Financial Management Workshop for CILs…Regulations and Beyond
IL-NET presentation on May 25-27, 2016
Module 11: Documentation for Payroll Time Worked and Services Provided

TIM FUCHS: Steve is an associate at Brustein & Manasevit and really an expert on Personnel Activity Reports and you all really focus on I guess originally Department of Education regulations, is that right?

But he will be able to help answer some of those specifics that you all had about reporting on staff time as well as an overview of the issue.

So thanks so much, Steven.

STEVE SPILLAN: Thank you.

Can everybody hear me?

So I assume they'll deal with the volume if that becomes an issue.

As Tim said, my name is Steve Spillan, I've been with Brustein & Manasevit about ten years now.

We focus primarily on federal grants management.

Now generally we focus on U.S. Department of Education, we also work with a lot of grants under Education, we also work with grants under the Workforce Innovation and Opportunity Act, the Rehabilitation Act and so on, so we've worked with DOL, HHS, a lot of different Federal agencies.

I am sorry that Tiffany Winters couldn't be here.

She is currently on her honeymoon, so it's not that she blew you guys off, there were just other plans that were made.

Unfortunately you're stuck with me for a little while.

What we're going to go through today are just a general overview of the new rules under, it's referred to as Part 200, the Uniform Grant Guidance. 

At one point it was the Super Circular, then it became the Omni Circular.

They changed the name about half a dozen times.

Generally, I'm going to refer to it as Part 200, or the Uniform Guidance.

Anytime I use either of those terms I am referring to the exact same rules.

We're going to go through the general structure of those new, of the Uniform Guidance.

We're going to talk a little bit about cost principles.

We're going to go through the requirements of determining what is an allowable cost and how it's going to apply to time and effort documentation.

Then we'll go through the old rules, to compare them to the new rules.

Most of you are familiar with the old rules under A-122, 87, all the other old circulars.

They were much more structured, much more rigid requirements and that led to a lot of audit findings, some of which we're going to talk about.

The new flexibility that's been offered by OMB and other federal agencies that have adopted these rules, really gives you much more room to maneuver, so to speak with how you want to track your time. 

However, and we're going to get into this as we get into the actual rules themselves.

It is an area, the term I like to use, is they give you a lot of rope in which to hang yourselves.

Because there's another requirement built in there, that if you don't, whatever new system you come up with, if it doesn't meet, you know, HHS standards, they can require you to keep a PAR and they can determine what's going to be in that PAR.

So we're going to talk about the flexibility and then I'm going to give you a little bit of a warning to hold off on any changes you warning to hold off on any changes you might want to make.

Finally we'll talk about what to look for in moving forward, when audit findings start popping up under these new rules.

Give us a better idea what we're looking for.

I have some of your questions that were asked earlier in the day.

They were written down.

I'll go over those.

As questions come up, go ahead and throw up your hand.

You don't have to wait until the end of the presentation.

If you have a question, raise your hand, we'll bring you a mic and we will go through that way.

If it's about a slide currently up there, it's better to have that information up there as you're asking the question.

So going through the, this is a general overview of the Uniform Grant Guidance.

It is a combination of all the old circulars.

HHS had to deal with this, ED had to deal with this when the program was still over there, but you had Federal agencies that were administering grants, where they had grantees that all had to go under different rules.

Nonprofits had your own rules, state local governments, Indian tribes, institutions of higher education, so not everybody was held to the exact same standards.

Government recognized this as a problem, went through, this was a multiyear process.

For years we were promised, you're going to get the final rules, you're going to get the final rules.

We finally got a glimpse of them in 2013.

Final rules were issued about a year later, and now with the exception of procurement rules, everything under Part 200 is now applicable to all of your federal grants.

All right, so it combined all of these old circulars including the audit rules, everything, now all in one big spot with Part 200.

The effective dates for all direct grants, directly from the federal agencies, the rules were effective as of December 26, 2014.

For any pass through grants, state administered programs, funds that flow through down to sub grantees, those were effective as of July one, 2015.

Now, for the third bullet there, everybody needs to, if you have these slides in front of you, get your pen out and mark something down for me real quick.

July 1, 2017, that's what the third bullet should say, 2017.

This changed. 

Originally they were going to allow for one year grace period, they upped it to a two year grace period.

So for all state administered programs, anything the funds flow through a pass through entity, all non-Federal entities, so anyone that receives federal funds will have until July 1, 2017 to get their new procurement rules in place based on Part 200.

Now that is not what we are going to talk about today. 

But it's an important part I just wanted to point out.

Until you have those new rules in place, your new procurement policies and procedures, you still have to operate under your old procedures. 

Okay, and then for indirect cost rates, the new rules would apply whenever you're up for negotiation of your indirect cost rate.

All right.

Because this combined many different OMB circulars, it included the cost principles, it included the administrative rules and the audit rules.

This is the general breakdown.

We're going to spend almost all of our time today in the cost principle, Subpart E.

Okay.

One of the new requirements under the UGG, under Part 200, is that every non-Federal entity, so anyone that receives federal funds, has to have written policies and procedures on how you determine if a cost is allowed.

Now, for a lot of non-Federal entities, a lot of grantees and sub recipients, a majority of your costs are tied to your personnel costs, how you're paying your staff.

That has to be included in this process.

What's the determination process for determining who gets paid, how much they get paid? 

Make sure you are following all the different rules.

Now they specifically said they don't want you to just copy the allowability procedures in Part 200.

They want you to look at these and figure out how they're going to directly apply to your non federal entity.

All right, so just going down the line, looking at necessary, reasonable and allocable.

The salary that you're paying to a particular staffer.

Is the work that staffer is doing necessary for the purposes of your program?

Is it helping you achieve a program goal or a program objective?

The reasonableness, they use what's referred to as prudent person standard.

Would a prudent person in your particular, at your non-Federal entity, figure that this is an appropriate salary to pay to that person?

Okay.

Now that's going to be somewhat subjective depending on what state or what locality you're in, but would a prudent person in your exact situation or in a like situation, would they assume that this is a reasonable salary to pay?

First thing you're looking at is the work the employee is doing.

If it's benefiting the program, if it is actually completing a program objective, great.

Next, look at how much you're paying them, how much you charge into that Federal award, and that brings us into the question of allocability.

When we talk about the rules we are going to focus on cost objectives.

But regardless, if you're paying an employee with federal funds for a certain amount of work.

Let's say you are only paying them 60% of the work they do out of federal funds.

Whatever federal program you're paying them under, that has to be the program that's benefiting from at least 60% of the work they do.

You can only pay them an amount that's commensurate with the benefit that the program receives.

Okay, and that determination obviously is going to be made in the documentation that we're going to talk about. 

You're going to see the breakdown for cost objectives for funding sources, but someone has to be making that determination.

That okay, this person is spending 60% of their time on the federal program, and paying them as such.

Or they are spending 100% of their time on the federal program.

Just so long as, when you are working through your procedures, we don't need a name of a person that's going to make that determination.

But who within the organization, what office, what position?

All right, this is what they're looking for and it's just to show that you have strong internal controls.

That there is somebody at the highest level, that's determining, okay, this is how much this employee should be paid, this is the source they should be paid from and there has been a review to make sure that this is actually, that we're only paying them for the work they did that benefited the program.

Has to conform with all federal law and grant terms.

That means not just the authorizing statute or the program regulations, but the individual requirements in your grant awards or your sub award notifications.

In some places, they still call them subcontracts.

What I'm talking about is if you have funds awarded to you from the state and then you're using those to carry out the term of the grant.

To carry out the objectives of the grant.

That's what the feds refer to as the sub award.

All right.

So if you still call them a subcontract, I know different states have different words for it, but what I am referring to is the funds you would get from the state, or the state would send out to the sub recipients to carry out the actual terms of the program.

All right.

So you have to go back and look at that sub award agreement.

See if there's any additional requirements that have been placed on you, even outside of what these federal rules are.

One of the questions I always get is our state requires us to do XY and Z on our time and effort forms.

But I don't see that in the federal rules.

The states or the pass through entities are always allowed to be more restrictive, to add more requirements, if they feel it's necessary.

But any additional requirements they're going to place on you is going to be included in that sub award agreement.

So go back and look at those grant terms to figure out exactly what you're going to be held accountable for.

Has to be consistent with all state and local policies.

At the state level, sure they can be more restrictive if your locality has more restrictive rules.

Or if your non-Federal entity has written policies about how you track your time and it is somewhat more restrictive than the federal rules, if an auditor comes in and looks and sees you're compliant with federal rules but not following your own procedures, that's an audit finding, because the federal rules require you to follow your own policies and procedures.

Go ahead check state policies, check local policies, see if there's anything that would require you to go above and beyond what is required just for federal compliance.

Has to be consistently treated.

We are going to talk about this in a few minutes.

When I say consistently treated, I am looking at two different things.

One, direct versus indirect.

If you are charging somebody's salary as a direct charge, you can then not include in that salary in your indirect cost plan.

Or vice versa.

If somebody's salary is being recovered under indirect costs, you cannot then direct charge that salary.

It's double dipping.

That's an audit finding.

So you have to make sure it's consistently treated.

Beyond that, because they want consistent treatment between any state or local funds you might be getting and the federal funds.

They don't want you following two different sets of procedures for the funds.

They want you to have one set of procedures for all the funds that you spend that are compliant both with federal, state, and local requirements.

Have to be in accordance with generally accepted accounting principles.

Really what we're talking there is most people track everything by percentages on your time distribution records.

That your accounting records, however you do your payroll, that just, an auditor could come in, review your payroll records and not necessarily have to have you walk them through every single step.

That okay, this is generally the way you're going to handle payroll.

This is how the funds go out, this is how we're tracking them, whatever in your area what generally accepted accounting principles are.

Can't be included as match.

Now if you are working with any other federal programs, and there is a match requirement, make sure you're not using any funds you're getting from HHS to match a grant for another award you might have.

Unless it's specifically authorized by statute, you cannot use federal funds as a match for another federal program.

Net of all applicable credits, that is not going to apply much to your time and effort documentation.

All that is saying is that if you somehow brought in money, interest rebates, overpayments that were returned to you, any funds that have been brought in outside of program income, you have to make sure you spend that before you request additional funds.

So as far as personnel costs, the only thing we're looking at there is you've used those funds to pay down your personnel costs before you start requesting additional draw downs or additional reimbursements.

And then finally, everything has to be adequately documented.

Now, this was a much bigger deal under the old A-122 or the old circulars than it is going to be under the new time and effort rules. 

But still, even if you're only paying the person exactly what you should be paying them, they have done 60% of their work benefited the program, 60% of the program funds are what you used to pay that part of salary, great. 

If I can't follow that through your documentation, if there's no paper trail, that's an audit finding, you're going to owe that money back to the Federal government.

This is what I was saying earlier.

Direct versus indirect.

It's got to be one or the other.

It can't be both.

Now, this, I believe this was a question that was asked earlier today.

Our state is under the belief that Executive Directors should track their time by cost fund rather than be indirect.

Under the new rules, if you have clerical staff, administrative staff or anyone who oversees multiple programs, where the work that they're doing cannot easily be divided between the different programs, that's generally going to be an indirect cost. 

You are not going to be able to direct charge their salary because you can't pull out a percentage that you can charge the Federal award.

So what the rules say, is anyone, administrative, clerical staff, should be treated as indirect unless they meet all four of these requirements.

You have to show that this staffer, or the work that they're doing is integral to the federal activity.

That the work they're doing is integral to the program, without them you could not administer the federal program.

You have to be able to identify a specific individual with that activity.

Okay, this is the person who is doing the work without which we could not administer the program.

Those costs need to have been explicitly included in your approved budgets and finally you have to make sure you're not also recovering under indirect.

Only under those four cases can you direct charge administrative or clerical staff, and a lot of times it is going to apply to a lot of supervisors.

Not that they would necessarily be considered administrative or clerical but the work they're doing might be benefiting multiple programs and you can't just, it's not easy to pull out that percentage.

When you have that, you can only direct charge if you can follow each one of these.

All right.

And to show such services are integral to the activity, what you may not be able to come up with 60% or 70%, what they're saying is that you can show some sort of benefit.

This is the benefit that the program is receiving from the work that they're doing.

And that that is going into your determination for exactly how much you're paying out of which program to that particular staffer.

All right.

If you can't meet all four of those, it's got to be an indirect cost and if you're direct charging without being able to meet all four of those requirements, audit finding and you whatever amount of federal funds you paid to that person is probably going to be disallowed and you're going to have to pay it back.

All right.

And then I just included this as to why this is a big deal.

Payments made for cost determined to be unallowable, have to be refunded, including any interest, to the Federal government in accordance with whatever instructions they've provided.

Okay.

There's an old rule, or an old saying, better to ask for forgiveness than permission.

Well that is absolutely not true when it comes to federal grants.

(Laughter.)

The process of going through and figuring out exactly how much money is going to be considered unallowable, how much has to be paid back, where you're going to find the money to pay those funds back, this is all a giant headache that if you can avoid at all costs you should.

Now that's not to say if you have costs disallowed that's the end of the conversation.

A lot of the work that my firm does, we work with grantees and sub recipients, if they have a cost that's been deemed unallowable and they have to pay it back.

If it was a program team that came in and did a review or it was based off your single audit.

Once the Federal agency makes their final determination, that's not the end of the conversation.

We've worked with grantees that were having personnel costs completely disallowed and we worked with them on what's known as a reconstruction.

Affidavit signed, I can say, you know, from my own first-hand knowledge, this employee spent this amount of time working on this program and therefore the salary should have been and you lay out the amount.

A lot of Federal agencies have accepted that, work down the amount and then you end up paying back a significantly less amount of repayment than you would have otherwise.

But, with a lot of these grantees we've worked with, this is a two to two and a half, three year process.

It usually takes about a year for them to get that final determination.

Once you appeal it, generally steps you have to go through, with any sort of legal system, it takes forever.

And so you might not have this resolved until two or three years down the road.

All right.

So while it's not the end of the conversation, the goal should still be, let's make sure we're not having any costs disallowed, that we're following all the rules.

It sounds like that should be common place but if it was, I don't think my firm would still exist.

Obviously people are having issues with this.

So that's why we're going around, telling everybody what the rules are to make sure you have the tools to avoid these kind of headaches down the road. 

All right.

So the old rule, under A-122. 

If you were paid with federal funds, you had to maintain a Personnel Activity Report.

It had to be after the fact, had to account for total activity, had to be signed by the employee or supervisor with first-hand knowledge.

And had to be prepared at least monthly and coincide with one or more pay period.

Every one of those requirements was non negotiable.

If you missed any one of those points, that was going to be an audit finding.

Okay.

A lot of the issues that we saw were people weren't doing it after the fact.

If you were going to leave town on June 30, and you were, you weren't going to be back until August or something like that, you might sign off on a PAR on June 27 but the period ran through the end of June, that's not after the fact.

Okay.

Because of that, even if everything else was correct and you were still paid the way you should have been, that's an audit finding, they'd ask for the money back and then you'd have to go through the process of showing, no, we really did pay what should have been paid but again that's a headache you want to try to avoid if you can.

All right.

Another common finding was no affirmations. 

The form should have a statement on it that says, you know, I'm certifying this is the time I spent and that you know, I'm basing this either off of, you know, I was the one doing the time or if you're a supervisor, based off of, you know, your first-hand knowledge of how that employee spent their time.

I know a lot of grantees use a system where both have to sign.

You have the employee sign and a supervisor sign.

That's a much stronger internal control.

And you're going to have, auditors much less likely to question a PAR that has both signatures on it.

Okay.

And again, that certification statement needs to be there to show, yes, I'm certifying.

I'm not just signing a document.

I'm actually signing this to say that, yes, this is the amount of time I've spent working on the program, this is the amount of money I was paid based on my work.

The problem is sometimes somebody would sign it and, you wouldn't know who it was.

Is this the employee, is this a supervisor's signature?

If it wasn't clearly labeled on the form, I have no idea who signed it and if a supervisor did sign it, how did I know they had first-hand knowledge?

No certification statement.

No comment, or no title as far as who was signing.

Auditors had questions and any time that comes up, it's going to raise a red flag and make the auditor look much more closely at your documentation.

And our general rule of thumb, is you don't want the auditors to look at anything more closely than they have to.

Prepopulated forms, everything was already filled out, they just had to sign their name to it.

That's not necessarily out of compliance.

The problem is, if you have no mechanism for making sure there's not some sort of reconciliation, then the auditor is going to question, well how do I know that they really read through and made sure this was accurate.

That they did not just put their name on it.

We have always recommended generally avoid prepopulated forms.

Doesn't mean you can't use an electronic form.

It just means make sure that if the timing and everything else is actually already put in there before the employee or supervisor goes to sign it, that they actually have to review the document and make sure it's accurate before they put their signature on it.

All right.

It's an extra safeguard, as long as you have that in place you can avoid that kind of audit finding.

Common findings where they didn't account for the total time.

Okay.

That's still a requirement under the new rule, as it was under the old rule.

If you're only paid 50% from federal funds and the other 50 comes from a state or local source, all of your work still needs to be included on your time and effort documentation.

All right.

If you're only paid 10% from federal funds and everything else comes from state or local, doesn't matter.

The moment you're paid with federal funds, you have to keep time and effort documentation and it has to account for your total activity.

Everything you've done, not just the federal work you've done you were paid for from federal programs.

For 200%, that's what we like to refer to as fraud.

(Laughter.)

We're going to talk about that when we get to the new rules.

You have to get as close to 100% as you can without going over.

Because all of our high school coaches lied to us, you can't actually give 110%.

You can only do 100% of your time. 

If you were supposed to work 40 hours in a week and you worked 60, it's great you worked 20 hours more than you needed to, but 100% of your time is the 60 hours, not the 40 you were planning.

We're not concerned with what you were budgeted.

We're concerned with what you actually did.

And I'm going to talk about doing a reconciliation between budget amount and that when we get to the new rules.

But just make sure you're accounting for total time, which cannot be anything above 100%.

And finally, does not identify the cost objective.

That's also a rule that carries over from the old circular to the new rule.

You need to break it down by actual cost objective. 

All right.

You can't just say, I worked this amount of time on an HHS grant.

That's not good enough.

And within certain grants, you are going to have multiple cost objectives.

If there's any funding from a program that you have to track separately, administrative funding, any set asides, things like that, that's going to be its own cost objective.

So any funding you have to track separately, that's the cost objective and if that's the pot of funds you were paid from, and that's the cost objective you were working on, that's what has to be listed on the form.

You can't, I mean, we've actually seen examples of the cost objective was, federal programs.

That's an audit finding or HHS grant.

That's an audit finding.

My favorite one to date was the cost objective was doing my job.

(Laughter.)

Well, I commend you on doing your job, but you're, your non federal entity is now going to have to pay back your salary to the Federal government.

Okay.

So just make sure you're actually going by the cost objective.

Those are the old rules.

Any questions on that before we move on?

Perfect, every time I don't get questions I can only assume, aww you've ruined my perfect record.

Okay.

AUDIENCE MEMBER: My question is, how do you split vacation and sick hours in different cost objectives, lets say the employee covers different programs.

Do you estimate?

How you apply the cost objectives when there is vacation?

STEVE SPILLAN: When we are talking about leave, whether it is sick leave, vacation, paid leave, it just has to be done equitably across, so if you're paid 60% from federal funds, you can't charge 100% of your sick leave to the federal program.

You got to break it down the same way.

Okay.

60% of that amount of time.

Now, if you, whatever date, leave days you use, whatever hours you use, it has to somehow be worked into your time and effort documentation.

Now, there are different ways you can do that.

There's an accrual basis, there is an estimation.

Generally make sure whatever method you choose, check with the pass through entity to make sure they're going to sign off on that.

And then it has to be included in your own written policies and procedures.

Now, this is one of the areas, I was going to get into a little later but it makes sense to talk about it now.

Under the new rules, there are multiple areas where all non-Federal entities, grantees, subgrantees, everybody, now has to have written policies and procedures.

Time and effort isn't one of those.

But if you go to Section 200.431, which deals with fringe benefits, includes leave, vacation, things like that, one of the rules to using federal funds to pay for sick leave is that it has to be in accordance with your written policies. 

All right.

So generally time and effort isn't required, but if you're going to charge sick leave or any other fringe benefits to Federal awards, then you have to have a written policy for how you're going to do that.

We'll be talking a little bit later about making sure that, that your new time distribution records are part of your framework of internal controls.

Having procedures is really a best practice.

It's not officially required but it will make your life easier if you have them.

Did I answer your question?

Okay.

Any other questions before I move on?

We have time, you don't have to run.

AUDIENCE MEMBER: Hi, going back to something I thought I heard you say in passing, I want some clarification.

Other funds have to be used before you use the federal funds.

STEVE SPILLAN: Not.

Go ahead.

AUDIENCE MEMBER: Like if you have donations that are given in general, you have to figure out and use those before you can use federal funds?

STEVE SPILLAN: Donations are different.

The category I'm referring to.

Did everybody hear the question?

Okay.

The category I'm referring to was applicable credits, which has a specific definition which unfortunately I don't have the rule in front of me.

But it includes things like, if you were under contract, and you paid a contract, either an overpayment, either you paid them more than you were supposed to or they didn't deliver something they were supposed to and those funds are returned.

It was federal, what it really is, any federal funds you've spent that have somehow been returned back to you, you need to spend that before requesting any additional reimbursements or using any other federal funds.

That's under the allowability rules.

It says you have, that any cost you're drawing down or you're seeking reimbursement for have to be net applicable credits.

Meaning you spend those applicable credits before.

Otherwise, even if you still are spending it on an allowable cost, if you draw funds down or seek a reimbursement before you've spent an applicable credit, that cost is going to be disallowed.

Donations, that's not within the definition of an applicable credit.

Sorry.

Hold on.

Got to wait for mic.

AUDIENCE MEMBER: What if you pay for an expense in one fiscal year but then you get refunded in the next fiscal year?

STEVE SPILLAN: Just make sure you're spending that before using any of the next fiscal year's funds.

If it happens you're well within the fiscal year and you have started spending the fiscal year funds, they're not going to penalize you for that.

You just have to make sure once you get that money back, that is spent first.

All right.

It's, I mean, it's in the same line of first in, first out. 

That was money you have already received, you have already spent.

You have got it back, you know, sometimes it's indemnities on losses, interest rebates, anything like that.

Anything that has come back to you.

they just want you to spend that first before requesting additional payments or using funds that were awarded for the next, or the current fiscal year.

It's just you've already spent these.

So now that it's back to you, they want you to spend that again before you spend something else.

AUDIENCE MEMBER: You've used the word several times, must be signed by a supervisor, must be signed by a supervisor.

If I send my schedule of, or excuse me, my PAR to my board chairman, and he acknowledges it with an e-mail, is it the same?

STEVE SPILLAN: I would say no, here's why.

There has to be some sort of a certification that that board member has first-hand knowledge of how you spent your time.

AUDIENCE MEMBER: He's my supervisor.

STEVE SPILLAN: Does he have first-hand knowledge aside from the fact that you just sent him the PAR?

AUDIENCE MEMBER: No, but I can't have a subordinate signing it because they don't know.

STEVE SPILLAN: Under the federal rules, it only has to be signed by an employee or a supervisor with first-hand knowledge.

Now we recommend you do both.

But if there's nobody, if you're the top of the food chain and nobody else above you that has first-hand knowledge of what you've been doing, then your signature should be sufficient.

So what I would recommend is if you have policies that specifically state you want both, work something in there that says, unless this particular position. 

You know, whatever position you have, where there's nobody higher has first-hand knowledge, make sure that's noted somewhere in the policies, and you won't get dinged with an audit finding.

AUDIENCE MEMBER: This may not be a question for you, next half of my question but it goes to the folks here from ACL.

Have Centers for Independent Living through audit findings been asked, short of fraud, been asked to pay back funds because frankly that's just not an issue you could go out and raise funds for.

You know, hey, give us some money so we can give it to the government.

PAULA MCELWEE: I can probably answer that since the folks from ACL are outside the room.

This is Paula.

There have been situations where someone has had to repay.

They are infrequent, most of the time they'll negotiate through with you how you will handle it and what you will do next, so most of the time the first process is to fix your process, and they'll want to see proof that you've fixed whatever the error is.

We're small, we don't have a lot of money to give back, and so there isn't a lot of incentive to charge us for it.

It is infrequent but it has happened.

STEVE SPILLAN: And to piggyback on that answer, under the new federal rules, both in the flexibility they've offered under time and effort and in the new audit rules that have been put in place, which I think somebody else either has or will talk to you about during this conference, all federal agencies are encouraged to, I'm not going to go into detail, since someone else is talking about it, it is known as cooperative audit resolution, and the whole idea is to work with you if there's an area of noncompliance, rather than just saying, ha ha, we got you, give us our money back. 

You laugh.

But that is kind of the attitude auditors have been operating under for like the last 20 years.

Now under the new rules, there was a comment that was offered by COFAR, which is the Council on Financial Assistance Reform, which is the group that spearheaded the new rules, and when they talked about the flexibility that they were offering under the new rules for time and effort, they specifically said, doing this the way we're going doing it, tying it to your internal controls and stepping away from the, who has to sign it, when has to be signed, and those other more regimented requirements, it was because the whole purpose of the rules, according to COFAR and OMB, is to make sure that you are paying your employees for work they've actually done.

Not generate audit findings and that's what the old rules were doing.

They were generating audit findings, even if you were doing everything correctly.

But you did not fill the form out right that was going to cause a problem.

They have recognized that, and they are trying to move forward in a way that says, okay, we're going to focus more on your outcomes.

Did you actually pay them for the time they worked for, and if you can show that you did, they're not going to go after you for any additional funds, or at least that's what COFAR and OMB are hoping for.

Towards the end of the presentation, we'll talk about how we think that's going to work out with the auditors and the federal agencies.

AUDIENCE MEMBER: I wanted a little bit of clarification on something you said about the different cost objectives.

How you don't separate the cost objectives by the funding source itself.

STEVE SPILLAN: Because the funding source and cost objectives for a lot of programs are two different things.

The example I'm most familiar with isn't one that is going to help a lot of people in this room, because it is an education specific issue. 

But it is under a Federal award. 

So if under funds you get you have a five or 10% administrative set aside, that's its own cost objective.

So you have the local award you've received, is one cost objective.

The administrative set aside is another cost objective.

So if the work they're doing is administrative and getting paid from that pot of funds, that's the cost objective that has to be noted on your time and effort documentation.

Okay.

So like the funding source isn't necessarily different but it can be.

Like if you look at the funding sources, okay, this federal HHS program is the funding source but within it there are multiple cost objectives, just make sure that the documentation breaks it down by cost objective.

All right.

Moving on.

Again, you can ask questions throughout the whole presentation.

And then once we're done with this, I believe lunch is next.

I will stick around, if anybody has any additional questions.

You know, that way I'll make sure everything gets answered before I leave.

So the full citation for what I've given you right here is two CFR 200.430, starting paragraph i.

The reason I say that, but I've gotten so used to this, that I just say section 430.

But that's the full citation, so if you ever want to look it up.

I encourage everybody.

This presentation is good, I think it is going to give you the information I think you need.

It is not a substitute for going through and looking through the rules yourself.

Make sure you're familiar with them as possible.

This is the new standard.

Charges of Federal awards for salary and wages have to be based on records that accurately reflect the work performed.

That's the standard.

Everything else we're going to talk about fits underneath that and shows how you're meeting that standard.

But that right there, that is the standard.

I didn't say anything about when it has to be signed, who has to sign it, the time periods it has to cover because none of that is included in the new rules.

They're stepping away from that requirement.

That doesn't mean I think you should abandon that practice.

We're going to talk about that.

But the standard itself is that whatever records you keep have to show that the – that accurately reflect the work that employee performed.

And again, that's a general shift under the new rules, one of – when COFAR came out and said one of the reasons they're proposing Part 200, it was generally to allow greater flexibility in meeting your program objectives.

Now when you guys talk about procurement, and equipment and things like that, you are going to see they missed the mark by a wide margin on giving you more flexibility.

But, time and effort is actually one of the few areas where they did give you a lot of flexibility.

You are free to decide how you want to try to meet these new standards.

Don't get your hopes up yet.

I'm going to disappoint you in probably about 20 minutes.

All right.

The forms still have to demonstrate allocability, all right?

Under the federal rules, if an employee is paid with federal funds, they have to show they worked on that particular program and cost objective.

So allocability is still a requirement, but that is a requirement for all costs, not just time and effort, it is not included in the time and effort section of the rules, but it is still a requirement.

So make sure if you are paying them from this particular HHS grant under this cost objective, that the work they did actually benefitted that program.

All right.

Who do you have to maintain these documents for?

Any employee whose salary is paid in whole or in part with federal funds or if they're paid with nonfederal funds but you're using their salary for a match or cost sharing for some other federal program, you would also keep time and effort documentation.

All right.

When I say paid in whole or in part, I mean that.

If they're paid 10% from federal funds and 90% from other sources, you still have to maintain time and effort documentation unless you want to pay back that 10% to the federal program.

This only applies to employees of your nonfederal entity.

Not contractors.

If you contract out for services and they're not an employee, they're an independent contractor, you don't have, you're not exerting control over what they're doing, the services they're providing are helping you carry out the grant but they themselves are not carrying out the grant.

They're a subcontractor.

They don't have to keep time and effort documentation.

For them you just have to make sure you went through the proper procurement procedures to get their services but you don't have to keep time and effort docs.

I provided you a chart here.

It's about as common sense as you can get.

You ask yourself, is this person an employee?

If they are, were they paid with federal funds?

If they were, time and effort is required.

If they are an employee, and they were not paid with federal funds, but used them for match, time and effort is required.

My favorite is this last category over here, is he or she an employee?

I don't know.

Don't admit that to an auditor.

Talk to somebody else.

If you're not sure, ask HR, find out, and then we're going to have a long conversation about your internal controls and making sure that all costs are necessary and reasonable and there is somebody there to make sure that, yes, this is an employee.

Again, I'm not, you got a little bit of a chuckle out of you guys, that wasn't included to get a laugh.

It was included because we've run across that before. 

Part of the work my firm does, we will come on site with a client and we'll pretend to be an auditor, or a federal program monitor and we'll review your fiscal policies.

We'll look at your time and effort, that was an issue, they had this person that they weren't keeping documentation for, we're, like, okay, are they an employee?

I don't know.

It's like, well, I'm glad you're telling me this and not the auditor when they are here, so lets work this out.

It turns out they were an employee, they were just working in an office that that particular staffer had no idea what was going on over there. 

Which again, could be a problem in and of itself.

As long as you go through this process and you figure out who is an employee, are they being paid with federal funds, then you have to keep the records.

So that's standard, that the documentation has to reflect the work, accurately reflect the work performed.

This is how you meet those standards. 

Your records have to be supported by a system of internal controls that provide reasonable assurances the charges are accurate, allowable and properly allocated.

How that works at your non-Federal entity is really up to your non-Federal entity.

All right.

You have to decide, okay, what internal controls do we have in place?

To A, make sure that this employee is paid with federal funds.

That they're only being paid for the work that they did and that some sort of review is taking place.

Whether it's a reconciliation done at the end of the period, where we are looking at what they were budgeted versus what they did.

Whether a supervisor is signing off. 

What protections do you have in place to make sure they're only being paid for the work that was done?

Okay.

I mean, there's no federal standard that they put out for what exactly you have to do to meet that.

But we will talk a little bit later about their definitions of internal controls and I'll give you a general idea what they're looking for.

It has to be incorporated into your official records.

Again, that's going to vary depending on your non-Federal entity.

Somewhere in your, I need to be able to come in and when I look through your files I should be able to see, okay, this is who was paid, this is how much they were paid, this is the period they were paid over.

You don't have to have, I'm not saying I need a physical copy in front of me.

Under the new federal rules, you could keep all of your documentation electronically.

The rules say that's perfectly acceptable.

You have to make sure there are safeguards in place, that only the people that should be looking at the documentation can and only somebody with the authority to alter documents can do so.

Meaning they are password protected, things like that.

One of my favorite parts of the rule, they have to remain readable.

It's not that your PDF is going to fade over time but as technology changes you have to update yours accordingly.

Example that was used at a conference, it was somebody out in the audience that came up with this idea, if you were keeping records on floppy disk, that's obviously not going to work anymore.

That's a great example.

I wish I would have come up with it.

I'm not quite old enough to remember floppies that well though.

That's right, I said it.

It's more fun to say that when my boss is here because then he gets really mad.

It has to reasonably reflect the total activity for which you're compensated.

This is what we talked about earlier.

Get as close, the reason that's the standard they give, reasonably reflect, because they want you to get as close to 100% as possible.

But they understand you may not be able to get to exactly 100%.

All right.

If you, if an employee spends .5% of their time on a particular activity, it might be hard to track that.

They understand that.

So they want you to get as close to 100% as possible.

And you go back to using that prudent person standard for allowability. 

Would a prudent person believe this is a reasonable approximation of the time that they spent?

Now we are going to talk about if your records meet the requirements, you don't have to provide any additional materials, like time cards and things like that.

But having those handy to help support whatever percentage you come up with would still be helpful for you if it is questioned in an audit.

All right.

The documentation has to encompass all activities, both federal and nonfederal.

Again, even if it is 10% federal, 90% everything else, you have to make sure all 100% of that is included on the form.

It has to comply with all established accounting policies and practices and you have to support distribution among specific activities or cost objectives, so that requirement carried over from the old circulars.

Whatever the cost objective is, make sure that is clearly noted on whatever documentation you're keeping.

I mentioned this a little bit earlier.

COFAR.

When they released these rules, the draft rules, it was in February of 2013.

All right.

The inspector, I believe the proper way to say it, the Inspectors General from the various Federal agencies got together and offered comments that summer and one of the areas they were most upset with was the direction they were going on time and effort.

As far as the IGs were concerned, they wanted everybody to keep doing PARs. 

Easiest way for auditors to track what you're doing, to make sure you're doing everything right, they didn't want this additional flexibility.

This is how COFAR responded.

By focusing more on your internal controls, the rule mitigates the risk that the non-Federal entity is going to focus on the prescribed procedures, dotting the Is, crossing the Ts, which alone by themselves may be ineffective in assuring full accountability. 

The goal is uncovering weaknesses, not generating audit findings.

All right.

There were a lot of areas where when the rules were originally proposed in 2013, OIG and a lot of other Federal agencies commented.

And OMB and COFAR did back away a little bit.

On audits, they were originally going to raise the audit threshold up to a million dollars.

Instead it was currently, was at 500,000.

OIG was really unhappy with that. 

They compromised and they cut it in half, they raised it to 750,000.

A lot of other areas, they caved, this is the one area where they told OIG they could go take a walk.

This was how they wanted to set out, this was the flexibility they were going to offer.

Here is the problem.

OMB and COFAR are not the people that are going to be doing your audits.

So what they wanted and what the auditors might do might be a little different.

We'll talk about that.

But this is the reasoning behind what they're trying to do.

All right.

I'll give you the exact definition of a cost objective.

It's a program, function, activity, award or organizational subdivision, contract or work unit for which cost data are desired.

And for which provision is made to accumulate measure cost, processes, products, jobs, capital projects, etc.

So like I said, right there, it's, anything for which costs data are desired.

If you have to track the funding separately.

A set aside, administrative set aside, cap on certain areas of funding.

That's its own cost objective and that's what has to be included on your time and effort documentation.

All right.

That can be more than one Federal award.

Like you can have certain cost objectives that, I mean, the definition they give you here is generally if it comes from two different Federal awards, it's going to be two different cost objectives.

But we're going to talk about blended funding where that might actually get combined.

Where if the work could be fully supported by either, you can count it as a single cost objective.

But generally, more than one Federal award is going to be different cost objectives, a Federal award and a non-federal award would generally be different cost objectives.

Indirect costs versus direct costs.

My favorite one, is the bottom one which is unallowable activity and a direct or indirect activity.

We're going to have a another discussion on the unallowable activity.

Whatever you're charging, going back to allocability, cost has to be allocable to a particular Federal award, and cannot be charged to other Federal awards to overcome fund deficiencies.

Let's say somebody is working on two different Federal awards, 60% on award A, 40% on award B.

But you have more money in award B, so you're just gonna pay more of their salary out of that.

No, not allowed.

Allocability says it has to be based on the benefit the program received.

So 40% of their time is on program B, program B can only pay 40% of their salary.

When we talk about blended funding in a minute, there's some flexibility there but again you have to be careful.

Going back to that last part.

Doesn't preclude, let's say you are working on a activity that could be fully supported by either.

All right.

If you wanted then, you could generally count that as a single cost objective and you could decide exactly where those funds are going to come from.

If you want to pay them 70% out of B and 30% out of A, but their work could be fully supported by either, that's generally allowed.

Just make sure if you're doing that, someone has made that determination, that their salary could be fully covered under either of these programs, the work they're doing fully benefits either of these programs.

All right.

Nine times out of ten, that's going to be a state objective you're working on and a federal objective that might coincide.

For a lot of different federal programs, it's going to be a little more rare that you're going to be able to fully support from two different federal programs.

All right.

If the cost benefits two or more projects in a way that could be determined without undue effect or cost, that's how you break it out, 60% here, 40% here.

They do recognize that there are some activities that are going to be really hard to draw that out.

All right.

Now generally, there's some flexibility for institutions of higher education that doesn't carry over to others, but what I have said for all grantees, is that if the cost benefits two or more activities, and you can't determine exactly 60% here, 40% here, because it's too interconnected, then they do give you the flexibility that you can allocate it out on what they refer to as a reasonable documented basis.

Going back to that prudent person standard.

Would a prudent person in your situation believe, okay, I can't get, I can't give you an example of exactly 60, 40.

I don't have that.

But based on our review, we think it could be 50/50.

Okay.

I'm giving you these general examples, because it is really going to depend on the work that employee is doing.

Somebody with the authority to do so has to look at that employee's time and say that, look, I can't break it down the way that we can with everybody else but we think this is a reasonable approximation of how we can divide their time, and we're going to pay them accordingly. 

Under the federal rules, this isn't a new rule, just first time they wrote it down. 

If you're ever unsure if a cost is going to be allowable, which carries over to this, if you are ever unsure if that is going to be the appropriate way to pay that employee, the appropriate way to track their time, ask the pass through entity or ask the Federal agency.

Okay.

Now, anyone who has ever submitted a request to a Federal agency, I can't promise you you're going to get a quick response.

The joke I've always used is, if you have a kid in high school and you ask a question of a Federal agency, there's a good chance that person, that your child is going to be a doctor before you get a response.

Now that's not always the case.

You have some people in the Federal agencies that are very good at getting back to you quickly.

But a lot of Federal agencies move, other people say they move at a glacial pace.

I think that is a giant insult to glaciers.

That was a courtesy, thank you.

But if you're ever in that position, it's better to get that prior approval than to go ahead and charge that employee's salary the way you've come up with, only to have it disallowed later.

If you're ever not sure, go to the Federal awarding agency, or if it's a pass through, go to state or the pass through entity, and ask this is how we want to break down this employee's time, we're going to pay them accordingly, would you sign off on it, and if they don't, try to come up with a plan B, see if there's another way you can do it.

And really, it's better to have that plan B not just if they say no, but if they don't give you a response at all.

Better to have a plan B that you know would get approved otherwise, but it is a possibility if you can get that approval.

All right.

Budget estimates alone are not going to qualify as time and effort documentation.

You have an approved budget, you know generally how you want to spend that, whose salary you're going to pay, how much you're going to pay.

But that estimate is not good enough because going back to that first statement of what the new rule is, it's, you're paying them for work that was actually performed.

Okay.

So there has to be some sort of reconciliation.

Did you go back and say, okay, this is what they were budgeted, this is what they did and either lines up perfectly or it doesn't but you have to pay them for the work they did.

You can use those budget estimates as a springboard, as a base, all right.

But only if they can produce a reasonable approximation, we think this is how much time they're going to spend.

If any significant changes are identified.

When you do that reconciliation, you go through and say, okay, you know, they worked this many more hours more than we thought they would, we're going to have to pay that much more and then go back through and make that change in those budget estimates.

And then finally, you have internal controls in place to make sure there's an after the fact reconciliation.

Once the period is over, somebody has gone back, compared the two, and now we have this one set of documents that says, this is the work they actually did.

So you could start off with budget estimates but that can't be the end result.

All right.

In the off chance that somebody actually did do exactly what they were budgeted, you still need to have an after the fact signature or some sort of certification to say, yes, they did exactly what was budgeted, exactly what we thought they did, but we did go back and do a review just to make sure.

That's what auditors are going to be looking for, that somebody did an after-the-fact review.

All right.

So all necessary adjustments.

All right.

If they, if you have them budgeted out at 60/40 and they did 70/30, some sort of reconciliation was done and it was only done by somebody with authority to do so, a supervisor, the head of your organization, whoever handles your personnel issues.

Whoever it is at your non federal entity that is going to handle that, make sure they have gone through and done that review and updated all documentation accordingly.

All right.

Again, just like under the old rules, because practices are going to vary, your records can reflect categories as a percentage, 60/40.

You don't have to say he spent 12 hours on this, eight hours on that and so on.

You can break down by percentages, 60/40, 50/50. 

Or multiple, 60/20/20.

Whatever it is, you can use percentages to break it down on your forms.

Okay.

This is where it gets a little interesting.

Under the new rules, cognizant agencies for indirect costs, so generally it is going to be HHS, are encouraged to accept alternative proposals based on outcomes and milestones for program performance.

But you have to be, you have to be able to easily document those outcomes and milestones.

So what they're saying is, coming up with a plan that says, you know, we're going to do XYZ by certain date, and to do so we're going to have to pay our employees out accordingly.

You come up with a plan for each milestone, that dictates how much an employee would have paid to get you to that milestone.

All right.

That will be considered an alternative proposal because it is separate from the rules we just talked about.

You're not necessarily going through the normal, okay, we're going, we look at this month one period, two month one period.

Go back and look at what they did and pay accordingly.

This one you are doing a lot of the work up front.

Budget estimates aren't allowed by themselves, that's part of the rule.

But if you come up with this system, that when you meet certain benchmarks, that's going to dictate how much an employee would be paid.

You can do that if it's approved by the Cognizant agency for indirect costs.

So if HHS signs off on it, you can do this alternative proposal.

Based on the conversations we've had and guidance we've seen from the Federal agencies, it's very rare that they're going to allow this. 

OMB was encouraging them to accept these alternative proposals.

It is not required.

It is really at the discretion of the Federal agency.

But if you can come up with a system where the employees are paid based on these milestones or these outcomes, and it's, you can do it in a way that convinces HHS, that you're still going to meet that general standard of you're only really paying them for the work they did, they can sign off on it.

But understand, if they do, they're going to be watching you a lot more closely. 

Because even if they sign off on it, they're going to be a bit more worried about how you're tracking that time. 

They are going to go through, they might require periodic reviews.

They might require you to submit documentation to them on a certain, like every quarter, every month, something like that, beyond what they might require under a normal situation.

So it is an option, it is a possible flexibility but be very careful if you're going to go down that direction.

All right.

If the records you have meet all the standards we just talked about, okay, and accurately reflect work that is performed, the nonprofit entity cannot be required to provide additional support or documentation.

When I say can not be required, it means the feds can't require it.

If the state wants you to be a bit more specific about certain things, it's within the states discretion.

But the feds cannot require you to provide additional support.

Having said that, there are certain DOL rules you still have to follow.

Under the Fair Labor Standards Act, you still have to support all salary, payments made for salaries or hours worked, with something along the lines of time cards, showing the amount of hours they've worked each day.

That's a DOL rule.

You can't get by that.

But for the purposes of meeting your time and effort requirements, you don't have to provide those to the auditor.

You just give them your time and effort documentation and that's what they look at.

But I said earlier, even though you're not required to keep you know time cards and things like that for that purposes, I'd always have them handy.

That way if an auditor does question how you paid a certain employee, you have this additional evidence to back it up.

And the reason that that's really important is because the rule states for a non-Federal entity that have records that don't meet these standards, so it's been determined that whatever system you've come up with has not met the minimum standards of section 430, HHS can require you to keep a PAR and the language they use is including prescribed certifications or equivalent documentation but they don't define what a PAR is.

Under 122, a PAR was very clearly defined.

After the fact.

Signed by the employee and so on.

None of that is included in Part 200.

Which means it is at HHS's discretion, exactly what would be required in that PAR.

All right.

Now we've already seen from the comments from OIG and the other agencies they didn't like the direction OMB was going.

Because of that, this paragraph in the rules worries me.

That's when I made the comment earlier today, they're giving you just enough rope to hang yourself.

This is exactly what I'm referring to.

If you come up with a new system, like everyone generally right now should be using PARs, if you come up with a new system that you think meets these requirements but are not quite as burdensome as keeping the monthly PAR, every two weeks, however it is you're doing it, that's fine, that's great, that's what OMB wanted you to do but that doesn't mean HHS or the auditors are going to accept that.

Auditors have been trained for years for exactly what they're looking for and how they're, pretty much how they're going to end up getting you to owe money back to the Federal government. 

It's not like they woke up the day after rules took effect, and were like, oh, let's change everything we've ever done.

This is going to be a process.

Under the old rules, under A-122, I gave you multiple examples of findings and areas of noncompliance where money had to be re-paid.

I don't have that under the new rules.

We don't have those audits, we don't have any litigation that I can point to to say how it's exactly how it is going to work.

This puts the ball in the fed's court.

So if HHS decides, no, what you've come up with, even though you think it's okay, does not meet what we believe the definition of an, of allowable system under Section 430 is, in that case, you're going to have to keep a PAR and we determine what's on that PAR.

If we want you to keep it every two weeks, you're going to keep every two weeks.

If we want you to keep it weekly, you are going to do it weekly.

There is a ridiculous amount of discretion given to the feds if they make that decision.

Now the guidance documents that have been put out and statements that have been made, no agency, not ED, not HHS, DOL, nobody has said that this is what they're going to do.

But it is within their discretion, within their authority to do so.

As you move forward, be very careful.

Work with your pass through entity, work with the state.

Figure out, okay, this is what we want to do, would you sign off on it.

Because then if there's anything the state or the pass through entity is not sure about, they can go directly to the feds.

You can always go directly to the feds, but generally if you get funds through a pass through, it's better to work with them just to make sure they're aware of what's going on.

All right.

Part of the rules, it has to be incorporated into your internal controls in a way do show that the cost, the money that you're paying to your employees is accurate, it's allowable, and it's allocated properly.

So when they say internal controls, what do they mean?

The citation I have given here is to the old EDGAR, for when the program was still under ED, but the definition is still the exact same and you can find it in section 302 of the UGG.

You have to maintain effective control and accountability for all funds, all property, and any other assets.

Adequately safeguard all of those assets, and you have to use assets solely for the authorized purpose.

How does that translate to your time and effort?

Again, going back to you're only paying employees from the programs that benefitted from the work that they did.

I've said that probably six or seven times by now.

But what I'm trying to point out, is that there has to be some sort of framework at your non-Federal entity to ensure that that's exactly what you're doing.

All right.

That there's somebody reviewing your records, making sure they're compliant with the federal rules, whether it's HR, whether it is a supervisor, whoever it is, that there's some sort of review that's done, some sort of after the fact monitoring, self-monitoring of your own non-Federal entity.

We're going through, we're making sure that all records are accurate and that employees are only paid from the proper program and for the work that they did benefiting that particular program.

Definition they give of internal controls, it is a process implemented by your non-Federal entity designed to provide reasonable assurance regarding the achievement of objectives in the following categories, your effectiveness and efficiency of operations, reliability of reporting, and compliance of applicable laws and regulations.

For time and effort documentation, we are kind of looking at that reliability of reporting.

If I'm an auditor and I come in, am I going to see anything in your time and effort records, that is going to raise red flag?

Is there anything that I'm going to have ask more questions about, or have you clearly met the federal requirements?

Some of that is going to depend on the auditor you get.

A lot of clients we've dealt with in the past, we have gone in and tell them they are doing something wrong.

A lot of times, their time and effort documentation. 

We made a comment of, you know, based on this, I can't tell if your employee or your supervisor signed it.

Not clearly noted on here.

Well we've never had that come up on an audit before.

That's great.

The only thing that means, you have a horrible auditor.

That was the most common complaint we'd always get, this has never been an issue before.

No, it's always been an issue.

Your auditor just hasn't caught it yet, and because they have not caught it yet, it doesn't mean it won't be caught in the future.

What happens if you get a new auditor.

Make sure you're doing a review to say, okay, to the best of our ability, we believe a reasonable prudent person believe these records are compliant, that we have the appropriate safeguards in place to make sure the records are being reviewed, and that charges for salaries are based on work that was actually done.

If you have that in place, you shouldn't have any question costs on your salaries.

We are giving you a couple of documents, and I believe somebody else later today or tomorrow is going to be talking about internal controls in more detail.

They give you two examples of the kind of internal controls they're looking for, you can find them in these two documents down here at the bottom.

It's the U.S. Comptroller Generals Standard for Internal Control Integrated Framework and then what's known as the COSO Report.

It is the Internal Control Integrated Framework by the Committee of Sponsoring Organizations of the Treadway Commission.

My God, people in Washington love to have their long complicated titles and acronyms.

But if you go through these documents, they'll walk you through the kind of internal controls you're looking for.

Really, what it boils down to, again, appropriate safeguards to make sure you're protecting federal funds.

Not just from fraud, not just making sure you're only working with contractors that are allowable or have the capacity to serve, not just going through the procurement, but with your time and effort.

When you are paying your salaries to employees working on federal programs.

All right.

Are there appropriate protections in place?

Have you gone through the rules?

One of the big things they look for when they look at these protections, policies and procedures.

If you have a policy manual walking through exactly how employees are supposed to track their time, what those records are going to look like and exactly what review is done, I mean an auditor will love you.

That might be overpromising a little bit.

The auditor will definitely appreciate that more than if you don't have a policy manual.

Two reasons policy manuals are helpful. 

It's something you can hand to an auditor to look at, and it's a fantastic training tool.

A lot of sub recipients, grantees, have high turnover with employees.

Best way to train an employee, give them a manual and have them look at it.

I keep saying hand, give them a manual.

It could be electronic.

For years now, generally people have been doing paper copies and one of the worst instances I ever came across, we were up in, I'm not naming anybody specifically, up in the state of Vermont, and we asked for their policies and procedures on procurement.

And they were like, sure, no problem.

Picked up a document and when he dropped it on the table, you could see the dust fly up.

And it's, like, okay, has anybody read this since my grandfather was born?

Like it's just one of those where they have a procedure so they think they're fine.

They have a policy, they think it is okay, but they're not using it.

The danger there, again if you're not following your own policies, that's an audit finding.

So when we finally reviewed what they were doing, they were doing everything properly but they had a couple of extra steps in their own policies they didn't need to follow and they weren't following, and we are like, that's fine, you shouldn't have a policy manual that says this is what you have to do.

You have to update your policies, make sure it's reflecting what you at your non-Federal entity have in place to make sure you're doing this correctly.

Now hopefully again, electronic versions, not going to be any dust flying up.

But if I'm an auditor and I come in, let's say I know you're charging sick leave to the Federal awards, under the federal rules to do that, it has to be in accordance with your written policies, and I said, okay, where's your policy on how you are charging fringe benefits or sick leave.

If you stare back at me with a blank stare having no idea what I am talking about, that's a problem.

That is if I am an auditor and I've come in and asked that question.

Now if you're the employee at your non-Federal entity that handles that specifically, and you know exactly what the policy is and you know everything is okay, that's fine.

Do other employees at your non-Federal entity, do they know your sick leave policies?

Do they know what your policies and procedures say about how they're tracking their time?

Cause if an auditor comes in, they are going to be asking similar questions to multiple people.

If they start getting conflicting answers or they notice some people don't have those answers and they know for a fact that person is paid with federal funds, that's a problem.

Now that's not the kind of finding that's going to lead to any repayment of funds most likely, but that's the kind of finding that will require corrective action.

You are going to have to start doing additional training of employees, things like that.

So it's better to head this stuff off at the pass. 

Make sure everyone at your non-Federal entity is aware of what your time and effort policies are.

That they know how they have to track all their time.

That they know that either they have to sign off on the document or somebody else has to.

Whatever your process is, everyone should be, especially everybody paid with federal funds should be familiar with what that policy is.

That way if they're ever asked a question they can answer intelligently.

All right.

Just internal controls in general, you have to comply with all Federal statutes and regs.

You have to evaluate and monitor, the non-federal entities compliance of statutes.

Again, that's you, doing self-monitoring, self-evaluation.

The pass through entity is always gonna have to monitor what you're doing.

That does not necessarily mean they are coming in and doing it on site.

It could be a desk monitoring, there are a whole number of ways they can monitor what you're doing.

But you need to be monitoring your own internal procedures.

That is a strong internal control, self-monitor.

Is somebody doing a periodic review, to say, not only that the records are being filled out correctly but if you have an officer, employee who is required to check that, is somebody checking that they're doing that?

Somebody making sure that whoever that is has to go do that reconciliation, are you doing the check to make sure they have done the reconciliation?

That's self-evaluation.

If you come across area you know they're not doing it, or you know people are filling things out wrong, are you taking prompt corrective action?

Are you fixing the problem?

Cause if you discover the problem and you fix it before auditor comes in, it's a lot of headaches that gets avoided down the road.

And then this is especially when you're dealing with employees and how they're paid.

Make sure you're also protecting all personally identifiable information.

If I don't work at your non-Federal entity, if I just walk in, I shouldn't be able to access a document that gives me names, Social Security, address, things like that.

There are protections under HIPAA and FERPA for health care record protection, student record protections, this is specifically dealing with you and your staff.

Making sure you're protecting the personally identifiable information of your staff.

Again, that goes back to having those safeguards, if it's electronic system, not anybody can log in.

If you're still keeping everything on hard copy, that's fine.

A little environmentally unfriendly but still fine.

But make sure I can't walk into a room, open a file cabinet and look into any file I want, or write on any file I want, if I don't have the authority to do so.

All right.

Always have those safeguards in place.

So what does that mean for right now?

We talked about what the new rules are, how they relate to the old rules, much less regimented, you don't have to necessarily have a specific person sign off on it.

You don't have to necessarily keep it monthly, you could do it quarterly.

Under the rules you could do it annually, but then that's going to bring up questions of strong internal controls.

Can you really go back and just do one reconciliation a year?

We normally recommend you do them at least quarterly or at least semiannually.

We would recommend don't go more than six months without doing that reconciliation.

The more frequently you do that reconciliation, the happier your auditor will be. 

And generally the more covered you'll be against any findings that might pop up later on.

But, if you heard these rules, and you decided, okay, there are significant changes I want to make to my system, I think the PARs are too burdensome.

I don't think it's in our best interests to keep doing this, that's fine.

That's what the rules can do.

But, I say, if HHS determines whatever system you come up with is not appropriate, is not allowable or doesn't meet all the requirements, they're going to determine exactly what your time and effort system will look like from then on.

I think we can all agree nobody wants that.

All right.

Now, under the old rules, I had, you know, cases that we worked on personally, there were documents that came out from the different agencies.

I don't have any of that right now.

I don't know how the auditors are going to treat this, because this is really the first full year in which auditors are going to be looking at your policies and procedures and how you do things based solely on the new rules under Part 200, with the exception of procurement.

Because of that, I don't have a lot of findings I could point to.

I don't have audit resolution cases that I can look at.

I can't intelligently tell you exactly what kind of system you could come up with that will be compliant.

What I can say is that if you were keeping PARs right now that are compliant with A-122, or you know, 87, whatever your non-federal entity fits under, make sure that if you are compliant with that, I can almost guarantee you, you will be compliant under the new rules.

Okay.

When we ask somebody at OMB that question, their exact response is, well not necessarily.

They need to clarify.

The reason they said that, they want you to go back and review your system.

They don't want you to just assume we're compliant, we're fine, we don't have to worry about anything.

Go back and look at how you're doing things, figure out if this was compliant under the old system.

If it was, then it's certainly going to be compliant under the new system.

Because the new system doesn't require you to have it signed by an employee or supervisor with first-hand knowledge.

Doesn't require you to keep it monthly.

Doesn't require you to do after the fact or have that certification statement, so if you do, those are stronger internal controls than what are necessarily required.

All right.

That will generally be acceptable.

I can't imagine an auditor questioning that.

So what I would do, wait, I'd say a minimum of two years, but I mean, you could go farther than that.

Wait until we get audit findings.

Wait until this has actually been played out either at the Federal agency or in the office of administrative law judges, within the Federal agency, until we have rulings to show, that okay, this is what is expected.

This is what the agency is looking for.

To be honest, the feds might not be 100% sure how they're going to treat it.

All right.

If you look at a lot of the guidance documents that have been put out by the different Federal agencies, it hasn't been particularly clear what they're expecting from you.

They'll mention the rule, really just restate what the rule is, and move on to the next question.

And it's because I don't think they really have a plan moving forward.

They're going to wait to see what some of these new systems look line and that's going to determine how they're going to react.

That is going to determine what they will accept and what they won't accept.

And then OMB is likely going to get involved again.

If they feel the Federal agencies aren't adhering to the spirit of the new rule, we can see additional rules clarifying what exactly should be allowed or what the feds can and can't do.

But as of right now, we don't know. 

So I recommend, keep going with your PARs.

Keep making sure they're signed by the appropriate people.

Keep including the certification statements.

I believe in your, here it is.

I think in the materials you received everybody should have received a copy of a sample PAR.

Okay.

So if everybody looks at that, this form must reflect each employee's, I am sorry.

I will actually give everybody a second to pull that out.

All right.

Now, there isn't a single PAR out there that you could hand me, that I could say 100% this is going to be okay.

This is going to depend on your auditor.

What I can do, is look at a PAR and tell you this appears to me to meet the requirements and you should be good using something similar.

The form must reflect each employee's actual activity, per funding source, and account for the employee's total activity during pay period.

They have a spot for the employee's name.

They have the pay period it covers.

Underneath that, you will see the different cost objectives.

On the left side you have your different cost objectives, including administrative or they have different codes for absence.

If you're on the paid time off, vacation, jury duty, family death, unpaid, family medical. 

So it covers those fringe benefits, the leave.

It covers administrative costs and it has the different cost objectives listed down the side.

Now, this is for a two-week period.

Has you filling out specifically.

Now the federal requirements don't require you to go that detailed but again, if you have that information and you feel it can only make your documentation stronger we certainly encourage you to include that but you're only required at this point, at least under the old rules to do monthly.

If you're doing it every two weeks, that's okay too.

Some auditors might actually consider that a stronger internal control.

And at the bottom, I certify that this report is an accurate representation of the activities or effort expended during this pay period and that I have full knowledge of those activities, and it very clearly has a spot for your employee signature or approved by, where you then put the supervisor's signature.

So a lot of the findings we talked about earlier are, they are already taken care of here.

Clearly states who the employee is, or who the supervisor is.

You have the certification statement.

You have the cost objectives.

All right.

The only way you can really mess this up is let's say it goes, again, let's say it goes through the end of this week, which I believe you know, so Friday is the 27th.

If you sign it, okay, and you have signed, there's no spot for the date here.

I might encourage you maybe put the date of signature on here.

That would make it a little bit stronger, because if they see that you've signed it before the end of the period, that's a problem, that's an audit finding.

If there is no date, that's not necessarily out of compliance but they're going to ask the question.

They are going to say, okay, I see somebody signed this, how do I know they signed this after the fact?

Again, you can, that's an easy way, that's an easy issue to deal with.

You can simply have the employee sign an affidavit that I signed this form on this date, you're fine.

If you put the date on here, it might go a little bit easier for you.

But if you meet all those requirements, and you're doing it after the fact, so they're signing it after the end of the period that it covers, you're going to be compliant under A-122, which means you're going to be compliant under the new rules in Part 200.

So I'd definitely encourage everybody to take a look at this.

I'm not saying it has to look exactly like this.

Go back and look at your own forms, see what you're using, see if it matches up.

And then decide, what changes if any, need to be made moving forward.

I want to back up a little bit and talk about under alternative proposals.

I gave you the citation for that, which was Section 430 (i)(6), but if you go one more paragraph down, paragraph 7, they refer to blended funding.

Now under blended funding, they allow that a grantee can establish a single cost accounting code if they are working with multiple grants, or multiple programs that do essentially the same thing.

This went back to what we were talking about earlier.

If you are working on a program, or multiple programs, where the work could be fully supported by either, what the federal rules are now allowing, is what is referred to as blended funding.

You could simply take program A, program B, put them into a single pot of funds, and that's now your program or your cost objective.

All right.

But it has to be work that could be fully supported by either.

An example that they give is if you have, let's say, four programs, and three of them can all be considered all the work could be fully supported by either of those three, you can't then blend all four and pay an employee from that pot of four.

You can only pay them from the pot of the three that you blended together because of the similarity between the programs.

If you're ever going to do that, do not do it without getting prior approval from the pass through or the feds, all right?

So it is when you get funds from more than one program, or it can even be more than one agency, if it's an HHS and ED grant or HHS and labor grant, but they're doing essentially the same things.

If you ever listen to Congress go on about stuff, one thing they'll talk about is program duplication. 

A lot of federal programs in which some do exact same things.

This is kind of what they're talking about.

If you're still dealing with a program where you are doing essentially, providing the same services, doing essentially the same activities, you could theoretically combine them.

But only if you're conducting the same or closely related activities you can then count it under a single cost code.

All right.

You know, the example I use in education, what we have under, for K12 it's called schoolwide programs, it's the same deal. 

They're combining all of their funds into one pot, and therefore they're only tracking that single, like the schoolwide program is its own cost objective.

All right.

Now, I don't know exactly what federal programs all of your non-Federal entities might be participating in.

Some of you might just have the one from HHS.

Some of you might have more.

It's going to have to be determination with each non-Federal entity if this is something you think you could use.

Okay.

But you have to get prior approval, and if it's HHS and ED grant, you have to get approval from both agencies.

Okay.

Anyone who is involved, like whether it's two agencies, if you're getting, might possibly getting money from two different pass throughs, make sure both pass throughs have signed off on it, and you can only, it can only be for those activities be funded by all, or that can be fully funded under the programs.

Like I said earlier, if you have four programs and only three of them can be blended under these rules, that's all you could do, blend the three, still have the other separate program with its own cost objective. 

This is an allowable use of funds and when you would do your time and effort documentation, you'd have the single cost objective.

That one blended program.

Okay.

Remember how I said earlier, we don't know exactly how the auditors are going to treat the new flexibility.

This is a giant land mine you can step on.

If you've come up with a blended program you think is perfect, that's great.

If you get an auditor that's never dealt with a blended program, that could be a problem.

Okay.

That doesn't mean you shouldn't do it.

But it means you have to make sure.

And when I'm saying get approval, I don't mean you were on the phone with somebody from HHS and they said it's okay.

That's not worth anything.

All right.

Under the federal standards of documentation, I need some sort of document in front of me.

An e-mail from somebody at HHS might work but I'd prefer a signed certification.

You send a written request to the agency, this is what we want to do, would you sign off on it.

They send you a written response back signed by somebody with the authority to approve it, then you can move forward with that blended funding.

Just be very careful and make sure you have buy in from both the pass through and all the different federal agencies before you get too far down that road.

I still have some questions that were asked today that I don't think I got to.

Our state requires the PAR for staff be broken down by each activity.

And all activities must match the timesheet.

What do you suggest for this time documentation?

Again, what I said earlier, as long as it is broken down by cost objective, okay, and again, that example that we just went over, cost objective is listed on down the side and you fill in the amount of time or the percentage of time right next to it.

That meets the minimum requirements.

Now, if the state is requiring you to break it down even further, you know, the state has the discretion to be more restrictive, you need to follow whatever the state policy is.

When more than one program benefits equally by the work done, it's not possible to separate the time, how do you allocate?

We talked about that a little earlier.

They want you to break it down by percentages as much as you can.

They understand there are certain activities, they can't do it.

So they want you to do a reasonable approximation.

As close to a perfect break down as you can get.

And again, if you have a supervisor that signs off on that and says, look, the work they're doing cannot easily be broken down into these percentages, this is as close as we can get.

This is a reasonable approximation of what they've done and have a supervisor sign off on it, you should meet that requirement.

Or again, we go back to that blended, if you have certain programs that are so similar they can fully support the work that's being done and you've blended the programs.

Then you would just need the one single cost objective under that blended program and that would be fine as well.

But that has to be approved by the Federal agency.

Do PARs need to be signed?

Do they have to be printed, signed and filed?

Can electronic signatures be used?

Under the new rules, there was nothing mentioned of signatures. 

So under the new rules, no, they don't have to be signed.

Should they be signed?

Absolutely.

It's strong internal control.

It's a way to make sure that if, that somebody has reviewed it and therefore we know it's accurate.

All right.

Without that signature, the auditor is going to ask questions and you're going to have to have additional documentation to back it up.

But if you have a signature, it should solve some of those problems.

Does it have to be a handwritten signature?

Can it be electronic?

That's really up to you.

But if it's going to be an electronic signature there have to be the appropriate safeguards in place.

If I'm not the supervisor that is using that electronic signature but I have access and I can put that signature on the document, that's a problem. 

Only the person with the authority to sign it should have the ability to add that electronic signature and if that's what you're doing, that's fine.

Just make sure those safeguards are in place.

I'm not a software expert, I can't walk you through exactly what that would entail.

Whatever program you're using, make sure that only people that should have the access have the access.

And then if that's the case, the electronic signature should be fine.

They've already said you don't have to print everything out.

If you don't have a hard copy, there's obviously nothing for you to sign.

Do the electronic signature, that's fine.

Just make sure the safeguards are in place.

Regarding signatures and PARs by employees and supervisors.

As the director I have a very difficult time getting a board member to sign a PAR as well.

All other staff have signature but ED, but I do not. 

Is this okay?

I think we talked about this a little earlier.

If you are the highest level employee that has first-hand knowledge of what you're doing, your signature should be sufficient.

Just make sure that in your own policies you don't just have a blanket statement, it has to have employee and a supervisor.

State it has to have an employee or a supervisor, with first-hand knowledge.

Or if you want to require both that is fine, but add that caveat, if this certain position there is nobody higher, that their signature is sufficient.

And then you're fine.

You've met the minimum requirements.

You are following your own policies, there shouldn't be an audit finding.

What is required on timesheets and PARs? 

Is in and out time required?

It was not required under the old rules, it is not required under the new rules.

They allow you to do it by percentages.

You can just say 60% here, 40% here. 

Now for DOL requirements, you do have to have in and out records, the hours you worked each day.

There have to be some sort of records showing that.

For time and effort purposes, all we need is the percentage break down.

We're still a little fuzzy on PARs versus timesheets.

I think I just referenced that now.

The PAR doesn't have to be a timesheet, but there are records that are required under DOL standards that you're going to have to maintain anyway.

Should indirect staff also keep log notes along with their timesheets?

I think log notes is one of those areas where I'm not sure I understand what you mean when you say log notes.

It could be we're using different terms that refer to the same documentation.

If you're paid with federal funds, you have to keep time and effort documentation.

That documentation might be different between your different non-Federal entities and there is a difference between time and effort documentation and what's known as time and attendance records.

Time and attendance records are your timesheets, your in and out, how much you worked that day.

That's different from your time and effort, which shows how much work you did for a federal program.

Okay.

You have to keep the time and effort documentation if you're paid with federal funds.

Okay.

Now, whatever these log notes are, that, yeah.

PAULA MCELWEE: Let me clarify just a minute first and then we can get to the question.

What we're seeing across the country, is that sometimes your state entity is wanting you to add a whole bunch of things to this document because they want it to collect other information.

And that other information is what services you deliver.

Most of you have a database program that documents the service delivery.

And you should be able to make an argument that it does not also need to be in the PAR.

It's not required by any of these regulations that we're looking at that the time and effort requirement also tells exactly what you were doing.

It's not that kind of a requirement.

But there are many states who are trying to turn it into that.

They want you to prove that the person did consumer service delivery during this time and they did record keeping during this time and they did, and they even sometimes want you to break it out by core service.

Well, we were doing advocacy today.

That's all done by your database typically.

That's collected on your database and it's turned into your 704 report, and I would say that some advocacy statewide needs to happen related to that if your state is doing that, because it really is not required by these regulations at all.

STEVE SPILLAN: That covers that.

I do want to add that if a state does require you to submit additional documentation of some sort, you're going to have to do that regardless.

But again, what you said about state advocacy, that makes sense.

If you get together and say hey this is not required, this is too much of a burden on us, you can certainly lobby the state to change that requirement.

PAULA MCELWEE: The state does have the right to add additional requirements.

He said if I wanted to say it again, because everybody wants to say, tell them they can't.

Well, no, that's not an option.

But you can tell them there's another way, and work it through.

STEVE SPILLAN: Somebody asked to show an example of a PAR, so we can better see what needs to be included.

We just went over that example.

Which I think is useful.

As far as what the state requires, if the state wants you to keep that, you have to keep that. 

Whatever records the state wants you to keep, you have to keep.

As far as whether that's required by the federal rules, no.

I normally try to be vague, as no I don't think so.

That is, that's not required.

The rule we just talked about where I said you have to get as close to 100% as you can, bathroom breaks would be kind of that deminimis amount, you don't have to track when you're in the bathroom.

From the federal rules.

If the state wants you to keep these additional categories and break it down like that, again, in order to be compliant under the federal rules you have to follow whatever state policies there are.

But if the state is claiming that's to meet the federal requirement, they're not meeting any federal requirement that I'm aware of.

So I would certainly say you might want to lobby the state and be, like, hey, this wasn't required under the old rules, it's not required under the new rules and it's a little, not a little, it's really burdensome to try to keep that kind of documentation, but in the end, if the state wants you to keep that, that's what you have to do.

Now, again, the audit finding won't be that you're not meeting Section 430 requirements.

The audit finding will be that you're not following state rules.

Okay, now, if you're not following state rules, there may not be a repayment associated to that.

The feds may not come to you and say, okay, you're not adding this time the state has wanted you to add, therefore we're disallowing the whole thing.

I find it hard to believe that a Federal agency would do that. 

What they would do is require corrective action.

And say that if you don't want to end up repaying funds down the road, you have to come into compliance with what the state wants you to do.

In the meantime, I'd encourage you to lobby the state and say, this isn't required under the federal rules, I don't know why you're making us do this.

But the states do have discretion to always be more restrictive.

Those were the only questions I had on the form.

We still have about 25 minutes, question in the back.

AUDIENCE MEMBER: This is more of a comment I guess for our, that's related to territories, and the network plans, the SILCs responsibility in setting up the network plan.

In both North Dakota and Minnesota, both SILCs have a network plan, it's a little different, or encompasses the whole state, so that all the counties within the states can be served and what we run up against is an old RSA interpretation where the boundaries of a Part C center can't be changed.

I think that really needs to be looked at, and if you look at the history of how most centers started, it was just a group of people getting together, and arbitrarily deciding on a service area.

In North Dakota, when the transfer from regional offices to Washington happened, they lost all the grants of origination, or Washington had, one of the two and so consequently, they called the DSU at that time, and asked them what the service areas were. 

For two of the centers in North Dakota, they redefined the service area based on the SPIL.

Our center used a logo and so they just named off the counties, which left around five counties in the middle of the state that's supposed to go to us but we now have to go back and forth between Part C funds and state funds and watch how we serve it.

So when you were talking about how to get permission on using the funds that have the same effort, in North Dakota we try to duplicate and put all the emphasis on the enacting law to duplicate Title VII of the Rehab Act at that time, the same in Minnesota, so they should all combine.

It's only that one opinion that's inhibiting us from doing that.

So if you can change that, that would be appreciated.

And give I think, the SILC, the centers, DSE the responsibility to look at states and figure out what is best for their individual states now that we're 30 years, 20 years past grant.

PAULA MCELWEE: Sometimes 40.

I don't know if you want to comment on that now or another time.

BOB WILLIAMS: We know there are several issues around service areas that are problematic and we need to sort through and if you can e-mail us the specifics, we will see what we can do.

PAULA MCELWEE: I don't know about you, but I'm thrilled to hear that you're looking at those specifics.

I'm sure there are a lot of states that are affected by that.

STEVE SPILLAN: Do we have other questions?

I was going to say earlier before somebody ended up asking one, when people don't ask more questions I can only assume I did such a fantastic job of explaining things.

That really everything was clarified. 

We had a question up here.

AUDIENCE MEMBER: Timesheets and PARs can be on one document.

STEVE SPILLAN: Can, don't have to be.

So long as it meets the requirements of a PAR.

Or even if you want to change your system moving forward, if it meets the requirements under Section 430, but it is also a timesheet, that's fine.

The difference there, is I don't know exactly how you do your timesheets but there needs to be some sort of example or some sort of, we usually say a signed certification is best.

If someone can add a signature saying I have reviewed this and based on either the fact it was me doing the time or I'm a supervisor with first-hand knowledge, I can certify this is accurate and reflects the work that was actually performed.

So as long as you include some type of language along there on the timesheet, fine.

The timesheet itself would be fine.

Again as long as you meet other requirements.

Nothing says you can't have one thing be both.

It is just most non federal entities have these timesheets, which include so much more information that is necessary for a PAR, that they then keep the PAR separately.

It's really at your discretion or if the state determines you can't do that, the state has discretion to say that.

But if you have no directive, you can certainly use one form as both.

So long as they meet the requirements.

That was a very complicated way of saying, yes, that was okay.

But I'm a lawyer.

We don't say anything clearly, unless we can't avoid it.

AUDIENCE MEMBER: Can you explain the new food rules?

Never mind.

STEVE SPILLAN: I can, but if somebody else is doing it later, that's up to you guys.

So the new food rules, in the UGG, what they've said regarding food is really in relation to conferences.

If you are hosting a conference and in order to be considered an actual conference, you have to be disseminating technical information beyond your non-federal entity. 

If you are a conference, the federal rules say, you can use federal funds to pay for food at that conference.

As long as it's in accordance with the statute, regulations and other award terms.

Now, a lot of Federal agencies, they're getting you on that other award terms area.

A lot of Federal agencies are saying, we don't want you spending federal funds on food, unless, and they give you like six or seven hurdles you have to jump over.

Now those, that’s the only food rules I'm familiar with.

Was there something more specific you're asking or was it about the conferences?

AUDIENCE MEMBER: It doesn't seem to be consistently applied, at least where I live.

STEVE SPILLAN: It's not.

So the problem is, OMB has said, yes, it's allowable but other Federal agencies over the past, I'd say five or six years have been moving in the direction of making it unallowable.

So what OMB said is, we believe it's an allowable cost so long as the grant award terms don't list it as unallowable.

A lot of individual awards are listing it as unallowable.

PAULA MCELWEE: We recommend that you put it in your budget, explain it, and get prior approval.

So there may be times when that entertainment is what the nonallowable cost is and food falls under that entertainment category, right?

Still does.

But there are some things you might be doing that are not entertainment, are conferences, but instead are independent living skills training or some other piece that you can justify, you're welcome to get prior approval from your person on what your specific purpose is.

STEVE SPILLAN: And there are certain programs that require community buy in or community participation in certain things, and the feds understand a lot of times if you don't give them food, they're not going to show up. 

Most of those programs make some sort of allowance but not all of them.

You have to go back and look at your grant award terms.

Like she said, included in your budget, or ask the state or you know, go to the Federal agency and say, this is how we want to spend it, this is why we think spending it on food is necessary.

And give them the opportunity to weigh in and they'll say yes or no.

Hopefully.

DARRELL JONES: This is Darrell from ILRU.

I want to let you guys know why we do lunches at our events. 

We actually took this question to the Rehabilitation Services Administration several years ago because there was this clarification, interpretation of the old rule at the time, and we explained, we justified, we wrote up quite a justification for why we need to provide at least lunches. 

We understood that we probably couldn't continue to justify breakfast and breaks, but lunch is a critical time of the day for us, and when you have an event where there are usually a large number of people with significant disabilities that you are trying to move in and out of a lunch period, to not have food readily accessible during the lunchtime has a significant impact on your event, so they gave us a special dispensation to continue providing food at lunch if we provide a program that is related to the content, so that's what we have continued to do.

STEVE SPILLAN: Building off of that, when RSA, when the whole grant was run through ED, ED is the one who started, I'm sorry, when I say ED, I mean U.S. Department of Education, in DC that's what everybody calls it.

I didn't learn until I was up in Alaska, and somebody asked who the hell ED was?

And why is he doing all this stuff that nobody liked?

ED started publishing rules in the last couple of years, saying almost exactly what you just said.

If you want to use federal funds for food, it had to be A, a working lunch.

It had to be, if it was working lunch, you had to show it was necessary by showing that it was on a substantive topic.

Couldn't just bring in a motivational speaker, or just talk about where next year's meeting was going to take place, it had to be substantive topic.

You had to show that you needed everybody there.

Like you didn't have enough time to let people go out and get their own food, or again, if you had a significant number of people with disabilities to show it would be too difficult for that many people to go out and get food in the amount of time we've allotted and we can't give them any more time because we need them here at this event or meeting is. 

But again, like it was said, if you can show all of that, and then showed that you paid a reasonable price, and did due diligence to see if there were any other options, then they would let you use the funds to pay for the food.

That was ED was doing. 

I haven't seen anything specifically out of HHS but it's been my general understanding that's the general direction most of the agencies were going.

If you can show that we need people here, we can't, because of that, we have to feed them, we can't give them enough time to get food themselves, it is necessary for the purpose of the program, then generally you can show that and a Federal agency might be willing to sign off on it.

I can't give you a blanket statement that they will allow it moving forward.

Any other questions?

Okay.

Over here.

They're coming.

AUDIENCE MEMBER: So I'm an independent contractor.

I do bookkeeping and accounting for small businesses and nonprofits, and a client sent me to this conference because there's a lot of questions I can't answer.

One of them is, she's sending, the Executive Director is sending her board members to a conference, and they were requesting and essentially saying she was legally obligated to provide a 90 day per diem per board member.

That's what I said.

STEVE SPILLAN: Legally obligated by whom?

AUDIENCE MEMBER: I don't know.

Whoever wanted the ninety day per diem, I suppose.

STEVE SPILLAN: Under the federal travel rules, what, like, you can do a per diem.

You can do an actual.

You can do a cost reimbursement basis or cash basis.

AUDIENCE MEMBER: That's what she was saying, she wants receipts.

STEVE SPILLAN: Whatever you choose, that's the standard you're held to.

That's one of the areas, when I talked earlier, there are certain places where everyone has to have written policies and procedures.

Travel is now one of those areas.

Because if you don't have written travel policies, you're going to be held to, known as GSA standards, which is what the Federal government employees and you don't want to be held to those standards.

So whatever your own policies are, if your policies have a per diem, then you follow the per diem.

But that, I've never heard of that.

The problem there is, if an auditor comes in there and sees it, they're going to question it, you're going to have to show why the $90 was required, and I think that's going to be a really high bar, and you're most likely going to get tripped up on it, and get dinged with an audit finding.

The problem there, they're not going to say 90 is too much, it should have been 40, and you got to pay 50 bucks back.

What they're probably going to say, this is not a compliant policy.

However much you paid for that travel, you now have to pay back.

So that, that's a serious area of concern. 

I think that is, I mean, there's no federal, I can't point to a rule and say, no, that absolutely says 90 is too much.

They don't have that.

But you go back to that prudent person standard, would a prudent person really think $90 a day is necessary?

I'm not going to lie.

When I travel and I use the company credit card, I might get a steak instead of a chicken sandwich.

But I'm not going to get a $90 steak and I'm not a state or local employee.

I'm with a private firm.

Even I think $90 would be too much.

So I can't imagine a federal grantee or sub recipient getting by with a 90-dollar a day.