Gratuity Violations Under 2 CFR 200
Written by: Shane Jernigan
Uniform Guidance allows NFEs to adopt entity-wide changes to internal policies and systems for all awards, both existing and new, without penalty. Therefore, a NFE may apply the new requirements found in 2 CFR 200 to all awards.
The Uniform Guidance contains more than 60 new and modified requirements for grants administration. Many NFEs have focused their attention to the more significant changes under 2 CFR 200. For example, the grants community has spent considerable time focused on the new procurement methods and internal control requirements. As a result, NFEs may miss developing new internal policies for seemingly less significant requirements.
One possible overlooked new requirement is found at 2 CFR 200.113 Mandatory Disclosures. This section reads:
“The non-Federal entity or applicant for a Federal award must disclose, in a timely manner, in writing to the Federal awarding agency or pass-through entity all violations of Federal criminal law involving fraud, bribery, or gratuity violations potentially affecting the Federal award. Failure to make required disclosures can result in any of the remedies described in §200.338 Remedies for noncompliance, including suspension or debarment. (See also 2 CFR part 180 and 31 U.S.C. 3321).”
This means NFEs will need to adopt and implement internal policies that comply with 2 CFR 200.113. The policy should indicate:
- Who is responsible for identifying violations that may potentially affect a Federal award
- Who is responsible for notifying the Federal awarding agency or pass-through entity of violations
- How the NFE will provide written notification to the Federal awarding agency or pass-through entity
- A definition of “timely manner” in which the NFE will notify the Federal awarding agency or pass-through entity
- A list of applicable Federal laws involving fraud and bribery
- A definition of “gratuity violations”
When drafting this policy, a NFE should work closely with their legal counsel. Under 2 CFR 200.113, a NFE must notify a Federal awarding agency of pass-through entity of a “violation” of Federal criminal law, and not just when an arrest, indictment, or conviction has occurred. This requirement could potentially present legal consequences for a NFE, therefore it will be critical that legal counsel is involved.
Another potential difficulty for NFEs is developing an adequate definition of a “gratuity violation.” 2 CFR 200.318(c)(1) provides guidance to NFEs in crafting a policy. The section reads, in part:
“The officers, employees, and agents of the non-Federal entity may neither solicit nor accept gratuities, favors, or anything of monetary value from contractors or parties to subcontracts. However, non-Federal entities may set standards for situations in which the financial interest is not substantial or the gift is an unsolicited item of nominal value. The standards of conduct must provide for disciplinary actions to be applied for violations of such standards by officers, employees, or agents of the non-Federal entity.”
Therefore, an adequate internal policy must:
- Explicitly prohibit NFE employees from soliciting or accepting “gratuities, favors, or anything of monetary value from contractors or parties to subcontracts”
- Explain when an “unsolicited item of nominal value” may be accepted
- Detail the consequences for employees that violate this policy
It is important that the policy clearly defines “nominal value.” For example, some NFEs allow employees to accept unsolicited items that are less than $25. NFEs have the discretion to set the nominal value that best meets their entity’s needs; however, caution should be applied if the threshold is set a value that may influence an employee’s actions. An adequate policy will detail how an employee reports items of nominal value, how the item is appraised, and the types of items that may be accepted.
NFEs should be aware that failure to adopt and implement an adequate policy may result in the Federal awarding agency or pass-through entity in applying sanctions for non-compliance. 2 CFR 200.338 identifies possible sanctions that may include temporarily withholding payments, disallowing costs, initiating suspension and debarment procedures, and terminating an award. A NFE could also face additional civil and criminal penalties for violations.
Do you have any questions or concerns about this new requirement? Let us know in the comment section below.
