The change in grant regulations released in late 2013 brings with it a renewed focus on performance, oversight and decreased administrative burdens for both grantees and awarding agencies.
As promised we are digging deeper into the major policy changes and what they mean to grant managers by looking at five pillars of the new grant regulations for federal awards.
The Five “R’s” Changing Grant Management
The five “R’s” of the changing grant management regulations include:
Pillar #1: Reform
The reform of the rules governing stewardship of taxpayer funds is at the core of this massive change.
The reformation of eight sets of guidance governing grant management of federal awards reframes the regulations into one “super-circular.”
The OMB believes these changes will reorient recipients towards achieving program outcomes instead of spending excessive time complying with overly burdensome and complex administrative requirements.
This reorientation on the federal level is to ensure that cooperative agreements and discretionary grants are decided on merit and outcomes and not just “business as usual.”
Pillar #2: Rethink
The Office of Management and Budget (OMB) has embraced new approaches which include innovative and cost-effective ways to improve the results of grant making and grant management processes.
This rethinking of the grant process includes experiments such as “fixed amount awards” which focus on accountability through performance more than compliance.
An objective of the new guidance is to redirect federal dollars toward organizations with a proven track record of accomplishing program objectives.
New initiatives such as tiered evidence grants, Pay for Performance, and Performance Partnerships encourage redirection of grant funds to organizations with strong track records of program effectiveness. (More about these initiatives in a future article.)
Pillar #3: Revise
The revised rules standardize financial management of federal awards which should benefit grantees with predictable and consistent application across all federal agencies.
This effort includes elimination of duplicative or conflicting rules which often led to confusion and wasted time for grantees and federal personnel.
The revision of the regulations also seeks to limit audit findings and funding restrictions caused by misunderstandings of the guidelines.
Pillar #4: Reduce
A main objective of this change it to reduce the risk of waste, fraud and abuse of taxpayer dollars and decrease the amount of administrative burden that organizations face in complying with the grant regulations.
The reduction in risk will be largely driven by increased screening before funds are awarded to grantees and subgrantees and more oversight during the grant period.
Likewise, an added level of certification by senior management puts more “skin in the game” on the organizational level to minimize grant funds mismanagement.
And once you get over the shock of having to relearn and redo all your internal grant policies and references, the amount of time spent in compliance activities should really go down.
As they say…”that’s the theory.”
Pillar #5: Rewrite
The new grant regulations rewrite parts of the guidance to eliminate several areas of concern to grant recipients including these examples:
• Clarify the circumstances where administrative costs can be included in Direct Costs
• Institute a new 10% Indirect Cost rate for organizations that have never had a negotiated indirect cost rate. (We saw this 10% rate becoming the “new normal” last year…)
• Allow for a one-time extension of a negotiated indirect cost rate for up to four years. (No new negotiating required.)
• Rule that computing devices that fall under the capitalization level for equipment can be treated as supplies and not be subject to the onerous equipment tracking and reporting requirements.
• Increase the single audit threshold to $750,000 in federal awards
Stay tuned. In our next article we’ll continue to get into more details.
Don’t forget we’ll be hosting an informative webinar about the changes on January 31, 2014.
When: Friday January 31st at noon Eastern Time, (11 AM Central Time, 10 AM Mountain Time, 9 AM Pacific Time)
Lucy Morgan CPA, MBA
CEO, Compliance Warrior