Uniform Guidance Compliance Hinges on Proper Documentation

  • Regulations
  • 6/3/2019
Beard Guy Reviewing Document

Many state and local governments aren’t meeting UG requirements because supporting documents are lacking. Here’s what to consider when maintaining written policies and procurement records.

Updated Uniform Guidance (UG) rules have called for substantial changes to your state or local government’s procurement policies and sub-recipient monitoring activities. The changes have placed particular emphasis on documentation that proves your organization is compliant with UG and federal award requirements. Many entities believe they’re in alignment but are finding that, come audit time, the necessary documentation to support all program activities and transactions actually falls short.

Proper documentation calls for thorough, organization-specific written policies and a record of procurement activities and methods.

Written policies must be unique to your government

Written policies are found deficient when they are copied from the UG or contain cookie-cutter language that doesn’t consider your organization’s particular situation and circumstances. Your policies should explicitly detail your procedures for compliance and include such details as who performs identified functions, what approvals are required and from whom, what the process for obtaining those approvals is, what the timing requirements are, and which specific documents will be utilized. They should be clear and thoroughly detail each process, similar to other accounting and financial procedures, policies, and manuals. A newly hired employee or external reader should be able to read your policies and understand exactly which steps need to be performed to administer the award and ensure federal compliance.

Your state or local government must have written policies covering:

  • Payment and billing
  • Allowable use of funds
  • Individual and organizational conflicts of interest
  • Procurement
  • Proposal evaluations
  • Travel

Payment and billing policies must include language and procedures describing your organization’s process for receiving award payments. They should address advance payments received for federal awards, as well as those received on a reimbursement basis, and align with the compliance requirements of each. For advance payments, describe how your government ensures any payments received are reflective of actual program needs and how time between the receipt and disbursement is minimized. For payments received as reimbursements, policies should detail how amounts are calculated, including any specific reports utilized, what documentation is retained as support, and how you ensure costs were incurred prior to the request being made.

Policies over the allowable use of funds should also detail how you determine and ensure all program costs are allowable under program requirements and are in accordance with Subpart E, Cost Principles, of the UG.

Properly procuring goods and services that are directly charged to a federal program is a major focus of the UG, so it is no surprise that it requires organizations to have specific and robust procurement policies. These policies should include detailed procedures for each type of procurement method allowed under the UG, as well as written standards of conduct which address conflicts of interest related to federal program employees and related organizations.

Your policies should also specifically address how your organization handles travel costs incurred for federal programs, as well as processes to evaluate any technical proposals considered within your federal program procurements. Remember that procurement requirements found in the UG apply to direct costs of federal programs, and the UG contains separate guidance for any indirect costs which are charged to federal programs.

Procurement documentation should emphasize methods

Most program personnel are well aware of the five allowable methods of procurement included in the UG, but many organizations are still falling short of adequately supporting and documenting their federal award procurements and the methods they are utilizing.

When it comes to supporting those methods used, the UG specifically states that entities “must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.”

This means that all procurements must be supported with sufficiently detailed documentation to allow an external observer to determine which method of procurement was used; why it was an appropriate method; what quotes, bids, or proposals were received from which vendors; and why the final vendor was ultimately chosen. This may be as simple as checking a box for a micro-purchase and adding a note with considerations on distributing similar purchases across multiple vendors. For procurements under sealed bids or proposals, there would likely be much more robust documentation in the form of bid solicitations, copies of bids received, notes on the bid review process, final approval of the chosen vendor, written contracts, and more. A checklist or similar tool can be helpful for all types of procurements and can help ensure you have gathered all required documentation.

Your documentation should show an auditor what method of procurement you utilized, why you chose it, or why you chose that vendor. An approved invoice isn’t sufficient to demonstrate that, but for some purchases, appropriate documentation can be fairly straightforward. Purchases of small supplies may be accompanied by an invoice and an attached checklist noting the micro-purchase method was used and this vendor had not yet been utilized that year. Even a supplies purchase of $20,000 may be accompanied by the same invoice and checklist, which may just have the small purchase option checked and include a list of quotes obtained.

Other procurements can be a little trickier. What if your program utilizes special software, and switching to a slightly cheaper option would come with residual training costs? What if your IT department updates your program computers every three years and just sends your federal program the bill? Even these procurements need more support than an approved invoice or contract. Verbally explaining your rationale for being unable to switch vendors for a certain service will not suffice. For specialized services that work in conjunction with other aspects of your program or come with residual costs, vendors and costs should still be addressed on a periodic basis, including considering long-term costs or savings of switching vendors. In the case of software, for example, this may be in the form of annually pulling out the trusty checklist noted above, selecting the small purchase option, and adding notes or summaries about other vendors researched, cost of base service, residual costs, and other relevant factors.

Take caution against leaning too often on the sole-source option in these cases, as a truly sole-source scenario as described in the UG is not as prevalent as you might think. In the software situation, for example, your program personnel will need to work with your IT department to ensure even these procurements comply with UG requirements. An important note to keep in mind here is that brands generally cannot be specified when it comes to describing and searching for the product needed.

The important takeaway is that your organization needs a method of documenting each and every procurement, and an approved invoice or purchase order won’t cut it. One option would be to develop a standard document, such as a checklist, that contains all of the available procurement methods and room to add notes or other support, which is completed and attached to every single procurements made with federal awards. Developing a process that is standard and consistent across all procurements is essential and will help ensure you are fully compliant come audit time.

How we can help

Effective grant compliance relies on an in-depth understanding of federal grant requirements and regulations, proper policies and procedures, and strong internal controls. CLA’s state and local government professionals can help you navigate the regulations, assist with documenting your policies and procedures, and provide insight tailored to your specific grants. We have identified other grant issues that most concern you and developed methods and tools, including a Uniform Guidance implementation checklist, articles, recorded webinars and presentation slides, and a subrecipient risk assessment matrix to help you meet these challenges.

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