OREGON 1

Arizona Department of Education Career & Technical Education Section Phoenix, AZ

TOPICS YOU WANT TO DISCUSS? QUESTIONED COSTS 3

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The secret to turning almost any finding into a “Questioned Cost” - Poor or No Documentation… 5

Accurate COST ALLOCATION – A Biggie! OMB Circulars A-87 & A-21 outline the factors to consider in determining the allowability of costs. In order to be reimbursed on federal awards, costs must meet the following criteria: o Be necessary and reasonable for proper and efficient performance and administration of federal awards. o Be allocable to federal awards. o Be authorized or not prohibited under state or local laws or regulations. 6

o Conform to any limitations or exclusions set forth in these principles, federal laws, terms and conditions of the federal award, or other governing regulations as to types or amounts of cost items (e.g., use of restricted rates as defined by 34 CFR and ). o Be consistent with policies, regulations, and procedures that apply uniformly to both federal awards and other activities of the governmental unit. o Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost. Cost Allocation (Cont.) 7

o Be determined in accordance with generally accepted accounting principles (GAAP). o Not be included as a cost or used to meet cost sharing or matching requirements of any other federal award in either the current or a prior period, except as specifically provided by federal law or regulation. o Be the net of all applicable credits. o Be adequately documented. Cost Allocation – (Cont.) 8

Time & Effort The primary issue is still allowable, allocable costs Semi-Annual Certifications o An employee working solely on a single federal award or cost objective Personnel Activity Reports (PARs) o More than one federal award; o A federal award and a non-federal award; o An indirect cost activity and a direct cost activity; o Two or more indirect cost activities which are allocated using different allocation bases; or o An unallowable activity and a direct or indirect cost activity. 9

Time & Effort (Cont.) o After-The-Fact Record: must reflect an after-the-fact distribution of the actual activity of the employee; o Total Activity: must account for the total activity for which the employee is compensated; o Monthly: must be prepared at least monthly and must coincide with one or more pay periods; and o Signed and dated: must be signed and dated by the employee. A signature of the supervisor alone is not sufficient. o Budget estimates determined before the services are performed do not qualify as support for charges to federal awards. o A substitute system is allowable with written prior approval – Rare… Don’t count on it… Personnel Activity Reports (PARs) 10

The T&E language is more to the point in A-87, A-122 & Cost Allocation Guide for State and Local Governments (The Green Book) ▫ The language for higher education participants in A-21 is not as clear… Circular A21 Section J.10.c.(2)(e)… “(e) For professorial and professional staff, the reports will be prepared each academic term, but no less than every six months. For other employees, unless alternate arrangements are agreed to, the reports will be prepared no less frequently than monthly and will coincide with one or more pay periods.” Time & Effort (Cont.) 11

Substantial Approval vs. Final Approval Recipients ( EDGAR 34CFR § ) o Correlates to “Obligate” vs. “Actually Getting Paid” 12

Don’t Forget Your Percents! o 5% MAX for Administration o Indirect Cost is an Administrative Cost o The SUM of your direct and indirect administrative costs cannot exceed 5% The percent of a state’s Perkins grant used for Statewide Activities (Perkins Section 124) cannot exceed 10% Statewide funds (for example) being paid to a college for professional service activities may have a MAX of 8% for their RESTRICTED INDIRECT COST rate (EDGAR 34 CFR ) Your Percents – Setasides 13

How To Turn Your Procurement Practices Into A Questioned Cost ? Don’t DOCUMENT or document poorly The services or property you bought is not ALLOCABLE to your Perkins grant Failure to document the method of allocation when services or property/equipment is shared by two or more cost activities Issue a service contract to someone on the Federal Debarment List (EDGAR 34CFR 85 Subpart B) 14

How To Turn Your Procurement Practices Into A Questioned Cost ? Failure to follow your own state’s procurement rules Issuance of district credit cards to staff – can be an internal control nightmare. I suggest you severely restrict 15

FAILURE TO FOLLOW YOUR OWN APPROVED PLAN OR GRANT FAILURE TO AMEND & KEEP IT CURRENT 16

For States – MAINTENANCE OF EFFORT MOE 17

SUPPLANTING It is a jump from the “presumption” of supplanting to an actual finding The primary question arises when you cover a cost previously paid for with non-federal funds The only easy supplanting findings I have seen have been where o State law says that the state will pay for “such costs” – Like a local district’s approved textbooks o The recipients agree they supplanted Supplanting defense – “would not have provided the service in the absence of federal funds” (OMB A-133 Compliance Supplement ; III.G.2.2 ) 18

PROPERTY MANAGEMENT FINDINGS, the “never ending easy audit finding…” Failure to follow your own state’s property management requirements The use of purchased equipment for non-CTE purposes The loss or theft of electronic toys…. cell phones, flat screens, cameras, back-up hard drives, etc. 19

The Latest In Easy Audit Findings.. T&E o PAR not signed by supervisor or person with knowledge of… o Assurances for single cost activities employees Failure to make available to the public Perkins grant recipient Performance Measures information Inventory maintenance issues 20

Get real familiar with your appropriate OMB Circular’s section on “Selected Items Of Cost” and the required and permissible uses of Perkins funds in the Act… Most common type of question is, “Can I buy, can I pay for…” questions 21

The AUDIT Process If you smell a finding – get involved before the exit conference – don’t wait Don’t let your administration concur with a finding in your area because, “it’s not in their administrative shop”. Some will concur with a finding not in their area, regardless of how much work or damage it will do to your area… Talk to your administration in advance and request to be involved relative to findings that include your area 22

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