Industry sign banking hawaii rfp myself
so I'm going to introduce Rachelle Maynard from Odyssey consulting she will be covering federal grants regulations well I'm not sure how I'm gonna follow those riveting presentations but I'm gonna so thank you John Herold and Senator de la Cruz for for having me today so this course is designed for nonprofit providers you'll hear me say NPP throughout the presentation that's my own acronym I came up with that and you know very clever and obviously the state procurement buyers that are in the room this should also help you as well so if you are conducting business with the state of Hawaii or using funds that are governed by federal regulations this presentation should speak to you so my name is Rachelle Maynard and I have over 15 years of experience in federal regulations and the applicable cost principles and I've worked in nonprofits academic medical centers and for most of my career and so I'm excited to share my knowledge with you and if you have any questions please don't hesitate to ask it sounds like we're gonna be taking all questions after the presentation but if you've got just a burning desire please please jump right in and also as John indicated earlier any time you have any questions jot them down and you guys can always reach out to your state procurement office as he said they are here to help okay so after this presentation we've got a few learning objectives um you should be able to understand and apply the federal regulations that are applicable to your award we call those blowdown provisions you should be able to identify and discuss applicable federal cost principles that are related to your award understand and apply best practices to the management of your award understand the single audit and uniform guidance requirements again that are applicable to your award and understand your options related to how you choose to calculate and utilize the indirect cost rate so to bring home the objectives that we've just discussed we are gonna talk about the federal regulations and obviously a one-hour presentation we are just going to scratch the surface of all of these topics and each one of these topics in and of itself could be you know several hours of discussion and learning so we're gonna be very high-level overview of the regulations we're gonna talk about how to apply them to the types of funding that most of you or most of your organization's receive we'll talk about the flow down requirements that again apply to most of your awards funded with federal dollars and then I'm gonna provide some recommendations and best practices about how to manage those funds consistent with applicable regulations so we'll take a look at the cost principles I'm sure most of you that have been working in the nonprofit sector have heard the term cost principles before but we will dive a little bit deeper into that and I'll provide some examples of costs and situations that will help you make the best spending decisions using federal funding we'll also look at the purpose and the guidelines around indirect costs so how to determine what rate is applicable to you and and what is the best practices and maximum thresholds and the last but not least we will review the ever dreaded audit requirements and what's required when you have a federal award in terms of being audited and and how you go about getting that completed what are they and why do they matter so to establish sort of a relationship baseline the next slide illustrates the just the very basic high-level flow of funding so the federal government has given the state of Hawaii funding to execute certain objectives and then the state of Hawaii has said hey we're then going to in turn award that to you nonprofit providers by doing that those funds that end up in the hands of the nonprofit providers has strings attached essentially right it has requirements and certain certain applicability that that wouldn't come to it otherwise if it didn't come from a federal source right so again when funding begins with the federal government we have to then take into consideration the regulations and other things that flow down from the federal government to the state and then ultimately to the nonprofit provider as Harold showed there is a life cycle of the award right so there's there is a planning phase an opportunity is identified this is happening at the state level where they then receive the federal funding from the government and then again they decide how they're going to distribute that money to the nonprofit providers and that's usually through the RFP process once the award is made to the nonprofit provider you guys then start project management and execution and then ultimately completion enclosures so for our purposes we're gonna stick to these two areas project management and execution and completion and closer closure cuz that's again Harold Harold got you to the part where you've got the award hopefully you've been successful with your RFP and so now we're gonna talk about what you do when you spend the money that you got okay so once you have that a word in hand it's imperative that you become very familiar with that a word document right you're going to look at the period of performance so that you know the dates of your award a lot of this is gonna sound really basic but you'd be surprised how many people kind of take for granted that they know what's in that document and they they really might not so again remember to look and see what your budget and your budget ceiling is as Harold indicated a lot of the awards have staggered payment structures so you get 85% but then 15% of it might be held back for some performance measures so again being aware of what your budget requirements are also individual awards may have different reporting requirements again that's hurl'd indicated that 15% might have to come back to you after you've submitted a report or some type of deliverable that indicates what your performance measure was that got completed right so you need to be aware of that also we're talking about federal terms and conditions but there are state specific terms and conditions that can be included in your word as well or also very specific award terms and conditions so each individual award is its own document and so they can put things in there that are related to that particular mechanism as well as that particular statement of work so just be aware of all of the things contained in your award and then we'll talk more broadly in the next slide about the overarching requirements so as we said the award terms and conditions that's where you start and then you may have your own nonprofit provider policies and procedures that you have to abide by the state of Hawaii will also have regulations that you have to comply with the agency or sponsor that could be federal or state like for instance DHS may have its own regulations that are applicable and then you have all of the federal guidelines as well so all of these important and so they're stacked here kind of on top of each other but they're they're all things that have to be followed in terms of you know building your regulation foundation so an example of how this might work in the real world let's talk about travel so the federal regulations require the travel that is being completed on a project that's sponsored by the federal government that it has to actually relate to the project so that's the federal requirement on top of that the Hawaii state requirement is that you have to complete that travel within certain per diem limitations right so food meals and incidentals [Music] accommodations like hotel stays all have to fall within that particular state required per diem rate also your nonprofit provider organization might have specific rules that require your travelers to keep all documents that are detailed receipts for their trouble so when you put all of those things together the result is then a compliant travel that is able to be reimbursed by your federal award all right so let's get into the nitty-gritty so what are the federal regulations that apply to most of the awards that you would receive from these type of programs from DHS the answer is the uniform guidance or 2 CFR 200 which is the code of federal regulations it is divided into several sub parts subpart a addresses all of the definitions so that you know the language that they're speaking subpart B has general provisions that address applicability so you can actually see if it applies to you it also talks about conflicts of interest and this is important in terms of you know segregating financial interests as you make decisions about suspending subpart C is pre-award so it's a lot of the components that Harold spoke about before the funding is actually provided to the nonprofit provider so Part D is post a word management and ear the cost principles and those are the primary sections that we're gonna live in today so Part F are the audit requirements and then there are various appendices this is the link to the electronic Code of Federal Regulations where you can find the full uniform guidance if you are so inclined and again if you are a nonprofit provider you probably should look at it and utilize that too to help write any policies and procedures that may be necessary for your organization okay I do not expect you to be able to read this so just start right there we'll go from there right and so this is a slide that is actually available in a handout to you over on this far table and and it's this is that kind of matrix where you would determine what type of situation and what type of organization and what type of funding for each one of these sections of the Uniform guidance and when it would apply to you so this is just a helpful do I have to worry about this handout right but again not not necessarily for you to see it the next slide is also something for you to be aware of but not something for you to be overly concerned about but these are federal laws that attach themselves to any federal funding that's received essentially so they're over very broad programs like the Copeland anti-kickback the Clean Air Act the bird anti lobbying amendment debarment and suspension and essentially what these laws are is to ensure that anyone receiving federal funding is following these federal regulations Equal Employment Opportunity again if you're receiving federal funding you are obligated to manage your your staff and manage your environment consistent with the Equal Employment Opportunity Act now most of these again are self-deleting in that if they don't apply to you for instance the Clean Air Act and federal Water Pollution Control if you're not dumping pollutants into the water or the air then these things obviously are not gonna apply to you so they are self-deleting in that regard and but I think most of them are if you're not lobbying you know hiring people to go to the hill on your behalf and write legislation and you're not taking kickbacks for you know selling certain cuts of meat or you know things like that then you should be pretty safe with these but do recognize that they can appear as flow down clauses in your contracts from the state or award from the state okay so federal cost principles there are four of them that kind of encompass all of the other cost principles reasonableness alec ability consistency and allowability so all of these are important and we'll talk about each one on the next few slides but what you should really be asking yourself when we talk about these is is the expense necessary and reasonable does it conform to the appropriate limitations of my award is it consistent with my policies as a nonprofit provider the state and federal policies as well is it consistent with other expenses that way that I've seen before is it documented according to general accounting practices which are called gap and is it not a cost that I'm sharing with other awards right like is it specifically for this for this project some things that are important is that it's documented so we'll all continue to kind of hammer that home as we as we go through so the next slide talks about allowability versus an allow ability and you also have a handout that that goes through and provides like a checklist of basic allowable and unallowable expenses there's obviously things that are that are very clear that would be unallowable obviously advertising and marketing for your particular organization you wouldn't be able to charge that to an award that it has federal funds alcohol meaning drinking not rubbing and office supplies all of those things would be would be items that would be technically unallowable expenses now potentially there's always exceptions to that and we'll talk about those in a minute but allowable expenses are generally things like salaries for employees that are working directly on the program that's been funded by the award the fringe benefits that are associated with those salaries so you know PTO and and health insurance those things and equipment those would all be considered reasonable and I don't and allowable expenses so once you've determined that your expense is in that allowable bucket right we then have to determine if it's reasonable so you have to apply what's called the reasonable person test if you've ever taken any sort of legal or business law class you've probably heard that terminology before it's basically what would a reasonable person in the same or similar circumstances do in your situation right what would the decision what decision would they make related to spending and the questions that they would ask themselves is is it a necessary expense do I have to incur this cost to complete the objectives of my project does the expense fall within the restrictions that are set before me so is it within the budget that I proposed to Harold is it in the regulations is it a sound business decision is it within market price is it prudent and is it following my own established policies at my organization so an example of again reasonable expenses would be salaries and equipment and supplies associated with the conduct of the award now for instance let's say you were doing a research study for the state of Hawaii regarding homeless people and you were doing a survey of 250 people across the island and you needed paper and pencils to go out and conduct that research study those things as I said before would typically be considered unallowable office supplies right but because you need those to achieve the objectives of your project that then becomes an allowable reasonable expense okay so those pencils you're gonna be able to go out and purchase but we go online and we look to see what type of pencils they have out there well they have the standard number two pencils and there are 20 cents apiece great they also have pencils that have a monogram logo of your nonprofit organization that are gold-plated and have three different types of lead and they're $20 a pencil so that's the difference between a reasonable expense and an unreasonable expense nobody wants the gold-plated pencils and nobody nobody really needs that right it's just like if you guys remember some of you you're probably too young but the gold-plated toilet incident at the White House does anybody remember that example yeah it was a very frowned upon purchase right nobody nobody needs a gold-plated pencil or toilet okay so once we've determined that it is allowable and reasonable we have to determine if the expense is allocable what that means is an alec ability is really a made-up word that the federal government created when they wrote the uniform guidance they do that a lot actually and so are these costs assignable with a relative benefit received meaning that I can say hey this cost is assigned to this project for this purpose right and the easiest example of that is salary right you can pretty clearly delineate that this individual work 20% of their time on this particular project that means it's allocable their time and effort is allocable to that project in my pencil and paper example I had to do 200 surveys I needed 200 pages of paper and I needed 200 pencils that's an allocable expense right so once we've determined that it is reasonable allowable and allocable we
hen get to my favorite test the front page test so you want to make sure that if it ends up on the front page of your local newspaper that you are not scared right nobody wants to nobody wants to read the headline local Hawaiian nonprofit provider bought gold-plated pencils for homeless survey that's not a headline that we want to see right so if you're if you think you've met all of the objectives just make sure you run it through that front page test before you make the purchase and charge it to your federally funded program so the next question that you want to ask yourself is is this a direct or indirect expense and some of this might be intuitive but again we're here for questions after if it's not so again direct expenses are those expenses that are directly allocated to the performance of the project that you're working on it to achieve the objectives of your award indirect expenses or how you turn the lights on right how you pay for your rent your utilities general office expenses pencils not for surveys right how you are going to you know pay your your support staff and people who aren't working on the project that may be your accountant those type of things right those are indirect expenses that you wouldn't be able to directly allocate to a project so that's that dividing line and we'll talk about how you get reimbursed for those type of the expenses in a in the next slide so the uniform guidance does provide for reimbursement of indirect expenses but at a set rate so there's two different pathways that you can take the first pathway is to developed what's known as a federally negotiated rate and some of your nonprofit organizations may already have that it's essentially where you go through and you work with your cognizant agency to prepare an indirect cost rate proposal you submit that to your cognizant agency which is usually the agency with which you receive the most funding so in this case it would be DHS and once that proposal is submitted and approved you would then have what's known as a federally negotiated indirect cost rate and that's the rate that you would be able to utilize on all of your proposals that are federally funded and those rates vary so some nonprofit organizations might have a 20% indirect cost rate I believe Harvard University's indirect cost rate is currently a hundred and one percent so you know go after this federally negotiated rates but most commonly nonprofit providers use what's known as the de minimis rate which is the federally allowable rate of ten percent that you're able to tack on to your direct cost budget so in the next slide we will show you an example of how these are calculating this looks very complicated but I assure you it is it's not as complicated as it looks so essentially what this example is is that if you have a total award budget of $100,000 and you're purchasing a piece of equipment of twenty thousand dollars the twenty thousand dollar piece of equipment can't have indirects charged to it because it's a distorting expense so it's removed from the indirect cost calculation and what's remaining is the eighty thousand dollars direct cost budget that we would divide by one point one point one zero which is your 10% rate to get what's remaining as the $72,000 direct cost budget then we take the seventy two thousand dollars multiply that by the ten percent and that gives you your indirect cost amount of seven thousand two hundred and seventy three dollars so your total award is still a hundred thousand dollars twenty thousand dollars for equipment and seven thousand for seven thousand two hundred and seventy three dollars for endurance and what that in directs to you means that's your operating budget that's how you get your operating budget for your nonprofit that becomes how you pay the rent how you pay the lights how you pay your staff that's not directly accounted for in a project cost that makes sense excellent so in addition to the federal cost principles we want to also ensure that we have good financial management practices and it's important that we are accurate efficient have account integrity and have good stewardship which means good stewards of the funds so as a recipients of federal funding that fund oral funding always originates the same place right taxpayer dollars so it's important that we have these financial management principles upheld when we're using these dollars and these are the things that your auditors are going to look at as well in addition to compliance with the federal cost principles so as we are making purchases we have some procurement requirements this is what's called the procurement claw and I did not make this up it's actually in the it's actually in the uniform guidance I did not make this graphic and and each one of these purchases has its special requirements that we'll go over in the next slide but for all type of procurement again it has to meet the cost principles it's got to be necessary reasonable and all that stuff but it also has to be free from conflict of interest so again remember when we talked about those financial conflict of interests that are in subpart D it also has to have potentially full and open competition depending on the threshold and it's got to be documented so remember when we talked about consistency as one of the as one of the cost principles part of consistency is having things documented in a consistent way so that you can go back and justify and explain how you made that decision it sometime in the future I don't know about you but you know it's really hard to remember three years later how you came to that conclusion if you didn't have that documented properly okay so the next slide illustrates the requirements for each one of the clause so micro purchases or anything up to ten thousand dollars you don't have to get a you don't have to actually get a quote for those type of purchases you just again it's got to meet those basic four requirements of the cost principles reasonable allocable consistent and allowable which small purchases relevant relative right but up to 250,000 dollars a quote is required sealed bids are required for construction projects and anything over 250,000 requires competitive proposals a lot of times some things are gonna have an what's required what's it what is known as a sole source and this is where you have only have one provider that's able to to provide that good or service in the scientific world this happens a lot right cuz you've got specific scientific expertise or equipment and so these just require a really strong documentation there's no competition and a sole source cuz you're trying to say that they're the only ones out there but you just have to have that documented appropriately sometimes you're going to need other people's help to accomplish the objectives of your award and that's when you are going to initiate a subcontract with that collaborator and it's always best practice to have what is known as a sub-recipient monitoring plan this is also a good idea for the state to have a plan with you guys as the nonprofit provider and that plan should have performance metrics this could be the performance measures that Herald talked about in his presentation and there should be cost measures deliverables that are required obviously compliance with regulations audit reports if you're required to do so and all of those things combined create a good monitoring plan that set everybody up for success so whether you're on the giving in to the planner they're receiving into the plan it's a good idea to have one in place so that everybody is on the same page moving forward so what's important for you two to know in terms of maybe as you walk out of this room what do you need to do right away so policies and best practices if you're receiving federal funding these basic policies really should be in your in your current policy repertoire as a nonprofit provider you should have an accounting policy so how do you deal with accounting transactions financial reporting those type of things how do you manage financial conflicts of interest how do you identify them report then what are they do you have any procurement how do you go about making decisions and these can be very simple in terms of hey my procurement policy is I follow the uniform guidance it's reasonable allocable I used the bear claw those things can be as long as you're doing that that can be your policy that you follow the uniform guidance travel another another policy that's that's required you should have had documented you know what type of receipts are required what your guidance is do use per diem or actuals all those four policies are necessary if you're receiving federal funding you'll want those documents it practices internal controls are important and this is setting up a checks and balance system right so making sure that the person that is requesting funding isn't also the one approving it right so or requesting a purchase isn't reviewing it this is difficult when you have when you're a one-person organization right but that then becomes really important why you have consistency and documentation because those type of situations do exist but if you have a larger organization you'll want to have those internal controls built in and again those relationships documented we call that segregation of duties so consistent documents it and well justified those are gonna be your best practices so whenever you're thinking about a policy or how to make decisions just remember those things also yes you are required to get audited you'll want to have an annual single audit performed and that can be performed by most most CPAs are familiar with the single audit process and for compliance with uniform guidance and it is required if you are a non-profit with expenditures that are over seven hundred and fifty thousand dollars per year if you're less than that you don't have to worry about it okay so your word is coming to an end the complexity of your closeout is going to mirror the complexity of your award so there was a smaller word your closeout it's probably gonna be pretty easy if it was really complicated with lots of hold backs and you know that 15% you're waiting on and lots of deliverables then your closeout might be a little more challenging but you'll want to make sure that you're looking at all of the financial considerations did you get all your money did you spend all your money correctly can you document that how are you disposing of any equipment that you that you purchased usually as the recipient of the award you would retain title to the equipment that you purchased but sometimes you might not you might have to give it back same with any property that you utilize that you might have leased or had some sort of property share arrangement you might have to submit a final report to again get that that remaining 15% and then you might have to submit and Aude it so you might want to make sure you've got all your records retained so what happens if you don't comply with federal regulations it's not good right as you can see these are some pretty high profile names up here you've got Yale University University of Massachusetts Harvard Johns Hopkins Florida International University and then you can see on the right hand side the numbers are pretty big eleven and a half million three million two million dollars lots of fines because they didn't use the money correctly that's what it boils down to a lot of these are infractions for cost transfers time and effort allocation but basically it boils down to they didn't charge the right expense to the right project right so they weren't following those cost principles that we just talked about so it's always a good idea to again make sure that you are following those principles and documenting them appropriately these are the top audit findings so conflict of interest so again we talked about that when making procurement decisions that would mean you know that let's say you are spending five hundred thousand dollars a year on a particular particular service and you own stock in the company that you're going to without getting any bids or your brother-in-law owns the company that you're utilizing and you're not getting any quotes and they're not providing the best deal that would be a conflict of interest right in accurate financial reports so again not documenting correctly what actually took place on the award inappropriate charges gold plated pencils in a in adequate time and effort records they're not keeping track of the time that a person spent on a project use many ways to go about doing that but not keeping records is not an option an allowable costs inadequate submission of reports and excess cash on hand that's probably not that big of an issue for you guys but if you do have a petty cash fund making sure that it's appropriate to your need lack of documentation that is the number three audit finding it's huge commingling of funds meaning that you're paying for award expenses with indirect costs etc so write your commingling your money that's used for the direct expenses versus the indirect and this doesn't mean having separate bank accounts necessarily what it means is is that you you have an accounting system whether that's QuickBooks or an Excel spreadsheet that actually shows that these are the funds that are segregated for this project and these are the funds that are segregated for my operating of my business and then these are the funds for an another project and untimely submission of reports so again back to knowing what the requirements of your award document are and following those and keeping track of them and some methodology all right so references there are a few that you can look to you if you have questions and there are several different grant making organizations HUD NSF NIH NASA do e that have lots of different policy manuals and guidance that you can look at and then obviously the uniform guidance itself but these are all really good resources a helpful tip pro tip for nonprofit providers a lot of policies and procedures are available online if you look at university websites so a lot of times they have the best of the best in terms of policies that are compliant with uniform guidance and you can find those on the web and and kind of rejigger them to work for your organization alright that's it thank you guys
