FINANCIAL AND ADMINISTRATIVE SERVICES Missouri Department of Elementary and Secondary Education April 25, 2013 Federal Fiscal Management Updates

Topics  Sequestration  NCLB and IDEA Part B Allocations  Period of Availability  What’s New  Time and Effort Reporting  ePeGS Enhancements  Tiered Federal Monitoring  General Federal Guidance

Sequestration

 The failure of the Joint Select Committee on Deficit Reduction (Super Committee) to produce a bill identifying budgetary savings of at least $1.2 trillion over ten years has triggered an automatic spending reduction process (called sequestration) that takes effect on July 1,  Sequestration Webpage:

 Sequestration Process under the Budget Control Act of 2011  The Office of Management and Budget (OMB) has calculated that there will be a 0.2% across-the-board cut for all non- security programs in the bill.  Programs with advanced appropriations (IDEA 611 & 619, Title I, II.A, III) will end up with a cut of 5.21%  Title I LEA funding will vary due to statutory formula  Will be implemented on July 1, Sequestration

NCLB & IDEA Part B Allocations

Funding Projections (NCLB)  In March, Congress passed a final budget appropriation for federal FY 2013  Comparison of 2011 Census Data with 2010 by state, Missouri’s change in the national poverty share increased by 3.12%  Preliminary allocations available by late April  s/index.html#update s/index.html#update  Sequestration reduces funding

Census Data (NCLB)  USDE uses census poverty to calculate all of the formula grants.  Count may be accessed through the US Census Bureau  Available under Federal Financial Management/Census at gement/ gement/  Income Year 2011  Large districts allocation is based solely on census poverty data  Small districts use alternative poverty

Allocation Criteria for (NCLB) The Department uses the following data to compute NCLB formula grants:  Census Poverty – Income Year 2011  Free and Reduced Lunch Counts – October 2012  Neglected and Delinquent Counts – Fall 2012  Nonpublic Enrollment & F/R Lunch Counts – Fall 2012  Hold Harmless Percentages The allocation amount is based on a formula and is NOT dependent on need or use of funds.

Allocation Criteria – Title I Title I allocation consists of four separate funding calculations: Each funding category has different criteria and formula to distribute these funds. Has hold-harmless criteria –no less than 85% if criteria are met and funding is sufficient. Detailed Allocation Criteria is located at: ment/Allocation%20Info.htm o Basic Grant o Concentration Grant o Targeted Grant o Education Finance Incentive Grant (EFIG)

Hold Harmless Amounts – Title I The amount made available to the LEA shall be:  Not less than 95% of the amount made available for the preceding fiscal year if the percentage of formula children is not less than 30%  Not less than 90% of the amount made available for the preceding fiscal year if the percentage of formula children is between 15% and 30%  Not less than 85% of the amount made available for the preceding fiscal year if the percentage of formula children is below 15%

Funding for IDEA IDEA Part B Entitlement funds (Section 611) are Federal funds your District/LEA receives to help support your special education program and implement IDEA. Timeline Counts and Part B Allocations are posted at: DateStep in Process Beginning of AprilPreliminary population and poverty counts posted on webpage April 21Deadline for LEAs to confirm/make changes to counts April 22Pull data that will be used to calculate final Part B allocations

Federal IDEA Part B Funds Formula Three separate components in formula: 1. Base Amount; 2. Population Count (includes ALL students) – September Enrollment – Home School – Non-Public – Neglected/Delinquent 3. Poverty Count (includes ALL students) – Free/Reduced Lunch Count

Period of Availability

Period of Availability of Funds “Where a funding period is specified, a grantee may charge to the award only costs resulting from obligations of the funding period unless carryover of unobligated balances is permitted, in which case the carryover balances may be charged for costs resulting from obligations of the subsequent funding period.” EDGAR §80.23

Grant Cycle / Obligation Period / FER Reporting Period Grant CycleObligation PeriodFER Reporting Period July 1, 2012 to June 30, 2013 Date of Substantially Approved Application to June 30, 2013 July 1, 2012 to September 30, 2013 Period during which funds may be obligated and expended. Obligations occur during the grant cycle, but only after a substantially approved budget application has been submitted. Expenditures for obligations made during the obligation period may be reported up until September 30.

When is an Obligation Made? EDGAR §76.707

What’s New

Cost Objective Criteria Documentation Required Single Cost Objective  Employee works solely on a single Federal award or cost objective Semi-Annual Certification  Must be prepared at least semi-annually; and  Must be signed after-the-fact by employee or supervisory official having firsthand knowledge of the work performed by the employee. Multiple Cost Objectives  More than one Federal award;  Federal award & non-Federal award;  Indirect cost activity & direct cost activity;  Two or more indirect activities that are allocated using different allocation bases;  Unallowable activity & a direct or indirect cost activity; or  One Federal award with multiple cost objectives. Personnel Activity Report (PAR)  Reflect an after-the-fact distribution of the actual activity of the employee;  Account for the total activity for which each employee is compensated;  Be prepared at least monthly & coincide with one or more pay periods; and  Must be signed after-the-fact by the employee.  At least quarterly, the actual time reflected on the PAR must be compared to the payroll charges, and if differences exist, then payroll adjustments must be made. OMB Circular A-87 Time and Effort Reporting Guidelines

Cost Objective Criteria Documentation Required Multiple Cost Objectives with Fixed Schedule (Substitute System)  Currently work on a schedule that includes multiple activities or cost objectives that must be supported by monthly personnel activity reports;  Work on specific activities or cost objectives based on a predetermined schedule; and  Not work on multiple activities or cost objectives at the exact same time on their schedule. Substitute System Certification & Fixed Schedule  Indicate the specific activity or cost objective that the employee worked on for each segment of the employee’s schedule;  Account for the total hours for which each employee is compensated during the period reflected on the employee’s schedule; and  Be certified at least semi-annually & signed by the employee & a supervisory official having firsthand knowledge of the work performed by the employee. Stipend and Extra Duty Pay  Pay for extra work beyond an employee’s regular contract Written Agreement  Indicates the extra work to be performed;  Date(s) of performance;  Amount to be paid to the employee; and  Must be signed by the employer & the employee to show the acceptance of the terms. And Semi-Annual Certification or Personnel Activity Report

Payment Request in ePeGS New for :  Expenditures will be reported by both object and function code  Expenditures in approved object codes may not exceed 10% of the total amount budgeted within the approved program  Expenditures outside approved function/object code will not be allowed

10% Variance Example Expenditures in approved object codes may not exceed 10% of the total amount budgeted within each of the approved programs.

Capital Outlay Page in ePeGS  Equipment is tangible, non expendable personal property having a useful life of more than one year and an acquisition cost of $1,000 or more per unit.  Unit Acquisition Cost is the net invoice price of the equipment, including the cost of modifications, attachments, accessories, or auxiliary apparatus necessary to make the equipment usable for the purpose for which it was acquired. Other charges such as the costs of installation, transportation or taxes should be included in the unit acquisition cost.

Capital Outlay Page in ePeGs Equipment

Capital Costs (Federal Funds) (34 CFR § ) Prior Approval from Special Education Finance is required for Non-Equipment purchased with Part B funds:  Alteration / Renovation: changing an existing LEA ‐ owned structure  Construction - building a new structure  Real Estate - purchasing a structure or land  Buses/Vehicles

Capital Outlay Page in ePeGs Non-Equipment

Tiered Federal Monitoring

Tiered Monitoring Timeline Task Desk AuditCohorts 1,2,3 Desk Monitoring (Tiered Federal Monitoring System) Cohort 3Cohort 1Cohort 2 On-site /telephone (Tiered Federal Monitoring System) Cohort 2-10% for On-site and 10% for telephone Cohort 3-10% for On-site and 10% for telephone Cohort 1-10% for On-site and 10% for telephone Clean-upCohort 1-10%Cohort 2-10%Cohort 3-10%

Tiered Federal Monitoring  Possible Risk Factors – On-site or Telephone  Amount of federal funds (large amounts = greater risk)  A-133 audit findings  Late MOSIS/Core Data Reports  Financial Distress  Administrator Changes/Other Issues Reported by Auditor or LEA  Late FER  Late Budget Application  Violation of CMIA

Tiered Monitoring Process  Tiered Monitoring Process at  Description  Cohort Groups  Timeline

Common Findings  General:  Expenditures not tracked separately  Time distribution for federally paid employees  Obligations prior to budget applications  CMIA  Allowable Costs/Uses of Funds  No inventory/tracking of equipment  IDEA Part B:  Special Education MOE documentation  Proportionate Share

Separate Tracking All Federal funds MUST be tracked separately from other funding sources.  EDGAR o Records shall be kept that fully show the amount of Federal funds received and how the funds are expended.  EDGAR o A grantee shall use fiscal control and fund accounting procedures that insure proper disbursement of and accounting for Federal funds.  MO Financial Accounting Manual o Federal funds generally require separate identification and reporting within the LEA’s audit report.

Cash Management Improvement Act  The Cash Management Improvement Act (CMIA) requires LEAs/Districts to demonstrate when receiving federal funds that they have either already spent the funds or will spend the funds within three business days of receipt of funds.  Payment requests may only include amounts already expended and/or amounts that will be expended within three business days of receipt of funds.  Violating CMIA requires interest to be calculated and funds returned.

Re-coding Expenditures  LEAs that receive federal funds through the Early Childhood Special Education (ECSE) or High Need Fund (HNF) payments must ensure they are completing journal vouchers/entries for those funds within three (3) days of receipt of the funds, or that they will expend within three (3) days, to be in compliance with CMIA.

Inventory Control (EDGAR 80.32)  Equipment & Property records (Inventory List)  Physical inventory (at least every two years)  Control system to prevent loss, damage, theft (all must be investigated), LOCKS!  Adequate maintenance procedures  If authorized to sell, proper sales procedures for highest return Note: $5000 according to EDGAR but MO has a lower threshold

Fiscal Guidance for Federal Grants The purpose of this document is to provide a reference to the fiscal requirements and procedures necessary for responsible financial management of federal grant programs. The intent is to provide a general overview of federal requirements and assist subgrantees/ recipients in the proper fiscal accountability for federal funds as prescribed by law.

Resources  DESE Accounting Manual (School Finance)  NCLB Administrative Manual admin-manual-June-2012.pdf  Individuals with Disabilities Education Act (IDEA) Regulations  MO State Plan for Special Education  Fiscal Monitoring resources

ANGIE NICKELL DIRECTOR SPECIAL EDUCATION FINANCE PAT KAISER DIRECTOR FEDERAL FINANCIAL MANAGEMENT (NCLB)