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Uniform Grant Guidance for Not-for-Profits – Analyze the Impact of New Rules Now

Fourth Quarter - 2014

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In December 2013, the U.S. Office of Management and Budget (OMB) published a comprehensive overhaul of grant reform rules titled Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Superseding and combining the requirements of eight existing OMB circulars, the new guidance – also referred to as the “Supercircular” or “Uniform Guidance” – provides a framework for grants management that aims to curb waste, fraud and abuse, strengthen oversight of Federal awards, eliminate unnecessary and duplicative requirements, and improve performance and outcomes while lowering costs. The new guidance takes effect December 26, 2014, with new Federal awards and additional funding to existing awards issued after that date subject to the Uniform Guidance.  Audit requirements will apply to audits of fiscal years beginning on or after December 26, 2014.

As with any new guidance, certain adjustments and planning on the part of not-for-profit organizations should be considered for the new guidelines. What are the most significant reforms for not-for-profit organizations to consider as they prepare to implement the updated provisions? Patricia McGowan, Partner and Not-for-Profit Industry Practice Leader in CohnReznick’s New England office, and John Eusanio, Partner, Not-for-Profit Industry Practice in CohnReznick’s New York office, recently hosted a webinar, Understanding Uniform Grant Guidance1, addressing the importance of the enactment and some of the most significant areas of reforms.

As the date of compliance quickly approaches, not-for-profit organizations should fully understand the ramifications of the key areas of reform, as discussed below.

Reforms to Administrative Requirements

The Administrative Requirements category, consisting of Subparts A through D, is one of three categories that contain major policy reforms implemented by the Uniform Guidance. In particular, new significant requirements include:

  • Conflict of Interest and Mandatory Disclosures – Federal agencies will be required to have policies on conflict of interest in Federal awards, and non-Federal agencies will be required to disclose to Federal agencies any conflict of interest or relevant violation of Federal criminal law. This means organizations must disclose any conflicts, including those that exist not only around who the organization is contracting with, but any conflicts of interest that might be known as related to awards.
  • Use of Grant Agreements and Cooperative Agreements – This incorporates new coverage on fixed amount awards. Payments are to be based on meeting specific requirements or milestones of the Federal awards, and accountability will be based on performance and results. An award amount is negotiated using cost principles as a guide, with review of the costs performed upfront, and no government review of the actual costs incurred. Any significant changes to an agreement, such as a new project partner, scope, etc., will require prior written approval by the awarding agency.
  • Notice of Funding Opportunities – Federal awarding agencies must announce specific funding opportunities by posting a public notice through an OMB-designated government-wide website The intent of the update is to ensure that award applicants have the skills and capacity to meet the requirements of the award.
  • Federal Agency Review of Merit – Federal awarding agencies must design and execute a merit review process for applications. The process is intended to identify the potential risk of an applicant and thereby determine the appropriate applicant for an award. Items that may be considered by awarding agencies include financial stability, quality of management systems, history of performance, reports and findings from audits performed under Subpart F, and an applicant’s ability to effectively implement statutory, regulatory or other requirements. 
  • Standard Application Requirements – Federal awarding agencies will be required to use OMB-approved applications and standard information collection forms to manage Federal awards. By creating standard documents, the goal is to establish a more fair and competitive process. A standard set of 15 data elements must be provided in all Federal awards, and Federal award applications must identify coverage in general terms and conditions, in addition to including an indication of the timing and scope of expected performance as related to the anticipated outcomes. 
  • Performance Measurement – More robust guidance is provided in order to measure performance, with the objective to help entities improve program outcomes, share lessons learned, and spread the adoption of promising practices. While Federal agencies will provide clear performance goals, indicators and milestones, recipients will be required to relate financial data to performance accomplishments. Not-for-profit organizations will need to implement a system that supports analysis of how costs incurred on a program validate performance.
  • Internal Controls – For Federal awards, non-Federal entities must establish and maintain effective internal controls. This includes taking reasonable measures to safeguard protected personally identifiable information; complying with Federal statutes, regulations, and terms and conditions; evaluating and monitoring compliance; and taking prompt action on audit findings. Best practice documents that may be utilized by non-Federal entities include Standards for Internal Control in the Federal  Government, Committee of Sponsoring Organizations (COSO) Internal Control – Integrated Framework 2013, and OMB Circular A-133 Compliance Supplement Part VI – Internal Control.
  • Procurement Standards – A key update is that all non-Federal entities, including sub-recipients of a state, must have and follow written procurement procedures that reflect procurement standards. The entity must maintain oversight to ensure contractors perform in accordance with the terms, conditions and specifications of the contract or purchase order. Moreover, the entity must maintain written standards of conduct covering conflicts of interest. A new provision in the final guidance addresses organizational conflict of interest – that is, if the non-Federal entity has a parent, affiliate or subsidiary organization, the entity must also maintain written standards of conduct covering such organizational conflicts of interest.

Reforms to Cost Principles

Subpart E of the Uniform Guidance centers on Cost Principles. A major reform with respect to Cost Principles is the consolidation of three previously separate OMB Cost Principles documents – OMB Circulars A-21, A-87 and A-122. Certain significant changes made to the Cost Principles section under the final guidance include:

  • Indirect Cost Rates – The new guidance provides for a de minimis indirect cost rate (IDR) of 10% of modified total direct costs to any non-Federal entity that has never received a negotiated IDR. If chosen to receive an award, the non-Federal entity must use the 10% rate on all Federal awards until the entity negotiates an approved rate with their cognizant agency.   Federal awarding agencies must accept a negotiated IDR unless a different rate is required by Federal statute or regulation, or when approved by a Federal awarding agency head or delegate based on documented justification.  In addition, any non-Federal entity that has a Federally negotiated IDR may apply for a one-time extension of a current negotiated IDR for a period of up to four years.
  • Compensation (Time and Effort Reporting) – New language in the Uniform Guidance is intended to reduce the administrative burden placed on not-for-profit organizations related to compensation and is less prescriptive regarding documentation.  Instead, the new guidance places a greater emphasis on an organization’s internal controls to ensure that salaries and wages are appropriately allocated or charged, based on actual time and effort spent, to Federal awards.  Not-for-profit organizations should review their current time and effort reporting model, with the understanding that simply because compliance was sufficient in the past under previous circulars that such compliance may not be necessarily efficient or acceptable going forward, and assess whether any changes or enhancements are necessary. 
  • Required Certifications – A new requirement to assure that expenditures are proper and in accordance with the terms and conditions of the Federal award and approved project budgets, the annual and final fiscal reports or vouchers requesting payment under the agreements now must include a certification, signed by an official who is authorized to legally bind the non-Federal entity. This individual will be subject to criminal, civil or administrative penalties for fraud, false statements, false claims or otherwise. Not-for-profit organizations should begin to assess whom within the organization will have this ability and authorization, and what level of controls and reviews they will need in order to sign the certification in the affirmative.

What Does CohnReznick Think?
Not-for-profit organizations should seek to determine potentially necessary changes to internal policies and procedures as a result of the Uniform Guidance. Moving to implement the provisions now is critical, as compliance with the updated regulations draws near.

To read the complete Uniform Guidance document, click here. For more information regarding how the new guidance will affect not-for-profit organizations, please contact your CohnReznick advisor.


For more information, please contact Patricia McGowan, partner, at or 959-200-7007, and John Eusanio, partner, at or 646-625-5767. To learn more about CohnReznick’s Not-for-Profit Industry Practice, visit our webpage.


Any advice contained in this communication, including attachments and enclosures, is not intended as a thorough, in-depth analysis of specific issues. Nor is it sufficient to avoid tax-related penalties. This has been prepared for information purposes and general guidance only and does not constitute professional advice. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is made as to the accuracy or completeness of the information contained in this publication, and CohnReznick LLP, its members, employees and agents accept no liability, and disclaim all responsibility, for the consequences of you or anyone else acting, or refraining to act, in reliance on the information contained in this publication or for any decision based on it.

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