Legal and financial information for the Community Action network
SPRING 2013
OMB Proposes Consolidation of Circulars By Anita Lichtblau, Esq., CAPLAW The federal Office of Management and Budget (OMB) has proposed an overhaul of its circulars applicable to federal grantees and subgrantees. The proposal, released in February, would combine all of the circulars into one, create more uniformity among the rules applicable to different types of grantees, clarify and add some rules, and make some substantive changes to existing rules. These new rules would not go into effect until both OMB and the relevant federal funding agency adopts the rule as a final regulation, which is likely to occur no earlier than 2014. Many of the proposed changes are favorable for Community Action Agencies (CAAs), a few not so much, and others could be improved with further clarification. CAPLAW will submit comments on the proposal, which are due June 2, and encourages both individual comments to OMB from CAAs and others, as well as suggestions for its comments to OMB. The proposal, as well as related materials, can be found at the White House website. Continued on page 7
Inside This Issue :
Ensuring Equal Access to CAA Programs By Melanie Toner and Allison Ma’luf, Esq., CAPLAW
Consider the following scenarios:1 Scenario 1: Amanda, the mother of a Head Start child, is deaf and wants to attend a presentation offered for parents of Head Start children.
Scenario 2: Will, who uses a wheelchair, wants to make copies of his resume. A copy machine is available for clients, and it is the Community Action Agency’s (CAA’s)
Continued on page 10
OMB Circulars Proposal ● Equal Access to CAA Programs ● Health Care Reform: Pay or Play Q&A ● Health Care Sidebar: Is Your CAA a Large Employer? ● DAB Decision
CAPLAW Board Winston A. Ross, President Westchester Community Opportunity Program David Brightbill, Vice President Washington-Morgan Community Action Gale F. Hennessy, Treasurer Southern New Hampshire Services Jerralynn Ness, Secretary Community Action Serving Washington County Douglas D. Rauthe, Director Community Action Partnership of Northwest Montana Patricia Steiger, Director Management Consultant Catherine Caputo Hoskins, Director Salt Lake Community Action Program Leonard Dawson, Director Emeritus David Bradley, CAPLAW Coordinator National Community Action Foundation
CAPLAW Staff
Registration Closes May 31st for the 2013 CAPLAW National Training Conference in Boston from June 19 - 21! This year’s conference will once again feature an expert faculty of attorneys, accountants, government officials and nonprofit managers who will be ready to answer your questions and give you the tools you need to resolve the legal, financial and management challenges you encounter every day. Rooms Filling Up Fast at the Sheraton Boston Hotel! Make your reservation at the Sheraton Boston Hotel at the discounted CAPLAW rate of $219 a night (plus tax) by May 24th. The Sheraton is located just four miles from Boston Logan International Airport. Enjoy indoor access to shopping and restaurants at The Shops at Prudential Center and Copley Place or one of our Boston Back Bay restaurants. Stroll just a few blocks to Copley Square, the Charles River or the Boston Common. Book your room today!
Anita Lichtblau, Esq. Executive Director and General Counsel Eleanor A. Evans, Esq. Deputy Director and Senior Counsel R. Allison Ma’luf, Esq. Associate General Counsel Michael Shepsis, Esq. Staff Attorney Stephanie Knechtle Communications Coordinator Ashley Billingsley Administrative Coordinator/Executive Assistant This report contains general information and is not intended to constitute legal advice. © 2013 Community Action Program Legal Services, Inc.
About CAPLAW CAPLAW is a nonprofit membership organization dedicated to providing the legal and financial resources necessary to sustain and strengthen the national Community Action Agency (CAA) network. For nearly 50 years CAAs have been fighting poverty, helping individuals become self-sufficient, building communities, and changing lives. Nationwide, approximately 1,000 CAAs leverage almost $10 billion in total funding, and provide a multitude of services, including job training, Head Start, economic development, energy assistance, and housing. Through its in-house legal and financial staff and a network of private attorneys and financial consultants, CAPLAW provides legal and financial consultations, training, and publications on a wide variety of legal and management topics. This assistance enables CAAs to operate legally and fiscally sound organizations and to promote the effective participation of low-income people in the planning and delivery of CAA programs and services, thereby enhancing CAAs’ ability to provide the nation’s poor with opportunities to improve their quality of life and to achieve their full potential. For membership information visit www.caplaw.org or call (617) 357-6915.
2 | CAPLAW Update Newsletter, Spring 2013
choose from three methods of calculating hours of service for its non-hourly (i.e. salaried) employees and may apply different methods to different classifications of non-hourly employees as long as those classifications are reasonable and consistently applied.3
2. How will an employer know whether it is a “large employer”?
Health Care Reform “Pay or Play” Q&A By Eleanor Evans, Esq., CAPLAW The federal health care reform law’s so-called “pay or play” rules for employers take effect January 1, 2014. These rules require “large employers” – those with an average of 50 or more full-time and full-time equivalent employees – to offer full-time employees and their dependents health insurance coverage that meets certain standards. If a large employer does not do so and one or more of its employees receives subsidized health insurance coverage through a state health care exchange, the employer will need to pay the federal government a fee. Despite the uncertainty that surrounds implementation of this key aspect of the health care reform law, employers should be planning now for how they will comply starting in 2014. This Q&A is intended to help employers in the Community Services Block Grant network better understand how the “pay or play” rules affect them and what actions will need to be taken to ensure compliance. Ultimately, each employer should consult with a qualified professional to determine the best way for it to comply with the “pay or play” mandate.
“Large Employer” Determination 1. What is a “large employer”?
In general, a “large employer” is one that employed an average of 50 or more full-time employees (including full-time equivalents, or FTEs) on business days during the previous calendar year. For this purpose, a full-time employee is an employee who averages at least 30 hours of service per week or 130 hours of service per calendar month.1 An hour of service is defined as each hour for which an employee is paid or entitled to payment either for performing duties for his or her employer or for vacation, holiday, illness, incapacity (including disability), layoff, jury duty, military leave or leave of absence.2 For hourly employees, an employer must calculate actual hours of service from records of hours worked and hours for which payment is made or due. An employer may
Many organizations will know that they have at least 50 full-time employees without needing to do any calculations. For example, a Community Action Agency (CAA) with 200 employees who average at least 35 hours per week would not need to perform a calculation to determine whether it is a large employer. Organizations with around 50 employees will need to perform a calculation to determine whether they will be subject to the pay or play rules.4 For information on how to perform this calculation, see the sidebar “Determining Whether Your Organization Is a ‘Large Employer’” on page 4.
“Play” Mandate 3. What does it mean to “play”?
Starting January 1, 2014, large employers must offer all of their full-time employees and their dependents5 the opportunity to participate in a health insurance plan that qualifies as “minimum essential coverage,” provides “minimum value,” and is “affordable.”
4. What is “minimum essential coverage”?
For this purpose, the term “minimum essential coverage” means coverage under a fully insured or self-insured employer-sponsored group health plan other than certain limited scope coverage, such as stand-alone dental or vision coverage or a flexible spending account.6
5. What is the “minimum value” requirement?
A plan provides “minimum value” if it pays for at least 60 percent of the actuarially determined cost of services provided under the plan.7 There are three ways for a large employer to determine whether a plan meets this requirement: (1) using an online calculator developed by the federal government; (2) comparing the plan’s covered services with those in a series of checklists of design-based safe harbors; or (3) for plans with nonstandard design features, hiring an actuary to determine and certify that the plan provides minimum value.8 The U.S. Department of Health and Human Services estimates that the overwhelming majority of employer-sponsored plans currently meet the minimum value requirement.9
6. What is “affordable” coverage?
A large employer is considered to offer “affordable” coverage if an employee’s required premium contribution for the lowest-cost employee-only coverage offered by the employer equals no more than Continued on page 12
CAPLAW Update Newsletter, Spring 2013 | 3
health care sidebar
In General:
To determine whether an organization is a large employer, add the number of full-time employees for each calendar month in the previous year to the number of full-time equivalent employees (FTEs) for each such month, then add the monthly totals together and divide by 12. If the result is not a whole number, round to the next lowest whole number. If the result is less than 50, the organization will not be a large employer for the next calendar year. If the result is 50 or more, the organization will be a large employer.1
Calculating FTEs:
To calculate the number of FTEs for each calendar month for the previous calendar year, add the total number of hours of service for each month for all employees who are not full-time employees; for any one employee, do not count hours worked over 120 for the month. Then, divide by 120. Take fractions into account.2
calculating ftes example:
XYZ CAA receives CSBG and Head Start funding. XYZ CAA has 60 employees in calendar year 2013. Of these employees:
• 20 work full-time all year; • 25 work full-time in the CAA’s Head Start program for 10 months of the year, do not work in July or August and are not entitled to paid leave for that time;
• 10 work part-time (an average of 80 hours of service per month) in the Head Start program
for 10 months, do not work in July or August, and are not entitled to paid leave during those months; and • 5 work an average of 125 hours per month in the CAA’s CSBG program all year. To determine whether it will be a large employer for 2014, XYZ first calculates the number of FTEs for each calendar month of 2013. XYZ CAA does not count any hours of service in July or August for the part-time Head Start employees who do not work in those months and are not entitled to paid leave during that time. For each of the five employees who work an average of 125 hours per month, XYZ CAA only counts 120 hours of service per employee per month and disregards the additional 5 hours per employee per month. This chart illustrates the FTE calculation: FTE Calculation for XYZ CAA for 2013 10 EEs who work 80 hours/month for 10 months 5 EEs who work 125/hours month all year (don’t
Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
800
800
800
800
800
800
---
---
800
800
800
800
600
600
600
600
600
600
600
600
600
600
600
600
600
600
1,400 1,400 1,400 1,400
5
5
11.67 11.67 11.67 11.67
count hours over 120)
Total hours of 1,400 1,400 1,400 1,400 1,400 1,400 service/month Divided by 120 = 11.67 11.67 11.67 11.67 11.67 11.67 # of FTEs/month
4 | CAPLAW Update Newsletter, Spring 2013
calculating ftes example continued:
Next, XYZ CAA adds the number of full-time employees for each calendar month in 2013 to the number of FTEs for that month, then adds the totals for all 12 months together and divides by 12 to determine whether it will be a large employer, and thus subject to the “play or pay” rules for 2014. Determination of Large Employer Status for XYZ CAA for 2014 (based on # of EEs from 2013) Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
20 EEsfull-time all year
20
20
20
20
20
20
20
20
20
20
20
20
25 EEs full-time 10 months
25
25
25
25
25
25
---
---
25
25
25
25
5
5
11.67 11.67 11.67 11.67
25
25
56.67 56.67 56.67 56.67
FTEs 11.67 11.67 11.67 11.67 11.67 11.67 Total # of EEs 56.67 56.67 56.67 56.67 56.67 56.67 per month
Total # of EEs = 616.7 The total number of employees, 616.7, is then divided by 12. The result is 51.39 which is rounded down to the next lowest whole number, 51. Since 51 is more than 50, XYZ CAA is a large employer subject to the “pay or play” mandate for 2014.
Transition Rule for 2014:
Because employers who may be subject to the pay or play rules will need time to prepare for compliance, there is a special rule for purposes of determining whether an organization will be a large employer for 2014. Instead of basing its calculation on the full 2013 calendar year, an employer may choose a period of at least six consecutive months in 2013 on which to base its calculation.3
Transition Rule example:
To determine whether it will be a large employer in 2014, XYZ CAA decides to use the six-month period March – August 2013 to perform its calculation. Using this method, XYZ CAA will not be a large employer for 2014. Determination of Large Employer Status for XYZ CAA for 2014 (based on # of EEs from Mar. – Aug. 2013) Mar
Apr
May
June
July
Aug
20 EEs full-time all year
20
20
20
20
20
20
25 EEs full-time 10 months
25
25
25
25
---
---
5
5
25
25
FTEs 11.67 11.67 11.67 11.67 Total # of EEs 56.67 56.67 56.67 56.67 per month
Seasonal Employee Exception:
Total # of EEs = 276.8 The total number of employees, 276.8, is divided by 6. The result equals 46.11 which, when rounded down to the next lowest whole number, 46, is less than 50. This lower number is due to the closure of XYZ CAA’s Head Start program during two months of the six-month period chosen by XYZ CAA to perform its calculation.
There is an exception for employers that exceed the 50-employee threshold due to seasonal workers. An employer will not be considered to be a large employer for a particular calendar year if, in the previous calendar year: (1) its workforce exceeded 50 full-time employees and FTEs for a period of no more than 120 days or four calendar months (which need not be consecutive); and (2) the employees in excess of 50 were seasonal workers. An employer may apply a reasonable, good-faith definition of the term “seasonal worker.”4 One example of seasonal workers might be participants in a summer youth employment program. (See endnotes on page 18) CAPLAW Update Newsletter, Spring 2013 | 5
DAB DECISION
• $11,340 for prepaid rent for nine months beyond the end of the FY 2009 budget year;
• $5,544 for prepayment on a van lease for the months of January 2010 through October 2010; and
• Prepayment for health insurance for the period from July
2009 to June 2010, $6,057 of which was allocable to the period beyond September 30, 2009.
Disallowance for Costs Extending Beyond Budget Period Upheld By Melanie Toner and Allison Ma’luf, Esq., CAPLAW S.A.G.E. Communications Services, DAB No. 2481 (2012) Determining when costs may be properly charged to an award can be tricky, especially when the funding received is for a long-term project. In this Department of Health and Human Services (HHS) Department of Appeals Board (DAB) decision, the DAB upheld the disallowance of $22,941 for rent, van lease and health insurance payments charged to a nonprofit’s federal grant that was awarded annually to fund a five-year project. The DAB found that the nonprofit erroneously charged costs resulting from obligations occurring after the budget period for one of the annual awards had ended.
Background S.A.G.E. Communication Services, Inc. (S.A.G.E.), a nonprofit organization located in Macon, Georgia, received from the Administration for Children and Families (ACF) a grant to fund a five-year project, the Community-Based Abstinence Education (CBAE) program. The project period ran from September 2006 through September 2011 and, after the first year of funding, ACF granted S.A.G.E. noncompeting annual awards for the subsequent years. Each award specified the budget period and the approved budget for that period. The budget year at issue was fiscal year (FY) 2009, September 30, 2008 through September 29, 2009. In January 2011 an independent auditor reviewed S.A.G.E.’s financial statements for FYs 2009 and 2010 and issued an OMB Circular A-133 single audit report on S.A.G.E.’s compliance with applicable federal program requirements. The auditor found that S.A.G.E. was reimbursed for the following non-compliant costs charged to the FY 2009 budget:
The auditor determined that these costs did not result from obligations incurred during FY 2009 and the costs were not pre-award costs authorized by ACF in its agreement with S.A.G.E. As a result, ACF issued a determination notifying S.A.G.E. that it was disallowing the $22,941 identified in the auditor’s report. S.A.G.E. appealed ACF’s determination to the DAB.
Overview of Applicable Laws The award notice for the CBAE grant stated that nonprofit grant recipients must comply with the uniform administrative requirements codified at 45 C.F.R. Part 74. Pursuant to these requirements, recipients must also comply with the applicable federal cost principles (OMB Circular A-122 codified at 2 C.F.R. Part 230), which specify which costs may be charged to federal grants, and the Single Audit Act Amendments of 1996, as well as OMB Circular A-133, which requires that grantees expending over $500,000 in a year in federal awards must have a single, comprehensive audit of their programs for that year.1 Generally, pursuant to the federal cost principles for costs to be charged to a federal grant, they must be reasonable for the performance of the award and allocable to that award.2 A cost is allocable to an award in accordance with the benefits received by that award.3 The federal cost principles also prohibit the shifting of costs to other federal awards to either overcome funding deficiencies or to avoid restrictions imposed by law or by award terms.4 Furthermore, costs must be adequately documented.5 The uniform administrative requirements instruct recipients to charge to an award “only allowable costs resulting from obligations incurred during the funding period and any authorized pre-award costs.”6 A grant recipient must also have in place a financial management system with records that adequately identify the source and application of federal funds, including accounting records supported by source documentation.7
Analysis of DAB’s Decision to Deny S.A.G.E.’s Appeal On appeal, S.A.G.E. offered various arguments challenging ACF’s disallowance. S.A.G.E. contended that the $22,941 was for “current obligations” or “continuing expenses.” S.A.G.E. stated further that its lease, in particular, was not only a current obligation but a continuing one “not severable based upon a funding/budget period or the recipient’s fiscal year.” S.A.G.E. further claimed that nothing in the federal Continued on page 16
6 | CAPLAW Update Newsletter, Spring 2013
OMB Circulars
(continued from cover) Here is a summary of some of the significant changes most relevant to CAAs. OMB specifically seeks comments from nonprofits on procurement and allocation of compensation costs. Please note that due to the length of the proposal, this article does not cover every proposed change; readers should review the proposal at the link above to review all provisions.
Consolidation of Circulars Currently, separate circulars with different rules apply to different types of grantees - nonprofits, institutions of higher education, and state and local governments - for both the cost principles and the administrative grant requirements.1 The proposed “super circular” creates just one set of rules for all types of federal grantees, except for some sections applicable to only one type of grantee. This would simplify grant administration for federal agencies and pass-through entities, which often fund multiple types of entities, including those state CSBG offices that fund both public and nonprofit CAAs. However, because the proposed uniform rules differ from the current rules, CAAs should review them carefully to determine how they differ and whether some of the original rules should be kept, either for all grantees or just for one type of grantee. In addition, when the final revised rules are implemented, which are likely to differ from the proposed rules, CAAs will need to review them again in order to understand how they may need to change their policies and practices. The super circular would also combine the different types of circulars applicable to grantees, i.e. the administrative grant requirements, the cost principles, and the audit rules, into one document. This should likewise simplify grant administration for both the funding entities and the grantees and subgrantees by making it easier to find all of the rules in one place, minimizing inconsistencies, and clarifying how the rules relate to each other.
The super circular would also combine the different types of circulars applicable to grantees, i.e. the administrative grant requirements, the cost principles, and the audit rules, into one document.
Grant Administrative Requirements This section of the proposal is based on OMB Circular A-110, codified at 2 CFR Part 215, except as noted below.
Subrecipient Monitoring and Management (.501) This
new section was created to co-locate guidance on oversight of subawards that previously was located in different places in different OMB Circulars, including Circulars A-110 and A-133. It would explicitly require pass-through entities (which include both states and other entities, such as CAAs, that award subgrants of federal funds) to make case-by-case determinations as to whether the entity receiving the federal
funds is a subrecipient or procurement contractor. This section also specifies provisions that must be included in subawards, including an indirect cost rate (see Section .616 discussion below).
Equipment Disposition (.503(d)) The proposed
revisions would streamline the process for disposition of equipment and supplies. The disposition options are modified somewhat from the current version of Circular A-110, but remain similar in substance. However, unlike in the current A-110 rule, grantees would have more leeway to choose among the options without prior instructions from the federal agency, although the agency may provide instructions under some circumstances. This should speed up the process for equipment disposition at the end of the grant. In addition, the proposal now explicitly states that equipment less than $5,000 in value may be retained once it is no longer needed for the project, with no further obligation to the federal government.
Electronic records (.506(b)) Grantees would be permitted to retain grant records in electronic, rather than paper, form without requiring approval from the funding source, as is currently required. This is a good proposal that reflects the current trends in record retention.
Procurement (.504) The proposal uses the language from
Circular A-102 (also referred to as “the Common Rule”), which applies only to state and local governments. OMB has specifically requested comments from nonprofits on how the change from the A-110 language to the A-102 language would impact them. In general, although the proposal follows the same principles, these requirements are clearer and provide more specificity than the current language in A-110. CAPLAW would welcome comments from nonprofit CAAs on whether they favor the change or not and why. The proposed provisions include:
• Encouraging grantees to enter into state and local
intergovernmental agreements where appropriate for procurement or use of common goods and services.
• Requiring grantees to maintain records of the history
of procurement, including the rationale for method of procurement, selection of contract type, contractor selection or rejection, and basis for contract price.
• Requiring grantees to have protest procedures to handle disputes and to report disputes to the federal agency
Continued on page 8
CAPLAW Update Newsletter, Spring 2013 | 7
OMB Circulars
(continued from page 7) (this is a new requirement that may not make sense in the nonprofit context, particularly when there is a passthrough entity involved and the amount is small. If it is used, a significant dollar threshold should be added).
• Replacing the requirement that all procurement
transactions provide, “to the maximum extent practical, open and free competition” with the requirement that they provide “full and open competition consistent with the standards of this section.”
• Providing examples of noncompetitive practices,
including noncompetitive pricing practices between firms or between affiliated companies and organizational conflicts of interest
• Raising the small purchase threshold to $150,000 and
specifying methods to be used below that threshold (price or rate quotes from adequate number of qualified sources). Although paragraph (f) in this section states that “cost or price analysis” is only required above the small purchase threshold (unlike the current rules, which require a cost or price analysis for all procurement transactions), another section states that “cost or price analysis” is required for all procurement methods. This inconsistency needs to be rectified.
• Detailing criteria and procedures for sealed bids,
competitive proposals, and sole source procurements.
Grant Closeouts (.508) Federal agencies would be
required to close out grants within 180 days after receipt of the grantee’s final report. This is a good thing for grantees. But what is also needed is a time limit on cost disallowances or requests for reimbursements by the government funding agency. These should be limited to the record retention period, which is three years from the final report, unless extended by a prior audit or investigation. It is unfair to ask a grantee to defend itself against a cost disallowance or request for reimbursement when it no longer has, or is required to retain, the necessary documentation. Unfortunately, just such a situation sometimes occurs.
Cost Principles This section of the proposal is based on Circular A-87, codified at 2 CFR Part 225, applicable to state and local government grantees.
Indirect Costs Acceptance of federal indirect cost rates (.616 (c)(1) and .501(c)) One very welcome proposed
change is that that all federal agencies and passthrough entities would be required to accept a grantee’s federally approved indirect cost rate, unless, in the case of a federal agency, the agency head approves nonacceptance of the rate based on 8 | CAPLAW Update Newsletter, Spring 2013
a documented justification OMB proposes to that is reported to OMB. The permit grantees more federal agencies would be flexibility in justifying required to implement and and documenting make publicly available the compenstation costs. policies, procedures, and general decision making criteria that their programs would follow to seek and justify deviations from the negotiated rates. If a grantee did not have a federally approved indirect cost rate, a pass-through entity would be required to either negotiate a rate in compliance with federal guidelines or use the flat 10% of direct cost rate, described below. The current refusal of some federal agencies, and more state pass-through entities, to accept the rate has been a frequent impediment to CAAs seeking reimbursement for indirect costs.
Flat rate alternative and extension of negotiated rate (616) Under the proposal, a grantee that has never received a federally negotiated indirect cost rate could use a flat rate of 10% of modified total direct costs for an initial period of up to four years. In addition, grantees with a current negotiated rate could apply for a one-time extension of that rate for up to four years. These options could save time for CAAs with federally negotiated indirect rates by decreasing the frequency of negotiations and encourage CAAs without such rates to use the simplified flat rate.
Direct shared costs (.607(d)) One area that has
caused confusion and sometimes resulted in monitoring findings is the ability of, and acceptable process for, grantees to allocate shared costs, either as an alternative to an indirect cost rate or as a supplement to an indirect cost rate for costs that are not part of the indirect cost pool. The proposal may clarify that to some extent by stating, as part of the direct cost allocation principles, that “if a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then … the costs may be allocated or transferred to benefitted projects on any reasonable documented basis.”
Selected Items of Costs (.621) More flexibility in employee compensation allocation (C-10) Compliance with current
requirements for documentation and methodology for allocating compensation costs among funding sources, including “Personnel Activity Reports” (PARs), has been burdensome and confusing for many grantees and is inconsistently applied among different funding sources. OMB proposes to permit grantees more flexibility in justifying and documenting such costs. It would no longer require Personnel Activity Reports per se, but instead permit annual or semi-annual certifications of after-the-fact allocation of time or other reasonable methods of allocating compensation. In addition, no documentation outside the payroll distribution system would be required for salaries of employees who work in a single indirect cost activity. Such costs could
be aggregated in a residual activity, such as finance department, and subsequently distributed by any reasonable method “mutually agreed to.” Although more options, including keeping the present PARs, would be welcome, the requirement for “mutual agreement” is problematic. To require each funding source, particularly when the issue of employees funded from multiple funding streams is the heart of this provision, to agree on a methodology, creates a significant burden. CAPLAW recommends that CAAs and their advisors review this section particularly carefully to determine if further revisions or clarification are necessary and communicate with CAPLAW on any such issues.
Communications Costs Communication costs, such as telephone services, were removed as a category. It is unclear why they were removed, but should be reinserted into the cost principles section.
Contingency provisions (C-12) Grantees could
include contingency amounts (e.g. for information technology systems, large construction projects) in their budget if they are foreseeable costs, but are difficult to determine precisely ahead of time. However, payments to a general contingency reserve would still be unallowable.
Inclusion of fringe benefit value for in-kind match (C-13) Currently, in valuing volunteer services for
purposes of match, grantees are permitted to include the fair market value of both the salary and the fringe benefits. The proposal explicitly excludes the value of fringe benefits associated with the time of employees donated by an organization. However, for other volunteers, the proposal just references “regular rates paid for similar work.” It should be clarified that that for individual volunteers, fringe benefits could continue to be included.
Use allowances (C-15) A use allowance for facilities
and equipment would no longer be an allowable cost; depreciation would continue to be an allowable cost. Some CAAs have expressed concern about this change. Comments and examples of the impact should be submitted to CAPLAW and/or OMB. The proposal contains new language that would allow fundraising costs for the purposes of extending the federal program objectives with prior approval from the federal funing agency.
Fundraising and investment management costs (C-20) The
proposal contains new language that would allow fundraising costs for the purposes of extending the federal program objectives with prior approval from the federal funding agency. It would also allow costs of investment counsel and staff and similar expenses for investments covering pension, self-insurance, or other funds which include federal participation allowed by the OMB super circular.
Computers (C-31) Costs of computing devices would
now be specifically mentioned as an allowable materials and supplies cost if the per unit cost is less than $5,000.
Travel for board members (C-53) Travel costs for
board members, currently allowable, would be allowable only with prior approval of the funding agency. This could create a significant administrative burden for CAAs and limit the ability to provide needed training to board members.
Interest (C-27) A lease/purchase analysis would no
longer be required to charge interest for a mortgage loan to a grant. Also, interest on financing for intellectual property purchase, including software, would be allowable.
Lobbying prohibition expanded (C-28) The general
ban on nonprofits lobbying with federal funds would now extend, for all grantees, beyond influencing state and federal legislation and the awarding of federal grants (the current language in OMB A-122) to supporting the enactment, repeal, modification, or adoption of any law, regulation or policy and policies by any government, without a specific determination by the federal awarding agency that such use is explicitly authorized by statute. This is a new prohibition, at least in the OMB circular, for state and local grantees. In addition, a provision found in the cost principle circular for state and local government grantees but not in the other circulars, which expressly prohibits the use of federal grant funds for the cost of membership in organizations substantially engaged in lobbying, would be added. Although the expansion of the prohibition is not favorable, it is consistent with an amendment to a federal statute several years ago, as well as recent federal appropriations laws.
Proposal costs (C-39) This provision is not now
included in OMB Circular A-110, although a similar provision is included the HHS administrative grant regulations for nonprofits (45 CFR 74.27). Proposal costs would now be specifically allowed as an indirect cost (as is currently permitted in the HHS regulations), but would need prior approval if charged as a direct cost. Although in general this change is welcome due to the ongoing lack of clarity in A-122 as to whether these costs are allowable, prior approval should not be needed for either direct or indirect charging.
Audits (.700 - .721) There are a number of proposed changes to what is now called the OMB A-133 circular that should be reviewed carefully by auditors. For CAAs’ purposes, the major proposed changes are: (1) an increase in the threshold for single audits, i.e. compliance or A-133 audits, from $500,000 in federal grant fund expenditures to $750,000; (2) an increase in the threshold for major program designation from $300,000 to $500,000; and (3) an increase in the threshold for reporting questioned costs from $10,000 to $25,000. (See endnotes on page 17) CAPLAW Update Newsletter, Spring 2013 | 9
Ensuring Equal Access (continued from cover)
policy for the clients, not the staff, to make the copies. However, the controls for the copier are located on top and at the back of the machine – too high and too deep for Will to reach or to read from his wheelchair.
Scenario 3: Sandra can see images and words of
a certain size and within a certain distance but is considered legally blind. She wants to sign up for a job training program offered by a CAA. The sign-up procedure for a program involves clients filling out an application and submitting it at the CAA’s front desk. The application form for this particular program consists of a single sheet of paper that asks for an individual’s name, address, and phone number, as well as a brief summary of his/her work history. Sandra is not able to fill out the paperwork. Additionally, the CAA does not have any equipment and materials that would enable Sandra to participate in the training. An organization that the CAA has previously partnered with on various community projects not only offers the same job training program as the CAA but also caters to the needs of individuals like Sandra who have trouble seeing. The only difference between the CAA’s program and the other organization’s program is that the CAA gives its participants a small stipend to help them with the costs associated with participation and the other organization does not. Is a CAA required to accommodate these individuals? If so, what reasonable accommodations is the CAA required to make? This article is intended to help CAAs better understand their responsibility under Section 504 of the Federal Rehabilitation Act of 1974 (Section 504) to accommodate clients with disabilities and ways in which they can fulfill these responsibilities.
Legal Overview
This article focuses on the Section 504 requirements that address making services and programs offered by CAA’s accessible. It does not address either the Section 504 requirements regarding structural changes to facilities to ensure accessibility or the additional protections for clients with disabilities provided by the Americans with Disabilities Act (ADA).7 Section 504 requires CAAs to provide qualified individuals with disabilities:
• The opportunity to participate in or benefit from the aid or services offered;
• The same aid or services offered to others unless it is
necessary to offer different or separate aid or services to ensure that such are as effective as those provided to others;
• The opportunity to participate as a member of a planning or advisory board;
• The equivalent enjoyment of any right, privilege,
advantage, or opportunity as experienced by others receiving the aid or services; or
• The opportunity to participate in programs or activities
Section 504 is incorporated by reference in the Community Service Block Grant Act (CSBG)2 and applies to any program or activity receiving federal financial assistance. 3 It generally require CAAs to ensure that people with disabilities enjoy the same opportunity as others to receive benefits and participate in programs offered by the CAA. Regulations issued by the federal Department of Health and Human Services (HHS) further explain how HHS grant recipients, including CAAs, must ensure compliance with Section 504.4 Section 504 protects “qualified handicapped persons,” who are individuals with mental and/or physical impairments that substantially limit one or more major life activities ...
meets the essential eligibility requirements for receiving benefits and/or services.5 For example, CSBG programs serve individuals and families who are income eligible. A person with a disability who wants to participate in a CSBG program must meet the income eligibility requirements to be considered a “qualified handicapped person” for purposes of receiving protection under Section 504. Another example involves a person who is blind who wants to participate in a driver’s education training offered by a CAA. Even if the individual possess all of the qualifications for the training, the fact that s/he lacks sight and is not eligible to drive under any current circumstances means that s/he is not a “qualified handicapped person” protected by the Act.6
Section 504 protects “qualified handicapped persons,” who are individuals with mental and/ or physical impairments that substantially limit one or more major life activities, such as caring for one ’s self, walking, seeing, hearing, speaking, breathing, working, performing manual tasks and learning. An individual with a disability is “qualified” if s/he
10 | CAPLAW Update Newsletter, Spring 2013
that are not separate or different, despite the existence of permissibly separate or different programs or activities.8
Furthermore, a CAA may not enter into any contract or arrangement with another organization or use any site or location that either subjects people with disabilities to discrimination on the basis of a disability or defeats or substantially impairs accomplishing program objectives with respect to people with disabilities.9 The regulations further clarify that for an aid or service to be equally effective does not mean that it produces identical results or level of achievement for people with and without disabilities. Rather, it means giving people with disabilities equal opportunity to obtain the same result, to gain the same benefit, or to reach the same level of achievement, in the most integrated setting appropriate to their needs.10 CAAs must ensure that qualified individuals with disabilities have meaningful access to services and benefits offered
and, to achieve this end, a CAA may have to make reasonable accommodations to its programs or benefits.11 While a CAA is not required to make “fundamental” or “substantial” modifications that jeopardize the integrity of programs and benefits offered, it may be required to make “reasonable” ones.12 An example of when it is reasonable for a CAA to accommodate a qualified individual with a disability is, if a CAA requires clients to complete registration forms, an individual with a learning disability, such as dyslexia, may reasonably ask for an accommodation in filling out the forms such as receiving assistance from staff. While a CAA is not required to make “fundamental” or “substantial” modifications that jeopardize the integrity of programs and benefits offered, it may be required to make “reasonable” ones.
Approach to a 504 Accessibility Request When responding to Section 504 requests like the ones in the scenarios at the beginning of this article, it is important for CAAs to develop an approach that contemplates the different factors under Section 504. The following questions may help guide a CAA’s approach to an individual’s request for an accommodation to make services and programs accessible: 1. Is the individual with a disability “qualified”, i.e., does s/he meet the basic eligibility requirements for the program? 2. Does the qualified individual with a disability have meaningful access to services and benefits offered by your CAA? a. Does your CAA provide the qualified individual with a disability with an opportunity to participate in or benefit from programs or services offered? b. Does your CAA offer the qualified individual with a disability the same programs or services offered to others? i. Is it necessary to offer different or separate programs or services to ensure that such are as effective as those provided to others? ii. If permissibly separate or different programs exist, does the qualified individual with a disability have the opportunity to participate in programs or activities that are not separate or different? c. Does your CAA ensure that qualified individuals with a disability are able to experience the same enjoyment of any right, privilege, advantage, or opportunity experienced by others? 3. Is it reasonable to provide the qualified individual with a disability with an accommodation? a. Will the accommodation requested fundamentally alter the nature of your CAA’s program or service?
It is important to remember that “technological advances can be expected to enhance opportunities” available to qualified individuals with disabilities.13
Possible Accommodations To Consider Some of the more common disabilities that CAAs may be asked to accommodate include being hard of hearing or deaf; visually impaired or blind; or physically disabled. Below is a list of possible accommodations that are often employed to make programs and benefits accessible to qualified disabled individuals with these types of disabilities. Possible Accommodations for Those Who are Deaf/Hard of Hearing:
• Installing a Text Telephone line (TTY) which is a special
device that helps people who are deaf, hard of hearing, or speech-impaired use the telephone to communicate. TTY enables users to type messages to one another instead of talking and listening. A TTY is required at both ends of the conversation to communicate.14
• Providing a sign language interpreter when one is requested within a reasonable time.
• Enabling deaf or hard of hearing individuals to sit close to a presenter/speaker and a sign language interpreter, if present. This enables such individuals to see the interpreter or read the lips of the presenter.
• Ensuring that instructions or other information given orally may also be made available in written form.
Possible Accommodations for Those Who are Blind/Visually Impaired:
• Offering to guide those who are visually impaired as they enter the unfamiliar space of the CAA. If they accept the assistance, offer them your arm rather than taking theirs.
• Giving a blind or visually impaired individual precise
direction to where they are heading (with approximate distance, etc.), if s/he does not wish to accept physical guidance.
• Providing documents used as a part of your CAA’s services in Braille.
• Using a screen reader to make documents available on
the CAA’s computers (if your CAA requires the use of computers as a part of participation). A screen reader is a software program that allows blind or visually impaired users to read the text that is displayed on the computer screen with a speech synthesizer. If a screen reader is used, make sure your employees are trained to use the software and able to set the individual up at a computer station.
• Offering assistance in filling out any necessary forms enabling participation in your CAA’s programs and services.
Continued on page 12
CAPLAW Update Newsletter, Spring 2013 | 11
Ensuring Equal Access (continued from page 11)
Possible Accommodations for Those Who are Physically Disabled:
• Training employees to assist a physically disabled client in using equipment offered to other clients for use such as copiers, computers, etc.
• Assisting clients who are physically disabled with filling out any necessary forms for participation in your CAA’s programs and services.
When considering what accommodations to make for individuals with disabilities, keep the following goals in mind:
• Promote non-discrimination,
• Ensure maximum integration,
• Facilitate effective communication, and • Avoid additional costs, when possible.
Scenarios Revisited Now that you are familiar with Section 504 legal requirements relating to accommodations for qualified individuals with disabilities, you are better equipped to resolve the issues in the scenarios from the beginning of this article.18 Did you come up with any of the following accommodations?
Scenario 1: A reasonable accommodation for Amanda
may include providing the services of a sign language interpreter for the presentation and reserving a seat for her in the front row so she can easily see the interpreter.
Scenario 2: A reasonable accommodations for Will
may include revising the CAA’s policy so that staff may accompany Will to the copy machine and operate the controls for him.
Scenario 3: Several reasonable accommodations
exist for Sandra. One may include having at least one computer with a screen reader and offering an electronic version of the workshop application form so Sandra could use one of the CAA’s computers to fill out the form by herself. Another possibility is for a staff member to assist Sandra in filling out the form. A third option is to offer Sandra the stipend she would have received by participating in your program and register her in the identical program offered by the other organization which caters to the needs of individuals with disabilities like hers. If your CAA decides to pursue this third option, it must ensure that Sandra is willing to accept it, since the law requires CAAs to integrate qualified individuals with disabilities unless the individual agrees to participate in separate and different programs. When 12 | CAPLAW Update Newsletter, Spring 2013
offering this third option to Sandra, the CAA must also make clear that it will work to accommodate Sandra in its program, if she prefers that option. A fourth option is to offer Sandra the third option as a standby until the CAA can take the necessary steps to accommodate Sandra in its program. If this fourth option is the one that is chosen, the CAA should establish a time frame within which it anticipates its ability to accommodate Sandra. The above solutions to the various scenarios are “reasonable” in that they do not require the CAA to fundamentally alter the services that they provide. They are simply providing the qualified disabled individual with meaningful access to the CAA’s benefits and programs, as required by law. (See endnotes on page 17)
Pay or Play
(continued from page 3) 9.5 percent of the employee’s household income.10 Because employers generally will not have access to data on their employees’ household incomes, proposed regulations offer employers three possible “safe harbor” methods for determining affordability. Under these rules, coverage is affordable if a full-time employee’s premium contribution does not exceed: (1) 9.5 percent of the employee’s wages reported on Form W-2; (2) 9.5 percent of the employee’s rate of pay at the beginning of the plan year; or (3) 9.5 percent of the federal poverty line for a single individual. An employer may choose to apply any one of these safe harbors for any reasonable category of employees, as long as it does so on a uniform and consistent basis for all employees in a particular category.11
7. How is an employer whose plan is not on the calendar year expected to meet the January 1, 2014 “play” mandate? Recognizing that large employers with existing noncalendar year plans would face challenges in complying by the January 1, 2014 deadline, the Obama Administration has issued two transition rules for large employers that maintained non-calendar year plans as of December 27, 2012.12
Recognizing that large employers with existing non-calendar year plans would face challenges in complying by the January 1, 2014 deadline, the Obama Administration has issued two transition rules for large employers that maintained noncalendar year plans as of December 27, 2012.
Under the first rule, an employer with a non-calendar year plan has until the first day of the 2014 plan year (rather than January 1, 2014) to offer affordable, minimum value coverage to those full-time employees who, under the terms of the plan that were in effect as of December 27, 2012, would be eligible to
receiving an exchange subsidy, or (2) $2,000 a year for each full-time employee, excluding the first 30 fulltime employees and not counting FTEs.15 Unless a large employer only has around 30 full-time employees (not counting FTEs), the $3,000 per year penalty for full-time employees receiving subsidized exchange coverage will almost always be less than the $2,000 per year penalty for every full-time employee.
participate in the plan as of the first day of the 2014 plan year. As long as the employer meets this deadline, it will not be penalized for failing to offer these employees qualifying coverage as of January 1, 2014.13 Under the second rule, an employer with a non-calendar year plan has additional time to expand eligibility under the plan and to offer coverage to those employees who were not eligible to participate under the plan’s terms as of December 27, 2012. This rule applies if either: (1) at least one-quarter of the employer’s employees (full and part-time) were covered under a non-calendar year plan on any date between October 31, 2012 and December 27, 2012 selected by the employer for making this determination; or (2) the employer offered coverage under a non-calendar year plan to one-third or more of its employees (full and part-time) during the most recent open enrollment period before December 27, 2012. If the employer offers affordable, minimum value coverage by the first day of the 2014 plan year to employees who would not have been eligible for coverage under any of the employer’s group health plans in effect as of December 27, 2012, it will not be penalized for failing to offer coverage to these employees as of January 1, 2014.
“Pay” Mandate 8. What does it mean to “pay”?
If a large employer does not offer its full-time employees and their dependents the chance to enroll in a health plan that provides minimum essential coverage, it must pay a fee if at least one full-time employee enrolls in coverage through the state health insurance exchange (see Q&A 9 for an explanation of state health insurance exchanges) and receives a subsidy (i.e., a premium tax credit or a cost-sharing reduction) for that coverage. The fee, which is calculated on a monthly basis, is $2,000 per year for every full-time employee, excluding the first 30 full-time employees and not counting FTEs.14 If a large employer offers health insurance coverage, but the coverage is not “affordable” and/or does not provide “minimum value,” the employer will be subject to a fee if at least one full-time employee enrolls in coverage through the state health insurance exchange and receives a subsidy for that coverage. In this case, the fee, which is calculated on a monthly basis, is the lesser of: (1) $3,000 a year for each full-time employee
A large employer may use optional “safe harbor” methods to determine which of its employees are full-time employees who must be offered affordable, minimum value health insurance coverage for themselves and their dependents and to calculate liability for potential fees if it does not offer this coverage. These methods permit an employer to determine ahead of time, based on an employee’s hours of service for an earlier period (known as a “measurement period”), whether an employee will be considered a full-time employee for a particular future period (known as a “stability period”) and therefore must be offered qualifying coverage for that period. The safe harbors, which are quite complicated to apply, will be of most relevance to employers with numerous variable hour or seasonal employees.16
9. What are state health insurance exchanges?
The health care reform law requires the establishment, by January 1, 2014, of a health insurance exchange in each state that centralizes the purchase of individual (as opposed to group) health plans in that state. Each exchange will have a website that directs individuals to health plans, provides standardized information on available health plans, and assists individuals in determining whether they are eligible for premium tax credits or cost-sharing reductions (together referred to in this article as “exchange subsidies”) when they purchase insurance through the exchange. If a state chooses not to establish an exchange itself, the federal government will set up the exchange in that state and run it. Twenty-six states have chosen this option. Seven other states will be working with the federal government to establish and operate their exchanges. The remaining states will set up and run their exchanges themselves.17
10. Who is eligible for “exchange subsidies”?
To be eligible for an exchange subsidy as defined in Q&A 9 above, an individual’s household income must be at least 100 percent, and no more than 400 percent, of the federal poverty line. Legal resident aliens with household incomes under 100 percent of the federal poverty line who are not eligible for Medicaid will also qualify. Individuals whose employers offer them affordable coverage that provides minimum value are not eligible for exchange subsidies, nor are individuals who are eligible for Medicaid, Medicare, CHIP, or government-sponsored insurance for veterans and members of the Armed Forces.18 Continued on page 14
CAPLAW Update Newsletter, Spring 2013 | 13
any) during which the employee and any of his or her dependents were covered under the plan. In addition, the employer will need to provide each employee named on the IRS filing with an annual statement detailing the information reported to the IRS on that employee.21
Issues to Consider in Deciding Whether to Pay or Play 14. What are important issues for large employers in the CSBG network to consider when deciding to pay or play?
Pay or Play
(continued from page 13) 11. Will small businesses be able to purchase insurance through an exchange?
In addition to insurance exchanges for individuals, the health care reform law (known as the Affordable Care Act) calls for establishment of the Small Business Health Options Program (SHOP) to assist small businesses in finding qualified health plans, getting information on their cost and benefits, enrolling their employees, and consolidating billing. Starting in 2014, SHOP or a merged SHOP and individual exchange will be offered in each state. Employers with up to 100 employees will be eligible, although states can limit participation to employers with up to 50 employees until 2016.19 If an employee purchases insurance through an exchange and is determined to be eligible for a subsidy, the exchange will notify the IRS and the employer.
12.How will an employer know if it is required to “pay”?
If an employee purchases insurance through an exchange and is determined to be eligible for a subsidy, the exchange will notify the IRS and the employer. In the following calendar year, the IRS will determine whether the employer owes any fees and, if so, the amount of those fees. It will then notify the employer of its determination, provide a certification that one or more employees has received a subsidy, and give the employer an opportunity to contest the certification and assessment before issuing a notice and demand for payment.20
13. Does an employer have any obligation to report information regarding its compliance with the pay or play mandate? Starting in 2015, large employers will be required to report to the IRS certain information on their compliance with the pay or play rules during the previous calendar year. A large employer will need to report whether it offers its full-time employees and their dependents minimum essential coverage, and if it does, describe certain terms of the plan, list the number of full-time employees for each month of the calendar year, and provide the name, address and taxpayer identification number of each full-time employee and the months (if 14 | CAPLAW Update Newsletter, Spring 2013
The following issues are important for CSBG-network employers to consider when deciding whether to pay or play:
• Whether fees for failing to offer coverage or offering
coverage that does not meet the affordability or minimum value requirements will be allowable costs under the federal cost principle circulars (more on this below).
• If the employer is small enough to purchase
coverage through SHOP in its state, what the quality and price of that coverage will be (more on this below).
• What the quality and price of coverage offered
through the applicable individual exchange will be.
• Whether the employer’s recruitment and retention of quality employees will be affected if it drops coverage altogether.
• The tax consequences for employees if the
employer drops coverage and employees purchase insurance through the individual exchange. Employer-provided coverage is a tax-free benefit and employees generally pay their premiums on a pre-tax basis while premiums employees pay for exchange coverage will be paid on an after-tax basis. Depending on their household income, however, employees may receive exchange subsidies.
• Whether employees will be likely to seek higher
salaries if the employer drops coverage. Note that additional compensation paid in the form of salaries will be taxable to employees, whereas employerprovided health insurance coverage is provided tax-free.
The individual exchanges and SHOP are scheduled to begin selling insurance to small employers and individuals by October 1, 2013.22 Although the Supreme Court resolved uncertainties about the Affordable Care Act’s constitutionality last summer, the legal challenges to the law delayed implementation of the individual exchanges and SHOP in some states. The fact that so many states have decided to rely on the federal government to set up and run their exchanges has also slowed this process. These delays have resulted
in uncertainty about the quality and pricing of plans that will be offered through the individual exchanges and SHOP. Due to this uncertainty, many employers considering whether to drop coverage are postponing that decision until 2014 or later, when there will be more clarity about exchange and SHOP plans. Federal grantees considering Federal grantees dropping coverage may also considering dropping want to delay their decision coverage may also want to see if guidance will be to delay their decision forthcoming as to whether to see if guidance will fees a large employer pays be forthcoming as to for its failure to “play” will whether fees a large be allowable costs under the employer pays for its federal cost principle circulars. failure to “play” will It is clear that the cost of be allowable costs providing health insurance under the federal cost to employees is an allowable principle circulars. cost.23 However, no guidance specifically addresses whether fees an employer pays due to its failure to “play” will be allowable costs. Costs of fines and penalties resulting from violations of, or failure of a federal grantee to comply with federal, state, and local laws and regulations are unallowable except when incurred as a result of compliance with specific provisions of an award or instructions in writing from the awarding agency.24 The Affordable Care Act, however, gives large employers a choice of whether to “play” or to “pay.” Only if an employer neither plays nor pays will it be violating or failing to comply with the Act. Therefore, it seems unlikely that fees paid for failing to play would be considered unallowable fines or penalties under this provision. Taxes that a federal grantee is required to pay are generally allowable, except for taxes from which an exemption is available to the grantee.25 It is not clear, however, whether the fees for failure to play would be considered taxes that a federal grantee is required to pay. Moreover, the cost principle circulars also require that, to be allowable, a cost must be allocable to the organization’s federal grant(s). According to the circulars, a cost is allocable to a particular cost objective, such as a grant, contract, project, service, or other activity, in accordance with the relative benefits received.26 It is possible, therefore, that absent guidance specifically stating that fees paid for failure to play are allowable, funding sources could seek to disallow the fees on the grounds that they do not benefit an organization’s federal grants. (See endnotes on pages 17-18)
Miss a webinar in the ‘Conquering Employment Law Conundrums’ series? This series focuses on honing the skills and increasing the knowledge of experienced CAA executives and HR professionals. Visit the CAPLAW Webinar Archive and view a library of FREE webinars On Demand! January 16: Employee Benefits Check-Up: Are You Ready for the Affordable Care Act? February 13: Managing the Changing Face, Risk and Cost of Discrimination March 13: Tackling Tricky Wage and Hour Topics April 10: Navigating an Employee Request for Accommodation May 15: A Cup of Alphabet Soup to Cure a Few FMLA Ills
Explore this resource on compliance & ethics and working with attorneys! This two-part guidebook will help Community Action Agencies: (1) establish and maintain a strong ethical culture within their organizations; (2) adopt policies and procedures that address the many legal, financial and administrative requirements with which they must comply; and (3) implement effective systems for complying with those policies and procedures. Learn more and download the guidebook!
CAPLAW Update Newsletter, Spring 2013 | 15
Lessons Learned • For multi-year awards that are funded in yearly
grants, ensure that your organization understands the distinction between the specified annual budget period for each of the yearly grants and the project period for the entire award.
• Maintain a financial management system that
adequately accounts for grant fund expenditures and ensures that funds are handled responsibly.
DAB Decision
(continued from page 6) cost principles indicated that an advance payment is not an allowable cost. S.A.G.E. also explained that it had “requested an opinion from the auditor on the prepayment of the rent and it was advised that it was acceptable.” The DAB rejected all of S.A.G.E.’s arguments and upheld ACF’s disallowance. The DAB found that, even though S.A.G.E.’s CBAE project continued beyond FY 2009, the uniform administrative requirements prohibited S.A.G.E. from charging to the FY 2009 award any costs resulting from obligations incurred after the FY 2009 award budget period ended on September 29, 2009. The DAB explained that the requirements only permit grantees to charge allowable costs resulting from obligations incurred during a funding period and any authorized pre-award costs. The DAB further noted that a “funding period” is defined as “the period of time when Federal funding is available for obligation by the recipient” and “obligations” are “amounts of orders placed, contracts and grants awarded, services received and similar transactions during a given period that require payment by the [grantee] during the same or a future period.”8 Moreover, the DAB observed that S.A.G.E. failed to provide any documentation or explanation supporting its contention that either the disallowed costs were incurred as current obligations or the payments were a necessary and reasonable cost of operating a CBAE program during FY 2009. The DAB also found that S.A.G.E. failed to provide any documentation to rebut the audit report findings that the costs were not reasonable and allocable to the FY 2009 award. Following its prior decisions, the DAB determined that for a cost to be allocable to an award in accordance to the relative benefits received, the cost must not only relate to the award’s cost objectives, but also to its funding period. The DAB noted that S.A.G.E. had stated for the record that it was “unaware that prepaid expenses should not extend beyond the program period” and “thought that as long as it did not extend beyond the project period, these expenditures were allowable.”
16 | CAPLAW Update Newsletter, Spring 2013
• For recurring costs paid in increments over multiple
yearly budget periods (such as rent, insurance, and utilities payments), pay only those costs attributable to each budget period with funds from the grant for that period.
• Ensure that the information in grant reports for each of these periods accurately corresponds with the expenditures and activities for that period.
• Adequately document all grant award expenditures. • Obtain funding source authorization before incurring pre-award costs.
(See endnotes on page 18)
BYLAWS TOOLKIT CAPLAW’s Bylaws Toolkit is just what you need to make your organization’s bylaws clear, effective, and up-todate. The toolkit outlines key concepts for your agency’s bylaws, such as the authority of the Board of Directors, petitions for board representation, replacement of directors due to vacancies, quorum and voting policies, officers, conflicts of interest, and more. Updated information includes sample language reflecting: the requirements of the 2007 Head Start Reauthorization, evolving governance best practices, and CAPLAW’s experience reviewing CAA bylaws over the years. Learn more and purchase the toolkit!
End Notes OMB Proposes Consolidation of Circulars 1. The circulars applicable to Community Action Agencies are the administrative grant requirements found at OMB Circulars A-102 (state and local governments); A-110, 2 CFR Part 215 (nonprofits) and the cost principles found at OMB Circulars A-87, 2 CFR Part 225 (state and local governments) and A-122, 2 CFR Part 230 (nonprofits).
CAPLAW has teamed up with the experienced employment law attorneys at Fisher & Phillips LLP to offer CAAs the essential low-cost legal service they need during challenging times. CAPLAW works with its members on a range of employment law issues. We understand that lack of access to an attorney and CAA budget limitations can be challenging. That is why CAPLAW has teamed up with the national employment law firm of Fisher & Phillips LLP to create the Employer Smarts Program, offering our members an array of reasonably-priced legal services. Why Join the CAA Employer Smarts Program? The attorneys of Fisher & Phillips are familiar with the unique requirements that govern CAA and Head Start grantees and will offer your CAA an array of flat fee legal services and training opportunities that CAPLAW or your local attorney may not be able to provide. These services include in-person staff training, employee handbook preparation, and phone access to attorneys familiar with your state’s employment laws. By working with an attorney to ensure your CAA’s policies and procedures are legally and practically compliant, you will be taking vital preemptive steps to avoid costly litigation, negative press, and the low employee morale and performance that goes along with it. Employer Smarts Options and Pricing: Your CAA can benefit from one or more of five different Employer Smarts options. View the services and prices available to your CAA. Learn More About the Program: Please contact Fisher & Phillips attorney John Polson for detailed information on each option at (949) 851-2424. Or, e-mail John at jpolson@laborlawyers.com. John and another Fisher & Phillips attorney will also be presenting workshops at the CAPLAW conference in June and will offer a sample of the type of training available.
Ensuring Equal Access to CAA Programs 1. Scenarios adapted from those included in: ADA National Network “At Your Service: Welcoming Customers with Disabilities” Web Course, http://www.wiawebcourse.org/. 2. 42 U.S.C. § 9918(c)(1). 3. 29 U.S.C. § 794(a). 4. 45 C.F.R. Part 84. 5. 45 C.F.R. § 84.3(l). 6. See Southeastern Community College v. Davis, 442 U.S. 397, 407 FN7 (1979). 7. Title II of the ADA requires that state and local governments give people with disabilities an equal opportunity to benefit from all of their programs, services, and activities. State and local governments are required to follow specific architectural standards in the new construction and alteration of their buildings. They also must relocate programs or otherwise provide access in inaccessible older buildings, and communicate effectively with people who have hearing, vision, or speech disabilities. Title III of the ADA requires places of public accommodation, including private social service center establishments (e.g., day care centers, senior citizen centers, homeless shelters, food banks, and adoption agencies), to comply with basic nondiscrimination requirements that prohibit exclusion, segregation, and unequal treatment. Places of public accommodation must also comply with specific requirements related to architectural standards for new and altered buildings; reasonable modifications to policies, practices, and procedures; effective communication with people with hearing, vision, or speech disabilities; and other access requirements. 42 U.S.C. §§ 12131-12134 (Title II) and 42 U.S.C. §§ 12181-12189. 8. 45 C.F.R. § 84.4(b)(1), (3). 9. 45 C.F.R. § 84.4(b)(4). 10. 45 C.F.R. § 84.4(b)(2). 11. See Alexander, Governor of Tennessee, et al. v. Choate et al., 469 U.S. 287, 301 (1985). 12. See Id. at 300. 13. See Southeastern Community College, 442 U.S. at 412. 14. Information provided by AboutTTY.com: “What is a TYY?”. Health Care Reform “Pay or Play” Q&A 1. Shared Responsibility for Employers Regarding Health Coverage, 78 Fed. Reg. 218, 241 (2013) (to be codified at 26 C.F.R. § 54.4980H-1(a)(18)) (proposed Jan. 2, 2013). 2. 78 Fed. Reg. 218, 241 (to be codified at 26 C.F.R. § 54.4980H-1(a) (21)). 3. 78 Fed. Reg. 218, 243 (to be codified at 26 C.F.R. § 54.4980H-3(b). 4. Note that, in certain cases, if an employer is part of a so-called “controlled group,” the employees of all the entities in the controlled group will be added together to determine whether any member of the group is a large employer. Thus, if an employer on its own does not meet the 50-employee threshold, Continued on page 18
CAPLAW Update Newsletter, Spring 2013 | 17
End Notes Health Care Reform “Pay or Play” Q&A Continued from page 17 if it is part of a controlled group, it will be considered a large employer if all the entities in the controlled group together have 50 or more employees and full-time equivalent employees (FTEs). 78 Fed. Reg. 218, 241 (to be codified at 26 C.F.R. § 54.4980H-1(a)(14)). 5. Note that the term “dependent” is defined to mean an employee’s child who has not reached age 26. An employee’s spouse is not a dependent. 78 Fed. Reg. 218, 241 (to be codified at 26 C.F.R. § 54.4980H-1(a)(11)). 6. 26 U.S.C. § 5000A(f). 7. 26 U.S.C. § 36B(c)(2)(C)(ii). 8. 45 C.F.R. 156.145(a)(1)-(3). 9. Actuarial Value and Employer-Sponsored Insurance, ASPE Research Brief, U.S. Department of Health and Human Services (November 2011) (visited May 21, 2013) http://aspe.hhs.gov/ health/reports/2011/AV-ESI/rb.shtml. 10. 26 U.S.C. § 36B(c)(2)(C)(i). 11. 78 Fed. Reg. 218, 252 (to be codified at 26 C.F.R. § 54.4980H-5(e)(2). 12. 78 Fed. Reg. 218, 236. 13. Id. 14. 26 U.S.C. § 4980H(a) and 78 Fed. Reg. 218, 250 (to be codified at 26 C.F.R. § 54.4980H-4). 15. 26 U.S.C. § 4980H(b) and 78 Fed. Reg. 218, 250 (to be codified at 26 C.F.R. § 54.4980H-5). 16. 78 Fed. Reg. 218, 250 (to be codified at 26 C.F.R. § 54.4980H-1(a)(22), (39) and (40) and -3(c)-(e)). 17. 42 U.S.C. §§ 18031 and 18041. Establishing Health Insurance Marketplaces: An Overview of State Efforts (The Henry J. Kaiser Family Foundation, May 2, 2013) (visited May 21, 2013) http:// kff.org/health-reform/issue-brief/establishing-health-insuranceexchanges-an-overview-of/. 18. 26 U.S.C. § 36B(a) and (c); 26 U.S.C. § 5000A(f)(1)(A)(ii); and 42 U.S.C. § 18071(b). 19. Affordable Insurance Exchanges: Choices, Competition and Clout for Small Businesses (Healthcare.gov, visited May 21, 2013) http://www.healthcare.gov/news/factsheets/2011/07/ exchanges07112011c.html. 42 U.S.C. §§ 18031 and 18041. 20. See 26 U.S.C. § 4980H(d); 78 Fed. Reg. 218, 231; and Internal Revenue Service, Questions and Answers on Employer Shared Responsibility Provisions Under the Affordable Care Act, Q&A 16 (Dec. 28, 2012) (visited May 21, 2013) http://www.irs.gov/ uac/Newsroom/Questions-and-Answers-on-Employer-SharedResponsibility-Provisions-Under-the-Affordable-Care-Act. 21. 26 U.S.C. §§ 6055-6056. 22. See 45 C.F.R. § 155.410(b). 23. 2 C.F.R. Part 230, App. B, ¶8.g. (OMB Circular A-122, which applies to nonprofit grantees); see similar provision in 2 C.F.R. Part 225, App. B, ¶8.d. (OMB Circular A-87, which applies to state and local governmental grantees). 24. 2 CFR Part 230, App. B, ¶16 (OMB Circular A-122, which applies to nonprofit grantees); see similar provision in 2 CFR Part 225, App. B, ¶16 (OMB A-87, which applies to state and local government grantees). 25. 2 CFR Part 230, ¶47a (OMB Circular A-122, applies to nonprofits); see also 2 CFR Part 225, App. B, ¶40 (OMB Circular A-87, applies to state and local governments). 26. 2 C.F.R. Part 230, App. A.3.; 2 C.F.R. Part 225, App. A.3.
18 | CAPLAW Update Newsletter, Spring 2013
Determining Whether Your Organization is a Large Employer 1. 78 Fed. Reg. 218, 242 (to be codified at 26 C.F.R. § 54.4980H-2(b)(1)). 2. 78 Fed. Reg. 218, 243 (to be codified at 26 C.F.R. § 54.4980H-2(c)). 3. 78 Fed. Reg. 218, 238. 4. 78 Fed. Reg. 218, 243 (to be codified at 26 C.F.R. § 54.4980H-1(a)(34) and -2(b)(2)). Disallowance for Costs Extending Beyond Budget Period Upheld 1. 45 C.F.R. §§ 74.26(a); 74.27(a). 2. 2 C.F.R. Part 230, Appendix A, A.2.a. 3. 2 C.F.R. Part 230, Appendix A, A.4.a. 4. 2 C.F.R. Part 230, Appendix A, A.4.b. 5. 2 C.F.R. Part 230, Appendix A, A.2.g, A.4.a. 6. 45 C.F.R. § 74.28. 7. 45 C.F.R. § 74.21(b)(2), (b)(7). 8. 45 C.F.R. § 74.2
This publication is part of the National T/TA Strategy for Promoting Exemplary Practices and Risk Mitigation for the Community Services Block Grant (CSBG) program and is made available free of charge to CSBG grantees. It was created by Community Action Program Legal Services, Inc. (CAPLAW) in the performance of the U.S. Department of Health and Human Services, Administration for Children and Families, Office of Community Services Cooperative Agreement – Grant Award Number 90ET0433. Any opinion, findings, and conclusions, or recommendations expressed In this material are those of the author(s) and do not necessarily reflect the views of the U.S. Department of Health and Human Services, Administration for Children and Families.