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DAY2AFTERNOONSESSION.MOV

10/04/2020

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>> All right. Welcome back. Good to have you all with us again. We're going to go ahead and get started. We're going to talk about payroll this afternoon. We're going to start here on slide 90 and I don't have much to say except that again, if you experience any technical issues, let us know no in the chat. If you have any kind of lag or internet problems, you'll want to maybe refresh or log back in, check your router. We'll be watching quality on our end, for sure.
Then as always, you can submit your questions through the Q&A tab there in the media site webinar, or if that doesn't work for you you're welcome to email me at tim@nicole.org or if you're on the phone, you can press star nine and you can enter those anytime, submit questions whenever you'd, but we will wait for our Q&A breaks to address them. Okay, thanks, John, take it away.
>> I just want to say before Paula gets started with the next slide here that, I know that the topics we discussed this morning are heavy-duty, they're very important to you and if you have any questions, if we did not make this clear, if you want any help with this, please let us know. Questions about the indirect cost rate, the 10% de minimis, or the different methodologies, those are all on the board any time and we will get back to them.
>> Yes, absolutely. We know that this is the area where more of your questions, financial questions at least, are around these issues than any other question we get. We want to make sure we covered as thoroughly as you need us to, and as we can. Part of the allocation, so we were talking about direct and indirect services so that your indirect costs can be properly allocated among your cost objectives. One of those main costs is payroll. The highest single cost that you have is the cost for your staff. You need to look at how do you divide that between your cost objectives specific one. This is going to identify what is direct and indirect in a given salary.
An executive director in a larger organization is probably going to be 100% indirect. An executive director who also does some program services in a small organization is going to divide that time between indirect and direct because some direct services are provided by that person. We're going to look at that kind of thing. How do you decide how you're payroll costs are allocated? You need to know that you are keeping track.
As we mentioned this morning, in addition to your funding sources or cost objectives that you usually think of, don't forget that nonallowable activities should also be measured. The time spent on that should also be measured so that you can charge the direct cost for lobbying or the direct costs for fundraising, along with the applicable indirect to those two areas, which are nonallowable areas that you very likely have some staff time spent in.
Some of the salaries will be 100% to any given a grant or project. If you have an employment program, that's a fee for service program. The staff person who does the employment-related work probably is 100% to that particular fee for service project. You have a separate cost objective for that, you're keeping track of that, and that person's time is probably 100%, which means it's not hard for them to complete a record of their time because the time's all in one place.
It is probably the most difficult to keep track of is the executive director or the program director, or a position that is split between costume jackets. It's more difficult to track. We're going to give you some tools for that, but it's more difficult to track. Some of them are going to be direct, but a lot of the payroll that benefits everybody is going to have to be indirect that might need accounting. If you have human resources, it would include that, general management costs that would include that, and like I said, some employees, especially the executive director or program director might provide both direct and indirect costs. Let's look at what the regulations talk about related to that.
>> Paula, before we start with this next slide here. I wanted to mention that the payroll that benefits all activities, pretty much across the board, accounting, HR, et cetera those cannot be directly charged to programs if you using the 10% de minimis, they have to be treated as indirect. That's the biggie when it comes to where you will lose money really. If you're getting the 10% de minimis, you cannot also charge any of this payroll that benefits your programs rather uniformly, you can't charge them as a direct cost. Sorry, go ahead, Paula.
>> That's right. I'll let you go ahead if it's okay.
>> All right. The uniform administrative requirements at the section we cited there are 45 CFR Section 75.430 provides guidance and documentation. It says that compensation includes all remuneration paid or earned during the period of performance. Employee compensation that's earned, but not paid just because of timing still can be charged against a federal award that's considered to be within that period of performance as long as the payroll is reasonable for the services rendered and it's paid consistently with the policies that you have in place.
Payroll allocations to federal awards and other activities need to follow those policies, including your indirect cost rate policy regardless of whether you have an approved indirect cost rate, that's how you need to allocate it. As we said before, if you don't have a federal indirect cost rate, you may not be reimbursed for all of those costs, maybe nothing other than the 10%. Allocation is required of all of your costs to make sure that each funding source there's only its fair share of these costs. That's going to end up meaning that some funders or some programs aren't fully funded.
>> Which is a constant challenge for you, we know that, and negotiating with them to fully pay you is an answer we don't have for you, but there you are. The regulations go on to say that charges to the federal awards for payroll must be based on organization records that actually reflect the work performed. Now, right out of the gate you need to know you can't just come up with an arbitrary allocation for time. It has to be based on actual PI, which lends credence to that concept that part B and part C may in some cases be a single cost objective.
Because if your records can't figure out how to separate them based on actual time, then you have to combine them for purposes of thinking through your cost objectives, but that may or may not be the case depending on how your grant is. Those records that you keep have to meet some criteria, specific criteria. One of those is that it has to be developed in a way that makes sure that it's accurate, that the charges are accurate so you have a system that you put together an internal control over people's recording of time that provided some reasonable assurance that what you get is an accurate reflection of the time that they actually spent.
>> We talked about that yesterday. We talked about controls over federal awards, and this is a key example. You need to have a process in place for allocating but you also need to have all of those other things that we talked about. Written policies communicate that to the people who are involved in check back periodically, monitored to make sure that it's working. This is a really key area. This is one where you really don't want to fall down because payroll is so huge.
>> Yes, absolutely. Whatever your record is, and we're going to suggest some record-keeping, you account for all the activity that they're compensated for not just what's allowable, but all of their time. If there was lobbying or fundraising, you're still accounting for all of their hours' work, 100% of their time, if they're part-time or full-time, 100% of their time, it's all of the time for which they're paid.
>> That means you can't say that this person works 40 hours and then puts another 10 hours of their own time and into lobbying. If they're working 50 hours, they're working 50 hours, and that's what this thing means is we need to account for all of the activity. Sorry to interrupt there, Paula.
>> No, that's not an interruption at all and I've heard some of you say, oh, I do lobbying on my own time and you really if you're speaking for your agency, you really need to separate out that time and you need to be paid for it all time that you worked for the organization. You don't just skip the past because you say, well, I'm doing it on my own time. You have to document then how you distribute your salaries among those specific activities or cost objectives. What is the division of time across all of the places that you're allocating to?
>> When we were under OMB A-122, that circular said you have to have personal activity reports, and it was pretty much virtually for everybody, even somebody who was fully engaged in one program. It's a direct charge to a single program. That's what this person was hired for. That's what they do. It was a little more liberal that you could just check back periodically and make sure that didn't change, but you needed to have personnel activity reports, still a good idea, but the new set of rules are more liberal.
The difference is A-122 wasn't enforced to the extent these new rules are being enforced. We all learned a lot from uniform guidance. We all learned a lot from the uniform administrative regulations. The auditors frankly, I'll say even heightened their awareness of it as well. The rules are less stringent, but the expectation is much higher now.
>> We did talk to the folks at the office of independent living programs about this specifically. While they didn't say that you had to use, what we'll show you in a minute, which is a payroll accounting process of personnel activity report or PAR they said, but you still have to show us how you spent your time. What is your record keeping going to be? Our conclusion and our recommendation is that you keep doing the PAR, it is a good tool. Many of you are already using it and while it may be permissible for you to use another approach, it gives you what's required, which is an accurate after the fact record of the time actually spent, as opposed to an estimate.
Now you can use estimates, in the short term, but you still have to adjust them later on. That arbitrary decision of, we're going to divide this person's salary, 70-30, needs to be supported with something and we feel like the PAR is probably the most accurate instrument for that support. That's the approach we're taking. Yes, you have some flexibility. We will mention a couple of other things you can do, but you still have to meet that expectation of having an accurate after the fact accounting at the time. In order to do that, we've got a good tool for you if you're not already using it, for you to take a look at it.
How do you interpret the new requirements that give you a little more flexibility? What would be the most effective way or efficient way to comply with the requirements that you document how people spend their time and the related costs for that? Some organizations are doing something like a quarterly, true up, so they're doing an estimate and then they adjust it based on actual records so that they true up the amount on some kind of a basis.
That's certainly an option you can reconcile and then adjust your allocation accordingly. You can do it each time that you submit payroll. Your timesheet goes in with all of this information and it gives you a constantly correct allocation of the time based on what you put in the payroll information. I'm not sure what we meant by what about the timing of your broadens.
>> Well, as Paula said, the most reliable way of doing this is to use a personal activity report. Then you're getting the payroll in properly all the time. The regulations say we can start with a budget or an estimate and true it up and they said we can even go one or two months without truing it up. I read into that we could go for up to three months before we true it up. At the end of each quarter, we could look at the work that people are doing, the areas they're working in, make sure that we are properly charging the payroll to the proper programs.
That does raise the question if you've done a drawdown before you've done a true-up, then could you be drawing down payroll from a program that shouldn't have been charged that amount of payroll? Hopefully, there wouldn't be a problem with that. We're just saying, be thoughtful about the timing of true-up versus the timing of drawdowns. Your drawdowns you are probably going to want to do those but monthly at least every four weeks, in some cases more often with the electronic drawdowns.
>> Yes. You do have to have a way that you allocate, you have to have a method again that applies to payroll and how you document that as you go on. Now, the regulations confirm that if the standards in this section are met, you're not required to provide additional documentation but we feel like you have to have some documentation to meet the regulations that are listed there. We're not quite comfortable with saying you don't need to do that.
Maybe, with time, we'll change our mind, but it's been several years now into this process and we're seeing, as John said, more enforcement and so as a result, we want to make sure that we're staying very conscientious about how we actually reflect the time. Many of you have used the personnel activity reports, the PARs to document the work performed. This is a proper compliant practice. It is not the only practice. It is not required specifically, but we feel like it's worthwhile to continue as a practice because it is proper and effective. It gives you the information that you need in order to keep good records related to your payroll allocation.
>> Quickly, this is Tim. Patricia was wondering where she could get a sample PAR. I just wanted to ask, I know we've got a sample coming up on the next slide and so I just wanted to highlight that for Patricia, that you can look at the sample, we'll talk about it and you can modify it as you need from the PowerPoint. Again, folks, don't forget that while you're viewing our slides in the webinar, you can also download and access these files on the training webpage. Thanks.
>> We do have some samples available that are in Excel typically. It does the math as well. That's useful, but a couple of you have shared those examples with us and we've made some of those available. This is a very simplified so it would fit on a slide example. It's a little bit less effective, but as you can see, you can put in your date, you can put in how many hours were spent in each of these activities and then your total time on that date. Then this total does need to be all of your hours, whatever they were.
If you work seven and a half hours a day that should total seven and a half, and you've spread all of your time in some way across all of those different cost objectives. That's the thing that you want to make sure you do. Those are the elements you have to know what day you work, how many hours you worked for which of these items. Now, sometimes it's difficult to do this as you go through the day, but I would very much suggest that you ask your staff to fill it out at the end of each day before they forget where they spent their time. It'll give you a more accurate actual after the fact analysis of time spent.
You would list all of your funding sources or cost objectives, you would list lobbying specific. I put employment end because that's a common program that some centers have. I failed to put in the fundraising, sorry, but we should have put in fundraising as well. At least anytime you have anybody working in that fundraising area. Notice the certification at the bottom.
Now, some of your policies require that this is signed by a supervisor. You can have it signed by the employee or the supervisor or both, but you need to follow your own policy and procedure on who signs your timesheets. Because this has become now more than just a timesheet so that you can pay the person who's also your record so that you can allocate that pay properly.
Somebody needs to certify that it's an accurate representation of the activities and effort expended during this pay period and that the person who signs knows that that's how the time was spent. If a supervisor was signing, you would expect that they would be a supervisor who can observe their staff and know what they're doing now, because during a pandemic that has shifted a little bit, but how much you actually see your staff at work, but that's the kind of thing we're thinking about.
>> Hi, Paula.
>> Yes.
>> This is Tim. I want to just offer this question from Kelly because I think it's a popular one. I'm going to paraphrase here, but she's basically wondered about a common kind of a frequently asked question about exempt or salaried employees who are not paid extra if they work over 40 hours. She's saying that their salaried employees always just show the 40 hours because there's not going to be an impact on their payroll, and she wants to know, do they need to track their time beyond the 40 hours? What's the guidance there?
>> Well, it says the actual representation of the time spent, so he wouldn't be paid any extra for doing it, but you would put down the actual time worked, how much of it is administrative in nature. Those evening board meetings are going to be included here. Usually, this is where you get push back because executive directors who are exempt staff, aren't used to tracking their time. They're not used to being accountable to anybody for their time unless they initiated this kind of process, so it's new. It doesn't affect how much they get paid. It doesn't change anything except the allocation of their time across those costs.
We have always said you have to write down your actual time. You could write down paid time off, you can write down any exceptions to what you're doing, but the activity report for people who are in that executive director's position will not always be the same, true of any exempt position if you have any others that are effective.
>> [crosstalk] Agreed, the total hours should be accounted for and where it becomes a real problem is that if you've got somebody who's working in multiple programs or multiple areas, direct or indirect possibly fundraising. What do you do if you don't assign all of their hours? Having said that, we should acknowledge on this personal activity report here that it's tedious in a couple of ways. First of all, it's tedious to maintain particularly day in and day out, number one, but number two, even when that's all done, it needs to be compiled, integrated with payroll so that the payroll can be put into the proper area.
There are services out there and software out there that do both the allocation of payroll, and to the different areas, and the charging of payroll. They really address both what the amount of the payroll should be, I should say all three. What the payroll should be, what the payroll overhead should be, and how those get charged specifically to programs or fundraising or administration. These have existed for a long time because in the world of manufacturing and construction that was a necessity, but now as software is being developed, there's more and more that is available and it's really worth taking a look.
I apologize that we don't have a specific recommendation for you, but I will just say that there are software that will take care of both the allocation and the dollar amounts, the charges, as well as process your payroll. There are a number of these available out there that you should consider, way, way easier than trying to match up this personnel activity report with your payroll person-by-person to decide where to charge payroll. That's really a top tedious task and if you can do that automatically, you want to do that. I don't know, Paula is that a--
>> That's true. I think it's always better if you can collaborate with your payroll people to make this happen.
>> I was going to ask if you could use COVID funds for that.
[laughter]
>> That's kind of a stretch I think.
>> Okay.
>> I'll ask the question I ask everybody, tell me how it would be related to the health and safety of people with disabilities during this pandemic?
>> Yes, I'm not sure to be related to the health and safety, but it's probably more difficult to document the areas you're working in when you're working remotely. Maybe it's a solution for proper accountability, but if that's not a qualifying cost then--
>> I don't think so but you can make your case. I can't say it's not allowable, but I'm not seeing it. That's all.
>> This is Tim, several people are asking different versions of, do we have to do this daily? Could our staff do a weekly PAR or a monthly PAR? Well, what's the recommendation there?
>> You can match it up with your payroll period. That's really not bad because matching it with your payroll period, let's say it's biweekly, some of my monthly, that's the point in time you're charging your payroll to the different areas. If you do a two week or a semimonthly PAR, that's actually easier to integrate. If you were to do this on a daily basis, then you've really got to do quite a bit of compiling to get it connected with the two-week payroll, for example, that you have.
You can't wait until the end of two weeks and scratch your head and say, what did I work on? You need to be tracking it. If you're working in different programs or different areas, you need to track it more frequently, but to really only need to compile it. I've seen things as simple as a calendar page with different color magic markers that identify the different areas that are worked on, then you compile it at the end of the paid documentation.
>> A couple of people have mentioned that their management information system that they use to record consumer services, to collect and keep the information for each information file for the individual person served, that that tool also has a way that the staff can enter their information and print out a timesheet related to how they did whatever it was that they did. A couple of them mentioned which system they use, but it will generate a PAR or it will allow you to print a timesheet that has that allocation if it's set up right.
The secret to all good software solutions is that they're set up so that they will accomplish what you wanted to accomplish, and if you're not sure if they do, or if you are struggling a little with it, most of the time the support for those different software options will assist you with this. I think all of them now have a capacity for this for people who are providing services directly. It is certainly an option for you.
I haven't worked with that myself, but I know that some of you have worked with that and found it very useful and it creates what you need to do your PAR. Certainly, that's a good tool for people who are providing consumer services. For people who are not though, there really isn't a way that I know of to use that instrument to track the time, for example, of an executive director or an accountant. There would still need to be some instruments to accomplish that.
For direct service staff, it works well because almost all of their time is centered on assisting people and it helps them keep that focus too, so it's useful. Several of you have said that you can pull a report and you can print out the calendars, you can have the documentation you need from those records and that's great. It just doesn't typically work for the general and the admin portion of the time that people spend.
>> Right. This is Tim. From the question side of things, I know Jackie recommended a program called Toggl, which I don't know, but she said they seem to like that. It's Toggl, T-O-G-G-L with no E at the end. She said it's a free, that's interesting, time-tracking software, also allows for a time clock for folks that are not here. [crosstalk] Then, Sally is asking John if QuickBooks will do any kind of personnel tracking. I'm not aware that it does, we don't use it for that, but do you know if there are features like that in QuickBooks or other accounting software?
>> I'm not sure about the QuickBooks itself. QuickBooks does have a separate payroll module that you can use but even if they can't do the allocation within it, there are different variations of QuickBooks with different add-ons. There are several partners to QuickBooks that provide add-on software. I could take a pick. I've actually got a list of some of those close by. I could take a look and let you know about that tomorrow, but I'm quite confident that if certain of the QuickBooks programs couldn't provide that as part of their payroll, then one of their partners could.
>> Okay, great. Then let me just clear out the queue because I've only got one other question sitting here. Gloria was wondering, Paula, how we differentiate between CARES time and Part C. As we try to spend down this CARES money in allowable ways, how do we decide what staff time is CARES and what guidance do we give to our staff so that they can show that correctly on a PAR.
>> That also as often needs to be shown correctly in your information management system, whatever it is that you're using. A couple of people mentioned so sweet specifically as recording time and I know that they did reach out right at the time that this first started and talked to ACL about what they would want for their annual report, but they also included a way that you can distinguish time, including the CARES app time.
You will have to define internally when are they working on CARES Act and when are they not, but it's just a matter of saying, "Okay, if you're working with the health and safety of people with disabilities during a pandemic, who are typically served by you, who need to do some kind of intake. They need to be considered a consumer of your center and you need to keep the record of what you do for them related to keeping them safe and healthy during a pandemic."
Did you go over food? Did you take or mail or drop off supplies that will protect them, supplies for them? Did you do the things that have to do with their safety, as opposed to any other independent living skills training, or other core services that you typically provide? What we're seeing is people are doing both still and as you should. Part C is still paying for independent living skills training, even though now it's by Zoom instead of in your office. That's still a Part C service. It's still one of the core services provided through that funding for anyone who comes to you.
You may have an expanded group, you may have something else different thought about it, but it is certainly something that you can record as you always did as a service. Same with peer support groups. Maybe those peer support groups were always face-to-face and now they're not, but they're still a peer support group. They're still one of the core services that you provide through Part C.
Typically what you're providing through CARES Act is more support directly to the consumer, you may be paying for some of their costs for accessing your services. That includes a lot of centers have purchased some kind of tablet and set it up for the consumer and made it available to them so that they can Zoom in because they didn't have a way to do those remote services. That's one of the things that we've seen but you can identify what is helping them with the virus protection from it, recovery from illness, good information about it, and that kind of thing. You can look at all of that as part of COVID-19 support.
Once in a while something will cross over then you just have to make an arbitrary decision on how you will deal with that type of thing and then do it consistently as you go forward. Just another that's showing up in the live chat people use, that even the administrative in general time can be recorded in sale suites at least, and probably in the others as well, I would guess. I wasn't aware of that. That's good to know. You could enter it differently. You're not entering it by the consumer served but you can still enter your time and that can create your record. That's good to know. All right.
>> Carly is asking if we could talk about the accessibility of these programs. She said, "We looked at timekeeping programs. We couldn't find any that worked well with screen readers." I feel your pain. This is why we still do this manually, but at NICOLE right on our spreadsheets and documents is that so often these snazzy programs that do not consider access. I don't have anything to offer, but sympathy, Paula or John, do you know of any programs that work well that are also accessible?
>> I don't know, unfortunately. I know there were a couple of accountants who are working on a program, I haven't heard from them in quite a while. They reached out to me for consulting, connected with me through one of these trainings, but I haven't heard anything from them in over a year or so. I don't know whether they're coming out with something that would be more accessible, but no, I am not.
>> The systems that are put together specifically for the 704 used to be, or the public performance report, which includes sales suite is one that's been mentioned. There was a condo and mentioned yesterday and I'm blanking on which one it was, but there are six or seven of them. I think you could absolutely push back if you're not finding it accessible and they absolutely should provide you with support in order to make it more accessible because that is a priority. Then they'll say that at least verbally, so make it happen at the local level because it certainly is a major goal for any software that works specifically for centers because we have a lot of staff that need that information.
I know we have a program director here who uses a screen reader here, meaning I'm in Fresno and there's a center here that I'm familiar with and has expressed that there are things that are improving about the database program that they use. That it is much more accessible than it was. Do keep pushing back and also checking back to make sure that you're using all the accessibility features that are coming forward, because there are some changes hopefully being named that way. Keep that in mind. Other questions, Tim?
>> Kathy just offered that sale suite works well with jaws and I was aware of that. That's great, but as we talked about earlier, that's not likely to be a one-size-fits-all solution for tracking time for all staff. Paul asks, suppose we're doing a quarterly tune-up and we find that we've over-allocated payroll to Part C, what do we do with the overage that we have drawn down during that time? How do we reflect this on the FFR? Paula help me with the FFR equity.
>> The FFR there's SF report. FFR is something.
>> That's a financial report, but at any rate, I think the answer is you would want to adjust for that in the subsequent quarter. Fortunately, we're talking about something that happened within the year, not that you're finding out about at the end of the year, and they will happen. That's just the nature of budgeting and preliminary rates, but if you found at the end of a quarter that you've charged too much payroll, then you would want to adjust that.
I guess I would also say that's a good example of where you maybe have to challenge yourself on the system here. It seems it lets you down a little bit, so is there anything you can do to tighten that up? Maybe you do have to consider a PAR or an electronic system to have your debt on a more up-to-date basis.
>> Yes, it certainly makes sense to do that. The federal financial report, I think, is the report where you tell how much you do down versus how much you spent, I think, and if that's the report we're talking about, then that would be, you would just have to adjust it in the next one. There isn't any other option and you'll have a chance to do that at the end of the fiscal year as well because your last drawdown, hopefully, you can adjust it before you make that last drawdown but you want to keep it as accurate as possible.
There's been a little conversation in the chat about, how do you use QuickBooks. Dory said, "I use QuickBooks, I do a journal entry to make the allocation", and then she said, "It won't let you apply more than one class to an employee." Then Sally said, "Oh yes, you can, just don't do one class on the personnel record. You'll have to add the class on each line of the payroll if you're going to split it that way, but it works pretty easily." That's just a little conversation on this. A little peer support between a couple of the staff here on how they're using QuickBooks to do the personnel records. I thought I'd share that with everybody who might not have seen that.
Tim, anything else before we go on? All right, the allocation of the payroll overhead is the next topic.
>> [crosstalk]
>> I'm sorry, what?
>> I said I'm sorry, I couldn't get to my new [inaudible]>> No, no, we're good. We've gotten through everything so far. Thanks.
>> All right. Good. I get a lot of questions about this. It's like, okay, now we know what to do with time, but what about everything else that's related to payroll? John, what about everything else that's related to payroll?
>> All right, everything related to the payroll pretty much gets allocated along with the payroll, that includes the statutory payroll taxes, your social security, your unemployment, whatever else you have there, the benefits that you provide, which may be health insurance and possibly life insurance, all of those follow the payroll. I know some organizations with health insurance because it is a big cost, rather than just spread it on the basis of payroll dollars, they will assign it to specific people based on the actual cost, but again, that's tedious. I wouldn't recommend that unless it really makes an important difference and produces a more accurate results.
Vacation holiday, sick pay, or some of us call it leave time, that gets allocated along with the direct payroll, the payroll that's the direct hours, whether they're spent on programs or whether they're spent on administration, or lobbying. Then a question that came up. What about personal care services, where your sale X is the payroll agent for additional employees? I think the one difference you need to be aware of there is in a lot of cases, the benefits structure for these folks is not the same as the benefits structure for the rest of your agency, and so you probably wouldn't just allocate the same percentage payroll overhead to these folks that you would for your regular full-time staff.
Paula, I don't know whether you have any input on that, but I think you know what I mean. These folks are often part-time. They often, typically don't get the same level of benefits as your full-timers anyways.
>> Yes. They're often some very specific things about them that make them different than your other employees so handling them-- What's the right word? Separately? Handling them separately?
>> Separate pools because that payroll has a pool of its payroll overhead that's different percentage-wise from the rest of your agency. Just something to be thoughtful about.
>> Let's see. Let's revisit the rent and utilities allocation. Then if some of you are looking ahead, you may realize that this part is going a little bit more quickly. We'll take lots of time for questions in just a second. We'll give you the assignment because it relates to this, but then we will go ahead and begin to go into tomorrow's schedule because we have a couple of places where the schedule is pretty tight. We'll go ahead and get a few slides ahead this afternoon before we do that. Just in case you're looking ahead.
Rent and utilities we've talked about, but I think it's good to look back at how you do that. Square footage, as we mentioned, is the most typical way. Some of you had suggested no, you'll make it all indirect. You set your own policies around how you treat all this, but because that's a large cost that is going to make your rate appear higher, even though you're not shooting for a specific number. I think it will make your rate appear higher if you put it all in indirect.
Each cost objective or activity uses a specific space typically. You have a shared space, lobby, bathrooms, hallways, conference room, but you also have the offices of the specific people and you can certainly charge that based on the square footage that they use. That's an option for you. Facility costs that benefit everybody are included in the general administrative side and are indirect, but you can use direct for the rest of it, of course, unless you'd be 10% de minimus in which case you don't get to include those costs.
>> Yes, and that can be a pretty big deal. Again, just challenging that 10% de minimus.
>> Yes, some of you thought, "Oh, good. That'll be easy." When we first looked at it at a glance, we may have thought the same thing, but as we got into it, we learned some things about the 10% de minimus. I hope you all have learned some things too. Other allocable costs, any costs that benefits more than one cost objective is spread, but any costs that only benefit one or maybe one or two out of five or six, you can assign directly to those costs if you wish to do that. Costs that benefit all the cost objectives can be in your general administrative, but costs that only benefit one or two would only be split by one or two if that makes sense.
All right, last words about allocation of other costs, allocation of any cost, cost allocation. We're going to do your questions in a minute, but what we would like you to do if you haven't already for your assignment is to find your indirect cost proposal and your approved rate and look at the date on it because there is an expiration date by which you were supposed to give them a response on how it actually worked in reconciliation and a new rate which happens at the end of each of those provisional periods.
Sometimes they don't remind you of that early on. I've seen some centers where they didn't get a notice until six or eight months after the expiration dates that the people at the cost allocation group were awaiting their reconciliation and reapplication. If you haven't done it yet, someone's still wanting to see it. Do take a look at what they suggest that you do there or what they require that you do there. Find that proposal, are you confident that your center is applying it? Once you reread the proposal you'll probably be able to determine that, and are you applying it consistently the methodology, not just the number? That's part of--
>> I would say at this point too because we're almost at the end of September, if you have a September year and/or even a June 30th year and you should have a final cost rate for the last year. When you're looking at your provisional rate for the current year, also see if you have your final rate by this year. I will say sometimes that process happens a little slowly, but it certainly should have happened by now, if not you may want to reach out to your HHS, whoever your contact person is to find out the status of that final rate.
>> Other questions, Tim?
>> No, we've gotten through them all.
>> Well, let's look ahead then into a little bit of, these are some small topics that we can tackle that we're going to be a little bit of odds and ends of things. I get a lot of questions about paper and electronic records, and since the COVID-19, we're also getting a lot of questions about electronic signatures, whether or not you still have to have a wet signature for everything. Here's the reference. If anybody at the state level argues with you about this it's 45 CFR, 75.363 is the number. Methods for collection, transmission, and storage of information. This has been in place since 2013, which I find interesting. It's an executive order to make open and machine-readable the new default for government information.
Now that's the reason for allowing electronic records that it would be more accessible, that it would be open and machine-readable if it's electronic, as opposed to paper. That's a new default and HHS being part of that federal government, and the non-federal entity should whenever practicable collect, transmit, and store federal award-related information in open and machine-readable formats rather than closed formats or on paper.
>> That's not just allowing you to keep electronic records, that's expressing a strong, clear preference for electronic records. The timing of this is pretty good because now there are programs out there. I know you can do this, within QuickBooks, some of the versions anyways, you can scan your invoice associated with the check. If somebody's coming in to look at your records, they can look at the check that was written. They can look at the supporting invoice. You don't need to keep that paper.
Now I know we always have a level of fear when we get rid of something tangible like that. Of course, you do have to have good, solid backup systems when everything is electronic, but this is a tool for efficiency, and if you're not doing this, this is a change worth seriously looking at.
>> All of the documentation, I keep urging you that with your CARES Act expenditures, for example, to give your rationale for why it is CARES Act related, you can do that on your purchase order or whatever system you use to authorize an expenditure. You can write right on there, why it is CARES Act appropriate. Why it fits that funding and puts your rationale down because I can tell you now when OMB or Inspector General's Office comes around in three years to begin to look at how everybody's spent that money, maybe four years, because the money goes into next year, but that you know that they will check some of the recipients of these funds.
When they do, you may or may not remember why you thought it was a good idea. Or you may have won the lottery and gone to live in Europe, and you're not even anywhere around anymore, and the person who filled your position doesn't know why on earth you spent the money the way that you did. Make sure that you have documented the reason why it's reasonable and necessary expense.
That's true for Part C too, if there's anything you think a person might question as an expense, put down why you felt like it was appropriate and why it helped you to further the goals of the grant with that purchase order with your note or the email where you check out that possibility or whatever else you want. It can all be electronic. You don't have to keep a paper file in order to do this backup documentation on why you think an expense is appropriate. You can certainly do that.
Now, I don't know how many of you are now keeping almost all electronic documentation, but I know that some of you during this time, when your offices will partially shut down, some of you use some of your time going through old records. I got a lot of requests for how long you had to keep things. Now, you need your own document retention policy. We suggest one in the financial management manual, and you can take a look at it there, but as we look at those expenses, those dates for how long you keep things, that can also apply to the electronic records. You can get rid of the paper records sooner if you recorded it electronically and you have it. I hope that that makes sense to you all.
An interesting thing that has happened just to pick on California for a minute, there are people from the department of rehabilitation, I apologize in advance if this hurts your feelings but they've required at the department of rehabilitation, everything you signed in blue ink so you can prove that it was a wet signature and not a copy. They've required that for quite some time and now suddenly have rescinded that because all kinds of electronic signatures are now okay.
ACL is even saying you don't have to have a signature at all if you have documentation from someone that they witnessed the person saying yes or a funding, whatever it is they were going to sign. If you're working with somebody brand new that you've never met in person and you haven't met them yet because they're distancing so you're talking to them by phone and email, and you're determining whether or not they're eligible for your services, you're going to ask them, "Do you have a significant disability?" You're going to record their answer rather than expecting them to sign the statement that says yes.
Suddenly they're not just saying you can do electronic signatures, they're also saying you can have an affirmation written by someone else who witnessed the person saying yes. That's very different from what you're used to thinking about. It used to be that every consumer file had to have paper with any of those signatures, that wasn't just California, that was everywhere. You had to have a paper file with any signed pieces and now they're saying, no, you don't have to have a wet signature, you just need affirmation. Somebody needs to verify that that is the case, but that isn't the only way to do it. Isn't that signature, you can do it in other ways. Isn't that interesting?
>> You know what else that means? When you've got everything done electronically, when your accounting system, your supporting invoices, your process for allocation is all electronic when the auditors come out to do the audit, they actually don't need to come out, they can do that work remotely. I'm not talking about just in this time situation, but the funder audit, the independent audit can be performed remotely to a much greater extent. Believe me, we've all learned a lot about doing that over the past couple of months, but it doesn't make the audit go away, but it makes it less intrusive. Right there it's worth taking some time to do whatever you can to make your system more completely electronic.
>> We could actually get to the day where all those banker's boxes on the conference room table and the auditor's staying in your offices for a period of time. None of that is necessary anymore. Let's move there. Some of you have storage units full of paper. I know you do, and you can let that go. You can do electronic records, but it's a shock, I think to all of us, it's like, we don't have to do it that way anymore. All right.
>> We have a couple questions on that. Do you want to just mention if anybody wants to chat about either of those, whether anybody is keeping all electronic records, or if you've gotten pushback with electronic only records, please share that.
>> You can drop that in the chat or you can have Tim read it for you, either one. I have to apologize, but I need to step away for just a second, there's somebody waiting in my hallway for an answer.
>> All right.
>> I'll be right back.
>> On the next slide here, we say there are some expenses that won't have invoice support such as employee mileage for training, but we do need documentation for these things. There may be an expense reimbursement form that you have, check requests can serve as documentation. There are some good examples of that on the internet. Tim, I don't know if you have any examples there, I'm not aware of any but there are a lot of examples of check requests and if anybody wants some we can look one up for you.
If travel is reimbursed with some level of frequency, the check request should leave space for the date, the purpose, the distance travelled. Check requests should be signed by the requester and by whoever is approving it just as you would sign an invoice for approval. That should be an independent person, of course.
>> I'm not seeing a bunch of things falling into the chat, except people are saying, "No paper. Yay. Beautiful." [chuckles] All right. Our next quick topic is budgeting, grant writing and funding requests. Now, before we tell how it's allocated, I think that's what this is about, I do want to mention something about the budget. That is that you are not required to submit a budget for your Title VII funds specifically, but you are required to have budget approval from your board of directors for a consolidated budget for each year, and have financial statements related to that budget and you do report on how you're spending your funds and whether or not they fit within your program purpose.
You want to make sure that you have good budgeting in place. It used to be that we had to submit a very detailed budget to the federal funder, which gave new detail and which could only be changed with action from your board, which then was passed on, which then was approved at the federal level and then came back. That kind of detail is not at this point required.
We're in a much better situation as regards the detail of trying to make the changes as you're working through that flexibility of what additional things might you want to buy because you had a vacant position for five months so you've got this extra money to spend and you need to adjust the budget. Those kinds of details are no longer required for prior approval, which they used to be. That said, you still need to follow good budget revision practices within your business.
Your board approves the budget, if you're going to revise the budget significantly, the board needs to know what it is you're doing. If you don't revise your budget and you just keep applying your budget versus actual against your budget, you can deal with it that way too and explain why something is high or low and what you're going to do about it. That's also a way that you can do it, but with your budgeting process, just because they aren't requesting it at the federal level doesn't mean you don't need it.
You need a good budget in place and you need to be conscientious about making sure your board knows about your spending and that you report to the board about how that's going related to the budget. That's just a general statement about budget.
>> The rest of the slide, Paula is about an accounting idiosyncrasy, soliciting contributions is fundraising. Soliciting grants is administration. Budgeting, for budget submission is administration and that's a big deal because administration can pretty much always be recovered as an indirect cost, fundraising can't be recovered. It can't use federal funds, but just keep that in mind that soliciting contribution, fundraising, soliciting grants is administration.
>> Okay, good. Makes sense. Debit and credit card procedures, you'll find some in that sample, fiscal policies and procedures handbook that we gave you and we've said it repeatedly, be sure you customize it to your agency. We've also seen some comments from you all about your homework assignment yesterday. Some of the things that you're going to be doing with those procedures are most of the time it was, we need more detailed procedures and you very well may need more detailed procedures for a number of things in that manual, not just this one, because you're going to find that you need to direct people in how to do the thing the policy requires.
That's the reason for the procedures, but, if you're being reviewed ACL may look at that policy and then look at your actual practice and see, are you following your policy accurately? Somebody mentioned that they had an audit that was done remotely, a Part C. I don't know if it was a Part C audit, but there were 10 centers that participated in a field test for that funder audit, and that was all electronic.
They did go out into the field and do some onsite follow-ups, but, yes, it was all electronic. That's been now, year and a half, maybe two years ago that that started. Anyway, they may look at your policy and your actual practice and they want to see what you're using, and what the spending limits are, who's authorized, and how you deal with them. If you use debit cards, you need specific procedures around how you do that.
If you use credit cards, you need specific procedures around how you do that. Who has access to them, who signed the bill, what documentation we require related to their use. I've mentioned this before, but I want to say it again, the credit card statement that you get, by either email our paper, that credit card statement is not sufficient documentation for those expenses. You need the original receipt.
Sometimes the example I use is if I'm traveling to a conference and my meals all show up on my hotel bill, that I'm going to be reimbursed for. If I don't have the original meal receipt, how does my office know that I didn't have wine with dinner when wine is absolutely prohibited? They don't know that unless I give them the bill from dinner. They can't tell whether I'm drinking or not.
That would be an example when you're using a straight reimbursement method for travel, you have to have all of that detail to be able to show that your expenses were appropriate, and that's true with other things. That's just kind of a fun example. If somebody goes to Walmart to pick up supplies and they come back with those supplies, how do you know what was purchased and what was not? It's Walmart, they have everything. Unless you have the detailed receipt, you don't have sufficient documentation. Anytime you're charging anything, the bill itself is not sufficient documentation. You also need the backup receipt from that. How about travel, John?
>> You're going to see in that fiscal procedures manual, that there are policies covering different types of travel pre-approval reimbursements and per diem allowances. You need to address all of these. As Paula just pointed out, it's really imperative that once you establish a policy, for example, that you will or will not allow per diem allowances, you need to follow that.
Your policy should probably address that somebody is going to review all of these for everyone, even your most senior staff, so maybe a board member is going to review these. This is an area that sometimes is subject to abuse, not just in [inaudible]>> I know in New York state a few years ago that the state controller was auditing school districts and found a lot of abuse in travel reimbursements and charge card, personal charge reimbursements here.
It's a high profile area that has a bad history and is likely to be scrutinized in any sort of funder audit. As we said, senior staffs should be subject to the same documentation, and Paul, I think already covered well then when credit cards are used for travel expenses, original receipts are required for documentation.
>> That's any expenditure that is charged to a card, travel or otherwise?
>> We're going on to something very different at this point in time. I think we should make sure there aren't any questions. Tim, can you tell us if there've been any questions or comments?
>> Yes. We have a few quick ones, so let's clear some of these out. Kathy was asking just about electronic signatures. We talked a lot about what was required by ACL or States, but she was wondering about how that might play out in a court of law. Do you all have any insight on that?
>> You're talking about an electronic signature versus an actual signature, how that might hold up?
>> I believe that's the [inaudible] question.
>> IRS has now approved that, and that's a court of law that I know more about tax court than than other courts thankfully. It certainly is allowable so if proper procedures are followed, then I don't think there should be any issue with that at all, and with the mandate was just talked about from expressing a preference for electronic documentation, I think, there may be some transition time.
I suppose there may be some people that believe things just shouldn't change, but I think as we move forward here the electronic documents should be more and more a way of our life. I know in our industry, there are service companies that are helping us deliver tax returns, electronically get signed, e-file authorizations back electronically without any physical paper at all, and that's all allowable. I think it should be treated just as an original document.
>> Really we have very little risk. I guess the other side of it is we're not getting releases from people for very much that would have to do with the legal situation. I'm not sure the frequency with which you might have something that would be legal in nature, but I can't see that there would be very many situations within a center where there's a legal situation emerging. I guess you work with youth, you have parental permission, I guess, to provide services to them that these other methods they're telling us there are good methods to youths.
>> What about things like vendor invoices and receipts, can they be digitized and saved in that way? Or do they need to be kept as original copies?
>> They can be digitized. As I said, the QuickBooks, just as one example now has a feature that does that, but there are other separate softwares that will integrate with your general ledger. If you've got an older copy of a QuickBooks or a different software that doesn't allow that there are other programs that allow you to scan the invoices and save them inside your accounting system, connected to her associated with your check.
As somebody looks at your travel expense, they can look at what it's composed of check by check. They can look at the supporting invoices, all digital, no paper, the paper can be shredded. I have little tremors when I say that, but that is the approved method, the preferred method now.
>> Speaking of the shredder timelines then for retention would be the same for paper as well as electronic documents? Is that right?
>> Generally, it is. Paula was mentioning that we may keep electronic records a little bit longer, but we should have a records retention policy that covers both paper and electronic records. We should very proactively destroy records at the date we have stipulated, whatever it is, in our policy.
>> You have to consciously do that with electronic records. We have a tendency, I think, sometimes to just let them sit out there in the ether or whatever. If we don't destroy them as we should, you run into the reality that it's hard to find them. It's hard to locate the right files, the more files you have to deal with. You want to organize them well, but you also don't want to keep more than you need to.
>> Right. Some people were asking about process and I think the answer comes as best from Patricia, who said, "We're in the process of digitizing 20 years of paper records. So much fun." Depending on your policies, you're not required to do 20 years worth, but whether it's financial or whether it's historical, in terms of the cost of keeping paper records, it's not fun to scan and digitize this stuff, but it may be worth your while and something that you can do ongoing as folks have free time or need a project, or you have some volunteers to work on that.
It is that there's no magic bullet in terms of getting those things. You might find a better scanner, but there's no magic bullet. You got to do the work if you want to digitize this stuff.
>> That's true.
>> It's not just the cost of the paper records, the storage of the paper records, but it's the difficulty of sorting through them. With the electronic records, as they've progressed to search for key words and find a document among a pile of hundreds or thousands of pages, it's just way easier than what you can do with paper. There really is a payback from that.
>> Great point.
>> There are some things that you don't ever want to get rid of, so you have to be conscious of that. Your original documents that- your articles of incorporation, the various renditions of your bylaws through time, as they've been updated by your board of directors. Most of your board minutes, I suppose there's a point at which you wouldn't have to go back further then, but we suggest that you keep your board of records in a folder that says board records by years, a good way to do that.
Some of the centers have at different times had somebody leading them who was real gung ho to get rid of things. When you try to go back and revisit history, you've lost some things that are valuable. Do take the time to have a historian maybe handle a file of those old things. If you've got 20 years worth of records, some of them might be those kind of documents that have some significance and that you don't want to lose entirely. Even though typically, you wouldn't keep 20 year old records at all, there are a few things that you're going to want to keep long-term.
>> Great. All right. Good advice. I know that [inaudible] the one that hangs over us is the historical stuff, right? Whole cabinets full of historical documents that we want to digitize, but financially, the way to- keeping that from piling up is to make it part of your ongoing procedures. The modern financial stuff that we digitize is no problem at all, because we're doing it in real time as we go.
It really does make things easier. Cheryl's asking, while we're talking about it, what is ACL's current guidance on records retention? Paula, how many years do we need to keep accounting information or client information?
>> They require three years for consumer information. We usually said yes, five for a couple of reasons, but one is that then you've got any partial year also taken into consideration. If they're asking to look back at three years, they can do any period of time within that five-year span that you have it. We usually suggest that. With the financial records, John, seven years still applies?
>> Sort of as an outside, some things-- Keep in mind a 990 for one year due the next year. After three years that documentation is no longer needed. A lot of irregular documents aren't going to be necessary for more than a four year period. Pay roll things I think for the most part are that seven years or six years. I think it's a six year statute for most things.
We always add another year to that just as a bit of a margin of safety. We've got a pretty good list for you, if you look at that fiscal procedures manual we go into some pretty good details. It's a starting point but it's based on what we're seeing for best practices out there. One more comment before we leave the idea of electronic records here. I still am amazed when I pull out my phone and I take a picture of the front and the back of a check that somebody gave me and it's in my bank right away.
We talked to our bankers, we do this at our office too. We scan our checks and they just magically somehow through outer space end up at the bank. We said, "How long should we keep those checks just as a fail safe?" They said, "Not more than 30 days." That really tells you something about the security of these systems here.
>> Of course you need to keep anything that's related to anything that's pending legally. If you have anything at all that has a legal consequence, you're not allowed to get rid of the records when you're in the middle of a legal situation of any sort. Those [inaudible] until that's resolved and you know it's not going to go any further.
>> Any more questions, Tim, or should we move into procurements here?
>> Yes, why don't we do procurement. Those are the questions that we had up till now.
>> Procurements have to do with when you buy something. That's the definition. We have some procurement policies in the sample manual and those procurement policies have been updated. There are terms that we're going to go through for micro purchases and small purchases which are the ones that would most typically apply to your center. The limits have changed since the last time we did this training. We want to mention those new limits.
Regardless of those dollar limits on approvals, anything you purchase, any procurement needs to be limited to necessary items. There's that language again, remember reasonable, necessary, allocable, allowable. All your expenses need to fit all of those. You're going to have to have a process where you make sure that the purchases that you make are free of any possibility of theft or misuse for the purchases that you're making.
That you're keeping your costs controlled but not spending so much time on it that it doesn't make sense for the level of the purchase. That you comply with the regulations and that you properly allocate it. Those objectives are what you want to look at when you're looking at a procurement policy. Just keep in mind, [inaudible] necessary and I would plug reasonable in there as well and properly allocating it are two good elements of this kind of a process.
>> I wanted to mention that when uniformed guidance came out it said that organizations that are being reimbursed for their costs- in other words not just given a certain amount, if you're being reimbursed for actual cost, need to have a procurement policy. They realized that that was really tough. These are sort of complex. They backed off on that and added a year and then they added another year. I think they did that three times. That's over and done with now you have to have a written procurement policy if you're being cost reimbursed with federal money.
If you don't have one, then definitely get a hold of that fiscal procedures manual. There's one in there we think it's pretty compliant. We've gotten it out to a few people to get feedback and believe that it covers the key areas. Of course you have to make it yours. You can't just copy and paste it. Go through it, if you're not committed to doing things that are in that policy don't copy that part of it because you'll create problems for yourself. Your policy doesn't have to look just like this. We try to address all of the required areas in this sample policy.
>> That includes some key components, one of them is identifying who is responsible for purchasing or also who's authorized to do it. Who has permission by your policies to do the purchasing? That's going to vary some based on how big your organization is. A large organization may assign several people who are authorized for purchasing. A small organization may run everything through one person.
You need to know how you're setting it up so that you've got the proper safeguards in place. One of those safeguards is avoiding conflicts of interest. I get a lot of conflict of interest questions. I want to just touch on that for a minute before we go on with procurement. I don't think we have this in here later, if we do I apologize. A lot of times I get questions about conflicts of interest that are related to the fact that a board member could also receive services or that a consumer could also apply for a job to be on the board.
A staff member might also be a recipient of services or could be-- Those in and of themselves are not conflicts of interest. We are organized to be consumer controlled. When you're consumer controlled you are going to have some overlap where once in a while somebody is wearing more than one hat. They are on the board of directors but they are also coming to you for some kind of service.
When that happens, the key to whether it's a conflict of interest or not is whether or not the board member gets special treatment. If the board member gets something nobody else would get, responsiveness or a benefit or an item. Right now we're doing a lot of offering things to consumers that'll help them through this crisis. If a board member came in and wanted something bigger and better than anybody else, those would be conflicts of interest.
It is not in and of itself a conflicts of interest that a board member or a staff member asks for a service that is available to everybody else. This also applies of course in purchasing in a different way. That is that you want to make sure that the person doing the purchasing doesn't have a conflict with the person or doesn't have a relationship that benefits them with the person that they're giving the contract to or they're making the purchase from. That's the conflict of interest usually in procurement is around--
If you're going to buy a service from my husband then we need to make sure that that's done in a fair way because I don't want you to give him special treatment if he's charging twice as much. Don't put me in that position, that's a conflict, if he gets more than anybody else would get.
>> I wanted to mention, in your policy when you identify responsibility for purchasing, do that by title not by name because you don't want your policy to become obsolete as quickly as you might have turnover. Again, do that by title. Maybe the accountant or the treasurer, whomever it is but do that by title.
>> Yes, absolutely. That's true throughout all of your policies and procedures, make sure that you use titles. If you change titles don't forget to go back to your policies and make the adjustments. If you decide that you're going to call a position something different you may have to make those adjustments in your written policies as well. If somebody asks for your policies you're going to want to show that you're absolutely clear and above board and up-to-date with everything that you're doing.
If job descriptions don't match titles, don't match- that it indicates you're behind, you haven't kept things up-to-date. One of the things you want to show is that your current and you're on top of all the changes that might be happening to you.
>> You want to show that you're complying with HHS regulations for procurements, and those include purchasing only what you need to perform under the award that you've been given. Where it's appropriate you consider lease versus purchase. If for example, you need a piece of equipment to perform this service, but you only need it for a period of time, is leasing it a possibility?
You wouldn't do that with a small item but if it was a very significant piece of equipment that was only going to be needed temporarily that sort of analysis should be done. Then also documenting the basis for who you select to be a contractor after competitive bidding has been used.
>> Of course, some of the purchases are too small to require competitive bidding, but when competitive bidding is on those larger purchases, certainly part of what you want to look at. Here's how they define the thresholds and regulations. Micro-purchases not exceeding $10,000. Now, I don't know about you, but$10,000 is not a micro- or $9,000 is not a micro-purchase in my household.
[laughter]
>> You can tell that there are government contractors that make a lot more money than we do at centers, because these are written for all of the different groups that receive federal funds. That means that you can even when practical distribute the amount that you purchased to two or three different vendors, if you choose to do that so that everybody's benefiting at a local level.
You've shared the cost with, I don't know, our office [inaudible], and whoever, [laughs] so that you've shared the cost of the lawn staples and office [inaudible], and we've shared them among the qualified suppliers. A small purchase is between $10,000 and $250,000. There's not very many things that you're going to do that fall outside of that micro-purchase level, which means you still have to show that it's reasonable and necessary.
Reasonable, that might be shown by doing some price comparisons, you might choose to do that, but you're not required to. Isn't that an interesting thing to look at? You're not required under $10,000 to check prices except to show that it's a reasonable amount to pay. When it's a small purchase, the price or the rate quotations have to be obtained from an adequate number of qualified sources. Adequate number of qualified sources is actually the language out of the regulation.
Your policies are going to have to clarify what's an adequate number and what's a qualified source for your requests when price is going to qualify. What would make someone qualified to provide you with an update? That's good for you to take a look at.
>> I just want to clarify, this is not a competitive bid requirement, even as you approach the $250,000 amount. This simply says that you look at competitive prices or rates and you can do that by requesting a proposal, but you can also do that by going to somebody's website or just having an informal conversation with them, documenting it of course. That's the process, an adequate number.
I'm not sure you want to stipulate what's an adequate number because in some cases there may only be a couple of different providers of a particular service. In other cases, you're going to be near that lower threshold and it just won't seem as necessary as it is when you get to the higher threshold. I'm using loose wording like that, that gives you appropriate flexibility is a good idea.
>> They give you some things that you can use as criteria for yourself. It's interesting to me that buying local is not one of them. Buying American is, but buying local is not one of them. A lot of us who are from rural areas and want to work within our own community, that's not necessarily something that we would take into consideration. You get to decide how much information you will copy [inaudible] through the day and wherever else you're looking at prices but you can look at that.
An adequate number I would always think it's two or more. If there's only one provider then of course you can go with that one provider. Do you guys know about these thresholds?
>> Yes, I'll tell you if you did write your name down and send it in because Paula and I really really struggled on this one. We had some conflicting background. When the regulations came out you probably know that these numbers were 3,500 for micro purchases, 100,000 for small purchases and then you were above that level. Uniform guidance said, "If there are going to be changes we will publish them in the federal acquisition regulations." That's uniform guidance for profits.
It's sort of a counterpart to your uniformed guidance in the non-profit world. They didn't do it that way. They issued a memorandum. The memorandum first applied to non-profits that contracted with the department of the [inaudible] said, "We're going to bump you up from 3,500 to 10,000." Then they issued another memorandum which as I read it- I shared it with Paula, I think we've both read it to say the threshold is up to 10,000 for everybody. That turned out to not be the case.
The federal government acknowledged that it was so confusing that if you bumped your threshold up that wouldn't be a finding, as an auditor, that wouldn't be problematic because it was very confusing. They finally came out with a definitive guidance that these are the new limits. Actually HHS and ACL confirmed that they were following this guidance before we got the final rule that applies to all non-profits.
Bottom line is it's sort of hard to stay on top of these because they're not following the procedure that they talked about originally. We're going to do our very best to stay on top of this and make sure that we do have that information available. I'm sure that if you have a policy- all of you have those old levels and that those place a greater burden on you. It makes sense to read those policies. If you don't have one, get one. If you have one, read the policies, see what the thresholds are and I would recommend that you get up to these higher levels.
>> Your board may set some lower levels for where they approve purchases. They can certainly do that. They can ask you to compare prices at 2,000 instead of 10,000 and up. They could certainly have lower thresholds for your burden of proof that it's a reasonable purchase and for when you get approval. They may set those items at any level that they want.
This is the federal requirement for how you have to prove that your costs are reasonable. One more piece, just because it would be incomplete without it. Purchases over $250,000 do require sealed bids, competitive proposal purchases over 250,000 require competitive proposals that meet that requirement. Most of us do not have a grant related expense that would come even close to that so we [inaudible] spend a lot of time with--
There's a little bit about how you're supposed to do it. I don't know that there's any reason to cover this, really. I don't know what you think, John.
>> No, no, that's fine. I think it's pretty well laid out on the slide if there is an interest on the part of any participants here, so we can--
>> Yes. I think you're probably all familiar to some extent with the sealed bid process where you publicly put out the proposal, you request the proposals and publicize that, and then they're sealed until they're all open at the same time and then the decision is made. Usually the lowest responsive and responsible bidder is [inaudible] they use. So not always the lowest bid, but the lowest one that you feel like meets the criteria. I don't know that we need to, like I said, spend any time on that one.
Other procurement provisions, slide 113 for anybody who is trying to catch up with us. Other procurement provisions include that the procurement policies identify the limited exceptions to competitive bidding. That's the single source thing we said. That might be an exception to getting two prices you're not going to probably do competitive bidding, but in that medium category to get at least two prices or to show that it's reasonable.
If there's an emergency urgent need, I know of one center anyway, he used this related to CARES Act funds. There was not a great supply of personal protective equipment in the early weeks after they started. They went to where they could get the material.
>> It's also very real, in the audit, the single audit world in a smaller community. If you're not in a metropolitan area and you need a single audit and you reach out to the accounting firms in your area, there may not be that many that are qualified to do that. Actually to perform single audits that- they need to be peer-reviewed on single audits. If they don't have a resource, like I mentioned, the Governmental Audit Quality Assurance Center, they're they're just not a contender probably. That's just a very practical example of where you might have, if not a single source in all- for all practical purposes, a single source of a qualified provider of that service.
>> Yes, I was, looking at the percentages and 67% of you, that was higher than I expected to see. 67% of you said that you had had a single audit in the past, and if that's an accurate number, then maybe you're aware of this, but a single audit is very specific in that it's applying these federal regulations that we're going over and it's testing your system to make sure that you're following what's required by the federal government as opposed to a financial statement audit, which is simpler and not nearly as broad in its purpose. Is that a good way to say it?
>> Yes.
>> Anyway-- Go ahead.
>> Agencies also need to take affirmative steps to work with minority and women owned businesses. Affirmative steps means not just reaching out to these businesses, but even considering breaking a contract into components so that an organization that couldn't fulfill all aspects of a contract could still participate in it and so just think about that. Then finally your policy should express a preference for materials sourced in the US.
Goods made in the US and US employment, US employment probably isn't too tough but US goods and material sourced in the US, especially that first one can be a little difficult at times when so many of our goods come from overseas.
>> Yes, but that is a requirement that we give preference for US source materials. All right, Tim, do we have any questions about procurement?
>> We do. We have a few, and then if you guys have any more that have come up, you know you can enter them in the ask a question tab right there on the webinar, or you can email them to me too at [inaudible]>> if you're only on the phone, you can press star nine. Let's start with these few that have come in and then we'll see if any more join them. All right. Tammy is wondering if a [inaudible] is not using federal funds for the purchase, are the threshold requirements still necessary?
>> Well, you would generally have a policy, and generally it wouldn't be a policy for your federal procurements, but a policy for all of your procurements. I think as a practical matter, the answer would be, yes, as a legal matter, maybe not, but as a practical matter, I would think, yes. Paula, you?
>> Yes. You don't want to have more than one policy and procedure. It's just based on your funding source. You want your policies and procedures to be in keeping with the funding source, but they are your policies and procedures. You're going to continue to apply them across the board, and not make exceptions just for other things. Now, I guess if you have something specific in mind, we can talk about that in more detail, but as a general rule, you want it a single set of policies.
>> Okay. Avaz is wondering how we find American made products for the office. How do we comply with that rule? Any resources there?
>> Well, you ask [inaudible] the question and you show a preference is what really is required right now. This was a letter of ruling from--
>> I think it was an executive, presidential executive order, to have a preference for materials. That's really a good practical question because some of the things probably no problem, I assume your office paper and things of that nature, are primarily in the US but even- I imagine a lot of paper products are made in Canada. That may be a typical choice for you, where you can say to your vendor, "We have a preference for the US rather than the Canadian products."
If there's a measurable price difference, that's a factor that can counterbalance this. You'll evaluate that, but at least you show that you've considered it, that you have that preference for US materials and other things being equal. Those would be your choice, quality and price.
>> Okay. Thanks. All right. Holly is wondering if a micro purchase is now up to $10,000, do we still need that ACL permission for purchases over 5,000?
>> You do, and in fact, when we talked about this content with ACL, they asked us- while we're talking about procurement, they really felt the $5,000 limit was more important because the procurement doesn't always apply, but we also know that some of you are making some larger purchases that are not equipment that are supplies that you're getting out to people. We wanted to make sure that you're aware of how this works overall, but the 5,000 does still apply. It's in a different part of the regulations, but it also applies.
>> Yes, the $5,000 is mostly focused on equipment items. The procurement policies could be for audit services, for your annual building maintenance, for a service that you're subcontracting. It's not really equipment-focused. It may be equipment, but it's not equipment-focused dollar--
>> [crosstalk] [inaudible] contract that some of you are going to look for after our conversation.
>> You're dancing right around Tammy's next question, which is, do the procurement procedures apply to benefit purchases like health insurance?
>> I think so. John?
>> Yes, health insurance, let me think about that. I would say yes, and I think that's something you'd want to do anyways. We annually, in our firm, we look at what the different offerings are, and we certainly don't have the choices we had a few years ago, but we always consider them when it comes down to annual renewal time. You probably do as well, if you're using a payroll service bureau that assists with this, they may help you evaluate this, but I would say that it would apply.
I don't think- it certainly isn't carved out as an exception. Utilities might be because you don't have a lot of choices there, but I don't think something like health insurance, where there may be legitimate alternatives, that could both work for your agency.
>> Yes, in fact, some of the language around this, makes it clear that it's the total purchases for a year with that vendor or for that purpose and so when it's a cost, that's a monthly cost, you still need to look at it on an annualized basis when you buy these thresholds.
>> Right.
>> I think this came up yesterday, but Dora was wondering that $5,000 limit where we need ACL approval, that is per item, correct?
>> It is per item of equipment, specifically, not for supplies.
>> Got it. Those are the questions we had pending. Again, if you want to enter questions, you can type them in to ask a question tab, email them to me at [inaudible] or if you're only on the phone today, you're welcome to hit star nine to raise your hand.
>> Give you a couple of minutes, then we'll remind you about your assignment.
>> We've got a few minutes left in the schedule, but I don't see anything else coming in. If you want to go ahead and review the assignment and then if anything else comes in I'll let you know.
>> Okay, just to remind you, we can have a homework item for you, and that homework- I think in the morning we'll do the same thing that we did at noon today, which was to ask you about your experience. We'll put that in the live chat in the morning. As you come in, tell us what you found and if you had any revelations, but we want you to find your indirect cost proposal.
If you already know where it is, that's great. If you use it every day, that's great, but for some of you, I bet you haven't seen it. Find it. See what your approved rate is. Look at that expiration date. See if you should be checking on that, updating that, and do you feel like it's being applied? Take a look at that. Like I said, we'll ask you to plug in your discoveries first thing in the morning, and we'll talk about them a little bit as we start the day tomorrow.
>> You may also want to look at your procurement policy in light of what we just talked about and make sure those thresholds are up to date.
>> We mentioned if your policies use that OMB circular or anything with 34 CFR, they're out of date, which we didn't remember to tell you yesterday before you looked into policies.
>> This is Tim, just since we have a few extra minutes, I just want to highlight we're about halfway through the training, and so if there are content questions that you think of tonight by all means, send them to me [inaudible] but also if you have suggestions for the trainings or items that we're not hitting on, of course, we can't change our agenda.
We need to get through the rest of the content that we promised to provide, but if there are things that we could be doing better or suggestions that you have, we'd love to know that now, before we read it on a satisfaction survey after the training is over, so don't be shy. I know that's something we work really hard and the environment we try to create at our on-location trainings.
I know this is very different but believe me, if you all have suggestions or things we could be doing better, or if you want to go back and revisit a topic in one of our discussion sessions, I know we've got a little bit of extra time built in tomorrow afternoon, just exactly for that kind of check-in, don't be shy, let us know and we'll discuss it, and try to react--
>> Everything you've always wanted to ask about money and you're afraid to.
[laughter]
>> Right.
>> We'll entertain all questions. We may have to tell you you have to go look it up, but we'll entertain all questions.
>> Well, here, I'm feeling bad that we're ending early and when it's five minutes to the top of the hour, so you all are probably tired, John and Paula, I know you must be exhausted, but great job again today, to our audience, excellent questions and engagement continuing. I really appreciate that. We'll give you a few minutes back in your evening or afternoon here, and we will see you, same links, but you can access them through our training webpage that you've gotten used to now, and you may have noticed, we do have the transcripts up, on the materials page now.
You can see those, everything through this morning's session, the transcript is posted, and we'll get this afternoon's transcript posted here in the next few hours. Then again, we need a little bit of editing time on those videos, but those videos will begin to appear on that same site. All right. Well with that, we're going to go ahead and close. Have a great evening you all, we'll see you tomorrow morning, 11 Eastern. Bye-bye.
>> See you in the morning.