On December 19, 2014, the U.S. Office of Management and Budget (OMB) and 28 Federal agencies issued a joint interim final rule implementing the guidance for the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (colloquially referred to as the "Super Circular"). The rule also sets out individual agency-specific regulations, to the extent OMB has approved specific agency requests to supplement or vary agency requirements from the standard Super Circular guidance. These agency-specific requirements are located in the subsequent parts to Part 200 of Title 2 of the Code of Federal Regulations (CFR).
Given the size and specificity of the implementing guidance across 28 Federal agencies, we are unable to efficiently comment on each agency's regulations here. However, over the coming months, we expect our newsletters to highlight some of these deviations and their interplay with the Super Circular. In the near term, a nonprofit wishing to comment on the December 19, 2014 rule must do so by February 17, 2015.
Agency-Specific Regulations Do Not Represent New Policy
Despite the fact that OMB has issued individual agency exceptions to the Super Circular's overall regulatory scheme, OMB has explicitly commented that the agency-specific regulations "do not represent new policy." Rather, OMB only approved agency-specific regulations where authorized by statute or by a long-standing agency policy, or where an agency sought to include additional guidance as to how the agency would interpret a specific Super Circular provision. Thus, OMB asserts that agency-specific regulations are meant to be read in harmony with the policies of the Super Circular. In reading these regulations, grantees must first reference Part 200 of Title 2 of the CFR (which sets forth the Super Circular requirements), and then review the agency-specific regulations. Agency-specific regulations or augmentations to the Super Circular are located in the subsequent parts of Title 2. For example, the U.S. Department of Health and Human Service's regulations are located at Part 300 of Title 2 of the CFR, and the U.S. Department of Agriculture's regulations are located at Part 400.
The regulations for each agency have not recreated the entire Super Circular, but rather generally incorporate 2 CFR part 200 (the Super Circular) by reference, and then incorporate guidance specific to that agency. Thus, nonprofits must be careful in determining whether agency-specific regulations suggest exceptions to the Super Circular or are meant to supplement the Super Circular. Nonprofits should read the agency-specific regulations in harmony with the Super Circular, but if necessary, seek clarification from an awarding agency if agency-specific regulations appear to conflict with or represent an exception to the Super Circular's guidance. The Federal government has issued a crosswalk of the agency-specific regulations here.
Nonprofits Must Design a Process for Identifying the Requirements of Each Award
Although grantees have always been required to implement varying regulatory requirements (an inefficiency that OMB sought to rectify with the issuance of a global Super Circular), grantees may be lulled into a false sense of security that each agency and award applies identical regulations. In reality, grantees must pay close attention to the specific requirements of each funding agency and each award – even small differences from or clarifications to the Super Circular could significantly impact a grantee's reimbursement of a particular grant cost.
For example, 2 CFR 700.12, applicable to awards from the U.S. Agency for International Development (USAID), explicitly requires all negotiated contracts above the simplified acquisition threshold (currently $150,000) to include a provision requiring pass-through entities, USAID, and the Comptroller General to have access to certain contract-related records. Although this is a recommended best practice for all contracts, due to this specific requirement, grantees working with USAID risk disallowance for such contract costs if these provisions do not exist contractually.
The U.S. Environmental Protection Agency (EPA) has augmented its General Procurement Standards by "limit[ing] its participation in the salary rate (excluding overhead) paid to individual consultants retained by recipients or by the recipient's contractors or subcontractors to the maximum daily rate for level 4 of the Executive Schedule unless a greater amount is authorized by law" for subawards that do not comply with the Super Circular's general procurement standards. Thus, grantees that do not follow the procurement procedures cannot pay for a greater amount through an EPA grant, presumably even if the costs appear allowable and reasonable. This is especially important for nonprofits with lower-tiered subawardees, as such lower-tiered subawardees, depending on their size and familiarity with Federal grants, may not be as careful or adept in adhering to the Super Circular's procurement standards.
In another example, the U.S. Department of Transportation received an exception to continue using specific financial reports for certain awards, irrespective of the fact that the Super Circular requirements state that the Federal awarding agency may only solicit the OMB-approved data elements for financial information.
These seemingly minor agency-specific deviations from the general principles of the Super Circular could have a significant impact on how a nonprofit operationalizes a specific award, and could materially impact a nonprofit's bottom line by limiting the amount of reimbursable costs.
Tips for Addressing Agency-Specific Regulations at Your Nonprofit
Grantees should implement a process for (1) identifying agency-specific and award-specific deviations from the Super Circular, and (2) tracking their compliance with these requirements. For example, nonprofits may utilize the following methods to operationalize each Federal award:
- Identify and task individuals within your organization to be specifically responsible for understanding and implementing the guidance of the Super Circular and the relevant agency-specific regulations, including the notable differences between such;
- Identify the agencies from which your nonprofit receives significant financial support and create template compliance matrices for those agencies, incorporating both Super Circular requirements and agency-specific regulations;
- Read each Federal award and create a compliance matrix that identifies and tracks the Super Circular requirements and the agency-specific regulations of that award;
- Inform, train, and periodically retrain employees responsible for operationalizing these regulations (e.g., those responsible for financial reporting or procurements contracts for a specific award) to ensure they understand the differences between the general requirements of the Super Circular and the applicable agency-specific regulations; and
- Following performance of each award, debrief relevant personnel on the operational process – noting what worked and what did not – and develop lessons learned for future projects generally and for that funding agency specifically.