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HomeMy WebLinkAbout6.g. Policies and Procedures for Federal Awards Administration EXECUTIVE SUMMARY City Council Regular Meeting: September 21, 2021 AGENDA ITEM: Policies and Procedures for Federal Awards Administration AGENDA SECTION: Consent PREPARED BY: Teah Malecha, Finance Director AGENDA NO. 6.g. ATTACHMENTS: Draft Policies and Procedures for Federal Awards Administration APPROVED BY: LJM RECOMMENDED ACTION: Motion to approve the Policies and Procedures for Federal Awards Administration BACKGROUND The City received funding from the CARES Act and an initial portion of the funds that have been allocated to Rosemount under the American Rescue Plan Act (ARPA). The remainder of the funds from the ARPA are anticipated to be received in 2022. There are additional requirements for federal funds received when the expended amount exceeds $750,000 in a single audit. The City must comply with the Office of Management and Budget Uniform Guidance which includes internal controls, necessary documentation and subrecipient monitoring for grant recipients among numerous other items. The required information is included in the attached Policies and Procedures for Federal Awards Administration, and adoption of the proposed Policies and Procedures is necessary. RECOMMENDATION Staff recommends approval of the attached Policies and Procedures for Federal Awards Administration. POLICIES AND PROCEDURES FOR FEDERAL AWARDS ADMINISTRATION SEPTEMBER 21, 2021 FINANCE CITY OF ROSEMOUNT POLICY TITLE: EFFECTIVE DATE: PROPOSED BY: DATE APPROVED BY COUNCIL: SEPTEMBER 21, 2021 2    TABLE OF CONTENTS   OVERVIEW ..................................................................................................................... 3 Purpose........................................................................................................................ 3 Hierarchy of Authority .................................................................................................. 3 Revisions ..................................................................................................................... 3 Compliance Failures .................................................................................................... 3 General Accounting and Financial Management ............................................................. 3 Purchasing and Procurement .......................................................................................... 5 Payroll and Timekeeping ............................................................................................... 10 Grant Administration ...................................................................................................... 12 Grant Development, Application, and Approval ......................................................... 12 Grant Program Implementation .................................................................................. 13 Financial and Budgetary Compliance ........................................................................ 13 Record Keeping ......................................................................................................... 14 Other Guidelines ........................................................................................................ 15 Year-end Closing and Reporting ................................................................................... 15 Additional Federal Awards Compliance Requirements ................................................. 16 General Information ....................................................................................................... 16 Activities Allowed/Un-allowed and Allowable Costs/Cost Principles ............................. 17 Cash Management ........................................................................................................ 18 Eligibility ........................................................................................................................ 18 Equipment and Real Property Management ................................................................. 19 Matching, Level of Effort and Earmarking ..................................................................... 20 Period of Performance .................................................................................................. 21 Procurement, Suspension and Debarment ................................................................... 21 Program Income ............................................................................................................ 22 Sub-recipient Monitoring ............................................................................................... 23 Special Tests and Provisions ........................................................................................ 24   3    OVERVIEW Purpose – This manual has been prepared to document the policies and procedures for the administration of federal awards of the City of Rosemount (“City”). The Office of Management and Budget (OMB) Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance) requires all recipients and sub-recipients of federal funds to establish and maintain internal controls designed to reasonable ensure compliance with Federal laws, regulations and program compliance requirements. Written policies and procedures are part of the necessary internal controls and are required as a precondition to receiving federal funds. These policies and procedures are intended to be sufficiently comprehensive to adequately meet such requirements. However, in no case are these policies and procedures intended to supersede or limit Federal or State laws or regulations, or the provisions of individual grant agreements. Hierarchy of Authority – In the event that conflicting guidance on the administration of federal awards is available, the City has deemed federal guidance to be most authoritative, followed by other state or local agencies. Revisions – Guidance provided by the Federal government through the OMB UG Compliance Supplement are expected to be updated each year. Such updates are considered by the City as they become available and policies and procedures will be revised accordingly. Compliance Failures – Compliances failures, whether noted internally by management or through the external audit process, will be addressed immediately by reviewing the reason for the failure with responsible personnel and devising an improved process to encourage compliance in the future. General Accounting and Financial Management It is the policy of the City to comply with all statutory, regulatory, and contractual requirements in the conduct of, and accounting for, its financial operations. The official books of record for the City will be maintained subject to the following provisions: 1. The City will account for its operations in accordance with the Generally Accepted Accounting Principles (GAAP) applicable to local units of government. 2. The City will comply with the Super Circular issued by the Office of Management and Budget (OMB), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR 200). 4    3. The City will comply with all contractual requirements detailed in its duly executed grant agreements with awarding agencies. 4. The City will contract annually with an independent CPA firm for the purposes of conducting the City’s external financial audit. To the extent that the City has expended federal awards in excess of the applicable single audit limit (currently $750,000), the City will have a single audit performed in accordance with OMB UG. 5. To ensure continuing compliance with all applicable accounting requirements, the City may, at its discretion, contract with a CPA firm to provide internal auditing and/or consulting services. 6. The Finance Director shall be responsible for the maintenance of all accounting and financial records (including journals, timesheets, bank statements, audit reports and similar documents). Such records shall be retained as required by contractual or regulatory requirements. The City has adopted the state’s records retention schedule as its official guide for records storage, filing and destruction. 7. The City and employees are required to comply with the City’s conflict of interest procedures and report any potential conflicts of interest to their managers. No employee, officer or agent may participate in the selection, award or administration of a contract supported by a federal award if he or she has a real or apparent conflict of interest. Such violations may result in appropriate discipline. 8. The City will request prior approval from Federal agencies or pass-through entities for program or budget changes. 9. The City has implemented the new federal purchasing procedures which follow: acquisitions for micro-purchases (below $25,000 or below $2,000 for construction subject to the Davis Bacon Act) may be awarded without soliciting bids if the City considers the price to be reasonable. Procurements for small purchases (less than $175,000 - Minn. Stat. § 471.345), in which case quotations must be obtained from an adequate number of sources. Procurements made by sealed bid should be made to the lowest responsible (not necessarily the lowest bidder). Procurements made by competitive proposal must have standards to evaluate the selected recipient. Procurement made by non-competitive proposals (to one vendor) may be used only if one of the following applies a) the item is available 5    from a single source, b) an emergency exists c) the Federal agency expressly authorizes non-competitive proposals, or d) competition is seen as inadequate after solicitation to several vendors. 10. Other procurement procedures include: contractors who develop or draft specifications for bids are precluded from bidding on them. The City must maintain oversight so that contractors perform work as bid. Multiple provisions must be included in contracts (see Appendix II of grant procurement guidelines of super circular procedures). The City must verify to http://www.sam.gov/ if contract is $25,000 or more to review if on the suspended and debarred list for federal grants. 11. Procedures for inventory of federal capital purchases will be maintained by the Finance Department, with the help of the Engineer, and all items will be tracked annually. See Equipment and Real Property Management for further procedures. 12. The Finance Director (or designee) or the City Administrator are required to certify expenditures. Purchasing and Procurement It is the policy of the City to ensure that all disbursements of City funds are properly reviewed and authorized, and consistent with sound financial management principles, and made in compliance with all applicable federal, state and local laws. In order to meet these objectives, all disbursements of City funds shall be subject to the following provisions, to the extent that they do not conflict with or contradict with any specific federal, state or local law or council policies (the most specific or restrictive law, policy or procedure will be followed): 1. Substantial state and federal requirements exist pertaining to standards of conduct and conflict of interest. It is the intent of the City for all employees, officers or agents to conduct all activities associated with procurements in compliance with the highest ethical standards, including the avoidance of any real or perceived conflict of interest. It is also the intent of the City to impose appropriate sanctions or disciplinary actions, including but not limited to termination and/or prosecution, for any employees or officers who violate any of these requirements. 2. The City avoids the acquisition of unnecessary or duplicative items. Additionally, the City considers consolidating or breaking out procurements to obtain a more 6    economical purchase. And, where appropriate, the City makes an analysis of leases versus purchase alternatives, and other appropriate analyses to determine the most economical approach. 3. To foster greater economy and efficiency, the City enters into state and local intergovernmental agreements where appropriate for procurement or use of common or shared goods and services. This includes cooperative purchasing agreements where practical and beneficial. Depending on the purchase requested, the City may purchase it from a cooperative or inter-local agreement if the price is competitive and the goods or service are needed in a timely manner. The Finance Director and the City Administrator will make this determination. 4. The City awards contracts only to responsible contractors possessing the ability to perform successfully under the terms and conditions of a proposed procurement. The City considers such matters as contractor integrity and business ethics, compliance with public policy, ability to complete the project on time and in accordance with specifications, record of past performance, and the contractor’s financial and technical resources. 5. The City will award a contract to a contractor who has the appropriate experience, expertise, qualifications and any required certifications, necessary to perform the work. Contractors should also have the financial resources to sustain the project while the initial work is being completed and during each service period until he or she submits invoices for payment to the City as work is completed. Contractors should have the proper equipment or the capability to subcontract for the proper equipment necessary to complete the contracted work. 6. Debarment and Suspension: The City will not subcontract with or award subgrants to any person or company who is debarred or suspended from receiving federal funds. The Finance Director, or designee thereof, is required to check for excluded parties at the System for Award Management (SAM) website before any procurement transaction paid with federal funds. This list is located at: http://www.sam.gov/. 7. All procurement transactions paid with federal funds are conducted in a manner providing full and open competition. In an environment of full and open competition, no proposer or bidder has a competitive advantage over another. All potential proposers and bidders must be provided the same information and have the same opportunity to submit a bid or proposal. Providing a competitive advantage to one or more potential proposers or bidders over another can open 7    the potential for disputes and lawsuits that can be costly and can significantly delay the completion of projects. In accordance with 2 CFR 200.322, preference is given for goods, products and materials produced in the United States. 8. In order to ensure objective contractor performance and eliminate unfair competitive advantage, contractors that develop or draft specifications, requirements, statements of work, or invitations for bids or requests for proposals (RFPs) are excluded from competing for such procurements. The City does not engage in the following situations that may restrict full and open competition, including but not limited to: a. Placing unreasonable requirements on firms for them to qualify to do business. b. Requiring unnecessary experience and excessive bonding. c. Noncompetitive pricing practices between firms or between affiliated companies. d. Noncompetitive contracts to consultants that are on retainer contracts. e. Organizational conflicts of interest. f. Specifying only a “brand name” product instead of allowing “an equal” product to be offered and describing the performance or other relevant requirements of the procurement. g. Any arbitrary action in the procurement process. h. The City conducts federal procurements in a manner that prohibits the use of statutorily or administratively imposed state or local geographical preferences in the evaluation of bids or proposals, except in those cases where applicable Federal statutes expressly mandate or encourage geographic preference. 9. All solicitations will incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. Such description will not, in competitive procurements, contain features which unduly restrict competition. The description will include a statement of the qualitative nature of the material, product or service to be procured and, when necessary, will set forth those minimum essential characteristics and standards to which it must conform if it is to satisfy its intended use. Detailed product specifications will be avoided if possible. 10. The City will make independent estimates of the goods or services being procured before receiving bids or proposals to get an estimate of how much the goods and services are valued in the current market. To accomplish this, after bids and proposals are received, but before awarding a contract, the City 8    conducts either a price analysis or a cost analysis, depending on the type of contract, in connection with every procurement with federal funds in excess of $175,000. 11. The City takes all necessary affirmative steps to assure that minority businesses and women’s business enterprises, and labor surplus area firms are used when possible. To accomplish this, the City uses the following required affirmative steps: a. Placing qualified small and minority businesses and women’s business enterprises on solicitation lists. b. Assuring that small and minority business, and women’s business enterprises are solicited whenever they are potential sources. c. Dividing total requirements, when economically feasible, into smaller tasks or quantities to permit maximum participation by small and minority businesses, and women’s business enterprises. d. Establishing delivery schedules, where the requirement permits, which encourage participation by small and minority businesses, and women’s business enterprises. e. Using the services and assistance, as appropriate, of such organizations as the Small Business Administration and the Minority Business Development Agency of the Department of Commerce. f. Requiring the prime contractor, if subcontracts are to be let, to take the affirmative steps listed above. 12. Federal methods provide for procurement by micro-purchase. Micro-purchase is a purchase of supplies or services using simplified acquisition procedures, the aggregate amount of which does not exceed $25,000. The micro-purchase method is used in order to expedite the completion of its lowest-dollar small purchase transactions and minimize the associated administrative burden and cost. 13. Small purchase procedures may be used in those relatively simple and informal procurement methods for securing nonprofessional services, supplies, or other property that do not cost more than $175,000. 14. Sealed bids ($175,000, formal advertising, price is a major factor). Requirements for sealed bids: a. The invitation for bids will be publicly advertised and bids must be selected 9    from an adequate number of known suppliers, providing them sufficient response time prior to the date set for opening the bids. b. The invitation for bids, which will include any specifications and pertinent attachments, must define the items or services for the bidder to properly respond. c. All bids will be publicly opened at the time and place prescribed in the invitation for bid. d. A firm fixed price contract award will be made in writing to the lowest responsive and responsible bidder. e. Any or all bids may be rejected if there is a sound documented reason. f. Competitive proposal (> $175,000, fixed price or cost reimbursement, request for proposal (RFP) with evaluation methods). Requirement for competitive proposal procedures: g. Requests for proposals must be publicized requests and identify all evaluation factors and their relative importance. h. Proposals must be solicited from an adequate number of qualified sources. i. The organization must have a written method for conducting technical evaluations of the proposals received and for selecting recipients. j. Contracts must be awarded to the responsible firm whose proposal is most advantageous to the program. k. The organization may only use qualification-based methods, whereby competitors' qualifications are evaluated, and the most qualified competitor is selected, in the procurement of architectural/engineering professional services. 15. Procurement by noncompetitive proposals is procurement through solicitation of a proposal from only one source and may be used when using federal funds only when one or more of the following circumstances apply: a. The item is available only from a single source. This must be documented. b. The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation. c. Any Federal awarding agency expressly authorizes noncompetitive proposals in response to a written request from the City. d. After solicitation of several sources, competition is determined inadequate. 16. Time and materials type contract means a contract whose cost to the City is the sum of: the actual costs of materials, and direct labor hours charged at fixed hourly rates that reflect wages, general and administrative expenses and profit. 10    a. The City may use a time and materials type contract paid with federal funds in accordance with the above only (1) after a determination that no other contract is suitable; and (2) if the contract includes a ceiling price that the contractor exceeds at its own risk. 17. The City ensures that all prequalified lists of persons, firms, or products which are used in acquiring goods and services are current and include enough qualified sources to ensure maximum open and free competition. The City accomplishes this by conducting internet searches, including using vendor searches and by using other less technologically-advanced tools to locate and identify potential contractors. Federal guidelines are followed regarding the number of bids required. 18. The City requires that construction or facility improvement contracts, or subcontracts exceeding $175,000, include a bid guarantee equivalent to 5% of the bid price from each bidder (such as bid bond or certified check), a performance bond on the part of the contractor for 100 percent of the contract price, and a payment bond on the part of the contractor for 100 percent of the contract price. Note: The City’s purchasing policy does not apply to procurement by contractors or subcontractors on projects, federally supported or otherwise. Payroll and Timekeeping   The following provisions apply to the payment of employees and recording of time and effort (as required) in accordance with OMB UG: 1. The payroll records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated including: a. The total number of hours worked each day. b. The use of any holiday, personal, vacation, sick or other approved time off with pay. c. The total number of hours to be paid. d. The allocation of those hours to each program or department for which work was performed, when necessary. e. The dated signature or electronic signature of the employee and 11    supervisor for each payroll period. 2. Be incorporated into the City’s official records. 3. Reasonably reflect the total activity for which the employee is compensated. 4. Encompass federally-assisted and all other compensated activities by the City on an integrated basis but may use subsidiary records. 5. Support the distribution of the employee’s salary or wages among specific activities if the employee works in more than one area. 6. Budget estimates are not an allowable form of allocation, but may be used in the interim if: a. The system for establishing estimates provides reasonable approximations. b. Significant work changes are entered into the system in a timely manner. c. The City’s internal controls include review of after-the-fact interim charges. 7. Salaried employees charged to a federal grant will document time and effort as outlined in paragraph 1 above. The time must also be supported by records indicating the total number of hours worked each day. It is the responsibility of the employee being charged to a federal award(s) to clarify documentation requirements with the City Administrator or Finance Director and provide appropriate documentation to the Payroll Specialist as it becomes available. The employee should retain a copy of the documentation for his/her personal records. If an after-the-fact correction is necessary to an employee’s timesheet due to errors in the allocation of time worked, such corrections must be submitted to the Finance Director and approved in writing by both the employee and his/her supervisor. Certifications should never be signed prior to the end date of the payroll period being certified. Each certification should be provided to the Finance Department when available. Employees should retain a copy of the certifications for his/her personal records. 12    Grant Administration The following policies and procedures will also be applied, to the extent that they do not conflict with or contradict any existing Council policies: Grant Development, Application, and Approval 1. Legislative Approval – The point at which legislative approval is required is determined by the requirements of the grant program. If the grant must be submitted by “an individual authorized by the legislative body”, then City Council approval is required prior to submitting the application. If such legislative approval is not specifically required by the written terms of the grant, then the City Administrator or designee may, at his or her discretion, approve grant applications. 2. Matching Funds – Grants that require cash local matches must be coordinated through the Finance Department. At a minimum, funds must be identified within the existing budget to provide the match, or a budget amendment will be required. Depending on the nature of the grant, there may also be some policy implications that will bear discussion. For example, will the grant establish a level of service that cannot be sustained once the grant funds are depleted. In all cases involving matching funds, the grant applicant should contact the Finance Department to determine the strategy for securing matching funds. Refer to the section within this manual titled “Matching, Level of Effort and Earmarking” for additional information on compliance with the provisions of the OMB UG Compliance Supplement. 3. Grant Budgets – Most grants require the submission of an expenditure budget. The Finance Director will review this portion of the grant request prior to submission. Frequently, a technical review will discover inconsistencies in the calculations, cost centers that might have been overlooked, or identify reimbursable expenses of which program staff may not be aware—particularly in the area of indirect costs. 13    Grant Program Implementation 1. Notification and Acceptance of an Award – Official notification of a grant award is typically sent by a funding agency to the program director and/or other official designated in the original grant proposal. However, the authorization to spend grant funds is derived from the City Council through the approval of a grant budget. Such notification should also be directed to the Finance Department. 2. Establishment of Accounts – The department that obtained the grant will provide the Finance Director with information needed to establish revenue and expense accounts for the project, as well as a project code for tracking purposes. Ordinarily, this information will include a copy of a summary of the project and detail of the full project budget. 3. Purchasing Guidelines – All other City purchasing guidelines apply to the expenditure of grant funds. The use of grant funds does not exempt any purchase from normal purchasing requirements. All typical paperwork and bidding requirements as well as normal staff approvals apply. When in doubt, the program director should contact the Finance Director for further assistance. Financial and Budgetary Compliance 1. Monitoring Grant Funds – Departments may use some internal mechanism (such as a spreadsheet) to monitor grant revenues, expenditures and budgetary compliance, at the grant level. The Finance Director maintains all this information in financial software system as well; this is considered to be the City’s “official” accounting system by the granting agencies. Program Directors are strongly encouraged to use financial software reports provided by the Finance Department for their grant tracking. If any “off-system” accounting records are maintained, it is the responsibility of the Program Director to ensure that the program’s internal records agree to the City’s accounting system. 2. Fiscal Years – Occasionally, the fiscal year for the granting agency will not coincide with the City’s fiscal year. This may require adjustments to the City’s internal budget accounts and interim financial reports as well as special handling during fiscal year-end close. It is the responsibility of the Program Director to bring such discrepancies to the attention of the Finance Department at the time the grant accounts are established. 14    3. Grant Budgets –The terms of each specific grant will dictate whether any budget transfers between budgeted line items will be permitted. In no case will the Program Director be authorized to exceed the total budget authority provided by the grant. If grant funds have not been totally expended by fiscal year-end, it is the responsibility of the Program Director to notify the Finance Director that budget funds need to be carried forward to the new fiscal year, and to confirm the amounts of such carry- forwards. Carry-forwards of grant funds will be subjected to maximum allowable amounts/percentages based on the grant award agreement and/or the OMB UG Compliance Supplement. Capital Assets – The City is responsible for maintaining an inventory of assets purchased with grant funds. The City is accountable for them and must make them physically available for inspection during any audit. The City Council must approve of any sale of these assets. Customarily, the proceeds of the sale can only be used on the grant program that purchased them. (Refer to the specific regulations governing the original grant). The Finance Director will coordinate this grant requirement. All transactions that involve the acquisition or disposal of grant funded capital assets must be immediately brought to the attention of the Finance Director. Refer to the City’s capital assets procedures and the section of this manual titled Equipment and Real Property Management for additional information. Record Keeping 1. Audit Work-papers – The City’s external auditors audit all grants at the end of each fiscal year. The Finance Director will prepare the required audit work papers. Program Directors may be asked to assist in this process, if necessary. 2. Record Keeping Requirements – Grant record keeping requirements may vary substantially from one granting agency to another. Consequently, a clear understanding of these grant requirements at the beginning of the grant process is vital. The Finance Department will maintain copies of all grant draw requests and approved grant agreements (including budgets). The Program Director should maintain all other records. 15    Other Guidelines   Specific information on policies and procedures related to compliance with the provisions of the OMB UG Compliance Supplement have been addressed later in this manual and should be considered along with the information in this section. Year-end Closing and Reporting The following provisions will govern the year-end close-out process of the City for purposes of external financial reporting: 1. To the extent that the City is required to have a single audit completed in accordance with OMB UG, the City will accumulate the information necessary to prepare a Schedule of Expenditures of Federal Awards (“SEFA”) in accordance with federal and state requirements. This schedule will be characterized as follows: a. The schedule will include all federal financial assistance, including: grants, contracts, property, loans, loan guarantees, interest subsidies, cooperative agreements, insurance or direct appropriations. Amounts will be reported whether received directly from the Federal government or through a pass- through entity (in the event that the City is determined to be a sub- recipient and not a vendor). b. The schedule will be prepared on the same basis of accounting as the related financial statements. c. Federal awards will be grouped based on Federal awarding agency. Each federal award with current expenditures will be listed along with its Assistance Listing Number, pass-through grantor name (if applicable) and award/pass-through grantor number (if applicable). Such information will agree to the award documentation. d. If the Assistance Listing Number of a federal award cannot be reasonably determined, it shall be reported in the schedule using the two-digit prefix for the related Federal agency, followed by “UNKNOWN”. e. To the extent that amounts are passed-through to sub-recipients, a schedule of federal awards provided to sub-recipients will be prepared. f. In addition to current year expenditures, the schedule will list approved award/grant amount, accrued/deferred revenue at the beginning of the year, current year cash received, current year actual expenditures, and accrued/deferred revenue at the end of the year. If expenditures were incurred relative to this award in the prior year(s), this amount should be 16    disclosed as memorandum-only. g. Any adjustments to prior year awards, expenditures, and balances (including transfers between grants) will be disclosed in the footnotes to the schedule. h. Accrued/deferred revenue in the schedule shall agree to the amounts recorded as receivable/deferrals in the related financial statements. i. To the extent that a separate line item is included in the financial statements for federal revenue, this amount shall agree to expenditures in the schedule. Any reconciling items will be disclosed in the footnotes to the schedule. Additional Federal Awards Compliance Requirements   A number of the federal awards received by the City are passed-through the State of Minnesota. Management will consider both the OMB UG Compliance Supplement and any applicable compliance requirements as set forth by the State of Minnesota. General Information   Source of Information – Each year the Federal government (Office of Management and Budget) issues a comprehensive document on the compliance requirements each grant recipient is obligated to follow in general terms, along with program-specific guidance on various grant awards. There are 12 compliance requirements identified, each of which is considered individually in this manual. The following pages document the policies and procedures of the City related to compliance with such procedures, as applicable. In each year that the City is subject to a single audit, applicable compliance requirements are expected to be tested in detail by the City’s independent auditors. Objectives – The objectives of most compliance requirements are generic in nature. While the criteria for each program may vary, the main objective of the compliance requirement is relatively consistent across all programs. As such, the policies and procedures of the City have been based on the generic sense of the compliance requirement. For selected compliance requirements, this manual addresses the specific regulations applicable to individual grants. This is not intended to imply that a program is not subject to such policies if it is not specifically mentioned here. It is the intention of the City that all federal awards are subject to the following policies and procedures. Controls over Compliance – In addition to creating policies and procedures over compliance with provisions of federal awards, the City has implemented internal 17    controls over such compliance, generally in the form of administrative oversight and/or independent review and approval. In order to document these control activities, all independent reviews must be signed/initialed and dated. Documentation – The City will maintain adequate documentation to support both the compliance with applicable requirements as well as internal controls over such compliance. This documentation will be provided to the City’s independent auditors and/or pass-through grantor agencies, as requested, during the single audit and program audits. Activities Allowed/Un-allowed and Allowable Costs/Cost Principles Source of Governing Requirements – The requirements for activities allowed or un- allowed are contained in program legislation, Federal awarding agency regulations, and the terms and conditions of the award. The requirements for allowable costs/cost principles are contained in 2 CFR 200 Subpart E, program legislation, Federal awarding agency regulations, and the terms and conditions or the award. In order to ensure compliance with these requirements, the City has implemented the following policies and procedures: 1. All grant expenditures will follow 2 CFR 200 Subpart E, State law, city policy, and the provisions of the grant award agreement, which will also be considered in determining allowability. Grant funds will only be used for expenditures that are considered reasonable and necessary for the administration of the program. 2. Grant expenditures will be approved by department heads/program managers initially through the purchasing process and again when the bill or invoice is received. This will be evidenced by approval via the City’s accounting software. Accounts payable disbursements will not be processed for payment by the Finance Department until necessary approval has been obtained. 3. Payroll costs will be documented in accordance with 2 CFR 200 Subpart E as described in the section of this manual titled Payroll and Timekeeping. An indirect cost rate will only be charged to the grant to the extent that it was specifically approved through the grant budget/agreement. When allowable, indirect costs will be charged based on the Cost Allocation Plan of the City. 18    Cash Management Source of Governing Requirements – The requirements for cash management are contained in OMB UG 2 CFR 200.302 & 305, program legislation, Federal awarding agency regulations, and the terms and conditions or the award. In order to ensure compliance with these requirements, the City has implemented the following policies and procedures: 1. Substantially all the City’s grants are awarded on a reimbursement basis. As such, program costs will be expended and disbursed prior to requesting reimbursement from the grantor agency. 2. Cash draws will be initiated by the Finance Director or City Administrator who will determine the appropriate draw amount. Documentation of how this amount was determined will be retained and signed/dated. 3. The physical draw of cash will be processed through SWIFT (Minnesota’s State- wide Integrated Financial Tools payment system) or through the means prescribed in the grant agreement. 4. Supporting documentation from SWIFT or a copy of the cash draw paperwork will be filed along with the approved paperwork described above and retained for audit purposes. 5. When cash is received in advance or drawn, the City will work to minimize time lapse between transfer of funds and disbursement by the City. Eligibility Source of Governing Requirements – The requirements for eligibility are contained in program legislation, Federal awarding agency regulations, and the terms and conditions of the award. 1. Federal grants will only benefit those individuals and/or groups of participants that are deemed to be eligible. 19    Equipment and Real Property Management Source of Governing Requirements – The requirements for equipment are contained in OMB UG 2 CFR 200.310-316, program legislation, Federal awarding agency regulations, and the terms and conditions of the award. The following policies and procedures will also be applied, to the extent that they do not conflict with or contradict any existing Council policies: 1. All equipment will be used in the program for which it was acquired or, when appropriate and allowable, other federal programs. 2. When required, purchases of equipment will be pre-approved by the grantor or pass-through agency. The Finance Director, or designee will be responsible for ensuring that equipment purchases have been previously approved, if required, and will retain evidence of this approval. 3. Equipment records will be maintained, and an appropriate system shall be used to safeguard equipment. Equipment should be assigned to a program and physical location on the inventory. If such equipment is moved, it will be noted and adjusted in the City’s capital assets records. 4. When equipment is no longer needed for a federal program, it may be retained or sold with the Federal agency having a right to a proportionate amount of the current fair market value. Proper sales procedures shall be used that provide for competition to the extent practicable and result in the highest possible return. Procedures for Disposition of Equipment: 1. The City will keep, sell or otherwise dispose of the equipment with no further obligation unless disposal requirements are specifically detailed in the grant. 2. A record of the date, reason and method of disposal or sale will be maintained with the equipment inventory. Equipment purchased will be identified and kept in a capital asset listing. An equipment listing shall be maintained that includes the following: a. Asset number and description of the equipment b. Location of the equipment 20    c. Depreciation method & years of expected life d. Acquisition date e. Cost of the equipment f. Equipment classification (land, building, equipment, etc.) g. Make, Model, & Serial number or other identification number h. Vendor and invoice number to purchase equipment i. Disposition data including date and sale price of the equipment A physical inventory of the property will be conducted periodically, and the results will be reconciled with the capital asset listing. A control system will be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage or theft will be investigated. Maintenance procedures are in place to keep the equipment in good condition. Matching, Level of Effort and Earmarking Source of Governing Requirements – The requirements for matching are contained in OMB UG 2 CFR 200.306, program legislation, Federal awarding agency regulations, and the terms and conditions of the award. The requirements for level of effort and earmarking are contained in program legislation, Federal awarding agency regulations, and the terms and conditions of the award. The City defines “matching”, “level of effort”, and “earmarking” consistent with the definitions of the OMB UG Compliance Supplement: Matching or cost sharing includes requirements to provide contributions (usually non- federal) or a specified amount or percentage of match federal awards. Matching may be in the form of allowable costs incurred or in-kind contributions (including third-party in- kind contributions). Level of effort includes requirements for (a) a specified level of service to be provided from period to period, (b) a specified level of expenditures from non-federal or federal sources for specified activities to be maintained from period to period, and (c) federal funds to supplement and not supplant non-federal funding of services. Earmarking includes requirements that specify the minimum and/or maximum amount of percentage of the program’s funding that must/may be used for specified activities, including funds provided to sub-recipients. Earmarking may also be specified in relation to the types of participants covered. 21    In order to ensure compliance with these requirements, the City has implemented the following policies and procedures: 1. Compliance with matching, level of effort and earmarking requirements will be the responsibility of the Finance Director. 2. Adequate documentation will be maintained to support compliance with matching, level of effort, and earmarking requirements. Such information will be made available to city administration, auditors, and pass-through or grantor agencies, as requested. 3. Maintenance of effort for grants through the State Minnesota will be determined at the State level. Period of Performance Source of Governing Requirements – The requirements for period of performance of federal funds are contained in OMB UG 2 CFR 200.308-309 & 344, program legislation, Federal awarding agency regulations, and the terms and conditions of the award. In order to ensure compliance with these requirements, the City has implemented the following policies and procedures: 1. Costs will be charged to an award only if the obligation was incurred during the funding period (unless pre-approved by the Federal awarding agency or pass- through grantor agency). 2. All obligations will be liquidated not later than 120 days after the end of the funding period (or as specified by program legislation). 3. Compliance with period of performance requirements will initially be assigned to the individual approving the allowability of the expense/payment. This will be subject to review and approval by the Finance Department as part of the payment processing. Procurement, Suspension and Debarment Source of Governing Requirements – The requirements for procurement are contained in OMB UG and 2 CFR 180, program legislation, Federal awarding agency regulations 22    and the terms and conditions of the award. The requirements for suspension and debarment are contained in OMB UG and 2 CFR 180, which implements Executive Orders 12549 and 12689, Debarment and Suspension; program legislation; Federal awarding agency regulations; and the terms and conditions of the award. In order to ensure compliance with these requirements, the City has implemented the following policies and procedures: 1. Purchasing and procurement related to federal grants will be subject to the general policies and procedures of the City (described in the section of this manual titled Purchasing and Procurement). 2. Contract files will document the significant history of the procurement, including the rationale for the method of procurement, selection of the contract type, contractor selection or rejection and the basis of contract price. 3. The Finance Director will be responsible for determining whether the City is entering into a transaction that may be subject to suspension or debarment procedures and executing appropriate oversight and control activities at that time. The Finance Director, or designee thereof, is required to check for excluded parties at the System for Award Management (SAM) website: http://www.sam.gov/. Program Income Source of Governing Requirements – The requirements for program income are found in OMB UG 2 CFR 200.307, program legislation, Federal awarding agency regulations, and the terms and conditions of the award. In order to ensure compliance with these requirements, the City has implemented the following policies and procedures: 1. Program income will include (but will not be limited to): income from fees for services performed, the use or rental of real or personal property acquired with grant funds, the sale of commodities or items fabricated under a grant agreement, and payments of principal and interest on loans made with grant funds. It will not include interest on grant funds unless otherwise provided in the Federal awarding agency regulations or terms and conditions of the award. 2. The City will allow program income to be used in one of three methods: 23    a. Deducted from outlays b. Added to the project budget c. Used to meet matching requirements In the absence of specific guidance in the Federal awarding agency regulations or the terms and conditions of the award, program income shall be deducted from program outlays. 3. Program income, when applicable, will be accounted for as a revenue source in the same project code as the federal grant. Sub-recipient Monitoring The City will ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and, if any of these data elements change, include the changes in subsequent subaward modification. Required information includes: 1. Federal Award Identification. a. Subrecipient name (which must match the name associated with its unique entity identifier); b. Subrecipient's unique entity identifier; c. Federal Award Identification Number (FAIN); d. Federal Award Date (see §200.39 Federal award date) to the recipient by the Federal agency; e. Subaward Period of Performance Start and End Date; f. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; g. Total Amount of Federal Funds Obligated to the subrecipient by the pass- through entity including the current obligation; h. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; i. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); j. Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; k. Assistance Listing Number and Name; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listing Number at time of disbursement; l. Identification of whether the award is R&D; and 24    m. Indirect cost rate for the Federal award (including if the de minimis rate is charged per §200.414 Indirect (F&A) costs). The City will perform a written risk assessment of each subrecipient, evaluating their risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in 2 CFR 200.332. The City will monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. The City will verify that every subrecipient is audited as required by OMB UG 2 CFR 200 Subpart F when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold. Special Tests and Provisions In order to ensure compliance with these requirements, the City has implemented the following policies and procedures: 1. The Finance Director will be assigned the responsibility for identifying financial- related compliance requirements for special tests and provisions, determining approved methods for compliance, and retaining any necessary documentation. Program-related compliance requirements will be the responsibility of the department administering the grant.