Uniform Guidance Required Policies: Is Your Nonprofit Compliant?

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At a glance

• The Uniform Guidance specifically requires certain policies be formalized and written to adhere to compliance regulations.
• Your auditor should be asking for these policies as part of the tests of compliance.
• The policies must cover federal payments/drawdowns, the allowability of costs, procurement, and conflicts of interest, and subrecipient monitoring.

Maintaining written policies regarding certain federal award processes is not just best practice, it is required by the Uniform Guidance according to 2 CFR § 200.302 – Financial Management.

The first required policies in writing are over cash draws and federal payments to implement the requirements of § 200.305 – Federal payment. This section states, “For Non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity…”

According to this section, “The Non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part.”

Reimbursement is the preferred method in specific circumstances:

• When the requirements described above cannot be met.
• When the Federal awarding agency sets a particular condition.
• When the non-federal entity requests payment by reimbursement.

The second required policy is to determine the allowability of costs by subpart E of the Uniform Guidance and terms and conditions of the Federal award. The policy should cover reviewing purchase requests for unallowable items. To be allowable, costs must be:

• Necessary and reasonable for the performance of the federal award.
• Conform to any limitations or exclusions outlined in Subpart E or the federal award.
• Be consistent with policies and procedures that apply uniformly to federal and non-federal activities.
• Be accorded consistent treatment.
• Be determined by GAAP.
• Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in the current or a prior period.
• Be adequately documented.
• Cost must be incurred during the approved budget period.

Procurement is the third required written policy. By 2 CFR § 200.318 General Procurement Standards:

• Avoid the acquisition of unnecessary or duplicative items. Consideration should be given to consolidating or breaking out procurements to obtain a more economical purchase.
• Award contracts only to responsible contractors who can perform successfully under the terms and conditions of a proposed procurement. Consideration should be given to contractor integrity, public policy compliance, past performance records, and financial and technical resources. Vendors are selected based on numerous factors, including reliability, reputation, experience, and price.
• Maintain records sufficient to detail the history of vendor or contract procurement. These procurement memos must include the following:
  • Justification of the need for the work to be done by the contractor/vendor.
  • A table may be created to compare different vendors regarding cost, skills, features, etc.
  • Justification of selection if no bids were solicited – documentation of the contractor/vendor’s specialized skills or knowledge, experience, and recommendations from others, including a resume or bio.
  • Payment rates, with justification.
  • Rationale for the method of procurement.

Procurement policies should ensure the following:

• There are no unreasonable requirements on firms for them to qualify to do business.
• There are no requirements for unnecessary experience or excessive bonding.
• There are no organizational conflicts of interest by the organization’s Conflict of Interest Policy.
• There is no unnecessary specifying of “brand name” only product instead of allowing “an equal” product to be offered and describing the procurement’s performance or other relevant requirements.
• All prequalified lists of persons, firms, or products that are used in acquiring goods and services are current and include enough qualified sources to ensure maximum open and free competition.
• All necessary affirmative steps will be taken to assure that minority businesses and women’s business enterprises are used when possible, including placing qualified small and minority businesses and women’s business enterprises on solicitation lists and assuring that small and minority businesses, and women’s business enterprises are solicited whenever they are potential sources.
• All solicitations for services or supplies must include a clear and accurate description of the technical requirements for procuring material, product, or service. The description may set minimum essential characteristics and standards. Detailed product specifications should be avoided if possible.

Written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award, and administration of contracts in accordance with 2 CFR § 200.318(c)(1) should be included within the procurement policy, as should organizational conflicts of interest with any parent, affiliate, or subsidiary organization.

Finally, while 2 CFR § 200.332 Requirements for pass-through entities do not specifically require written policies over subrecipient monitoring, the AICPA and the OMB’s Compliance Supplement suggest this is best practice.

As a current or hopeful federal award recipient, you need to have these policies formalized in writing. If you would like assistance with writing policies, please contact Aprio, LLP