If you work with tribes or are part of a tribal government, you should closely follow the changes made to the National Defense Authorization Act. On June 30, 2018, the NDAA issued changes that increased the minimum thresholds for micro purchases and simplified acquisition. These changes impact many individuals and groups, as well as impact tribal governments.
Raising the minimum threshold should ease some of the reporting burden on those receiving federal funds.
What Are the Exact Changes?
- The threshold for micro-purchases is increased from $3,500 to $10,000
- The threshold for simplified acquisitions is increased from $100,000 to $250,000
What Should You Do?
Groups currently receiving federal awards, including tribal governments, may wish to immediately revise internal procurement policies so that they can implement the new thresholds.
Memorandum M-18-18 also outlines changes for institutes of higher learning, nonprofit research organizations, and independent research organizations that wish to use a micro-purchase threshold higher than $10,000.
There are some specific recommendations that can help you follow the new guidelines as stated in M-18-18.
- Micro-purchase: You should include purchases when the aggregate dollar amount does not exceed $10,000. It may be helpful to distribute micro-purchases fairly among qualified suppliers if you can. You don’t need competitive quotes if management determines that the price is reasonable. Document a definition of how you define ‘reasonable’ prices so that you have something to reference to confirm your choices.
- Small purchases: You can use simplified acquisitions for the purchase of property services that do not exceed an establish amount pursuant to 200.88 in the Uniform Guidance. This also includes purchases up to $250,000 according to M-18-18. Informal purchasing procedures are acceptable under the guidelines, but you should always obtain several price or rate quotes before making your choice. This is just good business practice that will also help you comply with the new requirements.
- Sealed bids: Large projects, such as construction projects, commonly exceed $150,000. A formal RFP or bid solicitation process is required. The fixed price, lump sum, or unit price should be awarded to the best bidder who conforms to all the material terms and provides the best price.
- Competitive bids and proposals: A formal bidding or solicitation process is required. Competitive bids and proposals covers purchases over $150,000. Fixed-price or cost-reimbursement contracts, as well as a formal bid process, should be used when sealed bids aren’t appropriate or warranted. Awarding the contract should be based on the quality of the program with price being one, not the only, factor.
- Sole source: You can only use the sole source designation when specific criteria is met. The criteria includes:
- The product or service is only available from a single source – no one else offers what you need
- There is a public emergency, and the fastest or best way to handle the emergency is to buy from one source
- Federal warding agency authorization, or the awarding agency specifically authorizes a non-competitive procurement. This is usually after a written request from the non-federal entity.
- There’s not enough or inadequate competition after you’ve asked for bids from multiple sources.
Can you request an even higher threshold than these new amounts? Yes, but with a catch. You’ll need to request approval from your institution’s appropriate Federal agency for indirect cost amounts. They will then assign you to the appropriate office inside the agency who can approve the new amount and maintain records indicating compliance with the new amount. It’s also a good idea to keep records on your own to support any moves you make when it comes to micro-purchases.
The world of nonprofit accounting is always changing, and new thresholds and guidelines like these are important to understand and follow. Welter Consulting can help you if you have any questions about these guidelines or other nonprofit accounting and software needs.
Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.