0001 1 2 3 4 U.S DEPARTMENT OF COMMERCE 5 National Telecommunications and Information 6 Administration 7 8 Broadband Technology Opportunities Program 9 10 11 COMPLIANCE REQUIREMENTS 12 13 14 Presentation 15 16 Cynthia B. Schultz 17 Director of Compliance and Audits 18 19 Transcribed from provided audio 20 21 22 0002 1 Male Speaker 1: Please take your seats. 2 Our program, our next presentation will begin shortly. 3 Ladies and gentlemen, please take your 4 seats. Our next presentation will begin shortly. 5 Male Speaker 2: Thank you, everyone. If we 6 can take our seats we’ll get started. 7 One housekeeping matter. For those standing 8 up and do not have a seat, there is one table, very 9 popular, right over here in the front, to my left. 10 So, if we could get some of the folks who are standing 11 up to come join us here in the front we’d appreciate 12 it. 13 Ms. Schultz: Okay. We’re going to begin. 14 Again, for those of you who don’t have seats, please 15 feel free to occupy the table next to our IG. You 16 just got to meet all of them. They’re very friendly. 17 But we’d like you to be comfortable throughout the 18 day. 19 So, I have the pleasure this morning of 20 addressing all of you on compliance. I normally go 21 before the IG, so I have a tough act to follow after 22 all of the great advice and the tips that they gave 0003 1 you. 2 I’m Cynthia Shultz, and I’m the Director of 3 Compliance and Audits for the BTOP program and work 4 very closely with the IG, as well as GAO and our team, 5 to help you succeed in your grants. And so, it’s a 6 pleasure to be able to take you through some of the 7 key compliance requirements. Probably a little bit of 8 housekeeping, as you saw, as you were asking very 9 important questions to our IG. 10 One of the things that I would recommend 11 when you do have questions is recognizing that all of 12 you come to us in your different entities For-Profits, 13 Non-Profits, State and local governments, perhaps some 14 sub-recipients and even contractors in the audience. 15 And so, there are all different kinds of rules that 16 I’ll go through that apply to all of you. And in, I 17 think, trying to keep less confusion, I would ask, if 18 you have specific questions about your project, to 19 take them offline and snag one of us to help you 20 navigate through that specifically, so that we can ask 21 the facts and understand better. Because much of what 22 you’ll learn about, and what you are learning about 0004 1 compliance in this program is that it’s very facts- 2 based according to your project specifically. 3 So, let’s begin. What I’m going to cover 4 today, this morning, is really just a basic primer for 5 all of you. Some of you may have seen this 6 presentation in, you know, while we were in the Pre- 7 Award for the NOFA 2 Round. And the other part of 8 what I want to bring to you is, as we are, you know, 9 growing the program, now you’re onboard, and we had 10 the Round 1 recipients, indeed we’ve learned a lot 11 through that process of your challenges. 12 And every time we do, we try to get better 13 in our messaging, either through fact sheets, changes 14 to our Recipient Handbooks, and things I’ll be talking 15 about this morning. So, I’m going to be highlighting, 16 really, the Federal regulations that apply to all of 17 you in this program -- the uniform administrative 18 requirements, the cost principles, and the audit 19 requirements, as well as some of the key ARRA 20 requirements, and then go over some of the special 21 award conditions which all of you, I’m sure, are very 22 familiar with in your CD-450s. 0005 1 First I’d like to begin, though, here with 2 talking about the key roles. I think this is really 3 an important part of our conversation this morning for 4 you all to understand as you, you know, walk forward 5 and start to implement your projects and deal with us, 6 the Federal officials in these projects. Who are we? 7 And who has authority? Who should you be speaking 8 with? When? How? These are all really important 9 questions. 10 Most importantly, of all of that, is that we 11 want you to come to us, and you want you to speak with 12 us. We want to work collaboratively with you. I know 13 I had the opportunity last night to sit with some of 14 you, and the question went around, what’s the most 15 important thing? And one of the things I think is the 16 most thing in this program is that, yes, you are, as 17 Tony Wilhelm said, you know, you are dealing here with 18 us Federal officials. This is not, perhaps, 19 government as you once knew it or still do know it. 20 We’re here to help you succeed. And so, we’re not 21 here to have that “gotcha” mentality. You know, we’re 22 here to partner with you collaboratively, to work 0006 1 through your issues the best we can. So, we don’t 2 want you to shy away, especially when you think you’ve 3 done something that may be incorrect. It’s important 4 for us to understand that maybe you made a mistake. 5 Mistakes are good. We grow through them and we learn 6 from them. And so, as you go forward and you’re 7 speaking with us, keep that in mind, and also 8 encourage the people on your staff to keep that in 9 mind. 10 I know that they can, you know, get nervous 11 when you’re talking to a Federal official. But as our 12 IG also pointed out, it’s really important. 13 Communication is probably the most important thing to 14 the success of this. Learning the rules, the 15 regulations of how to really navigate through this, 16 and open communication through the entire project. We 17 know you’re going to have challenges, not just because 18 a lot of you are new to the grants world, but also 19 because of the times of our economy. We understand 20 that. We’re here, we’re right here, American citizens 21 alongside of you, understanding exactly what those 22 challenges are. So, bring them to us and we’ll work 0007 1 through them together. 2 With that being said, we do have two 3 different roles. We have the Federal Program 4 Officers, who Larry introduced this morning, and Tony, 5 and then the NTIA program, and very important to us, 6 of course, are our Grants Officers. And I know Sonja 7 Wyatt is with us, and I’m sure some from your team. 8 And I haven’t seen Joyce Brigham from NIST yet. But 9 they, we work collaboratively every single day, 10 probably every hour, on some level with them, as well 11 as you all probably do. 12 Let me tell you the distinguishing factors 13 here, as you go forward in speaking with folks. Our 14 Federal Program Officers are really the people you’re 15 going to be talking to on the first line on many 16 issues that deal with programmatic requirements -- the 17 NOFA, the technical requirements, the PPR reporting 18 requirements, right? The progress reporting 19 requirements. That’s a different role than our Grants 20 Officer plays in the awards. Grants Officers are the 21 only Federal officials that have the authorization to, 22 one, sign the CD-450, which is your binding contract 0008 1 with the Government when you accept that award. Or 2 even if you didn’t sign it, you drew down money, 3 that’s a form of acceptance of the award. 4 And the other things is that they are 5 responsible for the financial part, so you will file 6 financial reports on a quarterly basis. They’re also 7 responsible for the ARRA reporting, and we’ll talk a 8 little bit about that. But it’s probably one of the 9 most important things, and it’s probably very, very 10 challenging for all of you. It is an ARRA 11 requirement. And I always say this is our President’s 12 report card to the nation. And your role in that is 13 really important, and we’d like to see you all succeed 14 with A’s, so that we can make sure that we’ve got a 15 good report card going out. But our Grants Office 16 handles those reporting requirements. 17 They also handle all amendment award 18 requests, and they are the only ones that can actually 19 officially approve changes in budgets and scope. And 20 throughout this conference you’ll be hearing, there’ll 21 be some presentations on scope modifications and more 22 discussion on amendment award requests. I’m not going 0009 1 to go into great detail about that. But it’s really 2 our Grants Office. If you don’t have -- and you don’t 3 need written approval in all circumstances, so it’s 4 important that you do talk with our Grants Office and 5 our Federal Program Officers. But, where you do need 6 them, you will have to have them in writing, because 7 that becomes part of your CD-450, which is also known 8 as your binding contract with the Government. So, we 9 interchange this. 10 And just so you don’t get confused, again, 11 Federal Program Officers are really your interface to 12 your project, the technical requirements. The Grants 13 Office really is the grants administrator of a Federal 14 Grants award, handling the things of financial 15 reporting, ARRA reporting, and all of the amended 16 award requests. We work hand-in-hand with one 17 another, and it won’t surprise you, as you probably 18 all learned, and, or, will learn, that sometimes we 19 wear both hats and we change hats, but at the end of 20 the day, the actual approval authority does flow 21 through to the Grants Office with the recommendations 22 of our FPOs. 0010 1 So, there are a lot of rules and regulations 2 that flow with these awards, that I hope will become 3 somewhat second nature to you. I’m sure that they’re 4 quite daunting right now and challenging, especially 5 for our For-Profit grantees who are new to the Federal 6 Grant world and others who may be new to the Federal 7 Grant world. So, we’re to help you sort of figure out 8 where you are. And I always say, you know, how you 9 learn to know what hat you’re wearing, because as 10 Katie pointed out, what hat you’re wearing, whether 11 you’re a recipient, a subrecipient, or a vendor, is 12 going to be critical in how well you navigate through 13 the roles and responsibilities that you have as prime 14 recipients. 15 So, just to touch on lightly -- and I’m not 16 a person who really reads from slides, so this is 17 available to you in your handbooks as well as online - 18 - I’m going to touch on the major things and points 19 that I think are important to you. 20 You have to comply with all of these uniform 21 administrative requirements. You have to comply with 22 the cost principles and the audit requirements. We’ll 0011 1 go through that. Remember, this is a Federal grant, 2 and there is discretion as far as the Federal grants 3 go when you’re dealing with cost principles. So it’s 4 important that we understand what the facts of your 5 case are so that we can get to the right result with 6 you. And so, when you’re reading through these 7 requirements and you’re grappling with them, and you 8 may not understand them, you know, you can reach out 9 to us for clarification and we’ll assist you to the 10 best of our ability in doing that. 11 Some of the key things that really are going 12 to be incredible significant, especially if you dealt 13 in the sole source justification, but for everything 14 in the competitive bid requirement, is that you must 15 have written procurement procedures in place, and you 16 must have a written Code of Conduct. And I’ll go into 17 a little bit more detail under these under the Uniform 18 Administrative Regulations. But it’s something that, 19 if you don’t that -- please, jot this note down -- 20 that when you get back you’ve got to go to work on. 21 Because this is what you will be audited against. And 22 if you don’t have it, it will become a material 0012 1 finding, and it has the potential of potentially 2 derailing certain contracts that you may have put in 3 place. So, we’re going to look to you about how you 4 run your awards, and that’s one way that we do it 5 that’s critical -- what your written procurement 6 procedures are. 7 As far as the drawdowns of funds, we’ve seen 8 this in some of our grantees already. The basic rule 9 here is that -- most of you are under the EA-SAC 10 drawdown once you meet your EA-SAC requirement, 11 special work condition for your infrastructure 12 projects. Not so for your SBA PCC. Most of those 13 were granted through categorical exclusion. But the 14 things is, you can’t hold on to Federal Government 15 money for longer than 30 days. So, if you drew down 16 more than you spent, then you have to return it to the 17 Treasury, or, you have to, yeah, return it to the 18 Federal Government. You can still use it, but you 19 can’t keep it in your bank account, and you can’t 20 commingle it, you can’t use it to pay, you know, wages 21 for some other part of your operation that is not part 22 of this grant because you might be in a bind. So, 0013 1 whomever is in charge of the accounting procedures, 2 it’s very important that you come to understand what 3 the cost principles are and the rules and requirements 4 around drawdown, and that you monitor it very, very 5 closely throughout the program. 6 Again, our Inspector General, of course, has 7 a right to access all grants and records. And I’m 8 hoping you, as prime recipients, will also make sure 9 that your subrecipients know that you, too, want 10 access to their records that relate to this, and their 11 documentation, so that you can successfully monitor 12 the flow-down requirements to those subrecipients. 13 I’ll talk a little bit more about that when we talk 14 about the audit section. 15 So, the next slide here goes to, this is 16 just sort of a great, I think, example of helping you 17 know where you fall as far as these regulations go. 18 So I would encourage you to really use this if you’re 19 not familiar with which circular applies to you. 20 Basically, if you look on the left-hand column and you 21 go down, it begins with the For-Profit Entity. And 22 the different entities that apply, that have received 0014 1 grants in our program, are listed here. So you’ve 2 got, you know, Institutions of Higher Education, Non- 3 Profits, you have State and Local Governments, Tribal 4 Governments, and the For-Profits. How do you use this 5 chart? You walk across. So, if you’re a For-Profit 6 entity, you’ll walk across and you’ll see exactly 7 which Commerce OMB circular will apply to your 8 project. Now, let’s say you’re a For-Profit entity, 9 and you have partnered with at subrecipient who is a 10 Non-Profit entity. That Non-Profit entity must adhere 11 not to your line of administrative requirements and 12 cost principles, but what falls on their line. Right? 13 So, the OMB circulars apply to the entity, not to the 14 prime recipient. 15 So, if you have multiple subrecipients, you 16 know, you have a Non-Profit, and then you have a State 17 or a local government, you’ll have three potentially 18 different sets of principles that may apply. So, just 19 walk through this, make sure you’re aware of that. 20 And also, make sure when you’re talking with your 21 subrecipients that they understand where their roles 22 and responsibilities apply as far as these particular 0015 1 OMB circulars are concerned. 2 So, we’ve got, like I said, a lot of 3 regulations and policies and procedures. And the good 4 news is, if you haven’t gone to our website, which is 5 on this slide, I’m going to encourage all of you to 6 make sure that this is one of your, you know, marked 7 as a favorite or bookmarked, that you actually go to 8 it, you use it. It is your, you know, resource, your 9 greatest resource into the BTOP Grant world. 10 There’s a part of this that’s called, Grants 11 Management, and I think it’s, one, two, three, four, 12 it’s the fifth tab over. Under this I’m very pleased 13 to say that when you click on that tab you will find 14 every single document applicable to your grant. So, 15 we didn’t leave it up to you to go fish in the Federal 16 Government, or onto OMB’s website, every entire agency 17 to figure out which one applies to you. We packaged 18 it up very neatly under Grants Management for you. We 19 tell you what the policies, you know, the DOC policies 20 are, grants policies. We tell you, you know, which 21 OMB circulars. They’re all there for the 22 administrative requirements for all entities. All 0016 1 cost principles are there. The audit requirements. 2 We’re still working on the For-Profit audit guidance 3 book that we’ll post there as well. All environmental 4 laws across the Federal Government, all hyperlinks are 5 there. All of our guidance documents to you are 6 there. And, of course, the one thing that I, you 7 know, you heard our Assistant Secretary this morning 8 say, it’s very important to read these things. It’s 9 the one mantra that I say every day to everybody at 10 BTOP. And when I’m even speaking with some of you, 11 it’s very obvious whether you’ve read it or whether 12 you haven’t read it because of the questions you ask. 13 So, we know just by that simple question, that you 14 really haven’t gone either to the Grants Management, 15 or you haven’t really read through the materials. I 16 can’t stress enough, please do that, for a couple of 17 reasons. One, we want you to be successful, you want 18 to be successful in this. And the way to success is 19 to educate yourself on these. This is not intuitive 20 if you’ve never been in the Federal Grant world. 21 Likewise, it’s not rocket science if you haven’t read 22 these yet. They’re pretty straight forward and clear 0017 1 on a lot of what the requirements are. They’ll make 2 sense to you if you do read them, and where you don’t, 3 then come to us and ask us. 4 But another key reason why I’m encouraging 5 you, please read these things, is so that you’re on 6 the same page when you are having a conversation with 7 us. And remember, resources are precious to you. And 8 you also heard our Assistant Secretary speak to the 9 budget this morning. Resources are very precious to 10 us here at BTOP as well. And so, you can help us do 11 our job better if you do the reading and you come to 12 us with the real issue, instead if you haven’t done 13 the reading and we’ve got to, then, train you on that 14 or ask you to go back and read it. So, let’s share 15 resources as we work collaboratively in this effort. 16 So, the one place that I’d like to bring you 17 to in your book to make sure, because we’ll be giving 18 a pop quiz tomorrow, I think, at lunch -- 19 (Laughter.) 20 Ms. Schultz: -- is for Tab O, BTOP 21 Recipient Handbook 2010. You’ll see here that there’s 22 the Table of Contents, and if you open it up -- which 0018 1 I’m going to ask you to do because if you haven’t read 2 this I want you to become familiar with what the Table 3 of Contents is so that you can actually understand 4 that not only do we have this incredible grants 5 management resource for you, but this is really, you 6 know, the most important, one of the most important 7 documents for you to become familiar with. It’s now 8 posted on our website. It posted yesterday. It is 9 the second version, because as we grow in the program 10 and noodle through some of these key issues with you, 11 we improve the handbook for you, and we also create 12 fact sheets so that we can message out to the entire 13 BTOP family of grantees, you know, further guidance on 14 particular issues. So, you can see the award 15 responsibilities, the project startup activities. 16 Drawdown of funds is there, how to comply with your 17 environmental SAC, your recipient reporting, project 18 modifications and award action requests, project 19 closeout, grant administration standards, complying 20 with the awards terms, understanding stakeholder and 21 media relations -- you’ll be attending a presentation 22 this afternoon and, again, as our Assistant Secretary 0019 1 said, we hope that you become part of that video and, 2 in telling your story, and this is going to help you 3 in that presentation and in these materials to learn 4 how to do that. And then we give you a master 5 checklist of activities. 6 This is to help you. So, become familiar 7 with that checklist. And it’s for financial, if you 8 go to it -- we didn’t put the whole thing here. It’s 9 130 pages, so we didn’t want you to lug that back and 10 forth. But it is available. That checklist is key. 11 I always said, use the checklist. Sit down at the 12 table. If you’ve got your financial part of it, then 13 make sure your CPAs, your accounting folks are at the 14 table and you’re following through with these rules. 15 If you’ve got the procurement side, the contract side 16 of this, get those folks at the table. Make sure 17 you’re following those rules and your State and local 18 procurement requirements. And make sure you’re 19 following that checklist, because, you know what? We 20 are. So, that’s our dialogue. And some of you have 21 gone through some of your initial desk reviews, I 22 believe, and you will go through, all of you will go 0020 1 through your first initial desk review. This 2 checklist is a really good primer to help you prepare 3 for that. So, go to it and start reading so that you 4 can answer the questions when you get on with the, our 5 Federal Program Officers. 6 Again, we also have helpful resources. 7 We’ve added, and I’ll talk a little bit about this, an 8 environmental commitment schedule checklist to help 9 you navigate through the environmental special award 10 condition on time, on schedule, so that you keep your 11 schedule with the milestones. 12 And here you will see fact sheets. A lot of 13 work has gone into this. A lot of thought, a lot of 14 approval processes throughout NTIA working with our 15 Office of Acquisition Management, which is the 16 responsible office of the Department for all grants 17 under the Department of Commerce. Sometimes we work 18 with the OMB on some of these things. We work with 19 our Office Counsel, and also our Office of Chief 20 Counsel. So, when you read these things, this is your 21 guidance from us on how to do better and tackle some 22 of the issues that you have. 0021 1 Now, as you go through this and you think, 2 gosh, you know, if it just talked to my issue a little 3 bit better, I would understand a whole lot more. 4 Well, we want to hear about that. So if you have 5 ideas for the next version of this that would help or 6 help your staff, you know, comply with these things, 7 then we’d like to hear what those ideas are so that, 8 if it makes sense across the board for everyone we 9 will make sure that it gets into the next version of 10 the Recipient Handbook, as well as, if it warrants it, 11 to a fact sheet. 12 Okay. So, moving along here, we’re going to 13 start talking about the administrative requirements. 14 When you look to the Uniform Administrative 15 Requirements, this is where you’re going to find all 16 the information -- well, almost all of the 17 information. Actually, the Federal Government does a 18 great job at putting pockets of information in 19 different places. I think we’ve done a great job 20 trying to bring all of those pockets back to you, you 21 know, to make one, have one central repository for it. 22 But, so it’s going to talk about property and 0022 1 procurement standards. So, when you’re grappling with 2 all of these procurement issues, the first thing you 3 need to do is go and read the applicable uniform 4 administrative circular that applies to you, because I 5 think it’s going to answer a whole heck of a lot of 6 questions for you. 7 On the financial and program management 8 side, reporting and record-keeping, and the flow-down 9 requirements for subrecipients, which you started to 10 hear a little bit about from our IG, and this is going 11 to be a very critical part for you in managing the 12 grant. And it’s, one of your prime responsibilities 13 is in the monitoring of the subrecipients and what you 14 put into place. So, the uniform administrative 15 requirements is one place where you can go for this. 16 But there’s also a couple of other places 17 that talk about roles and responsibilities of 18 subrecipients and vendors, and one of them is in the 19 A-133 on the audit section. It talks a lot about the 20 subrecipient roles and the recipient roles, so you 21 might want to go there. And another really great 22 place to go is the OMB guidance that’s put out for 0023 1 ARRA reporting. They also talk about the roles and 2 responsibilities of subrecipients and how they flow 3 down. So if you’re really grappling with, you know, 4 what hat who’s wearing, I would encourage you to go to 5 those sources of information, all of which are 6 available on the Grants Management site, for free, and 7 read about it. And, you know, I’m not going to 8 guarantee that they’re all going to line up perfectly 9 for you. But I will tell you that they will give you 10 the kind of information that you need to help you make 11 decisions as you are, you know, partnering with your 12 subrecipients or your vendors. 13 So, let’s talk about some of these roles and 14 responsibilities. Recipient, and subrecipient, and 15 contractor. So, a lot of you, as you heard Katie say, 16 you know, it really matters whether you’re the prime, 17 the subrecipient, or contractor. So, that’s what the 18 regulations talk to. I know all of you in ARRA, NOFA 19 talked about public-private partnerships. But you’ve 20 got to drill down now as grantees into what hat you’re 21 wearing in this public-private partnership. And 22 that’s really important. So, you know, when we think 0024 1 and when we’re trying to figure out the issue with 2 you, we’re going to ask you, just as you, we asked one 3 of the recipients in the audience, who are you? Who 4 are you providing services? Are they a subrecipient 5 or are they a contractor? So, when you come to us, if 6 you can get that clarity in your question, that’s 7 going to help us a whole lot in understanding how to 8 answer and get you the guidance that you’ll need on 9 the issue. So, this sets forth -- and it’s just a 10 resource. This comes out of our A-133, section 210. 11 And, you know, it applies to all entities in the BTOP 12 Grant world, with the exception of the For-Profit 13 entities. There is subpart 235 of A-133 for program- 14 specific audits. And, again, I’ll talk a little bit 15 more about that. 16 So, here, the recipient, you as recipients 17 understand because you’ve been on the front line with 18 us through the entire process -- the application, the 19 due diligence, and now in the post-award environment 20 as the grantee. Your issues are going to be with, who 21 are you choosing as a subrecipient and a contractor? 22 And, you know, the subrecipient is somebody who’s 0025 1 walking side-by-side with you and somewhat in your 2 shoes, to make sure that they’re benefiting the 3 public, you know, the objectives of our program, the 4 public purpose of this grant. They’re involved in the 5 managing and decision-making on a daily basis, or on a 6 very critical, substantial level in the grant. That’s 7 very different than a vendor. And I, you know, 8 sometimes I use the analogy, right or wrong, but, is 9 that, you know, a vendor is providing equipment or 10 services, much like, one could say -- and I remember 11 having this discussion with someone within Commerce, 12 because we differed on what we thought a subrecipient 13 was. 14 So, you know, whomever you’re speaking to, 15 you could hear differing things. We’re all sort of 16 grappling with this in the world of ARRA. So don’t be 17 frustrated. We’ll work it through with you. But, one 18 of the things was, you know, her position was, well, 19 an engineer is a subrecipient. And I said, I don’t 20 think so. That sounds like a contractor to me, a 21 contracting service. And, you know, she said, no, you 22 know, they’re there for the whole life of the project. 0026 1 And I said, yeah, so is my doctor, but that doesn’t 2 mean my doctor is coming in on the daily decisions of 3 my life. Only when I go to that doctor and need 4 something. 5 So, when you’re looking at the kinds of 6 relationships you’re building, is that vendor out 7 there providing those services to others, you know, 8 ubiquitously, you know, because that’s what they do 9 for a living, and you’re just receiving some of those 10 equipment and services? That’s a very different 11 relationship that a subgrantee, also known as a 12 subrecipient, who is getting direct money, a subaward, 13 or subgrant. You’ll hear these differing words 14 depending on what kinds of documentation you’re 15 reading. And so, it’s important for you to start to 16 really understand these concepts if you don’t. And 17 this is one way, it’s only you who can go to the table 18 and discussion with the folks that you are partnering 19 with and figure out what role do you want them to 20 have? Because it is a significant role to be a 21 subrecipient, right? All of what flows to you under 22 these Federal regulations flow through to the 0027 1 subrecipient. 2 And that being said, there are a lot of 3 contractors that, remember what Chris said -- It’s the 4 nature of the relationship, not what you write in your 5 agreement. So, you know, obviously, nobody really 6 wants the Federal Government to, like, you know, be 7 involved in all of these rules and regulations 8 attaching, because they’re challenging. So, we know 9 that contractors, everyone wants to be a contractor 10 instead of a subrecipient. It’s easier, right? And, 11 you know, you just get to benefit from the program, 12 and you get to get your money, and then you don’t have 13 all of these responsibilities. Be careful. Because 14 even if you came in and we awarded it, that was phase 15 1. Phase 2 is going to be our audits, and they’re 16 going to come in and they’re going to look to the 17 nature of the relationship. So, this is why I’m going 18 to spend a lot of the talk, of what I’m talking about 19 today with you this morning, on this, so that you 20 really does get on your radar, you really start 21 thinking about these roles, and you become very clear 22 as you move forward what it is. The last thing we 0028 1 want to see when these audits come, and you know they 2 will come for each and every one of these projects, is 3 material findings on this issue recommending 4 disallowances because you didn’t get the role defined 5 correctly. So, you have opportunities to get this 6 right. Talk to us about it -- if it’s not, what may 7 need to happen in order for you to get it right, and 8 the steps that you’ll have to go through. Okay. 9 Again, you’ll see that this presentation really spends 10 a lot of time on this issue, because we know that this 11 is a challenge, and so we spend time where we know 12 that our grantees are having challenges. 13 I provide this to you because you really see 14 what the subrecipient’s, you know, role are. So if 15 you’re sitting at the table and it sounds like that’s 16 who your partner is -- that they’re doing these kinds 17 of things, they’re performing the substantive work on 18 the award to accomplish BTOP’s purposes, you know, 19 that they’re going to, you know, the financial rewards 20 that they’re going to have, that they’re part of the 21 decision making of who you’re choosing, why you’re 22 choosing it, all of those kinds of things -- that’s a 0029 1 true partner, right? Without that partner you 2 wouldn’t be successful? That’s different than a 3 vendor, where you can go out and, whether you buy that 4 computer or that computer, or that switch, or that 5 switch, it’s not going to make a bid difference for 6 you meeting your objectives on the project. 7 Distinguishing the subrecipients from contractors, 8 again, I just highlighted this in speaking with you. 9 Really, they provide the goods and services for the 10 benefit of the recipient. They don’t directly perform 11 any substantive work toward achieving the BTOP 12 purposes. And, of course, the subrecipient flow-down 13 requirements do not apply to contractors. 14 That said, one caveat to help you out here - 15 - if you read the administrative requirements and you 16 get to the end of it, there’s appendices, and it also 17 talks about it in the administrative requirements, and 18 it recommends certain contractual provisions that you 19 should have in your contracts with vendors that are 20 required as a matter of Federal law because of the 21 Federal grant. So, go there an make sure that you’ve 22 read that, and that you’re building these into your 0030 1 contracts. And if they’re not, then amend your 2 contracts and put them in. Okay? It doesn’t mean you 3 have to go out for a whole new, you know, RFP. But 4 you do have to amend it to make sure these clauses are 5 in, because they’ll be looking for them in the audits 6 on the Federal side of things here. 7 Okay. Where did we go? I’m going to talk 8 about the recipient codes of conduct. This, as having 9 mentioned right up front, having written procurement 10 procedures, having written codes of conduct, is 11 mandatory. It’s not, you know, voluntary. You’ve got 12 to have them for these grants. And so, if you already 13 have them in your organizations, that’s okay. You can 14 use them here. You don’t have to create new ones for 15 BTOP. If you don’t have them at all, then you have to 16 get them, and they’re really important. And there’s a 17 lot of different sources you can go out to. And I am 18 hoping that as you talk over the next couple of days 19 with one another and you’re grappling with some of 20 these issues, and you’re talking to somebody who has 21 familiarity with Federal grants, you know, ask them. 22 You know, ask for some assistance amongst one another 0031 1 to help you all out. So, the Code of Conduct, of 2 course, this goes to the heart of procurement, right? 3 The relationships. You can’t have somebody writing 4 your RFP and then bidding on that, right? That’s 5 going to present a problem. Related-party 6 transactions. 7 The things that the IG and the DOJ, the bid- 8 rigging, all of these kinds of things that, you know, 9 you don’t, you’ve heard them speak to it. You can 10 just Google all of this on FCC’s IG’s website and 11 others, and see the kinds of things that folks find in 12 Federal money. And that can help you be better 13 stewards of your own projects. Informing yourself is 14 going to be very important. So, understand what these 15 requirements are, and look within your organization, 16 and make sure that, to the extent that some 17 organizations or subrecipients may be very small, and 18 so they wear a lot of hats within their organization, 19 then you’re going to have to make sure that you’re 20 Chinese-walling yourself off, and that you are doing 21 what? You’re recording that, so that if there is a 22 finding, you can say, well, no. Here. We understood 0032 1 this. This is what our written Code of Conduct did. 2 We understood that there might be an appearance of a 3 conflict. This is how we handled it. 4 Remember, it’s a reasonable and prudent 5 person test when you’re going through these audits as 6 well, and so, as long as you’ve documented your 7 decision and it’s reasonable and it’s in accordance 8 with these principles, you should do fine. The one 9 thing, it’s like, you know, when in doubt, don’t do 10 it. The one thing I say that trips up a lot of folks, 11 especially in the For-Profit world because of sales 12 teams, right? And you’re used to going out and giving 13 the latest iPhone out, the latest Starbucks card, t- 14 shirts, you know, mugs, you know, hopefully not, you 15 know, a weekend on your yacht and, you know, a trip 16 to, you know, oh, an exotic place, or even a trip, you 17 know, to the local restaurants, you know, entertaining 18 your entire family or friends. This creates problems. 19 So, I say, don’t give a penny and don’t take a penny. 20 It’s that simple. Just keep the rule simple for you. 21 Then you don’t have to ask us, gosh, is an iPhone 22 okay? No. 0033 1 (Laughter.) 2 Ms. Schultz: It’s not. You know? If you 3 do it and the IG comes, and the auditors come, and 4 they see this, or some whistleblower, they love, this 5 is, you know, your competitors love to make phone 6 calls. And, you know, they say these things, then, 7 you know, then we have to do what? We have to look 8 into it, investigate it, if it’s right, what? There’s 9 a problem. What does that do? When we have a problem 10 like that, you’re not playing by the rules. So, you 11 know, stigma’s attached to that. You know, just stay 12 away from it. That’s my best advice to you. Just 13 don’t do it. And tell folks when they come to you and 14 they offer it to you. Say, no thank you, I’ll pay for 15 my own lunch, or, you know, I know some of you have 16 State and local procurement rules you’ve got to 17 follow. Just keep it single, and pay for yourself, 18 and just don’t take anything. And don’t want to give 19 anything out. 20 So, for the For-Profits, make sure that 21 you’re educating your own sales team. Because these, 22 you know, you’ve heard about fraud here. But a lot of 0034 1 what turns into fraud is because it’s sort of a 2 negligence. You didn’t read your Recipient Handbook 3 and the rules, and so there’s ignorance because you 4 didn’t read those foundational things. Then you get 5 tripped up, which leads you into gross negligence. 6 It’s getting worse now. And now you’re getting 7 scared, so you start to not want to talk to people 8 about it and hide it, which then starts making it look 9 more like fraud, when in actuality it started just at 10 negligence, and you’ve created this scenario along the 11 way. So, be careful. Try not to do that, right? 12 Because it’s easier. You will make mistakes. There 13 are, there’s a lot of stuff here to help you get it 14 right. And if you noticed, even, in your 15 organization, oops, that was not what we should have 16 done, go back and correct it. Right? I mean, talk 17 about it. Bring it to our attention so we’re aware of 18 it. You know, that’s a better thing than hiding it, 19 because, you know, then it gets found out, and you 20 didn’t say I,t and then, again, that starts to 21 unravel, right? And we don’t want to go there. 22 So, the procurement standards. Again, 0035 1 here’s an area where you’ve got to have written 2 procurement procedures. This is so important, and I’m 3 going to use sole source justification issues as an 4 example here. If you used sole source justification, 5 or sole source in choosing a subrecipient or a vendor, 6 and don’t have written procurement standards, you’re 7 going to get dinged. It’s just that simple. Because 8 you’re written procurement standards are going to have 9 to say that you allow sole source, and it’s, they’re 10 going to have to specify how and under what 11 circumstances. And sole source, there’s a lot of 12 guidance out there, right? 13 State and local procurement law follows, you 14 know, sole source, and what you need to do. You can 15 look to the guidance in the Federal documents, it also 16 talks about what you need to do. If you are in a sole 17 source environment, you’ve got to document, document, 18 document, right? You have to do a cost-price 19 analysis. You’ve got to document the justification 20 for that. Be smart. And, you know, I know we’re all 21 aware that, just as, you know, Larry had said this 22 morning, this was a very fast, speedy process. We get 0036 1 that, right? We were right there with you working 2 night and day to help get this out the door. So, we, 3 you know, it might be time, as you go through the 4 master checklist, to go back and look at these things 5 and shore up these things within your organization. 6 And if this is one of them, make sure you’re paying 7 attention, okay? And take care of it. 8 So, I give you some examples where, you 9 know, competition, you know, may or may not, you know, 10 be required. But you’re going to have to document 11 that. This is a competitive environment. DOC policy 12 requires that you have competitive bids and proposals 13 for subrecipients and vendors in the program, and that 14 you follow also your State and local rules on top of 15 the Federal requirements. So, again, please make sure 16 that you’re paying attention to these types of issues. 17 In the procurement world, okay, where did I 18 get that? Or, did I go backwards? Okay. Wow. 19 Somebody wants me to speed up or slow down. I’m not 20 sure. It’s very sensitive. Okay. So again, this 21 just a slide to help you through, right? It’s a 22 reference point. I just talked about it. Make sure 0037 1 that you’re documenting it, your justification. 2 The next slide we’re going to go to is 3 really the different types of competitive proposals 4 and non-competitive proposals. Again, this is on a 5 case by case basis. It’s specific to your 6 organization. So I encourage your to sit down at the 7 table with your contract folks, your procurement 8 specialists, your lawyers, whomever’s engaged in the 9 entire procurement process, and make sure that, you 10 know, everything’s lining up and you’re meeting your 11 requirements, and also your types of competitive bid 12 proposals. 13 Some allow sealed bids. Some require, you 14 know, three, that have to be posted in the newspaper. 15 I mean, it’s all across the board, so I can’t speak 16 individually to that for the entire nation, because 17 these are a matter largely of state law as well, and 18 local procurement law, and within your own 19 organizations. For-Profits, this is not a world in 20 which you generally play, except that if you are a 21 vendor to State and local governments you certainly 22 have to follow those laws and rules and requirements. 0038 1 So, please familiarize yourself with these as 2 presented here and in the other documentation I’m 3 referring you to. 4 I provide you with this summary, really, to 5 show you what you, a primary recipient and a 6 subrecipient, have to have versus a contractor. I’ve 7 spoken about this -- the flow-down requirements, 8 everything you’re hearing about, recipients today 9 flows down through to the subrecipient. And it’s your 10 job to monitor them, as it is our job to monitor you. 11 And so, the best way you can sort of learn about how 12 to do subrecipient monitoring is to follow some of our 13 guidance of how we’re monitoring you. Of course, you 14 don’t need to get that detail-oriented in a lot of 15 instances. But it should be a good guiding post for 16 you, that what we’re asking of you, you should be 17 asking of your subrecipients. You determine the level 18 of detail and documentation that you’ll be needing to 19 see. Contractors on the other part, you know, you 20 want to go out and make sure that you’re doing 21 business with folks who haven’t been debarred or 22 suspended in the Federal Government. You want to do 0039 1 your due diligence, right? You don’t want to find out 2 that your major contractor or subrecipient has somehow 3 been debarred under another Federal program. So, and 4 further guidance just came out from the OMB on this 5 issue, too, that really is requiring us at the Federal 6 level to monitor this suspension and debarment and the 7 audits, to make sure that if you’re getting material 8 findings in other agencies, that, of course, impacts 9 your role here within the BTOP grants. So, just to 10 keep you apprised of that. Again, the most important 11 thing is, I think, that you go out and make sure that 12 you’ve got the clauses for contracts, and I told you 13 where you could go to get some guidance on that, so 14 you’re thinking about that. 15 I’m going to turn now to the property 16 standards. Near and dear to my hear, security 17 interest. And all of you will come to know, for the 18 most part, your role in the security interest. If you 19 don’t, the first thing I want to say is, don’t panic, 20 you know? A lot of you come to us, and it’s, like, I 21 can’t sign the award until I get the security 22 interest. You know, these things take time. These 0040 1 are not simple issues when you’re granting the Federal 2 Government interest in your security. From our 3 perspective, it’s really simple. Right? We have a 4 reversionary trust interest. Sign it over. Right? 5 (Laughter.) 6 Ms. Schultz: From your perspective, it’s, 7 like, well, we can’t do that. We have a bank loan. 8 We have a third party. We have this, we have that. I 9 mean, there’s all these contingencies. They don’t 10 want to do it, they don’t want to play. I don’t know 11 what to do. Do I not sign? Do I give back the award? 12 No. No, no, no. Relax. We’ll find a solution, 13 right? That’s what we do. BTOP is great at that. 14 And we want to find a solution. But here’s the rule. 15 At the end of the day we have to take a security 16 interest, right? This is the American taxpayer’s 17 money. So, I don’t know where you get to go out in 18 the world and get a, you know, 2 million or a 5 19 million or a 50 million dollar, you know, deposit in 20 your bank account with no strings attached. I don’t 21 think you get that. And you don’t get it in the 22 Federal Grant world. You are required, as the 0041 1 recipient or the subrecipient, to provide -- or, both 2 sometimes we see -- a security interest in this. Now, 3 that being said, generally there’s lots of lawyers 4 that start to come to the table, right? Because, you 5 know, you’ve got interest in this for various reasons. 6 We have the complication in this particular 7 grant world that we’re dealing with infrastructure. 8 Does the bank own, you know, 100 million, and the BTOP 9 grant is 20 million, and how do you parse that out? 10 Who has the first, who’s first in line? Well, 11 generally, what do you think the answer is when it 12 comes to the Federal Government? 13 (Laughter.) 14 Ms. Schultz: Right. You got it. We’re 15 first in line, right? But that’s not to say that we 16 can’t find a solution to maybe be joint. But that 17 takes dialogue, it takes work. You know, commit some 18 resources if this is a concern of yours in your 19 organization, to work with us, to work with your 20 counsel on this, your banks, your lenders, because we 21 can’t understand all of where your lending is and the 22 intricacies of that, right? And we don’t have the 0042 1 time, nor do we have the resources. So, for us it’s 2 fairly simple, you know, you sign off and you give it 3 to us. But there are various mechanisms we’ve been 4 working through. We hope to issue some guidance on 5 this. Right now it’s with the Grants Office and with 6 our OGC, and so we’ll keep you posted as to what type 7 of guidance that we’ll be able to provide you with. 8 But, again, it’s got to be the recipient and, or the 9 subrecipient. It cannot be the contractor. Your 10 contractor cannot own these assets. Right? I mean, 11 you’ve got to own the assets, and you’ve got to get 12 the security interest. We can’t get a security 13 interest from a contractor. The contract the Federal 14 Government has is with you, the prime. And so, this 15 responsibility will ultimately rest with you. And 16 generally, these things can take a couple of years. 17 You didn’t see us put a Special Award Condition on 18 your grant saying, you must figure out the security 19 interest within the first six months, otherwise you’re 20 not getting any money. We didn’t say that. So, 21 because we know that this takes time. And so, I want 22 you to all know that, you know, relax. It does take 0043 1 time. And we’ll get to a solution, you know. And 2 whatever that solution is, it’s going to hopefully 3 meet the success of your goals and aims. 4 The, next I’m going to turn to -- see? 5 Isn’t this amazing what the administrative 6 requirements -- all of the stuff is there. Isn’t that 7 something? So, the next thing you go to -- did I -- 8 financial management. That’s there, too. So, we have 9 the financial capabilities checklist. This is really 10 important. Now, a lot of you may have gotten a 11 Special Award Condition on accounting verification. 12 And if you did, it basically said that we require at 13 management level a certification, or it’s actually -- 14 what did we call it? Assurance, management assurance, 15 I think it was -- that you have the accounting systems 16 in place in order to, you know, account for these 17 Federal funds and not commingle them with other funds 18 in your organization or with other Federal grants that 19 you may have. 20 And so, you have this management assertion 21 that you provide to us. You’re required to give it to 22 us within 30 days. It used to be a CPA certification 0044 1 that was required. We changed that, working with the 2 AICPA organization as well as OMB, because after 3 Sarbanes-Oxley, of course, a lot of accountants don’t 4 want to give certifications to accounting systems that 5 haven’t been put in place yet because they can’t test 6 them. And so, therefore, this is one of the areas 7 where you’ll see the agility and the swiftness with 8 which we work to try and make things easier for you. 9 And by asking just for a management assertion, get it 10 to us in 30 days, and that will lift the restriction 11 on that particular SAC to allow you to start drawing 12 down funds. 13 Why did we do that? Because this is 14 critical. This is where a lot of findings come in in 15 the audits. So, it’s to highlight to the heads of 16 organizations, as well as the authorized organization 17 representative, that this is important, right? 18 Prioritize this as you’re setting up your grants so 19 that you have the proper financial management systems 20 in place, or you are building them out to prepare to 21 properly administer these funds within your 22 organization and then, vis-à-vis, your interactions 0045 1 with the Federal Government on this. Okay. 2 Award management and recordkeeping. So, I 3 happen to think that anybody who has the honor within 4 your organization to be responsible for recordkeeping 5 under a BTOP grant should be given a raise. 6 (Laughter.) 7 Ms. Schultz: Because it’s important. And, 8 because this is where you’re going to run into tons of 9 problems, right? You don’t have the documents when 10 the audit comes. And when you don’t have the 11 documents, you know what the finding is? There’s a 12 finding. And it can be material. And the result of a 13 material finding would be a recommendation from our 14 IG, most likely to disallow those expenses. So, that 15 person in your organization is really important. And 16 whomever you are, if you are here, you know, and the 17 person in your organization responsible for the raise 18 isn’t, take this back, and make sure that it’s well- 19 known, and make sure you speak to this, because it is. 20 This is what’s going to also ensure your success. 21 It’s the little things sometimes that matter 22 most, that people oversee in an organization. And 0046 1 this is one of those little things that happens to 2 matter the most for all of you, is your recordkeeping. 3 And, you know, so I also say, go back and see what 4 kind of recordkeeping you have, what are your 5 processes and procedures that are in place? Who’s 6 monitoring whether they’re following it? That’s a 7 tough one in an organization, isn’t it? You know, 8 contracts are signed. Who owned it at the end, you 9 know? You don’t have counsel. What, whose desk is it 10 sitting on? And then the audit comes, and you don’t 11 have the one that was signed. I know I was there that 12 day. I’m sure I signed it. 13 Well, where is it? I don’t know. You know, 14 these are the kinds of things that will create a lot 15 of problems and will cost you a lot of resources, and 16 will cost us a lot of resources, right? And we don’t 17 really want to spend our money doing that if we don’t 18 have to, but we will, because it is our, you know, our 19 obligation. So I say, if you have one person and your 20 are a sizable grant, please think about a redundant 21 backup system that you have in place, that somebody 22 else in your organization understands your 0047 1 recordkeeping. So, if it’s John or Jay or Mary or 2 Jane, it’s not just about them. What happens if 3 they’re in an accident or they’re taken ill, or they 4 decide to take another job? You have to have 5 redundancy built in here because this is important to, 6 one, administering under your responsibilities of this 7 grant. So, please take note of that. And also, 8 remember that you’ve got to keep your documents up to 9 3 years after the award closeout. There’s an audit 10 going on, you know, after that time period, that 11 closes. If there’s litigation, and we don’t want to 12 see that here, it would be after that closes, and that 13 could be time eternal. So, of course, we don’t ever 14 want to be in that environment. 15 Cost principles. This is an area that, if 16 you don’t know what cost principles are, make sure 17 you’ve got an accountant in your organization who 18 does. And if it’s fuzzy to you, it’s everything to 19 you in the grant as you’re going through on your 20 budgets, and you’re doing budget modifications. You 21 have to understand the basics of costs principles in 22 the Federal Government. And so, we are now turning to 0048 1 the cost principles and leaving the, you know, the 2 administrative requirements. Basically, they’ve got 3 to be consistent, reasonable and allocable, right? 4 This is the reasonable mind test. Cost principles, we 5 have direct and indirect costs. We don’t allow 6 operating expenses under the infrastructure. We do 7 under SBA, PCC in this program. I’m not going to 8 spend a lot of time on this because it’s very fact- 9 specific to your awards. But please become familiar 10 with these principles. Make sure that you understand 11 what a direct cost is versus an indirect cost, whether 12 or not it is eligible. Generally speaking, if you’ve 13 got a direct cost, it had to be a line item in your 14 budget. You have to have a negotiated indirect cost 15 rate in the Federal Government, also known as a NICRA, 16 which goes to this next slide. 17 So it gives you some idea of the direct 18 costs and the indirect costs. And it really tells you 19 the definition. I mean, if you can specifically 20 identify it with a particular cost objective and it 21 follows through with the allowable guidelines, it’s 22 going to be a direct cost, versus the indirect costs 0049 1 of running your organization. I’m not going to spend 2 a lot of time on the negotiated indirect cost rate. 3 For those of you who are familiar with Federal grants, 4 you probably will know that indirect costs is probably 5 one of the most complicated areas in Federal grants. 6 And so, of course, I don’t want to talk about 7 complicated things. 8 (Laughter.) 9 Ms. Schultz: But, no, really, if you’ve got 10 a NICRA, you know, from another cognizant agency, and 11 you’re using it because you’ve worked in the world of 12 Federal Grants, that’s great. We’re not seeing a lot 13 of folks coming in needing to get a negotiated 14 indirect cost rate. If you do, there’s a process that 15 you have to follow, and we set that forth, not only in 16 this presentation. It’s in the Recipient Handbook, 17 also in other guidance documents that are available to 18 you. So, please familiarize yourself with those. 19 Again, more on the negotiated indirect cost rates. 20 How are we doing on time? Okay. 21 I’m going to just highlight, right? There’s 22 eligible and ineligible costs for these programs. And 0050 1 these next slides go through some of them. I’m not 2 going to read them out loud to you. I’m putting them 3 there so that you can use this as a reference point. 4 Really, where you go, you go to the NOFA, is one of 5 the areas. You look at the, you know, NOFA, what is 6 allowable, what’s not allowable. Remember that, that 7 really is the controlling, you know, law of our 8 program, so to speak, that regulates everything we do 9 and how we think within the program. So, you’re under 10 NOFA 2, being the Round 2 recipients. Please be 11 aware, if you’re speaking to Round 1 recipients that 12 the NOFAs differ in various areas. 13 And so, you have to be familiar with what 14 your area is. A woman asked this morning, for 15 example, about the pre-application expenses that were 16 spent by Gates Foundation that went through a 17 consultant and, you know, what do we do with that? 18 Well, the NOFA 1 said from the time of the issuance of 19 the NOFA to the time of the submission of the 20 application, that would be the time period where pre- 21 application expenses would be allowed, if approved by 22 whom? Our Grants Office. So, you’d have to go there. 0051 1 NOFA 2 doesn’t say that. NOFA 2 says, from the time 2 of the date of the issuance of the NOFA to the time of 3 the date of the issuance of the award. So, it’s 4 different. So you get a longer period of time to 5 cover pre-application expenses. So, that’ just one 6 example where you have to know what your NOFA says. 7 So, please make sure that somebody in your 8 organization is responsible for understanding the ins 9 and outs of that NOFA as it applies to your projects, 10 as well as the policies I’m talking about. There’s a 11 pre-award notification, a Federal register notice. 12 That’s all on the Grants Management site. Somebody’s 13 got to read them in your organization, and then 14 they’ve got to brief you, if you’re not the one 15 reading them, with the highlights of what’s most 16 important. And only you know what those are in your 17 organization. We don’t know what they are for each 18 and every one of you. So again, on the PCC projects, 19 these next slides really take the infrastructure, they 20 give you ideas of what’s eligible costs and the 21 ineligible on the PCC projects. You know, Laura 22 Dodson and her team are here on the infrastructure. 0052 1 Laura Breeden and her team are here on the PCC and 2 SBA. And I would encourage you to talk to them if you 3 have any questions about the eligibility or 4 ineligibility costs for anything related to your 5 projects. These are the SBA, again, and so if this is 6 new to you, again, please refer to it, and then ask 7 questions. 8 Tax rules for BTOP grants. The first thing 9 I have to tell you is we can’t give you any advice, 10 okay? 11 (Laughter.) 12 Ms. Schultz: So, don’t call us asking for 13 advice. And, but what we can do is lead you, for the 14 infrastructure grants, to two IRS rulings that relate 15 to the BTOP grants to help you out. Take them to your 16 tax advisors, your tax lawyers. Make sure this is 17 really for For-Profits. Make sure you understand what 18 the tax implications are of your grants. If you 19 haven’t thought about this, make sure that you cover 20 this now. Sooner’s better than later on this. So, I 21 give you these hyperlinks. 22 Another thing I should tell you is, the 0053 1 Recipient Handbook will be hyperlinked by section on 2 our website. And, as well, if you go onto our website 3 and you click -- and we’ve gone through that effort of 4 hyperlinking every document we’ve referred to, so it 5 makes it really for all to access these documents. 6 Or, send the right person in your organization. If 7 you happen to hate tax, then don’t click on that 8 button. Send it to the person who loves that stuff, 9 and ask them to read about it. 10 Government-wide audit requirements. So, you 11 know, this is, you know, they’re coming, right? 12 They’re coming a little bit later for you than they 13 are for the Round 1, but Round 1 grantees will begin, 14 theirs will be due by the end of March, one year after 15 the issuance of the grants. And I think our first 16 grant issued on December 16th of 2009 or thereabouts. 17 So, audits are coming. You’re going to have to hire 18 CPAs, you know. We highly encourage, as does all of 19 the Federal Government documentation, that the CPAs 20 you are hiring, if they’re not certified, I mean, the 21 best world would be if they were certified in A-133 22 audits, right? Because this is a different kind of a 0054 1 world. 2 So, if A-133 audits apply to you, you’re 3 going to want to make sure when you’re hiring a CPA 4 that they know what A-133 means. And if you say, you 5 know, I’ve got to comply with all this A-133 and, you 6 know, I give you a hint. You know, go find section 7 210, for example. I talked about it. Say, you know, 8 and that section 210, what do you think about it? And 9 if they look at you dazed, you know, you’re going to 10 have an idea about whether or not they know anything 11 about A-133 audits. But, you know, interview them, 12 okay? Interview them, and say, this is really 13 important to our organization, you know, what do we 14 need to do to prepare for it? And what do we need to 15 do to succeed? And all of those kinds of things. The 16 For-Profits, again, there’s a reference in A-133. A- 17 133, as it stands, does not apply to For-Profit 18 entities, okay? But there is a section in there -- 19 it’s called subpart 235 -- and it makes reference to 20 program-specific audits. And you can imagine the 21 reason for this. I mean, I’m going to just take a 22 Fortune 100 For-Profit company in our country. They 0055 1 don’t want to go through an organization-wide audit 2 because they’ve received, you know, a $20 million 3 grant, and all of a sudden we have to do an 4 organization-wide audit on $33 billion, or $100 5 billion, right? That’s not going to happen. 6 So, the reason why is that there’s a subpart 7 235 that says program-specific on it. In that, what 8 we are doing at NTIA, working very closely with our 9 IG, who helps us in this, because For-Profits don’t 10 generally get Federal grants. But in Commerce we do 11 have a program under the ATP that did allow grants for 12 For-Profits, and the IG helped them out there, too, to 13 make sure that you got the right guidance. So, we’re 14 going to put out For-Profit guidance for you. I, 15 we’re just finishing up on the compliance supplement. 16 If that’s a new term to you, let me just tell you 17 quickly what it is. OMB puts out, for every single 18 agency and every single grant program to the extent an 19 operating unit within the Federal Government 20 participates, a compliance supplement. So, for BTOP 21 last year we had a compliance supplement for 2010. 22 This year we’re just finalizing our 0056 1 submission to the OMB for 2011. What is that 2 document? A compliance supplement, you know, it’s 3 like a 300-page tomb that OMB, you know, puts out. 4 There will be about, I don’t know, maybe 8, 10 pages 5 for BTOP in there. And it’s specific to the BTOP 6 program, so it helps auditors understand what’s 7 different about our program that they should be 8 auditing and looking for. So, that’s the purpose of 9 it. So I want you all to understand that when you’re 10 talking to your auditors, you know, that compliance 11 supplement’s going to be important. If you’re a For- 12 Profit entity, our For-Profit guidance is going to be 13 important. 14 A couple of things that I want to point out 15 here. If you are a recipient and a For-Profit, and 16 you’re getting audited, and you have a subrecipient 17 who’s a Non-Profit, they have to go through an A-133 18 audit, right? Because A-133 applies to Non-Profits, 19 State and local governments. So, that A-133 audit is 20 going to apply to that Non-Profit. You are 21 responsible for making sure that, you know, one, 22 they’re getting that audit, two, if there are findings 0057 1 in that audit, that they are taking corrective action 2 to shore those up. You’re responsible for that. Not 3 us. We’re responsible for making sure that you are 4 monitoring your subrecipients. We are not going to go 5 into your subrecipient level, however. The auditors 6 will, but our FPOs won’t, because that’s not the 7 relationship. 8 So, I want you to be clear about that one 9 relationship. The other thing I want you to know is, 10 For-Profit entity, the A-133 does not apply to you. 11 But within that document lies all of the richness of 12 what the subrecipient and recipient roles and 13 responsibilities are. And so, in our For-Profit 14 guidance we will make reference to bridge that gap 15 between the For-Profit and the A-133 that, what, the 16 documentation and the guidance in the A-133 will apply 17 on the For-Profit. So, that’s going to help you out a 18 lot, right? No one’s going to make up any new rules. 19 It’s also going to help you in understanding your 20 roles as a subrecipient, in monitoring your 21 subrecipients, or, if you’re subrecipients sitting in 22 the room, it will also allow you to understand what 0058 1 those requirements are. 2 As far as the timelines for it, the IG went 3 over it in its presentation, you can find in here. 4 And again, we just posted a fact sheet on audit 5 guidelines that gives you the general basics of, you 6 know, about auditing. There will be another fact 7 sheet that we’ll be working on, and perhaps a 8 presentation, a webinar that we’ll give on audits as 9 we get closer to that time period. I would encourage 10 you all to participate in that and to ask your great 11 questions that you do, you know, so that you come to 12 understand exactly, how does this work? You know, if 13 there are findings, what takes place? Our audit fact 14 sheet that you’ll find in the Recipient Handbook now 15 does not really cover the correction action part of 16 it. That’s sort of a “stay-tuned,” coming out as we 17 work through those issues. 18 But, basically, so what happens? I mean, 19 let’s just talk a little bit about that. Let’s say 20 you get material findings. You know, audits will come 21 through in different ways. The For-Profits, if you’re 22 a For-Profit, you’ve got to submit it to Atlanta, 0059 1 right? To the IG. There’s an address in Atlanta. 2 You also have to submit it to us, right? You have to 3 submit it, upload into GOL, you have to, you know, 4 submit it to, I think, the Grants Office. And if 5 you’re an A-133, there’s an different process for you 6 in doing that. But For-Profits have a different path. 7 So, the IG will be looking at the A-133 material 8 findings, right? And they’ll be opining, and they’ll 9 be talking to us about it. We’ll be talking to you 10 all about it. They’ll also be looking at the For- 11 Profit audit. So, let’s say there are material 12 findings. Well, then the dialogue begins. And we’re 13 not going to find anything about, you didn’t have the 14 documents, right? Because you’re all going to get 15 that one right. 16 So, that’s not going to be a finding in our 17 program. But there may be some other things that will 18 become findings. And so, we’re going to have to 19 dialogue back and forth on how to resolve them. We’ll 20 have to dialogue internally, and we’ll have to 21 dialogue with you. And I want you to know that it is 22 a dialogue. And so, what you bring, and your 0060 1 arguments, and how cogent they are, and how much 2 supporting documentation you have to back up, is going 3 to be really, really important for you to succeed on 4 that finding, right? And you can succeed on it. I 5 mean, just because it’s a material finding. There may 6 be back and forth. But there’s, you know, don’t lose 7 all hope on that just because that happens. 8 If we have a material finding and it stands, 9 does that mean we’re going to take the money back? 10 Well, maybe. It depends on what the finding is. But 11 we can also impose what we call -- and you’ll see in 12 the monitoring plan -- performance improvement plans 13 and corrective action. Generally, in an audit finding 14 I would guess that you’re probably see a corrective 15 action plan that’s put in place -- How are you going 16 to correct what you did wrong? And you’re going to 17 have a time period to do it, and then you’re going to 18 have to prove it. And you’re going to work out that 19 corrective action plan with the Grants Officer and the 20 FPO on the project, okay? 21 And then, you know, take it seriously. If 22 you land -- even before an audit you can get into a 0061 1 performance improvement plan. If we find at a desk 2 review you’re doing something that’s off, you know, 3 you’re off course, we can then put a performance 4 improvement plan in place on these grants. We can 5 also put corrective action plans in place on these 6 grants. Remember, when we do that, it’s not, again, a 7 “gotcha”. It’s to help you, right? Get back on 8 course. You’re just steering off course. And if you 9 steer off course and you don’t understand, you know, 10 the wind vane and this, that you’ve got to get to the 11 end in three years, and you’ve got to be substantially 12 complete within two, our job is not only to monitor 13 and administer these Federal funds, and make sure that 14 you’re spending them properly, but it’s also to help 15 you in that monitoring to get, you know, across the 16 finish line successfully and stay on course. 17 So, when we see that you’re not doing that, 18 you may see corrective action plans. You know what? 19 Embrace it. Learn from it. You know, change what you 20 need to. And move forward. Don’t look at it as a 21 negative hit against you, okay? 22 All right. I’m going to move into some of 0062 1 the key ARRA requirements now in the few minutes that 2 we have left together. And remember, I’m here over 3 the next couple of days, so feel free to come up to me 4 and talk to me about anything that’s on your mind, or 5 any of my colleagues here will be happy to help you 6 out. 7 Davis-Bacon. So, Davis-Bacon applies. And 8 if you’re not watching Davis-Bacon and you don’t know 9 what Davis-Bacon is, this morning it’s important for 10 you to understand it. I’m not going to spend a great 11 deal of time on it. We have a Davis-Bacon fact sheet 12 that I’m going to ask you to read so that you can go 13 and understand more about it. You can also, we have 14 contacts at the Department of Labor. But, let it 15 suffice to say that if you’re working on projects that 16 have construction and it’s over $2,000, you have to 17 pay prevailing wages. And we work very closely with 18 the Department of Labor, and we have a Federal 19 responsibility, as you do as the recipients in this. 20 And it’s a very important responsibility. We have 21 delegated this responsibility to you as the prime 22 recipients. You have to monitor the payroll 0063 1 certifications weekly on your projects, okay? It’s 2 your responsibility. It will come in an audit. So, 3 make sure somebody is doing that within your 4 organization. Here’s one tip that I’ll tell you -- 5 how you do that, a lot of organizations already do 6 that. If you don’t you’re going to have to set up 7 these processes and procedures. 8 The other thing that you’re going to find 9 when you go to prevailing wages -- this is technology, 10 and what’s the great thing about technology? It 11 changes almost every day, right? It has a new name, 12 new hat, new this, new toy. And so, you know, one of 13 the things, I think we have, Vint Cerf is the Father, 14 you know, of the Internet, and he’s the Chief 15 Evangelist now. I mean, that’s a new C-word. And, 16 you know, so, what’s going to happen here is, you 17 might get to a labor category and you don’t find 18 yourself, or you don’t find, you know, that doesn’t 19 fit in technology. What do I do? Well, then you’re 20 going to need to get a Conformance, it’s called. And 21 so, you’re going to have to apply for that. We have a 22 process and procedure. So look at the Recipient 0064 1 Handbook of how to do that. And we work, then, with 2 DOL. And they’re pretty committed to getting a result 3 back to you in 30 days, right? Not a lot of time. 4 If you did not build Davis-Bacon into your 5 contracts, or if you did not pay prevailing wages, 6 you’re going to have to, okay? So, you’re going to 7 have to look back at your contracts, make sure that 8 this, these clauses are in there. I told you, you 9 know, about the appendix and the administrative 10 requirements, about contract clauses. Davis-Bacon is 11 one of them. So, make sure you’re building it into 12 your contracts. Okay. How did we get back to that? 13 We’re backwards again. 14 Buy American. Well, you heard our IG talk 15 about Buy American. But the thing about the program 16 for us is, basically, while Buy American does apply as 17 an ARRA requirement, within the world of BTOP and 18 technology, our Secretary, Secretary Locke, signed a 19 waiver, I think back in July of 2009, waiving the Buy 20 American requirement across the board for certain 21 things. As you see, switching, routing equipment, 22 transport, access, customer premises equipment. And 0065 1 that was done in large part because, you know, we 2 don’t manufacture those items in the United States, 3 and we didn’t want an onslaught of waivers coming in. 4 And so, another way that your Government is working 5 for you and streamlining the process to make things 6 easier for you, and this is one of those ways. 7 So, please make sure that if you are 8 acquiring equipment, that it falls within that waiver. 9 If you think it does not, then please contact your 10 FPO. There are waiver requirements under our program 11 as set forth in the NOFA. So, pay attention to that. 12 But I think it’s a little bit different in our program 13 than it is across a lot of the other ARRA grants 14 throughout the country. 15 So, I’m just going to highlight the Special 16 Award Conditions here. You’ve got a whole bunch of 17 them. Pay attention to them. Some of them are what 18 we call actionable, right? I talked about the 19 accounting verification. The other big one for the 20 CCI and infrastructure projects, of course, is the 21 environmental assessment that’s due, the draft, within 22 6 months. And you cannot draw down funds, except in, 0066 1 you know, limited circumstances, only if you have 2 provided us with a budget, a 6-month budget which was 3 approved by our Grants Office. 4 So, this is a lot of language that may look 5 like small print on your contract, but it’s real 6 critical language. Special Award Conditions is like, 7 you know, what we talk about every day. SAC. What’s 8 SAC? This is what you hear in the halls where we’re 9 at, right? You know, what did they do with that SAC? 10 And, was this SAC lifted? Is that SAC, I mean, can 11 get they get it lifted? And so, you need to 12 understand which SACs apply to you, which Special 13 Award Conditions apply to your award, and then put 14 somebody on this to be monitoring them, right? So 15 that you know when they’re getting lifted and, most 16 importantly, the ones that are actionable. Then, 17 those are the ones you prioritize. Why? Because they 18 affect the drawdown of your money. And what does that 19 do, actually, in our program? The whole reason behind 20 ARRA was to, you know, really, you know, kick start 21 our economy and get jobs back, right? And get money 22 back into the economy. And so, we’re very interested. 0067 1 So is this Administration, our President, our 2 Assistant Secretary, our Secretary. I mean, they 3 watch this very closely, and they ask us all the time, 4 how is this doing? We monitor it very closely. 5 Of course, drawdowns are different than 6 expenditures. We’re aware of the fact that a lot of 7 you are spending money but you haven’t drawn down yet. 8 So, you will show those expenditures in your ARRA 9 reporting. Whereas in the daily monitoring that we do 10 of your drawdowns, and we do, we can see exactly what 11 you are drawing down. We look at it according to the 12 milestones in your budgets, okay? So, we’re behind 13 the scenes. It’s not an emerald curtain. We’re right 14 there watching what you’re doing because that’s our 15 job. And so, in the drawdown, we want you to be able 16 to draw down this money. I’m going to encourage those 17 who have environmental assessment SACs, please talk to 18 our incredible environmental team. I mean, they’re 19 just wonderful. They’ve done phenomenal work, and 20 they’re here to help. And they’re so helpful, and 21 they’re so wanting to help you. 22 So, don’t be afraid. Ask them questions. 0068 1 And listen to their advice. We’ve got a lot to 2 accomplish for you to get that draft environmental 3 assessment in. It’s not something you wait for the 4 5th month to start on. If you have an environmental 5 assessment SAC, I’m here to tell you, that is a high 6 priority in your infrastructure project today. So if 7 you don’t have an environmental consultant onboard, 8 and you have to put that RFP out because you don’t 9 have that in-house, you need to start thinking about 10 that this week, okay? And get started on that. And 11 then, we’ve put in a checklist for you of a schedule 12 to help you along the lines. There’s a tremendous 13 amount of information on environmental assessments and 14 guidance to help you walk through this. 15 So I really want you to pay attention to 16 that, because you cannot begin construction, and you 17 cannot begin ground-disturbing activities, until you 18 receive a finding of no significant impact, or a 19 mitigated finding of no significant impact, or a 20 programmatic agreement. It is a Federal violation for 21 you to do that. And money that you expend on that 22 without, before-time, becomes ineligible if you are 0069 1 engaged in construction and ground-disturbing 2 activity. So, I’m stressing this here. Make sure you 3 take that word back, because we cannot reimburse on 4 those funds if you’ve begun work without the Federal 5 clearance on the FONSI. And we’re here to partner, to 6 make sure you get through that. All right. 7 So, I just talked about the Special Award 8 Conditions. That’s the slide I just went over. You 9 can look for it in the reference. Again, the 10 enforcement side is usually the segue into the IG, but 11 they’re already done. And we’re here to just tell you 12 that, you know, part of it, the most important thing 13 for us is to ensure your success, right? Work 14 collaboratively with you. 15 We know you’ve got the challenges. Our 16 responsibility as Federal officials is to, you know, 17 administer and be the safe-keeper of this money, 18 working collaboratively with you, monitoring your 19 progress to your milestones to make sure that you meet 20 the entire BTOP objectives. At the end of the day, 21 you know, if you don’t take this seriously, or, things 22 start to happen or unravel, you know, the Federal 0070 1 Government does have a lot of various things in place 2 that it can do to enforce, you know, proper execution 3 of these grants. And we are required, obviously, to 4 do that. And I’d think you would think no less of us, 5 you would require us as also stewards of these awards 6 to make sure that we take appropriate action when we 7 see that that’s required or necessary. And so, these 8 are just some of the things that we can do. We can 9 suspend payments, and that may happen to you in some 10 periods throughout the award, you know. That just 11 means you’re not paying attention and you’ve got to 12 wake up and pay attention, and get back on track. We 13 can suspend an award. We can terminate for cause. We 14 can do all of those thing. But what I’m here to tell 15 you is, we really don’t want to do any of those 16 things. 17 So, please, continue the dialogue, continue 18 the collaboration with all of us. And we look forward 19 to working with you on this incredible journey and 20 opportunity that we have. 21 Thank you very much. 22 (Applause.) 0071 1 Ms. Schultz: Okay. Before I take 2 questions, what I’d like to do -- remember I said that 3 the partnership was a really important, you know, not 4 only working with our FPOs, but we work every day with 5 our Grants Office, and we have NOAA and NIST, and I 6 wasn’t sure, and I was just told that they’re here. 7 The team is here, which is great. So, can I ask the 8 NOAA team to stand up, who work on the infrastructure 9 and CCI projects? Because, yes. 10 (Applause.) 11 Ms. Schultz: They do amazing work. And, 12 you know, please stop them, talk to them about any of 13 the questions. And can I ask the NIST team to stand 14 up, who does the SBA and PCC? They’re our Grants 15 Office for those awards. Thank you. 16 (Applause.) 17 Ms. Schultz: So, we’re just about out of 18 time. I don’t know if anybody has, you know, we have 19 time maybe for just a couple of questions. If you 20 have one, if you’d come to the mic. Otherwise, we’re 21 going to be breaking here, I believe, for lunch. 22 Great. 0072 1 (Laughter.) 2 Ms. Schultz: So, enjoy your lunch, and 3 we’re around. Yes. Okay. 4 Mr. Preston: I have a question. 5 Ms. Schultz: Okay. Shucks. Yeah. 6 Mr. Preston: My name’s Jay Preston, from 7 western Montana, Ronan Telephone Company. It occurs 8 to me that this presentation you just made would be 9 very valuable to us to show to some of our staff 10 members and partners locally. Is this presentation 11 something we will have available to us by video? 12 Ms. Shultz: It’s being recorded, so the 13 answer to that is yes. 14 Mr. Preston: Thank you. 15 Ms. Schultz: That was an easy one. 16 (Laughter.) 17 Ms. Schultz: Okay. Enjoy your lunch, and 18 we’ll see you back here, I think, at 1:30. Oh. 19 Bill’s got a couple of announcements. I’m sorry. 20 Please stay seated, and he’ll get to those. Thank 21 you. 22 Bill: All right. Thank you very much, 0073 1 Cynthia. So, this morning you heard from us, from 2 NTIA, from the Office of the Inspector General. At 3 lunch we want to give you all the opportunity to hear 4 from one other. As one who’s read a lot of your 5 applications, I know that you have a lot to share with 6 one another -- best practices, experience, you have 7 connections within your state and your region that can 8 be valuable to other organizations who receive BTOP 9 awards from your region. 10 So, I encouraged you to sit geographically. 11 And what we’d like you to do -- if I could get that 12 first slide. What we’d like you to do during a 13 working lunch is introduce yourself to one another. 14 You’ll see that you’re all wearing different colored 15 stickers. If you look down and see that you’re not 16 wearing a red sticker, and someone else is wearing a 17 red sticker, that means they have a different project 18 type than you do. So, tell them a little bit about 19 your project type, about your key objectives, your 20 geographic reach, the communities you’re serving, and 21 the clients you’re serving. I think it’s, you know, 22 very easy to understand what we’re trying to do. We 0074 1 think there’s a lot that you all can share with one 2 another. Our hope is that you start some of that 3 sharing during lunch, and that we’ll continue to work 4 on those, sort of, sharing, and talk a little bit more 5 about third party outreach after lunch at a group 6 exercise. 7 So, with that, lunch is served. There are 8 400 lunch boxes out in the foyer. Please bring them 9 back to your table and enjoy. For BTOP staff, I’d 10 like to invite you to the Skyline Suite for a brief 11 lunch, and then I encourage you to come back and enjoy 12 the conversations and discussions. 13 Thank you all. 14 (End of Audio.) 15 16 17 18 19 20 21 22