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									                                         1

Accountability and Transparency: An
American Recovery and Reinvestment Act
(ARRA) Grant Management Workshop with
Michael Brustein


October 14, 2009


Michael Brustein, Esq.
Brustein & Manasevit
3105 South Street NW
Washington, DC 20007
(202) 965-3652
mbrustein@bruman.com
www.bruman.com
                                             2




Topics
1.   Recent Developments in the Beltway
2.   Update on ARRA
3.   Basic Guidelines of Grants Management
4.   State Administered Program
5.   Internal Controls
6.   Grant Management
7.   Federal Cost Principles
8.   Supplement Not Supplant
9.   Monitoring and Auditing
                                             3




Recovery Act: Road Map
• Overview
• State Fiscal Stabilization Funds
• Race to the Top
 ▫ Break
• Innovation Funds & Select targeted funds
• Reporting & Accountability
• Questions and Answers
                              4




Recovery Act: Fiscal Crisis
                                        5




SFSF: Capturing the Crisis


  Never allow a crisis to go to waste

         – Rahm Emanuel, White House
 Chief of Staff.
                                                             6




Recovery Act: Dual Purposes
• To help stabilize State and local budgets
  in order to minimize and avoid
  reductions in education and other
  essential services.
• Promoting essential education reform in
  four areas.
 ▫   Teacher effectiveness and distribution
 ▫   Pre-K to career data systems
 ▫   College and career ready standards
 ▫   Intensive support and effective interventions for the
     lowest performing schools
                                   7




Recovery Act: Funding Principles
• Balance speed and stimulus
  with careful planning and
  effective reforms.
• States should award funds to
  LEAs as quickly as is prudent
  and LEAs should use funds
  expeditiously but sensibly.
                                                                    8




Recovery Act: Funding Sent
• State Stabilization - $32.5 billion (67% based on
  approvable application).
• Made available April 1:
  ▫   IDEA, Parts B & C - $6.1 billion (50%)
  ▫   Title I, Part A - $5 billion (50%)
  ▫   Vocational Rehabilitation: $270 million (50%)
  ▫   Independent Living - $52.5 million (100% of formula monies;
      $87.5 million in competitive grants to follow)
• Made available April 10
  ▫ Homeless Youth - $70 million (100%)
  ▫ Impact Aid - $40 million (100% of formula monies; $60
    million in competitive grants to follow)
                                                                                                    9




Recovery Act: Funding Coming
• State Stabilization, phase 2: Sept./Oct….Dec., $16.1 billion (33%)
• IDEA, Parts B & C: Sept. 1, $6.1 billion (50%)
  ▫    Update: The remaining 50%, accelerated and to be available to all states on or
       around September 1.
• Title I, Part A: Sept. 1, $5 billion (50%)
  ▫    Update: The remaining 50%, accelerated and to be available to all states on or
       around September 1.
• Title I School Improvement Grant : January 2010 (?), $3 billion
  (100%)
• Enhancing Education Through Technology: July 24, $650
  million (100%)
• Vocational Rehabilitation: Sept. 1, $270 million (50%)
       Update: The remaining 50%, accelerated and to be available to all states on or around
        September 1.
• Statewide Data Systems: Late 2009/ early 2010.…, $250 million
  (100%)
• Teacher Incentive Fund: Early 2010, $200 million (100%)
• Teacher Quality Enhancement: Oct./Nov., $100 million (100%)

                                          bruman.com                                            9
                                                                10



Recovery Act: Ed Reform Quid Pro
Quo
• (1) making improvements in teacher effectiveness
  and in the equitable distribution of qualified teachers for
  all students, particularly students who are most in need;
• (2) establishing pre-K-to-college-and-career data
  systems that track progress and foster continuous
  improvement;
• (3) making progress toward rigorous college- and career-
  ready standards and high-quality assessments
  that are valid and reliable for all students, including
  limited English proficient students and students with
  disabilities; and
• (4) providing targeted, intensive support and
  effective interventions for the lowest-performing
  schools.
                              11


Recovery Act: Reporting and
Accountability
       Unique tracking &
        reporting requirements
        required for all ARRA
        funds.
                                         12



ARRA: State Fiscal Stabilization Funds
                                                                                    13



Recovery Act: Key Mechanics
• A State must restore fully the levels of State
  support for elementary and secondary education
  and for public IHEs for FY 2009 to the greater of
  the FY 2008 or FY 2009 levels.
  ▫ For FY 2008, a State must use the actual levels of State support for
    elementary and secondary education and for public IHEs.
  ▫ For FY 2009, a State may use (a) the actual levels of State support for
    elementary and secondary education and for public IHEs; (b) the projected
    levels of State support for elementary and secondary education and for
    public IHEs; or (c) prior- enacted levels of State support for elementary and
    secondary education and for public IHEs that were subsequently revised.
• Only funds that a State awards through its
  primary elementary and secondary
  education funding formula(e) may be used in
  determining the levels of State support for
  elementary and secondary education.
                                                     14




Recovery Act: Key Mechanics - MOE
• In each of FYs 2009, 2010, and 2011, the State
  will maintain State support for elementary and
  secondary education at least at the level of
  such support in FY 2006.
• In each of FYs 2009, 2010, and 2011, the State
  will maintain State support for public IHEs (not
  including support for capital projects or for
  research and development or tuition and fees
  paid by students) at least at the level of such
  support in FY 2006.
                                                 15




Recovery Act: Key Mechanics -
Obligation
1. A Governor must return to the Secretary
  any funds that the State does not award as
  subgrants or otherwise commit within
  two years of receipt of those funds.
     The Department is awarding funds to
     States in two phases, and there are
     separate deadlines by which the Governor
     must subgrant or commit the funds awarded
     in each phase.
2. LEAs and IHEs must “obligate” ARRA
  funds by September 30, 2011.
                                                   16




Recovery Act: Mechanics – Uses
• Any Education Stabilization funds that an LEA
  receives may be used for activities authorized
  under the ESEA, the IDEA, the AEFLA, or the
  Perkins Act, subject to ARRA and other
  applicable Federal requirements, including the
  limited prohibitions.
• Critical Reminder: The Education Stabilization
  funds are ALWAYS Federal ARRA funds.
                                                               17




Recovery Act: Mechanics – Impact Aid
• ESEA includes the broad Impact Aid authority
  (see Title VIII of the ESEA), an LEA may use
  Education Stabilization funds for activities that
  would be allowable under Impact Aid.
  ▫ This flexibility applies to all LEAs that receive
    Education Stabilization funds, and is not limited to
    those LEAs that also receive Impact Aid funds.
  ▫ Under the Impact Aid authority, an LEA may use
    Education Stabilization funds for educational purposes
    consistent with State and local requirements, subject to
    ARRA and other applicable Federal requirements,
    including the limited prohibitions.
                                                            18




Recovery Act: Mechanics – Impact Aid
• Among other things, the Education
  Stabilization funds may be used for
  activities such as:
 ▫ paying the salaries of administrators, teachers, and
   support staff; purchasing textbooks, computers, and
   other equipment; supporting programs designed to
   address the educational needs of children at risk of
   academic failure, limited English proficient students,
   children with disabilities, and gifted students; and
 ▫ meeting the general expenses of the LEA, investing in
   pre-K as part of “elementary education,” etc.
                                                                                19




Recovery Act: Mechanics –
Construction
• Construction is allowed, Section 8007 of
  the ESEA, but…
 ▫ Prohibitions that apply to an LEA’s use of Education
   Stabilization funds, including prohibitions against
   using funds for:
    (a) stadiums or other facilities primarily used for athletic contests or
     exhibitions or other events for which admission is charged to the
     general public;
    (b) improvement of stand-alone facilities whose purpose is not the
     education of children, including central office administration or
     operations or logistical support facilities;
    (c) school modernization, renovation, or repair that is inconsistent
     with State law.
                                                                 20




Recovery Act: Mechanics – Restrictions
• Casinos and other gaming establishments, aquariums,
  zoos, golf courses, or swimming pools (Section 1604 of the
  ARRA);
• Financial assistance to students to attend private elem. &
  secondary schools, (with IDEA exceptions) (ARRA Section
  14011);
• Maintenance (!) of systems, equipment, or facilities;
• Construction, M/R/R of stadiums or other facilities
  primarily used for athletic contests or exhibitions or other
  events for which admission is charged to the general
  public; or
• Construction, M/R/R of facilities (a) used for sectarian
  instruction or religious worship; or (b) in which a
  substantial portion of the functions of the facilities are
  subsumed in a religious mission.
                                                       21




Recovery Act: Mechanics – Davis
Bacon
• Buy American: No funds appropriated by the
  Act may be used for a public buildings/works
  project unless “all iron, steel and manufactured
  goods used... are produced in the U.S.” (ARRA Sec.
  1605).
• Davis Bacon: Any laborers and mechanics
  employed by contractors or subcontractors on
  construction, modernization, renovation, or repair
  projects … must be paid in accordance with the
  prevailing wage requirements. (ARRA Sec. 1606).
                                              22




SFSF: Phase 2 Background
• “[ED] proposes specific data and
  information requirements that a State
  receiving funds…must meet with respect
  to statutory assurances.” (at 37837).
• “[ED intends] to use the data information
  collected in assessing whether a state is
  qualified to participate in and received
  funds from other reform oriented
  programs administered by the
  Department." (at 37838).
                                                              23




SFSF: State Plan – now or later…
• State plan must detail
 ▫ current and planned ability to collect the data needed
   for a proposed assurance indicators and descriptors,
   including the status of the States current ability to
   make the data or information available to the public.
 ▫ If the State cannot collect or report the data, the plan
   must describe the process and timeline for developing
   and implementing the means to do so…

           no later than September 30, 2011.
                                                             24




SFSF: Achieving Equity in Teacher
Distribution [8]
• States and districts will need to collect,
  publish, and analyze basic information
  about how districts evaluate:
 ▫ teacher and principal effectiveness and
 ▫ How districts distribute their highly qualified and
   effective teachers among schools.
• Principals play a critical role in teaching
  and learning.
 ▫ “It is important to highlight inequities that result in
   low-income and minority students being taught in
   schools overseen by ineffective principals at higher
   rates than other students.”
                                                   25




SFSF: Reminder!
• “[ED intends] to use the data information
  collected in assessing whether a state is
  qualified to participate in and received funds
  from other reform oriented programs
  administered by the Department." (at 37838).
                                                  26




RTT: A Moonshot
• As Secretary Duncan framed it at the
  kickoff event on Friday July 24, it is an
  education “moon shot.”
 ▫ “It is a once-in-a-lifetime opportunity, and
   this Department will not pass that up.”
                                                               27




RTT: A Moonshot
• $4.3 billion for the race to the top fund,
  the state incentive grant fund in the
  statute.
• Competitive grant designed to encourage
  and reward states that are implementing
  significant education reforms across the
  four core reform / assurance areas.
 ▫ Implement standards and assessments,
 ▫ improving teacher effectiveness and achieving equity
   and teacher distribution,
 ▫ improving collection and use of data, and
 ▫ supporting struggling schools.
                                                          27
                                                            28




RTT: Timing
• Phase 1: open in late calendar year 2009.
  ▫ Fall 2009 – notice inviting applications available
  ▫ Two months later applications from the states are due
  ▫ First-half 2010 winners announced for phase 1 and
    feedback for those who did not win.
• Phase 2: open in late spring of 2010.
  ▫ Application deadline for phase 2, spring 2010
  ▫ Winners announced for phase 2, Sept. 2010
• States that apply in phase 1 but not awarded grants may
  reapply in phase 2, together with first time States.
• States apply individually and collaboration will be
  rewarded
                                                29




RTT: priorities, requirements & criteria
• The notice of July 29 provides
  ▫ “proposed priorities,”
  ▫ “requirements,” and
  ▫ “selection criteria.”
  ED expects to set “a high bar on both state
    reform conditions and reform plan
    criteria.” (at 37805).
                                                         30




RTT: Proposed Priorities
• Five proposed priorities for the
  competition
 ▫ Priority 1 is absolute (the state must address this
   in the application).
 ▫ Priority 2 is a competitive preference priority
   (May earn points and use as tiebreaker).
 ▫ Priorities 3-5 are invitational priorities. (No
   points are awarded, USED encourages).
                                                     31




RTT: Proposed Priority 1
Priority one: absolute priority –
  Comprehensive approach to the four
  education reform areas.
• How State & participating districts will use the
  funds for comprehensive and coherent policies
  and practices designed to increase achievement
  and reduce the gap as measured by the
  National Assessment of Education Progress
  (NAEP).
                                                     32




RTT: Proposed Priority 2
Priority two: competitive preference
 priority – emphasis on STEM.
 ▫ Offering rigorous course of study in STEM
 ▫ Cooperation with industry experts and resources
 ▫ Prepare more students for advanced study &
   careers in STEM, including addressing needs of
   underrepresented groups and women and girls.
                                                            33




RTT: Proposed Priorities 3-4:
invitational
Priority three: Data Interoperability!
• Expanding statewide longitudinal data systems to
  include or integrate data from special-education,
  limited English proficiency, early childhood, human
  resources, finance, health, postsecondary, and other
  relevant areas.
Priority four: Program interoperability!
• P-20 coordination and vertical alignment
• How to address early childhood programs, K-12,
  postsecondary institutions, and workforce organizations
  to create a more seamless P-20 route for students.
                                                                 34




RTT: Proposed Priority 5: invitational
• Priority five
  ▫ School level conditions for reform and
    innovation that include flexibility and
    autonomy for:
      Staff selection,
      New structures and formats in the school,
      Budget flexibility and management,
      Promotion based on credit not on time, and provision of
       comprehensive services to high needs students.
                                                                          35




RTT: Requirements - eligibility
1.       State must have an approved application
         under both phase 1 and phase 2 of SFSF.
2.       State must not have “any” legal, statutory, or
         regulatory barriers to linking student
         achievement or student growth data to
         teachers for the purpose of teacher and
         principal evaluation.
     ▫     “One of the most effective ways to accurately assess teacher
           quality is the measure growth and achievement of a teachers
           student.” (at 37806).
     ▫     The capacity to tie teacher data student achievement data is
           “fundamental” to race to the top reforms and to the
           requirement of ARRA that states take action to improve
           teacher effectiveness. (Id.).
                                                               36




RTT: Requirements - Application
• Application must be signed by the Governor, State’s
  Chief School Officer, and the president of the State
  Board of Education.
• State must describe progress to date in each of the four
  education reform areas, including how the state has
  used other federal and state funding over the last several
  years to pursue reforms in these areas.
• Provide financial data to compare percentage of total
  revenues available to the State used to support
  education (elem., secondary and public high ed.) in
  FY2009 and FY2008.
                                                                        37




RTT: Requirements - Application
• Provide a detailed plan for the use of the grant
  funds for each reform plan criterion that
  includes seven express elements.
  ▫ 1 Key activity is undertaken
  ▫ 2 Goals and rationale for the activity
  ▫ 3 Timeline for implementing
  ▫ 4 The parties responsible for implement
  ▫ 5 The resources they will use to support the activities (funding,
    personnel, systems, etc.)
  ▫ 6 States annual targets and, where applicable, alignment for the
    four school years beginning with 2010 – 2011 school year
  ▫ 7 Information requested as supporting evidence.
                                                   38




RTT: Requirements - Application
• Submit a certification from the State Attorney
  General … that that the State’s statements,
  descriptions, and conclusions concerning state
  law are accurate and complete and reasonable.
                                 39


ARRA Targeted / Formula Funds




 August 2009   bruman.com       39
                                    40


ARRA Reporting Overview

       U.S. Department of Education
       (ED) officials have made it
       clear that they expect
       unprecedented accountability
       and reporting for the American
       Recovery and Reinvestment
       Act (Recovery) funds.
              bruman.com
                                                     41




ARRA Reporting Overview
• Key reporting requirements:
 ▫ Section 1512 quarterly reporting applies to all
   ARRA funds “recipients”
 ▫ Section 14008 ARRA SFSF annual reports
 ▫ List of Programs Subject to Recipient
   Reporting, available in OMB Guidance
   Memorandum 09-21-supp1.
 ▫ Exceptions:
    Division B of ARRA not required to report
    Mandatory programs
    Individuals receiving awards
                                                     42




Sec. 1512 Quarterly Reporting
• Reporting applies to recipients and the Recovery
  Act defines a “Recipient” in sec. 1512 as any
  entity that receives Recovery Act funds directly
  from the federal government.
• Prime recipients may delegate certain reporting
  requirements to sub-recipients. If the reporting
  is delegated to a sub-recipient, the delegation
  must be made in time for the sub-recipient to
  prepare for the reporting, including registering
  in the system.
                                                      43




Sec. 1512 Quarterly Reporting
Structure
Planning is critical
Has there been delegation of reporting
  responsibility?
• If the reporting is delegated to a sub-recipient,
  the delegation must be made in time for the
  sub-recipient to prepare for the reporting,
  including registering in the system.
• If not, prime recipients reporting for the sub-
  recipients would complete all data elements.
                                                 44




Resources & Questions
• CDE:
 ▫ Join-arra-page-updates@mlist.cde.ca.gov
 ▫ www.cde.ca.gov/ar
• United States Department of Education,
  ED.gov/recovery
• OMB Webinar training materials,
  http://www.whitehouse.gov/Recovery/WebinarTr
  ainingMaterials/
• FederalReporting.gov
• Brustein & Manasevit, www.bruman.com
                                               45




Basic Guidelines of Grants
Management
• What Rules
    Program Statute
    EDGAR – Education Department General
     Administrative Regulations
    GEPA – General Education Provisions Act
                                                      46




EDGAR
http://www.ed.gov/policy/fund/reg/edgarReg/edgar.ht
ml
• Part 74        Administration of Grants with
                 Nonprofits

• Part 76        State-Administered Programs


• Part 80        Uniform Administrative
                 Requirements*
                                                      47




Edgar part 80
1. High Risk Grantees      9. Changes
2. Standards for           10. Real Property
   Financial               11. Equipment
   Management              12. Supplies
3. Payments                13. Copyright
4. Allowable Costs         14. Debarment
5. Availability of Funds   15. Procurement
6. Cost Sharing            16. Monitoring
7. Program Income          17. Financial Reporting
8. Non-Federal Audit       18. Retention of Records
                                                 48




Legal Structure of Federal Programs
• Statutes
 ▫ Program Statutes
 ▫ General Education Provisions Act (GEPA)
• Regulations
 ▫ Program Regulations
 ▫ Education Department General Administrative
   Regulations (EDGAR)
• OMB Circulars – 2 CFR
• Guidance – 2/03 Non Regulatory Guidance
                                                    49




Where to Find Fiscal Requirements?
• Office of Management & Budget Circulars
• http://www.whitehouse.gov/omb/circulars
 ▫ OMB Circular A-122, A-87, A-21 Cost Principles
 ▫ OMB Circular A-133 Single Audit
 ▫ OMB Circular A-133 Compliance Supplement
     – Appendix VII – Moran 20009
     – Addendum #1 June 30, 2009
                               50




Nature of State-Administered
          Programs
                                                    51




Difference Between Grants and
Contracts
• Payments received for goods or services
  provided as a vendor are not considered federal
  awards
                                               52


Characteristics of Federal Awards
to Grantees / Subgrantees
1. The entity determines eligibility
     –   e.g. CTE students
2. Performance is measured
     –   FAUPL
3. The entity has responsibility for program
   decision making
     –   How to expend funds
4. Must adhere to program compliance
     –   Cost principles
5. Carries out a program
     –   Workforce training
                                                       53




Characteristics of Payment for Goods
and Services
1. Provides goods and services within normal
   business operation
2. Provides similar goods or services to many
   different purchasers
3. Operates in a competitive environment
4. Provides goods and services that are ancillary to
   operation of federal program
5. Not subject to compliance requirements of the
   federal program
                                            54




Sometimes it is difficult to distinguish
between grant and contract




The substance of the relationship is more
important than the form of the agreement
                                                  55




Program compliance requirements normally do
not pass through to vendors. However, grantee
is responsible for ensuring compliance for
vendor transactions, including vendor’s records
to determine program compliance
                                  56

Essential Elements of Effective
Management of
21st CCLC
1.   Internal Controls
2.   Budget Control
3.   Record Management
4.   Cash Management
5.   Inventory Management
6.   Procurement
                                                      57




Internal Controls
• Internal controls are tools to help program and
  financial managers achieve results and
  safeguard the integrity of their programs
  ▫ Includes processes for planning, organizing,
    directing, controlling, and reporting on agency
    operations
                                                      58




Objectives of Internal Control
•   Effectiveness and efficiency of operations
•   Reliability of financial reporting
•   Compliance with applicable laws and regulations
•   Safeguarding assets
Budget Control
• Must compare actual
  expenditures to budgeted
  amounts on a routine
  basis




                             59
                                             60




Record Management Systems



        Sub-grantees must maintain
        records which adequately identify
        the source and application of the
        federal funds

                               80.20(b)(2)
                                                61


Keep Records That Show :
1.   How funds are used
2.   Total cost of the project
3.   Share of costs provided by other sources
4.   Financial records that show compliance
5.   Program records that show performance
6.   Detailed records needed to satisfy an
     effective audit.
                                          62




Source Documentation




       Accounting records must be
       supported by source
       documentation such as cancelled
       checks, paid bills, payroll, t/a
       records, contracts, etc.
                                                63




Cash Management




     Minimize time (72 hours) between receipt
     of funds and satisfying obligations.
                                               64




Cash Management




     Draw down funds as close as possible to
     the time of making obligations.
                                               65




Cash Management




     SEA must monitor sub-grantees to assure
     they are drawing down cash as close as
     possible to satisfy obligations.
                                          66




Cash Management




     Sub-grantees shall promptly remit
     interest earned on advances. ($100
     exception)
                              67




Life Cycle of the Federal
Dollar –
The Period for Obligations,
Liquidations, and Carryover
                                  68




What constitutes an obligation?
• 34 CFR 76.707
• 34 CFR 75.707
Obligations
 Acquisition of Property     Date of binding
                           written commitment

   Personal Services          When services
     by Employee              are performed

   Personal Services         Date of binding
     by Contractor         written commitment

         Travel            When travel is taken
                                          70




Tydings
Funds not obligated in the current year
 shall remain available for obligation
 during succeeding year


                   20 U.S.C 1225(b)
                                                                                   71




                                                           Typically
                                                          September       Typically
                         Typically                         30th for       December
                         July 1st                         State as a       31th for
                                                            Whole         State as a
                                                                            Whole


 Pre-award               Grant Start      Post-award                   Close-out
 Planning




Period of Availability
      Begins IF                            Time to               Liquidate
     Application                                                 Funds &
                                          Obligate
    Approved or                                                  File FSRs
    Substantially                      Funds (Period
     Approvable                        of Availability)
                                        72




Liquidations




         Obligations must be
         liquidated within 90 days
         after the end of the funding
         period.

                                80.23
                       73




Inventory Management
                                                                  74



Inventory Management
34 CFR 80.32
• 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
• Supplies
  ▫ Everything else
                                                    75




Equipment
• Must have adequate controls in place to account
  for:
 ▫ Location of equipment
 ▫ Custody of equipment
 ▫ Security of equipment
                                                         76




Equipment (cont.)
• Property records
 ▫ Description, serial number or other ID, title info,
   acquisition date, cost, percent of federal
   participation, location, use and condition, and
   ultimate disposition
• Physical inventory
 ▫ At least every two years
• Control system to prevent loss, damage, theft
 ▫ All incident must be investigated
                                                  77




Equipment (cont.)
• Must protect against unauthorized use
 ▫ May use for other projects as long as use is
   incidental and does not interfere
• When property no longer needed, must follow
  disposition rules:
 ▫ Transfer to another federal program
 ▫ Over $5,000 – pay federal share
 ▫ Under $5,000 – no accountability
                                                      78




Supplies
• Must maintain effective control and
  accountability
• Must adequately safeguard all such property
• Must assure that it is used solely for authorized
  purposes
79
                         80




Procurement

   Common Problems
   Potential Solutions
Procurement:
Common Problems
     • Controls over purchase
       orders
     • Lack of descriptions in
       contracts/invoices
     • Lack of approval over
       payment process




                                 81
                          82




Understanding the
Federal Cost Principles
                                                 83


Cost Principles: Basic Guidelines
• All Costs Must Be:
  ▫   Necessary
  ▫   Reasonable
  ▫   Allocable
  ▫   Legal under state and local law
  ▫   Conform with federal law and grant terms
  ▫   Consistently treated
  ▫   Not included as match
  ▫   Net of applicable credits
  ▫   Adequately documented
                                                       84


Basic Guidelines cont…
 • Necessary and Reasonable
  ▫ Must be necessary for the performance or
    administration of the grant
  ▫ Must follow sound business practices
     Arms length bargaining (hint: procurement)
     Follow federal, state and local laws
     Follow terms of the grant award
  ▫ Fair Market prices
  ▫ Act with prudence under the circumstances
  ▫ No significant deviation from established prices
                                                85




Basic Guidelines cont…
• Allocable
 ▫ Can only charge in proportion to the value
   received by the program
                86




Direct Cost
v.
Indirect Cost
                                      87


Administration & Indirect Cost
     • Direct (directly related)
     • Indirect (Organization wide)
                   88




Elements of Cost
Principles
                                            89


Advertising & Public Relations Costs

Explanation:

 • Public relations and promotional costs
   are generally not allowable.
                                              90

Audit Services
Explanation:
• A percentage of audit costs is allowable,
  provided the audits are performed in
  accordance with the Single Audit Act.
                                                      91

Communication

Explanation:
 • The following costs are allowable to your grant:
   telephone
   facsimile
   on-line services
   messenger
   other similar costs
                                            92


Compensation for Personnel
Services
Explanation:
• This cost item includes compensation
  paid to teachers, counselors,
  administrators, coordinators, and other
  personnel.
                               93




The Achilles Heel of Federal
Compliance:
Time Distribution
                                 94


Support of Salaries & Wages




    Personnel Activity Reports
             (PAR)
                               95




PARs Required If Employee Is
Working On Two Or More
Functions
                                     96

PAR Elements

• After the fact (not budgeted)
• Account for total activity
• Signed by employee or supervisor
• Prepared at least monthly
                                    97




Questions on
Time and Effort


       Is the distinction between
       single or multiple cost
       objectives based on how
       employees are paid?
                                        98




Questions on
Time and Effort cont…


         If employee is paid with
         nonfederal funds, but effort
         is counted toward a match,
         are T/E records required?
                                               99




Questions on
Time and Effort cont…


If the employee works on an activity that is
allowable under more than one program,
must the time be allocated?
                                              100




Questions on
Time and Effort cont…


         If the employee works in two
         district positions (ex. instructor
         during the day and tutor after
         school) must time records be
         kept to reflect the supplemental
         time?
                                       101




Questions on
Time and Effort cont…



        How do you handle t/e for an
        employee paid over a 12 month
        period, but works only a 9 month
        school year?
                                      102




Questions on Time and
Effort cont…



        What if the employee works only
        a brief time on an activity
        unrelated to the federal cost
        objectives?
                                      103




If deviations between budget
estimates and actual costs are less
than 10% are adjustments required?
                                                    104


Memberships, Subscriptions &
Professional Activities
Explanation:

• The cost of your campus’s participation in
  professional organizations and subscriptions to
  professional and technical publications is allowable.
• You may charge the cost of meetings and
  conferences when the primary activity is to
  communicate technical information about the grant.
                                        105


Training
Explanation:
 • Your school’s professional
   development and training costs are
   allowable.
                                          106



Travel Costs
Explanation:
    • Travel costs, including
      transportation, lodging, subsistence,
      and related items, incurred by your
      school’s employees when traveling on
      business are allowable.
                                           107


Supplement Not Supplant
   • Cannot use federal funds to pay for
     services, staff, programs, or
     materials that would otherwise be
     paid with state or local funds
   • Always ask: “What would happen
     in the absence of federal funds?”
                                                    108


Supplement Not Supplant cont…
 •    Presume supplanting in 2 situations:
     1. Used federal funds to provide services
        the grantee is required to make available
        under other federal, state or local laws
     2. Used federal funds to provide services
        the grantee provided with state or local
        funds in the prior year.
                                              109


Supplement Not Supplant cont…
  • Presumption may be rebutted:
    ▫ If grantee/sub-grantee demonstrate it
      would not have provided the services
      with nonfederal funds if the federal
      funds were not available.
                                                 110


Supplement Not Supplant cont…
• To rebut presumption show:
  ▫ Fiscal or programmatic documentation to
    confirm that, in the absence of federal
    funds, would have been eliminated
    staff/services in question
  ▫ State or local legislative action
  ▫ Budget histories and information
  ▫ Letter to OK:
     http://www.ed.gov/policy/elsec/guid/secl
      etter/030306.html
                        111




Monitoring & Auditing
                                             112


EDGAR 80.40
     • SEA responsible for managing day-
       to-day operations of sub-grant
       supported activities
     • SEA is legally responsible for sub-
       grantee expenditures
                                          113


EDGAR 80.40
        • SEA must monitor sub-
          grantees to assure compliance
          with applicable federal
          requirements and performance
          goals being achieved
                                       114


EDGAR 80.40
     • Grantee monitoring must cover
       each program, function, or
       activity
                                                      115


OMB Guidance:
 “Grantee monitoring should occur throughout the
   year rather than relying solely on a once-a-year
   audit.”
 • Reliance on Desk Review is insufficient.

 OMB

 • OMB expects pass-through entities to consider
   various risk factors in developing sub-recipient
   monitoring procedure
   (relative size and complexity of award, prior
   experience)
                                     116


The Single Audit Process

   • Single Audit Act
   • A-133
   • Role of the Inspector General
                                                     117


Pass-through Entity (SEA)
Responsibilities Under A-133
1.   Identify all awards for sub-recipients
2.   Advise subs of all requirements
3.   Monitor all subs for compliance
4.   Ensure that subs expending over $500,000 have
     audits
5.   Issue management decisions and ensure subs
     take corrective action
6.   Adjust own records necessitated by audits
7.   Require sub to permit SEA access to records
                        118




OMB Circular A-133
Compliance Supplement
                                 119




Pass-through entity may charge
to federal grant the cost of
“Limited Scope Audit”.
                                         120


Limited Scope Audit
 Address one or more of the
 following types of compliance
 requirements:
 •   Allowable costs / cost principles
 •   Eligibility
 •   Matching / MOE
 •   Earmarking
 •   Reporting
               121




QUESTIONS???
                                                  122




This presentation is intended solely to provide
general information and does not constitute
legal advice. Attendance at the presentation
or later review of these printed materials does
not create an attorney-client relationship with
Brustein & Manasevit. You should not take any
action based upon any information in this
presentation without first consulting legal
counsel familiar with your particular
circumstances.

								
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