Of all the challenges that 2020 laid at the doorstep of your nonprofit organization, one that may have come with a mixed reception is the increase in federal funding from the CARES Act and other legislation. On one hand, the additional funds help to meet the unprecedented need of your populations served. On the other hand, the additional funds may have pushed you into Single Audit territory, maybe for the first time ever. If you were already a resident of Federal Audit Land, it is possible that the increased effort to serve your clients caused you to miss some important changes to the Uniform Guidance.
In August 2020, OMB issued the revised Uniform Guidance. The revised guidance is effective for all new federal awards, and modification of existing awards, on or after November 12, 2020. In case you missed the release, here are three things you should know about the 2020 UG revisions.
No 3 – The Return of FFATA
The Federal Funding Accountability and Transparency Act (FFATA) became law in 2006. In short, it requires information on federal awards be made available to the public on a searchable website (www.USASpending.gov). The reporting requirements, and the audit requirements, faded into the background for a few years, but the 2020 UG revisions brought it back. The reporting requirement applies to prime awardees (subrecipient organizations can breathe a sigh of relief) and, with the 2020 revision, requires reporting for any awards in excess of $30,000. As with any revisions to federal guidance, your accounting and compliance policy manuals should be updated to reflect the new guidance. If you’re applying for federal awards as a prime recipient, review your compliance procedures with your auditor so there are no surprises at the end of the year.
No. 2 – Learn the New UG Language
No change to policy is complete without a change to the accompanying language. Many of the definitions changed only to provide clarity to existing terms and ensure alignment with the other revisions. However, be alert to a couple of key changes. The Catalog of Federal Domestic Assistance number has been replaced by an Assistance Listing number. Of course, there will be a transition period during which a Google search for CFDA numbers will still get you where you need to go. It is a minor change, but go ahead and update your accounting and compliance policy manuals as you’re updating for the rest of the revisions. Auditors should ensure their nonprofit clients have made the change on the SEFA headings.
The other key change is to distinguish between Period of Performance and Budget Period. Under the revised guidance, Period of Performance refers to the estimated period between the start of an initial federal award and the projected end date, which may include one or more budget periods (§200.211(b)(5)). Budget Period refers to the period between the start date of a funded portion of an award to the end date of that funded period during which recipients are authorized to expend the funds awarded (§200.308). There’s nothing earth-shattering here, but it will be important to make sure your compliance policies are updated to reflect the changes. Also, your audit may be a bit less stressful if everyone is speaking the same language when discussing award periods and auditing the timing of expenditures.
No. 1 – Watch How You Shop
There were some changes in the OMB’s guidance on procurement, primarily as it relates to micro-purchases. Under the revised guidance (§200.320), micro-purchases up to $10,000 require no action from the nonprofit or the cognizant agency issuing the related award. Micro-purchases from $10,001 to $50,000 require the nonprofit qualify and self-certify the purchase. Purchases above $50,000 require cognizant agency approval. Your organization’s procurement policies and related internal control processes should be updated to reflect these changes effective with the effective date of the revisions. Auditors should be aware there may be some overlap of policies depending on the award period and the date of the transaction.
Two restrictive policies were addressed in the 2020 revision. If the Never Contract with the Enemy provision (§200.215) applies to your grant, nonprofits are required to exercise due diligence to ensure none of the funds are provided, directly or indirectly, to a person or entity actively opposing the US or coalition forces involved in a contingency operation in which members of the Armed Forces are actively engaged in hostilities. The other piece of legislation, specifically prohibiting covered telecommunication and video surveillance services and equipment (§200.216), aligns the Uniform Guidance with the National Defense Authorization Act of 2019. Again, make sure your policies and procedures are updated for this guidance and include procedures for checking vendors against lists maintained at www.sam.gov and for documenting the results of that check.
While we’re on the topic of spending, new guidance also permits those non-federal entities that do not have an approved current negotiated indirect cost rate to charge a de minimis rate of 10% of the modified total direct costs for the award (§200.414). The de minimis rate may be used indefinitely or until your nonprofit negotiates a rate, which it may do at any time. Note that no documentation is required to justify the 10% de minimis indirect cost rate. However, the election to use the de minimis rate should be formalized in your organization’s policies and procedures.
Take the time to review all of the UG revisions, not just those discussed here, and consider how your compliance procedures need to change. Also keep in mind that there may be a transition period for some of these revisions that may create differences in compliance policies based on award and transaction dates. Like us at JJCo, your auditors should also be a resource for helping you decipher the guidance and determining how it applies to your nonprofit.
Take the time to review all of the UG revisions, not just those discussed here, and consider how your compliance procedures need to change. Also keep in mind that there may be a transition period for some of these revisions that may create differences in compliance policies based on award and transaction dates.
Like us at JJCo, your auditors should also be a resource for helping you decipher the guidance and determining how it applies to your nonprofit.
About the author:
Craig Mayers, MAcc, CPA, CGMA is currently an Audit Manager with Jacobson Jarvis & Company, a Seattle-based public accounting firm serving only the nonprofit community. His more than 20 years of public and private accounting experience gives him unique insights in accounting, business management and leadership that he loves to share with his clients.