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.

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Sub-Recipient Monitoring

If you receive federal awards and pass some portion to other organizations, the first thing you should do is verify whether an organization is really a sub-recipient or is a contractor.

A sub-recipient

determines eligibility to participate in a federal program
makes decisions about the program
is responsible for complying with federal program requirements
carries out the program

A contractor

provides goods or services as part of their regular business operations, which are similar to goods or services they provide to different purchasers,
operates in a competitive environment,
their goods or services are ancillary to the operation of the federal program.
If you pass money through to a sub-recipient, you must provide them with:

the federal award, name, and CFDA number,
the federal awarding agency,
the current federal award amount being passed through,
the cumulative federal award amounts being passed through,
the date of the award,
the timeframe for performing services,
the contact person with your agency,
the pass-through entity’s name and ID number, and
the indirect cost rate (their rate if they have an approved indirect cost rate or have agreed to use the de minimis 10% rate).

Under Uniform Guidance, now you must also:

assess the risk of the sub-recipient not complying with all requirements (based on your prior experience with the sub-recipient, or on the results of previous audits, or the results of federal monitoring that you are aware of),
monitor sub-recipients for performance and compliance (review reports of services they have provided, review audit reports, compare actual accomplishment to objectives,
where appropriate. Calculate whether per unit costs are as expected, and obtain information about cost overruns, failure to meet goals, delays and the like),
consider withholding funds if there are issues, until evidence of acceptable performance is received,
consider additional monitoring and more detailed reporting, and
If issues are identified consider training, consider on-site reviews or agreed-upon procedures audits of aspects of their program.

The sub recipient entity must provide:

confirmation of their indirect cost rate if they have one , and
access to records and financial statements.
Heveron and Company may be able to help with this process. We can provide sub recipient monitoring services or provide agreed-upon procedures examinations to help assure sub-recipient compliance. In either case you would have a report to document compliance with your responsibilities. Call us if we could help or if you have questions.