Sorting it all out – your approved application and budget, NOGA, and Provisions and AssurancesCommon Audit FindingsAllowable and Unallowable Costs, including OMB Circular A-122 and Reasonable and Necessary Costs Accounting for Grant Funds, including documentation for expenditures Time and Effort Reporting and Charges to PayrollEquipment and Furniture – capitalized vs. non-capitalized and Disposition of EquipmentSupplement, not supplantAudit Requirements for NonprofitsOther key uniform administrative grant requirements from 34 CFR Part 74Matching and Cost-Share Requirements – Allowable items and accounting for cost share
“UGMS” - Uniform Grant and Contract Management Standards Act of 1981 (Texas Government Code, Section 783) was directed the governor’s office to establish similar principles for state funded grants and contracts as those in the federal grants and contracts world.“UGMS” incorporates the federal cost principles for use with state funded grants. It establishes UNIFORM procedures to promote the efficient use of public money.
Hold up hard copy of a NOGA for audience to see.The Notice of Grant Award (NOGA) authorizes the grantee to expend funds.
Budget Items MUST be allowable under federal cost principles [Office of Management and Budget (OMB) Circular A-122]Be reasonable and necessary to accomplish the program goals.Clearly support the project’s goals and objectivesPresent a fair and accurate best estimate of the costs to complete the proposed project – based on the best information availableEnsure that implementation, continuation, and phase-down costs can be met Not assume that income from a grant alone can support a project.
You have to demonstrate an adequate financial management system with separate budgets that apply to the grant funded items versus non-grant funded items. Don’t comingle funds! Why is it important? Failure to implement could lead to misuse of grant funds and the inability to run your program.If it’s not documented, then it NEVER happened. Employee time and effort is the biggest finding. Why is it important to document an employee’s time and effort on a grant? Failure to do so could lead to misuse of grant funds and the inability to run your program. Full time grant paid positions must work full time on the grant funding them.Adequate internal controls help determine reasonable and necessary expenditures. For example, if you’re charging your entire building’s rent to the grant; however, your business is offering other non-grant services, then internal controls would alert you to equally allocate rent costs to all who use the building. What other shared expenditures can you think of that might be cost allocated? Employee phones? Office supplies? Administrative costs? Why is it important to equally allocate costs?Supplanting is big with personnel and administrative costs. Adequate fiscal controls help maintain effective control of program compliance. For example, 21st CCLC fully funds a required full time dedicated Project Director. Can this person do other non-grant related jobs? Why not? The grant is intended to provide a Project Director to run this grant, not pay for an existing position that has other responsibilities. Any one 100% grant funded by 21st must only work on 21st.All expenditures must be necessary and reasonable to the grant purpose. All costs must be approved and supported with documentation.
Office of Management and Budget is the federal agency responsible for issuing numerous circulars governing various aspects of grants managementCirculars address federal cost principles and administrative requirements and are considered legally binding as a condition of accepting grant awardsRevisions to OMB Circulars, including circulars pertaining to federal cost principles, audits, and uniform administrative grant requirements, are published in the Federal RegisterOMB Circular A-122, A-133, and A-110 apply to nonprofit organizationsCirculars are also available on OMB’s website:http://www.whitehouse.gov/omb/circulars/index.html
Policy for reimbursing travelActual travel costs must be documented with a “travel voucher” or other comparable documentation completed and signed by the employee. Documentation should include at a minimum:The name of the individual claiming travel reimbursementThe destination and purpose of the trip, including how it was necessary to accomplish the objectives of the grant projectThe dates of actual travelThe actual mileage (not to exceed reimbursement at the maximum allowable rate)The actual amount expended on airfare, with receipt attached The actual amount expended on lodging per day, with a receipt attached (may not exceed the maximum allowable)The actual amount expended on meals per day (may not exceed the maximum allowable; tips/gratuities are not reimbursable)The actual amount expended on public transportation, such as taxis, shuttles, etc.The actual amount expended on a rental car, with receipt attached and justification for why a rental car was necessary and more cost effective than alternate transportation The actual amount expended on incidentals, such as hotel taxes, copying of materials, and other costs associated with the travelThe total amount reimbursed to the employeeAny travel costs not properly documented are not reimbursable.
The accounting ledger must reflect each individual transaction on the credit or charge account billing statement by:the individual vendor name (not just the credit card company name)the source of funding (i.e., donations, a particular state grant, a particular federal grant, etc.)the expense category (i.e., supplies, instructional materials, equipment, travel, etc.)the actual date of the transaction (as opposed to the billing statement date or the date that the total credit/charge account bill was paid).Grantees must maintain financial accounting reports (e.g., a detailed general ledger that supports the expenditures reported to the TEA on an interim or final expenditure report) that discloses the accounting of grant funds and be able to produce such reports.
Unless specifically approved in the grant agreement, any program income must be deducted from the expenditures to be charged to the grantThis means the grantee would need to deduct the program income from the expenditures prior to filing the final expenditure report and TEA making final payment to the granteeIf approved by TEA in the grant award, the grantee may add the program income to the total grant and not deduct it from expenditures
Employees must prepare time and effort reports, at least monthly, to coincide with pay periods. Such reports must reflect an after-the-fact distribution of 100 percent of the actual time spent on each activity and must be signed by the employee. Charges to payroll must be adjusted based on time and effort records.
T&E Reports must:Reflect an after-the-fact account of the actual activity of each employee (budget estimates do not qualify as support for charges to payroll);Account for 100% of their time;Must be prepared at least monthly and must coincide with one or more pay periods;Salaries and wages of employees used in meeting cost sharing or matching requirements must be supported in the same manner as salaries and wages claimed for reimbursement under the grant; andBe signed by the employee or by a supervisor having first-hand knowledge of the activities performed by the employee that the distribution of activity represents a reasonable estimate of the actual work performed by the employee.
What does Supplement, Not Supplant in grant terms mean?Federal funds may be used only to supplement the educational programs generally offered from other fund sources. Federal funds may be used only to provide supplemental services that would not have been provided had the federal funds not been available.What does Supplement, Not Supplant in grant terms mean?Other funds which previously funded activities may not be diverted to another purpose simply because federal funds are now available to fund those activities.In other words, the use of federal funds may not result in a decrease in other funds for a particular activity, which, in the absence of the federal funds, would have been available to conduct the activity.
Documenting Supplement, Not SupplantRecipients of federal funds must maintain documentation which clearly demonstrates the supplementary nature of the funds and activities.It is both the funding and the activities that must be supplemented.
Two Sources of Audit Requirements or Financial Reporting:1. Texas Non-Profit Corporation Act, Vernon’s Texas Civil Statutes, Article 1396-2.23A. Financial Records and Annual Reports2. Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-ProfitOrganizationsThe Texas Non-profit Corp. Act maintains:Corporations shall maintain current true and accurate financial records with full and correct entries made with respect to all financial transactions of the corporation, including all income and expenditures, in accordance with generally accepted accounting practices. Based on these records, the board of directors shall annually prepare or approve a report of the financial activity of the corporation for the preceding year. All records, books, and annual reports of the financial activity of the corporation shall be kept at the registered office or principal office of the corporation in this state for at least three years after the closing of each fiscal year.
In cases of continued inability or unwillingness to have an audit conducted in accordance with A-133, TEA can:(a) withhold a percentage of federal awards until the audit is completed satisfactorily;(b) withhold or disallow overhead costs;(c) suspend federal awards until the audit is conducted; or(d) terminate the federal award.
Reporting Package Includes:Financial statements and schedule of expenditures of federal awardsSummary schedule of prior audit findingsAuditor’s reportCorrective action plan
Management’s Decision:Clearly states whether or not the audit finding is sustained, the reasons for the decision, and the expected action to repay disallowed costs, make financial adjustments, or take other action. If the grantee has not completed corrective action, a timetable for follow-up should be given.
Grantees must keep records of cost sharing or matching as if it were grant costsCan come from: allowable costs borne by non-federal grants grantee in-kind contributions cash donations third party in-kind contributions
Cash, grantee in-kind, and third-party in-kind contributions must be:Verifiable from the grantee’s recordsNot included as contributions toward any other federal programNecessary and reasonable for proper and efficient accomplishment of the grant projectAllowable under the cost principlesNot paid by another federal grant unless specifically authorized in statuteProvided for in the approved budget (allowable under the grant)
Note: Unrecovered indirect costs (when indirect costs are an allowable cost under the grant program) may be counted toward cost sharing or matching with approval of TEA (properly budgeted and approved in the grant application)Whether the cost requires an actual cost outlay or not:if a cost has valueif recognized under the applicable cost principles (OMB Circular A-122)if an allowable cost under the grantit should be considered a grantee in-kind contribution.Ex: Office space, utilities, internet access, equipment usage, employee services, classroom space
If services provided by the loaned employee are in different line of work, value at same rate as volunteer for similar work.Ex: If a lawyer volunteers to drive a bus for grant activities, his time is valued at the rate of a bus driver, not the rate of a lawyerIf he donates legal services to the grant project, his time is valued at his rate of lawyer
Note:If third party retains title and donates use of equipment or use of space in building,value at fair market rental rate of equipment or space.If third party donates equipment, buildings, or land and passes title to grantee, depends on purpose of grant.Purpose:Acquiring capital (equipment, buildings, land) market value at time of donationOperating grant (cannot claim cost of donated equipment, building, or land)Must use depreciation or use allowances based on market value of donation (6 2/3% of market value of equipment; 2% of market value of buildings or land)
Liza LorenziProgram SpecialistTexas Education AgencyLiza.Lorenzi@tea.state.tx.us(512) 463-9762ACE Help Desk: TexasACE21@EdvanceResearch.com
 Education Department General Administrative Requirements (EDGAR) -
 Office of Management and Budget (OMB) Circulars
• A-110 - Uniform administrative requirements for grants and agreements with institutions of higher education,
hospitals, and other non-profit organizations
• A-122 - Cost Principles for Non-Profit Organizations -
• A-133 - Audits of States, Local Governments, and Non-Profit Organizations -
 Uniform Grant Management Standards (UGMS) – https://governor.state.tx.us/files/state-
4. Sorting It All Out…
5. Approved Grant Application
• The approved negotiated grant application and the signed Notice of Grant Award
(NOGA) together constitute a legally binding agreement between TEA and
Certification and Incorporation
• I hereby certify that the information contained in this application is, to the best of my knowledge, correct and that the organization
named above has authorized me as its representative to obligate this organization in a legally binding contractual agreement. I
further certify that any ensuing program and activity will be conducted in accordance with all applicable Federal and State laws and
regulations, application guidelines and instructions, the Provisions and Assurances, Debarment and Suspension, lobbying
requirements, Special Provisions and Assurances, and the schedules attached as applicable. It is understood by the applicant that
this application constitutes an offer and, if accepted by Agency or renegotiated to acceptance, will form a binding agreement.
• The grantee is responsible for maintaining copies of negotiated changes,
corrections, and amendments to the original application.
6. Budget Schedules
• Budget schedules represent the “financial plan” for the grant project.
• Organized by cost categories in accordance with federal Generally Accepted
Accounting Principles (GAAP)
1. Direct Costs
• Payroll Costs (6100)
• Professional and Contracted Services (6200)
• Supplies and Materials (6300)
• Other Operating Costs (6400)
• Capital Outlay (6600)
2. Indirect Costs
• Narratives should support and reference the budgeted items.
7. Budget Review Process
• Review all items for allowability
• Calculate the maximum allowable indirect costs
• TEA may review whether budget items charged to indirect costs are consistent among
the applicant’s grant projects
• Review job positions, salaries, and wages
• Number and classification of positions
• Percent of time allocated to the grant project
• Reasonableness of compensation
• Each job position funded with the grant must be listed in the
• Certain budgetary changes require TEA’s prior approval via the
• Refer to specific instructions in the RFA (Part 3: Schedule Instructions) and on
the amendment schedule (Part 4: Schedule 3 – Purpose of Amendment)
• An amendment is effective on the day it is received by TEA in
substantially approvable form
• The last date to submit an amendment is usually 90 days prior to
ending date of grant
9. Provisions and Assurances
• General Provisions and Assurances (Schedule #6A) – included with every grant application from TEA
• Debarment and Suspension (Schedule #6B) – included with every federally funded application
• Lobbying Certification (Schedule #6C) – included with every federal application in which the applicant can
request greater than $100,000
• Disclosure of Lobbying (Schedule #6D)- included with every federal application in which the applicant can
request greater than $100,000
• NCLB Provisions and Assurances (Schedule #6E) – included with every application funded by NCLB federal
• Program-Specific Provisions and Assurances (Schedule #6F) – included if the program requires additional
provisions or assurances such as supplement-not-supplant, data collection, survey participation, attendance
at events, and other programmatic requirements
10. Common Audit Findings
11. OMB Circular A-122 and
Federal Cost Principles
12. Premises of Federal Cost Principles
The application of the cost principles is based on the premises that:
• Organizations are responsible for the efficient and effective administration of Federal awards through
the application of sound management practices
• internal controls
• written policies and procedures
• separation of duties
• checks and balances
• effective and appropriate decision-making
• appropriate authority levels approving purchases and expenditures
• Organizations assume responsibility for administering Federal funds in a manner consistent with
underlying agreements, program objectives, and the terms and conditions of the Federal award
• Each organization, in recognition of its own unique combination of staff, facilities, and experience, will
have the primary responsibility for employing whatever form of organization and management
techniques may be necessary to assure proper and efficient administration of Federal awards
13. Guidelines of Federal Cost Principles
To be allowable under Federal awards, costs must meet the following general criteria:
• Be reasonable and necessary for proper and efficient performance and administration of Federal
• Be allocable to Federal awards under the provisions of the Circular.
• Be authorized or not prohibited under State or local laws or regulations.
• Follow the most restrictive rules
• Conform to any limitations or exclusions set forth in these principles, Federal laws, terms and
conditions of the Federal award, or other governing regulations as to types or amounts of cost
14. Guidelines of Federal Cost Principles
• Be consistent with policies, regulations, and procedures that apply uniformly to both Federal
awards and other activities of the organization.
• Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost
if any other cost incurred for the same purpose in like circumstances has been allocated to the
Federal award as an indirect cost.
• Be in accordance with generally accepted accounting principles (GAAP).
• Not be included as a cost or used to meet cost sharing or matching requirements of any other
Federal award in either the current or a prior period, except as specifically provided by Federal
law or regulation.
• Be adequately documented.
15. Allowable and Unallowable Costs
• Specific allowable and unallowable costs are often described in the Request for Application (RFA)
• Part 2: Program Guidelines
• Part 3: Schedule Instructions
• Guidelines Related to Specific Costs
• Costs must also be allowable as specified in the applicable OMB Circular
• Guidance related to allowable and unallowable costs are available on the Grant Resources section of
the TEA Grant Opportunities page at:
16. Allowable Payroll Costs
• OMB Circular A-122, Attachment B, section 8 addresses “Compensation for Personal Services”
• Payroll costs are allowable to the extent that:
• compensation is reasonable for the services rendered and conforms to the established policy of the
organization consistently applied to federal and non-federal activities
• salaries and wages are supported by time and effort reports
• Compensation is considered reasonable to the extent that:
• it is consistent with that paid for similar work for non-grant funded employees (when organization is
predominantly engaged in non-federal activities)
• it is comparable to that paid for similar work in the labor markets (when organization is predominately
engaged in federal activities)
“Obligations mean the amounts of orders placed, contracts and subgrants awarded, goods and
services received, and similar transactions during a given period that will require payment by the
grantee during the same or a future period” (34 CFR 74.2 and 80.3)
• When an obligation occurs depends on the type of transaction:
• Real or personal property: the date of a binding written commitment to acquire the property
• Services by an employee: when the services are performed
• Services by a contractor: the date of a binding written commitment to obtain services
• Utility services: when the services are received
• Travel: when the travel is taken
• Rental (or leasing) of property: when the property is used
• An “obligation” is the encumbrance of funds and must occur between the beginning and ending dates
of the grant
• Once an encumbrance is paid, the obligation becomes a “cost”
18. Liquidation of Obligations
• Grantees must pay all of their bills or the expenditure must be in their “accounts payable” by the
time the final expenditure report is due to TEA.
• In order to pay a bill or to be in “accounts payable”, the invoice may have been received but the
goods and services must have been received.
• NOTE: Auditors will determine if supplies and equipment were purchased in sufficient time to
benefit the current grant period. Grantees cannot stockpile for future grant periods.
19. Reasonable and Necessary
All costs must be reasonable and necessary to carry out the grant project
• What the current market will bear for comparable goods and services
• In accordance with prudent business practice
• Necessary to carry out the objectives of the grant project
20. Determining Reasonableness
Consideration shall be given to:
• Whether the cost is of a type generally recognized as ordinary and necessary for the operation of
the organization or the performance of the award.
• The restraints or requirements imposed by such factors as: sound business practices, arms-length
bargaining; Federal, State and other laws and regulations; and terms and conditions of the
• No significant deviations from the established practices of the organization which may
unjustifiably increase the Federal award’s cost.
21. What Does “Necessary” Mean?
• A cost is necessary when it is vital or required in order to meet the objectives of the grant or for
the grant to be successful.
• It is not “nice to have”.
22. What are Allocable Costs?
• A cost is allocable to a particular cost objective if the goods or services involved are chargeable or
assignable to the cost objective in accordance with relative benefits received.
• Cost objective: a function, grant, contract, or other activity for which cost data are needed and for
which costs are incurred
• it is possible for some costs to benefit more than one objective or program
• a cost benefitting more than one program must be shared or prorated by those programs
• A cost allocable to a particular Federal award or cost objective may not be charged to other
Federal awards to overcome fund deficiencies, to avoid restrictions imposed by law or terms of
the Federal awards, or for any other reasons.
23. Direct Costs
Typical direct costs chargeable to federal grants are:
• Salaries and benefits for employees who devote time to one or more specific grant programs
• Professional and contracted services for a specific grant program
• Materials purchased for a specific grant program
• Equipment purchased for use in a specific grant program
• Travel costs and other operating costs directly attributed to a specific grant program
24. Indirect Costs
Organizations must have an approved indirect cost rate from their cognizant
agency in order to charge indirect costs to state or federal grants.
• Costs that are incurred for common or joint purposes
• Costs that benefit multiple cost objectives thus supporting more than one federal award, state
project, or activity
• Costs that cannot be specifically identified with a particular grant program without effort
disproportionate to the benefits received
• Human Resources
• Building Maintenance, etc.
25. Accounting for Funds
26. Origin of Financial Management Requirements
• 34 CFR Part 74 – Uniform Administrative Requirements for Grants and
Agreements with Institutions of Higher Education, Hospitals and
Other Nonprofit Organizations (OMB Circular A-110)
• Codified in Title 2 CFR Part 215
27. Financial Management Systems
34 CFR 74. 21
• Financial management systems shall provide for:
• Accurate, current, and complete disclosure of the financial results of
each federally-sponsored project
28. Financial Management Systems
• Records that adequately identify the funding source and application (i.e., use) of
funds for federally funded grant programs
• Records shall contain information for each grant you receive pertaining to:
• Unobligated balances
• Outlays (i.e., expenditures)
• Income (i.e., revenues)
• Interest (on debt)
29. Financial Management Systems
• Effective control over and accountability for all funds, property, and
• Adequately safeguard all assets and assure they are used solely for
• Budget control - compare actual expenditures to budget amounts for
30. Financial Management Systems
• Written procedures to minimize the time between the receipt of
funds by the grantee and the disbursement of funds
• 3-day cash management rule – no more cash on hand than to meet 3
days’ business needs
31. Financial Management Systems
• Written procedures for determining the reasonableness, allocability,
and allowability of costs in accordance with the provisions of the
federal cost principles and the terms and conditions of the award
• Accounting records supported by original source documentation
32. Source Documentation
• Payroll records, including charges to payroll supported by time and
effort records and copies of payroll checks
• Purchase orders
• Itemized Invoices
• Itemized Receipts
• Copies of checks
• Travel vouchers with appropriate travel receipts
33. Use of Organization Credit Cards
• Grantees are advised to use caution in using organization credit cards
• A grantee may use any medium to transact business during the course of implementing a grant
program. However, some business practices are better than others because they facilitate the
implementation of internal controls that mitigate the risk that an employee or other agent will
use public (or local) funds in an inappropriate or unauthorized manner.
• A grantee may use a revolving credit or charge account issued directly to the grantee (i.e., a
corporate account) to transact business related to a grant program provided that it properly
accounts for each individual transaction charged to the account(s).
34. Use of Organization Credit Cards
• Grantees should maintain the original, internal accounting records that identify the business
purpose and the general ledger account code classification of each transaction :
• purchase order
• travel reimbursement voucher
• employee expense reimbursement voucher, etc.
• Grantees should maintain the original, third-party records (e.g., invoice, itemized receipt) that:
• itemizes and adequately describes or otherwise identifies the goods purchased or services rendered
• clearly identifies the business or individual the grantee transacted with
• identifies the date of the transaction
35. Use of Organization Credit Cards
• The classification of costs by specific funding source and expense type and the
maintenance of adequate source documentation is necessary for reporting
purposes to the TEA.
• It is also necessary to demonstrate compliance with state and federal cost
principles and standards of financial management systems and conformance with
generally accepted accounting principles.
• It is also a requirement of the Internal Revenue Code applicable to all business
36. Program Income
• Program income includes income from:
• Fees for services performed
• The use or rental of equipment or space acquired under a federal grant
• The sale of commodities or items fabricated under the grant
• License fees and royalties
37. Time and Effort
38. Time and Effort Reporting and Charges to Payroll
• OMB Circular A-122, Attachment B, Section 8. “Compensation for Personal Services,”
Subsection m. “Support of Salaries and Wages”
• All charges to payroll for grant-funded staff must be based on distribution of activity
reports (i.e., time and effort reports). This includes professionals (exempt) and
nonprofessionals (nonexempt) whose compensation is charged, in whole or in part,
directly to awards.
• Therefore, all personnel, whether 100% funded or partially funded from the grant,
must maintain time and effort records for 100% of the time (unless the organization has
a substitute system approved in writing by the cognizant agency).
39. Nonprofessional (non-exempt) Employees
• Charges for salaries and wages of nonprofessional employees must
also be supported by records indicating the total number of hours
worked each day maintained in conformance with the Department of
Labor regulations implementing the Fair Labor Standards Act (FLSA).
For this purpose, the term “nonprofessional employee” shall have the
same meaning as “nonexempt employee” under FLSA.
40. Components of a Time and Effort Report
• Daily records:
• The activity (what the employee did)
• Time frame (how long it took the employee to do it)
• Funding source (which funding source will it be charged to)
• Job descriptions
NOTE: If a grantee does not have adequate time and effort records then either TEA or
an independent auditor (CPA) may disallow payroll costs charged to the grant program.
42. Equipment and Furniture
• All capitalized equipment and furniture must be approved in your grant application
• Capitalized Equipment means:
• Tangible nonexpendable personal property having a useful life of more than one year and
• an acquisition cost which equals or exceeds $5,000 or more per unit, or
• which meets the capitalization level of the organization for financial statement purposes, whichever is
(34 CFR 74.2 and OMB Circular A-122, Attachment B, section 15)
• Title to equipment belongs to the grantee
• TEA reserves the right to transfer equipment due to noncompliance or after the grant ends,
regardless of how it is classified
43. Use of Equipment
• Grantee shall use equipment as long as needed for the project for which it was
originally purchased, whether or not the project continues to be federally funded.
• When no longer needed, equipment may be used in other federal grants funded
by TEA (if purchased with state funds, would be used in another state program). If
no other grants funded by TEA, then may use in other federal grants.
• Shall make equipment available for other federally funded projects as long as
doesn’t interfere with project under which it was originally acquired.
(34 CFR 74.34)
44. Property Management Records
34 CFR 74.34(f)
• Equipment records shall be maintained accurately and shall include:
• Description of the equipment
• Serial number, model number or other identification number
• Funding source of the equipment, including the award number
• Acquisition date and cost, including the unit acquisition cost
• Percent federal participation
• Location and condition of the equipment and the date reported
• Ultimate disposition of the equipment
45. Other Requirements
• A physical inventory of equipment must be taken and the results reconciled with the equipment
records at least once every two years.
• A control system must be in effect to insure adequate safeguards to prevent loss, damage, or
theft of the equipment.
• Implement procedures to adequately maintain the equipment to keep it in good condition.
• Provide insurance for property purchased with grant funds equivalent to insurance for property
purchased with non-grant funds (34 CFR 74.31)
• If authorized by TEA to sell the equipment, establish procedures which provide for competition to
the extent practicable and result in highest possible return.
46. Disposition of Equipment
34 CFR 74.34(g)
When no longer needed for original project or another federally funded project:
• Grantee shall request disposition instructions from TEA
• If approved by TEA, equipment with current fair market value of less than $5,000 - may be
retained, sold, or otherwise disposed of with no further obligations to TEA (except as noted
• Equipment with current fair market value of $5,000 or more – may be retained or sold but TEA
shall have right to the proceeds
• TEA reserves the right to transfer title to another grantee for noncompliance or as needed after
the project ends (regardless of how equipment is classified)
47. Supplement, Not Supplant
Supplement – to add to; to enhance; to expand;
to increase; to extend; to create something new
Supplant – to take the place of; to replace with
48. Ensuring Supplement, Not Supplant
• The applicant assures in their applications for federal funds that they are using
funds to supplement, not supplant.
• In discretionary applications, applicants must describe how funds and activities
are supplementary to current or previously funded activities.
• Penalties for supplanting are oftentimes very severe. All federal funds involved in
a supplanting situation would most likely have to be returned to the federal
49. Am I Supplanting?
Ask yourself this question:
• If I didn’t have federal funds available to conduct this activity/service, would I still
conduct it with other funds anyway?
• If the answer to the question is yes, you are supplanting because it is no longer a
supplementary activity. You must be able to demonstrate that you could not conduct the
activity if it weren’t for these federal funds.
• The test to determine whether supplanting has occurred is whether the programs
supported with federal funds would, in the absence of those federal funds, have been
supported with other funds.
50. Supplement, Not Supplant
• A grantee can demonstrate that it is supplementing where there is
acceptable documentation of a diminished budget.
• Must be able to prove that fewer non-federal funds are available in
the current year than there were in the previous year.
• Must be carefully documented.
51. Audit Requirements
52. OMB Circular A-133
• Requires a Single Audit if the grantee expends more than $500,000
total in each fiscal year in federal grant funds (all federal grants added
• 34 CFR 74.26 requires nonprofit organizations to comply with the
requirements in the Single Audit Act and OMB Circular A-133
• Single Audits are conducted by an independent auditor hired by the
53. Single Audit Requirements
• A single audit encompasses a grantee’s financial statements and schedule of
expenditures of federal awards for the entire organization.
• A program-specific audit focuses on one particular program and may be selected
by the auditee if they expend federal awards under only one federal program and
the federal program’s laws, regulations, or grant agreements do not require a
financial statement audit of the auditee (primarily for grantees that receive only
one federal grant even if they expend more than $500,000 annually)
54. Your Responsibilities
Under OMB Circular A-133, Auditees (i.e., YOUR ORGANIZATION) shall:
• Identify, in your accounts, all Federal awards received and expended and the federal programs under which they were
• Maintain internal control over federal programs that provides reasonable assurance that you are managing federal
awards in compliance with laws, regulations, and provisions.
• Comply with laws, regulations, and provisions of grant agreements.
• Prepare appropriate financial statements, including the schedule of expenditures of federal awards.
• Ensure audits are properly performed and submitted when due.
• Follow up and take corrective action on audit findings, including preparation of a summary schedule of prior audit
findings and a corrective action plan.
55. Audit Report Submission
• Audit must be completed and the data collection form and reporting
package submitted with 30 days after receipt of the independent
auditor’s report, or 9 months after the end of the audit period,
whichever is earlier.
• Data Collection Form (completed by the auditor) - states the audit
was completed in accordance with A-133 and provides information
about your organization, your federal programs, and the results of the
56. Audit Report Submission
• You must submit a copy of the Data Collection Form and the reporting
package to the Federal Clearinghouse designated by OMB
• Click on “Search the Single Audit Database”
57. TEA’s Responsibilities
TEA’s Division of Financial Audits:
• Ensure subrecipients expending $500,000 or more in federal awards
during the past fiscal year have met the audit requirements
• Issue a management decision on audit findings within 6 months after
receipt of the audit report and ensure that the grantee takes
appropriate and timely corrective action
58. Contract Administration
59. Contract Administration System
• Maintain system for contract administration to ensure:
• contractor is conforming to terms and conditions of award and specifications
• adequate and timely follow up of all purchases
• evaluation of contractor performance and documentation of performance
• contract defines a sound and complete agreement
60. Contract Provisions
• Contractual provisions in contracts more than $25,000 that allow for:
• administrative, contractual, or legal remedies in the event the contractor
violates or breaches the contract terms, and the remedies
• termination (for cause or for convenience) by the grantee, including the
manner for termination and basis for settlement
• termination for default or for circumstances beyond the control of the
61. Monitoring and Reporting
• Grantees must:
• manage and monitor each project
• monitor any subawards or subcontracts
• report to TEA as required (both fiscal and programmatic reports)
• retain all original records for 5 years from the ending date of the award
• provide timely and unrestricted access to records and to personnel by TEA,
USDE, OIG, etc. as long as records are retained
• NOTE: Records need to be organized and easily accessible.
62. Matching and Cost Share
63. Matching or Cost Sharing Basics
(34 CFR 74.23)
• Other federal funds may not be used to meet a matching or cost sharing
requirement (unless otherwise permitted in the authorizing program statute –
Even Start allows other federal funds for cost share)
• Costs must first be allowable costs under the grant program to be allowable to be
counted toward cost share or match (the costs must also be obligated/expended
during the same grant period)
• Costs used to count toward cost share or match may not be used to count toward
cost share or match of another federal program
64. Determining Value of In-Kind Contributions
• Grantee in-kind contributions
• Third-party in-kind contributions
• Services and property donated by others
• Volunteer services
• Services provided by employees from other organizations
• Donated supplies
• Donated equipment, buildings, or land
65. Grantee In-Kind Contributions
• Equipment owned by grantee – 6 2/3% of original acquisition cost
• Use of building space owned by grantee – 2% of original acquisition
cost plus capital improvements (for the square footage used)
66. Third Party Volunteer Services
• Services provided by professional and technical personnel, consultants, and other
skilled and unskilled labor
• Count if the service is an integral and necessary part of the approved grant
• Value at rate consistent with those paid for similar work in the grantee
organization or in the labor market
• May include reasonable, allowable, and allocable fringe benefits
67. Third Party Other Employees
• Employees of other organizations (“loaned” employee)
• Value at employee’s regular rate of pay (plus reasonable, allowable, and
allocable fringe benefits)
• Excludes any overhead costs
• Must be for what employee is normally paid to do (same line of work)
68. Third Party Donated Supplies
• Non-capitalized equipment, office supplies, workshop or classroom
• Value shall be reasonable and not exceed fair market value at time of