THE NEW SUPER CIRCULAR

General Overview

For those of you who are involved in organizations that are required to conform to specific OMB circulars, one of the historically frustrating issues has been duplicative and conflicting guidance when comparing circular to circular. One of the main drives of the Super Circular, for which the official name is Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, was to remove the conflicting guidance by combining eight individual circulars into one. The initial industry interpretations of the new guidance show that this goal was accomplished, for the most part, admirably.

In strengthening the accountability for federal dollars, policies have been improved and tightened to help protect against waste, fraud and abuse. In the past, non-federal agencies have met audit findings that were a result of inappropriate procedures because of the overlapping/conflicting guidance. Due to the uniform effective date of December 26, 2014, Federal agencies will implement the new guidance on a consistent schedule.

A main focus of the guidance is to reorient recipients toward achieving program objectives. There is a strong shift of management requirements that will focus on performance outcomes and defined goals. There are new provisions for fixed amount awards that minimize compliance requirements and adding requirements to meet performance standards.

Direct and Indirect Costs

To address the ongoing inconsistency in the definition of direct costs which required administrative costs to be charged indirectly, language has been added to clarify the circumstances under which it is allowable to directly charge administrative support costs. Certain conditions however will need to be met and the organization must have prior approval of the federal awarding agency.

New Language regarding rate application (located in Subpart E – Cost Principles of the new guidance):

• Any non-federal entity that has never had a negotiated indirect cost rate may use a de minimis rate of 10% of modified total direct costs.
• Entities that have an approved federally negotiated indirect cost rate can apply for a one-time extension of up to four years without further negotiation.
• Pass through entities are required to provide indirect cost rates to sub-recipients.

Record Retention

Language has been added dramatically strengthening the position that electronic, open, machine readable information is preferable to paper, as long as there are appropriate and reasonable internal controls in place to safeguard against any inappropriate alteration of records.

Implementation, Accountability and Financial Reporting

As stated above, the uniform implementation date is December 26, 2014. One of the popular questions currently being asked is “At what pace and with what strength will the new guidance be enforced?” We think it would be prudent to move ahead under the assumption that all affected entities will be held accountable and be expected to be in compliance based on the schedule as outlined in section 200.111 of the new guidance.

With that in mind it is imperative that your fiscal department be using an accounting and financial reporting system that will give you the reports necessary to show that you have met the goals or milestones defined within your grant requirements. At the same time you need a system that will provide you with the accountability to meet the audit requirements set forth in the new guidance as well as GAAP standards.

The GMS Accounting and Financial Management System is a proven package that will meet all of your needs. GMS has provided the tools to help assure a non-profit organization has compliance capability when all eight individual OMB Circulars were enforced, and GMS continues to provide that assurance with the Super Circular.

To help your organization comply with the preferred electronic record keeping, GMS incorporates electronic document attachment to all books of entry and master files as well as automatic pdf report generation. The Cost Allocation portion of the software has internal Indirect Cost allocation capability incorporating all approved base types and available rate types.

The system also has specific internally generated reports available such as FASB 117 Worksheets, GASB 34 Worksheets and Schedule of Federal Assistance. With the tightening of the reigns and shifting of compliance and responsibility, the GMS Accounting and Financial Management System is certainly the software of choice.