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COVID-19: Information from SPA/OSP/CGA

Impacts of the 2020 Uniform Guidance Revisions

2 CFR 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards

Summary for Michigan State University Campus

On August 13, 2020, the Office of Management and Budget (OMB) issued its Final Guidance on amendments to the Uniform Guidance in 2 CFR 200.  These revisions are part of a required review of the Uniform Guidance performed every five years.  With two exceptions that are effective August 13, 2020, these revisions are effective November 12, 2020.

The revisions incorporate current goals and initiatives of the Administration, statutory requirements, and clarifications of existing requirements.  As these are the first major changes to the Uniform Guidance since it was initially published in 2013, the revisions are extensive.  The impact of these revisions may range from minor and unique circumstances to large-scale changes that affect all recipients.

The main revisions to the Uniform Guidance have been made to the OMB Guidance for Grants and Agreements.  The revisions reflect the focus of the OMB on enhanced results-oriented accountability for grants and foster improved stewardship to ensure the public receives value for funds spent on grant programs.  2 CFR 200 is referred to as guidance, because it is direction to the federal agencies.  The agencies implement the direction into agency regulations, sometimes customized for the agency’s mission, which then becomes applicable to the grantee community.

Examples of several requirements that may impact you:

  1. Technical reports:
    1. Final technical reports must be submitted, or it is considered a material failure and that is expected to impact other awards issued at the institution (item 19).
    2. Agencies may expand the requirement for goals, measures, and accounting with payment implications (items 9 & 15).
  2. Easier for the government to terminate awards mid-cycle (item 17).
  3. Complications for subawards, particularly international subawards (items 3 & 12).
  4. Prohibition on using/purchasing certain technology products (Huawei, ZTE, et al) (item 3).
  5. Buy American preference in purchasing (item 11).

The attached table includes a summary of those changes that are most likely to have an impact on the campus community.  This summary is intended as a guide.  Each of the changes listed in the attached table includes a link to the applicable section(s) in the Code of Federal Regulations (CFR).

Changes Impacting Campus

Item Number Item Summary of Changes Implications for Campus
1.

Some exceptions to registering in SAM, safety, security and dollar amount – 25.110, Appendix A to Part 25

  • OMB added an exception allowing agencies to waive the requirement to register in SAM when there are circumstances that would prevent an applicant from registering prior to the submission of an application.
  • Federal awarding agencies are responsible for the determination on whether there are circumstances that prevent an applicant from registering in SAM and are no longer required to request a waiver from OMB in these instances.
  • Subrecipients are not required to have an active full SAM registration, but they must have a Unique Entity Identifier (UEI). All prime awardees and subrecipients of federal funds require a SAM or UEI unless a federal awarding agency grants an exception.
  • MSU as the awardee will have one UEI, which will be managed centrally.

2.

Requirement to implement “Never Contract with the Enemy” Provision– Part 183 for international work exceeding $50,000 as defined.
  • This requirement has been in place for several years for federally funded contracts (FY2015 National Defense Authorization Act).  This new provision is now in effect for grants and cooperative agreements that are expected to exceed $50,000 within the performance period, are performed outside of the U.S. and its territories, and are in support of a “person or entity that is actively opposing United States or coalition forces involved in a contingency operation in which members of the Armed Forces are actively engaged in hostilities.”
  • Before awarding a grant or cooperative agreement, Federal Awarding Agencies must check the current list of prohibited or restricted parties in SAM and exercise due diligence to ensure federal funds are not provided to restricted persons or entities, either directly or indirectly.
  • The revisions also require agencies to insert terms and conditions in grants and cooperative agreements regarding the institution’s responsibilities to ensure that no federal award funds are provided to the enemy, to terminate subawards that may be in violation of this requirement, and to allow the Federal Government to access records to ensure compliance.
  • Recipients must exercise due diligence to ensure that federal funds are not provided to restricted persons or entities. 
  • Documentation may be required as additional audit requirements may apply in order to demonstrate compliance.
3. New provision on technology costs, Prohibition on Huawei, et al – 200.216 & 200.471
  • The revised guidance includes a new provision at §200.471, explaining that costs incurred for telecommunications and video surveillance services or equipment such as phones, internet, video surveillance, and cloud servers are allowable except when obligating or expending covered telecommunications and video surveillance services or equipment or services as described in § 200.216 to: (1) procure or obtain, extend or renew a contract to procure or obtain; (2) enter into a contract (or extend or renew a contract) to procure; or (3) obtain the equipment, services or systems.
  • §200.216 implements Public Law 115-232 Section 889 of the FY2019 National Defense Authorization Act (NDAA), prohibiting federal funds from being used to procure goods and services from certain foreign entities due to national security concerns.  This provision lists some entities, such as Huawei Technologies Company and ZTE Corporation. This clause became effective on the date of publication, August 13, 2020, and must be flowed down to subrecipients.
  • US Institutions with foreign operations or awards to operate in foreign countries may have difficulty implementing this clause due to Huawei telecom equipment's widespread use outside the US.
  • Since MSU is a federal contractor, please note that this is a prohibition for MSU regardless of funding source.
4. Changes to Numbering System and References – Particularly in Subpart A, 200.1 and Subpart C, D, & E
  • The revisions add new provisions that will change the numbering system in the revised guidance compared to the current guidance, thereby necessitating corresponding changes to nonfederal entities’ internal policy references for awards received under the revised guidance.
  • The numbering has changed for several sections in the Final Guidance. 
  • SPA/OSP/CGA will review and update any references listed on our website. 
  • Units should review their internal reference documents and guidance and adjust as necessary.
5. Improper Payments, increased documentation expected – Subpart A
  • The revised guidance defines an improper payment as “any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative or other legally applicable requirements.”
  • The revised guidance also: (1) explains what ”incorrect amounts” are; (2) notes that when an agency’s review is unable to discern whether a payment was proper as a result of insufficient or lack of documentation, the payment should be considered improper; (3) states that interest and other fees resulting from an underpayment by an agency are not considered improper payments if the interest was paid correctly; (4) explains that a questioned cost should not be considered improper until the transaction has been completely reviewed and confirmed to be improper, and (5) defines the term “payment.” The revised guidance further advises users to refer to the improper payment definition in Circular A-123, Appendix C.
  • Increased documentation may be required in order to clearly demonstrate that all payments made are reasonable, allowable, and correct.
6. More definition around terms related to timing for spending – Subpart A (budget period, period of performance, renewal award - minor changes) The revisions to Subpart A include new definitions for “budget period” and “renewal” and amended definitions of “period of performance,” “obligations,” and “micro-purchase.”  The revisions also clarified the definition of “simplified acquisition threshold.”  All definitions are now listed under one section number and are not capitalized, which may make locating and reading them more difficult.
7. Amended micro-purchase definition – Subpart A & D, 200.320
  • The revised guidance removes the threshold dollar amount from the definition of “micro-purchase” and updates it to, “the purchase of supplies or services, the aggregate amount of which does not exceed the micro-purchase threshold.”
  • The micro-purchase threshold was updated to reflect the $10,000 threshold set in 2018.
  • All non-Federal entities may establish a micro-purchase threshold higher than $10,000, and up to $50,000 without prior approval from the cognizant agency for indirect costs, so long as certain requirements are met, and proper documentation and justification are provided. 
  • Institutions can request a micro-purchase threshold above $50,000 based on certain conditions that include a formal approval process and additional recordkeeping requirements.
MSU’s micro-purchase threshold is currently set at $10,000, so this update will not have an immediate impact on our operations.
8. Clarified simplified acquisition threshold definition – Subpart A
  • The revised guidance maintains the existing definition of simplified acquisition threshold, but clarifies that the threshold for procurement activities administered under federal awards is set by the FAR.
  • The simplified acquisition threshold was raised from $150,000 to $250,000.
  • The simplified acquisition threshold was raised from $150,000 to $250,000 by the FAR, allowing more purchases to qualify for simplified procurement under the small purchase procedures.
  • MSU is currently using the $250,000 threshold, so this update will not have an immediate impact on our operations.
9. Performance, goals, objectives, and measures to be increasingly emphasized (brings in Circular 11 too) – Subpart B, C, 200.201, 202, 203, 208, 211(a), & D, 200.301, 329, 332

 

  • The revised guidance updates the language under the “Performance measurement” provision of section 200.301, stating that federal awarding agencies must (instead of “should”) measure the recipient’s performance to show achievement of program goals and objectives, share lessons learned, improve program outcomes, and foster adoption of promising practices. It also adds that this provision is designed to operate in tandem with evidence-related statutes (e.g., the Foundation for Evidence-Based Policymaking Act of 2018), which emphasizes collaboration to advance data and evidence-building functions in the federal government.
  • The revised guidance has new language pertaining to the federal award performance goals discussion (section 200.211(a)) stating: “Performance goals, indicators, targets and baseline data must be included in the federal award, where applicable. The federal awarding agency must also specify how performance will be assessed in the terms and conditions of the federal award, including the timing and scope of expected performance.
  • Award documents are expected be more detailed under this revised guidance, including performance goals, indicators, targets, and baseline data.  OSP/CGA will look to PIs to review and approve the performance goals if different than proposed.
  • We will want to watch how agencies implement, but it may mean additional accounting and documentation and additional terms for our subrecipients are needed to clearly illustrate how projects are meeting performance goals. 
10. More risk analysis for related entities (FAPIIS (to convert to SAM)) – Subpart C, 200.206(a)(2) The revised guidance adds language related to the Federal Awardee Performance and Integrity Information System (FAPIIS) stating that, federal awarding agencies, prior to making a federal award, must “consider all of the information available through FAPIIS with regard to the applicant and any immediate highest level owner, predecessor (i.e., a nonfederal entity that is replaced by a successor), or subsidiary, identified for that applicant in FAPIIS, if applicable.”
  • Special conditions that correspond to the degree of risk assessed may be applied to the Federal award.
  • Delinquencies in both financial and programmatic reporting will be reported in FAPIIS and will impact the institution’s risk level.
  • MSU takes the role of the Federal government when subawarding to another entity and will have increased responsibility when sub-awarding.
11. Buy American preference – Subpart D, 200.322
  • The revised guidance states that procurements under federal awards should provide a preference for items produced in the United States to the greatest extent practicable. 
  • This provision must be flowed down to all subawards, including contracts and purchase orders for work or products.
  • The terms "produced" and "manufactured" are narrowly defined for iron and steel products and items and construction materials composed of non-ferrous metals, plastics and polymer-based products, and aggregates.
  • Purchases made with Federal award funds should provide a preference for items produced in the United States when possible.
  • Justification should be provided for   procurement of non-domestic materials and equipment to the extent practicable.
12. Religious liberty and free speech Subpart D, 200.300
  • The revised guidance updates language to underscore the importance of complying with the First Amendment and religious liberty laws under federal awards.
  • This clause must be flowed down to subrecipients
  • Additional terms and conditions may be incorporated into the award.
  • There are some concerns about the practicality of applying this requirement to subawards to foreign entities.
13.

Appears to add restrictions in spending between budget years (pre-award and publication costs) – Subpart D & E, 200.308, 458, 461

  • Pre-award costs are to be charged only to the initial budget period of the award, unless otherwise specified by the federal award funding agency.
  • Recipients are required to report deviations from budget or project scope or objective and request prior approvals from Federal awarding agencies for budget and program plan revisions, in accordance with section 200.308.
  • Recipients may charge publication costs during closeout. However, if the costs are not incurred during the performance period, costs must be charged to the final budget period unless specified by federal awarding agency.
  • Agencies may require stricter adherence to charging costs within a specific budget period.
  • The language could potentially require accounting for each budget year separately. 
  • Publication costs charged during close-out are only allowable against the last budget period of the award
  • Prior approvals are required for revisions to the budget and program plan; deviations from budget, project scope, or objective must be reported.  Please check with CGA Awards Group if questions.
14. Added requirements and flexibility for procurement – Subpart D, 200.318-327
  • The types of procurements have been simplified: Informal (Micro-purchases, Small purchases), Formal (sealed bids and proposals), and Noncompetitive (e.g., sole source).
  • An entity may establish a micro-purchase threshold above the current threshold of $10,000, up to $50,000 without prior approval from the cognizant agency for indirect costs (see item 7 above).
  • Language was added regarding small purchases to clarify that price quotations must be obtained from an adequate number of qualified sources "as determined by the appropriate non-federal agency."  This means that entities may set the number of quotations from sources needed to meet the requirement (e.g., two or more). 
  • OMB added language regarding the Simplified Acquisition Threshold that allows an entity to utilize a threshold based on internal controls and risk evaluation.  This threshold cannot exceed the FAR limit, which is currently set at $250,000 (see item 8 above).
  • When applicable, section 200.216 (Prohibition on Certain Telecommunications and Video Surveillance Services or Equipment) supersedes any guidance in sections 200.317-327 and must be considered first.
  • MSU is already using the updated micro-purchase threshold and Simplified Acquisition Threshold.
15. Recipient relate financial data to goals/objectives and cost effective practices – Subpart D, 200.329
  • The institution must monitor its activities under Federal awards to assure compliance with applicable Federal requirements and performance expectations are being achieved. Monitoring must cover each program, function, or activity.
  • The Federal awarding agency must require the recipient to relate financial data and accomplishments to performance goals and objectives of the Federal award. When required by the terms and conditions of the Federal award, recipients must also provide cost information to demonstrate cost effective practices.
  • Additional terms and conditions regarding cost effective practices may be incorporated into awards.
  • Further documentation may be required to monitor performance and demonstrate cost effective practices.
  • Will need to watch agency implementation.
16. Although still responsible for subaward risk-assessment and monitoring, not responsible for entities cross-cutting audit findings – Subpart D, 200.332 (d) (4)
  • The revised guidance also adds a new provision under monitoring activities to explain that the pass-through entity is not required to address all of the subrecipient’s audit findings, thereby seeking to ease pass-through oversight burdens.
  • The pass-through entity is responsible for resolving audit findings specifically related to the subaward and not responsible for resolving cross-cutting findings.
  • If a subrecipient has a current Single Audit report posted in the Federal Audit Clearinghouse and has not otherwise been excluded from receipt of Federal funding, the pass-through entity may rely on the subrecipient's cognizant audit agency or cognizant oversight agency to perform audit follow-up and make management decisions related to cross-cutting findings.
  • This provision reduces some pass-through oversight burdens; provides clarification that the entity issuing the subaward is no longer responsible for “cross-cutting” findings.
  • This guidance does not eliminate the responsibility to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward.
17. Termination when not agency priorities – Subpart D, 200.340
  • The termination provision eliminates the current “for cause” reason for termination and replaces it with one stating that an award may be terminated “if an award no longer effectuates the program goals or agency priorities.”
  • Federal awarding agencies must make recipients aware, in a clear and unambiguous manner, of the termination provisions in section 200.340.
  • The changes to this section are effective as of the date of publication – August 13, 2020.  
  • These provisions must be flowed down to any subawards.
  • Termination “for cause" has been eliminated, which provided some security that agencies would terminate projects based only on poor performance. There are concerns about the political motivations and implications this may have on scientific research.
  • Institutions will have the opportunity to object to and challenge any such termination by a federal agency.
  • Any costs incurred during suspension or after termination are allowed if they were properly incurred before the effective date of suspension or termination.
18. Final close-out reports within 120 days (when sub 90 days); annual technical 90 days – Subpart D, 200.344
  • Recipients will now have 120 calendar days (rather than 90) after the end date of the period of performance to submit all financial, performance, and other reports as required by the terms and conditions of the Federal award. 
  • Subrecipients must submit their closeout reports no later than 90 calendar days (this was previously 60 calendar days) after the end date period of performance to provide all performance, financial, and other reports required under the award's terms and conditions. 
  • If the recipient fails to complete the requirements, the Federal awarding agency or pass-through entity will proceed with the federal award's closeout with the information available.
  • The increase from 90 to 120 days is a positive change. While extensions can be requested, agencies will likely be strict in enforcing the 120-day requirement. Because agencies have only one year (from the end of the performance period) to closeout an award, the 30 days gained by the institution are 30 days lost to the agency.
  • Subrecipients must submit their closeout reports within 90 days. Institutions will need to be diligent in enforcing this deadline to meet the federal agency's 120-day requirement. 
19. Not submitting reports including technical reports in time for agencies to close within one year becomes a material failure to comply with award T&Cs and agencies must report (currently in FAPIIS) – Subpart D, 200.344(i)
  • Federal agencies continue to have one year from the end of the period of performance to close out the award, and if the recipient is late, federal agency closeout actions will occur with information available.
  • If awardees do not submit reports within the one year of the performance end date, the awarding agency must report the entity’s material failure to comply with the award terms and conditions with the OMB-designated integrity and performance system (currently FAPIIS).
  • Federal awarding agencies may also pursue other enforcement actions per section 200.339.
  • The closeout date of one year does not affect the federal agency's ability to "make Financial adjustments to a previously closed award such as resolving indirect cost payments and making final payments.”
  • Principal Investigators are responsible for completing technical or progress reports in a timely manner. 
  • A report of a material failure to comply with award terms and conditions would jeopardize MSU’s ability to secure future federal awards.
  • CGA will contact Chairs and Deans as issues arise and may need to consider additional technical/project final report submission monitoring.
  • Contact CGA as soon as possible when a PI has left the institution or, for other reasons, may no longer be able to submit the report to develop plan to contact the agency and meet requirements.  
20. F&A, no documentation for 10% de minimis rate on subawards – Subpart D, 200.332, Subpart E, 200.414
  • OMB clarified that any nonfederal entity that does not have a current negotiated (including provisional) indirect cost rate, except those entities described in Appendix VII.D.1.b, may use the 10% de minimis rate, expanding this option to all nonfederal entities where it was previously only available to recipients with no negotiated indirect cost rate.
  • No documentation will be required to justify the 10% de minimis indirect cost rate.
  • This is a welcome change that provides added flexibility for organizations with expired IDC agreements.  Use of the 10% de minimis rate is now clear, concise, and available to all.
  • No documentation will be required to justify use of the 10% de minimis indirect cost rate.
  • Generally, MSU will be using either the current rate, the expired rate, or the de minimis rate, as most appropriate.
21. OMB designated website for rate agreements (some exceptions). – Subpart E, 200.414(h)(1)
  • To comply with the Federal Funding Accountability and Transparency Act, as amended by the DATA Act, the revised guidance includes a new indirect cost requirement to make all negotiated indirect cost rate agreements publicly available on an OMB-designated federal website.
  • Grantees must provide federally negotiated indirect cost rate, distribution base and rate type.
  •  Information relating to negotiated indirect cost agreements (NICRAs) will be collected and displayed on a public website.
  • The information is limited to the rate, distribution base, and rate type; no proprietary information will be published.
22. Evaluation costs and extraordinary costs for specific programs are listed as "examples" of costs that may be directly charged when sometimes also F&A costs – Subpart E, 200.413(b)
  • To provide clarity and consistency among federal awarding agencies, the revised guidance updates the “Direct costs” provisions to include program evaluation costs as an example of direct costs under a federal award. It states that “if directly related to a specific award, certain costs that otherwise would be treated as indirect costs may also be considered direct costs.”
  • Examples include extraordinary utility consumption, the cost of materials supplied from stock or services rendered by specialized facilities, program evaluation costs, or other institutional service operations.
  • If directly related to a specific award, certain costs that otherwise would be treated as indirect costs (extraordinary utility consumption, program evaluation costs, etc.) may be considered direct costs.
  • Additional documentation will be required to justify charging these as direct costs to the award.

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