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2. 2 Intersection of Fiscal and Program Requirements Larry Fanning School Finance Specialist II STATE OF ALASKA Department of Education & Early Development larry_fanning@eed.state.ak.us

3. 3 Five Important Things to Know 1. Where to find Federal Education Grants Management Requirements. 2. What Conditions Must be Met by the LEAs? 3. Costs. 4. Contract Administration. 5. Internal Controls.

4. 4 Where are the Federal Education Grants Management Requirements? Program Rules: www.ed.gov www.ed.gov Statutes Regulations Guidance Letters Monitoring Reports

5. 5 Governing Legal Authorities Federal Law Statutes - Programmatic & Administrative Programmatic ( www.ed.gov) 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.htm

6. 6 Regulations Code of Federal Regulations (CFR) Education Dept Gen Admin Regs (EDGAR) Important Administrative Requirements that apply to federal education funds www.ed.gov/policy/fund/reg/edgarReg/edgar.html OMB Circulars Uniform Administrative Requirements Cost Principles Audit Requirements http://www.whitehouse.gov/omb/circulars/index.html

7. 7 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 Requirements http://www.whitehouse.gov/omb/circulars/a102/a102.html A-133 Audits of State and Local Governments http://www.whitehouse.gov/omb/circulars/a133/a133.html Audit Tip: Grantees must comply with the cost principles in appropriate OMB Circular

8. 8 Federal Education Grants Management Requirements EDGAR Financial Management = 80.20 Equipment = 80.32 Procurement= 80.36 Important points For state-administrated programs, SEAs and LEAs must follow own laws and procedures For direct programs, EDGAR thresholds apply to LEAs

9. 9 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

10. 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

11. 11 Lifecycle concept (contd) Changes Budget Changes 10% Program Changes Changes in scope or object Change in key personnel Contract with 3 rd 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

12. 12 State-administered programs EDGAR 76 Subpart G When obligations are made EDGAR 76.707

13. 13 EDGAR 76.707

14. 14 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.

15. 15 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

16. 16 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.

17. 17 Fleshing out Equipment Equipment is defined as the organizations 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

18. 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

19. 19 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

20. 20 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? Its not the pencils, but the big ticket items i.e. computers, bookshelves

21. 21 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?

22. 22 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?

23. A-87, ATTACHMENT A, (C)23 Basics-General Principles of Determining Costs Costs Must Be: Necessary and Reasonable Allowable Allocable Legal

24. 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

25. A-87, ATTACHMENT A, (C)25 Basics NECESSARY & 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?

26. A-87, ATTACHMENT A, (C)26 Basics NECESSARY & 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?)

27. A-87, ATTACHMENT A, (C)27 Basics ALLOCABLE 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

28. A-87, ATTACHMENT A, (C)28 Basics Allocable (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

29. 29 Basics Allocable (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

30. 30 Basics PROGRAM ALLOWABLITY In general two types of programs Specific rules regarding allowable costs Title V Part A has 27 allowable uses by LEAs Flexible program- general criteria Title IA, Eligible Students Purposes of the program

31. 31 Basics PROGRAM 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 3 rd party for administration

32. 32 Basics Supplement 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

33. 33 Basics Examples of Allowable Cost Controls Budget Controls Strong pre-award planning Communication between fiscal and program staff Routine reconciliation to actual expenditures

34. 34 Basics Examples of Allowable Cost Controls Integrated financial management system Inventory Procurement Grants Accounting

35. 35 Contracts Supported 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

36. 36 Contracts Supported 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)

37. 37 Contracts Supported by Federal Funds As a practical matter (cont) Through performance-based monitoring. ED/SEAs 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)

38. 38 Contracts Supported 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

39. 39 General Principles of Control In general, must implement controls over federal funds ED looks to systems, not individuals, to ensure funds are spent appropriately

40. 40 Five Important Things to Remember 1. Where to find Federal Education Grants Management Requirements. 2. What Conditions Must be Met by the LEAs? 3. Costs. 4. Contract Administration. 5. Control Principles