Uniform Administrative Requirements, Cost Principles, and Audit Requirements: Frequently Asked Questions (FAQs)

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Implementing Uniform Guidance for Non-Federal Entities

Are all Head Start and Early Head Start grantees covered by the Uniform Guidance?

All grantees are covered by at least some aspects of the Uniform Guidance. The new regulations use the term "non-federal entity" rather than grantee. Non-federal entity refers to a state, local government, Indian tribe, institution of higher education, or nonprofit organization that carries out a federal award as a recipient or sub-recipient. This definition covers the vast majority of Head Start, Early Head Start, and partnership grantees.

Please note that for-profit organizations are not included in the term "non-federal entity" and continue to be covered by Title 48 Part 300 of the Federal Acquisition Regulations System, for grants management purposes. However, some provisions of Part 75 do apply to for-profit organizations. These are regulations that are specific to the U.S. Department of Health and Human Services (HHS). There are special provisions for awards to commercial organizations, as outlined in §75.215.

Audit requirements apply to all organizations, including for-profit organizations that expend $750,000 or more of federal funds in a fiscal year.

Does the Uniform Guidance supersede the Head Start Act and Program Performance Standards?

No, the new fiscal regulations do not supersede the Head Start Act and Program Performance Standards. The fiscal requirements in the Head Start Act continue to apply, such as the 15 percent administrative cost limitation, 20 percent nonfederal match requirement, fiscal reporting to the governing body and Policy Council, and Executive Level II compensation limits. It will be important for grantees to ensure their implementation strategies for the new regulations are consistent with and take into account how to apply the fiscal aspects of the Head Start Act and Program Performance Standards.

Supersession for HHS is addressed in regulation §75.104:

    As described in §75.110, this part supersedes:

      (a) The following Office of Management and Budget (OMB) guidance documents and regulations under Title 2 of the Code of Federal Regulations:

        (1) A-21, "Cost Principles for Educational Institutions" (2 CFR part 220)

        (2) A-87, "Cost Principles for State, Local, and Indian Tribal Governments" (2 CFR part 225) and Federal Register notice 51 FR 552 (Jan. 6, 1986)

        (3) A-89, "Federal Domestic Assistance Program Information"

        (4) A-102, "Grant Awards and Cooperative Agreements with State and Local Governments"

        (5) A-110, "Uniform Administrative Requirements for Awards and Other Agreements with Institutions of Higher Education, Hospitals, and Other Nonprofit Organizations" (codified at 2 CFR 215)

        (6) A-122, "Cost Principles for Non-Profit Organizations" (2 CFR part 230)

        (7) A-133, "Audits of States, Local Governments, and Non-Profit Organizations"

        (8) Those sections of A-50 related to audits performed under subpart F of this part

      (b) This part also supersedes HHS's regulations at 45 CFR parts 74 and 92.

Additional information is provided in §75.105 Effect on other issuances.

For federal awards subject to this part, all administrative requirements, program manuals, handbooks, and other non-regulatory materials that are inconsistent with the requirements of this part are superseded upon implementation of this part by the HHS awarding agency, except to the extent they are required by statute or [limited exceptions] authorized in accordance with the provisions in §75.102.

When does the new Uniform Guidance take effect?

2 CFR Part 200 offers Uniform Guidance from OMB, and 45 CFR Part 75 describes how HHS will carry out the requirements of the Uniform Guidance.

§200.110 Effective/applicability date.

(b) Audit requirements and any other standards which apply directly to federal agencies will be effective Dec. 26, 2013 and will apply to audits of fiscal years beginning on or after Dec. 26, 2014.

HHS published implementing regulations on Dec. 19, 2014 as an interim final rule, also effective Dec. 26, 2014. HHS will consider and address comments that are received within 60 days of the date of publication in the Federal Register.

Is it possible for a non-federal entity to be subject to both the Uniform Guidance and the previous fiscal regulations at the same time?

A non-federal entity may have awards that are covered by the prior regulations and the current uniform guidance in the same fiscal year. For example, if a nonprofit grantee received an award on Nov. 1, 2014, that award is subject to 45 CFR Part 74. Let's say the grantee's fiscal year begins Jan. 1, 2015. That same grantee gets another award on Feb. 1, 2015. The February award is subject to 45 CFR Part 75 and the new audit requirements apply to the fiscal year beginning Jan. 1, 2015.

Will auditors use the uniform guidance after Dec. 26, 2014 and how and when do grantees need to be transitioned from their current regulations to the new regulations?

Be sure to look at the auditee responsibilities set out in the new HHS implementing regulations at §75.508 - §75.512. Auditors will rely on the Notice of Award to identify which regulations apply to the major programs and awards they are auditing. Non-federal entities won't need to do anything to formally adopt the Uniform Guidance, since its application date is established in the regulation. However, the Office of Head Start (OHS) has given grantees the ability to group Head Start awards and choose a transition date, in which case the non-federal entity would need to specify an adoption date in in its fiscal policies and procedures, as described in ACF-IM-HS-14-07. They also must be sure to share the Information Memorandum (IM) and adoption date with their auditor.

It is important that non-federal entities look at how HHS has adopted and implemented the Uniform Guidance. In some cases, HHS has allowed grantees some flexibility in the timing of adoption of certain elements of the Uniform Guidance:

    §75.110 Effective/Applicability date.
    Allows non-federal entities previously subject to OMB Circular A-110 to continue to comply with the procurement standards in previous OMB guidance for one additional fiscal year after this part goes into effect. If an entity chooses to remain with the previous procurement standards for an additional fiscal year before adopting the procurement standards in this part, they must document this decision in their internal procurement policies.

The regulations also includes new and updated definitions that will apply to Head Start grantees, such as defining the term "prior approval" and revising terms like "cost sharing and matching" to be fully applicable in the HHS context. In this case, "cost sharing and matching" would refer to non-federal share match.

What is the status of delegate agencies under the Uniform Guidance and 45 CFR Part 75?

This is an area where knowing and understanding defined terms is important.

A "recipient" is an entity that receives a federal award directly from a federal awarding agency to carry out an activity under a federal program. It usually refers to, but is not limited to, non-federal entities. The term recipient does not include sub-recipients. So, what we think of as the "grantee" is the recipient of the federal award.

The "sub-recipient" is a non-federal entity that receives a sub-award from a pass-through entity to carry out part of a federal program. Under the Head Start Program Performance Standards, a "delegate agency" would fall within the definition of sub-recipient under Part 75.

In terms of the funding relationship between the recipient and its delegate agency sub-recipient, the recipient is a pass-through entity. "Pass-through entity" refers to a non-federal entity that provides a sub-award to a sub-recipient to carry out part of a federal program. Depending on its service delivery and funding structure, a recipient can be both a provider of direct services and a pass-through entity, such as where an organization provides some services directly and others are provided by one or more delegate agencies. The recipient must meet the requirements detailed in §75.352 when they enter into a pass-through arrangement, including a delegate agency agreement. These requirements are in addition to those in the Head Start Program Performance Standards that relate specifically to delegate agencies.

"Sub-award" is an award provided by a pass-through entity for the sub-recipient to carry out part of the federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a federal program. A sub-award may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract (or a delegate agency agreement). Guidance for determining whether an entity receiving funds should be characterized as a sub-recipient or a contractor is found at §75.351.

Both the recipient and the sub-recipient fall within the definition of a non-federal entity.

Fiscal Policies and Procedures

Do all grantees have to make changes in their fiscal policies and procedures in order to be compliant with the Uniform Guidance?

Yes, all non-federal entities will need to review and make at least some changes in their fiscal policies and procedures to assure that they are fully compliant with the new regulations. For example, the Uniform Guidance and Part 75 address employee health and welfare costs:

    §200.437/§75.437 Employee health and welfare costs.
    (a) Costs incurred in accordance with the non-federal entity's documented policies for the improvement of working conditions, employer-employee relations, employee health, and employee performance are allowable.

The language previously read:

    Employee morale, health, and welfare costs.
    The costs of employee information publications, health or first-aid clinics and/or infirmaries, recreational activities, employee counseling services, and any other expenses incurred in accordance with the nonprofit organization's established practice or custom for the improvement of working conditions, employer-employee relations, employee morale, and employee performance are allowable.

An organization now needs a "documented policy" in order to pay health and welfare costs with federal funds. Costs that would previously have been described in fiscal policies and procedures as employee morale costs are no longer allowable.

In some cases, the new fiscal regulations provide more implementation options than the previous regulations. Non-federal entities will need to assess whether changes made available by the new regulations are beneficial to their organization. A grantee that has never had a negotiated indirect cost rate now has the option of using a 10 percent de minimis rate without negotiation. This may or may not be a good choice for an individual organization. Non-federal entities must consider possible changes to be sure they remain consistent with all applicable laws and regulations in addition to the Uniform Guidance, as well as contribute to more efficient and effective fiscal operations before they change existing practices.

How will monitoring change to reflect the Uniform Guidance, and are there parts of the regulations grantees should really focus on?

Emphasize the importance of understanding the history, objectives, and requirements of the new Uniform Guidance and how it relates to implementation of program goals and objectives. Be sure to communicate all changes to governing board, Policy Council, and anyone else involved in their implementation. Fiscal monitoring will follow a process similar to that of auditors to determine whether to apply the previous regulations or the new Uniform Guidance to individual awards.

In general, grantees may want to:

  • Make sure they understand the definitions in the Uniform Guidance and Part 75
  • Take a look at individual items of cost to see what is new and what has changed
  • Align procurement policies and procedures with the current requirements
  • Consider all options available for addressing indirect cost and what approach is most beneficial to the organization
  • Take a careful look at the many individual items of cost that relate to wage, benefit, and professional services payments in Title 2 Part §200 and 45 CFR Part §75:
    • §200.430 Compensation—personal services. (§75.430)
    • §200.431 Compensation—fringe benefits. (§75.431)
    • §200.432 Conferences. (§75.432)
    • §200.437 Employee health and welfare costs. (§75.437)
    • §200.438 Entertainment costs. (§75.438)
    • §200.445 Goods or services for personal use. (§75.445)
    • §200.447 Insurance and indemnification. (§75.447)
    • §200.459 Professional service costs. (§75.459)
    • §200.463 Recruiting costs. (§75.463)
    • §200.464 Relocation costs of employees. (§75.464)
    • §200.466 Scholarships and student aid costs. (§75.466)
    • §200.472 Training and education costs. (§75.472)
    • §200.474 Travel costs. (§75.474)

Indirect Costs and Cost Allocation

Are all grantees required to obtain a negotiated indirect cost rate?

No, grantees are not required to obtain a negotiated indirect cost rate. Grantees who have never had a negotiated indirect cost rate have three options for dealing with indirect costs:

  1. Indirect Cost Agreement: Negotiate an indirect cost rate agreement with the cognizant agency for indirect costs (Cost Allocation Services, or CAS), as outlined in §75.414 and explained in more detail in:
    • Appendix III to Part 75: Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Institutions of Higher Education (IHEs)
    • Appendix IV to Part 75: Indirect (F&A) Costs Identification and Assignment, and Rate Determination for Nonprofit Organizations
    • Appendix V to Part 75: State/Local Government and Indian Tribe-Wide Central Service Cost Allocation Plans
    • Appendix VI to Part 75: Public Assistance Cost Allocation Plans
    • Appendix VII to Part 75: States and Local Government and Indian Tribe Indirect Cost Proposals
    • Appendix IX to Part 75: Principles for Determining Costs Applicable to Research and Development Under Grants and Contracts with Hospitals
    • §75.416 and §75.417: Special Considerations for States, Local Governments, and Indian Tribes
    • §75.418 and §75.419: Special Considerations for Institutions of Higher Education
  2. De Minimis Rate: Any non-federal entity that has never received a negotiated indirect cost rate, except for a governmental department or agency unit that receives more than $35 million in direct federal funding, may elect to charge a de minimis rate of 10 percent of modified total direct costs (MTDC), which may be used indefinitely. Election and effective date of the de minimis rate should be reflected in the fiscal policies and procedures of the non-federal entity. Adoption of the de minimis rate does not impact the non-federal entity's responsibility to assure that administrative costs do not exceed 15 percent of the total Head Start award (federal + match).
    • MTDC includes:
      • All direct salaries and wages
      • Applicable fringe benefits
      • Materials and supplies
      • Services
      • Travel
      • Up to the first $25,000 of each sub-award (regardless of the period of performance of the sub-awards under the award)
    • MTDC excludes:
      • Equipment
      • Capital expenditures
      • Charges for patient care
      • Rental costs
      • Tuition remission
      • Scholarships and fellowships
      • Participant support costs
      • The portion of each sub-award in excess of $25,000
    • Costs must be consistently charged as either indirect or direct costs, but may not be double charged or inconsistently charged as both.
    • Once elected, the de minimis rate must be used consistently for all federal awards until such time as a non-federal entity chooses to negotiate for a rate, which the non-federal entity may apply to do at any time.
  3. Direct Allocation: This method is acceptable, provided each joint cost is prorated using a base which accurately measures the benefits provided to each federal award or other activity. The bases must be established in accordance with reasonable criteria and be supported by current data. For an example using nonprofit organizations, see Appendix IV to Part 75(B)(1-5).

How is the cognizant agency for indirect cost rate purposes identified?

Generally, the federal agency with the largest dollar value of federal awards with an organization will be designated as the cognizant agency for indirect costs for the negotiation and approval of the indirect cost rates. The cognizant agency for indirect costs is the federal agency responsible for reviewing, negotiating, and approving cost allocation plans or indirect cost proposals on behalf of all federal agencies. The cognizant agency for indirect cost is not necessarily the same as the cognizant agency for an audit.

Use the following to determine assignments of cognizant agencies for:

    1. Institutions of higher education: Appendix III to Part 75(C)(11)
    2. Nonprofit organizations: Appendix IV to Part 75(C)(1)
    3. State and local governments: Appendix V to Part 75(F)(1)
    4. Indian Tribes: Appendix VII to Part 75(D)(1)

Is cost allocation a thing of the past?

As organizations continue to grow in complexity and access multiple funding sources, cost allocation is becoming even more important for non-federal entities to understand and effectively implement. The Uniform Guidance and Part 75 provide more information and options than grantees had in the past to support differentiating between direct and indirect costs, identifying funding and administrative costs, and making sure that shared costs are charged to programs using methods that reasonably align with program benefit. So, cost allocation is definitely not a thing of the past; it is the way of the future for most organizations.

Did the new regulations do away with the requirement for personnel activity reports?

Personnel and associated fringe is the largest cost category in Head Start and Early Head Start programs. The Uniform Guidance makes recordkeeping easier, making it clear that personnel costs can be documented in a variety of ways. That said, the need to assure that personnel charges are properly allocated has to be recognized in whatever system is used by the non-federal entity.

§75.430 Compensation—personal services. Outlines the standards for documentation of personnel expenses. Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. In addition to other requirements, these records must:

  • Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated.
  • Be incorporated into the official records of the non-federal entity.
  • Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100 percent of compensated activities.
  • Comply with the established accounting policies and practices of the non-federal entity.
  • Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one federal award.

Budget estimates alone do not qualify as support for charges to federal awards. However, they may be used for interim accounting purposes, provided that:

  • The system for establishing the estimates produces reasonable approximations of the activity actually performed.
  • Significant changes in the corresponding work activity (as defined by the non-federal entity's written policies) are identified and entered into the records in a timely manner.
    • Short-term fluctuation (i.e., one or two months) between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term.
  • The non-federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a federal award based on budget estimates.
    • All necessary adjustment must be made such that the final amount charged to the federal award is accurate, allowable, and properly allocated.

Time records must be kept for nonexempt workers and volunteers as detailed below:

  • Nonexempt workers: In accordance with Department of Labor regulations implementing the Fair Labor Standards Act, charges for the salaries and wages of nonexempt employees, in addition to the supporting documentation described in this section, must also be supported by records indicating the total number of hours worked each day.
  • Volunteers: Salaries and wages of employees used in meeting cost sharing or matching requirements on federal awards must be supported in the same manner as salaries and wages claimed for reimbursement from federal awards.

For a non-federal entity where the records do not meet the standards described in this section, the federal government may require personnel activity reports, including prescribed certifications, or equivalent documentation that support the records as required in this section.

Like much of the new Uniform Guidance, these personnel compensation recordkeeping requirements direct non-federal entities to develop a system that meets regulatory requirements and holds them accountable for an outcome: charges are accurate, allowable, and properly allocated. We only see the term "personnel activity reports" used as a fallback where whatever system the recipient has implemented isn't meeting the outcome requirements.

However, the need for some sort of effective recordkeeping system is clear. If grantees currently have a system in place that works for them and utilizes personnel activity reports, it will continue to meet the requirements of the Uniform Guidance and Part 75. Non-federal entities who choose to create and implement a new system for documentation of personnel expenses will need to make sure that the regulatory requirements are met.

So, while the term "personnel activity reports" doesn't feature prominently in the new regulations, personnel recordkeeping remains an important aspect of fiscal management.

Are the individual items of cost that used to be in Appendix B for most grantees different in the new regulations?

Overall, there are more identified individual items of cost in the Uniform Guidance and the HHS implementing regulations at Part 75. In Appendix B to 2 CFR 230, we had items 1 through 52. In Part 200, we have 54 items, plus one added by HHS in Part 75 around independent research and development costs, for a total of 55. These items are found in the body of Part 75 from §75.421 through §75.476.

It's so much more than just a few more items added to the list; some are new, some are restated, some re-labeled, and others removed. The important consideration is not what is the same and different, but what the new list of items tells non-federal entities about what is and is not allowable.

Are there significant changes in allowability of individual items of cost?

Other FAQs in this section highlighted the individual items of cost that relate to wage, benefit, and professional services payments, which should be carefully compared to the non-federal entity's personnel policies and procedures as well as to the fiscal policies and procedures. We've also noted that employee morale costs as some recipients might have previously understood the term are no longer allowable.

In the area of real property, the items of cost no longer recognize use allowance as an allowable cost See §75.436 Depreciation. However, in §75.436(d)(5), there is information on a limited option to convert from use allowance to the depreciation method. §75.436(e) now requires that:

  • Charges for depreciation be supported by adequate property records
  • Physical inventories be taken at least once every two years
  • Adequate depreciation records showing the amount of depreciation taken each period be maintained

While general criteria for allowability of costs (§75.403 through §75.405) haven't changed, non-federal entities are going to need to: set aside their current assumptions about what individual items are and are not allowable; check the individual item of cost and other limitations in the Uniform Guidance and Part 75 against their current policies and practices; and adjust accordingly.

Can proposal costs now be charged to our Head Start award?

§75.460 Proposal costs.
Proposal costs are the costs of preparing bids, proposals, or applications on potential federal and non-federal awards or projects, including the development of data necessary to support the non-federal entity's bids. Proposal costs of the current accounting period for both successful and unsuccessful bids should be treated as indirect facilities and administrative (F&A) costs and allocated currently to all activities of the non-federal entity. No proposal costs of past accounting periods will be allocable to the current period.

Proposal costs must meet the basic cost principle requirement of reasonableness. They need to be characterized as indirect F&A costs and be within the scope of the negotiated indirect cost rate, de minimis rate, or cost allocation method used by the grantee and allocated consistently with other indirect F&A costs. So, for an example, a grantee could not charge the costs of preparing and writing its continuation funding application or designation renewal system (DRS) application directly to its current Head Start award. However, the cost could be charged by the non-federal entity in the same manner as other indirect administrative costs.

Can fundraising costs now be charged to our Head Start award?

§75.442 Fundraising and investment management costs.
(a) Costs of organized fundraising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred to raise capital or obtain contributions, are unallowable. Fundraising costs for the purposes of meeting the federal program objectives are allowable with prior written approval from the federal awarding agency.

The language in the new regulation is clear that organized fundraising remains unallowable. Of course, these regulations are brand new, and neither the Administration for Children and Families (ACF) nor OHS has given prior written approval for fundraising for the purpose of meeting federal program objectives. Consequently, at this time, all forms of fundraising, both organized and for the purpose of meeting match requirements, are unallowable.

Real Property Reporting, Requests, and Procurement

Is the SF-429 form required of all grantees, even if they have no real property or no real property bought with federal funds?

§200.329 Reporting on real property.
The federal awarding agency or pass-through entity must require a non-federal entity to submit reports at least annually on the status of real property in which the federal government retains an interest, unless the federal interest in the real property extends 15 years or longer.

The awarding agency can allow multi-year frequencies for reporting where the federal interest extends 15 years or longer, but ACF has opted to require annual real property reporting using Standard Form (SF) 429 and Attachment A, as indicated in ACF-IM-HS-15-01, for all grantees. If the non-federal entity has no real property to report, the grantee should insert comments to note that fact and still submit the report.

SF-429 has two functions, to report and to request permission for certain actions. The cover page and Attachment A are used for reporting. The cover page and Attachment B are used to request funds to engage in a facilities activity. A "facilities activity" is currently defined in Part 1309 of the Head Start Program Performance Standards as "purchase, construction, or major renovation." Additional materials will be required to meet all of the application requirements of Part 1309.

Is an inventory of real property at the program level also required?

An inventory of real property must be kept at the program level if depreciation is being charged against the Head Start award. In addition, awardees must maintain sufficient information about real property at the program level to support filing of the new SF-429 cover page and Attachment A, which must be submitted annually.

§75.436 Depreciation.
(e) Charges for depreciation must be supported by adequate property records, and physical inventories must be taken at least once every two years to ensure that the assets exist and are usable, used, and needed.

How is disposition of real property handled?

Disposition, as well as refinancing, encumbrance, and subordination, is requested using the cover page and Attachment C of SF-429. Disposition options are found in §75.318 Real property. These provisions are similar to what was previously in Part 92, but now allows grantees to use proceeds of a sale for another approved facilities activity instead of payment to the U.S. Treasury.

Is permission still required for purchase and sale of equipment? If so, what are the associated dollar amounts?

Yes, prior written approval is required for purchase or sale of equipment, defined as tangible personal property (including information technology systems) having a useful life of more than one year and a per-unit acquisition cost which equals or exceeds the lesser of the capitalization level established by the non-federal entity for financial statement purposes, or $5,000. Uniform Guidance §75.439 addresses equipment and other capital expenditures. Prior approval is defined in §75.2 as written approval by an authorized HHS (ACF) official evidencing prior consent before a recipient undertakes certain activities or incurs specific costs.

All administrative requirements, program manuals, handbooks, and other awarding agency materials that are inconsistent with the requirements of Part 75 have been superseded. This includes previous grants policy notes and guidance from the OHS that raised the prior approval threshold to $25,000.

§75.439 Equipment and other capital expenditures.
(b) The following rules of allowability must apply to equipment and other capital expenditures:

    (1) Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges, except with the prior written approval of the federal awarding agency or pass-through entity.

Be sure to look at the §75.2 Definitions for capital expenditures, equipment, special purpose equipment, general purpose equipment, acquisition cost, and capital assets.

Are the equipment inventory requirements the same as before?

§75.320 Equipment.
Inventory requirements in the Uniform Guidance are the same as the previous requirements for Part 92 grantees. Part 74 grantees should take a careful look the elements that are required in the inventory, which are slightly different than the former Part 74. Inventory requirements are found at §75.320(d), and (e) covers disposition of equipment.

Will grantees need to change their procurement policies and procedures?

Most likely yes. It is difficult to think of a situation where a grantee would not need to make changes to its procurement policies and procedures to align them with the new Uniform Guidance and HHS regulations at Part 75.

Are there any special timelines in the Uniform Guidelines that apply to procurement procedures?

§75.110 Effective/Applicability date.
(a) The standards set forth in this part which affect administration of federal awards issued by federal agencies become effective Dec. 26, 2014. For the procurement standards in 2 CFR 200.317-200.326, non-federal entities previously subject to OMB Circular A-110 may continue to comply with the procurement standards in previous OMB guidance (superseded by this part as described in 2 CFR 200.104) for one additional fiscal year after this part goes into effect.

Procurement is discussed in the Uniform Guidance at §200.316 through §200.317, and in Part 75 at §75.326 though §75.335. This area is not like personnel compensation where compliance is established by weaving together individual items of allowable and unallowable costs. A suggested approach to procurement is to sit down with the new regulations and ask what a fully compliant, effective, and efficient procurement system looks like from identification of:

  • Needs
  • Budget requirements
  • Competition
  • Contracting
  • Oversight
  • Approval of invoices
  • Allocation
  • Documentation
  • Payment

This critical system really doesn't lend itself to a piecemeal approach. Find additional information about procurement:

  • §75.326 Procurements by states.
  • §75.327 General procurement standards.
    • Use documented procurement procedures and must have written procedures for procurement transactions (§75.328(c)).
    • Maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.
    • Maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award, and administration of contracts (defined broadly).
    • Keep records sufficient to detail the history of procurement.
    • The type of procuring instruments used must be determined by the recipient but shall be appropriate for the particular procurement and for promoting the best interest of the program or project involved.
  • §75.328 Competition.
    • Provide full and open competition
    • Find examples of situations that lack competition in (1) – (7); for example:
      • (4) Noncompetitive contracts to consultants that are on retainer contracts.
  • §75.329 Procurement procedures.
    • The non-federal entity must use one of the following procurement methods:
      • Procurement by micro-purchases; less than $3,000 (always check definitions).
        • Must distribute micro-purchases equitably among qualified suppliers
        • May be awarded without soliciting competitive quotations if the non-federal entity considers the price to be reasonable
      • Procurement by small purchase procedures; less than simplified acquisition threshold, currently $150,000.
        • Relatively simple and informal
        • Price or rate quotations must be obtained from an adequate number of qualified sources
      • Procurement through sealed bids.
        • Preferred for construction
      • Procurement by competitive proposals.
        • More than one source submitting an offer
        • Used when conditions are not appropriate for the use of sealed bids
      • Procurement by noncompetitive proposals (very limited)

Don't forget that special considerations may apply, such as those in §75.459 Professional services costs.

Appendix II to Part 75—Contract Provisions for Non-Federal Entity Contracts Under Federal Awards, contains additional conditions A-J, including:

    1. Contracts for more than the simplified acquisition threshold must address administrative, contractual, or legal remedies in instances where contractors violate or breach contract terms, and provide for such sanctions and penalties as appropriate.
    2. All contracts in excess of $10,000 must address termination for cause and for convenience by the non-federal entity, including the manner by which it will be effected and the basis for settlement.
    3. Davis-Bacon Act, as amended.

Careful attention to procurement policies, procedures, and implementation is critical.

If you have more questions...

Who should grantees contact with fiscal questions during their funding periods?

Non-federal entities should contact their regional program or grants specialist with any questions about new Uniform Guidance and other fiscal requirements.

Additional Resources

Last Reviewed: March 2015

Last Updated: October 27, 2016