New Super Circular: Understanding Terms – It’s Important!

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When it comes to statutes and regulations, the definition of terms really does matter. The definitional content of a term can have a huge impact on what you can or cannot do in a given situation.

 

It’s important to note that the definitions section of the Super Circular is much more than a merger of definitions from the old circulars that it replaces late this year. The number of definitions is greatly expanded and if you ignore them, you do so at your peril.

 

Many of the new definitions add new restrictions about what you can and cannot do when you receive a federal award. Other definitions increase the risk you assume when you accept a federal grant, cooperative agreement, contract, or a loan (See 2 CFR 200.0 to 200.99; 78 FR 78599-78604).

 

Take a good hard look at Subpart A – Acronyms and Definitions (200.0 to 200.99) of the Super Circular.  It combines definitions and key terms from administrative requirements, cost principles, and audit circulars into one single list. And several new terms have been added. The selected terms in the table below are noted because of their impact on recipients or because they have compliance, financial or audit implications.

 

TERM           IMPORTANCE

200.3 Advance payment

Advance payment tendered by federal or pass-through entity made by check or periodic draw-downs. This is the usual payment method and is the opposite of reimbursement payments used for high risk recipients and most construction grants. States and other pass-through entities tend to use reimbursement as their default method of payment.

 

200.5 Audit finding

Deficiency required to be reported by auditor in schedule of findings and questioned costs (See 200.516). Audit findings come in three types: financial, administrative, and compliance. You want to keep audit findings to a minimum. Material audit findings are serious and can harm your organization’s funding credibility or cause your organization to be viewed as high risk.

 

200.8 Budget

The budget is the financial plan and not just the line item budget that is approved by federal or pass-through entity. This is a revised definition.

 

200.10 and .11

Catalog of Federal Domestic Assistance (CFDA) number and program title are defined separately.

 

200.12 Capital assets

New. This term is more comprehensively defined and tied to Generally Accepted Audit Principles (GAAP). It includes: (a) Land, buildings, facilities, equipment, intellectual property; (b) Additions, improvements, modifications, re-arrangements, renovations, reinstallations or alterations that increase asset value.

 

200.14 Claim

This term derives from Office of Management and Budget (OMB) Circulars A-110 and A-133. Although not new, it contemplates disputes over costs and improper payments that give rise to money demands which  constitute a debt to the federal government. Such debts can cause recipient to be classified as “high risk,” and to  be denied funding or even the right to compete for funding.

 

200.16 Closeout

Revised term. The process by which federal agencies and pass-through entities close out grants (See 200.343).

 

200.18 Cognizant agency for audit

This term is not new, but note that the cognizant agency for audit may not be same as the cognizant agency for indirect costs.

 

200.19 Cognizant agency for indirect costs

New term. This is the agency responsible for indirect cost negotiations and approvals, and might not be same as cognizant agency for audit.

 

200.25 Cooperative audit resolution

New term. This is technical assistance, and advice and assistance, to help grantees achieve full audit compliance and correct past problems. Failure of this process will bring sanctions to the audited organization.

 

200.31 Disallowed costs

These are charges that a federal agency, pass-through entity, or auditor determine to be unallowable. Such costs are subject to refund, recovery, or a claim action. (See also Questioned Cost 200.84).

 

200.33 Equipment

Equipment is tangible personal property valued at $5,000 or more, and with a life of more than 1 year. Property purchased with federal awards valued at $5,000 or more must be accounted for through the use of Federally mandated reporting forms (SF-429 family of forms). However if your threshold for capitalizing equipment is lower, you must use the lower threshold when equipment is purchased with federal awards. If your capitalization threshold is lower, consider raising it to the federal maximum of $5,000. Otherwise you could be reporting on lots of equipment purchased with federal money.

 

200.34 Expenditures

Definition is more detailed. Expenditures encompass all shares of funding that are incurred and charged to a federal or pass-through award. Expenditures can be direct or indirect. Expenditures can be those charged to the award or match share expenditures.

 

200.38 Federal award

This includes contracts, grants, cooperative agreements, and cost reimbursement contracts. It does not include a federal procurement contract.

 

200.45 Fixed amount award

This is an award of a specific, fixed dollar amount without regard to actual costs. It is a funding mechanism that is meant to promote results, rather than compliance. Focus is on results rather than compliance. (See 200.201). This is a new type of award ushered in by OMB Memo 13-17  (July 26, 2013).

 

200.49 and .50 GAAP and GAGAS

Generally Accepted Accounting Principles (GAAP) and Generally Accepted Governmental Auditing Standards (GAGAS). These terms are defined so that both standards are applicable to federal awards, and to the audits of those awards.

 

200.61 Internal controls; and 200.62 Internal control over compliance requirements for federal awards

These terms are important because they emphasize that recipient organizations must have and maintain a system of internal control over federal awards that promotes and documents compliance and performance. Watch for further revised advice on internal control in the 2014 and especially the 2015 Compliance Supplement. The Compliance Supplement is a supplement to OMB Circular A-133 on Single Audits. The Compliance Supplement has been incorporated into the Super Circular as an annual appendix.

 

200.66 Management decision

Taken from OMB Circular A-133. The official management decision on audits, questioned and disallowed costs establishes the claims and rights of the parties in the federal assistance relationship.

 

200.67 Micro-purchase

New term. The micro-purchase threshold from Federal Administrative Regulations (FAR) 2.1 is $3,000. This is a sub-set of small purchases, and all recipients can take advantage of this flexibility. These are purchases of $3,000 or less that are very informal, require minimal documentation, and do not require formal competition. For example, periodic purchase of office supplies or services that do not exceed $3,000 would be micro-purchases.

 

200.68 Modified total direct cost

This is a revised definition. In practical terms, Modified Total Direct Costs (MTDC) means total project costs allowable minus exclusions to MTDC. In calculating direct costs, the following are excluded: equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships, fellowships, participant support costs, and sub-awards and sub-contracts in excess of the first $25,000. "Charges for patient care” is a new and important exclusion to MTDC.

 

200.73 Oversight agency for audit

This is the awarding agency that provides the predominant amount of your organization’s federal awards, and is not the cognizant agency for audit (see 200.18). Oversight agencies have responsibilities such as ensuring that the required audit is tendered to the cognizant agency and to the Single Audit Clearinghouse, and that the audit is acceptable. (See 200.513 (b) of the Super Circular for more information.)

 

200.76 Performance goal

This is a measurable standard promised in your grant proposal that your organization will be held accountable for accomplishing. Failure without good reason could lead to revocation of funding. Both research and program type grant programs that seek to make positive changes in a problem will emphasize the use of performance goals.

 

200.79 Personally Identifiable Information (PII); and 200.82 (Protected PII)

Awarding agencies acting through their regulations and laws are going to require you to protect selected kinds of PII with an articulated process for safeguarding it.

 

200.84 Questioned cost

These are costs questioned by an auditor because of a compliance violation, lack of documentation, or because they seem unreasonable. Questioned costs could lead to a claim against your organization. Organizations must place greater emphasis on understanding and interpreting the federal cost eligibility standards to reduce instances of questioned or disallowed costs.

 

200.88 Simplified acquisition threshold

The small purchase threshold for federal awards (contracts and grants) is now $150,000, but if an organization’s threshold is lower, it must abide by the lower threshold. This is an important procurement policy question. Smaller organizations may not wish to have a small threshold this high, but large organizations are more likely to want to use this threshold. Smaller organizations can still take advantage of this higher threshold by having a series of escalating requirements within the $150,000 threshold to avoid procurement abuse.

 

 200.94 Supplies

Clarifies the threshold for defining personal property as a supply, and clarifies that computing devices are subject to the less burdensome administrative requirements of supplies (as opposed to equipment) if the cost is less than the lesser of the capitalization threshold established by the non-federal entity for financial statement purposes or $5,000.

 

—Henry Flood, Senior Advisor for Grants Administration

 

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