Not-for-Profit Notebook

Practical insight and analysis on the accounting, audit and tax issues impacting not-for-profit organizations.

Complying with Challenging New Procurement Standards

The relatively new federal procurement standards, which went into full effect in fiscal year 2017, significantly alter the way nonprofits receiving federal funding handle purchasing. You may have changed your written policies, but are you complying with the standards in practice? If not, you could risk losing funding. 

Basics of the Standards

The standards, “Uniform Administrative Requirements, Cost Principles, and Audit Requirements forPurchases Federal Awards,” impose strict requirements on nonprofits receiving federal funds. For example, you must pay attention to the amount of a purchase because it determines the procurement methods you need to employ.

There are three main categories of purchases that inform which procurement method you must use:

  • Micro-purchases
  • Small purchases
  • Purchases exceeding $150,000

“Micro-purchases” of supplies or services up to $3,500 generally can be awarded without soliciting competitive quotes. “Small purchases” of services, supplies or other property that don’t cost more than $150,000 require price or rate quotes from several qualified sources.

For purchases exceeding $150,000, you must select vendors or suppliers based on publicly solicited sealed bids or competitive proposals. Select the proposal most advantageous to the relevant program based on price and other factors that impact the program performance. Also perform a cost or price analysis for every purchase over $150,000, to make independent estimates before receiving bids or proposals.

In specific circumstances, such as a public emergency where the nonprofit must respond immediately, noncompetitive proposals solicited from a single source are permissible.

Common Barriers to Compliance

You should already be following the revised standards, which, as mentioned, went into effect in fiscal year 2017. However, some nonprofits have found it challenging. Significant barriers to full compliance include culture shock and staff resistance. Also, these standards have multiple documentation requirements that few organizations previously met:

  • All procurement procedures must be documented in writing
  • Conflict of interest policies covering employees involved in procurement as well as all entities owned by or considered “related” to your organization need to be included
  • You must keep records detailing each procurement, including bids solicited, selection criteria, quotes from vendors and the final contract price

To make the process more manageable and encourage full compliance among staff, try designing a checklist that outlines the decisions needed at each price level.

Don’t Delay your Compliance

Failure to comply with procurement standards could result in your nonprofit’s loss of federal funding. You can reduce that risk, though, by auditing your new procedures and processes to confirm that they’re getting the job done. Contact us for assistance.