Advance Notice of Proposed Revision

OFFICE OF MANAGEMENT AND BUDGET

OMB Circular A-110, "Grants and Agreements with Institutions of Higher Education, Hospitals and Other Non-Profit Organizations"

AGENCY: Office of Management and Budget, Executive Office of the President

ACTION: Advance Notice of Proposed Revision

SUMMARY: This advance notice seeks comments on a proposal by the Grants Management Committee of the Chief Financial Officer's Council that would ask OMB to amend Circular A-110, "Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations." The amendment would require Federal awarding agencies to offer recipients the option to request cash advances on a "pooled" basis. Before making this recommendation, the Council seeks comments from recipients and Federal agencies on the merits of pooled payment systems and grant-by-grant payment systems.

DATES: Comments must be received by June 30, 2000.

ADDRESSES: Comments should be addressed to: F. James Charney, Policy Analyst, Office of Management and Budget, Room 6025, New Executive Office Building, Washington, DC 20503. Comments may be submitted via E-mail (grants@omb.eop.gov), but must be made in the text of the message and not as an attachment. The full text of Circular A-110 may be obtained by accessing OMB's home page (http://www.whitehouse.gov/omb), under the heading "Grants Management."

FOR FURTHER INFORMATION CONTACT: Gary Maupin, Chief Financial Officer, Food and Nutrition Service, United States Department of Agriculture, at (703) 305-2046.

SUPPLEMENTARY INFORMATION:

Section 22(c) of the Circular provides that "whenever possible, advances shall be consolidated to cover anticipated cash needs for all awards made by the Federal awarding agency to the recipient." The Chief Financial Officers Council (Council) is considering whether to recommend an amendment to the Circular that would expand on this provision by requiring agencies to offer a pooled payment procedure (where cash advances are requested from a "pool" of grants rather than on a grant-by-grant basis) as an option for recipients in requesting cash advances under Federal awards. Under either method, however, a recipient must maintain systems that minimize the time elapsing between the receipt of Federal advance payments and their disbursement for program purposes. This issue emerged from the work of the Council's Grants Management Committee as it considered a proposal to formally incorporate a pooled payment process into the Federal Government's body of accounting standards.

In considering this proposal, the Council has consulted with several Federal agencies and some recipients subject to the Circular. However, OMB and the Council are interested in soliciting comments from the broader grants community, learning how pooled and grant-by-grant payment systems affect Federal agencies and recipients, as well as what specific problems or benefits are created for recipients under the two systems.

This proposal will not affect the policy recently adopted by the Council that each civilian agency permit recipients the option of using one of two governmentwide payment systems, the Automated Standard Application for Payments (ASAP) system managed by the Department of the Treasury, and the Payment Management System (PMS) operated by the Department of Health and Human Services (HHS). Both of these systems have the ability to track either pooled or award-by-award payment requests.

The Pooled Payment System

Under a pooled payment process, the recipient estimates the aggregate amount of cash that it will need for all its Federal awards from each awarding agency and requests a draw in that amount. The draw is then allocated among all the awards based on a formula. When recipients report expenditures, the allocation is adjusted to the actual reported expenditures.

The Council found that two major agencies currently using the pooling method - HHS and the National Science Foundation - believe it provides a more efficient and customer-friendly method of drawing cash for grant purposes. Recipients report individual cash expenditures for each grant via a financial report such as the Standard Form (SF) 269 (Financial Status Report) or SF-272 (Report of Federal Cash Transactions). Many recipients have expressed an inability to accurately determine cash needs on a grant-by-grant basis at the time of draw. Requiring this determination "up front" may cause recipients to draw larger amounts of cash, less frequently, resulting in poor management of Federal funds.

Grant-By-Grant Payment Systems

Other Federal agencies have developed systems that require recipients to request funds on a grant-by-grant basis. Some of these agencies approve the requests on a grant-by-grant basis; pool the individual amounts; and issue payments in the aggregate. At least one agency accepts grant-by-grant payments as reports of cash usage and records them as expenditures, eliminating the requirement for recipients to submit the SF-272 or, in most cases, the SF-269.

Agencies that use grant-by-grant payment systems believe that agency grant officers have more timely information on payments and can provide more immediate technical assistance to a recipient experiencing problems with a particular grant. These agencies believe that, under pooled payment systems, reports often come in too late for them to be able to help recipients take corrective actions on specific grants.

Effect on Federal Agencies

Federal agencies face some challenges accounting for advances similar to those of their recipients. These challenges include identifying advances to multiple awards. Those agencies that currently use pooling address this challenge by using estimates of how recipients will distribute a pooled payment request among the various grants held by the institution. These estimates are then adjusted to actual when the recipients submit their expense reports (SF-269 or SF-272).

After the agency has made these adjustments, it gains a better understanding of how the recipients are using funds under each specific award. Thus, accurate and timely reporting is essential to the success of any pooling method. For this reason, some agencies believe that a transition from grant-by-grant to pooled payments for their awards must be accompanied by monthly reporting of actual expenditures, in an electronic format, rather than the paper-based quarterly reporting that is currently required by agencies currently using pooled payment systems.

Request for Comment

OMB and the Council seek comments from both recipients and Federal agencies on the merits of pooled payment systems and grant-by-grant payment systems, as well as whether recipients should have this option. Specifically, commenters are asked to respond to the following questions:

Would it be worth it to recipients if they were allowed to make pooled payment requests only in exchange for a requirement to electronically report their actual costs on a monthly basis? (Section 52(a)(2)(iv) of the Circular authorizes Federal agencies to require monthly submission of the SF-272 from recipients that receive advances of $1 million or more annually.)

Should the Circular include a minimum number of awards and/or dollars below which the pooled payment option is not be offered? That is, recipients that only get a few awards, or for only small amounts, would not be offered the option to make pooled payment requests.

How might a pool payment system impact the Federal agencies' abilities to monitor the financial performance of recipients, and thus determine program compliance?

Should recipients be permitted to determine whether they receive advances on a pooled or grant-by-grant basis, or should Federal agencies continue to make that determination?

Joshua Gotbaum
Executive Associate Director and Controller