1. 2 Intersection of Fiscal and Program Requirements Larry Fanning School Finance Specialist II STATE OF ALASKA Department of Education & Early Development.

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Intersection of Fiscal and Program Requirements

Larry FanningSchool Finance Specialist II

STATE OF ALASKA Department of Education &

Early Development [email protected]

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Five Important Things to Know

1. Where to find Federal Education Grants Management Requirements.

2. What Conditions Must be Met by the LEA’s?

3. Costs.4. Contract Administration. 5. Internal Controls.

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Where are the Federal Education Grants

Management Requirements? Program Rules: www.ed.gov

Statutes Regulations Guidance Letters Monitoring Reports

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Governing Legal AuthoritiesFederal Law

Statutes -Programmatic & Administrative Programmatic (www.ed.gov)

NCLB Perkins

Administrative (General Cross-Cutting) Single Audit Act General Education Provisions Act (GEPA) straylight.law.cornell.edu/uscode/html/uscode20/usc_sup_01_20.ht

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Regulations Code of Federal Regulations (CFR)

Education Dept Gen Admin Regs (EDGAR) Important Administrative Requirements that

apply to federal education fundswww.ed.gov/policy/fund/reg/edgarReg/edgar.html

OMB Circulars Uniform Administrative Requirements Cost Principles Audit Requirementshttp://www.whitehouse.gov/omb/circulars/index.html

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What OMB Circulars Apply States, Local Governments, and Indian

Tribes A-87 Cost Principles (2 CFR Part 225)

http://www.whitehouse.gov/omb/fedreg/2005/083105_a87.pdf

A-102 Administrative Requirementshttp://www.whitehouse.gov/omb/circulars/a102/a102.html

A-133 Audits of State and Local Governmentshttp://www.whitehouse.gov/omb/circulars/a133/a133.html

Audit Tip: Grantees must comply with the cost principles in appropriate OMB Circular

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Federal Education Grants Management Requirements

EDGAR Financial Management = 80.20 Equipment = 80.32 Procurement= 80.36

Important points For state-administrated programs, SEA’s and

LEAs must follow own laws and procedures For direct programs, EDGAR thresholds apply

to LEA’s

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State-administered programs EDGAR 76 Subpart G “What are the Administrative Responsibilities

of the Subgrantees”-highlights: Compliance with statutes, regulations, state

plan, and applications 76.600 Subgrantee shall directly administer or

supervise the administration of each project 76.701

Fiscal control and fund accounting procedures that insure proper disbursement of and accounting of federal funds 76.702

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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

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Lifecycle concept (cont’d) Changes

Budget Changes 10%

Program Changes Changes in scope or object Change in key personnel Contract with 3rd party to administrator program

Funds expended Consistent with rules (A-87, program rules, cash

management, procurement, inventory rules) Consistent with budget ( as internal control)

Monitoring/enforcement to ensure proper EXPENDITURE

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State-administered programs EDGAR 76 Subpart G

When obligations are made EDGAR 76.707

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(a) Acquisition of real or personal Property

(b) Personal services by and employee of state or subgrantee

(c) Personal services by a contractor who is not an employee of state or subgrantee

(d) Performance of work other than personal services

(e) Public utility

services (f) Travel (g) Rental of real or

personal property (h) A preagreement

cost that was properly approved by the State under the cost principles identified in CFR 74.171 and 80.22

(a) On the date on which the subgrantee makes a binding commitment to acquire the property

(b) When the services are

performed

(c) On the date on which the subgrantee makes a binding commitment to acquire the services

(d) On the date on which the

subgrantee makes a binding commitment to acquire the work

(e) When the subgrantee receives the service

(f) When travel is taken (g) When the subgrantee uses

the property

The obligation is made------- If obligation is for------------

EDGAR 76.707

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State-administered programs EDGAR 76 Subpart G (cont)

When subgrantees may begin to obligate funds 76.708 (a)(2) “The date that the applicant

submits its application to the state in substantially approvable form.”

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State-administered programs EDGAR 76 Subpart G Records 76.730

A subgrantee shall keep records that fully show:

The amounts of funds under the grant or subgrant

How the subgrantee uses the funds The total cost of the project The share of the cost provided form other

sources; and Other records to facilitate an effective

audit

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Is it equipment?

Section 80.3 EDGAR Definitions.Equipment 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.

A grantee may use its own definition of equipment provided that such a definition would at least include all equipment defined above.

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Fleshing out Equipment Equipment is defined as the organization’s

“capitalization policy,” or $5,000 whichever is less.

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.

Non-capital expenditures become classified as supplies or some object of expenditure other than equipment

Not the $5,000 prior approval threshold for federal funds

Ted Mueller, Director Indirect Cost Group, Office of Chief Financial Officer USDOE

EDGAR 80.32 Equipment (d) 18

Fleshing out Equipment Inventory

Property records must be maintained that include:

Description Serial number Who holds title ( who is it assigned to) Acquisition date Cost Percentage of Federal participation Ultimate disposition data

Physical inventory at least every two years

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Fleshing out Equipment

District assigns computer to school, school assigns computer to teacher, teacher transfers, computer reassigned

Almost akin to evidence, the trail of equipment has to be documented

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What About Supplies? Supplies are what equipment is not. Is inventory required?

Can you prove the supply was: Reasonable and Necessary Allocable Allowable Legal

Can you prove use is consistent with funding source?

If monitored/audited can you locate the supply? It’s not the pencils, but the big ticket items

i.e. computers, bookshelves

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Helpful Questions to Ask When Analyzing Costs Is the proposed cost consistent with

federal cost principles? Is the proposed cost allowable under

the relevant program? Is the proposed cost consistent with an

approved program plan and budget? Is the proposed cost consistent with

program specific fiscal rules? Is the proposed cost consistent with

EDGAR?

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Helpful Questions to Ask When Analyzing Costs (cont)

Is the cost consistent with special conditions imposed on the grant?

If the news printed a story on the cost, how would you feel?

A-87, ATTACHMENT A, (C) 23

Basics-General Principles of Determining Costs

Costs Must Be: Necessary and Reasonable Allowable Allocable Legal

A-87, ATTACHMENT A, (C) 24

NECESSARY & REASONABLE COSTS Basics

• Must be necessary for the performance or administration of the grant

• Must follow sound business practices Arms length (hint: procurement process) Follow federal, state, and local laws Follow terms of grant award

Fair Market Prices Act with prudence under the circumstances No significant deviation from established

prices

A-87, ATTACHMENT A, (C) 25

BasicsNECESSARY & REASONABLE

(cont)

Practical aspects of “Necessary” Do I really need this

Surplus property/existing resources Is this the minimum amount I need to

spend to meet my need?

A-87, ATTACHMENT A, (C) 26

BasicsNECESSARY & REASONABLE

(cont)

Practical Aspects of “Reasonable” Is the expense targeted to valid

programmatic/administrative considerations?

Do I have the capacity to use what I am purchasing?

Did I pay a fair rate? Can I prove It? If I were asked to defend this purchase,

would I be comfortable? (If media ran story would I be embarrassed?)

A-87, ATTACHMENT A, (C) 27

BasicsALLOCABLE

Can only charge in proportion to the value received by the program.

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

A-87, ATTACHMENT A, (C) 28

BasicsAllocable (cont.)

Adequately Documented Amount of funds under grant How the funds are used Total cost of the project Share of costs provided by other sources Records show compliance Records show performance Other records to facilitate and effective

audit

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BasicsAllocable (cont.)

Practical Aspects Can I prove the program benefited?

Can I prove other programs are not benefiting?

Ensuring only authorized use Is a provision for incidental benefit

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BasicsPROGRAM ALLOWABLITY

In general two types of programs Specific rules regarding allowable costs

Title V Part A has 27 allowable uses by LEA’s

Flexible program- general criteria Title IA,

Eligible Students Purposes of the program

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BasicsPROGRAM ALLOWABLITY

Prior Approval Prior approval is required for:

Budget changes 10% allowance in account, not grant award

amount Programmatic changes:

Change in scope of objective Change in key personnel Contract with 3rd party for administration

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BasicsSupplement not Supplant

Can not use federal funds to pay for services, staff, programs, or materials that would have otherwise be paid with state or local funds

Designed to assure federal funds are paying for something “extra”

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BasicsExamples of Allowable Cost

Controls Budget Controls

Strong pre-award planning Communication between fiscal and

program staff Routine reconciliation to actual

expenditures

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BasicsExamples of Allowable Cost

Controls

Integrated financial management system Inventory Procurement Grants Accounting

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ContractsSupported by Federal Funds All contracts supported by federal funds

must contain required provisions: Remedies for breach, sanctions, penalties Termination for cause and convience Compliance with federal statutes and executive

orders Reporting requirements Patent rights Copyrights Access by federal agency, Comptroller General

of US to records contractor Retention of records for 3 years after final

payment

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ContractsSupported by Federal Funds

As a practical matter ( recent Focus by ED) Must have written contracts (purchase orders ok) Contract should include clearly defined

deliverables Description of services to be performed or goods

delivered Description of dates when services will be performed or

goods delivered Description of locations where services will be

performed or goods delivered Description of number of students/teachers/etc. to be

served (if applicable)

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ContractsSupported by Federal

Funds

As a practical matter (cont) Through performance-based monitoring.

ED/SEA’s increasing likely to determine if contracting expenditure is “worthwhile”

Make sure to retain documents that demonstrate a contract was programmatically permissible and necessary, reasonable, allocable, and legal (and other applicable documents)

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ContractsSupported by Federal Funds As a practical matter (cont)

Must have a written invoice Description of services performed Description of daters services were performed or

goods delivered Description of location services were performed

or goods delivered Description of students/teachers/etc. served (if

applicable) Invoice should be reviewed & approved

before payment Segregation of duties Documented approvals

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General Principles of Control In general, must

implement controls over federal funds

ED looks to “systems,” not individuals, to ensure funds are spent appropriately

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Five Important Things to Remember

1. Where to find Federal Education Grants Management Requirements.

2. What Conditions Must be Met by the LEA’s?

3. Costs.4. Contract Administration.5. Control Principles