1. Subrecipient Monitoring Webinar Presentation August 25, 2010

2. Audio is available via the internet Please be sure your— speakers are on & your volume is turned up Sound Check

3. Agenda Department Requirements and Expectations Best Practices – Using a Risk-Based Monitoring Approach – Monitoring American Recovery & Reinvestment Act (ARRA) Funds – Monitoring Subrecipients for Financial Risk Charlotte Stevens, Director – Division of Education Finance, Louisiana Department of Education – Web-Based Monitoring Jennifer Morgan - Title I and Title II Senior Consultant, Colorado Department of Education Questions

4. What is Monitoring? More than on-site visits Any action taken by grantee throughout the life of a grant to ensure legal compliance and program performance Ongoing process

5. Department Requirements and Expectations A pass-through entity shall..[m]onitor the activities of subrecipients as necessary to ensure that Federal awards are used for authorized purposes in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved. OMB Circular A-133__.400(d)(3), issued under the Single Audit Act of 1984, P.L. 98-502, and the Single Audit Act Amendments of 1996, P.L. 104-156.

6. Federal Requirements – Education Department General Administrative Regulations (EDGAR) Section 80.40 – State, Local and Indian Tribal Governments Grantees are responsible for managing the day-to-day operations of grant and subgrant supported activities. Grantees must monitor grant and subgrant supported activities to assure compliance with applicable Federal requirements and that performance goals are being achieved. Grantee monitoring must cover each program, function or activity. Section 74.51(a) – IHEs, Hospitals, Non-profits, Recipients are responsible for managing and monitoring each project, program, subaward, function, or activity supported by the award. Recipients shall monitor subawards to ensure subrecipients have met [A- 133] audit requirements in §74.26.

7. Federal Requirements Single Audit Act Single Audit Act, 1996 Amendments, 31 U.S.C. §7502(f)(2)(B) Grantees must: – Monitor subrecipients through site visits, limited scope audits, or other means; – Review subrecipient audits as necessary to determine whether prompt and appropriate corrective actions have been taken; – Require subrecipients to make records and financial statements available to independent auditors

8. A-133 Compliance Supplement Pass-through entity is responsible for during-the- award monitoring, through: – Reporting: reviewing subrecipient financial AND performance reports; – Onsite reviews: review programmatic AND financial records and observe operations; – Regular contact; OR – Other means STANDARD: Monitoring efforts must provide a reasonable assurance that a subrecipient administers Federal funds in compliance with laws and regulations and that performance goals are achieved

9. A-133 Compliance Supplement Additional requirements - American Recovery and Reinvestment Act (ARRA) – Pass-through entities are responsible for: informing first-tier subrecipients of the requirement to register in the Central Contractor Registration (CCR), including obtaining a Dun and Bradstreet Data Universal Numbering System (DUNS) number; keeping this information current (including performing periodic checks) – Advises auditors to test the pass-through entity’s subaward review and approval documents to determine whether, before the award, the pass-through entity checked CCR to determine whether subrecipients were registered

10. Review grant award agreements – Program-specific monitoring requirements – General Education Provisions Act (GEPA) Single State Application, 20 U.S.C. §1232d State must monitor agencies, institutions and organizations responsible for carrying out each Program; provide technical assistance to these entities; and correct deficiencies in Program operations that are identified through monitoring Additional Requirements

11. Federal Requirements - Conclusions Why do grantees have to monitor subrecipients? – It’s the law. How do grantees have to monitor? – It’s up to the grantee. How should you monitor, or, what does good monitoring look like?

12. Best Practices in Subrecipient Monitoring

13. Review and Revise Your Monitoring Plan What makes up a monitoring plan? Written set of policies and procedures that guide the scope and frequency of monitoring activities, including follow up on corrective actions Monitoring schedule Monitoring checklist Risk assessment, i.e., what factors determine the methods and frequency of monitoring subrecipients and programs?

14. Revising Program Monitoring Checklists Review current laws and regulations to ensure checklists cover all applicable program requirements Set forth requirements in plain language, cite to relevant law or regulation Identify method of verification and required documentation Identify cross-cutting monitoring requirements (e.g., cash management)

15. Scrutiny of Subrecipient Monitoring Plans A-133 Single Year Audit Review – Subrecipient monitoring included as a compliance requirement – Suggested audit procedure: review of subrecipient monitoring policies and procedures to gain an understanding of the scope, frequency and timeliness of monitoring activities

16. Scrutiny of Subrecipient Monitoring Plans Student Achievement and School Accountability Programs (SASA) review: – Includes subrecipient monitoring as a key requirement – State monitoring cycles, policies and procedures – Data collection instruments – Monitoring reports and feedback to LEAs – “High risk” identification process – Corrective action plans and SEA follow-up – SEA procedures for monitoring programs and activities funded with Recovery Act funds

17. Using a Risk-Based Monitoring Approach

18. Risk Analysis Risk Indicators Identify appropriate risk indicators, and assign each a value or weight Risk Assessment Evaluate and rank subrecipients and programs based on relative risk Resource Assessment Identify available monitoring resources and staff – weigh against monitoring needs Monitoring Plan Adjust monitoring plan, including monitoring activities and schedule based on risk and resource assessments

19. A-133 Compliance Supplement, Section M Risk Indicators Program Risk Program complexity Percentage of program awards passed through to the subrecipient Award amount

20. A-133 Compliance Supplement, Section M Risk Indicators Subrecipient Risk Award Amount New recipients History of non-compliance New personnel New or substantially changed systems

21. Examples from the Field Risk Indicators Size of subrecipient’s Federal award portfolio Prior findings: A-133 audits, federal program monitoring, grantee monitoring Program performance Academic performance and student subgroup performance Change in Program scope or activities Financial stability New management system Stakeholder complaints Percentage of Highly Qualified Teachers in district Type of entity Number of schools under improvement Distance from grantee

22. Using a Risk-Based Monitoring Approach Risk Assessment Evaluate subrecipients and programs against risk indicators Rank subrecipients and programs by risk Use data analysis and automation to make process more efficient Perform analysis regularly to account for changes in risk

23. Using a Risk-Based Monitoring Approach Resource Assessment Determine the amount and types of resources needed to monitor subrecipients and programs Identify available resources Address resource limitations

24. Adjusting the Monitoring Plan Monitoring Plan Reconcile difference between need and availability of resources Adjust monitoring schedule based on identified risks and available resources Schedule technical assistance based on identified risks

25. Common A-133 Finding Hypothetical: Grantee’s monitoring policy requires a subrecipient assessed as a “significant risk” to undergo an annual onsite monitoring visit. Fifty subrecipients are classified as significant risks based on a risk assessment. However, the grantee only has resources available to perform 30 onsite visits that year. A-133 Audit Finding: SEA is unable to conduct onsite reviews of all subrecipients within a monitoring review cycle. Possible Solution: Perform a resource assessment as part of a risk- based monitoring approach – Identify available resources, and/or alternative resources – Tie monitoring activities to budget – Adjust monitoring schedule so that plan can be implemented

26. Additional Recovery Act Requirements

27. Increased Single Auditor Scrutiny of Recovery Act Funds – Auditors required to report Recovery Act-related significant deficiencies or material weaknesses in the Schedule of Findings and Questioned Costs – Auditors instructed to consider whether control procedures in place over Recovery Act funds are appropriate, working properly and designed to prevent unallowable expenditures – Consider whether additional controls and system requirements will be needed to ensure that Recovery Act funds are able to be separately identified and tracked, and that Federal reporting and subrecipient monitoring requirements are met

28. Increased Single Auditor Scrutiny of Recovery Act Funds – Recovery Act awards high risk under A-133 = greater scrutiny – New Recovery Act expenditures may push subrecipients across the $500,000 A-133 audit expenditure threshold

29. Monitoring State Fiscal Stabilization Funds (SFSF) - Department Guidance Each state must have a comprehensive monitoring plan for SFSF supported activities. Monitoring plans should address the following: – Monitoring schedule – Monitoring policies and procedures – Data collection instruments – Monitoring reports and feedback to subrecipients – Processes to verify that required corrective actions are implemented

30. Scrutiny of Subrecipient Monitoring Plans State Fiscal Stabilization Fund (SFSF) review – Application and allocation procedures – Fiscal oversight policies and procedures – Subrecipient monitoring Policies and procedures Monitoring schedule Monitoring feedback and follow-up (corrective action/technical assistance) Process for prioritizing entities to be monitored (risk assessment) – Maintenance of effort – Progress in the four education reform areas – Reporting

31. Monitoring Existing Recovery Act Programs Challenge – Current monitoring schedules do not account for Recovery Act funds Possible Solution – Perform risk assessment, using size of Recovery Act funds as a risk indicator – Adjust monitoring schedule to review a larger percentage of Recovery Act programs

32. Monitoring Existing Recovery Act Programs Challenge – Recovery Act adds additional program requirements Possible Solution – Review legislation and OMB guidance – Adjust monitoring checklist to ensure full compliance with Recovery Act requirements

33. Monitoring Existing Recovery Act Programs Challenge – Providing sufficient fiscal oversight Possible Solution – Review legislation and OMB guidance; adjust monitoring checklist to ensure full compliance with fiscal requirements – Provide additional fiscal oversight over drawdown activity, allowable costs

34. Monitoring Subrecipients for Financial Risk Charlotte Stevens, Director Division of Education Finance Louisiana Department of Education

35. Web-Based Monitoring Jennifer Morgan, Senior Consultant Colorado Department of Education

36. Questions & Answers Further questions? Email - RMSCommunications@ed.gov

37. Thank you for participating! Please complete an evaluation— Your feedback is important. http://www.ed.gov/policy/gen/leg/recovery/rms-web- conferences.html

38. Department of Education (ED) Resources General Information, all ED Recovery Act Programs – http://www2.ed.gov/policy/gen/leg/recovery/programs.html http://www2.ed.gov/policy/gen/leg/recovery/programs.html SASA Monitoring – http://www2.ed.gov/admins/lead/account/monitoring/indicators0 910.pdf.http://www2.ed.gov/admins/lead/account/monitoring/indicators0 910.pdf IDEA Monitoring – http://www2.ed.gov/fund/data/report/idea/verificatvisit.html http://www2.ed.gov/fund/data/report/idea/verificatvisit.html SFSF Applicant Information, including Guidance and ED’s monitoring plans and protocols – http://www2.ed.gov/programs/statestabilization/applicant.html http://www2.ed.gov/programs/statestabilization/applicant.html ED OIG – OIG Recovery Act page http://www2.ed.gov/about/offices/list/oig/recoveryact.html http://www2.ed.gov/about/offices/list/oig/recoveryact.html – Subrecipient Monitoring under AARA http://www2.ed.gov/about/offices/list/oig/auditreports/fy2010/x0 5j0019.pdf. http://www2.ed.gov/about/offices/list/oig/auditreports/fy2010/x0 5j0019.pdf EDGAR: http://www2.ed.gov/policy/fund/reg/edgarReg/edgar.htmlhttp://www2.ed.gov/policy/fund/reg/edgarReg/edgar.html

39. Other Resources Office of Management and Budget – OMB Circular A-133 OMB Circular A-133 – June 2010 Compliance Supplement June 2010 Compliance Supplement – March 2009 Compliance Supplement March 2009 Compliance Supplement – March 2009, Compliance Supplement “Other OMB Circular A-133 Advisories Appendix VII -- American Recovery and Reinvestment Act” http://www.whitehouse.gov/sites/default/files/omb/assets/a133_compliance/app_ 7.pdf http://www.whitehouse.gov/sites/default/files/omb/assets/a133_compliance/app_ 7.pdf US Government Accountability Office – GA0 May 2010 Recovery Act Report to Congress http://www.gao.gov/new.items/d10604.pdf. http://www.gao.gov/new.items/d10604.pdf AGA Partnership for Intergovernmental Management and Accountability, Risk Assessment/Financial and Administrative monitoring tools – http://agacgfm.org/intergovernmental/resources.aspx http://agacgfm.org/intergovernmental/resources.aspx

40. Other Resources Information on Colorado Department of Education’s C-FIRS web-based monitoring system – http://www.cde.state.co.us/FedPrograms/NCLB/downloads/monit_cfirsusergd.pdf. http://www.cde.state.co.us/FedPrograms/NCLB/downloads/monit_cfirsusergd.pdf Information on Louisiana Department of Education’s Financial Risk Assessment – http://www.louisianaschools.net/lde/finance/2555.htmlhttp://www.louisianaschools.net/lde/finance/2555.html Disclaimer of Endorsement The resources on this slide contain hypertext links to information created and maintained by other public and private organizations. These links are provided for the user's convenience. The U.S. Department of Education does not control or guarantee the accuracy, relevance, timeliness, or completeness of this outside information. Further, the inclusion of links or pointers to particular items in hypertext is not intended to reflect their importance, nor is it intended to endorse any views expressed, or products or services offered, on these outside sites, or the organizations sponsoring the sites.

41. ARRA Contact Information State Fiscal Stabilization Fund: State.Fiscal.Fund@ed.govState.Fiscal.Fund@ed.gov Title I, Part A Grants to LEAs: TitleI.ARRA@ed.govTitleI.ARRA@ed.gov School Improvement Grants: SIGquestions@ed.govSIGquestions@ed.gov Educational Technology - Enhancing Education Through Technology: Title2D@ed.govTitle2D@ed.gov IDEA, Parts B & C: IDEARecoveryComments@ed.govIDEARecoveryComments@ed.gov Voc-Rehab, Independent Living Services & Centers for Independent Living: RSARecoveryActComments@ed.govRSARecoveryActComments@ed.gov

42. ARRA Contact Information Impact Aid: impact.aid@ed.govimpact.aid@ed.gov State Longitudinal Data Systems: slds@ed.govslds@ed.gov Teacher Quality Partnership: TQPartnership@ed.govTQPartnership@ed.gov Teacher Incentive Fund: TIF@ed.govTIF@ed.gov ED-OIG Hotline: oig.hotline@ed.gov, 1-800-MIS-USEDoig.hotline@ed.gov General Info: 1-800-USA-LEARN (1-800-872-5327) For archived and future web conferences: http://www.ed.gov/policy/gen/leg/recovery/web-conferences.html#schedule