August 19, 1998
MEMORANDUM TO THE PRESIDENT'S MANAGEMENT COUNCIL
- FROM: G. Edward DeSeve
- Deputy Director for Management, Acting
SUBJECT: Advisory to Federal Grantees on Responsibility to Address the Year 2000 Issue
The year 2000 (Y2K) issue has received a great deal of attention for some time now. Federal
agencies are working hard to ensure internal systems and those of organizations with which they
exchange data are Y2K compliant. This effort should include ensuring that Federal grantees and
subgrantees are aware that systems that are not Y2K compliant may affect their ability to account
for Federally funded programs in accordance with Federal requirements.
Governmentwide requirements contained in the OMB Circular A-102 Common Rule,
Administrative Requirements for Grants and Cooperative Agreements to State and Local
Governments" and OMB Circular A-110, "Uniform Administrative Requirements for Grants and
Agreements with Institutions of Higher Education, Hospitals, and Non-Profit Organizations"
require that grantee and subgrantee financial management systems be capable of providing
specific information about Federal programs. In addition, program laws and regulations may
require additional information which grantee and subgrantee systems must be capable of
providing. If grantee and subgrantee systems are not Y2K compliant, they may not be capable of
meeting these governmentwide and program specific requirements.
Federal grantor agencies should advise grantees of their responsibility to establish and
systems that meet governmentwide and program specific requirements and that systems which
are not Y2K compliant may not be able to satisfy these requirements. Further, Federal grantor
agencies should encourage grantees to inquire of grantor agencies about the use of grant funds to
correct Y2K problems. Grantees should also be advised of their responsibility to inform their
subgrantees of these requirements and about the use of grant funds to address Y2K problems.
To assist Federal agencies in advising grantees, attached you will find an advisory that all
grant-making agencies should use. This will ensure uniformity and minimize confusion in
instances when grantees receive an advisory from multiple Federal agencies. Each agency should
provide a contact person for questions from grantees.
Should you or your staff have any questions, please contact Jimmy Charney in the Office of
Federal Financial Management, at (202) 395-3993.
ADVISORY TO GRANTEES AND SUBGRANTEES
FROM: [Grants policy officer]
SUBJECT: Non Year 2000 Compliant Computer Systems May Not Meet Federal Grant
The Year 2000 Issue
The Year 2000 (Y2K) Issue concerns the ability of data processing systems to process
dependent data accurately beyond the year 1999. It is a broad operational problem, as well as an
accounting systems problem. Systems that are not Y2K compliant may not be able to continue to
process information in accordance with Federal management and program specific requirements.
The inability to process information in accordance with Federal requirements could result in a
requirement to return funds that have not been accounted for properly.
Federal Grants Management and Program Specific Requirements
Federal grants management requirements are contained in the OMB Circular A-102
Rule, "Uniform Administrative Requirements for Grants and Cooperative Agreements to State
and Local Governments" and OMB Circular A-110, "Uniform Administrative Requirements for
Grants and Agreements with Institutions of Higher Education, Hospitals, and Non-Profit
Organizations." These regulations require that grantee and subgrantee financial management
systems be capable of providing certain information, including: (1) accurate, current, and
complete disclosure of the financial results of each federally-sponsored project or program in
accordance with the prescribed reporting requirements; (2) the source and application of funds
for federally-sponsored activities; and (3) the comparison of outlays with budgeted amounts for
In addition, implementing statutes and regulations for certain Federal programs may require
systems make certain calculations or provide specified data, which may not be possible if
systems are not Y2K compliant. For example, programs that provide assistance to individuals
may have time limits. Such systems must be able to calculate the passage of time accurately to
ensure assistance payments do not exceed prescribed limits. Loan programs may require that
interest be calculated on outstanding balances over time. Accordingly, loan systems must be
capable of calculating interest payments over the period covered by loan agreements.
Grantees and subgrantees should identify systems critical to the management of Federal
programs (mission-critical systems) and assess whether these systems are Y2K compliant. For
those systems that are not Y2K compliant, grantees and subgrantees should take immediate
action to remediate the Y2K problem and validate the success of the remediation effort. Since
grantee and subgrantee data processing may be performed by outside entities or be dependent
upon data received from outside entities, the assessment should include inquiries of these
organizations about their Y2K assessment, system remediation, and testing efforts. The timetable
for completing this process should ensure that properly functioning mission-critical systems are
in operation before existing systems will cease performing mission-critical functions.
Grantees should advise Federal grantor agencies if the assessment discloses significant Y2K
problems or if the grantee cannot complete the remediation and testing phases before systems
cease performing properly. Similarly, subgrantees should advise grantees of significant Y2K
problems or an inability to complete systems testing and validation before systems cease
operating properly. This will assist Federal agencies, grantees, and subgrantees with contingency
planning. [Grantees should contact their Federal grantor agency about the use of Federal
funds to address Y2K problems] or [Attached to this advisory is guidance about the
use of grant
funds to address Y2K problems.]
Questions about this advisory
Grantees should direct questions about this advisory to the [Federal awarding agency
contact]. Subgrantees should direct questions to the non-federal organization providing
with the most Federal funding.
Additional Y2K Resources
The General Services Administration's Office of Information Technology maintains an
http://www.itpolicy.gsa.gov) which includes valuable information about addressing the
concerns discussed in this advisory. Check under the heading "Year 2000 Directories."