- Briefing Room
U.S. Department of Transportation
Federal Highway Administration
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Washington, DC 20590
2 CFR 200 Implementation Guidance
U.S. Department of
|Subject:||Action:2 CFR 200 Implementation Guidance||Date:||December 4, 2014|
|From:||Elissa K. Konove [Signed]
Chief Financial Officer
|In Reply Refer To:||HCFB-31
Director, Innovative Program Delivery
Director, Technical Services
Directors of Field Services
The Office of Management and Budget (OMB) has published 2 CFR Part 200 (referred to as the “Supercircular”) to streamline the Government-wide guidance on Administrative Requirements, Cost Principles, and Audit Requirements for Federal awards. The Supercircular consolidates and eliminates the duplicative guidance found in 8 OMB circulars which includes A-50, Audit Follow-Up, A-87, Cost Principles for State, Local, and Indian Tribal Governments; A-102, Grants and Cooperative Agreements with States and Local Governments; and A-133, Audits of States, Local Governments, and Non-Profit Organizations. The new Supercircular expands requirements in several areas.
The consolidation of the circulars is a key component of a larger effort to more effectively focus Federal resources on improving performance and outcomes, while ensuring the integrity of Federal funds in partnership with State, local, and tribal stakeholders. The Department of Transportation (DOT) will adopt OMB’s revised Government-wide Supercircular with an anticipated effective date on or before December 26, 2014. DOT submitted to OMB an Interim Final Rule (IFR) to adopt the Supercircular regulation under 2 CFR Part 1201. The implementation of the Supercircular will cancel 49 CFR Parts 18 and 19.
The administrative requirements and cost principles will apply to new awards authorized on or after the effective date unless an OMB approved deviation exists. Project modifications made on or after the effective date may be subject to the Supercircular requirements if the Federal agency’s modification also amends the terms and conditions of the Federal award. Existing Federal awards that do not receive incremental funding with new terms and conditions will continue to be governed by the terms and conditions of the Federal award in effect prior to the effective date. Subpart F, Audit requirements, will apply to audits of non-Federal entity fiscal years beginning on or after the effective date. The revised audit requirements are not applicable to fiscal years beginning prior to that date.
The policy implications are wide-ranging across many Federal Highway Administration (FHWA) programs. FHWA will develop and update regulations, policies, guidance and training. The process of developing or updating regulations, policies, guidance and training will take place subsequent to the effective date of the Supercircular. A listing of frequently asked questions and answers is included as Attachment A.
Key Changes Affecting FHWA: Following are some of the key changes in the various subparts of the Supercircular affecting FHWA business processes.
Pre-Federal Award Requirements (2 CFR 200 Subpart C) – The new Supercircular seeks to increase competition for Federal funds awarded under discretionary grant programs. The goal is to improve transparency and make more information available to interested parties:
Information contained in a Federal award (2 CFR 200.210) – Each Federal award must include 15 uniform data sets. Some of the required fields are not currently in the Fiscal Management Information System (FMIS). These fields will be added to FMIS 5.0 when the system is in production. The additional fields include the following:
In addition, the Office of Acquisition and Grants Management will publish general terms on the FHWA website and reference the site in all FHWA agreements.
Post Federal Award Requirements(2 CFR 200 Subpart D) – The Supercircular includes significant reforms to current administrative requirements (formerly circular A-102). Some of the additional reforms include the following:
Performance measurement (2 CFR 200.301) – Recipients of Federal awards must relate financial data to the performance accomplishments of an award. Recipients must also provide cost information to demonstrate cost effective practices. For FHWA awards made under chapter 1 of Title 23, the requirements of 2 CFR 200.301 do not apply. The Federal-aid highway program performance management measures under Chapter 1 of Title 23 will be set forth in the regulations that implement 23 U.S.C. 150. Under the Supercircular (2 CFR 200.101(b)(3)), where Federal statutes or regulations differ from Supercircular requirements, the provisions of Federal statutes or regulations govern administration of those statutory requirements. Other programs not carried out under chapter 1 of Title 23, such as the Federal Lands Highway Program, may need to address financial and performance data consistent with the requirements in 2 CFR 200.301. In these instances, FHWA must provide enhanced and proactive oversight to ensure goals and milestones are met during the implementation of the program.
Greater focus on internal controls (2 CFR 200.303) – Organizations must establish and maintain effective internal controls over Federal awards to provide reasonable assurance that awards are being managed in compliance with laws and regulations. Non-Federal entities and their auditors will need to exercise judgment in determining the most appropriate and cost effective internal control in a given circumstance. Non-Federal entities must also take measures to safeguard personally identifiable information.
Payment (2 CFR 200.305) – New restrictions are placed on different types of payments. For States, the Cash Management Improvement Act (CMIA) agreements between the Treasury and the States cover the Federal-aid program’s operation and will minimize the impact of this requirement on FHWA. Under 23 U.S.C. 121, FHWA makes progress payments to States for the Federal share of cost of eligible construction projects or activities incurred to date, plus the Federal share of the value of stockpiled material.
Cost sharing or matching (2 CFR 200.306(a)) – For discretionary research grants, voluntary committed cost sharing cannot be used as a factor during the merit review of applications or proposals for discretionary awards, but may be considered if voluntary cost sharing is consistent with Federal awarding agency regulations and specified in a notice of funding opportunity.
Period of performance (2 CFR 200.309) – This is a significant change to the Federal-aid highway program because it will impose a period when project costs can be incurred, which includes a project agreement start and end date. Current Federal-aid regulations stipulate that costs can only be incurred after the authorization date of a project unless otherwise authorized under 23 CFR 1.9(b). The new provision will require an end date to be included in the agreement after which no additional costs may be incurred and are not eligible for reimbursement.
A data field to record the project end date is not currently available in FMIS 4 but will be programmed in FMIS 5. Until FMIS 5 includes the project end date field, States should enter this information in the State Remarks field when a new project agreement is executed or an existing agreement is modified. The period of performance must be based on the States’ estimated project schedule, including required processes to ensure all Federal requirements have been satisfied. Divisions must ensure the estimated period of performance is in line with the States’ established policies, procedures, and project schedules. The agreement end date may be modified as necessary, based on documented revisions to project schedules or other circumstances.
Greater responsibilities for subrecipient monitoring (2 CFR 200.331) – All pass-through entities (e.g., State DOTs) must ensure subrecipients comply with all Federal laws and regulations and monitor performance schedules to ensure they are achieved. Further, Federal award terms are required to be included in the terms of subawards. The Supercircular also expands the use of indirect cost rates to all grants. If applicable, pass-through entities must include (at the time of a subaward) an approved, federally recognized indirect cost rate negotiated between the subrecipient and its cognizant agency if one exists. Other subrecipients who intend to claim reimbursement of indirect cost must develop an indirect cost proposal in accordance with the requirements of the Supercircular and maintain the proposal and related supporting documentation for audit. Where a non-Federal entity only receives funds as a subrecipient, the State DOT will be responsible for negotiating and/or monitoring the subrecipient’s indirect costs.
Project closeout (2 CFR 200.343 thru 200.345) – Recipients are required to submit all eligible incurred costs and required performance and financial reports or project records specified in the project agreement or stewardship and oversight procedures within 90 days after the agreement end date. The project should then be closed no later than one year after receipt and acceptance of all required final reports. FHWA may exercise unilateral authority to close projects in its financial management system if the recipient fails to comply with project closeout requirements. This authority must be based on a risk evaluation by the FHWA division office and advance notice provided to the award recipient.
Cost principles (2 CFR 200 Subpart E and Appendix VII) – The Supercircular is generally consistent with previous cost principles requirements (formerly circular A-87). The Department is seeking clarification from OMB regarding applicability of 2 CFR 200 Subpart E to for-profit organizations. The following are some of the changes affecting FHWA:
Indirect costs (2 CFR 200.412 thru 200.417) – Under the new rules, Federal agencies and pass-through entities must accept a negotiated indirect cost rate if one exists, or negotiate a rate in accordance with Federal guidelines. There are exceptions when a statute or regulation requires it, or if the non-Federal entity receives $35 million or less in direct Federal funding.
Narrative cost allocation methods – Appendix VII(F)(3), State and Local Government and Indian Tribe Indirect Cost Allocation Plans, allows a narrative cost allocation method. FHWA is currently testing several financial management improvement initiatives related to this method due to significant State DOT interest.
Audit Requirements (2 CFR 200 Subpart F) – The Supercircular is generally consistent with previous single audit and other audit requirements (formerly circular A-133). The primary changes affecting how FHWA awards are audited are as follows:
FHWA Implementation: The following are key activities FHWA will complete to implement the requirements of the Supercircular:
Coordination - The implementation of 2 CFR 200 will require the coordination of many FHWA offices. The initial step to this coordinated effort was the development of the Supercircular implementation plan, which includes a listing of the required activities to comply with the requirements in the Supercircular. The implementation plan will be used to track the status of each activity to completion.
A task force has been selected to coordinate and facilitate the completion of each activity. Task force members include the following:
Communication – Communicating the Supercircular to units within FHWA is imperative to its implementation. Briefings and web conferences designed to communicate the impact of the Supercircular to FHWA units have already occurred. Several briefings have been prepared and delivered to FHWA leadership to keep them abreast of the implementation schedule and impacts to their office. The information has also been communicated via monthly webinars and conference calls. The Resource Center Finance Services Team is developing a webinar on the Supercircular implementation that will be presented to all offices within FHWA prior to the effective date.
Training Development and Updates – The cancellation of 49 CFR Parts 18 and 19, and combining other administrative requirements, cost principles and single audit requirements into the Supercircular will require the development of new training courses and updates to existing training. The National Highway Institute will be working with the different program offices to modify and update existing training impacted by the Supercircular. The Resource Center will also be updating webinars, videos, and other training modules to address the Supercircular requirements. A listing of the training which will be developed or updated is included as Attachment B.
Regulations, Policy and Guidance Updates – FHWA regulations, policies and guidance documents referencing grants administration, cost principles and single audit requirements superseded by the Supercircular must be modified. Once the Supercircular is effective, FHWA will begin developing and revising the impacted documents. Some of the key regulations policies and guidance to be updated include the following:
A complete list of the regulations, policies and guidance to be developed or updated is included as Attachment C.
Other Requirements – A list of FHWA deviations will be published in the Final Rule in 2 CFR 1201. The following FHWA statutory exceptions apply under the authority of 2 CFR 200.101(b)(3):
If you have any questions concerning this memorandum, please contact Mr. Danial Parker in the Office of Financial and Management Programs (HCFB-31) at 720-963-3216.
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