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(#14) Intersection of Fiscal and Program Requirements

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(#14) Intersection of Fiscal and Program Requirements

  1. 2. Intersection of Fiscal and Program Requirements <ul><li>Larry Fanning </li></ul><ul><li>School Finance Specialist II </li></ul><ul><li>STATE OF ALASKA </li></ul><ul><li>Department of Education & Early Development </li></ul><ul><li>[email_address] </li></ul>
  2. 3. Five Important Things to Know <ul><li>Where to find Federal Education Grants Management Requirements. </li></ul><ul><li>What Conditions Must be Met by the LEA’s? </li></ul><ul><li>Costs. </li></ul><ul><li>Contract Administration. </li></ul><ul><li>Internal Controls. </li></ul>
  3. 4. Where are the Federal Education Grants Management Requirements? <ul><li>Program Rules: www.ed.gov </li></ul><ul><ul><ul><li>Statutes </li></ul></ul></ul><ul><ul><ul><li>Regulations </li></ul></ul></ul><ul><ul><ul><li>Guidance </li></ul></ul></ul><ul><ul><ul><li>Letters </li></ul></ul></ul><ul><ul><ul><li>Monitoring Reports </li></ul></ul></ul>
  4. 5. Governing Legal Authorities Federal Law <ul><li>Statutes - Programmatic & Administrative </li></ul><ul><ul><li>Programmatic ( www.ed.gov ) </li></ul></ul><ul><ul><ul><li>NCLB </li></ul></ul></ul><ul><ul><ul><li>Perkins </li></ul></ul></ul><ul><ul><li>Administrative (General Cross-Cutting) </li></ul></ul><ul><ul><ul><li>Single Audit Act </li></ul></ul></ul><ul><ul><ul><li>General Education Provisions Act (GEPA) </li></ul></ul></ul><ul><ul><ul><li>straylight.law.cornell.edu/uscode/html/uscode20/usc_sup_01_20.htm </li></ul></ul></ul>
  5. 6. Regulations <ul><li>Code of Federal Regulations (CFR) </li></ul><ul><ul><li>Education Dept Gen Admin Regs (EDGAR) </li></ul></ul><ul><ul><ul><li>Important Administrative Requirements that apply to federal education funds </li></ul></ul></ul><ul><ul><ul><li>www.ed.gov/policy/fund/reg/edgarReg/edgar.html </li></ul></ul></ul><ul><li>OMB Circulars </li></ul><ul><ul><ul><li>Uniform Administrative Requirements </li></ul></ul></ul><ul><ul><ul><li>Cost Principles </li></ul></ul></ul><ul><ul><ul><li>Audit Requirements </li></ul></ul></ul><ul><ul><ul><li>http://www.whitehouse.gov/omb/circulars/index.html </li></ul></ul></ul>
  6. 7. What OMB Circulars Apply <ul><li>States, Local Governments, and Indian Tribes </li></ul><ul><ul><li>A-87 Cost Principles (2 CFR Part 225) </li></ul></ul><ul><ul><li>http://www.whitehouse.gov/omb/fedreg/2005/083105_a87.pdf </li></ul></ul><ul><ul><li>A-102 Administrative Requirements </li></ul></ul><ul><ul><li>http://www.whitehouse.gov/omb/circulars/a102/a102.html </li></ul></ul><ul><ul><li>A-133 Audits of State and Local Governments </li></ul></ul><ul><ul><li>http://www.whitehouse.gov/omb/circulars/a133/a133.html </li></ul></ul><ul><li>Audit Tip: Grantees must comply with the cost principles in appropriate OMB Circular </li></ul>
  7. 8. Federal Education Grants Management Requirements <ul><li>EDGAR </li></ul><ul><ul><li>Financial Management = 80.20 </li></ul></ul><ul><ul><li>Equipment = 80.32 </li></ul></ul><ul><ul><li>Procurement= 80.36 </li></ul></ul><ul><li>Important points </li></ul><ul><ul><li>For state-administrated programs, SEA’s and LEAs must follow own laws and procedures </li></ul></ul><ul><ul><li>For direct programs, EDGAR thresholds apply to LEA’s </li></ul></ul>
  8. 9. State-administered programs EDGAR 76 Subpart G <ul><li>“ What are the Administrative Responsibilities of the Subgrantees”-highlights : </li></ul><ul><ul><li>Compliance with statutes, regulations, state plan, and applications 76.600 </li></ul></ul><ul><ul><li>Subgrantee shall directly administer or supervise the administration of each project 76.701 </li></ul></ul><ul><ul><li>Fiscal control and fund accounting procedures that insure proper disbursement of and accounting of federal funds 76.702 </li></ul></ul>
  9. 10. Lifecycle concept: Budgeting and Expenditure Application/budgets reviewed. After approval, funds are awarded. Funds expended. Monitoring consistent with program, fiscal and admin requirements. Application is submitted, funds budgeted consistent with program, fiscal and admin requirements Budget and programmatic changes are approved
  10. 11. Lifecycle concept (cont’d) <ul><li>Changes </li></ul><ul><ul><li>Budget Changes </li></ul></ul><ul><ul><ul><li>10% </li></ul></ul></ul><ul><ul><li>Program Changes </li></ul></ul><ul><ul><ul><li>Changes in scope or object </li></ul></ul></ul><ul><ul><ul><li>Change in key personnel </li></ul></ul></ul><ul><ul><ul><li>Contract with 3 rd party to administrator program </li></ul></ul></ul><ul><li>Funds expended </li></ul><ul><ul><li>Consistent with rules (A-87, program rules, cash management, procurement, inventory rules) </li></ul></ul><ul><ul><li>Consistent with budget ( as internal control) </li></ul></ul><ul><li>Monitoring/enforcement to ensure proper EXPENDITURE </li></ul>
  11. 12. State-administered programs EDGAR 76 Subpart G <ul><li>When obligations are made EDGAR 76.707 </li></ul>
  12. 13. EDGAR 76.707
  13. 14. State-administered programs EDGAR 76 Subpart G (cont) <ul><li>When subgrantees may begin to obligate funds 76.708 </li></ul><ul><ul><li>(a)(2) “The date that the applicant submits its application to the state in substantially approvable form.” </li></ul></ul>
  14. 15. State-administered programs EDGAR 76 Subpart G <ul><li>Records 76.730 </li></ul><ul><ul><li>A subgrantee shall keep records that fully show: </li></ul></ul><ul><ul><ul><li>The amounts of funds under the grant or subgrant </li></ul></ul></ul><ul><ul><ul><li>How the subgrantee uses the funds </li></ul></ul></ul><ul><ul><ul><li>The total cost of the project </li></ul></ul></ul><ul><ul><ul><li>The share of the cost provided form other sources; and </li></ul></ul></ul><ul><ul><ul><li>Other records to facilitate an effective audit </li></ul></ul></ul>
  15. 16. Is it equipment? <ul><li>Section 80.3 EDGAR Definitions. </li></ul><ul><ul><ul><li>Equipment </li></ul></ul></ul><ul><ul><ul><li>means tangible, non expendable, personal property having a useful life of more than one year and an acquisition cost of $5,000 or more per unit. </li></ul></ul></ul><ul><ul><ul><li>A grantee may use its own definition of equipment provided that such a definition would at least include all equipment defined above. </li></ul></ul></ul>
  16. 17. Fleshing out Equipment <ul><li>Equipment is defined as the organization’s “capitalization policy,” or $5,000 whichever is less. </li></ul><ul><li>Capitalization means at what point an item is depreciated based on the useful life of the asset, versus being expensed at the time of acquisition. </li></ul><ul><li>Non-capital expenditures become classified as supplies or some object of expenditure other than equipment </li></ul><ul><li>Not the $5,000 prior approval threshold for federal funds </li></ul><ul><ul><ul><ul><li>Ted Mueller, Director Indirect Cost Group, Office of Chief Financial Officer USDOE </li></ul></ul></ul></ul>
  17. 18. Fleshing out Equipment <ul><li>Inventory </li></ul><ul><ul><li>Property records must be maintained that include: </li></ul></ul><ul><ul><ul><li>Description </li></ul></ul></ul><ul><ul><ul><li>Serial number </li></ul></ul></ul><ul><ul><ul><li>Who holds title ( who is it assigned to) </li></ul></ul></ul><ul><ul><ul><li>Acquisition date </li></ul></ul></ul><ul><ul><ul><li>Cost </li></ul></ul></ul><ul><ul><ul><li>Percentage of Federal participation </li></ul></ul></ul><ul><ul><ul><li>Ultimate disposition data </li></ul></ul></ul><ul><ul><li>Physical inventory at least every two years </li></ul></ul>
  18. 19. Fleshing out Equipment <ul><li>District assigns computer to school, school assigns computer to teacher, teacher transfers, computer reassigned </li></ul><ul><li>Almost akin to evidence, the trail of equipment has to be documented </li></ul>
  19. 20. What About Supplies? <ul><li>Supplies are what equipment is not. </li></ul><ul><li>Is inventory required? </li></ul><ul><ul><li>Can you prove the supply was: </li></ul></ul><ul><ul><ul><li>Reasonable and Necessary </li></ul></ul></ul><ul><ul><ul><li>Allocable </li></ul></ul></ul><ul><ul><ul><li>Allowable </li></ul></ul></ul><ul><ul><ul><li>Legal </li></ul></ul></ul><ul><ul><li>Can you prove use is consistent with funding source? </li></ul></ul><ul><ul><ul><li>If monitored/audited can you locate the supply? </li></ul></ul></ul><ul><li>It’s not the pencils, but the big ticket items i.e. computers, bookshelves </li></ul>
  20. 21. Helpful Questions to Ask When Analyzing Costs <ul><li>Is the proposed cost consistent with federal cost principles? </li></ul><ul><li>Is the proposed cost allowable under the relevant program? </li></ul><ul><li>Is the proposed cost consistent with an approved program plan and budget? </li></ul><ul><li>Is the proposed cost consistent with program specific fiscal rules? </li></ul><ul><li>Is the proposed cost consistent with EDGAR? </li></ul>
  21. 22. Helpful Questions to Ask When Analyzing Costs (cont) <ul><li>Is the cost consistent with special conditions imposed on the grant? </li></ul><ul><li>If the news printed a story on the cost, how would you feel? </li></ul>
  22. 23. Basics-General Principles of Determining Costs <ul><li>Costs Must Be: </li></ul><ul><ul><li>Necessary and Reasonable </li></ul></ul><ul><ul><li>Allowable </li></ul></ul><ul><ul><li>Allocable </li></ul></ul><ul><ul><li>Legal </li></ul></ul>
  23. 24. NECESSARY & REASONABLE COSTS Basics <ul><li>Must be necessary for the performance or administration of the grant </li></ul><ul><li>Must follow sound business practices </li></ul><ul><ul><li>Arms length (hint: procurement process) </li></ul></ul><ul><ul><li>Follow federal, state, and local laws </li></ul></ul><ul><ul><li>Follow terms of grant award </li></ul></ul><ul><li>Fair Market Prices </li></ul><ul><li>Act with prudence under the circumstances </li></ul><ul><li>No significant deviation from established prices </li></ul>
  24. 25. Basics NECESSARY & REASONABLE (cont) <ul><li>Practical aspects of “Necessary” </li></ul><ul><ul><li>Do I really need this </li></ul></ul><ul><ul><ul><li>Surplus property/existing resources </li></ul></ul></ul><ul><ul><li>Is this the minimum amount I need to spend to meet my need? </li></ul></ul>
  25. 26. Basics NECESSARY & REASONABLE (cont) <ul><li>Practical Aspects of “ Reasonable” </li></ul><ul><ul><li>Is the expense targeted to valid programmatic/administrative considerations? </li></ul></ul><ul><ul><li>Do I have the capacity to use what I am purchasing? </li></ul></ul><ul><ul><li>Did I pay a fair rate? Can I prove It? </li></ul></ul><ul><ul><li>If I were asked to defend this purchase, would I be comfortable? (If media ran story would I be embarrassed?) </li></ul></ul>
  26. 27. Basics ALLOCABLE <ul><li>Can only charge in proportion to the value received by the program. </li></ul><ul><li>Example: LEA purchases a computer to use 50% in the Title IV program and 50% in a state program-can only charge 50% to Title IV </li></ul>
  27. 28. Basics Allocable (cont.) <ul><li>Adequately Documented </li></ul><ul><ul><li>Amount of funds under grant </li></ul></ul><ul><ul><li>How the funds are used </li></ul></ul><ul><ul><li>Total cost of the project </li></ul></ul><ul><ul><li>Share of costs provided by other sources </li></ul></ul><ul><ul><li>Records show compliance </li></ul></ul><ul><ul><li>Records show performance </li></ul></ul><ul><ul><li>Other records to facilitate and effective audit </li></ul></ul>
  28. 29. Basics Allocable (cont.) <ul><li>Practical Aspects </li></ul><ul><ul><li>Can I prove the program benefited? </li></ul></ul><ul><ul><li>Can I prove other programs are not benefiting? </li></ul></ul><ul><ul><ul><li>Ensuring only authorized use </li></ul></ul></ul><ul><ul><ul><li>Is a provision for incidental benefit </li></ul></ul></ul>
  29. 30. Basics PROGRAM ALLOWABLITY <ul><li>In general two types of programs </li></ul><ul><ul><li>Specific rules regarding allowable costs </li></ul></ul><ul><ul><ul><li>Title V Part A has 27 allowable uses by LEA’s </li></ul></ul></ul><ul><ul><li>Flexible program- general criteria </li></ul></ul><ul><ul><ul><li>Title IA, </li></ul></ul></ul><ul><ul><ul><ul><li>Eligible Students </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Purposes of the program </li></ul></ul></ul></ul>
  30. 31. Basics PROGRAM ALLOWABLITY Prior Approval <ul><li>Prior approval is required for: </li></ul><ul><ul><li>Budget changes </li></ul></ul><ul><ul><ul><li>10% allowance in account, not grant award amount </li></ul></ul></ul><ul><ul><li>Programmatic changes: </li></ul></ul><ul><ul><ul><li>Change in scope of objective </li></ul></ul></ul><ul><ul><ul><li>Change in key personnel </li></ul></ul></ul><ul><ul><ul><li>Contract with 3 rd party for administration </li></ul></ul></ul>
  31. 32. Basics Supplement not Supplant <ul><li>Can not use federal funds to pay for services, staff, programs, or materials that would have otherwise be paid with state or local funds </li></ul><ul><li>Designed to assure federal funds are paying for something “extra” </li></ul>
  32. 33. Basics Examples of Allowable Cost Controls <ul><li>Budget Controls </li></ul><ul><ul><li>Strong pre-award planning </li></ul></ul><ul><ul><li>Communication between fiscal and program staff </li></ul></ul><ul><ul><li>Routine reconciliation to actual expenditures </li></ul></ul>
  33. 34. Basics Examples of Allowable Cost Controls <ul><li>Integrated financial management system </li></ul><ul><ul><li>Inventory </li></ul></ul><ul><ul><li>Procurement </li></ul></ul><ul><ul><li>Grants </li></ul></ul><ul><ul><li>Accounting </li></ul></ul>
  34. 35. Contracts Supported by Federal Funds <ul><li>All contracts supported by federal funds must contain required provisions: </li></ul><ul><ul><li>Remedies for breach, sanctions, penalties </li></ul></ul><ul><ul><li>Termination for cause and convience </li></ul></ul><ul><ul><li>Compliance with federal statutes and executive orders </li></ul></ul><ul><ul><li>Reporting requirements </li></ul></ul><ul><ul><li>Patent rights </li></ul></ul><ul><ul><li>Copyrights </li></ul></ul><ul><ul><li>Access by federal agency, Comptroller General of US to records contractor </li></ul></ul><ul><ul><li>Retention of records for 3 years after final payment </li></ul></ul>
  35. 36. Contracts Supported by Federal Funds <ul><li>As a practical matter ( recent Focus by ED) </li></ul><ul><ul><li>Must have written contracts (purchase orders ok) </li></ul></ul><ul><ul><li>Contract should include clearly defined deliverables </li></ul></ul><ul><ul><ul><li>Description of services to be performed or goods delivered </li></ul></ul></ul><ul><ul><ul><li>Description of dates when services will be performed or goods delivered </li></ul></ul></ul><ul><ul><ul><li>Description of locations where services will be performed or goods delivered </li></ul></ul></ul><ul><ul><ul><li>Description of number of students/teachers/etc. to be served (if applicable) </li></ul></ul></ul>
  36. 37. Contracts Supported by Federal Funds <ul><li>As a practical matter (cont) </li></ul><ul><ul><li>Through performance-based monitoring. ED/SEA’s increasing likely to determine if contracting expenditure is “worthwhile” </li></ul></ul><ul><ul><li>Make sure to retain documents that demonstrate a contract was programmatically permissible and necessary, reasonable, allocable, and legal (and other applicable documents) </li></ul></ul>
  37. 38. Contracts Supported by Federal Funds <ul><li>As a practical matter (cont) </li></ul><ul><ul><li>Must have a written invoice </li></ul></ul><ul><ul><ul><li>Description of services performed </li></ul></ul></ul><ul><ul><ul><li>Description of daters services were performed or goods delivered </li></ul></ul></ul><ul><ul><ul><li>Description of location services were performed or goods delivered </li></ul></ul></ul><ul><ul><ul><li>Description of students/teachers/etc. served (if applicable) </li></ul></ul></ul><ul><ul><li>Invoice should be reviewed & approved before payment </li></ul></ul><ul><ul><ul><li>Segregation of duties </li></ul></ul></ul><ul><ul><ul><li>Documented approvals </li></ul></ul></ul>
  38. 39. General Principles of Control <ul><li>In general, must implement controls over federal funds </li></ul><ul><li>ED looks to “systems,” not individuals, to ensure funds are spent appropriately </li></ul>
  39. 40. Five Important Things to Remember <ul><li>Where to find Federal Education Grants Management Requirements. </li></ul><ul><li>What Conditions Must be Met by the LEA’s? </li></ul><ul><li>Costs. </li></ul><ul><li>Contract Administration. </li></ul><ul><li>Control Principles </li></ul>

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