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Hobbs Straus successfully defended a former casino workers’ suit against a Tribe in a Tenth Circuit case finding absence of federal jurisdiction over non-Indian contract and tort disputes arising in Indian country. (2009)

General Memorandum 13-013

General Memorandum 13-013
OMB Notice of Proposed Guidance on Reform of Federal Grant Policies, including Single Audit Act and Cost Principles

On February 1, 2013, the Office of Management and Budget (OMB) published in the FEDERAL REGISTER a Notice of Proposed Guidance (Proposed Guidance) regarding the reform of federal grant policies, including audits and cost principles. This Proposed Guidance is a critical development that will affect tribal programs. The OMB is requesting comments from the public on the attached Proposed Guidance by May 2, 2013.

The OMB states that, when adopted, any new guidance developed from this Proposed Guidance will supersede and replace OMB Circulars A-21; A-87; A-110; A-122; A-50; A-89; A-102; and A-133. The OMB states that the new consolidated circular would apply uniformly across all types of entities (including tribal governments), except where specific variations are noted within the consolidated circular. The full text of the new circular can be accessed at www.regulations.gov, by searching for OMB-2013-0001.

We previously reported in General Memorandum 12-046 (March 23, 2012) on the Advanced Notice of Proposed Guidance that OMB had published, and OMB now states that comments received were considered and the broad themes of that feedback are addressed in the preamble to the Proposed Guidance.

The OMB undertook this effort in response to direction provided in Executive Order 13520 of November 23, 2009, Reducing Improper Payments and the Presidential Memorandum of February 28, 2011, Administrative Flexibility, Lower Costs, and Better Results for State, Local, and Tribal Governments. The OMB explains that the goals of the reforms are to: strengthen federal oversight of federal grant dollars to protect from waste, fraud, and abuse; eliminate unnecessarily burdensome requirements; increase the impact and accessibility of programs; standardize information collections across agencies; better focus the Single Audit to reduce waste, fraud, and abuse; and provide new administrative approaches for determining and monitoring the allocation of funds. 
Section A– Reforms to Administrative Requirements (Circulars A-102, A-110, and A-89)

The OMB now states that the changes proposed in Section A (formerly Section C in the Advance Notice published last year) are meant to apply to grants to Indian tribes. However, in response to tribal comments over the proposal to assess "each proposal's merit and financial risk" prior to making an award (which is not permitted under the Indian Self-Determination and Education Assistance Act or ISDEAA), OMB states that with respect to ISDEAA agreements, where an OMB Guidance is in conflict with the ISDEAA, the ISDEAA governs (see page 7285 of the attached Proposed Guidance).

Section B – Reform to Cost Principles (Circulars A-21, A-87, and A-122,
and Cost Principles for Hospitals)

The OMB proposes to combine Circulars A-21, A-87, and A-122 in a single consolidated document. No longer would tribes and their accountants be able to rely only on Circular A-87. In response to tribal concerns from the Advance Notice last year, OMB states that where conflicts exist with the ISDEAA cost principles, the cost principles of the ISDEAA will govern. The Proposed Guidance still proposes to provide "limited variations" by type of entity in a new, consolidated document.

Additionally, OMB had previously proposed that flat rates be used for indirect costs instead of negotiated rates, and this could have been detrimental for some tribes (but possibly not for others). In the Proposed Guidance, however, OMB notes that commentators were universally against the flat rate proposal. In response, OMB proposes to provide all types of entities the option of extending negotiated rates for indirect costs for up to four years, subject to agency approval. The purpose, OMB states, is to reduce the burdens on entities by allowing for less frequency of negotiations of indirect cost rates (see page 7287 of the attached Proposed Guidance).

Also under Section B allocable administrative support for specific projects would be charged as a direct cost. The OMB indicates this is not intended to result in a net increase in costs. Rather, OMB states that all work that is directly allocable to one award may be charged to that award, regardless of the type of task. OMB is proposing this reform so that direct costs are consistently allocable to one award, while indirect costs are those that cannot be easily allocated.

Section C – Reforms to Audit Requirements (Circulars A-133 and A-50)

Section 5(a)(2) of the Indian Self-Determination and Education Assistance Act requires each tribe receiving funds under that Act to comply with the annual audit required by the Single Audit Act. The Proposed Guidance would not change this requirement, but would raise the threshold from $500,000 to $750,000. As we reported previously, OMB had initially proposed a three-tier approach to audit requirements. In response to the comments OMB received, the Proposed Guidance has a single threshold of $750,000 to trigger Single Audit requirements.

Please let us know if we may provide additional information on the OMB Proposed Guidance on Reform of Federal Grant Policies Relating to Grants and Cooperative Agreements, Cost Principles and Administrative Requirements or assistance in preparing comments.

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Inquiries may be directed to:
Geoff Strommer (gstrommer@hobbsstraus.com)
Jeremy Brave-Heart (jbrave-heart@hobbsstraus.com)
Duke McCloud (dmcloud@hobbsstraus.com)

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