OFFICE
OF MANAGEMENT AND BUDGET
Circular
A-110, "Uniform Administrative Requirements for Grants and Agreements
with Institutions of Higher Education, Hospitals and Other Non-Profit
Organizations"
AGENCY:
Office of Management and Budget
ACTION:
Notice
SUMMARY:
This notice explains the conclusions reached by OMB and the Grants
Management Committee of the Chief Financial Officers (CFO) Council regarding
their previous request for comments on the desirability of requiring Federal
grant-making agencies to offer their grantees the option to request cash
advances on a pooled basis, and on the merits of pooled payment systems
and grant-by-grant payment systems. They have decided not to propose an
amendment to OMB Circular A-110, "Uniform Administrative Requirements
for Grants and Agreements with Institutions of Higher Education, Hospitals,
and Other Non-Profit Organizations," which would include such a requirement.
The rationale for this determination is explained below.
FURTHER
INFORMATION CONTACT: Gilbert Tran, Technical Manager, Office of Management
and Budget, at (202) 395-3052.
SUPPLEMENTARY
INFORMATION
I. Purpose
This notice
explains the conclusions reached by OMB and the Grants Management Committee
of the CFO Council regarding our previous request for comments on the
desirability of requiring Federal grant-making agencies to offer their
grantees the option to request cash advances on a pooled basis (i.e.,
when cash advances are requested from a pool rather than on a grant-by-grant
basis), and on the merits of the two systems. The rationale for the decision
not to propose an amendment to OMB Circular A-110, "Uniform Administrative
Requirements for Grants and Agreements with Institutions of Higher Education,
Hospitals, and Other Non-Profit Organizations," that would include
such a requirement, is explained below.
It is also
intended that this notice explain the differing perspectives and clarify
when pooling is applicable, in order to maintain a policy which can work
for all.
II. Background
On May 1,
2000, 65 FR 25396, OMB published an Advance Notice of Proposed Revision
(ANPR) in which comments were sought on several questions relating to
Federal requirements for requesting and issuing cash payments under Federal
awards. The core issue was whether OMB should amend A-110 to require Federal
awarding agencies to make the pooling method of requesting and issuing
cash payments under awards available to their award recipients.
III. Grant-By-Grant
Payment Systems
With the
grant-by-grant payment method, a recipient identifies estimated costs
for each award and requests cash advances on that basis. Some of these
agencies approve the requests on a grant-by-grant basis, pool the individual
amounts, and issue payments in the aggregate.
Some Federal
agencies systems currently require grant-by-grant requests, and several
indicated that their grant-by-grant payment systems are more streamlined
than the pooled systems. One agency said it had eliminated the need for
the SF -272 (Report of Federal Cash Transactions) and SF-269 (Financial
Status Report) by accepting grant-by-grant cash requests as reports of
cash usage and recording them as expenditures.
Agencies
that use this method believe it generates better data and strengthens
their recipient monitoring programs. With grant-by-grant systems, it was
reported that agencies have more timely information on payments and can
provide more immediate technical assistance to a recipient experiencing
problems with a particular grant. It was also reported that pooled payment
reports often arrive too late for agencies to help recipients take corrective
actions on specific grants.
IV. The
Pooled Payment System
Under a pooled
payment process, the recipient estimates the aggregate amount of cash
that it will need for all of its awards from the awarding agency and requests
a cash advance in that amount. The awarding agency uses a methodology
it has developed to estimate how the recipient will distribute the cash
advances among its various awards; it then assigns the estimated amounts
to awards in its internal accounts. When recipients report actual expenditures,
the agency adjusts the allocation to the actual reported expenditures.
Recipients report expenditures for each grant via financial reports such
as the SF-269 or SF-272. Since these estimates are adjusted to actual
when the recipients submit their reports, accurate and timely reporting
is essential.
Since many
recipients, particularly those with a high volume of grant awards, are
unable to determine actual cash needs on a grant-by-grant basis at the
time of draw without expending considerable time and effort, requiring
this determination up-front may cause recipients to draw larger amounts
of cash, less frequently. Some agencies believe that a transition from
grant-by-grant to pooled payments must be accompanied by monthly reporting
of actual expenditures, in an electronic format, rather than the paper-based
quarterly reporting that is currently required by some agencies using
pooled payment systems.
V. Summary
of Comments Received
Altogether,
65 comments were received: 33 from universities, 14 from State and local
agencies, 14 from Federal agencies, and four from other sources. The following
text explains the conclusions reached after considering these comments.
Comments
were requested on whether Circular A-110 should be amended to require
that Federal grant-making agencies make the pooling option available to
their grantees, and on questions relating to the merits of pooled payments
and grant-by-grant payment systems.
The 33 comments
received from universities unanimously supported making the pooling option
available to recipients. The 14 Federal commenters were divided, as indicated
in Sections III and IV, above, with some agencies preferring grant-by-grant
payments and other agencies supportive of a pooled payment process. Of
the 14 State and local agencies commenting, only eight has comments on
this question, with five opposed to the idea of requiring Federal awarding
agencies to make the pooling method available and one that expressed concern
about being forced to pool. Their opposition must be viewed as theoretical,
however, because Circular A-110 does not apply to State and local governments.
[The audience for Circular A-110 consists of universities, hospitals,
and other not-for-profit organizations.]
The universities'
strong support for the pooling method stems from the ways in which their
administrative needs differ from those of State and local governments.
Major research universities typically have large grant portfolios that
may include hundreds, or even thousands, of discretionary grants. Indeed,
one university responding to the ANPR submitted an itemized list of its
Federal awarding agencies and the number of active awards from each; the
commenter had 1,260 awards from nine Federal agencies, with the number
of awards per agency ranging from ten to 400. Many of the awards received
by such universities may be for relatively small dollar amounts; awards
to the aforementioned commenter from one Federal agency averaged $2,500.
The universities find the pooling method of requesting advances responsive
to the difficulty of gauging their cash needs for each of their Federal
awards at the specific point in time that they need to make a cash draw.
To illustrate,
an organization representing the higher education community commented
that "[our] membership firmly believes that a pooled payment system
as described in the subject notice would be a significant step toward
streamlining the payment procedures for recipients of federal assistance.
We know that streamlining is a priority for the government and concur
with the findings of the CFO Council that the pooling method as currently
practiced at NSF and DHHS provides a more efficient and customer-friendly
method of drawing cash for grant purposes."
Conversely,
universities find it much more labor-intensive and administratively burdensome
to generate actual, grant-by-grant data. The aforementioned commenter
added that "drawing cash on a grant-by-grant basis is time consuming
and adds no value to the process. [Our] member universities report that
much more effort is required for grant-by-grant drawdowns than is necessitated
by pooled draws...This practice is not conducive to good management of
federal funds and results in poor management of university resources.
Using the grant-by-grant drawdown process in effect converts an advance
payment system into a reimbursement system. The cost and burden of estimating,
executing and adjusting for grant-by-grant drawdowns is excessive."
VI. Conclusion
Given the
differing perspectives on this issue and the division between the 14 Federal
commenters, revising Circular A-110 does not appear to be the most effective
approach. In order to maintain a policy that can work for all, OMB and
the CFO Council believe that the grant-by-grant option is not encouraged;
however, this method is permitted when a Federal agency and its Circular
A-110 grant recipient agree that grant-by-grant requests for cash advances
are preferable to pooled requests. We are committed to encouraging the
pooling method for the Circular A-110 community, yet permitting the grant-by-grant
method when both the Federal agency and the grant recipient prefer that
method, or when the awarding agency determines that conditions require
it.
OMB will,
therefore, leave Circular A-110 unchanged. The existing Circular A-110
text does not require Federal awarding agencies to make the pooled payment
method available to their recipients, but it does authorize them to do
so. Section 22(c) provides that, "Whenever possible, advances shall
be consolidated to cover anticipated cash needs for all awards made by
the Federal awarding agency to the recipient." Since the awarding
agency must determine when conditions merit making pooled payments to
a recipient, the existing text takes a permissive, rather than a mandatory,
approach to the issue.
Mark W.
Everson
Controller
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