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Action Plan for the Super Circular

Written by Warren Averett on January 22, 2015

By now everyone has attended several presentations or webinars on the Super Circular. Some brave and dedicated souls have even scrupulously read, underlined and highlighted Title 2, Part 200 of the Code of Federal Regulations (COFAR), which includes the new Uniform Guidance (aka, the Super Circular). But what does it all mean? The new rules were issued almost one year ago, with a delayed implementation timeframe for non-federal entities. Now, however, is the time when all diligent non-profits need to get out their list and check it twice to ensure they are in compliance with the new requirements. Be sure the items below are part of your organization’s action plan:

Sub-Recipient Oversight

The federal government is really emphasizing “substance over form” in these relationships and, simply put, wants to see less talk and more action. Pass-through entities should:

  1. Ensure awarding policies include a risk assessment process for selecting sub-recipients. If you have awarded money to a sub-recipient previously who had significant disallowed costs, think four times before granting that same sub-recipient more money.
  2. Ensure monitoring policies include adequate oversight and follow up. The more money a sub-recipient receives and the higher risk a sub-recipient is, the more often and diligently they should be monitored. Decided to give that sub-recipient, with disallowed costs, money anyway because they are just so darn good at providing services? Be sure you examine their costs monthly and make site visits throughout the granting period. Consider whether current staffing is adequate for the increased oversight or whether you will need to contract with outside help to assist with monitoring.
  3. Ensure contracts contain the required 15 data elements from the COFAR and include either the sub-recipients negotiated indirect cost rate or the de minimis 10 percent.
  4. Ensure policies include consequences for failure of the sub-recipient to deliver and enforce those consequences. If you find disallowed costs during your monthly monitoring of the sub-recipient, there needs to be repercussions and the follow up needs to be documented.

Time and effort reporting
In theory, “personal activity reports” can be replaced with “something else that shows time was appropriately allocated to a grant”. Most organizations are holding tight until more guidance is issued in this area and continue to use “personal activity reports”.

At first glance, you might think that the one year reprieve granted in August 2014 to delay the effective date of these requirements gives you lots of breathing room. However, for many nonprofits, the changes that will be required to their procurement systems are significant, and many will need all that time to implement the changes.

  1. Document the policies you are following. The new policies are required for fiscal years beginning after December 26, 2015. For fiscal years beginning after December 26, 2014 (the start of the one year grace period), organizations can either implement the new requirements or use the old requirements; auditors will ensure compliance with the requirements the organization selects, so make it very obvious which policies you are following.
  2. Go ahead and make sure your employee conflict of interest policy is in line with the guidance and draft a new organizational conflict of interest policy that is in accordance with the new guidance.
  3. Update contract templates to ensure they contain all the required new language and consult with legal counsel to ensure you have considered the impact (if any) the provisions will have for your organization. While many of the requirements are documentary in nature, the required termination provisions may actual have an in-substance impact.
  4. Begin the process of updating purchasing policies and templates. The new guidance provides for five different types of purchasing and each type has its own set of rules. Documentation will be critical. A thorough comparison of current policies and procedures as compared to the new requirements will be necessary and some organizations will find they must make substantial changes to their current practices.

Incorporating the above suggestions in your action plan will help get your new year off to a great start. While the Super Circular will bring “super” changes to many organizations, a little preparation and a lot of documentation goes a long way in ensuring compliance. For assistance in evaluating how the new requirements will affect your organization, please contact your Warren Averett advisor.

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