What is the Super Circular?

According to the Federal Register, the Office of Management and Budget (OMB) Super Circular guidance was created in order “to deliver on the promise of a 21st-Century government that is more efficient, effective and transparent.” The Super Circular supersedes and streamlines requirements from previous OMB Circulars applicable to the administration, use, and audit of federal grant funds by nonprofit organizations, state, local and tribal governments, and colleges and universities.

When Does it Become Effective?

The Super Circular’s requirements apply to new federal awards issued by federal awarding agencies on or after December 26, 2014. Or, in the case of incremental funding, to the first funding increment issued on or after December 26, 2014.

What Has Changed?

The following is a summary of what we believe to be the most significant changes resulting from the OMB Super Circular and suggested actions your organization may need to take to be in compliance with the new requirements.

Audit Requirements

  • Audit requirements will apply to audits of non-federal entity fiscal years beginning on or after December 26, 2014.
  • OMB has raised the threshold for OMB A-133 compliance audits (single audits) from expenditures of $500,000 to $750,000.
  • The threshold for distinguishing between Type A and Type B programs has been increased from $300,000 to $750,000.
  • The percentage of coverage required in any Circular A-133 audit has been reduced from 50% to 40% for auditees that aren’t considered low risk and from 25% to 20% for low-risk auditees.
  • The criteria for classification as a low-risk auditee have been revised. One new criterion will require that the auditor not report a substantial doubt about the auditee’s ability to continue as a going concern. Another criterion will require the financial statements to be prepared in accordance with U.S. GAAP unless another basis is required by state law.

Procurement Requirements

  • In light of significant changes to procurement rules made by the Super Circular, for the non-federal entity’s first full fiscal year that begins on or after December 26, 2014, it must document whether it is complying with the old procurement standards or the new ones and must meet the documented standard. For future fiscal years, all non-federal entities will be required to comply fully with the Super Circular.
  • The Super Circular requires a formal process for procurements of $150,000 or greater. Procedure must be documented, provide full and open competition, include a cost or price analysis, consider conflicts of interest, and award only to “responsible” contractors.
  • Records must be maintained to document the history/rationale of the procurement.
    Prohibits state or local geographical preferences.
  • Must use one of five procurement methods (§200.320):
    1. Procurement by Micro Purchase (<$3,000) – may be awarded without soliciting competitive quotations if the non-federal entity considers the price reasonable.
    2. Procurement by Small Purchase Procedures (>$3,000 and <$150,000) – price or rate quotations must be obtained from an adequate number of qualified sources.
    3. Procurement by Sealed Bid (formal advertising).
    4. Procurement by Competitive Proposal.
    5. Procurement by Noncompetitive Proposal – only appropriate in specific situations.

ACTION: For your organization’s first full fiscal year beginning on or after December 31, 2014, document whether you are complying with the old procurement standards or the new ones. Review current procurement policies for necessary changes required by §200.317-§200.326 of the Super Circular.

Conflict of Interest and Disclosure Requirements

  • Federal awarding agencies are required to establish conflict of interest policies for federal awards. Non-federal entities must disclose in writing any potential conflict of interest to the federal awarding agency or pass-through entity in accordance with the applicable federal awarding agency policy.
  • A non-federal entity or an applicant for a federal award must disclose, in a timely manner, in writing to the federal awarding agency or pass-through entity all violations of federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the federal award.

ACTION: Establish methods to identify and evaluate potential conflicts of interest as early as possible in the award process. Establish responsible party for monitoring potential conflicts of interest. Screen employees for potential conflicts of interest. Consider if current conflict of interest policies cover federal awards.

Documentation of Compensation for Personal Services

  • Sets forth documentation standards for time recording and labor expense. Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Although the Super Circular, no longer specifically requires personnel activity reports, it is not clear exactly what documentation will be sufficient.

ACTION: Many organizations receiving federal grant funds are choosing to continue using personnel activity reports until more information is available.

Indirect Costs

  • Non-federal entities that receive funds directly from the federal government and that have never received a federally negotiated indirect cost rate may choose to use the 10% de minimis indirect cost rate, without having to go through the process of negotiating a rate.
  • Non-federal entities that have negotiated rates may apply for a one-time extension of a current rate for up to four years.
  • Allows for direct charging of administrative and clerical salaries if all of the following conditions are met:
    • These salaries are integral to a project or activity;
    • Individuals can be specifically identified;
    • Such costs are explicitly included in the budget or have the prior written approval of the Federal awarding agency; and
    • The costs are not also recovered as indirect costs.

ACTION: Consider flexibility and new options for the recovery of indirect costs.

Sub-recipient Monitoring

  • More stringent requirements for sub-recipient monitoring if Federal funds are passed through one non-federal entity to another including:
    • Required documentation of classification of the entity receiving the Federal funds as a sub-recipient or a contractor;
    • Identification or negotiation of an appropriate sub-recipient indirect cost rate at the time of award;
    • Ensured communication of new requirements within sub-recipient agreements;
    • Evaluation of sub-recipient risk of noncompliance and determination of necessary monitoring activities; and
    • Imposed remedies for sub-recipient noncompliance, when necessary.

ACTION: Establish a formal process to properly structure sub-recipient agreements. Consider expanded responsibilities described above, including how “hands on” monitoring will be performed and documented.

Where Can You Get More Information?

While we have highlighted some of the changes, we encourage you to obtain all the details relevant to your organization by reviewing the Super Circular.

Should you have any questions, please feel free to contact a member of HBE’s Non-profit Specialty Team at (402) 423-4343.

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