“How do pass-throughs entities (and grant managers) assess risk and integrity? We use subawards, but I’m unsure how to assess risk and integrity.”
“Do sole source procurement rules apply to all purchase threshold levels? Do you have to seek prior approval from the funding agency to sole source?”
“Would a consultant providing services to a non-profit subrecipient of a federal grant need a contract if the aggregate total is less than $150k, in the micro-purchase level?”
This article continues our series on 10 Essential Questions (and Answers) for Grant Managers.
One of our grant management webinars on updates to 2 CFR Part 200 Uniform Grant Guidance brought lots of great questions to our discussion.
Here are the questions (and answers) asked by our participants:
Question: “How do pass-throughs entities (and grant managers) assess risk and integrity? We use subawards, but I’m unsure how to assess risk and integrity.”
Answer: Evaluating the risk and integrity of subrecipients is a critical role of pass-through entities. While the purpose of evaluating integrity serves the same purpose as the risk assessment-i.e. to reduce the risk of waste, fraud and abuse, the integrity assessment is designed to provide insight into the level of ethics at the organization. In contrast, the risk assessment is to provide “reasonable assurance” grant will be managed effectively and efficiently.
Here are some additional resources that may be useful in modeling your risk and integrity assessment and help you develop an individualized monitoring plan based on the level of risk.
Sample Risk Assessment
Sample Subrecipient Monitoring Checklist
We also have a checklist of subrecipient questions at:
https://blog.myfedtrainer.com/7-areas-of-subrecipient-monitoring-do-you-know-what-to-ask/
Question: “Do the sole source procurement rules apply to all purchase threshold levels? Do you have to seek prior approval from the funding agency to sole source?”
Answer: Yes, sole source (aka) “Noncompetitive Procurement” in the procurement standards in 2 CFR Part 200 subpart §200.320-Methods of procurement applies to purchases at ALL purchase levels except the micro-purchase level.
From subsection 200.320 (c)
(c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply:
(1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section);
(2) The item is available only from a single source;
(3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation;
(4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or
(5) After solicitation of a number of sources, competition is determined inadequate.
And yes, prior approval from the federal funding agency is one of the ways to ensure that your sole source procurement is an allowable expenditure of federal funds.
In other words, “Expediency of Research” or similar justifications no longer fly for grant managers as a sole source justification.
Question: “Would a consultant providing services to a non-profit subrecipient of a federal grant need a contract if the aggregate total of the contract is less than $250k, in the small-purchase threshold?”
Answer: The answer to that question is “probably,” and here is why:
1) Consulting services get a lot of scrutiny by funding agencies because of the history of abuse of these types of relationships.
2) It would be challenging to meet the contract administration requirements in the procurement standards without a contract; it could be viewed as noncompetitive if there is not some form of competition for the services.
3) Without a contract, it is difficult for the auditors and the funding agencies to review what services the consultant was to perform to determine if the costs are “reasonable,”-which is a requirement of even the lower threshold small purchase threshold purchases.
So, in summary, even though a written consulting contract is not explicitly required, the best practice is to have one, and without one, you can run afoul of the rest of the administrative requirements.
Here are some additional relevant sections from the 2 CFR Part 200 guidance:
- From 200.318 General procurement standards.
(h) The non-Federal entity must award contracts only to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed procurement. Consideration will be given to such matters as contractor integrity, compliance with public policy, record of past performance, and financial and technical resources. See also § 200.214.
(i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.
(j)
(1) The non-Federal entity may use a time-and-materials type contract only after a determination that no other contract is suitable and if the contract includes a ceiling price that the contractor exceeds at its own risk. Time-and-materials type contract means a contract whose cost to a non-Federal entity is the sum of:
(i) The actual cost of materials; and
(ii) Direct labor hours charged at fixed hourly rates that reflect wages, general and administrative expenses, and profit.
(2) Since this formula generates an open-ended contract price, a time-and-materials contract provides no positive profit incentive to the contractor for cost control or labor efficiency. Therefore, each contract must set a ceiling price that the contractor exceeds at its own risk. Further, the non-Federal entity awarding such a contract must assert a high degree of oversight in order to obtain reasonable assurance that the contractor is using efficient methods and effective cost controls. (2) Since this formula generates an open-ended contract price, a time-and-materials contract provides no positive profit incentive to the contractor for cost control or labor efficiency. Therefore, each contract must set a ceiling price that the contractor exceeds at its own risk. Further, the non-Federal entity awarding such a contract must assert a high degree of oversight in order to obtain reasonable assurance that the contractor is using efficient methods and effective cost controls.
- From 200.319 Competition.
(a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and § 200.320.
(b) In order to ensure objective contractor performance and eliminate unfair competitive advantage, contractors that develop or draft specifications, requirements, statements of work, or invitations for bids or requests for proposals must be excluded from competing for such procurements. Some of the situations considered to be restrictive of competition include but are not limited to:
(1) Placing unreasonable requirements on firms in order for them to qualify to do business;
(2) Requiring unnecessary experience and excessive bonding;
(3) Noncompetitive pricing practices between firms or between affiliated companies;
(4) Noncompetitive contracts to consultants that are on retainer contracts;
(5) Organizational conflicts of interest;
(6) Specifying only a “brand name” product instead of allowing “an equal” product to be offered and describing the performance or other relevant requirements of the procurement; and
(7) Any arbitrary action in the procurement process.
- From 200.459 Professional service costs.
(a) Costs of professional and consultant services rendered by persons who are members of a particular profession or possess a special skill, and who are not officers or employees of the non-Federal entity, are allowable, subject to paragraphs (b) and (c) of this section when reasonable in relation to the services rendered and when not contingent upon recovery of the costs from the Federal Government. In addition, legal and related services are limited under § 200.435.
(b) In determining the allowability of costs in a particular case, no single factor or any special combination of factors is necessarily determinative. However, the following factors are relevant:
(1) The nature and scope of the service rendered in relation to the service required.
(2) The necessity of contracting for the service, considering the non-Federal entity’s capability in the particular area.
(3) The past pattern of such costs, particularly in the years prior to Federal awards.
(4) The impact of Federal awards on the non-Federal entity’s business (i.e., what new problems have arisen).
(5) Whether the proportion of Federal work to the non-Federal entity’s total business is such as to influence the non-Federal entity in favor of incurring the cost, particularly where the services rendered are not of a continuing nature and have little relationship to work under Federal awards.
(6) Whether the service can be performed more economically by direct employment rather than contracting.
(7) The qualifications of the individual or concern rendering the service and the customary fees charged, especially on non-federally funded activities.
(8) Adequacy of the contractual agreement for the service (e.g., description of the service, estimate of time required, rate of compensation, and termination provisions).
(c) In addition to the factors in paragraph (b) of this section, to be allowable, retainer fees must be supported by evidence of bona fide services available or rendered.
Grant Management Training with a Greater Purpose
You’ve just gotten a behind-the-scenes look at our approach to grant management training.
We are dedicated to helping grant professionals connect on a deeper level to their work and communities as they continue their life-changing work funded by Federal grants.
Grant Management Training with a Greater Purpose
You’ve just gotten a behind the scenes look at our approach to grant management training.
We are dedicated to helping grant professionals connect on a deeper level to their work and communities as they continue their life-changing work funded by Federal grants.
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Author:
Lucy Morgan CPA, MBA
CEO, Compliance Warrior
Author of “Decoding Grant Management-The Ultimate Success Guide to the Federal Grant Regulations in 2 CFR Part 200” The 2nd Edition is now available on Amazon in Paperback and Kindle versions.
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