New single Audit guidelines due out later this year have been causing anxiety for many nonprofits. These new rules and regulations, called the Uniform Guidance (UG), will be in effect for entities with new contracts or revised contracts signed after 12/26/14. New administrative requirements and cost principles may be in place as early as this summer for some organizations. The most significant impact to nonprofits is time and effort reporting requirements.

When salaries are charged to a federal program, the UG requires:

  • Charge is reasonable — salaries charged should be at the same rate for both federal and non-federal contracts. Additionally, salaries should be comparable to that paid for similar work in the labor market. Salaries charged follow the nonprofits written policy for tracking time. Is supported per documentation requirements. The last criteria of supporting the time spent on a federal contract is the most critical.Significant issues can arise if the nonprofit is not complying with these mandated requirements. Supporting time and effort under the new rules might require a few tweaks to your current policies and procedures.

Under the new requirements, the process must:

  • Be supported — best practice would suggest having a timecard that outlines total hours worked for each employee by day and activity
  • Be an official record — best practice would require employees to certify a timecard and a supervisor to approve the time card periodically (at the end of time period is suggested).
  • Reflect total hours worked by the employee (cannot show estimated or budgeted; MUST be actual based on employees “clocking in and out” every day).
  • Show federal, nonfederal time spent on contract and programmatic work, administrative work and fundraising work performed.
  • Comply with accounting standards (generally accepted accounting principles or other standards followed). This may mean educating employees on what is defined by GAAP as program, management and fundraising activities.
  • Show how the employee’s time is allocated over the various programs. Audit support must be retained to show how the costs were charged to the various programs. Best practice might suggest a summary by employee and activity for each pay period would be sufficient support.

Many different payroll systems have the ability to incorporate the above requirements however if the cost is not feasible for your small nonprofit, a simple paper timesheet that tracks each day can be sufficient to comply. Our firm is here to help navigate tyou through these new requirements in this year of transition. Please contact our experts in non profit accounting Gerard DeBlois or Jessica Yoder.