Under Uniform Guidance procurement guidelines, there is a concept of a micropurchase threshold under which price analysis or comparison is not required for purchase. It is not widely known, but there is potential for increasing your organization’s micropurchase threshold if you meet certain qualifying factors. Effective November 2020, minor technical edits were made to the definition for micropurchase, to clarify that the cognizant agency for indirect costs may approve a higher micropurchase threshold if requested by the non-federal entity and that the non-federal entity has some options.
2 CFR 200.320 Methods of procurement to be followed officially adjusted the Uniform Guidance to reflect the thresholds from OMB Memorandum M-18-18 whereby the threshold for micropurchase was increased to $10,000 and the simplified acquisition threshold was increased to $250,000. In addition, the revision outlined a process by which non-Federal entities may establish a micropurchase threshold above $10,000.
The section places the responsibility for choosing a micropurchase threshold squarely on the shoulders of the non-federal entity:
2 CFR 200.320 (1)(iii) “Micro-purchase thresholds. The non-Federal entity is responsible for determining and documenting an appropriate micro-purchase threshold based on internal controls, an evaluation of risk, and its documented procurement procedures. The micro-purchase threshold used by the non-Federal entity must be authorized or not prohibited under State, local, or tribal laws or regulations. Non-Federal entities may establish a threshold higher than the Federal threshold established in the Federal Acquisition Regulations (FAR) in accordance with paragraphs (a)(1)(iv) and (v) of this section.”
It goes on to say in 2 CFR 200.320 (1)(iv) “Non-Federal entity increase to the micro-purchase threshold up to $50,000. Non-Federal entities may establish a threshold higher than the micro-purchase threshold identified in the FAR in accordance with the requirements of this section. The non-Federal entity may self-certify a threshold up to $50,000 on an annual basis and must maintain documentation to be made available to the Federal awarding agency and auditors in accordance with § 200.334. The self-certification must include a justification, clear identification of the threshold, and supporting documentation of any of the following:
(A) A qualification as a low-risk auditee, in accordance with the criteria in § 200.520 for the most recent audit;
(B) An annual internal institutional risk assessment to identify, mitigate, and manage financial risks; or,
(C) For public institutions, a higher threshold consistent with State law.”
In other words, if your organization qualifies as a “low risk auditee”, you may independently elect, on an annual basis, a micropurchase threshold of up to $50,000. Anything over that requires approval by the cognizant agency and the organization must submit a request showing that the qualifications are met.
The low-risk auditee determination is based on certain facts and is not a matter of judgment. The entity is considered low-risk if it meets ALL of the following criteria for each of the previous two audit periods:
- Single audits were performed on an annual basis in accordance with the provisions of 2 CFR 200, subpart F, including submitting the data collection form and reporting package to the federal audit clearinghouse by the due date.
- The auditor’s opinion on whether the financial statements were prepared in accordance with GAAP, or a basis of accounting required by state law, and the auditors in-relation-to opinion on the schedule of expenditures of federal awards were unmodified.
- The auditor’s Yellow Book report on internal control did not identify any deficiencies in internal control over financial reporting as material weaknesses.
- The auditor did not report a substantial doubt about the entity’s ability to continue as a going concern.
- None of the federal programs had audit findings from any of the following in either of the preceding two audit periods in which they were classified as Type A programs:
- Internal control deficiencies that were identified as material weaknesses in the auditor’s report on internal control for major programs.
- A modified opinion on a major program in the auditor’s report on major programs.
- Known or likely questioned costs that exceeded 5% of the total federal awards expended for a Type A program during the audit period.
If you were low risk and adopted a higher threshold and then no longer qualify as a low-risk auditee, your procurement policy would have to be adjusted accordingly at the time your status changes (i.e. when the event occurs that changes your qualifications).
As always, the key to a successful procurement policy is documentation, so carefully consider and document the determination of low-risk auditee status, the risks inherent in your entity’s procurement process and your internal controls to address the risks.