Feb 12, 2016
Ann M. Cole CPA
In order to streamline guidance provided to non-federal entities who receive federal awards, the Office of Management and Budget consolidated former OMB Circulars (A-21, A-87, A-110, A-122, A-133 and parts of other circulars) into one document known as the “OMB Uniform Guidance: Cost Principles, Audit and Administrative Requirements for Federal Awards (UG).” Organizations that receive and expend federal awards through the various federal programs will be using the Uniform Guidance for federal amounts awarded after last Dec. 26. Organizations must be aware of the award dates and how that may affect them during 2015. During this transition year, it is possible to have funding awarded prior to Dec. 26, 2014, that is subject to the former OMB Circular guidance and funding awarded after Dec. 26, 2014, to a fiscal year end in 2015 that is subject to the new UG. Organizations should review their award dates to determine which set of rules are appropriate to use.
The UG has placed an increased emphasis on internal controls by specifically stating that the Government Accountability Office (GAO) “Green Book” internal control requirements are to be used by non-federal entities to design their controls over expending federal funds. While the Green Book has been updated and issued with the date of September 2014, the actual effective date of the Green Book is not until Fiscal Year 2016. The Green Book refers to COSO Internal Control Integrated Framework (Committee of Sponsoring Organizations of the Treadway Commission), which was updated in May 2013 so organizations would reference these documents when designing or updating their internal controls during FY 2015.
One area of significant change is the UG Cost Principles, Subpart E which combines the three circulars on Cost Principles into this one Subpart. Cost principles that were only applicable to certain types of organizations are now available to all non-federal organizations that expend federal funds as well as additional rules that will apply to all non-federal organizations. Cost principles, especially the principles that apply to labor-related costs, are stricter than in the past, and increased scrutiny from federal awarding agencies regarding labor-related documentation and controls will be a result. Subpart E, Section 200.430 Compensation – Personnel Service specifically addresses time and effort reporting. Time and effort estimates may no longer be appropriate and only actual hours and effort may be used. If an organization has a federal award that is required to provide time and effort reporting, now is the time to review those new requirements and make any necessary adjustments to the organization’s documentation process.