What measures should municipalities implement to ensure that vendor invoices comply with federal requirements?

Good Practices to Ensure Vendor Invoicing Compliance

Municipalities are “responsible for the efficient and effective administration of the federal award through the application of sound management practices,”[1] such as those embodied in Federal Uniform Guidance (“Uniform Guidance”) standards.[2]  Municipalities should provide adequate documentation to support (i) the costs charged to the federal award, (ii) financial management, and (iii) internal controls.

Key compliance measures for vendor invoicing include the following:

• Enumerate invoicing requirements and procedures in all procurement solicitations.
• Include invoicing procedures and policies in all contractual documents.
• Provide invoicing requirements in pre-bid, pre- and post-award communications, and meetings.
• Implement mandatory award training for award stakeholders, covering, at a minimum, invoicing systems, procedures, oversight, and regulatory requirements.
• Address deficiencies during the period of performance rather than at the monitoring or auditing stage.
• Document all invoicing exceptions or deficiencies, including corrective actions.
• Perform field audits in real time to confirm goods “provided” made it to the intended recipient and are accounted for.
• Document communications with the stated beneficiaries of the “provided services” to make sure they were delivered.
• Ensure separation of duties such that individuals ordering the goods and services are not approving those items.
• Perform due diligence on vendors and suppliers to ensure the goods and services being requested are items that the vendor/supplier has a history of providing.[3]

Municipalities should also consider the following when establishing invoicing requirements and procedures:

• Frequency, timing, and/or milestones for contractor and subcontractor invoices.
• Level of detail and logical organization of invoices for contractor and subcontractor invoices.
• Supporting documentation requirements for contractor and subcontractor invoices.[4]

Cost Principles and Financial Management

Uniform Guidance § 220.401 establishes how cost principles are applied to non-federal entities who receive federal awards.[5] These principles apply generally to federal awards with the exception of federal awards to hospitals or fixed amount awards.

Regarding financial management, Uniform Guidance § 200.302 establishes that non-federal entities must have systems in place “to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award.”[6] § 200.302 also details guidance related to financial reporting (§ 200.328), monitoring and reporting program performance (§200.329), and requirements of the non-federal entity’s financial management system, which include: record retention, access to records, storage of information, and transfer of records (refer to §§ 200.334-200.337 for details).[7]

Internal Controls

Uniform Guidance § 200.303 details the responsibilities of the non-federal entity related to internal controls, including the need to “[e]stablish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.”[8]

Last Updated: February 7, 2023