The HMEP Supercircular Impact and Risk Assessments

1. The HMEP Supercircular Impact and Risk Assessments Matthew Jones PHMSA Hazmat Grants Division Team Lead

2. Goals of the Presentation 1. Provide a brief overview of the Supercircular changes, and how they will affect HMEP grantees. 2. Analyze the subgrant guidance for managing subgrants contained in the Supercircular. 3. Communicate the HMEP Risk Assessment policy for FY15 and beyond.

3. Section 1: Supercircular Overview

4. Section 1: Supercircular Overview “What is a Supercircular?” 2 CFR PART 200—UNIFORM ADMINISTRATIVE REQUIREMENTS, COST PRINCIPLES, AND AUDIT REQUIREMENTS FOR FEDERAL AWARDS. The result of a three-year effort across Federal agencies, the rule released by the cross-agency Council on Financial Assistance Reform (COFAR) to implement OMB guidance on grant-making across Federal agencies.  The goal was to reduce the total volume of financial management regulations. Reduce administrative burden and risk of waste, fraud, and abuse for the approximately $600 billion in Federal grants expended annually. 

5. Section 1: Supercircular Overview “What is new with 2 CFR part 200? “ Per OMB/COFAR Eliminates duplicative and conflicting guidance. Focuses on performance over compliance for accountability. Provides for consistent and transparent treatment of costs. Limits allowable costs to make the best use of Federal resources. Strengthens oversight. Targets audit requirements on risk of waste, fraud, and abuse.

6. Section 1: Supercircular Overview “Where can I find a summary of the changes?” https://cfo.gov/cofar/ Background information on the process. Frequently asked questions and COFAR answers. Crosswalk between old guidance and new guidance. Crosswalk for Federal Agency exceptions.

7. Section 1: Supercircular Overview The 2 CFR part 200 streamlines related circulars and guidance: A-21 - Cost Principles for Educational Institutions A-50 - Audit Follow-up (related to Single Audits). A-87 - Cost Principles for State, Local and Indian Tribal Governments A-89 - Federal Domestic Assistance Program Information A-102 - Awards and Cooperative Agreements with State and Local Governments A-110 - Uniform Administrative Requirement for Awards and Other Agreements with Institutions of Higher Education, Hospitals and Other Nonprofit Organizations A-122 - Cost Principles for Non-Profit Organizations A-133 - Audits of States, Local Governments and Non-Profit Organizations

8. Section 1: Supercircular Overview 2 CFR part 200 Structure There are three major sections: 1. Administrative Requirements: Subparts A - D (formerly A-102; A-110) 2. Cost principles: Subpart E (formerly A-21; A-87; A-122) 3. Audit Requirements : Subpart F (formerly A-133 and A-50)

9. Section 1: Supercircular Overview 2 CFR part 200 Structure There are 6 Subparts: Subpart A, 200-xxx Acronyms and Definitions Subpart B, 200.1xx – General Provisions Subpart C, 200.2xx – Pre-award - Federal Agencies Subpart D, 200.3xx – Post-award - Recipients Subpart E, 2004xx - Cost Principles Subpart F, 200.5xx – Audit Requirements 11 Appendices (I – XI)

10. Section 1: Supercircular Overview Sub-Part C: Pre-award – Federal (key sections) The funding opportunity announcement is different in order to comply with Appendix I – Format for funding announcement. Federal agencies required to undertake a merit review in accordance with 200.204. Federal agencies required to develop a risk assessment policy in accordance with 200.205 (more on this later!) Federal awards required to contain the 19 data elements for grant awards outlined at 200.210. Your grant award, may look slightly different.

11. Section 1: Supercircular Overview Sub-Part B: Post-Award– Recipients (key sections) 200.303 – Internal Controls Grantees must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the award is managed in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

12. Section 1: Supercircular Overview Sub-Part B: Post-Award– Recipients (key sections) §200.317   Procurements by states. When procuring property and services under a Federal award, a state must follow the same policies and procedures it uses for procurements from its non-Federal funds. All other non-Federal entities, including subrecipients of a state, will follow §200.318 General procurement standards through 200.326 Contract provisions.** **There is a DOT exception to this rule, which we will discuss in the next section!

13. Section 2: Subaward Management

14. Section 2: Subaward Management §200.330   Subrecipient and contractor determinations Pass-through entities must make case-by-case determinations as to whether each agreement casts the entity receiving the funds in the role of a subrecipient or a contractor. You must choose: Is the agreement a Subaward or Contract? If it is a subaward, you must follow 200.330 and 200.331 If it is a contract, you must follow 200.317, which directs States to follow their policies and procedures.

15. Section 2: Subaward Management §200.330   Subrecipient vs. Contract? How do you know? A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient. See §200.92 Subaward. Characteristics which support the classification of a subaward is if the entity: Determines who is eligible to receive what Federal assistance. (2) Has its performance measured in relation to whether objectives of a Federal program were met. (3) Has responsibility for programmatic decision-making. (4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award. (5) Uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity.

16. Section 2: Subaward Management §200.330   Contract Classification 200.330 provides guidance on what should be classified as a contract. A contract is for the purpose of obtaining goods and services for the non-Federal entity's own use and creates a procurement relationship with the contractor. See §200.22 Contract. Characteristics indicative of a procurement relationship are when the entity: (1) Provides the goods and services within normal business operations. (2) Provides similar goods or services to many different purchasers. (3) Normally operates in a competitive environment. (4) Provides goods or services that are ancillary to the operation of the Federal program. (5) Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons.

17. Section 2: Subaward Management §200.331   Requirements for pass-through entities. Required Award Information All pass-through entities must ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the information outlined at 200.331. This information includes: 1. Federal Award Information, Subrecipient name (which must match the name associated with its DUNS) Subrecipient'sunique entity identifier (DUNS) Federal Award Identification Number (Grant Number) Federal Award Date SubawardPeriod of Performance Start and End Date Amount of Federal Funds Obligated by this action Total Amount of Federal Funds Obligated to the subrecipient Total Amount of the Federal Award Federal award project description Name of Federal awarding agency, pass-through entity, and contact information for awarding official CFDA Number and Name Identification of whether the award is R&D; (likely not applicable for HMEP) Indirect cost rate for the Federal award (including if the de minimis rate is charged per §200.414 Indirect (F&A) costs).

18. Section 2: Subaward Management §200.331   Requirements for pass-through entities. Required Award Information, cont… 2. All requirements imposed by the State on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award. 3. Any additional requirements that the State imposes on the subrecipient in order for the State to meet its own responsibility to the Federal awarding agency; including identification of any required financial and performance reports.

19. Section 2: Subaward Management §200.331   Requirements for pass-through entities. Required Award Information, cont… 4. An approved federally recognized indirect cost rate negotiated between the subrecipient and the Federal Government or, if no such rate exists, either a rate negotiated between the State and the subrecipient; or a de minimis indirect cost rate as defined in §200.414 Indirect (F&A) costs. 5. A requirement that the subrecipient permit the State and auditors to have access to the subrecipient's records and financial statements. 6. Appropriate terms and conditions concerning closeout of the subaward.

20. Section 2: Subaward Management Risk Assessment for Subgrants- State’s should evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. The risk assessment may include consideration of such factors as: 1. The subrecipient's prior experience with the same or similar subawards. 2. The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F—Audit. 3. Whether the subrecipient has new personnel or new or substantially changed systems. 4. The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency).

21. Section 2: Subaward Management Subaward Special Conditions and Monitoring States may consider imposing specific subaward conditions upon a subrecipient if appropriate as described in §200.207 Specific conditions. States must monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, State monitoring of the subrecipient must include: 1. Reviewing financial and performance reports required by the State. 2. Ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award found during the State’s monitoring. 3. Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the pass-through entity as required by §200.521 Management decision.

22. Section 2: Subaward Management §200.331   Requirements for pass-through entities. Special Conditions and Monitoring, cont.. Depending upon the State’s assessment of risk posed by the subrecipient, monitoring tools may be useful to ensure proper accountability and compliance with program requirements and achievement of performance goals: 1. Providing subrecipients with training and technical assistance on program-related matters. 2. Performing on-site reviews of the subrecipient's program operations.

23. Section 2: Subaward Management Special Conditions and Monitoring, cont… States must verify that every subrecipient is audited as required by Subpart F—Audit Requirements, when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in §200.501 Audit requirements($750,000). States should consider taking enforcement action against noncompliant subrecipients as described in §200.338 Remedies for noncompliance. This could include: Temporarily withhold cash payments pending correction of the deficiency Disallow all or part of the cost of the activity or action not in compliance. Wholly or partly suspend or terminate the award. Withhold further awards for the project or program. Take other remedies that may be legally available.

24. Section 2: Subaward Management Subrecipient Procurement Remember, States are to follow 200.317 . The rest, including subrecipients, are to follow 200.318 through 200.326. However…… Agencies had the opportunity to request exceptions. You can view these in cofar agency exception crosswalk . DOT’s exception is located at 2 CFR 1201.317. 2 CFR 1201.317 Procurements by States. “Notwithanding 2 CFR 200.317, subrecipients of States shall follow such policies and procedures allowed by the State when procuring property and services under a Federal award.” This means the States need to tell the subrecipients which procurement polices to follow: State procurement guidelines Continue to follow Supercirular 2 CFR 200.318 – 2 CFR 200.326. Follow subrecipient’s established policies and procedures.

25. Section 2: Subaward Management Subaward Management Recap: 4 Key Takeaways Determine whether an agreement is a subaward or a contract, using the guidance provided at 2 CFR 200.330. If identified as subaward, include the required award informatin located at 200.331. Conduct a risk assessment for subawards as outlined at 200.331. 4. Monitor subawardsas required by 200.331. Include additional monitoring if there is a higher risk. This may include special terms and conditions on the award.

26. Section 2: Subaward Management Subaward Management Recap: Moving Forward, 5 Considerations: States should develop a written policy for how they manage subgrants. Base this on the requirements at 2 CFR 200.330 and 200.331 and tailor it toward your organization and subgrant process. Incorporate policies on subgrant management and monitoring into your overall internal controls and written policy. Review 2 CFR 200.330 and 2 CFR 200.331. Generally subgrants comprise the largest portion of funding, therefore it is logical to prioritize subgrant management. FY16 PHMSA will increase monitoring for subgrant management in accordance with 200.330 and 200.331. Need help determining if it should be a subgrant or contract? Ask your grant specialist!

27. Section 3:PHMSA HMEP FY15 Risk Assessment Policy

28. Section 3: Risk Assessment §200.205   Requires Federal Agencies to conduct risk assessments! The Federal awarding agency must have in place a framework for evaluating the risks posed by applicants before they receive Federal awards. This evaluation may incorporate results of the evaluation of the applicant's eligibility or the quality of its application. If the Federal awarding agency determines that a Federal award will be made, special conditions that correspond to the degree of risk assessed may be applied to the Federal award.

29. Section 3: Risk Assessment §200.205   Requires Federal Agencies to conduct risk assessments cont… In evaluating risks posed by applicants, the Federal awarding may consider: Financial stability. 2. Quality of management systems. 3. History of performance. 4. Reports and findings from audits performed under Subpart F—Audit Requirements. 5. The applicant's ability to effectively implement statutory, regulatory, or other requirements. ** In addition to this review, PHMSA must comply with the guidelines on government-wide suspension and debarment in 2 CFR part 180, and must require grantees to comply with these provisions. These provisions restrict Federal awards, subawards and contracts with certain parties that are debarred, suspended or otherwise excluded from or ineligible for participation in Federal programs or activities

30. Section 3: Risk Assessment HMEP Risk Assessment Policy PHMSA will conduct risk assessments for all HMEP applicants in FY15. The factors that may be evaluated include: Unobligated balance – high unobligated balance corresponds to a higher risk. Timeliness of reporting – late reporting corresponds to a higher risk score Single Audit findings – PHMSA or systemic grants-related Site-visit findings. Personnel turnover Application review – Does not follow the HMEP application kit, lack of detail in the application, computational errors, missing items, etc. Timeliness of responseto PHMSA inquires.

31. Section 3: Risk Assessment HMEP Risk Assessment Policy - Affect on Payment and Monitoring The risk assessment corresponds to the payment review and level of monitoring. High-risk grantees will be required to submit supporting documentation for reimbursements and will have a higher level of monitoring. This may include an annual desk review and/or site visit until they are moved to medium-risk, as well as periodic phone conferences. Medium-risk grantees will be required to submit SF-270s and will receive a moderate amount of monitoring. Monitoring will likely include desk review or site visit every 1-2 years, with quarterly or semi-annual phone conferences. Low-risk grantees will be required to submit SF-270s. Monitoring will likely include a site visit or desk review every 2-3 years and quarterly or semi-annual phone conferences.

32. Section 3: Risk Assessment HMEP Risk Assessment Policy What does a low-risk grantee look like? Spends nearly all of the funds on allowable HMEP activities. Does not consistently de-obligate a high amount (more than 10%). Timely reporting of FFRs and final reports. Applications continuously provide a high-level of detail as to what activities are proposed. Responsive to PHMSA inquiries. No significant single audit or PHMSA site-visit findings. (no major questioned costs).

33. Section 3: Risk Assessment HMEP Risk Assessment Policy What does a medium-risk grantee look like? Spends most of the funds on allowable HMEP activities. Does not consistently de-obligate a high amount (less than 15%) Generally timely reporting of FFRs and final reports. Applications continuously provide an acceptable level of detail as to what activities are proposed. (Subgrant process is TBD, but some examples provided). Generally responsive to PHMSA inquiries. No significant single audit or PHMSA site-visit findings. (no major questioned costs).

34. Section 3: Risk Assessment HMEP Risk Assessment Policy What does a high-risk grantee look like? Consistently de-obligates over 20% of the HMEP grant funds. Does not submit FFRs and final reports in a timely manner. Applications do not provide adequate detail of activities and timeline. Delayed response to PHMSA inquiries. Significant single audit or PHMSA site-visit findings (material weaknesses, major questioned costs).

35. Section 3: Risk Assessment HMEP Risk Assessment Policy “How will I know what level of risk my agency is?” We will tell you! The risk level will be included on the grant award, in box 14, remarks. Payment instructions will be listed on the Terms and Conditions document to provide guidance as to what level of supporting documentation must be submitted, based upon your risk level.

36. Section 3: Risk Assessment HMEP Risk Assessment Policy “I’m a high-risk grantee? How can I change this?!” Submit a well-written, detailed application that fully describes the activities. Do not de-obligate funds (review Andre’s presentation for tips!) Submit reports on time, and respond to PHMSA requests for information. Do not have major site-visit or single audit findings.

37. Section 3: Risk Assessment HMEP Risk Assessment Policy If new factors come to light, a low, or medium risk grantee may be moved to a higher risk level. PHMSA always reserves the right under Federal regulation to request additional supporting documentation for payments or conduct monitoring activities to ensure funds are being spend within appropriate Federal guidelines.

38. Section 3: Risk Assessment HMEP Risk Assessment Policy Next steps: HMEP risk assessment policy to be finalized internally before September. Grantees should review the NGA to find their risk assessment level, as well as the terms and conditions for payment and monitoring guidance. Email blast to grantees communicating the finalized risk assessment policy. Post-award webinar or phone conference in September.

39. Summary Presentation Recap: Section 1: 49 CFR 18 and the old Federal grants regulations (A-87, A-102, A-133) are replaced by 2 CFR part 200. Review the Supercircular and the COFAR crosswalk and Q and A. Section 2: Review 2 CFR 200.330 and 2 CFR 200.331 in order to manage subgrants according to the new regulations. Follow the guidelines for determining whether an agreement is a contract or subgrant, and if a subgrant, understand the requirements for managing. Section 3: PHMSA is developing a new risk assessment policy for FY15 and beyond. The overall effect will be streamlined reimbursements and a focus on performance over compliance.

40. Questions?