Updated Field Alert: OMB Extends Deadline for Comments on the Proposed “Supercircular” (Uniform Grants Guidance to Replace Cost Principles, Audit, and Administrative Requirements)

On Friday, February 1, 2013, the Office of Management and Budget (OMB) released Proposed OMB Uniform Guidance: Cost Principles, Audit, and Administrative Requirements for Federal Awards (the “Proposal”). ¹

The Proposal encompasses reforms proposed by OMB in a February 28, 2012 Advance Notice of Proposed Guidance (“ANPG”) published in the Federal Register.  Both that notice and the Proposal were developed in response to the President’s direction to OMB to work with Executive Branch agencies; state, local, and tribal governments; and other key stakeholders to evaluate potential reforms to Federal grants policies.

Along with the Proposal, OMB issued guidance in the Federal Register (“Proposed Guidance”) that responds to comments it received during the review period following the ANPG.²   It outlines the ideas proposed in the ANPG, identifies the broad themes throughout the comments, and proposes reforms stemming not only from the ANPG but also from stakeholder comments.  Grantees of all types should take the time to review the Proposal and consider the implications it may have on their programs.  OMB is again asking the public to comment on the Proposal; written comments will be used to further refine reforms prior to the issuance of new guidance.

Background

As the Proposed Guidance states, OMB is committed to transforming the federal financial assistance framework, including grant making, so that it meets a higher standard of performance while delivering the right program outcomes.  This initiative is part of President Obama’s commitment to developing a more efficient, transparent, and creative government while ensuring financial integrity.

As such, in addition to holding agencies accountable for getting results and addressing weaknesses among grant recipients, OMB seeks to strengthen accountability for federal dollars by improving policies and focus audit resources to protect against fraud, waste, and abuse.³

Proposed Reforms

Reforms to Cost Principles (Circulars A-21, A-87, and A-122, and the Cost Principles for Hospitals): Subchapter F Cost Principles and Appendices IV-IX

The reforms discussed in the ANPG under this section and incorporated into or clarified by the Proposal include:

1. Consolidating the cost principles into a single document with limited variations by type of entity;
2. For indirect costs (“facilities and administrative” or “F&A”), using flat rates instead of negotiated rates;
3. Exploring alternatives to time-and-effort reporting requirements for salaries and wages;
4. Charging directly allocable administrative support as a direct cost;
5. Including the costs of certain computing devices as allowable direct cost supplies;
6. Clarifying the threshold for an allowable maximum residual inventory of unused supplies;
7. Eliminating the requirement that printed “help-wanted” advertising comply with particular specifications;
8. Allowing for the budgeting for contingency funds for certain awards;
9. Strengthening requirements for all recipients to document cost accounting practices and provide necessary paperwork to auditors while eliminating cost accounting standards and the requirement for institutions of higher education to file a disclosure statement;
10. Allowing for excess or idle capacity for certain facilities, in anticipation of usage increases;
11. Allowing costs for efforts to collect improper payment recoveries; and
12. Providing non-profit organizations with an example of the certificate of indirect costs.

The public responded to the ANPG with additional suggestions for OMB to consider.  As a result, OMB chose to incorporate into the Proposal (a) clarification of the circumstances under which agencies may make exceptions to the negotiated cost rate; (b) clarification of the Cost Principles for information technology; (c) clarification of costs related to family-related leave and dependent care; and (d) clarification that participant support costs are allowable to all recipient entities.⁴

Reforms to Administrative Requirements (the Common Rule Implementing Circular A-102); Circular A-110; and Circular A-89: Subchapters A-E

Please note:  A-102 is the circular upon which 45 CFR Part 92 for State, Local and Tribal Governments is based.  A-110 is the circular upon which 45 CFR Part 74 for Non-Profits, Institutions of Higher Education and Hospitals is based.  These proposed reforms could have great effect on federal grantees.

In drafting the Proposal, OMB considered the reforms proposed in the ANPG, comments received in response to the ANPG, and additional “write-in” ideas submitted by the public.  Reforms of note include:

1. Creating a consolidated, uniform set of administrative requirements in OMB Circulars A-102 and A-110 for all grant recipients.

The Proposal generally uses language from A-110 and attempts to explicitly state separate provisions for state, local, and tribal governments carried over from A-102, as described in the crosswalk guidance.⁵

2.  Requiring pre-award consideration of each proposal’s merit and each applicant’s financial risk.

The Proposal grants agencies “significant flexibility” in their interpretations of this requirement.  The Proposed Guidance notes that an agency may conduct a risk assessment at any point prior to award, thereby only reviewing applications likely to be selected.

3.  Requiring agencies to provide at least a 30-day notice of funding opportunities.

To help ensure that applicants have adequate time to apply for assistance, the Proposal suggests that the notices of funding opportunities remain open onwww.grants.gov for “at least 30 days, unless exigent circumstance dictate otherwise.”

4.  Providing a standard format for announcements of funding opportunities.

The Proposal incorporates the idea that the circulars should include the list of categories of information to be published in public funding opportunity announcements.

5.  Consolidating standards on subaward management.

The Proposal includes a section entitled, “Subrecipient Monitoring and Management” for guidance on oversight of subawards.  Such information was formerly located in different places throughout different OMB Circulars.

The Proposal also (a) updates the threshold for small purchase procedures to be consistent with the simplified acquisition threshold at 41 USC 403(11) (currently $150,000); (b) clarifies that the 3-year period for retention of documents starts on the day the award recipient submits its final expenditure report; (c) requires agencies to provide recipients with information such as a unique award identifier at the time an award is made; and (d) adds language requiring Federal agencies to complete all closeout actions for Federal awards no later than 180 days after the final report is received.

Reforms to Audit Requirements (Circulars A-133 and A-50) Subchapter G: Audit Requirements

The reforms discussed in the ANPG under this section and incorporated into the Proposal include:

1. Concentrating audit resolution and oversight resources on higher dollar, higher risk awards;
2. Streamlining the types of compliance requirements in the Circular A-133 Compliance Supplement;
3. Strengthening guidance on audit follow-up for Federal awarding agencies;
4. Reducing burdens on pass-through entities and subrecipients by ensuring across-agency coordination; and
5. Reducing burdens on pass-through entities and subrecipients from audit follow-up.

Submitting Comments

Given the importance of the Proposal’s scope and its likely impact, grantees and other interested parties are encouraged to submit written comments to OMB. Comments can be submitted anytime until June 2, 2013 an extended deadline) as per this Federal Register Notice: (https://www.federalregister.gov/articles/2013/03/21/2013-06455/reform-of-federal-policies-relating-to-grants-and-cooperative-agreements-cost-principles-and). Comments may be submitted electronically via http://www.regulations.gov.

If you have any questions about the information in this Field Alert or other federal grants issues, please contact Ted Waters (ewaters@feldesman.com) or Zoë Beckerman (zbeckerman@feldesman.com).

For information about our Federal grants, Head Start, and corporate compliance trainings, please visit us here: https://learning.ftlf.com

1. Available at http://www.whitehouse.gov/omb/grants_docs under “Proposed Policies” and on www.regulations.gov by searching for docket number OMB-2013-0001.
2. 78 Fed. Reg. 7282 (Feb. 1, 2013).  OMB received more than 350 comments to the ANPG.
3. http://www.whitehouse.gov/blog/2013/02/01/proposal-better-management-federal-grants.
4. Participant support costs are direct costs for items such as stipends or subsistence allowances, travel allowances, and registration fees paid to or on behalf of participants or trainees (but not employees) in connection with meetings, conferences, symposia, or training projects.  Existing guidance for non-profits states that such costs are allowable when approved by the awarding agency; this reform would expand that language to all types of recipient entities.
5. To help parties identify and understand the proposed policy changes, clarifications, and updates to policy provisions, OMB developed a crosswalk from existing to proposed guidance.  It is available at http://www.whitehouse.gov/omb/grants_docs#proposed.