaching full capacity


Speculative financing arrangements unallowable◦ Gains and/or losses◦ Related to debt arrangements on capital assets◦ Hedges, derivatives, etc.◦ Even if embedded in contracts◦ Whether used for risk management purposes,

forecasting or calculations used for the preparation of proposals for federal funding

◦ Regardless if related to assets, liabilities, or expenses

◦ Update cost principles for all debt arrangements


Provide nonprofits an example of the required certification (Certificate of Indirect Costs)◦ Consistent with what is provided state, local, and

tribal governments◦ Increase uniformity in documentation


Provide nonprofits with indirect cost proposal documentation requirements◦ Similar to what is provided to governmental

entities


Questions OMB Asks:Would 4 year IDC reduce administrative burden?Are there federal or state laws that prohibit flat indirect cost rate?Which proposal do you like better?

Flat rate? Longer term? Flat rate percentage of IDC?What are the cost implications these reforms?Does direct charges of administrative support for substances and IT help?Allowance of cost recovery for improper payments? Excess capacity of IT and safety?


Questions OMB Asks:Would you participate in time and effort study?

Do you have recommendations for changes?If university, would you reduce UCA to be able to charge as an allowable cost?CAS-covered contracts – are there issues between this discussion and the FAR?


Create a consolidated uniform set of administrative requirements◦ Combine A-102 and A-110◦ Include limited exceptions by type of recipient

Require pre-award review◦ Merit review of each proposal

Formalize a “best practice” Does not apply to formula grants

◦ Assess applicant financial risk Stability Internal controls Quality of management Performance history Single Audit report reviews


Create a consolidated uniform set of administrative requirements◦ Combine A-102 and A-110◦ Include limited exceptions by type of recipient

Require pre-award review◦ Merit review of each proposal

Formalize a “best practice” Does not apply to formula grants

◦ Assess applicant financial risk Stability Internal controls Quality of management Performance history Single Audit report reviews Modify award decisions and terms of award based on risk

◦ Greater transparency in award process◦ Increased quality◦ May Increase agency burden


Provide 90-day notice of funding opportunity in Catalog of Federal Financial Assistance

Replace CFDA with CFFA Still post on Grants.gov

◦ Exception is statutory requirement or emergency◦ Domestic and international◦ Projected amount of funds and eligibility

Priorities for grants, loans, insurance, and other types of financial assistance


Provide standard format for announcements◦ Eligibility◦ Qualifications◦ Evaluation criteria◦ Disclose all agency terms and conditions up front

Reiterate Paperwork Reduction Act Approval◦ Limited to standardized data elements approved

by OMB◦ Enhance transparency and standardization◦ Deviations rarely approved by OMB◦ Develop comprehensive end to end reporting

system at one entry point◦ Measure and monitor program performance


OMB Questions:What areas of past performance should be considered part of risk assessment?What should be considered as merit evaluation criteria? What should be reviewed?What information collections for applications and reporting provide government best data?Are these collections burdensome?Should there be standard data elements?Are there system issues and costs associated with new pre-award and post award requirements? What their costs?


Suggested Reforms:Eliminate annual application process for multiple year awardsLimited period of availability of fundsAutomatic closing of accountLack of any appeal process for granteesGrant audits focus on procedural and documentation errors not fraud, waste and abuse despite satisfactory performanceLack of consistency in Agency interpretation of government-wide requirementsEnforcement of unwritten requirementsIneffectual A-133 audits to protect future cost disallowancesLack of OMB enforcement of agency consistencyLack of Government policymaking body for grants like OFFP


41

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