Covid-19 Grant Funds

Many for-profit, nonprofit, and governmental organizations have received and will continue to receive new federal and state grants funds, because of Covid-19.  The information regarding how and when to use such grant funds has been limited, vague or not provided until months after funding is received or awarded.  Guidance is also continuously changing and being updated. 

Entities expending more than $750,000 of federal grant funding in a year are required to have a financial statement and compliance audit referred to as a Single Audit.  Organizations without prior audit requirements may now have an audit requirement due to federal funding received/spent during 2020.  As these federal funds are new and have limited or changing guidance, receiving organizations should work with their accounting firms and granting agencies to ensure compliance.  Proper documentation is also key in the future when granting agencies or auditors have questions.

Single Audits are conducted under Subpart F of the Office of Management and Budget’s (OMB) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).  OMB annually issues a Compliance Supplement, which identifies compliance requirements and suggests audit procedures for numerous federal grant programs.  The 2020 Compliance Supplement was provided in two parts.  The first part, issued in August 2020, was primarily developed prior to the Covid-19 pandemic, and the second part, or 2020 Compliance Supplement Addendum, was issued in December 2021 and addressed Covid-19 funding. 

Federal funding related to Covid-19 came in the form of new federal grant programs or increases in existing federal grant programs.  Existing federal grant programs have provided additional funding with increased award amounts, reduced matching requirements, and elimination or reduction of eligibility requirements.  Organizations report federal funding on the Schedule of Expenditure of Federal Awards (SEFA).  Covid related funding for new or existing programs needs to be identified separately from other federal grant programs on the SEFA.

Provider Relief Funds (PRF) were given to organizations providing healthcare services.  In addition to being used for Covid related expenditures, PRF may be used for lost revenues.  The calculation for lost revenue for Provider Relief Funds has changed several times over the past year.  The Department of Health and Human Services established a portal for recipients of PRF to register and provide additional information on the use of the funds.  Registration is allowed on the portal, but reporting requirements have been delayed. 

Other federal grants, such as the Coronavirus Relief Funds (CRF), have been provided to cities, schools, and nonprofits.  Each of the receiving organizations may have different requirements.  For some, specific expenditures must be identified and submitted to receive funding.  For other organizations, funding was based on a per unit allocation, and these subrecipient organizations were provided funds with no requirement to track expenditures.  CRF funds were provided to other organizations as the beneficiary and not as a subrecipient.  The Single Audit requirements do not apply to beneficiaries.

Numerous federal laws have been enacted to create new and additional Covid-19 related federal grant funding.  The most recent was the American Rescue Plan Act (ARPA) issued on March 11, 2021.  Some of the grant programs under ARPA may be used to cover costs incurred through December 31, 2024.  Thus, organizations may be expending Covid-19 related for several more years. 

The compliance professionals at Ketel Thorstenson, LLP can help you navigate the Uniform Guidance requirements.  Please contact us to answer questions and for additional guidance.

June 7, 2021

New Federal Grant Funds

Many for-profit, nonprofit, and governmental organizations are receiving new federal and state grants funds during the pandemic.  In some instances, organizations receive the funds in their bank account with limited information on how to use such funds.  In addition to limited or vague information on how and when to use these federal and state funds, the guidance that is provided changes on a consistent basis. 

Throughout history, most federal grants required funds to be spent on specific programs or items, which is referred to as allowable costs.  New concepts are included in the pandemic related funding, including a concept of lost revenue. The calculation for lost revenue for Provider Relief Funds has changed several times in the past few months.

Other federal grants, such as the Coronavirus Relief Funds (CRF), have been provided to cities, schools, and nonprofits.  Each of the receiving organizations may have different requirements.  For some, specific expenditures must be identified and submitted to receive funding.  For other organizations, funding was based on a per unit allocation, and these subrecipient organizations were provided funds with no requirement to track expenditures.  CRF funds were provided to other organizations as the beneficiary and not as a subrecipient. 

Organizations without prior audit requirements may now have an audit requirement due to federal funding received/spent during 2020.  As these federal funds are new and have limited or changing guidance, receiving organizations should work with their accounting firms and granting agencies to ensure compliance.  Proper documentation is also key in the future when granting agencies or auditors have questions.

            Please reach out to the compliance professionals at Ketel Thorstenson, LLP to answer questions and for additional guidance.

January 21, 2021

Updates to Uniform Guidance

The Office of Management and Budget (OMB) has updated the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Audit (Uniform Guidance) originally effective in 2014.  The revisions are intended to reduce burden of grant recipients, provide guidance and clarification on requirements, and improve overall federal grant management. Most of the revisions are effective for new awards issued on or after November 12, 2020.   

The changes primarily impact the entities expending federal grants.  The following are the significant changes to Uniform Guidance.

  • Definitions are combined into the new Section 200.1.  The revision includes new definitions and updated definitions.  Noteworthy changes include:
    • The definition of Catalog for Federal Domestic Assistance (CFDA) number has been replaced with the new term Assistance Listings number.
    • Other definitions updated include revisions to improper payment, questioned costs, and period of performance.
  • Clarification of must versus may related to Uniform Guidance requirements. (Section 200.101)
  • Procurement standards have been changed for the following:
    • Procurement methods are grouped into three categories of informal (micro-purchase/small purchase), formal (sealed bids/proposals) and noncompetitive (sole source), Section 200.320.  The new informal procurement method may be used when the federal award purchase is under the simplified acquisition threshold. 
    • To match other guidance, the micro-purchase threshold was increased to $10,000 and the simplified acquisition threshold was increased to $250,000.
    • Recipients may increase their micro-purchase threshold if certain requirements are met (Section 200.320).  The recipient may self-certify annually a threshold up to $50,000.  The self-certification must include a justification, clear identification of the threshold, and other supporting documents.  A formal approval process by the Federal government is required for thresholds above $50,000.
    • Adding the domestic preferences for procurement requirements encouraging use of goods and products produced in the United States (Section 200.322).
    • The time for direct awards closeout reports increased from 90 to 120 days (Section 200.344).
  • The revised guidance clarifies that any recipient without a current negotiated indirect cost rate may use the 10 percent de minimis rate.  Previously, the de minimis rate could only be used for recipients that have never received a negotiated indirect cost rate.

The two changes that are effective upon issuance of the Uniform Guidance revisions on August 13, 2020 are changes with Section 200.216 related to prohibitions for certain telecommunication and video surveillance services/equipment and Section 200.340 regarding a federal agency’s ability to terminate an award.

What should organizations expending federal grants do related to the Uniform Guidance revisions?  Here are some suggestions for recipients:

  • Determine the person within the organization who will review and evaluate the changes.
  • Identify the timing for applying the changes by determining grants awarded after the effective date.
  • Review the organization’s written federal grant policies and procedures for potential updates.

The Uniform Guidance revisions can be accessed at the following link, Guidance for Grants and Agreements.  Please contact the experts at KT with questions regarding the Uniform Guidance revisions.

December 7, 2020

Are Your Records Missing?

Many nonprofit organizations that have been around for a while do not have a formal record filing system for their important IRS and organization documents.  This is especially true for smaller nonprofits that have frequent board of directorship turnover and basically operate out of someone’s house as a formal “office”!  There are certain “permanent file” type documents that should be maintained by all nonprofit organizations, large or small.  In fact, these records are required to be made available to the IRS or to the general public if requested.  So as a due diligence reminder, next time you go to a board meeting for a nonprofit organization, ask if anyone has seen the following records:

  1. Articles of Incorporation
  2. Bylaws
  3. Employer Identification number
  4. South Dakota Sales tax number (if applicable), or sales tax exemption letter if applicable
  5. IRS tax exemption letter
  6. IRS Form 1023 or 1024 “application for tax exemption”
  7. Conflict of Interest Policy for Board Members/officers

If some or all of these are missing, you could contact prior representatives from your organization to see if they can locate them.  If not, please contact us and we can guide you on how to proceed.


June 1, 2017

‘Tis the Season of Giving: Charitable Contributions

2015 Traci HansonThe holiday season is a time when many people donate to various charitable organizations.  Individuals typically provide donations in the form of monetary or donated property.  These contributions benefit the charitable organization and also provide a tax deduction to the donor.  In order for this tax deduction to be allowed, the IRS has specific requirements for the charitable organization to follow.  Do you know what all of the requirements are?  Acknowledging donations is not only required by the IRS, but also provides a means for an organization to say ‘thank you.’

There are many ways in which an individual can donate to a charitable organization.  We will focus our discussion on two main ways: monetary and property.


The IRS requires a donor to maintain a record of their contribution or a written communication from the charity in order for the amount to be deducted on their individual tax return.  A record of their contribution could be in the form of cancelled check or, for payroll deductions, a pay stub or other employer-furnished document showing the amount withheld.  If a donor makes a single contribution greater than $250, written communication from the charity is required.

Donated Property

Individuals who donate property are allowed to deduct the fair market value of such property as of the date of the donation.  Fair market value is generally the price at which property would change hands between a willing buyer and a willing seller, neither having to buy or sell, and both having reasonable knowledge of all the relevant facts.  Donated property can range from clothing and toys to vehicles, artwork or land.  The value of the property is the responsibility of the donor for purposes of determining the amount of the deduction.  The charitable organization should always provide acknowledgements; however, the acknowledgement should never include an estimated fair market value.  Special rules apply to donated vehicles.


The following items are required to be included in the written communication from the charity:

  1. Name of the organization, including a statement that the organization is a charity recognized as tax-exempt by the IRS under Section 501(c)(3).
  2. Date of the donation.
  3. Acknowledge the amount.
    1. If cash, include the amount received.
    2. If donated property, include a description (but not the value) of the non-cash contribution. The value of the non-cash contribution is the donor’s responsibility.  For example:

Thank you for the 200 shares of IBM stock donated on December 31, 2016. 

  1. Statement that no goods or services were provided by the organization in return for the contribution, if that was the case.
    1. If any goods or services were provided (referred to as a quid pro quo contribution), include a description and good faith estimate of the value of the goods or services. For example, an individual paid $100 to attend an annual gala event, to include dinner.  (See exceptions to this rule outlined below.)  The acknowledgement could state:

For federal income tax purposes, you can deduct as a charitable contribution the price of this ticket less its fair market value. We estimate the fair market value of this ticket to be $40 (i.e. the cost of the dinner provided), so your charitable contribution is $60.

A penalty is imposed on a charity that does not make the required disclosure in connection with a quid pro quo contribution of more than $75. The penalty is $10 per contribution, not to exceed $5,000 per fund-raising event or mailing.

Other Comments

The following summarizes some of the other nuances of these requirements:

  • Acknowledgement is required for each donation greater than $250. In lieu of this, the charity can provide an annual statement of all giving.
  • Acknowledgements are typically sent to donors no later than January 31st of the year following the donation. A donor must receive acknowledgement by the earlier of:  the date the donor files his/her tax return or the due date of the extended tax return in order for the individual to deduct the contribution.
  • Although no financial penalty to the charitable organization exists for not providing the written acknowledgement, there could be a financial or public relations impact if the donor was unable to deduct the donation on their tax return and then, consequently, decides not to donate again.
  • Acknowledgements can be provided in written format, such as letters, postcards or computer-generated forms, or they can be provided electronically.
  • What are the requirements if a donor requests not to be reimbursed for an expense? Is that considered a charitable contribution?    The rules are the same as above.  For example, a committee member elects to pay his/her own way to a conference for the benefit of the charitable organization.  The donor should receive a written acknowledgement of this donation.  As it was a noncash donation, only a description would be provided in the acknowledgement.
  • There are a few exceptions to providing the fair value of goods or services received. See those exceptions outlined below:

A. Token Exception – Insubstantial goods or services provided by a charitable organization in exchange for contributions do not need to be reported. The amount considered insubstantial is adjusted for inflation each year.  For 2016, to qualify as token goods or services, they must cost the organization no more than $10.60, and the contribution received must have been at least $53.

 For example, if a charitable organization gives a water bottle with its logo and that cost is less than $10.60, the organization does not need to provide a statement with the fair value of the goods or services received for donors who contributed more than $53.  The individual would receive the full $53 deduction on their tax return.

B. Membership Benefits Exception – An annual membership benefit is also considered insubstantial when provided in exchange for an annual payment of $75 or less and consisting of annual rights and privileges, such as allowing free admission to workshops.

If your organization has any specific questions regarding acknowledgements to donors, please contact one of our non-profit specialists.

December 12, 2016

Auditee Responsibilities Under Uniform Guidance

Ketel Thorstenson, LLP will be hosting a lunch and learn series presentation of a webinar regarding auditee responsibilities under Uniform Guidance on August 17, 2016. The webinar will assist auditees in the very important role they play in the Single Audit process under Uniform Guidance.

Uniform Guidance impacts states, local governments, Indian tribes, and nonprofit organizations that expend federal grant funds. Eight separate grant circulars were combined into one location with Uniform Guidance.  Uniform Guidance consists of three main categories:

  • Section A: Subparts A-D: Reforms to Administrative Requirements
  • Section B: Subpart E: Reforms to Cost Principles
  • Section C: Subpart F: Reforms to Audit Requirements

Under Uniform Guidance, entities that expend more than $750,000 in a fiscal year are required to have a Single Audit. A Single Audit is an audit of the financial statements and federal grant compliance. Single Audits are complex engagements with a number of unusual audit requirements.  The Single Audit process always runs more smoothly when auditees have an understanding of the audit process and are prepared for it.  The webinar will include the following:

  • What compliance requirements are, how auditees can identify them, and what auditors are required to test, including a high-level overview of the audit requirements in  Subpart F of the Uniform Guidance;
  • Auditee responsibilities for internal control over compliance and auditor responsibilities for understanding and testing internal control over compliance;
  • The various reporting requirements for auditees and auditors; and
  • Tips for auditees to get ready for Single Audits and steps that can be taken to help ensure a quality audit is obtained.

Plan to attend the webinar on August 17. RSVP by August 12 to [email protected] or call 605-716-3284. Seating is limited. Cost is $5, lunch will be provided.

July 25, 2016

Uniform Grant Guidance Part III

2015 Traci HansonIt is hard to believe that December is here.  With the new Uniform Grant Guidance (the Guidance) becoming effective on December 26, 2014, we wanted to remind Organizations of impacts of the Guidance and certain actions that Organizations will need to take to ensure compliance with the new Guidance.  Any organization expending federal money (even if it is just $1) is subject to the Guidance.  We will also review the final section of the new Guidance relating to the audit requirements.

The new Guidance consists of three main categories:

Section A: Subparts A-D: Reforms to Administrative Requirements

Section B:  Subpart E:  Reforms to Cost Principles

Section C:  Subpart F:  Reforms to Audit Requirements

Section A, subparts A-D and Section B, subpart E were reviewed in previous newsletters.  Please see those articles for additional information on the respective sections of the Guidance.  As a reminder, for organizations receiving any federal grants, the Guidance is requiring written policies for grant compliance.  We would suggest that organizations develop general written grant compliance policies for each of the 14 compliance requirements (see previous newsletters articles) and more detailed written grant compliance policies for specific grant requirements, as needed.

The Cost Principles portion of the Guidance includes general requirements for costs charged to federal grant programs to be reasonable and properly documented.  A new de minimis indirect cost rate of 10 percent of modified total direct costs is included in the Guidance.  Documentation for personal services (salaries and wages) charged to a federal grant program was modified to be less prescriptive under the Guidance, but the documentation must still be based on records that accurately reflect the work performed.  Numerous individual costs are also included in the Cost Principles section of the Guidance.  Organizations will want to review these details to ensure compliance.

The Reforms to Audit Requirements in Section C, subpart F are not effective until years beginning on or after December 26, 2014, or December 31, 2015 year-ends.  This section of the Guidance replaces OMB Circular A-133.  One of the changes with the Audit Requirements is that the compliance audit threshold changed from $500,000 to $750,000.  The increase in the compliance audit threshold eliminates a compliance audit requirement for approximately 5,000 organizations, but still covers 99.7 percent of federal grant funds currently audited.

During a compliance audit, the auditor will select certain federal grant programs to test in detail based on a prescribed risk assessment.  Under the Guidance, several changes were made to the risk assessment process, which may result in fewer federal grant programs being audited in detail.  With fewer organizations and federal grant programs being audited, monitoring of subrecipients may need to be expanded.

Auditors are required to report findings related to a lack of adequate internal controls over federal grants and noncompliance with federal grant requirements.  Overall, finding requirements have not substantially changed under the Guidance with continued emphasis on identification of prior findings, including updates and details as to why a finding is not corrected.  The threshold for reporting known or likely questioned costs increased from $10,000 to $25,000 under the Guidance.  Questioned costs are costs questioned by an auditor because of an audit finding resulting from violating a federal requirement, inadequate supporting documentation for costs, or unreasonable costs charged to a federal grant program.

As a part of the compliance audit process, the audited financial statements and results of the compliance audit, including findings, is summarized on a data collection form.  The data collection form has historically been available to the public.  Under the Guidance, the data collection form and the entire reporting package, consisting of the financial statements, auditor’s reports, audit findings, and summary schedule of prior audit findings, will be available to the public on the Federal Audit Clearinghouse website.

This is a summary of the changes to the Audit Requirements within the Guidance.  The full Guidance is available at the following link:Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Two Frequently Asked Questions documents were issued to assist with implementation of the Guidance, which can be found at  Please contact Traci Hanson, Shelley Goodrich, or Sandra Weaver with specific questions related to the Guidance.

December 8, 2014

Uniform Grant Guidance – Part II

Traci HansonThe effective date for the new Uniform Grant Guidance (the Guidance) is getting closer. As described in the previous newsletter, the new Guidance is effective December 26, 2014. There is no getting around reading the new requirements in order to become familiar with them. The Cost Principles are a significant portion of the new Guidance.

The new Guidance consists of three main categories:
Section A: Subparts A-D: Reforms to Administrative Requirements
Section B: Subpart E: Reforms to Cost Principles
Section C: Subpart F: Reforms to Audit Requirements

The Uniform Grant Guidance – Part I newsletter reviewed Section A, subparts A-D. Section B, subpart E is reviewed in this newsletter.

Subpart E (Sections 200.400 through 200.475 and Appendices III through IX) includes revisions to the Cost Principles that were previously found in Circulars A-21, A-87 and A-122. The goal in combining these three circulars was to provide consistency across entities in policies and eliminate duplicate language. The Cost Principles for hospitals are not included in the Guidance. OMB has stated they will be added at a later date.

Be sure to carefully read the full text of Subpart E as there are too many changes and details to fully describe in a summary. Implementation of the revised Cost Principles and other Uniform Grant Guidance is the responsibility of grantees. We have included below a description of several of the more significant changes grantees need to be aware of. To learn more about numerous other Cost Principles changes, refer to a useful tool that OMB issued titled, Uniform Guidance Cost Principles Text Comparison. This tool shows, in a side-by-side comparison, how the wording from OMB Circulars A-21, A-87, and A-122, compare to the new Guidance.Section 200.400, Policy Guide. This section discusses the fundamental premises of the Cost Principles and reminds us that the grantee is responsible for efficient, effective administration of the Federal award through sound management practices in accordance with agreements and terms of the Federal award.

  • Section 200.407, Prior Written Approval. Provides one place for non-federal entities to consult regarding the circumstances under which they should seek prior approval from the federal awarding agency. 22 specific areas need prior approval, so all grantees should become familiar with these. For example, capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with prior written approval of the Federal awarding agency or pass-through entity.
  • Sections 200.412 through .414, Direct and Indirect (Facilities & Administration) Costs. The most significant change to this section relates to the indirect cost rates. Overall, the Guidance will allow for more consistency as it will require federal agencies to accept a non-federal entity’s negotiated indirect cost rate unless a statute or regulation allows for an exception or if the federal agency head approves an exception based on justification that has been publically documented. Non-federal entities will have the option to extend their negotiated rate for up to four years; this is a one-time only extension which is only available if there have been no major changes to their indirect costs and they receive approval from the cognizant agency responsible for their indirect cost rate. If an extension is approved, the non-federal entity may not request a review of the rate until the extension period is up. After the extension period ends, the entity will need to re-apply for a negotiated rate.
  • For non-federal entities that have never received a negotiated indirect cost rate, the Guidance allows the non-federal entity to charge a de minimis rate of 10 percent of modified total direct costs which may be used indefinitely. If elected, this methodology must be used consistently for all federal awards until such time as the non-federal entity chooses to negotiate for a rate, which the non-federal entity may apply to do at any time. The Guidance also requires that pass-through entities honor the negotiated indirect cost rates, negotiate a rate in accordance with federal guidelines, or provide a minimum flat rate.

  • Section 200.415, Required Certifications. To assure expenditures are proper and in accordance with the terms and conditions of the federal award and approved project budgets, this section clarifies that the annual and final fiscal reports or vouchers requesting payment under the agreements must include a certification that is signed by an official that can legally bind the organization. Cost allocation plans and indirect cost rate proposals must be certified by an individual at a level no lower than Vice President or Chief Financial Officer. The signing official is responsible for the accuracy of the information, and false data may be subject to penalties under the False Claims Act.
  • Section 200.428, Collections of improper payments. Provides guidance that will allow entities to keep amounts collected to cover expenses related to the collection effort for recovering improper payments.
  • Section 200.430, Compensation – Personal Services (Time and Effort Reporting). The Guidance related to compensation is more principles based than the current requirements. For example, all of the illustrations contained in the existing Cost Principles have been removed from the Guidance. Further, the Guidance places more emphasis on internal controls over personnel-related costs. Because of the far-reaching changes in this area, grantees will need to focus on understanding how the move to broad principles will impact them.The changes made by OMB in this area were aimed at reducing the administrative burden of documenting time and effort. Included in the Guidance is a requirement that charges must be based on records that accurately reflect the work performed. These records must:
    • Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated
    • Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100 percent of compensated activities
    • Comply with the established accounting policies and practices of the non-federal entity
    • Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activitySupport for payroll costs can be based on budget estimates made before the services are performed for interim accounting purposes in certain circumstances. However, an after-the-fact review process must be performed, and all necessary adjustments must be made, such that the final amount charged is accurate, allowable, and properly allocated. In addition to supporting performance based documentation, charges for non-exempt employee wages must also be supported by records showing the total hours worked each day. For states, local governments, and Indian tribes, substitute systems for allocating salaries may be used if prior approval is received. These systems may include rolling time studies and case counts. In some cases, the federal government may require personnel activity reports, including prescribed certifications, or equivalent documentation that supports the records.
  • Section 200.433. Contingency Provisions. This section addresses contingency provisions relating to large construction or other significant projects that include budget estimates of future costs. It has been enhanced to include specific guidance on accepted estimating methodology.
  • Section 200.446, Idle Facilities and Idle Capacity. This section now allows for the costs of idle facilities when they are necessary for fluctuations in workload, such as those which may be typical of developing shared service arrangements, provided the idle costs are allocated appropriately to all benefitting programs. In addition, idle costs are allowable if facility costs were necessary when acquired and are now idle due to changes in program requirements, reorganization, etc.; however, in this circumstance, they are only allowable for a reasonable period not to exceed one year.
  • 200.449, Interest. Non-federal entities whose fiscal year starts on or after January 1, 2016, may now be reimbursed for financing costs associated with patents and computer software. Financing costs (including interest) to acquire, construct, or replace capital assets are allowable.
  • 200.474, Travel Costs. Supporting documentation for travel costs charged directly to an award must justify that participation by the individual was necessary to the award and costs are reasonable and consistent with the non-federal entity’s established travel policy. Temporary dependent care costs, which directly result from travel to conferences and meet specified standards, are allowable.
  • Appendices III through IX. The Cost Principles section is supplemented by Appendices III through IX that provide specific guidance on Indirect Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (Appendix III), Nonprofit Organizations (Appendix IV), State/Local Government and Indian Tribe Allocation Plans (Appendix V), Public Assistance Cost Allocation Plans (Appendix VI), States and Local Government and Indian Tribe Indirect Cost Proposals (Appendix VII) and a list of nonprofit organizations exempted from Subpart E (Appendix VIII).

This is a summary of the Cost Principles in the new Guidance. The full Guidance is available at the following link: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Future KT newsletters will review the Audit Requirements under the new Guidance. Please contact Traci Hanson, Shelley Goodrich, or Sandra Weaver with specific questions.

September 8, 2014

Uniform Grant Guidance – Part I

The issuance of the new Uniform Grant Guidance (Guidance) will impact states, local governments, Indian
tribes, and nonprofit organizations that expend federal grant funds.  The Guidance combines eight separate grant
circulars into one location.  Organizations that expend federal grants need to begin reviewing the Guidance now to ensure policies and procedures are implemented by the December 26, 2014 effective date.

The Guidance is intended to reduce administrative burden and risk of waste, fraud, and abuse in the
following ways:

1. Eliminating duplicative and conflicting guidance by combining eight circulars into one.

2. Focusing on performance over compliance.  This includes potential OMB waivers for certain compliance requirements, approval of new strategies that improve cost-effectiveness and fixed awards with reduced requirements to meet performance requirements.

3. Encouraging efficient use of information technology, including the purchase and use of information technology  systems.

4. Providing for consistent and transparent treatment of indirect cost and administrative expenses.

5. Limiting allowable costs to make the best use of Federal grants with more clear language regarding certain specific costs such as conferences, morale, and student activities.

6. Setting standard processes to reduce the burden of processing data differently for multiple Federal agencies.

7. Encouraging recipient entities to have family-friendly policies so employees can balance personal responsibilities while maintaining successful careers contributing to Federal grants.

8. Strengthening oversight by requiring Federal agencies and pass-through entities to review risk associated with a potential recipient before making a grant.  The recipient agencies will also be required to disclose relevant conflicts of
interest and criminal violations.

9. Targets oversight where most Federal funds are at risk by raising the single audit threshold from $500,000 to
$750,000.  The higher threshold covers 99 percent of Federal funds, but eliminates approximately 5,000 recipient entities from the single audit.  This saves the government about $250 million per year. Single audit reporting packages will be available to the public under the new Guidance.

The new Guidance consists of three main categories:
Section A: Subparts A-D: Reforms to Administrative Requirements
Section B:  Subpart E: Reforms to Cost Principles
Section C:  Subpart F: Reforms to Audit Requirements

This KT newsletter will review Subparts A through D which cover new acronyms, definitions, general provisions, federal agency requirements, and other administrative requirements.

Subpart A—Acronyms and Definitions (Sections 200.0 through 200.99) —Subpart A is now the primary place to go to find the definitions of terms used throughout the Uniform Grant Guidance. The subpart includes an index for the
definitions.  Below are just of few of the definitions included in Subpart A that have been revised or streamlined.

  • 200.21, Compliance Supplement – Previously it was called the Circular A-133 Compliance Supplement and was included as Appendix B to Circular A-133. The Compliance Supplement will now be Appendix XI to Part 200 of the Uniform Grant Guidance.
  • 200.23, Contractor – Note that the term “vendor” as used in Circular A-133 (in contrast to a subrecipient) isno longer used. The term “contractor” is defined here and will be used instead of “vendor” going forward. See also section 200.330 in Subpart D which further discusses subrecipients versus contractors.
  • 200.79, Personally Identifiable Information (PII) and 200.82, Protected Personally Identifiable Information– These terms, which were not previously defined in grant guidance, are now defined, and will be important to auditors and auditees as single audit reporting packages submitted under the new guidance will be publically available (with exceptions for Indian tribes).  The Guidance states that auditors and auditees must ensure no protected personally identifiable information is included in the reporting package.
  • 200.80, Program Income – A definition of program income, which was not previously defined in Circular A-133, is now defined.
  • 200.90, State – The definition of State no longer includes Indian tribes as Circular A-133 had done. Instead, Indian tribes are now defined separately in section 200.54.

Subpart B—General Provisions (Sections 200.100 through 200.113) – This Subpart discusses the purpose, applicability,
exceptions, and effective date of the Uniform Grant Guidance. A chart is included in section 200.101 that indicates which Subparts are applicable to different types of awards. This section also clarifies that the terms and conditions of federal awards flow down to subrecipients unless the Uniform Grant Guidance or the terms and conditions of a federal award specifically indicate otherwise.  Recipients should pay close attention to section 200.101, Applicability, as exceptions to the Uniform Grant Guidance are only identified there and not elsewhere in the Guidance.  The section also requires recipients to disclose potential conflicts of interest.

Subpart C—Pre-Federal Award Requirements and Contents of Federal Awards (Sections 200.200 through 200.211) –
This Subpart provides more streamlined guidance to federal agencies on information that is required to be provided to non-federal entities for the purpose of applying for and receiving federal awards. Some of the requirements include determining the instrument to be used (e.g., grant agreements, cooperative agreements, or contract), standard formats to announce funding opportunities, standard application requirements, and the standard information that must be
included in each Federal award.  Federal agencies will also be required to consider risk (such as financial stability, prior performance, and management systems) posed by each applicant prior to making an award. The terms and conditions of the award may be impacted by this risk assessment.

Subpart D—Post-Award Requirements for Financial and Program Management (Sections 200.301 through 200.345) – The following presents a summary of Subpart D:

  • 200.303, Internal controls – This section requires non-federal entities to establish and maintain effective internal control that provides assurance an entity is managing federal awards in compliance with federal statutes, regulations, and terms and conditions of federal awards. This is a much more explicit internal control requirement for auditees than that described in previous guidance. The new Guidance states that non-federal entity internal controls should be in compliance with COSO and the GAO’s Green Book (Standards for Internal Control in the Federal Government).
    As noted in a previous KT newsletter, COSO was revised in 2013 (click to read previous article).  Currently, the GAO is in the process of modifying the Green Book in light of the recent COSO revision.  Federal grant recipients shouldbecome more familiar with both COSO and the Green Book.
  • Sections 200.317 through 200.326, Procurement Standards – States will follow the same policies and procedures they use for procurements from non-federal funds (i.e., state procurement statutes).  For other non-federal entities five procurement methods are outlined in the Guidance: micro-purchases (do not exceed $3,000), small purchase procedures (which are subject to the Simplified Acquisition Threshold currently at $150,000), sealed bids, competitive proposals, and noncompetitive proposals (under limited circumstances).  In general, the new procurement standards adopt the majority of the language used from Circular A-102. Therefore, non-federal entities currently subject to Circular A-110 will likely be affected more significantly. However, all organizations should review these changes carefully to determine the impact on their procurement procedures.
  • Sections 200.327 through 200.329, Performance and Financial Monitoring and Reporting – The existing Report of Federal Cash Transactions and the Financial Status Report have been deleted and replaced with the requirement that Federal award agencies use only the OMB-approved government-wide data elements for collection of financial information, which is currently the Federal Financial Report.
  • Section 200.330 through 200.332, Subrecipient Monitoring and Management – Guidance on determining subrecipients versus contractors is now included in Section 200.330. Note that subrecipient monitoring guidance is currently primarily located within the audit requirements (i.e., Circular A-133 and the OMB Compliance Supplement). The Guidance adds more prominence to these requirements and expands them in Section 200.331. For example, 200.331 is very explicit about what information needs to be included by a pass-through entity in its subawards at the time the subaward is made, such as federal award identification, all requirements imposed by the pass-through entity, certain indirect cost information, access requirements, and terms and conditions surrounding closeout. Finally, requirements are included in this section regarding a pass-through entity’s responsibility to evaluate each subrecipient’s risk and develop appropriate subrecipient monitoring in response to the assessed risk.
  • Section 200.33 through 200.337, Record Retention and Access – Rather than addressing the issue throughout the Guidance, a new section was added to clearly articulate the treatment of electronic records. Organizations should, whenever practical, collect, transmit and store Federal award information in open and machine readable formats.

This is a summary of the administrative requirements of the new Guidance.  The full Guidance is available here. Due to the comprehensive nature of the Guidance and the scope of the changes, management should consider developing a detailed plan to ensure compliance by the effective date, which is for years beginning after December 26, 2014.  Recipients need to be ready to implement the Guidance for all new federal awards and for additional funding under existing awards made after December 26, 2014.  Staff that work in the grant function will need to be trained, and any new entity-specific policies and procedures will need developed or modified.

Future KT newsletters will review the Cost Principles and the Audit Requirements under the new Guidance.  Please contact Traci Hanson, Shelley Goodrich, or Sandra Weaver with specific questions.

June 8, 2014

Highlights of New and Changing Regulations

The nonpr2015 Traci Hansonofit and governmental regulatory environment is constantly changing, whether it’s tax regulations, accounting requirements, or grant compliance. This article highlights the recent and upcoming changes to the new data collection form, the federal Form 990, the new Uniform Grant Guidance, and the updated COSO.

New Data Collection Form
This January, the Office of Management and Budget (OMB) released the 2013 Data Collection Form, applicable for audit periods ending in 2013. Along with the new form, the Federal Audit Clearinghouse launched a new Internet Data Entry System (IDES) website for filing the data collection form.

The data collection form will look similar to the previous version; however, there are some significant changes. A new column to the Federal Awards page was added, identifying the number of findings for each federal award program. This column will correspond with the new Federal Awards Findings Page, which identifies the following:

  • finding number referenced in the financial statements
  • the type of compliance requirement the finding relates to (see our Federal Compliance Requirements Newsletter Series)
  • whether the finding resulted in a modified opinion (other than clean opinion) or an “other matter”
  • the severity of the finding: material weakness, significant deficiency, or other finding
  • if questioned costs are associated with the finding

Federal loans and loan guarantees will also be reported on the Federal Awards page. If the federal program consists of part loan or loan guarantee, the loan/loan guarantee expenditures should be listed on one line and the non-loan/loan guarantee expenditures on a separate line.

The biggest change to the new website is each user will be required to create an account to review and certify (electronically sign) the data collection form. During the process of preparing the new data collection form, the auditee and auditor will receive an email from IDES directing new users to register a new account. A new account may also be set up by going to and clicking “Submit an Audit.” On the next webpage, a new account can be created with an e-mail address. After registering for an account, you will receive an e-mail to complete registration by creating a password 12 characters long, consisting of uppercase and lowercase letters, numbers and a special character. Once you reach the Account Home page, you will see options to start a new submission, resume work on an uncompleted submission, revise a previously submitted form, and to view archived forms. For security purposes, the password will expire with 30 days of inactivity.

New Form 990
The IRS has released the 2013 Form 990 and instructions, along with all the related schedules. The good news for the 2013 Form 990 and 990 EZ is that no significant changes were made to the basic forms, schedules or questions. A majority of the 2013 changes relate to clarifications for certain requirements and responses. A summary of all changes to the Form 990 and related schedules can be obtained on the IRS website.

New Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
In December 2013, the U.S. Office of Management and Budget (OMB) issued Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Grant Guidance or Guidance). Because of the length and complexity of the new guidance, this update will focus an overview of the new guidance. Future KT newsletters will cover general provisions, changes to the OMB Cost Principles, and the new single audit requirements.

The Council of Financial Assistance Reform (COFAR) was established to streamline guidance for federal awards, easing administrative burden and strengthening oversight of the more than $500 billion expended annually in federal funds to reduce risks of waste, fraud, and abuse.

The Uniform Grant Guidance supersedes and streamlines requirements from eight different grant circulars into one set of guidance contained in Title 2 of the Code of Federal Regulations (CFR) as follows:
• Subpart A contains acronyms and definitions used throughout the Guidance.
• Subpart B discusses general provisions including the purpose of the Guidance, its applicability, and effective date.
• Subpart C covers administrative requirements directed primarily at federal agencies including pre-award activities and requirements for the contents of federal awards.
• Subpart D includes many of the administrative requirements including procurement, internal control, and subrecipient monitoring.
• Subpart E includes reforms to the Cost Principles previously found in Circulars A-21, A-87, and A-122
• Subpart F includes the reforms to single audit requirements which were previously found in Circulars A-133 and A-50.

The Uniform Grant Guidance defines non-federal entities as states, local governments, Indian tribes, institutions of higher education, or nonprofit organizations that carry out a federal award as a recipient or subrecipient. Non-federal entities will need to implement the new administrative requirements and Cost Principles for all new federal awards and for additional funding to existing awards made after December 26, 2014. This effective date may be challenging as some entities may have funding subject to the old cost principles and the new Cost Principles within the same fiscal year. OMB is expected to issue additional clarifying guidance relating to the effective date.
The audit requirements in Subpart F will be effective for fiscal years beginning on or after December 26, 2014. Therefore, auditees subject to a single audit with December 31, 2015, year ends will be required to undergo the first single audits conducted under the Uniform Grant Guidance. Early implementation of Subpart F is not permitted.

COSO Framework
Internal control helps entities achieve important objectives and sustain and improve performance. In 1992, the Committee of Sponsoring Organizations of the Treadway Commission (COSO) issued a report titled Internal Control—Integrated Framework (COSO report). The COSO report defines internal control, describes the components of effective internal control, provides criteria against which internal control can be evaluated, and presents guidance that organizations can follow when reporting publicly on internal controls over financial reporting.

The guidance issued by COSO was among the first internal control frameworks. The concept of internal control changed drastically after COSO issued its guidance. Not only did the new concepts affect how internal control was viewed by businesses, management, and CPAs in the United States, it also served as a basis for changes in the accounting profession’s standards relating to internal control. Basically, COSO is to internal control what GAAP is to financial statements. The COSO framework impacts financial statement audits because the COSO guidance was adopted into the auditing standards and is referenced in the new Uniform Grant Guidance noted above.
In the twenty years since the inception of the original COSO framework, business and operating evironments have changed dramatically, become increasingly complex, technologically driven, and global. At the same time, stakeholders are more engaged, seeking greater transparancy and accountability for internal control systems that support business decisions and governance of an entity.

In May 2013, COSO issued its updated Internal Control—Integrated Framework (the updated framework). This updated framework will replace COSO’s original framework on internal control that was originally issued in 1992. Because COSO considers the key concepts and principles in the original framework still fundamentally sound and widely accepted, entities may continue to use the original 1992 framework until December 15, 2014. After that time, COSO has indicated that it will consider the original framework superseded. However, the COSO Board encourages users to transition their applications and related documentation to the updated framework as soon as is feasible under their particular circumstances. Transition issues and an overview of the updated framework will be discussed in further detail in a future newsletter.

If you have any questions about the above updates please contact any of our non-profit specialists.

March 5, 2014