Threshold System Presented by Jan Stanley, State Title I Director Office of Assessment and Accountability Fall Title I Directors Conference October 23-25,

Threshold System

Presented by Jan Stanley, State Title I Director Office of Assessment and Accountability

Fall Title I Director’s ConferenceOctober 23-25, 2007

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Necessity for increased fiscal awareness ED placing more emphasis on fiscal and

administrative requirements due to concerns at state and local levels High profile fraud and abuse Concerns about quality of single audits

Office of Inspector General-part of on-site SEA monitoring visits

Threshold system regulations in Part 80 of EDGAR apply to all grantees and sub grantees

Improper Payments Act of 2002 requires a tracking of items purchased with federal funds 2

Essential Questions

1. From what government document are the basic fiscal threshold requirements derived?

2. What are the three components of a threshold system that ED deems important for the effective management of federal grants?

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Essential Questions

3. Which OMB Circular identifies allowable expenditures under general cost cutting principles?

4. What two parts of a property management system (inventory) are required, but most neglected within district procedures?

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Threshold system requirements Derived primarily from the Education

Department General Administrative Regulations (EDGAR)

Three important systems that are critical for effective grants management are: financial management (74.21 and 80.20); procurement (74.41-48 and 80.36); and equipment/inventory management (74.34 and

80.32).5

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Threshold System RequirementsWhat Rules Apply?

Overall, must use fiscal control and reporting procedures that will ensure the proper disbursement of and accounting for federal funds

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Threshold System Requirements

All grantees and subgrantees must implement systems that meet specific requirements of EDGAR

FMS = 80.20(b)

Procurement = 80.36(b)-(i)

Inventory = 80.32(c)-(e

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General Principles In general, the SEA

and the LEA must implement controls over federal funds

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

Financial management Definition-controlling and accounting for

federal funds and assets Used to make informed programmatic decisions Used to substantiate and document expenditures

Seven standards described in Section 80.20(b)of EDGAR

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Financial management rules 7 requirements:

Financial Reporting Accounting Records Internal Control Budget Control Allowable Cost Source Documentation Cash Management

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Examples of Allowable Cost Controls

Grant manuals Formal procedures or statue relating to costs Guidelines for determining allowable costs

(OMB Circular A-87, EDGAR) Access to helpful resources and program guidance

Professional development and

technical assistance to LEAs

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Examples of Allowable Cost Controls

Budget controls Pre-award planning process and technical

assistance - developing and approving budgets Communication between fiscal and program staff

at the SEA and LEA levels Routine reconciliation to actual expenditures at

the SEA and LEA levels

Financial management

Acquisition of property Date of binding or written commitment – PO or contract

Personal services by employee

After services are performed

Personal services by contractor

Date of binding written commitment

Travel After travel is taken

Obligation=transaction that requires payment

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Financial management

Obligation Obligation-transaction that requires payment Valid obligation–transaction giving rise to an

obligation within the period of grant availability

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Financial ManagementLiquidation

Liquidation–settle an obligation by paying funds

All obligations must be liquidated within 90 days after the end of the obligation period

SEA may impose a shorter deadline on sub grantee

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Procurement procedures

General procurement procedures found in EDGAR - some in statute

Follow State’s procurement procedures Purchasing Policies and Procedures Manual Available on WVDE website

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Procurement procedures Review all proposed purchases to avoid

unnecessary or duplicative items Surplus property Structure procurement to obtain most economical

purchase Intergovernmental agreement for common goods or

services Lease vs. purchase

All procurement transactions must be conducted with full and open competition

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Procurement ProceduresContracted Services

Must have written contracts Contract should include clearly defined deliverables

Description of services to be performed or goods to be 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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Procurement ProceduresContracted Services Must have written invoice

Description of services performed or goods delivered Description of dates 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

Inventory management

Inventory items purchased with federal funds are divided into three categories:

Real Property Equipment Supplies

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Inventory managementEquipment inventory vs. internal control

EDGAR requires an inventory for equipment Inventory not required for supplies; however,

ED determined that an adequate internal control system must include a process for labeling and locating property purchased with federal funds

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Inventory ManagementDifferent rules for equipment and supplies Equipment

Federal Definition of Equipment Tangible property Useful life of more than one year Acquisition cost of $5,000 or more

State may use another definition as long as it includes all property described above

Supplies

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Inventory Management Equipment

Must have adequate controls in place to account for: Location of equipment - assure that it is used

solely for authorized purposes Custody of equipment - maintain effective control

and accountability Security of equipment - adequately safeguard all

property

Inventory management Written inventory–updated annually Physical inventory–documented every two

years Control system–safe guard against loss, theft,

and used solely for intended purposes Deposition

Transfer to another federal program site Under $5000–no fiscal accountability to ED Over $5000–pay proportional share to ED

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Essential Questions

1. From what government document are the basic fiscal threshold requirements derived?

2. What are the three components of a threshold system that ED deems important for the effective management of federal grants?

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Essential Questions

3. Which OMB Circular identifies allowable expenditures under general cost cutting principles?

4. What two parts of a property management system (inventory) are required, but most neglected within district procedures?

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