The Uniform Guidance has ushered in a new age of accountability for federal grant recipients. New rules, new disclosures and a new focus on ethical behavior are part of this change Setting Standards of Conduct.
In this article, we are going to focus on one more way that the new grant regulations are getting tougher on organizations and agencies.
Whether you are a Federal agency or an award recipient, you need to have a very specific written conflict of interest policy to meet the new grant guidance.
(I include federal agencies, because believe it or not, some Federal agencies that didn’t have their own ducks in a row with a conflict of interest policy for their agency!)
Here are some of the ways that the Uniform Guidance in 2 CFR Part 200 requires both non-federal entities receiving federal awards and Federal agencies to beef up their Standards of Conduct.
Get It In Writing
First, the new regulations explicitly required federal agencies and federal award recipients to have policies on conflicts of interest in writing!
(Expect auditors and others to ask to see a copy of the written policies earlier in the process than ever before!)
Next, non-Federal entities now are required to disclose in writing any potential conflicts of interest.
No more waiting to see if auditors will pick up problems as they do their fieldwork.
“If you see something say something” applies to grant recipients as well!
And that’s just the beginning!
Show and Tell-Disclosure is Now Required
In the past, conflicts of interest were often treated as more a game of “hide-and-seek” than “show-and-tell.”
Now, the overriding theme in the new grant guidance is increased responsibility for grantees.
In other words, if things go “south” with your grant…
It’s your responsibility as a grant recipient to disclose any potential conflicts of interest to the Federal awarding agency or pass-through entity.
No more waiting to see if the auditor “finds them.”
No more waiting to see if the awarding agency or their Office of Inspector General “find them.”
It’s all on YOU as the grant recipient to be alert to potential conflicts of interest and let the Fed’s know if anything is amiss.
Which inevitably raises the next question?
“How do I know if I have a potential conflict of interest?”
What to Look For? Un-masking Conflicts of Interest
Simply put, potential conflicts of interest occur when there is some form of advantage (either financial or non-financial) that a person could exploit for personal benefit from a contract being awarded to a certain company or person.
This can involve a wide variety of relationships including:
• Employees
• Officers
• Agents
• Members of the immediate family of employees, officers, and agents for the organization
• Partners
• Current or potential employers of all of these people
Here’s how this plays out in real-life:
If someone has a real (or even an apparent) conflict of interest, they are prohibited from participating in choosing, selecting, awarding, or administering contracts which are paid for by federal funds.
The reason behind this is simple.
People should not be in a decision-making role for federal funds when they are influenced by things other than the best interests of the award and the organization.
What is Nominal Value?
In real life, you may encounter situations that may create a conflict of interest without you even meaning to!
For example, if a vendor offers you a bottle of water or a cup of coffee, that could be a conflict of interest.
Here’s why…
The Standards of Conduct policy required by the Uniform Guidance say your policy must prohibit requesting or receiving ANYTHING of monetary value from a vendor or subcontractor.
And even a bottle of water or a cup of coffee have a monetary value.
Fortunately, there is a slight amount of flexibility in this section because the organization can set its own policies to define minor amounts where the value is nominal and unsolicited.
By setting a reasonable value as the nominal value of a gift, you can help your organization avoid a lot of headaches!
Best practices encourage organizations to define a nominal value that does NOT constitute a conflict of interest from the start and train employees on what that threshold is.
In other words, your policy should differentiate between a nominal value such as a bottle of water and a potential conflict of interest like accepting a flat screen television from a vendor.
But there’s even more to this part of the new grant regulations…
There’s Even More to the Standards of Conduct
The Standards of Conduct are required to cover more than just personal conflicts of interest.
If you are a non-Federal entity with a parent, affiliate company, or a subsidiary, you also need to be alert to organizational conflicts of interest in your Standards of Conduct.
In other words, steering contracts to your subsidiary could also be a conflict of interest!
Next, you want to ensure you lay out (at a minimum) who is covered under these rules.
The federal minimum for written Standards of Conduct is to cover the performance of any employees who are involved in selecting, awarding or administering the contracts used by the non-Federal entity.
(Personally administrating a Standards of Conduct policy that only covers some employees but not others is an administrative nightmare!)
But the Uniform Guidance does not require 100% of employees to be covered by the policy.
Finally, the Standards of Conduct must spell out the disciplinary measures that will be used when the rules are violated.
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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.
