1. Threshold System Presented by Jan Stanley, State Title I Director Office of Assessment and Accountability Fall Title I Directors Conference October 23-25, 2007 1

2. Necessity for increased fiscal awareness ED placing more emphasis on fiscal and administrative requirements due to concerns at state and local levels High profile fraud and abuse Concerns about quality of single audits Office of Inspector General-part of on-site SEA monitoring visits Threshold system regulations in Part 80 of EDGAR apply to all grantees and sub grantees Improper Payments Act of 2002 requires a tracking of items purchased with federal funds 2

3. Essential Questions 1. From what government document are the basic fiscal threshold requirements derived? 2. What are the three components of a threshold system that ED deems important for the effective management of federal grants? 3

4. Essential Questions 3. Which OMB Circular identifies allowable expenditures under general cost cutting principles? 4. What two parts of a property management system (inventory) are required, but most neglected within district procedures? 4

5. Threshold system requirements Derived primarily from the Education Department General Administrative Regulations (EDGAR) Three important systems that are critical for effective grants management are: financial management (74.21 and 80.20); procurement (74.41-48 and 80.36); and equipment/inventory management (74.34 and 80.32). 5

6. 6 Threshold System Requirements What Rules Apply? Overall, must use fiscal control and reporting procedures that will ensure the proper disbursement of and accounting for federal funds

7. 7 Threshold System Requirements All grantees and subgrantees must implement systems that meet specific requirements of EDGAR FMS = 80.20(b) Procurement = 80.36(b)-(i) Inventory = 80.32(c)-(e

8. 8 General Principles In general, the SEA and the LEA must implement controls over federal funds ED looks to systems, not individuals, to ensure funds are spent appropriately

9. Financial management Definition-controlling and accounting for federal funds and assets Used to make informed programmatic decisions Used to substantiate and document expenditures Seven standards described in Section 80.20(b)of EDGAR 9

10. 10 Financial management rules 7 requirements: Financial Reporting Accounting Records Internal Control Budget Control Allowable Cost Source Documentation Cash Management

11. 11 Examples of Allowable Cost Controls Grant manuals Formal procedures or statue relating to costs Guidelines for determining allowable costs (OMB Circular A-87, EDGAR) Access to helpful resources and program guidance Professional development and technical assistance to LEAs

12. 12 Examples of Allowable Cost Controls Budget controls Pre-award planning process and technical assistance - developing and approving budgets Communication between fiscal and program staff at the SEA and LEA levels Routine reconciliation to actual expenditures at the SEA and LEA levels

13. Financial management Acquisition of propertyDate of binding or written commitment – PO or contract Personal services by employee After services are performed Personal services by contractor Date of binding written commitment TravelAfter travel is taken Obligation=transaction that requires payment 13

14. Financial management Obligation Obligation-transaction that requires payment Valid obligation–transaction giving rise to an obligation within the period of grant availability 14

15. Financial Management Liquidation Liquidation–settle an obligation by paying funds All obligations must be liquidated within 90 days after the end of the obligation period SEA may impose a shorter deadline on sub grantee 15

16. Procurement procedures General procurement procedures found in EDGAR - some in statute Follow States procurement procedures Purchasing Policies and Procedures Manual Available on WVDE website 16

17. Procurement procedures Review all proposed purchases to avoid unnecessary or duplicative items Surplus property Structure procurement to obtain most economical purchase Intergovernmental agreement for common goods or services Lease vs. purchase All procurement transactions must be conducted with full and open competition 17

18. 18 Procurement Procedures Contracted Services Must have written contracts Contract should include clearly defined deliverables Description of services to be performed or goods to be 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)

19. 19 Procurement Procedures Contracted Services Must have written invoice Description of services performed or goods delivered Description of dates 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

20. Inventory management Inventory items purchased with federal funds are divided into three categories: Real Property Equipment Supplies 20

21. Inventory management Equipment inventory vs. internal control EDGAR requires an inventory for equipment Inventory not required for supplies; however, ED determined that an adequate internal control system must include a process for labeling and locating property purchased with federal funds 21

22. 22 Inventory Management Different rules for equipment and supplies Equipment Federal Definition of Equipment Tangible 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 Supplies

23. 23 Inventory Management Equipment Must have adequate controls in place to account for: Location of equipment - assure that it is used solely for authorized purposes Custody of equipment - maintain effective control and accountability Security of equipment - adequately safeguard all property

24. Inventory management Written inventory–updated annually Physical inventory–documented every two years Control system–safe guard against loss, theft, and used solely for intended purposes Deposition Transfer to another federal program site Under $5000–no fiscal accountability to ED Over $5000–pay proportional share to ED 24

25. Essential Questions 1. From what government document are the basic fiscal threshold requirements derived? 2. What are the three components of a threshold system that ED deems important for the effective management of federal grants? 25

26. Essential Questions 3. Which OMB Circular identifies allowable expenditures under general cost cutting principles? 4. What two parts of a property management system (inventory) are required, but most neglected within district procedures? 26