August 31, 2017

Government Grant and Contract News for Nonprofits – August 2017

5 min

As the summer comes to a close, it has been quite busy with the issuance of several federal grant-related materials that may be of interest to nonprofits. First, after several years, the Council on Financial Assistance Reform (COFAR) issued a new frequently asked questions document for the Uniform Administrative Requirements, Cost Principles, and Requirements for Federal Awards (Uniform Guidance) at 2 CFR 200. Second, the U.S. Office of Management and Budget (OMB) also issued a notice announcing the availability of the 2017 OMB Audit Requirements, Appendix XI—Compliance Supplement (2017 Supplement). Finally, OMB also issued its report to Congress on the DATA Act Pilot Program, which included a number of recommendations that could have a material impact on nonprofit federal grantees.

New FAQs on the Uniform Guidance

As one of its parting deliverables, in July 2017, COFAR issued new Frequently Asked Questions (FAQs).1 The revised FAQs include 24 new topics and revisions to four previously released FAQs. Many of the new questions touch on indirect cost rate issues, including:

  • Negotiating indirect cost rates with state agencies;
  • Closing out awards without a final indirect cost rate;
  • Providing proof of indirect costs for the de minimis rate;
  • Whether the de minimis rate is a de facto rate;
  • Verifying an indirect cost rate; and
  • Documentation required for negotiating an indirect cost rate.

Some focused on non-federal entities' audit requirements and cost allowability issues.

The four revised questions addressed the effective dates and grace period for procurement, which was recently delayed to later this year, and various policy related issues.

2017 OMB Audit Requirements, Appendix XI—Compliance Supplement

On August 14, 2017, OMB issued a notice announcing the availability of the 2017 OMB Audit Requirements, Appendix XI—Compliance Supplement (2017 Supplement). The long-awaited 2017 Supplement will supersede the 2016 Supplement and will apply to audits of fiscal years beginning after June 30, 2016. As nonprofit grantees know well, the 2017 Supplement serves to identify existing compliance requirements that the federal government expects to be considered as part of an audit. Without the 2017 Supplement, auditors would need to research many laws and regulations for each program under audit to determine which compliance requirements are important to the federal government and could have a direct and material effect on a program.

Providing the 2017 Supplement is a more efficient and cost-effective approach to performing this research. For the programs contained herein, the 2017 Supplement provides a source of information for auditors to understand the federal program's objectives, procedures, and compliance requirements relevant to the audit, as well as audit objectives and suggested audit procedures for determining compliance with these requirements. From a nonprofit's perspective, the 2017 Supplement is a key tool for a nonprofit organization to be fully prepared for an auditor's testing of their programs' internal controls and compliance with applicable laws and regulations. Given this, recent OMB notice gives interested parties an opportunity to submit comments on the 2017 Supplement, which are due by October 31, 2017.

OMB's DATA Act Pilot Program Report

On August 10, 2017, OMB submitted a report to Congress detailing its findings and recommendations relating to the implementation of the federal Digital Accountability and Transparency Act of 2014 (DATA Act) (Pub. L. No. 113-101). In May 2017, the Trump Administration enabled a new view of federal spending that, for the first time, linked federal account information to awards. This roll-out was the culmination of three years of effort by OMB and partner agencies, such as COFAR, which began with the goal of standardizing key data elements shared across multiple functions.

The authors of the DATA Act believed that the increased interoperability of financial data systems could dramatically improve the efficiency of the federal government and significantly reduce the financial reporting burden of grantees, contractors, and other parties that partner with the government. The DATA Act tasked OMB with running a pilot program to explore these possibilities by identifying common reporting elements and unnecessarily duplicative or burdensome financial reporting requirements for recipients of federal awards. OMB divided the pilot program into two separate work streams and oriented the pilot toward areas of opportunity, identified by a) procurement and b) financial assistance (grants) communities, respectively.

The goals of the grants pilot were to find opportunities to create new common data standards, to build tools to increase efficiencies in reporting, and to provide resources for lowering the administrative burden on awardees and the government workforce. The grants pilot identified six test models to investigate reforms, and collected or analyzed data on all six. The grants test pilots demonstrate that the following conditions can reduce recipients' burden:

  1. Required reporting data elements are defined in a central open repository;
  2. Reported data is collected centrally;
  3. Data can be re-used and auto-populated across government; and
  4. Available resources explain requirements and business processes where needed.

As described in OMB Memorandum M-17-22, Comprehensive Plan for Reforming the Federal Government and Reducing the Federal Civilian Workforce, President Trump wants to streamline the federal government and make it more accountable and more efficient. The findings in the DATA Act's pilot program provide a path forward for OMB and its partner agencies to build on. We will continue to monitor activity in this area and report on such when information becomes available.

[1] On June 15, 2017, by Memorandum M-17-26, the Office of Management and Budget (OMB) disbanded COFAR.