AAU, COGR and APLU recommend that OMB eliminate the DS-2 requirement for institutions of higher education.
The DS-2 is a document setting forth an institution’s accounting practices with regard to federal funds that requires approval by the institution’s cognizant agency for indirect costs. It is a transposition of accounting policies and practices that are already documented elsewhere, usually on an institution’s website or within workpapers that are readily available to auditors. Cognizant agencies cannot keep up with requests for approval and necessary changes are delayed. It is now a burden both for universities and the government that has far outlived any usefulness. It is rarely requested at audit, yet IGs insist it is a critical tool to mitigate waste, fraud, and abuse. All other recipients of federal funds, including State, Local, and Tribal governments and nonprofits are excluded from this requirement.
In a survey of COGR members conducted in October 2014 at the request of OMB, 77 institutions reported that in 87% of the total federal audits conducted in the last 5 years (1,048 of 1,204 federal audits), a DS-2 was not requested. The DS-2 adds little if any value to enhance stewardship and accountability of federal funds. The COGR survey supports the fact that the DS-2 is not a priority document used in federal audits. Eliminating the DS-2 requirement for IHEs will restore fairness across all non-federal entities without sacrificing accountability and reduce administrative burden for universities and their cognizant agencies.