Fiscal Requirements
for
Federal Programs
NEW FEDERAL PROGRAMS DIRECTORS TRAINING
November 15, 2011
Session Topics & Group Assignments
Overview of Fiscal Information Related to:
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Legal Structures for Fiscal Accountability
Allowable Costs and Procurement Procedures
Inventory
Time and Effort
Indirect Costs
Maintenance of Effort
Supplement/Supplant
Grant Awards
Transferability
Availability of Funding
Carry Over
Comparability
Review of LEA Fiscal Section Monitoring Document
“I don’t have an answer, but you’ve sure given me much to think about.”
A. Legal Structures
1. From what government documents are the basic
fiscal requirements derived?
2. Which OMB Circular identifies allowable
expenditures under general cost cutting
principles?
3. Which OMB Circular provides the guidelines for
fiscal audits?
4. Which OMB Circular provides the guidelines for
the submission and approval of plans?
Legal Structure
Program Statute
Program
Regulations
OMB Circulars
EDGAR
Guidance
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Legal Structures
• Program statutes
– NCLB (No Child Left Behind Act of 2001)
– GEPA (General Education Provisions Act )
• Regulations
– EDGAR (Education Department General Administrative
Regulations)
– Federal Program Regulations – Title I, Title II, Title III
• OMB Circulars (Office of Management and Budget)
– A 87 – allowable costs
– A 110 – approved plan for issuance of grant
– A 133 – fiscal audits
• Guidance
– Non regulatory guidance for all federal programs
Federal Grants Resources
• Program Guidance: www.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/edgar.html
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Federal Grants Resources
• Office of Management & Budget (OMB) Circulars:
http://www.whitehouse.gov/omb/circulars
– Circular A-87 principles for allowable costs
– Circular A-122-cost principles for non-profit
organizations
– Circular A-133 Compliance Supplement-audit
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B. Allowable Costs and
Procurement Procedures
1. List several questions that should be asked
before approving expenditures.
2. Describe some components of procurement
procedures.
3. What information should be included at a
minimum in all contracts?
4. What information should be provided on all
invoices for contracted services?
Allowable Costs
• Necessary? Reasonable?
• Legal under state and local law?
• Allowable?
– Check Circulars A-87 & A -133
– Does it supplement not supplant the program?
• Do you have money allocated in your
approved budget to cover the expense?
• Is it supported by a scientific research base?
Written Procurement Procedures
• Grantees and LEAs receiving federal education
funds must follow the procurement rules contained
in the Education Department General
Administrative Regulations (EDGAR).
• Some federal program statutes also contain
procurement guidelines (for example, Title I Part A
contains contract requirements for SES contracts).
Written Procurement Procedures
• Section 80.36(a), allows states and local
educational agencies (LEAs) to use the same
procurement policies and procedures they use
for procurements made with state funds.
• Director or designee should sign off at all levelsrequisition, PO and invoice
• When purchases are made with a credit card
utilizing federaI funds, the LEA must obtain
written preauthorization for the purchase from
the federal program director.
Written Procurement Procedures
• Written contracts for any contractual service
(e.g., interventionists; professional development
presenters; academic coaches)
• A contract should include:
– Description of services, including the location at which the services
will be provided
– Number of days of contracted service – include starting and ending
dates
– Total cost of all services described in the agreement
– The federal grant project code matching the county budget from
which the services will be paid
– Appropriate signatures from both entities.
Written Procurement Procedures
Invoices submitted for payment on contract
• must be written and describe services performed or goods
delivered
• include dates services were performed or goods were
delivered
• state location services were performed or goods were
delivered
• include description of students/teachers/etc. served
(if applicable)
• be reviewed and approved prior to payment.
C. Inventory
1. What information is required on an inventory
form for federal programs?
2. What two parts of a property management
system (inventory) are required, but most
neglected within district procedures?
3. How often is a physical inventory and
reconciliation required?
Inventory
Inventory items purchased with federal funds
are divided into three categories:
• real property (land and structures);
• equipment (tangible, nonexpendable property
that has a useful life of more than one year); and
• supplies (consumables)
Inventory
Under Section 80.32(c) of EDGAR, grantees and
subgrantees must maintain specific property
records that include:
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a description of the property;
a serial number or other identification number;
the acquisition date and cost of the property;
the percentage of federal participation in the cost of the
property;
• the location, use and condition of the property, and
• any ultimate disposition data including the date of disposal
and sale price of the property
Inventory Control
• Control system to ensure adequate
safeguards to prevent loss, damage or
theft of the property. Any loss, damage or
theft must be investigated by the grantee or
subgrantee.
• Check out procedures for equipment used
off property
Inventory Control
ED determined that an adequate internal
control system must include a process for
labeling and locating property purchased
with federal funds
(e.g., Title I FY 12 or Title I ARRA FY10)
Physical Inventory
Subgrantees must take a physical inventory
of equipment at least every two years and
must reconcile the results. The person
conducting the physical inventory should
sign and date the inventory form.
If any equipment is missing, the grantee or
subgrantee must indicate on an inventory
form.
D. Time and Effort
1. What employees are required to maintain time
and effort documentation?
2. Describe the two types of time and effort
documentation and describe the use for each.
3. How often must the amount of payment from
each cost objective be adjusted for a staff
member who is funded by more than one cost
objective?
Time and Effort
• If federal funds are used for salaries “time
distribution records” must be kept
• Must demonstrate that employees paid with
federal funds actually worked on the specific
federal program for the percentage of time for
which the individual is being paid
Time and Effort
• Type of documentation depends on how many
“cost objectives” the employee worked on
• These cost objectives must be connected to the
employee’s salary source
• What is a cost objective?
– A specific grant award, or other category of
costs, that requires the grantee to track
specific cost information
Time and Effort
• If an employee works on a single cost objective:
– Semi-Annual Certification
– Signed by employee and supervisor every six
months
– Example: “I hereby certify that for the period
January 1, 2011 through June 30, 20101 onehundred percent (100%) of my time and effort
was spent on Title I Administration.”
Time and Effort
If an employee works on multiple cost objectives:
– Personnel Activity Report (PAR)
• After the fact
• Account for total activity
– Prepared at least monthly and coincide with
one or more pay periods
– Signed by employee and supervisor
Time and Effort
• Determine estimates for budgeting
– Estimates must produce reasonable
approximations of the activity actually
performed
– Quarterly comparison of estimates to actual
costs
• If difference is less than 10% - annual
adjustment
• If difference is more than 10% - quarterly
adjustment
E. Indirect Costs
1. Do federal programs utilize the restricted or
unrestricted indirect cost rate?
2. Why are most indirect charges expensed at the
end of the year?
3. Which indirect cost rate must be applied to
carryover funds-the grant year or the current
fiscal year’s cost rate?
Indirect Costs
• Rate is based on expenditures during past year
• Calculated by entering amounts into a
spreadsheet that contains a formula approved by
the USDE.
• Restricted / Unrestricted Rate
Indirect Costs
• The amount of indirect charge expensed should
be based on actual expenditures for the year
• Use the rate that is applicable for the year in
which expenditures occur
• A change in the county’s indirect rate from year
to year may be attributed to a change in the
expenditures of the LEA (particularly if there was
a change from one year to the next in the way
expenses are coded)
Three Primary Fiscal Requirements
of §1120A of NCLB
• Maintenance of Effort
– MOE looks across the district to ensure that roughly the
same amount of state and local funding is being
contributed district-wide from one year to the next.
• Comparability
– Looks more narrowly at individual schools and inquires
whether Title I schools and non-Title I schools are being
treated fairly.
• Supplement Not Supplant
– Narrows the focus even more to individual expenditures
and asks whether each unique expenditure of federal
funds would have still been made if the federal funds
were not available.
F. Maintenance of Effort
1. Define Maintenance of Effort.
2. What percentage of the combined fiscal effort
per student or the aggregate expenditure of the
LEA from state and local funds for free public
education in the LEA must the LEA maintain from
the preceding year?
3. If a LEA fails to maintain this percentage, what
are the consequences?
Maintenance of Effort
• The statue states that an LEA may receive Title I funds
only if the SEA determines that the LEA has
maintained its fiscal effort.
• SEA distributes a report that provides the combined
fiscal effort per student from state and local funds for
each LEA. This amount is entered into the LEA Title I
application for funding.
• Upon review of the application, the SEA must determine
that either the combined fiscal effort per student or the
aggregate expenditure of the LEA from state and local
funds for free public education in the LEA for the
proceeding year was not less than 90% of the combined
fiscal effort for the second proceeding year.
Maintenance of Effort
• Results of Failure to Document MOE
– WVDE will reduce the amount of the allocation of federal
program funds by the percentage by which a LEA fails to
meet the requirement by falling below the 90% of the
combined fiscal effort per student or the aggregate.
– This money is then returned to the State for reallocation
to other districts according to need.
WAIVER – The USED Secretary may waive the
requirements of maintenance of effort if it is determined
that a waiver would be equitable due to exceptional or
uncontrollable circumstances. Such exceptions may
include a natural disaster or a precipitous decline in the
financial resources of the LEA.
G. Supplement not Supplant
1. Discuss the supplement not supplant regulation
as it applies to federal programs.
2. Provide a key question one should ask when
trying to determine a supplant situation.
3. List three situations where an auditor will
presume use of federal funds will violate the
“supplement, not supplant” requirement.
Supplement NOT Supplant
• Federal program funds may not be used to pay
for services, staff, programs, or materials that
would otherwise be paid with state or local funds.
• Key question: “How would the district/school
have paid this expenditure in the absence of
federal funds?”
Supplement NOT Supplant
• A-133 Compliance Supplement provides three general
situations where an auditor will presume use of federal funds
will violate the “supplement, not supplant” requirement:
• Use of federal funds to provide services the SEA or LEA is
required to make available under other federal, state or
local laws
• Use of federal funds to provide services the SEA or LEA
provided with state or local funds in the prior year
• Use of Title I, Part A funds to provide the same services to Title
I students that the LEA or SEA provides with state or local
funds to nonparticipating students
H. Grant Awards
1. When may a district obligate funds from a
current grant?
2. What are some key parts of the grant award of
which one should make note?
3. Why is important to track the entire grant award
as well as individual school allocations?
4. What WVEIS reports are most helpful and what
resources are available on the WVDE website?
Allocation Procedures
SEA to LEAs
• Approved Plan Required (OMB A-110, Subpart C
.10)
• Financial and Program Requirements (OMB A-110,
Subpart C .21)
• Revision of Budget and Program Plans (OMB A-110,
Subpart C .25)
Grant Award
• Letter of Explanation
• Assurance statements
– Included within the
strategic plan
• Grant Award
– Amount
– Obligation and
liquidation dates
– Commitment number
– Project code
– Scope and conditions
Tracking Budget Expenditures
• Total composite budget
• Administrative budget
• Individual school budgets
http://wveis.k12.wv.us/surveys/genledger_proje
cts_years.cfm
I. Transferability
1. From which NCLB programs may funds be
transferred?
2. Which NCLB program may accept funds, but
may not have funds transferred to another
program?
3. What restrictions exist for districts which are
identified for improvement?
4. What restrictions exist for districts which are
identified for corrective action?
5. What effect do the fiscal year and the period of
obligation have on transferred funds?
Transferability (LEA)
• An eligible LEA may transfer up to 50% of the
formula funds allocated under any of the
following programs:
– Teacher and Principal Training and Recruiting Fund §2121
– State Technology (formula grants only)-§2412(a)(2)(A)*
– Safe and Drug Free Schools-§4112(b)(1)
– Innovative Programs-§5112(a)
• An LEA may transfer funds from any of these
covered programs to Title I, Part A, but not out of
Title I.
*Applies only to portion of funds subgranted on a formula basis.
Transferability-LEA
• The transfer of funds within the LEA are not
limited to administrative funds, but apply to all
funds (both administrative and programmatic).
• An LEA identified for improvement under
§1116(c) of the statute may not transfer more
than 30% of the funds allocated under any of
the four covered programs. Moreover, any
funds that are transferred may only be used for
school improvement activities.
• An LEA loses its transferability authority
immediately upon being identified for corrective
action.
Transferability
• Funds may not be transferred across fiscal
years.
• Transferability does not affect the period in which
the SEA or LEA may obligate the funds.
• Prerequisites for SEA and LEA Transferability:
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Consult with private schools
Determine funds to be transferred
Determine amount of fiscal year
Modify each affected State or LEA plan
Establish an effective date
Notify and obtain approval from the SEA
Transferability
• Accountability Requirements
– Programmatic accountability
• The statute mandates that the transferred
funds be subject to the rules and
requirements of the programs to which they
are transferred.
– Fiscal accountability
• Records must permit normal monitoring,
evaluation and auditing activities
• Agency must be able to produce reports on
transfers as requested
J. Availability of Funds
1. Who authorizes the availability of federal funds and why is
a time limit placed on the funds?
2. What is the obligation period of the federal grants?
3. Define the “tydings period” and of what benefit is this
provision?
K. Carryover
1. What percentage of the fiscal year’s allocation
may a LEA carry into the “tydings period” for the
Title I and Title II programs?
2. What procedures must a LEA follow if it is
determined that the LEA exceeds the permissible
amount of carry over?
3. If a waiver cannot be granted, what action must
the state take?
4. Name the three ways that Title I carryover funds
may be utilized when planning the proceeding
year’s budget.
Availability of Funding
• Funds become available for obligation on July 1
of each year, and remain available for a total of
15 months (until September 30 of the succeeding
year).
• To avoid hasty, “use it or lose it” expenditure of
leftover funds at the end of this period, the
General Education Provisions Acts gives SEAs
and LEAs the authority to carry over their grants
for an additional year, for a total availability of 27
months. This extra 12 months is called the
“Tydings Period”.
Carry Over
Title I and Title II are subject to a cap on
amount that be carried forward into the
“Tydings Period” which provides another 12
months for the use of funds.
• 15% of the grant can be carried forward into
the Tydings period
–LEAs wishing to carry over a greater
percentage may request a waiver once
every three years.
Carry Over
• An LEA has significant discretion in handling its
Title I carryover funds.
1. Funds may be added to the LEA’s subsequent year’s allocation and
redistributed to participating schools in accordance with normal
allocation procedures – decreasing amount of allocation based on
highest to lowest poverty. *
2. Funds may be added to the LEA’s subsequent year’s allocation and
redistributed to participating schools equitably based on a per pupil
amount times the number of low income students in each school. *
3. Funds may be designated for district wide activities that could best
benefit from additional funding (e.g. parent involvement activities,
professional development, pre-K, services for extended day/year
programs).
* The requirement for equitable services to private schools also applies to carryover funds.
The LEA is not permitted to use Title I carryover funds in a school that is not eligible
for Title I funding.
Comparability
1. Define comparability of services.
2. How often must a district demonstrate
comparability?
3. How would you determine if a district does not
have to demonstrate comparability?
4. What is the purpose of excluding “all federally
funded” staff when determining comparability
calculations?
Comparability
• Requires that LEAs be able to document that the
services provided with state and local funds in
Title I schools are comparable to those provided
in non-Title I schools in the LEA.
• State and local funds must be used in
participating schools to provide services that,
taken as a whole, are “at least comparable” to
services in schools that do not participate in
Title I schools.
• Comparability must be met by LEAs on an
annual basis.
Comparability
• Comparability requirements do not apply to a
district that does not have more than one building
per grade span
• Federally funded staff are excluded from
comparability calculations because the purpose
of comparability is to determine if the LEAs are
allocating Title I schools a fair share of
nonfederal funds.
Fiscal Monitoring Requirements
Section VII of the LEA monitoring document
“I don’t have an answer, but you’ve sure given me much to think about.”
Tell me and I'll forget,
show me and I may
remember, involve me
and I'll understand.
Chinese Proverb