2014-06-17 Raffa BDO Managing U.S. Federal Awards

BDO USA, LLP, a Delaware limited liability partnership, is the U.S.
member of BDO International Limited, a UK company limited by
guarantee, and forms part of the international BDO network of
independent member firms. BDO is the brand name for the BDO
network and for each of the BDO Member Firms.
Managing U.S. Federal Awards:
Internal Control Requirements &
Accounting System Implications
Presented By:
Eric Sobota, Partner (BDO USA, LLP)
Sokhar Chan, Manager (BDO USA, LLP)
Seth Zarny, Partner (Raffa, P.C.)
Buu-Linh Tran, Manager (Raffa, P.C.)
June 17, 2014

Managing U.S. Federal Awards: Internal Control Requirements & Accounting System Implications
Page 2
Agenda
 Overview & Background
 Pre-Award Administrative Requirements
 Post-Award Implementation Requirements
 Strategic Considerations

Overview & Background

Page 4
Development
 In 2009, President Obama issued Executive Order 13520
 declared a focus on reducing improper payments government-
wide and eliminating waste and fraud
 January 18, 2011, the President issued Executive Order
13563,
 directed all executive agencies to review their regulations, and
determine if they were “tailor[ed]... to impose the least burden
on society”
 In an accompanying memorandum, the White House
stated that “Executive Order 13563...requires
retrospective analysis of existing significant rules and
greater coordination across agencies to simplify and
harmonize redundant, inconsistent, or overlapping
requirements, thus reducing costs”

Page 5
Development
 On February 28, 2012, OMB published an Advance Notice of
Proposed Guidance (ANPG) in the Federal Register
 Proposed the consolidation of cost accounting principles, but did
not propose to consolidate the various administrative
requirements unique to each category of recipient
 On February 1, 2013, OMB issued the draft text of the
Supercircular, currently designated as OMB-2013- 0001-0002
 OMB also published a 15-page summary and discussion document
in the Federal Register setting forth a history
 Over 300 individuals and institutions submitted comments by the
June 2, 2013 deadline
 The rule issued December 26, 2013 and will be fully
implemented by December 26, 2014
 OMB will integrate the new rule into Title 2 of the Code of
Federal Regulations

Page 6
Overview
 December 26, 2013 OMB issued Uniform Administrative
Requirements, Cost Principles, and Administrative
Requirements for Federal Awards
 Consolidates regulations to provide consistent guidance for grant recipients
and issuers
 Changes and consolidations include:
 Provides a single resource for requirements that apply to all recipients,
eliminating the requirement for grants professionals to cross-reference
between multiple resources;
 Includes new measures designed to ensure merit-based grant awards and
identify problems early in the process;
 Introduces more formal requirements for certification of compliance and
disclosure of noncompliant or criminal acts;
 Attempts to streamline and standardize the cost principles in many ways,
including new options for the recovery of indirect costs.

Page 7
Implementation - Key Dates
 Standards that apply directly to Federal agencies are already
effective on 12/26/13.
 Federal agencies will simultaneously implement regulations
applicable to recipients.
 Individual Federal agencies currently required to implement
“SuperCircular” with regulations to be effective by 12/26/14.
 Required to submit draft implementing regulations to OMB by
6/26/14.
 Administrative requirements and costs principles apply to new
grant awards and additional (incremental) funding made after
12/26/2014.
 Audit requirements in Subpart F will apply to audits of FY
beginning on or after December 26, 2014
 Audit threshold change (FY beginning after 12/26/14)

Page 8
Cost and Audit Principles
 Effective 12/31/2014 farewell to the following:
• Administrative Requirements in A-102 and A-110
• Cost Principles in OMB Circulars A-21, A-87 and A-122 (limited
variations by entity type)
• Audit Policies OMB Circulars A-133 for audit provisions
• Federal Program Information Requirements in OMB Circular A-89
• OMB’s Directive on Federal Agency Assistance Program
Announcements

Page 9
New Guidance
 Uniform Administrative Requirements, Cost Principles
and Audit Requirements for Federal Awards (also known as the
“SuperCircular” and the “Omni-Circular”)
 New Guidance broken out into six(6) subparts and
several appendices:
 Subpart A – Acronyms and Definitions
 Subpart B – General Provisions
 Subpart C – Pre-Award Federal Requirements and Contents of
Federal Awards
 Subpart D – Post Federal Award Requirements
 Subpart E- Cost Principles
 Subpart F – Audit Requirements
Specific elements of costs are addressed further in Appendix III for Educational
Institutions and Appendix IV for Nonprofit Organizations

Page 10
Significant Features
 Imposes common requirements for both administrative and
accounting functions
 Supersedes Circulars A-89, A-102, and A-110 for administrative
requirements
 Provides across-the-board deadlines and thresholds for notice
requirements, small purchase limits
 Requires new quality control and efficiency measures
 Significant new guidance for Federal grants personnel
 Consolidates Circulars A-87, A-21, and A-122 setting forth the
cost principles governing the use of Federal grant funds for
state and local public agencies, higher education institutions and
nonprofit organizations not covered by the other circulars.
 All of these entities must now refer to the consolidated terms of
the Supercircular.

Page 11
What Are Requirements for
Grant Management System?
 Tracking pre-award process (process for grant application)
 Tracking grant dollars
 Monitor Grant Spending - Avoid over spending
 Allocate IDC
 Financial Reporting – maintaining grant reports/ donor reports
 Grants – Tracking non financial information & managing grant
information
 Robust Reporting – Ability to drill down

Page 12
How can Technology Help?
 Intacct Project Accounting/ User Defined Fields
 Microsoft dynamics GP Grants Management/Extender
 Microsoft Dynamics SL – Project/grants – allocations, modifier
 SharePoint
 Financial System(s)
 Custom application/ Database
 MS Excel / Word

Page 13
Field Offices – Other Factors
 People (Priorities/culture/authorities)
 Technical challenges
 Different Processes
 Multicurrency
 Different systems
 Locations
 Support/ Financial Reporting
 Reporting to necessary stakeholders (Board of directors, Donors, executives,
program managers, grants managers, etc.)
 Nonprofits must account for:
 Funds, Grants, Projects, Programs, and More
 Documentation

Page 14
What Types of Data Are Tracked?
 Non-Financial
 Pre-award Process & Related Information
 Awarded Information including
- Contractor/ Sub-Recipient, sub-recipient IDC, track compliance
- IDC
- Matching Requirements
- Reporting Requirements/ schedule
 Manage Grant Life Cycle
 Financial
 Linking grants to financial transactions
 Financial Reporting (PL by Grant, SEFA)
 IDC calculation

Page 15
Tools for Tracking Non-Financial Data
Demo Dynamics GP and Intacct

Pre-Award Administrative Requirements

Page 17
Reforms to Administrative
Requirements
 Pre-Award Requirements (§200.200-211)
 For all awards, Federal agency must consider government-wide
“eligibility qualification or financial integrity information,” such as
FAPIIS, Dun & Bradstreet, “Do Not Pay,” and List of Excluded Parties.
 “For competitive grants and cooperative agreements,” Federal agency
must publicly announce funding opportunities, including:
 Specific eligibility information and “merit review process” including
“criteria and process to be used to evaluate applications;”
 Available for at least 60 calendar days (no less than 30 days);
 Framework for evaluating risks posed by applicants (including
performance of other awards and audit reports).
 Suggests these provisions be used for non-competitive awards too.
 “Fixed Amount Awards” available.

Page 18
Direct Costs
 Allows for direct charging of administrative and clerical
salaries if all of the following conditions are met:
 Integral to a project or activity;
 Individuals can be specifically identified;
 Such costs are explicitly included in the budget or have the prior
written approval of the Federal awarding agency; and
 The costs are not also recovered as indirect costs.

Page 19
Indirect Cost Rates
 Negotiated rates accepted by all Federal awarding
agencies
 A different rate may be used when required by Federal
statute/regulation, or when approved by a Federal agency.
 May apply for a one-time extension of a current negotiated indirect
cost rates for a period of up to four years.
 Any non-Federal entity that has never received a negotiated indirect
cost rate, (exceptions in Appendix VII) may elect to charge a de
minimis rate of 10% of MTDC which may be used indefinitely.
 Award levels for Federal awards will not be adjusted
throughout the “life” of the award due to changes in
negotiated rates
 Negotiated rates include final, fixed and predetermined rates.

Page 20
Indirect Cost Methods
 Negotiated Lump Sum for Indirect Costs
 Method may be used for self-contained, off-campus or primarily
subcontracted activities where the benefits of the overall indirect
activities cannot be determined.
 In lieu of detailed cost information, can negotiate a fixed amount
per agreement for indirect costs.
 Predetermined Rates for Indirect Costs
 Permanent rate established for a specified current or future period
and is not subject to adjustment.
 Negotiated Fixed Rates and Carry-Forward Provisions
 Allows a fixed rate for one fiscal year or longer and apply an
adjustment for over/under billing to the next fixed rate negotiation

Page 21
Indirect Cost Methods

Page 22
How Are Financial Data Tracked?
 Intacct
 Dimensions
 Project Accounting Modules
 Dynamics GP
 Chart of account (COA) – Track grant activities through segment of COA
 Analytical Accounting (AA) – Dimensions
 Olympic – Use project to track grant transactions
 Dynamics SL
 Project Accounting Series
 Cost Allocations
 Project, Tasks, Account Category
 Indirect & Direct Rates, Provisional/Actual

Page 23
Financial Data in Dynamics GP, SL
and Intacct ?
Features Chart of Account Analytical
Accounting
SL/Olympic Intacct
1.Track grant transactions X X X X
2. Track grant budgets for fiscal and
grant period
X X X X
3. Prevent or provide warning when
expenditure exceed grant revenue
X X (SL)
4. Track employee time against grant X X (Only w/ Project)
5. Track employee expense against
grant (web-based application)
X X (only w/ Project)
6. Bill against the grant X X X X (only w/ Project)
7. Management Reporter (FRx)/
Financial Reports by Project
X X X
8. Smartlist X X X
9. SSRS/ Custom report X X X X
10. Cost Allocations Moderate Moderate Extensive Moderate

Page 24
Pros and Cons
Solutions Pros Cons
Chart of
Account
Easy to maintain (Accounting dept control over
COA)
No sub-ledger to manage
Easy to create report using MR
Can slice and dice segment for reporting
Work with MR/ existing report writer
Long COA
Not accommodate multiple year (grant yr vs.
fiscal yr)
Maintain old accounts forever
Data entry
Unable to handle complex grant requirement
(time entry, complex allocation, etc.)
Analytical
Accounting
Shorten COA
Prevent charging expenditure in excess of
revenue
Work with MR/ existing report writer
Maintain sub-ledger / resource
Separate screen for data entry
Require reconciliation
Additional training
Additional configuration/setup
Olympic Project
Accounting/
Dynamics SL
Shorten COA
Track employee time and expense against
grant
Allows for sophisticated allocation
Allows for sophisticated billing
Sophisticated Costing – Direct/Indirect Rates
Separate screen for data entry
Has separate reporting function
Intacct Project
Accounting
Shorten COA
Track employee time and expense against grant
Require reconciliation

Page 25
Tools for Tracking Financial Data
& Reporting

Page 26
Sample SEFA Report

Government Contractors Financial & Project Management System Seminar
Page 27
Post-Award Implementation Requirements

Page 28
Sub-recipient Overview
Implications for pass-through entities
 One of the most significant changes is the more stringent
requirements for sub-recipient monitoring
 Examples of expanded pass-through entity responsibilities
include:
o Requirement for consistent practice to distinguish sub-recipient from
contractor
o Identifying or negotiating an appropriate sub-recipient indirect cost
rate at the time of award
o Ensuring “flow-down” of new requirements are included within sub
agreements, as applicable
o Evaluating sub-recipient risk of noncompliance and determining
necessary monitoring activities – including on-site reviews
o Imposing remedies for sub-recipient noncompliance, when necessary

Page 29
Sub-recipient or Contractor…
What’s the difference?
 Sub-recipient:
o A sub-recipient “uses the Federal funds to carry out a program for a
public purpose specified in authorizing statute”
o Characteristics which support classification of the non-Federal entity
(NFE) as a sub-recipient includes when the NFE:
1. Determines who is eligible to receive what Federal assistance;
2. Has its performance measured in relation to whether objectives of a
Federal program were met;
3. Has responsibility for programmatic decision making;
4. Responsible for adherence to applicable Federal program requirements
specified in the Federal award; and
5. In accordance with its agreement, uses Federal funds to carry out a
program for a public purpose specified in authorizing statute, as opposed
to providing goods or services for the benefit of the pass-through entity.

Page 30
Sub-recipient or Contractor…
What’s the difference? - (cont’d)
 Contractor:
o A contract is for the purpose of obtaining goods and services for the
non-Federal entity’s own use and creates a procurement relationship
with the contractor
o Characteristics indicative of a relational between a NFE and a
contractor are when the NFE who is receiving federal funds:
1. Provides similar goods or services to many different purchasers;
2. Normally operates in a competitive environment;
3. Provides goods or services that are ancillary to the operation of the Federal
program; and
4. Is not subject to compliance requirements of the Federal program as a
result of the agreement, though similar requirements.

Page 31
Sub-recipient Selection & Planning
What’s required?
 Establish formal process to properly structure sub-
recipient agreements. Be sure to include:
o All flow-down requirements necessary to ensure appropriate sub-
recipient use of Federal award
o Any additional flow-down requirements necessary for pass-through
entity to meet its own responsibilities
o A requirement that the sub-recipient permit access to records and
financial statements through the period of performance
 Consider expanded pass-through entity responsibilities
o Required information to be provided to sub-recipients
o Use of appropriate sub-recipient indirect cost rates
o Conduct sub-recipient risk assessment

Page 32
Required information
 Must clearly identify every sub-award to the sub-
recipient and must include the following information at
the time of the sub-award:
o Federal Award Identification and Federal Award Identification
Number (FAIN)
o Sub-recipient name and DUNS number
o Federal award date
o Sub-award period of performance (start and end dates)
o Funding information
o Federal award project description
o Name of the Federal awarding agency
o Catalog of Federal Domestic Assistance (CFDA) title and number
o Identify if award is for Research & Development (R&D)
o Indirect cost rate for the Federal award

Page 33
Required information – (cont’d)
 Changes to data elements previously provided must be
reflected in subsequent sub-award modifications
 Should some of the required information not be available
at the time of award, pass-through entity may include
the best information available to describe the Federal
award and sub-award

Page 34
Indirect cost rate
 Consider if sub-recipient has an approved/federally
recognized indirect cost rate
 If no such rate exists, consider alternative options:
o Negotiate rate with sub-recipient
o Use de minimis rate of 10% of modified total direct cost (MTDC)
o Utilize fixed amount sub-awards
 Requires prior written approval from the Federal awarding agency
 May only be used when total sub-award value does not exceed the
Simplified Acquisition Threshold (i.e. $150,000)
 Must consider requirements of section 200.201 “Use of grant
agreements (including fixed amount awards) cooperative agreements,
and contracts”

Page 35
Sub-recipient Monitoring Activities
Risk assessment
 Sub-recipient monitoring plan must ensure that the sub-
award:
o Is used only for authorized purposes
o Is in compliance with Federal statutes/regulations & sub-award T&Cs
o Achieves its performance goals
 Consider risk of sub-recipient noncompliance
 Risk assessment is based on:
o Prior/past experience with similar sub-awards
o Previous audit results
o Significant changes in personnel or systems
o Extent and results of Federal awarding agency monitoring

Page 36
Monitoring plan
 Minimum monitoring activities must include:
o Reviewing financial and programmatic reports
o Conducting on-site reviews/audits based on risk assessment
o Conducting follow-up reviews to ensure timely completion of
corrective actions required to address deficiencies – as identified
through on-site reviews, audits, or other means
o Issuing a management decision for audit findings pertaining to the
Federal award
o Verifying that each sub-recipient receive completed audits, as
required
 Design of monitoring plan will vary based on sub-recipient
risk assessment:
o i.e., more stringent monitoring plan is required for high risk sub-
recipients

Page 37
Additional considerations
 Based on results of monitoring activities, pass through entities
should
o Provide training and technical assistance to appropriate sub-recipient
staff
o Determine if on-site reviews/audits necessitate adjustments to own
records
o Consider taking enforcement action against noncompliant sub-recipients
 If sub-recipient noncompliance is determined, pass through
entities may apply enforcement action through specific
conditions (§200.207)
 If noncompliance cannot be remedied through specific
conditions, more severe enforcement action may be taken
(§200.338)

Page 38
Imposing specific conditions
 Specific conditions can
o Dictate how sub-award receives payment
o Require additional reporting requirements or prior approvals
o Require sub-recipient obtain technical or management assistance
 When imposed, specific conditions must be clearly
communicated to sub-recipients
 Any specific conditions must be promptly removed once
corrected

Page 39
Additional enforcement action
 If noncompliance cannot be remedied through specific
award conditions, consider more severe enforcement
action, such as:
o Applying temporary cash withholds
o Disallowing all or part of the cost of the activity
o Suspending or terminating the sub-award
o Recommending the Federal awarding agency initiate suspension or
debarment proceedings
o Withholding future awards to the sub-recipient
o Pursuing other remedies legally available

Page 40
Sub-recipient Monitoring
Performance strategies
 Internal:
o All sub recipient monitoring task can be performed “in house” using
staff
o Omni-circular provides for opportunity to augment and refine existing
processes to address new compliance requirements
o Consider timing requirements and resource bandwidth
 External:
o New requirement allows for outsourced sub recipient monitoring
functions
o Considered an allowable direct cost provided that agreed upon
procedures are:
 Conducted in accordance with Generally Accepted Government Auditing
Standards (GAGAS)
 Paid for and arranged by the pass-through entity
 Limited in scope to specific compliance requirements

Page 41
Sub-recipient Monitoring
Cost recovery strategies
 Limited cost recovery afforded through an indirect rate
o Only first $25,000 of sub-recipient costs receive indirect cost
allocation
 New guidance allows for outsourced sub-recipient monitoring
costs to be recovered directly to awards
 Organizations who plan to outsource sub-recipient monitoring
must:
o Determine the mechanics and allocate costs prior to finalizing budgets
o Ensure these are costs included in upcoming proposals
 Otherwise, these costs may not be allowed as direct cost going forward

Page 42
General best practices
 Sub-recipient monitoring procedures should include:
o Informing your sub-recipient of pertinent information
o Ensuring your sub-recipients are receiving audits when necessary
o Reviewing financial and programmatic reports
 Reconcile the sub-recipient's budgeted expenditures to actual expenditures
 Perform an on-site visit to the sub recipient to review financial and
programmatic records and observe operations
 Desk review - review financial and program reports submitted by sub
recipients for allowable use of the grant funds.
o Establishing a tracking system to assure timely submission of required
reporting
o Having a 2nd party within your organization periodically review the
adequacy of sub recipient monitoring for all programs
o Document! Document! Document!

Page 43
Tracking Sub-Recipients in the
Accounting System

Page 44
Procurement
 Methods of Procurement to be followed (§200.320)
1.) Procurement by Micro Purchase (<$3,000*)
- “may be awarded without soliciting competitive quotations if Non
Federal entity considers price to be reasonable.”
2.) Procurement by Small Purchase Procedures (<$150,000)
- “price or rate quotations must be obtained from adequate number
of qualified sources.”
3.) Procurement by Sealed Bids (formal advertising)
4.) Procurement by Competitive Proposal
5.) Procurement by Noncompetitive Proposal
• Contracting with small and minority-owned businesses.

Page 45
Procurement
 Procurement by Noncompetitive Proposal
 Limit Sole Source Procurements to the following situations:
 The item is available only from a single source;
 The public exigency or emergency for the requirement will not
permit a delay resulting from competitive solicitation;
 The Federal awarding agency or pass-through entity expressly
authorizes noncompetitive proposals in response to a written
request from the non-Federal entity; or
 After solicitation of a number of sources, competition is
determined inadequate.

Page 46
Procurement
 Procurement Standards for “non-Federal entities”
(§200.317-326)
 Requires a formal, almost FAR-like process, presumably to ensure
the most efficient use of grant dollars.
o Procedure must be “documented”
o Must provide “full and open competition”
o Must perform “cost or price analysis”
o Must consider conflicts of interest
o Award only to “responsible” contractors
 Records must be maintained to document the history/rationale of
the procurement.
 Prohibits state or local geographical preferences.
 Must use one of 5 procurement methods (§200.320)
o Less formal methods OK if under the Federal “Simplified Acquisition
Threshold” of $150,000.

Page 47
Procurement
 Effective Procurement Systems
 Maintain adequate descriptions of the system including policies,
procedures, and purchasing practices that comply with applicable
laws, regulations, and contract terms and conditions;
 Mitigate against conflicts of interest;
 Ensure applicable flow down clauses and terms and conditions are
included in contracts, as required to execute the requirements of
the award;
 Clearly define lines of authority and responsibility within the
system;
 Ensure procurements are based on authorized requisitions;

Page 48
Reforms to Other Administrative
Requirements
 Effective Procurement Systems (continued)
 Define contractor evaluation criteria and methods for determining
source selection;
 Perform timely cost/price analysis and technical evaluations to
determine cost/price is fair and reasonable;
 Maintain documentation which details the complete and accurate
history of the purchase transaction to support method, contractor
selected/basis of award, and reasonableness of cost/price;
 Implement strong contractor monitoring and management of
controls;
 Ensures effective and efficient procurement of required quality
supplies and services at reasonable cost/price from responsible
and reliable sources.
 Address adequate competition.

Page 49
Procurement Implications in the
Accounting System
 Purchasing Module
 GP/ SL – Business Portal/ PO
 Intacct - Purchasing
 3rd Party Solutions
 eRequester
 ReQlogic
 Docassist
 Features include:
 RFQ, RFP
 Requisition / approval
 Documentation (include policies and procedures)
 Price Analysis

Page 50
Requirements
 Mandatory disclosures (§200.113)
 Recipients and sub-recipients must disclose, “in a timely manner,”
in writing to the awarding agency or pass-through entity “all
violations of Federal criminal law involving fraud, bribery, or
gratuity violations potentially affecting the Federal award.”
 Failure to make “required disclosures” can result in remedies in
§200.338, including withholding of payments, disallowance, and
suspension/debarment from future awards.
 This disclosure requirement is narrower than the so-called
“mandatory disclosure” rule under the FAR.
 §200.113 requires disclosure of violation of federal criminal law –
higher standard of proof and intent requirement.
 FAR rule, on other hand, is triggered if the contractor has “credible
evidence” of violation of Federal criminal law, violation of civil
False Claims Act, or significant overpayment.
 But, some agencies are already moving closer to FAR rule and may
take this as cue to do more.

Page 51
Requirements
 Mandatory disclosures – effective practices
 Set standards and establish procedures to facilitate timely discovery
of improper conduct;
 Assign responsibility at a sufficiently high level to ensure business
ethics and compliance programs are effectively carried out;
 Conduct periodic reviews to ensure compliance with code of
business ethics and conduct;
 Establish processes to periodically assess the risk of criminal
conduct (or other conduct subject to reporting requirements);
 Establish an effective internal reporting mechanism (e.g., hotline)
which allows for anonymity or confidentiality, by which employees
may report suspected instances of improper conduct;
 Define disciplinary action for improper conduct;
 Establish a process to consider making appropriate and timely
disclosure, in writing, to applicable agency OIG or pass-through
entity.

Page 52
Requirements
 Certification Requirements For Recipients (§200.415)
 ‘‘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.”
 Potential civil and criminal liabilities (including the Civil False
Claims Act) could be applied to the individual and the organization.
 Organization also subject to remedies for non-compliance under
§200.338.

Page 53
Requirements
 Effective Certification Controls
 Process by which the Organization reviews records to determine if
more current, accurate, and complete cost data is reasonably
available and should be disclosed to the Government.
 If discovered, additional cost data must be provided to the
Government with the executed Certificate.
 Identify and disclose assumptions and limitations in data.
 The impact/effect of the new cost data on proposal cost should also
be provided to the Government.
 Typically occurs after budget agreement, but prior to contract award.
 Best Practices
 Establish policy/procedures on certification execution;
 Clearly define roles and responsibilities within the process;
 Create checklist with signatory authority/responsibilities;
 Develop training program to educate team members; and
 Obtain similar certifications from subrecipients and consider remedies.

Page 54
Oversight
 Conflicts of Interest
 Two types of Conflict of Interest:
 Organizational Conflict of Interest (OCI) - arises when, because of other
relationships or circumstances, a contractor may be unable, or potentially
unable, to render impartial advice or assistance to the government, the
contractor’s objectivity in performing the work is or might be impaired,
and/or the contractor would have an unfair competitive advantage.
 Personal Conflict of Interest (PCI) - Personal Conflicts of Interests is a
situation in which a covered employee has a financial interest, personal
activity, or relationship that could impair the employee’s ability to act
impartially and in the best interest of the Government.
 Requirement:
 Agencies required to develop conflicts of interest policies for “Federal
awards,” including subawards;
 Not limited to procurement transactions.
 Required to disclose conflicts to agency/non-federal entity.

Page 55
Oversight
 Effective processes
 Establish methods to identify and evaluate potential conflicts of
interest as early as possible in the acquisition or subaward process;
 Establish responsible party for monitoring potential conflict of interest
 Screen covered employees for PCI
o Require Disclosure of Interest Statement
- Updated when personal or financial interest changes and no less than annually
 Maintain written standards of conduct covering conflicts of interest.
 Develop training to promote awareness and reinforce disclosure
requirements; and
 Define disciplinary action, if PCI is violated;
 Establish process to disclosure to CO, in writing, any “potential
violation conflict of interest” and demonstrate corrective actions.

Page 56
Oversight
 Internal Control Requirements
 Establish and maintain effective internal control over the Federal
award that provides reasonable assurance that the non-Federal
entity is managing the Federal award in compliance with Federal
statutes, regulations, and the terms and conditions of the Federal
award;
 Comply with Federal statutes, regulations, and the terms and
conditions of the Federal awards;
 Evaluate and monitor the non-Federal entity's compliance with
statute, regulations and the terms and conditions of Federal awards;
 Take prompt action when instances of noncompliance are identified
including noncompliance identified in audit findings;
 Take reasonable measures to safeguard protected personally
identifiable information and other information the Federal awarding
agency or pass-through entity designates as sensitive.

Page 57
Oversight
 Internal Control best practices
 Design and document effective practices within policies and
procedures;
 Establish independent monitoring practices to ensure actual
practices are consistent with documented processes, including
review of established policies and procedures;
 Establish reporting requirements for potential noncompliance,
including recommended corrective action plans and milestones for
implementing corrective actions;
 Develop and provide training to applicable personnel.

Page 58
How Technology Can Help with
Internal Control
 Approval Workflow
 Audit tool – Monitor and Confirm Internal Control
Working
 3rd Party Audit Tools
 FastPath
 Rockton Auditor

Government Contractors Financial & Project Management System Seminar
Page 59
Strategic Considerations

Page 60
Changes to Selected Items of Cost
 Compensation for Personal Services (200.430)
 Sets forth documentation standards for time recording and labor
expense;
 Charges to Federal awards for salaries and wages must be based on
records that accurately reflect the work performed. These records
must:
o Be supported by a system of internal control which provides reasonable
assurance that the charges are accurate, allowable, and properly
allocated;
o Be incorporated into the official records of the non-Federal entity
o Reasonably reflect the total activity for which the employee is
compensated by the non-Federal entity not exceeding 100% of
compensated activities;
o Encompass both federally assisted and all other activities
o Comply with the established accounting policies and practices of the non-
Federal entity.

Page 61
 Compensation for Personal Services
 Previously, grantees maintained written records of employees’
activities to document an employee’s time as an allowable cost
 Specific support for salaries and wages included:
 After-the-fact determination of actual activity for each employee,
not the budgeted amount
 Total Activity for which employees were compensated
 Signed by individual employees or responsible supervisor with
firsthand knowledge; and
 Prepared at least monthly to coincide with one ore more pay
periods

Page 62
 New guidance provides that the grantee must meet broad objectives
for allowability and specific time and effort documentation is not
required.
 Must be reasonable for the services rendered and conform to the
established written policy
 Charges to the Federal awards for salaries and wages must be
based on records that accurately reflect the work performed
 Records must meet the documentation standards set forth in
200.430.
 Budget estimates continue to be insufficient support for charges,
however, it does allow non-federal entities to make interim charges
based on budget estimates as long as final adjustments to charges
are made to ensure that any amounts charged to Federal awards is
accurate.

Page 63
 Uncertainty around Acceptable Type of Documentation
 Allows grantees to use their own system of internal controls to
document compensation costs
 Continues to require an after-the-face review of “records that
accurately reflect the work performed”
 Potential for audit questioned costs
 Further guidance will be available in June 2014
 Exchange Rates (200.440)
• Cost increases for fluctuations in exchange rates are allowable costs
subject to the availability of funding, and prior approval by the
Federal awarding agency.

Page 64
 Equipment (200.439) and Materials and Supplies
(200.453)
• Cost of certain computing devices are allowable as direct cost
supplies.
• Charge and treat computing devices not considered depreciable
assets based on capitalization policy as direct costs.
• Must follow practices for allocability of direct versus indirect costs.
 Depreciation (200.436)
• All references to use allowances have been eliminated.
• Organizations that have facilities that they own and are old will have
an issue with this as there is no use allowance anymore.

Page 65
Timekeeping
Demo Intacct Timesheet System

Page 66
A-133 Audit Considerations
 Increase to $750,000 from $500,000 in the dollar
threshold for the A-133 audit
 Still required to make records available for review or audit by
appropriate officials of Federal agencies, pass-through entities and
the GAO.
 Level of oversight needed for other provisions that
would fall below the new threshold:
 Pre-award review of risks,
 Standards for financial and program management,
 Sub recipient monitoring

Page 67
Considerations
 The guidance provides flexibility and new options for the
recovery of indirect costs
 Consider new options which may offer significant advantages
 Take action:
 Perform gap assessment of current processes to uniform guidance
 Compliance polices are critical
 Conflicts of Interest, ethics and compliance, and consider
internal reporting policies.
 Procurement – document process, rationale, and consideration of
price/cost.
 Internal training.
 Subawards
 Address award process and effective monitoring/oversight.
 Address changes to cost principles.

Page 68
Next Steps
 Review Uniform Requirements
 Including the commentary from Council on Governmental Relations
(COGR).
 Note the key dates and begin preparing
 Attend additional training sessions, roundtable events
 Non-Federal entities who implement entity-wide system changes to
comply with guidance after the effective date will not be penalized.
 Monitor OMB and Federal agency actions

Questions?
Eric Sobota
BDO USA, LLP
(703) 770–6395
esobota@bdo.com
Seth Zarny
Raffa, P.C.
(301) 279-6500
szarny@raffa.com
Buu-Linh Tran
Raffa, P.C.
(301) 279-6511
btran@raffa.com

2014-06-17 Raffa BDO Managing U.S. Federal Awards

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