In May 2017, the Office of Budget and Management (OMB) issued guidance to allow an additional grace period of one year for non-federal entities to comply with the procurement standards of the Uniform Guidance. The implementation date will now start for fiscal years beginning on or after December 26, 2017.
 
The original procurement guidance was included in the Uniform Guidance issued in December 2013 and represented a significant change to the current guidance at that time. Among the changes were the following requirements: 

• Procurement policies and standards of conduct must be documented for purchases made using federal funds
• The use of full and open competition through five methods of procurement are required:
  • Micro-purchase – The aggregate dollar amount does not exceed $3,000 (or $2,000 in some instances, such as construction). There are no competitive quotes required if management determines the price to be reasonable.
  • Small purchase – Required to be used for up to the Simplified Acquisition Threshold (currently $150,000). Informal purchasing procedures can be used, but quotes must be obtained from multiple sources.
  • Sealed bids – Most commonly, sealed bids are used in construction contracts and must be used for purchases over the Simplified Acquisition Threshold. Formal solicitation is required and the bids that meet all requirements and that come in at the lowest price will be awarded the contract.
  • Competitive proposals – Used for purchases of the Simplified Acquisition Threshold and requires formal solicitation, fixed-price or cost-reimbursement contracts. This is used when sealed bids are not appropriate. While cost is a factor here, the lowest bid will not always win.
  • Noncompetitive proposals – This is also known as sole-source procurement and is available when specific criteria is met, such as in the case of a public emergency. 

What should you do now? Even though an extended grace period has been granted, your nonprofit organization should take steps to move towards compliance with the new procurement standards. First, document your current procurement and standards of conduct (if not already done) and assess how they will need to change. Educate those in the purchasing area to ensure they are aware of the new policies. Finally, evaluate your internal controls surrounding purchasing and adjust them as needed. 
 
Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.