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Four big Uniform Guidance requirements

May 04, 2021

Our previous article discussed when a single audit is required. Uniform Guidance also requires organizations to be in compliance with other regulations, including those regarding allowable costs, procurement, internal controls and cost allocation.

Uniform Guidance allowable costs

It’s very important to understand what you are allowed to spend federal dollars on. Uniform Guidance regulations include an entire section dedicated to the cost principles. It walks through how non-federal entities are allowed to spend federal dollars under the regulations. 

The costs you charge to federal programs are required to:

  • Be reasonable and necessary for your program
  • Conform to limitations
  • Be consistent with other organization activities
  • Be treated consistently
  • Be determined in accordance with generally accepted accounting principles (GAAP), as appropriate 
  • Not be included as cost or match in any other federally funded program
  • Be adequately documented
  • Incurred during approved budget period

This section also includes guidance on how to allocate shared costs among the program that benefit from the cost and a list of selected items of costs that are either unallowable or require prior written approval.

Uniform Guidance procurement

Once you understand what you are allowed to spend funds on, make sure you understand how you are allowed to use federal funds to make purchases (i.e., what your procurement standards are). An organization’s documented procurement procedures must conform to the Uniform Guidance procurement standards

There are a few specific items to be aware of when it comes to procurement standards:

  • Organizations are required to have written standards of conduct covering real or apparent conflicts of interest in the selection, award or administration of a contract. Within this written standard, the organization is required to define when a conflict of interest exists and have written policies that include disciplinary action for violations.
  • Organizations are required to avoid purchasing unnecessary or duplicative items. They are required to award contracts to responsible contractors, maintain records with rationale for the method of procurement and contractor selection and are responsible for settlement of all contractual or administrative issues with the contractor.

The regulations provide guidance on the procurement methods you should use depending on the dollar amount of the purchase decision. Here is a brief summary on the different methods:

  • Micro-purchases are purchases up to $10,000, unless an organization has a different amount in its policies and procedures. For purchases that fall into this category, to the maximum extent practicable, the regulations state you should distribute equitably among qualified suppliers. You can purchase without competitive quotes if the price is considered reasonable based on research, experience, purchase history or other information and you document it accordingly. 
  • Small purchases are purchases over $10,000 and up to the simplified acquisition threshold of $250,000. For purchases that fall in this category, you are required to receive price or rate quotes from an adequate number of qualified sources, as determined by your policies and procedures. 
  • Sealed bids or requests for proposal (RFPs) are required for purchases over $250,000. For sealed bids, you are required to publicly solicit bids, receive bids from two or more responsible bidders and document your decision. For RFPs, you are also required to make sure that you have an adequate number of offerors, and you need to document your selection decision.
  • Noncompetitive procurement can be awarded if one or more of the following apply:
    • Purchase is less than the micro-purchase threshold
    • Available only from a single source
    • Emergency
    • Express authorization from the awarding agency
    • After solicitation of a number of sources, competition is determined inadequate

Documentation is the key to making sure your organization is following the Uniform Guidance procurement standards. You need to make sure you have a documented process that your organization is consistently following. 

Uniform Guidance internal controls

In addition to rules regarding how you are allowed to spend federal dollars, organizations are also required to have a system of internal controls in place. The Uniform Guidance regulations state: non-federal entities MUST maintain a system of internal controls that provide for reasonable assurance that the entity is managing the award in compliance with federal statutes, regulations and the terms and conditions of the award. These internal controls should comply with the Committee of Sponsoring Organizations of the Treadway Commission (COSO) or Green Book.

Furthermore, non-federal entities are required to evaluate and monitor compliance with their internal controls, take prompt action for noncompliance and take reasonable measures to safeguard personally protected identifiable information.

The COSO framework requires organizations to look at the following components: control environment, risk assessment, control activities, information and communication and monitoring. The framework includes 17 principles that are included under these internal control components. 

In order to make sure your system of internal control is adequate, we recommend that you pay special attention to segregation of duties, tone at the top of your organization, monitoring, risk assessment and reporting. 

Uniform Guidance cost allocation

As stated above, under the Uniform Guidance, you are required to allocate costs using a reasonable method to ensure that programs are charged for the benefits they receive. Under the Uniform Guidance, you have three options for charging shared costs: direct costing, indirect cost rate or electing to use the de minimis rate.

Direct costing: Direct costing can be used for direct costs that can be easily and accurately assigned to a specific award. You allocate costs based on relative benefit received. Shared costs are charged to programs based on an activity or non-monetary base. An example of direct costing could be charging a shared vehicle based on the miles driven, or charging building and maintenance to different programs based on square feet.

Indirect cost rate: Organizations have an opportunity to apply for a negotiated cost rate with their cognizant agency. This rate is based on actual expenses and has to be approved each year. Any organization that has a current negotiated indirect cost rate may apply for a one-time extension of the rate for a period of up to four years. 

De minimus rate: When the Uniform Guidance was released, one of its main goals was to try to decrease the administrative burden placed on federally funded organizations. The de minimis rate is one of the ways they are trying to accomplish this goal. Organizations have the opportunity to apply a 10% flat rate, without regard of actual expenses. No approval is required to use and an organization may use indefinitely. 

Get access to Uniform Guidance training

That was a brief introduction to the larger requirements listed in the Uniform Guidance, but you can go more in depth with our monthly Uniform Guidance trainings

Each month the Wipfli training team talks through best practices related to procurement, the five internal control objectives, and more. We also have a financial policy and procedures template that we offer through our MyWipfli membership. MyWipfli includes an “ask an expert” option so that you can send your single audit question to us and receive a response within 2-3 business days. Click here to learn more.

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Author(s)

Ciara M. Leahy, CPA
Senior Manager, Audit
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