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Uniform Guidance-Payroll Documentation

Recently there have been numerous reports of significantly increased enforcement of requirements for documenting payroll allocations with personnel activity reports whenever federal funding is received. So some of the provisions contained in the “Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards”, effective for 2015, will be welcome. Some of these provide some relief from recordkeeping requirements and others provide some welcome clarification

Specifically, rules for documenting payroll allocation include:

Budget estimates can be used on an interim basis as long as they are reasonable approximations of time actually worked, they are updated when appropriate, and ultimately adjusted as necessary.
Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed and is supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated.
Another provision states that, for records which meet these standards, the entity will not be required to provide additional support or documentation for work performed. However, later on it says that in cases where records do not meet the standards, the federal government may require personal activity reports.
The section on payroll documentation goes on to say that cognizant agencies for indirect costs are encouraged to approve alternative proposals based on outcomes and milestones for program performance where these are clearly documented. These can be acceptable alternatives to the documentation requirements above.
Incentive compensation is allowable if it’s based on cost reduction, efficient performance, safety awards, and similar criteria, as long as overall compensation is reasonable
Compensation is also allowable when paid to trustees, directors, or officers when it is reasonable and is paid for services.
Fringe benefits, including standard items, authorized absences, pursuant to an organization’s policy, and even certain reserves for self-insurance of unemployment are allowable.
Paid personal use of company vehicles is not allowed even if it is reported as compensation.
Postretirement health insurance is allowed generally on a pay-as-you-go basis.
Severance pay is allowable as long as it meets certain criteria such as being subject to an established policy.
If you receive and spend federal awards, documentation for payroll cost is still very important, but this flexibility is a welcome relief.

Federal Internal Control Standards – the Green Book Is Released

Standards for Internal Control in the Federal Government has been issued by the Comptroller General. What color is it? Green! Why should you care? Because the new rules for Uniform Grant Guidance say that you must have internal controls over administration of federal awards and they should be compliant with COSO or this publication.

The Green Book is manageable in length, under 70 pages of content with some clear illustrations, a concise list of the components and principles of internal control, and an appendix that lists the principles that should be followed.

More importantly, it is not dramatically different from the COSO standards that you are probably already familiar with. The 5 components of internal control (control environment, risk assessment, control activities, information and communication, and monitoring) are the same as COSO.

Internal controls are critically important in nonprofits, and documentation of your controls is a must for organizations receiving federal and other funding, so familiarity with this new guidance is valuable.

Google “standards for internal control in the federal government” or Use the links in our website.