What Not-for-Profits Need to Know About the New Procurement Standards Effective in 2018– June 19, 2018 by Sarah Lee

In 2013, the Office of Management and Budget (OMB) issued new procurement standards under Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and then extended their implementation for nonfederal entities until after 2017. The new standards bring significant documentation requirements for not-for-profits procuring goods and services from outside vendors.
However, time is up! Beginning in 2018, all not-for-profits must comply according to the schedule below: 

  • December 31 year-ends went live with the new standards on January 1, 2018
  • June 30 year-ends go live July 1, 2018, and
  • September 30 year-ends go live October 1, 2018 

Under the new Uniform Guidance, not-for-profits’ procurement efforts of any kind must comply with the following standards: 

  1. Document and maintain written policies and procedures over procurement. Ensure the policies meet all standards and incorporate any other applicable laws and regulations.
  2. Ensure costs incurred are necessary and cost-effective.
  3. Conduct procurement transactions in a manner that provides full and open competition.
  4. Maintain written standards of conduct covering conflicts of interest and governing the performance of employees engaged in the selection, award and administration of contracts. Policies must include disciplinary actions to be applied in the event of any violation of the standard.
  5. Maintain documentation addressing cost and price analysis, and vendor selection, as applicable for the selected method of procurement. 

The most significant revision to the requirements is that there are now five allowable methods of procurement with dollar thresholds for each: 

  1. Micropurchases (less than to $3,000)
  2. Small purchases (less than $150,000)
  3. Sealed bids purchases (more than $150,000)
  4. Competitive proposal purchases (more than $150,000) and
  5. Noncompetitive purchases (special circumstances, which are applicable for all purchase levels). 

Don’t underestimate the changes in the new rules or the compliance challenges they bring. As documentation remains one of the more important requirements under the new guidance, work toward ensuring all of your policies and procedures surrounding procurement have been appropriately documented and communicated to all applicable employees. Increased documentation also includes keeping all quotes received, rationale for selections, cost/price analysis and negotiation memorandum.
This post is a primer to all of the detail included in the new procurement standards. Hopefully your not-for-profit has made the time and effort to understand the requirements and revisit your related policies and procedures. If not, begin working with your audit team now to help get you up to speed.
Read the entire text of the new procurement standards.
Please contact a member of your service team, or contact Sarah Lee at slee@cohencpa.com or Marie Brilmyer at mbrilymer@cohencpa.com for further discussion. 

Cohen & Company is not rendering legal, accounting or other professional advice. Information contained in this post is considered accurate as of the date of publishing. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts, circumstances and current law.