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Property Management – From Purchasing to Disposition!

Property Management – From Purchasing to Disposition!. Tiffany R. Winters, Esq. twinters@bruman.com Brustein & Manasevit, PLLC www.bruman.com Spring Forum 2013. What Rules Apply??. State educational agencies (SEAs) and local educational agencies/school districts (LEAs): EDGAR Part 80

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Property Management – From Purchasing to Disposition!

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  1. Property Management – From Purchasing to Disposition! Tiffany R. Winters, Esq. twinters@bruman.com Brustein & Manasevit, PLLC www.bruman.com Spring Forum 2013 Brustein & Manasevit, PLLC

  2. What Rules Apply?? • State educational agencies (SEAs) and local educational agencies/school districts (LEAs): • EDGAR Part 80 • OMB Circular A-102 (Sections __.30- __.36) • Institutions of Higher Education (IHEs) and Nonprofit Organizations • EDGAR Part 74 • OMB Circular A-110 (2 C.F.R. 215.30 – 215.48) Brustein & Manasevit, PLLC

  3. What is Equipment? • Equipment: tangible, nonexpendable, personal property having a useful life of more than one year and an acquisition cost of $5,000 or more per unit • Grantees may lower the threshold 34 C.F.R. 74.2 34 C.F.R. 80.3 Brustein & Manasevit, PLLC

  4. What about everything else? • Technically – everything else are “supplies” • Supplies means • Personal property, excluding equipment • 34 C.F.R. 74.2; 34 C.F.R. 80.3 34 C.F.R. 74.2 adds… • Intangible property • Debt instruments • Inventions of a contractor conceived or first actually reduced to practice in the performance of work under a funding agreement Brustein & Manasevit, PLLC

  5. Other Technological Items? • Prior audits applied equipment rules to other items • Found setting threshold of $500 was too high • Significant Technological Items • Easily Pilferable Items • Highly Walkables • New OMB Notice • Introduces New Category of “Computing Devices” Brustein & Manasevit, PLLC

  6. OMB: Computing Devices Are Allowable Direct Cost Supplies • Explicitly includes the cost of computing devices as allowable direct cost supplies • Documented in separate line item • Not required to conduct more stringent inventory controls in place for equipment! Brustein & Manasevit, PLLC

  7. Would new OMB requirements actually change equipment thresholds set by auditors? Brustein & Manasevit, PLLC

  8. Purchasing Brustein & Manasevit, PLLC

  9. Purchasing Equipment: Procurement Standards IHEs and Nonprofits: • Must follow policies and procedures that meet the standards set out in 34 C.F.R. 74.41 through 74.48. • Rules are designed to ensure materials and services are obtained in an effective and compliant manner. 34 C.F.R. 74.40 Brustein & Manasevit, PLLC

  10. Purchasing Equipment: Procurement Standards SEAs: • States may use their own procurement policies and procedures to procure equipment. 34 C.F.R. 80.36 • Best Practice: Ensure that policies and procedures meet all standards for other grantees and subgrantees. LEAs: • Other grantees and subgrantees must follow policies and procedures that meet the standards set out in 80.36(b)-(i). Brustein & Manasevit, PLLC

  11. Ownership Generally, title to equipment purchased with Federal funds vests in the organization that made the purchase. 34 C.F.R. 80.32(a) 34 C.F.R. 74.34(a) Brustein & Manasevit, PLLC

  12. Ensuring Purchases are Necessary • All costs have to be necessary for the performance or administration of the Federal grant 34 C.F.R. 80.22/ 34 C.F.R. 74.27 (OMB Circulars A-87/A-21/A-122) • Must review all proposed purchases to avoid unnecessary or duplicative items 34 C.F.R. 80.36(b)(4-7) 34 C.F.R. 74.44(a) Brustein & Manasevit, PLLC

  13. Open Competition SEAs and LEAs • All procurement transactions will be conducted in a manner providing full and open competition 34 C.F.R. 80.36 IHEs and Nonprofits • All procurement transactions shall be conducted in a manner to provide, to the maximum extent practical, open and free competition 34 C.F.R. 74.43 Brustein & Manasevit, PLLC

  14. Open Competition SEAs and LEAs • Situations that restrict competition: • Unreasonable requirements on vendors to qualify to do business • Pre-qualified lists should not limit competition • Requiring unnecessary experience or excessive bonding • Noncompetitive pricing practices • Noncompetitive awards to consultants on retainer • Organizational conflicts of interest • Specifying a brand name • In-state or local preferences 34 C.F.R. 80.36(c) Brustein & Manasevit, PLLC

  15. Open Competition IHEs and Nonprofits • Be alert to organizational conflicts of interest and noncompetitive practices that may restrict or eliminate competition or restrain trade 34 C.F.R. 74.43 Brustein & Manasevit, PLLC

  16. Conflict of Interest • Must have written policies and procedures regarding conflict of interest. • A conflict of interest arises when any of the following has a financial or other interest in the firm selected for award: • Employee, officer or agent • Any member of that person’s immediate family • That person’s partner • An organization which employs, or is about to employ, any of the above or has a financial interest in the firm selected for award. 34 C.F.R. 80.36(b)(3) 34 C.F.R. 74.42 Brustein & Manasevit, PLLC

  17. Conflict of Interest IHEs and Nonprofits • Officers, employees, agents of the recipient shall neither: • Solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subagreements. • However, recipients may set standards for situations in which the financial interest is not substantial or gift is an unsolicited nominal value. • Standards must include disciplinary actions for violations. 34 C.F.R. 74.42 Brustein & Manasevit, PLLC

  18. Role of Cost/Price Analysis • Method and degree of cost or price analysis depends on the particular facts and circumstances • Must make independent estimate before receiving bids or proposals 34 C.F.R. 80.36(f) 34 C.F.R. 74.45 Brustein & Manasevit, PLLC

  19. Vendor Selection Process • Must have written selection procedures • Procedures must ensure all solicitations: • Include a clear and accurate description of technical requirements • Identify all requirements vendor must fulfill • Identify evaluation factors 34 C.F.R. 80.36(c) 34 C.F.R. 74.44 Brustein & Manasevit, PLLC

  20. Types of Procurement SEAs and LEAs • Methods of procurement: • Small purchase procedures • Competitive sealed bids • Competitive proposals • Noncompetitive proposals 34 C.F.R. 80.36(d) Brustein & Manasevit, PLLC

  21. Vendor Selection Process: Small Purchase Procedures • Good or service that costs $100,000 or less • State or local government may set lower threshold • Must obtain price or rate quotes from an adequate number of qualified sources • “Relatively simply and informal” 34 C.F.R. 80.36(d)(1) Brustein & Manasevit, PLLC

  22. Vendor Selection Process:Noncompetitive Proposals Under 34 C.F.R. 80.36(d)(4): Appropriate only when: • The good or service is available only from a single source (sole source) • There is a public emergency • The awarding agency authorizes • After soliciting a number of sources, competition is deemed inadequate Brustein & Manasevit, PLLC

  23. Types of Procurement IHEs and Nonprofits Recipients shall make procurement documents available upon request when any of the following conditions apply: • A procurement is expected to exceed the small purchase threshold, fixed at $100,000. • Note: While EDGAR states the amount is set at $25,000 41 U.S.C. 403(11) was updated and increased. • The procurement specifies a brand name; • The proposed award is to be awarded to other than the apparent low bidder under a sealed bid; etc. 34 C.F.R. 74.44(e) Brustein & Manasevit, PLLC

  24. Brand Name Requirements SEAs and LEAs • States Brand Names restrict competition • Must state “brand name or equal” 34 C.F.R. 80.36(c) IHEs and Nonprofits • The specific features of a brand name or equal descriptions that bidders are required to meet must be included in the solicitation 34 C.F.R. 74.44(a) Brustein & Manasevit, PLLC

  25. Noncompetitive Procurement • Standard more relaxed for IHEs and Nonprofits: • Must maintain justification for lack of competition when competitive bids or offers are not obtained and it exceeds the small purchase threshold 34 C.F.R. 74.44(e) Brustein & Manasevit, PLLC

  26. As a practical matter, a noncompetitive contract raises “red flags” Ensure persuasive and adequate documentation to facilitate audit Vendor Selection Process:Noncompetitive Proposal Brustein & Manasevit, PLLC

  27. Vendor Selection Process • Can only contract with responsible contractors possessing the ability to perform successfully: • Contractor integrity • Compliance with public policy • Record of past performance • Financial and technical resources 34 C.F.R. 80.36(b)(8) 34 C.F.R. 74.44(d) Brustein & Manasevit, PLLC

  28. Cannot contract with vendor who has been suspended or debarred http://www.epls.gov/ www.sam.gov 34 C.F.R. 80.35 34 C.F.R. 74.44(d) 34 C.F.R. 85.530 Vendor Selection Process Brustein & Manasevit, PLLC

  29. Procurement Documentation • SEAs and LEAs: Retain records to document: • Rationale for the method of procurement • Selection of contract type • Contractor selection or rejection • Basis for contract price 34 C.F.R. 80.36(b)(9) Brustein & Manasevit, PLLC

  30. Procurement Documentation (cont.) • IHEs and Nonprofits: Retain records to document: • Basis for contract selection • Justification for lack of competition (if applicable) • Basis for award cost or price 34 C.F.R. 74.46 Brustein & Manasevit, PLLC

  31. You finally Purchased the Item, Now what? Brustein & Manasevit, PLLC

  32. Must maintain a contract administration system that ensures contractors perform in accordance with the terms, conditions, and specifications of the contract Clearly stated in Part 74 Implied in Part 80 Contract Administration Brustein & Manasevit, PLLC

  33. Contract Administration IHEs and Nonprofits • A system for contract administration must be maintained to ensure contractor conformance with terms of contract • To ensure adequate and timely follow up of all purchases • Must document whether contractors have met the terms of their contracts! 34 C.F.R. 74.47 Brustein & Manasevit, PLLC

  34. Contract Provisions • All contracts supported with Federal funds must contain certain required provisions • Specifics vary slightly 34 C.F.R. 80.36(i) 34 C.F.R. 74.48 Brustein & Manasevit, PLLC

  35. Contract Administration • As a practical matter: • Must have written contracts (purchase order ok) • Contract should include clearly defined deliverables • Description of services to be performed or goods to be delivered • Dates of performance • Location of services or delivery • Description of number of students/teachers/etc. to be served (if applicable) • Invoice must match the purchase order • Both must be reviewed and approved before payment!!! Brustein & Manasevit, PLLC

  36. Must have adequate controls in place to account for: Location of equipment Custody of equipment Security of equipment Inventory Management Brustein & Manasevit, PLLC

  37. Inventory Management • Equipment property records • Description, serial number or other ID, title info, acquisition date, cost, percent of Federal participation, location, use and condition, and ultimate disposition • Physical inventory • At least every two years 34 C.F.R. 80.32 34 C.F.R. 74.34 Brustein & Manasevit, PLLC

  38. Inventory Management (cont.) • Must protect against unauthorized use • May use for other projects as long as use is incidental and does not interfere • Control system must be in place to prevent loss, damage, theft • All incidents must be investigated Brustein & Manasevit, PLLC

  39. How can I use my inventory? Brustein & Manasevit, PLLC

  40. Use of Grant-Acquired Equipment SEAs and LEAs • May be used for the grant program that purchased the equipment: • As long as needed; and • Even if no longer funded with Federal funds • When no longer needed, may be used in other activities currently or previously supported by a Federal agency. • Preference given to ED programs. • May be used on other projects/programs currently or previously funded by the Federal government, but watch allocability! 34 C.F.R. 80.32(c) Brustein & Manasevit, PLLC

  41. Use of Grant-Acquired Equipment IHEs and Nonprofits • May be used for the grant program that purchased the equipment: • As long as needed; and • Even if no longer funded with Federal funds • When no longer needed, may be used in other Federally funded activities, but must be prioritized to: • Preference given to ED programs (if initial grantee); then • Other Federal agency programs 34 C.F.R. 74.34(c) Brustein & Manasevit, PLLC

  42. Disposing of inventory Brustein & Manasevit, PLLC

  43. Equipment Disposition • When equipment no longer needed, must follow disposition rules: • Transfer to another Federal program • Over $5,000 – pay Federal share • Under $5,000 – no accountability 34 C.F.R. 80.32(e); 34 C.F.R. 74.34(g) IHEs and Nonprofits • Disposition rules requested from the Secretary (i.e., granting agency) Brustein & Manasevit, PLLC

  44. Disposition of Supplies • If there is residual inventory of unused supplies exceeding $5,000 in total aggregate fair market value upon termination or completion of the award; and • Supplies are not needed for any other Federal grant; then • Must compensate ED for its share! 34 C.F.R. 80.33 34 C.F.R. 74.35 Brustein & Manasevit, PLLC

  45. Sale of Property • Proper sales procedures shall be used that provide for competition to the extent practicable and result in the highest possible return A-133 Compliance Supplement Part 3 (3-F-1) Brustein & Manasevit, PLLC

  46. Still have trouble with property management rules? Review your internal controls! Brustein & Manasevit, PLLC

  47. Components of Internal Controls Brustein & Manasevit, PLLC

  48. Control Environment Examples • Management committed to providing proper stewardship for property acquired with Federal awards. • No incentives exist to under-value assets at time of disposition. • Sufficient accountability exists to discourage temptation of misuse of Federal assets. Brustein & Manasevit, PLLC

  49. Risk Assessment Examples • Procedures to identify risk of misappropriation or improper disposition of property acquired with Federal awards. • Management understands requirements and operations sufficiently to identify potential areas of noncompliance. • Decentralized locations, • Departments with budget constraints, • Transfers of assets between departments, etc. Brustein & Manasevit, PLLC

  50. Control Activity Examples • Accurate records maintained on all acquisitions and dispositions of property acquired with Federal awards. • Property tags are placed on equipment. • A physical inventory of equipment is periodically taken and compared to property records. • Property records contain all required information. • Procedures established to ensure that the Federal awarding agency is appropriately reimbursed for dispositions of property acquired with Federal awards. • Policies and procedures in place for responsibilities of recordkeeping and authorities for disposition. Brustein & Manasevit, PLLC

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