1. Auditing of Grants Howie Barber Springfield Public School 1

2. Presentation Overview Standards for Grants Most Common Grant Management Rules Standard Process of Federal Grant Audits 2

3. GRANT STANDARDS Office of Management and Budget Circulars (OMB) A-87 3

4. Seven Standards for Grants Financial Reporting Accounting Records Internal Control Budget Control Allowable Cost Source Documentation Cash Management 4

5. GRANT MANAGEMENT RULES 5

6. Legal Structure of Federal Programs Statutes ◦ Program statutes (NCLB, IDEA, Perkins) ◦ General Education Provisions Act (GEPA) Regulations ◦ Program-specific regulations ◦ Education Department General Administrative Regulations (EDGAR) OMB Circulars Guidance ◦ Non-Regulatory guidance, letters, press releases 6

7. Where to Find Federal Education Grants Management Requirements Program Rules: www.ed.govwww.ed.gov ◦ Statutes ◦ Regulations ◦ Guidance General Education Provisions Act (GEPA): http://www.law.cornell.edu/uscode/20/usc_sup_ 01_20_10_31.html Education Department General Administrative Regulations (EDGAR): http://www.ed.gov/policy/fund/reg/edgarReg/edg ar.html http://www.ed.gov/policy/fund/reg/edgarReg/edg ar.html 7

8. Where to Find Federal Education Grants Management Requirements Office of Management & Budget (OMB) Circulars: http://www.whitehouse.gov/omb/circulars http://www.whitehouse.gov/omb/circulars Circular A-133 Compliance Supplement (2009): http://www.whitehouse.gov/omb/circulars _a133_compliance_09toc/ http://www.whitehouse.gov/omb/circulars _a133_compliance_09toc/ 8

9. Procedures  How to determine if a cost is allowable  Inventory Management  Time & Effort  Supplement, Not to Supplant  Justification 9

10. How to Determine if a Cost is Allowable Federal Cost Principles 10

11. Helpful Questions to Ask to Determine if a Cost is Allowable 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? 11

12. Federal Cost Principles A-21 Educational Institutions A-87 State, Local, & Indian Tribal Governments A-122 Non-Profit Organizations 48 CFR Part 31 For-Profit Organizations 12

13. 10 Basic Guidelines of Cost Principles All costs must be: o Necessary o Reasonable o Allocable 13

14. 10 Basic Guidelines of Cost Principles In addition, all costs must: ◦ Legal under state and local law ◦ Conform with federal law & grant terms ◦ Consistently treated ◦ In accordance with Generally Accepted Accounting Principles (GAAP) ◦ Not included as match ◦ Net of Applicable credits ◦ Adequately documented 14

15. Basic Guidelines: Necessary & Reasonable Must be necessary for the performance or administration of the grant Must follow sound business practices: ◦ Arm’s length bargaining (procurement process) ◦ Follow federal, state and local laws ◦ Follow grant award terms Fair market prices Act with prudence under the circumstances No significant deviation from established prices 15

16. Basic Guidelines: Allocable Can only charge in proportion to the value received by the program Example: LEA purchases a computer to use 50% in federal program and 50% in a state program ◦ Can only charge half of the cost to the federal program 16

17. Basic Guidelines: Allocable Practical aspects of “allocable” ◦ Can I prove the program benefited? ◦ Can I prove other programs are not benefiting?  Ensuring only authorized use  Incidental benefit 17

18. Basic Guidelines Legal under state and local law ◦ If you can’t do it under state law, then you can’t pay for it with federal funds Conform with federal law and grant terms Consistent treatment ◦ Must follow uniform policies that apply equally to federal and non-federal activities ◦ Cannot charge direct costs to a program if similar charges are indirect costs under state programs 18

19. Basic Guidelines Net of applicable credits ◦ Examples: Purchase discounts, rebates, allowances, recoveries, indemnities on losses, insurance refunds, payment adjustments Adequately documented ◦ Amount of funds under the grant ◦ How the funds are used ◦ Total cost of the project ◦ Share of costs provided by other sources ◦ Records that show compliance ◦ Records that show performance ◦ Other records to facilitate and effective audit 19

20. Inventory Management 20

21. Inventory Management Different rules for equipment and supplies Equipment ◦ Federal definition of equipment  Tangible personal 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 21

22. Equipment Section 80.32 of EDGAR Must have adequate controls in place to account for: ◦ Location of equipment ◦ Custody of equipment ◦ Security of equipment 22

23. Equipment Property records ◦ Description, serial number or other ID, title information, acquisition date, cost, percent of federal participation, location, use and condition, and disposition (if applicable) Physical inventory ◦ Must be performed at least every 2 years ◦ Many states require it yearly Control system to prevent loss, damage and theft ◦ All incidents must be investigated 23

24. Equipment Must protect against unauthorized use ◦ May use for other projects as long as use is incidental and does not interfere with authorized use When property is no longer needed, must follow disposition rules: ◦ Transfer to another federal program ◦ Over $5,000 – Keep or sell, but must pay a share based on the percentage of federal ED participation at initial acquisition ◦ Under $5,000 – May keep, sell, or dispose of it with no obligation to ED 24

25. Supplies Section 80.33 of EDGAR Supplies are everything else ◦ Do not cost much money ◦ Used fairly quickly Examples: pens, paper, toner, laptops EDGAR does not set out any specific tracking requirements As a practical matter, ED expects sub grantees to track all property purchased with federal funds, in order to prove there has been an allocable benefit to the federal program 25

26. Supplies Must maintain effective controls and accountability system Must adequately safeguard all property Must assure it is used solely for authorized purposes 26

27. TIME & EFFORT REPORTING 27

28. January 24, 2008 Documentation of Federal Money Time and Effort Office of Management and Budget (OMB) Circular A-87 (5/10/04) establishes standards for charging fair and appropriate employee compensation to federal grants Two types of certification ◦ Semi-Annual Certification – funded from only one federal funding source ◦ Monthly Report – funded partially by federal funds

29. January 24, 2008 Payroll Documentation vs. Time and Effort Documentation Time and effort reporting shows how each employee spent his/her compensated time ◦ written and certified, after-the-fact documentation of how the time was spent Employee compensation charged to federal grants must be supported by documentation such as daily/weekly logs or calendars

30. January 24, 2008 Semi-Annual Certification Works solely on a federal grant Certification covers semi-annual period, i.e. ◦ (September to January; February to June) Report identifies federal grant as program Certification is signed and dated by employee and their supervisor after the work has been completed

31. January 24, 2008 Monthly Certification (Partially Federal Funded Staff) Works on one or more federal grants and/or other programs Prepared monthly Accounts for the total time for which the employee is compensated (all hours worked) Reflects an after-the-fact distribution of the actual work activity Signed by the employee and their supervisor To be sent in by the 15 th of every month

32. SUPPLEMENT, NOT TO SUPPLANT 32

33. Example (included in handouts) Non-Recurring Supplemental Pay Worksheet Not to be used for Professional Development Workshops School: Director/Principal: Activity: Funding: (This GL Account code must be obtained from SPS Finance Dept) ORG: OBJ: PROJ: Date: Posting #: These two fields to be filled in by SPS Finance Dept: RQ Code: Non RQ Cd: *** NOTE: Employee Social Security Numbers may NOT be entered on this form. Date 1Date 2Date 3Date 4Date 5Date 6Date 7 Empl IDEmployee Name RateTotal $0.00 TOTAL: $0.00 33

34. JUSTIFICATIONS 34

35. Example 1 35 Federal Funds Expense Justification Form This form must be attached to all federally funded expense requests including requisitions, Permission to be Absent from Duties form, Workshop/Supplemental payroll postings and all job postings. *This form is not to be used for Magnet expense requests* Department/School: Requisition Number (if applicable): Posting Number (if applicable): Please complete the required information below with as much detail as possible: 1.) Is this expense necessary in order improve students' academic achievement? Please explain. 2.) Is the decision to expend these funds beneficial to the program in a way I can prove? Please explain. 3.) Do I have documentation supporting the need of this expense within my program? Please explain. Please note: Federal funds are available to supplement, not supplant and therefore cannot be used to purchase text books or materials that are a requirement for the curriculum. Purchasing of food items or office supplies using federal funds can only be used for student achievement or parental involvement. Director/PrincipalDate

36. Example 2 Magnet Schools 36

37. QUESTIONS 37

38. STANDARD GRANT AUDIT REQUIREMENTS 38

39. Basic Rule: Grantee and Sub-grantees are responsible for obtaining audits in accordance with the Single Audit Act Amendment of 1996 (31 U.S.C. 7501-7505) and revised OMB Circular A-133 39

40. Who can audit a Grant? The audits shall be made by an independent auditor in accordance with Generally Accepted Government Auditing Standards (GAGAS) covering financial audits. 40

41. Grant Audit Checklist 41

42. Grant Application Is the Standard Contract Form and Application for Program Grants containing: ◦ Fund Code ◦ Program Name ◦ Project duration (Start and expiration dates) ◦ Total Amount Requested ◦ Budget Narrative ◦ Allocation with Expenditure Justification 42

43. Grant Amendments Form AM 1 30 Days prior to proposed change No later than 30 days prior to expiration Justification mandatory 43

44. Grant Award & Payment Notifications E-mailed by ◦ DESE  Grants Management Payment System ◦ G-5  Department of Education Grant Managements System 44

45. Request for Funds Screen shots: ◦ DESE  Grants Management Payment System E-mailed: ◦ G-5  Department of Education Grant Managements System 45

46. Final Financial Report Form FR-1 ◦ Multiple copies may apply  Prior Fiscal Year Submitted  Fiscal Year under Audit ◦ Grant annual expenditure submission  Available online  Hardcopy in grant binders 46

47. Employee Listing Any compensation issued ◦ Base pay ◦ Additional pay ◦ Stipends 47

48. Needs Assessment – “Title I” Needs Assessment – “Title I” Reservation Funds ◦ % of allocation (est. 25%) of grant funding ◦ Most At Risk students Completed by Principals / Chief School Officers (CSO) 48

49. Comparability Documentation Without Federal Funding ◦ Can staff be accounted for? ◦ Can services be provided? Similar to Oct 1 EPIMS Data Identifies Poverty Levels 49

50. Additional information Expenditure / General ledger Invoices and/or purchase orders Payroll registers 50

51. QUESTIONS 51

52. Contact Information: Howard Barber Senior Financial Analyst Springfield Public Schools P.O. Box 1410 1550 Main Street Springfield, MA 01102-1410 Ph: 413-787-7146 Fax: 413-787-6592 BarberH@sps.springfield.ma.us 52