Texas Register
(22 TexReg 9398). This rule is being
revised to conform the standards to changes in OMB Circular A-87, clarify
the state annotations to OMB Circular A-102 as necessary and to substitute
OMB Circular A-133, with state annotations, for OMB Circular A-128, which
was rescinded effective June 30, 1997, with the adoption by the federal government
of the revised OMB Circular A-133. To reduce confusion as to the applicability
of the standards, they have been renamed "The Uniform Grant Management Standards"
(UGMS). The Uniform Grant Management Standards were developed under the authority
of Chapter 783 of the Texas Government Code, which codifies the Uniform Grant
and Contract Management Act of 1981. The federal circulars have been renamed
and extensively modified to reflect state law, policies and practices. Pursuant
to the Act and Chapter 2105, Texas Government Code, the prescribed standard
financial management conditions and uniform assurances are applicable to all
grants and contracts executed between state agencies, local governments and
other affected entities, as described in §5.142(b).
§5.142.Purpose, Applicability, and Scope.
(a)
Purpose. The Uniform Grant and Contract Management Act
of 1981 directed the governor's office to establish uniform grant and contract
administration procedures " to promote the efficient use of public funds in
local government and in programs requiring cooperation among local, state,
and federal agencies." These standards further that objective by providing
awarding agencies and grantees a standardized set of financial management
procedures and definitions, by requiring consistency among grantor agencies
in their dealings with grantees, and by ensuring accountability for the expenditure
of public funds. State agencies are required to adhere to these standards
when administering grants and other financial assistance agreements with cities,
counties and other political subdivisions of the state.
(b)
Applicability. Chapter 783 of the Texas Government Code
specifically applies the standards only to state and local governments. School
districts, state colleges and universities and special districts are specifically
excluded by law from having to comply with these standards. However, to further
consistency and accountability, some state agencies have applied these standards
by rule or contract to all of their grantees. In addition, Chapter 2105, Texas
Government Code (1 TAC 5.167(c)) subjects all subrecipients of federal block
grants to the standards. Therefore, recipients and subrecipients other than
state and local governments, including nonprofit organizations, should ascertain
from their awarding agencies whether or to what extent they are subject to
these standards. In the event of a conflict between UGMS and applicable federal
law, the provisions of federal law shall apply.
(c)
Scope. These standard financial management conditions and
uniform assurances are applicable to all grants, cooperative agreements,
contracts and other financial assistance arrangements executed between state
agencies, local governments and any other subrecipient not specifically excluded
by state or federal law. Contracts for the sole purpose of procuring goods
or services on a competitive basis, in which there is a clear purchaser-vendor
relationship, as opposed to a grantor-recipient relationship, are excluded
from the requirements of these standards (see Uniform Assurances and Standard
Conditions Required: Variations (See "State Uniform Administrative Requirements
for Grants and Cooperative Agreements, Subpart A(3) definition of "grantee").
State agencies may deviate from these standards only if the agency has complied
with Texas Government Code, sec. 783.007(c), Uniform Assurances and Standard
Conditions Required: Variations (See "State Uniform Administrative Requirements
for Grants and Cooperative Agreements", Subpart A(6)(a)).
§5.143.Effective Date.
The effective date of the uniform cost principles and administrative
requirements is 20 days following final adoption in the
Texas Register
. Grants, contracts and other financial assistance agreements
entered into prior to the adoption date of these standards will be subject
to the provisions of the Uniform Grant and Contract Management Standards
dated February 22, 1990. The State of Texas Single Audit Circular is effective
for single audits of fiscal years beginning after June 30, 1996. However,
if an awarding state agency has already adopted rules in codified regulations
governing single audits of non-state entities for fiscal years beginning
after June 30, 1996, the agency shall apply the standards set forth in this
single audit circular for audits of fiscal years beginning after June 30,
1997.
§5.144.Adoption by Reference.
As directed by the Act, the Governor's Budget and Planning Office adopts
by reference Office of Management and Budget Circular A-87, as annotated and
revised; the Common Rule of OMB Circular A- 102, as annotated and revised;
and Office of Management and Budget Circular A-133, as annotated and revised.
These circulars have been renamed, respectively, "Cost Principles for State
and Local Governments and Other Affected Entities", "State Uniform Administrative
Requirements for Grants and Cooperative Agreements", and "State of Texas Single
Audit Circular".
§5.145.Grants and Contracts.
The terms "grants" and "contracts" as used in the Uniform Grant Management
Standards are synonymous only when used to describe a financial agreement
involving an awarding agency and a recipient or subrecipient. Procurement
contracts or agreements in which there is a clear purchaser- vendor relationship
are not covered by the Uniform Grant Management Standards.
§5.146.Standard Assurances.
A listing of major state assurances which may apply to federal pass-through
and state-appropriated funds may be found in the State Uniform Administrative
Requirements for Grants and Cooperative Agreements, Subpart B, §___.14.
Many of these assurances apply only to state agencies, and in most cases,
only some will apply to a given grant. This list is subject to change, and
it is the applicant's responsibility to determine which assurances are required
and that all those required by the awarding agency are submitted.
§5.147.Variance from Standards.
State agencies may vary from the Uniform Grant Management Standards
(UGMS) only when required to do so by federal legislation or regulations or
by specific state statute. State agencies are required to publish the variance
in the Texas Register and to notify the Governor's Budget and Planning Office.
State agencies' rules or self-regulation are not sufficient to authorize variance
from the provisions contained in the UGMS.
§5.150.Uniform Cost Principles and Cost Allocation Plans.
(a)
The Uniform Grant Management Standards (UGMS), Chapter
II, "Cost Principles for State and Local Governments and Other Affected Entities"
sets out the basic cost principles applicable to all grants administered by
a state agency which are awarded to cities, counties, other political subdivisions
of the state and entities receiving state-administered funds from federal
block grants. This chapter specifically includes, therefore, all federal categorical
grants, federal block grants, and state grants.
(b)
The basis of Chapter II is OMB Circular A-87, which designates
the Department of Health and Human Services (HHS) as the federal agency responsible
for issuing instructions for use by grantees in the preparation of cost allocation
plans. OMB Circular A-87 is included in its entirety, with annotations showing
differences between federal and state law and practices.
(c)
Cities, counties, and other political subdivisions of
the state seeking to establish a cost allocation plan and indirect cost rate
should contact the federal Office of Management and Budget to request an assignment
of a cognizant federal agency to review and approve any such plan. In those
cases in which funds are received from two or more state agencies, recipients
should contact the Governor's Budget and Planning Office to receive an assignment
of a state single audit coordinating agency. This agency may, but is not required,
to review and approve the cost allocation plan.
§5.151. Uniform Administrative, Accounting and Reporting Standards.
The basis of the Uniform Grant Management Standards (UGMS) Chapter
III, "State Uniform Administrative Requirements for Grants and Cooperative
Agreements", is the Common Rule of OMB Circular A-102, which has been adopted
by reference in §5.144 of this title (relating to Adoption by Reference).
Applicable provisions of the Common Rule have been reprinted in UGMS, with
annotations showing where state law and practices differ from the Common Rule.
(See "State Uniform Administrative Requirements for Grants and Cooperative
Agreements", Subpart A---General, §___.4 for applicability to state and
federal funds.)
§5.167. State of Texas Single Audit Circular.
(a)
The basis of the Uniform Grant Management Standards (UGMS)
Chapter IV, "State of Texas Single Audit Circular", is Office of Management
and Budget (OMB) Circular A-133. This state audit circular is to be used in
conducting single audits of state financial assistance to recipients and subrecipients.
All awarding agencies are responsible for ensuring compliance with OMB Circular
A-133 when federal funds are involved and for coordinating the single audit
of state funds with affected federal agencies when both federal and state
funds are awarded.
(b)
The concept of single audit is designed to maximize the
efficient and effective use of public resources, to minimize work flow disruptions
for grant recipients and to provide state awarding agencies consistent audit
procedures and assurances. Under these rules, a designated state single audit
coordinating agency will assure that the single audit effort is well-coordinated
among state funding agencies and with the federal cognizant agency. The federal
cognizant agency is responsible for assuring that the independent audit is
performed for federal funds in accordance with the provisions of OMB Circular
A-133. No attempt is made to emulate the federal cognizant agency by the designation
of the state single audit coordinating agency. Rather, the purpose is to provide
an audit coordination effort at the state level to bolster the single audit
concept. It must be thoroughly understood that the single audit process is
available but will not replace state agency program monitoring and review
of subrecipients' compliance with contractual terms and conditions throughout
the grant period. As indicated by Circular A-133 and this state single audit
circular, any supplemental audit work should build upon the audit accomplished
by the single audit.
(c)
Chapter 2105, Texas Government Code, requires that all
subrecipients of federal block grants be included under provisions of the
Uniform Grant and Contract Management Standards.
(1)
When a single audit is needed and two or more state agencies
provide funds to a recipient covered by this circular, the subrecipient may
request the designation of a state single audit coordinating agency from the
Governor's Budget and Planning Office. If only one state agency provides funds,
no state single audit coordinating agency will be necessary and the grant
recipient should work directly with its state funding agency.
(2)
To have a state single audit coordinating agency
designated, a recipient must submit a written request to the Governor's Budget
and Planning Office, P.O. Box 12428, Austin, Texas 78711. This request must
list the state agencies providing financial assistance with the grant amounts
for the year to be audited and indicate that the governing body has authorized
the initiation of the single audit.
(3)
Within 30 days after the receipt of the request,
the Governor's Budget and Planning Office, after consultation with the state
auditor, will designate a state single audit coordinating agency. The following
criteria will be used in selecting the appropriate state single audit coordinating
agency:
(A)
state agency request or agreement to be the coordinating
agency;
(B)
state agency capability;
(C)
amount and source of funds awarded to the grantee; and
(D)
state agency workload.
(E)
Request for change. A state agency or a recipient may
request a change in the designation of the state single audit coordinating
agency. The designation of a state single audit coordinating agency will remain
in force until eliminated or revised by the Governor's Budget and Planning
Office. All previous state single audit coordinating agency designations by
the Governor's Budget and Planning Office will become the state single audit
coordinating agencies upon the effective date of these rules.
(d)
At the earliest practical date, but not later than 60
days prior to beginning a single audit, the recipient shall notify the state
grantor agencies and the state single audit coordinating agency that the audit
plan is being formulated. Each state grantor agency should assure that special
audit issues are identified and transmitted to the recipient during this early
warning period. Any subsequent additional costs of compliance which are outside
the scope of OMB Circular A-133 or the State of Texas Single Audit Circular
are allowable expenses to the contract being audited, as long as they are
paid from nonfederal funds. The state single audit coordinating agency shall
have an opportunity to review the scope of the audit and, at its option, participate
in an engagement conference with the independent auditor prior to commencement
of the single audit. The state single audit coordinating agency shall contact
the federal cognizant agency at the earliest practicable point as necessary
to coordinate when federal and state funds are involved.
(e)
The state single audit coordinating agency must be provided
a completed audit report by the recipient. A desk review will be accomplished
by the state single audit coordinating agency to determine that the audit
report covers the major elements of the State of Texas Single Audit Circular.
Upon receipt of the audit report, the state single audit coordinating agency
is responsible for carrying out the duties described in §___400(a)(1)-(8),
Uniform Grant Management Standards.
(f)
When the state single audit coordinating agency determines
that the audit report meets the report requirements of this audit circular,
the recipient will be so notified by letter and instructed to distribute the
audit report to all state funding agencies for their review. A copy of the
notification letter should accompany the distributed reports.
(g)
Each state funding agency is responsible for reviewing
the portion of the audit dealing with its programs and is also responsible
for the necessary follow-up and resolution of audit findings that relate to
its individual programs. Each affected state funding agency must notify the
state single audit coordinating agency after the audit findings have been
resolved as required by the appropriate funding agencies.
(h)
The recipient must notify the state single audit coordinating
agency and the state grantor agencies when cross-cutting audit findings have
been resolved.
(i)
If assigned, the federal cognizant agency is responsible
for negotiating, approving and auditing indirect cost allocation plans. In
the absence of a signed negotiation agreement from the federal cognizant agency,
the state single audit coordinating agency, may, at its discretion, perform
these duties as they pertain to state funds. In the event that neither the
federal cognizant agency nor the state single audit coordinating agency performs
these duties, the major state funding agency or another state agency designated
by the governor's office may perform these duties as they pertain to state
funds.
This agency hereby certifies that the adoption has been reviewed
by legal counsel and found to be a valid exercise of the agency's legal authority.
Filed with the Office of the Secretary of State on January
23, 1998.
TRD-9801056
Pete Wassdorf
Deputy General Counsel
Office of the Governor
Effective date: February 12, 1998
Proposal publication date: September 19, 1997
For further information, please call: (512) 463-1788