NACTEI PRE-CONFERENCE
PHOENIX, AZ
MAY 6, 2013
FLYING UNDER THE RADAR:
MEASURING COMPLIANCE
WITH FEDERAL RULES
Presented by
Michael Brustein, Esq.
www.bruman.com
mbrustein@bruman.com
AGENDA
1.
2.
3.
4.
5.
6.
Update on Perkins Funding
Perkins Reauthorization Status
WIA Reauthorization Status
Navigating the Legal Authorities
New OCFO Guidance on Time and Effort
Proposed Super Circular
APPENDICES
1.
2.
3.
4.
Perkins Q & A
OCFO Guidance
Perkins Statute
Federal Education Audit Resolution - Key Events
Timeline
(1) CTE FUNDING
FY 13 (7/1/12 – 6/30/13)
FY 14 (7/1/13 – 6/30/14)
FY 15 (7/1/14 – 6/30/15)
$1,123,030,274
$1,066,878,760
$?
4
SEQUESTRATION
1. The 1/2/13 trigger date deferred by ED to
7/1/13
2. Congress delayed effective date from
1/2/13 to 3/1/13
3. Delay reduced uniform cut from 8% to 5%
4. OMB increased cut from 5.0% to 5.2%
5
PERKINS HOLD HARMLESS – SECTION
111(a)(5)
No State to receive less than base amount
received in 1998
Payments to all states shall be ratably
reduced
6
OVAE INTERPRETATION
Depending on population growth since
1998, some states witnessing
disproportionate reductions
7
OVAE estimates do not reflect bifurcation
of Perkins findings
25% - 7/1/13
75% 10/1/13
8
Because ED deferred March 1, 2013 cut
5.2% deducted from 7/1/13 25%
amount
9
There will be a second cut on October 1,
2013, because 75% award is based on
next year’s appropriation
10
What will amount be of second cut?
Not uniform
In range of 8%
11
OBAMA 2014 BUDGET
Released two months late on 4/10/13
ED would get $71.2 billion increase of
4.6% over 2012 (not 2013)
IDEA / Title I
Flat
Focus on Competitive Grants (RTT) and
Pre-K
12
(2) PERKINS V REAUTHORIZATION
Perkins IV authorized from 7/1/06
through June 30, 2012
Congress will continue to fund Perkins
until reauthorized (GEPA)
13
WILL PERKINS BE REAUTHORIZED IN
2013?
1. ESEA
2. IDEA
3. AEFLA
4. WIA
14
OBAMA ADMINISTRATION ISSUED
“BLUEPRINT”
Alignment
Allow states to
identify in demand occupations in high
growth industry sectors
15
Collaboration
Consortia funding
to ensure collaboration, with private
sector match
16
Accountability
Move from formula
funding to competitive funding
Common definition
Incentives for high
performance
17
Innovation
A competitive
innovation and transformation fund
18
NASDTEC
Base funding on POS
19
(3) STATUS OF WIA
REAUTHORIZATION
20
113 TH CONGRESS WIA PROPOSAL
Supporting Knowledge and Investing in
Lifelong Skills (SKILLS) Act (H.R. 803)
Sponsor: Representative Virginia Foxx (R -NC)
Introduced February 25, 2013
House Education and the Workforce’s
Subcommittee on Higher Education and
Workforce Training hearing February 26, 2013
Bill markup on March 6, 2013 and passed on
a party-line vote
21
CONSOLIDATION OF PROGRAMS
Proposed elimination of “duplicative”
and “ineffective” workforce programs
35 programs would be consolidated
Provides authority to Governors to
consolidate additional workforce
programs
Consolidated programs would be part of
a single funding stream called the
Workforce Investment Fund (WIF)
22
WORKFORCE INVESTMENT FUND (WIF)
WIF is a unified and flexible funding source
for employers, workers, and job seekers
Larger focus on Workforce Investment
Boards (WIBs)
2/3 of local WIBs must be businesses
Eliminates the requirement that unions be
represented on WIBs
23
COMMUNIT Y COLLEGES ROLE
State agency officials may designate CEOs of
community colleges to serve on Workforce
Investment Boards (WIBs)
Community colleges may serve on local WIBs
Eligible agencies for administering workforce
activities includes community and technical
colleges
State Unified Plan should include
consultations with community and technical
colleges
24
(4) NAVIGATING THE LEGAL AUTHORITIES FOR
THE ALLOWABLE USES OF PERKINS FUNDS
1. Perkins Act
2. EDGAR
3. OMB Circulars
25
PERKINS ACT
1. Serve only CTE students
2. Meet the Local Plan requirements on
Section 134 (Budgets)
3. Satisfy the Section 135 requirements
on uses of funds
4. Accountability – Section 113
5. Local Improvement Plans – Section 123
26
SECTION 135
a) Improve
b) Mandatory uses
c) Permissive uses
d) Administrative costs
27
EDGAR
Part 76 – State Administrative Rules
Part 80 – General Administrative
Rules
28
OMB CIRCULARS
A-87 / A-21 Cost Principles
A-133 Audit Principles
29
EDGAR PART 80
1.
2.
3.
4.
5.
6.
Standards for Financial Management
Payments
Allowable Costs
Period of Availability of Funds
Program Income
Non Federal Audit
30
EDGAR PART 80 (CONT.)
7. Changes
8. Equipment
9. Supplies
10.Procurement
11.Monitoring
12.Retention of Records
31
A-87 / 21 COST PRINCIPLES
In developing your Perkins Budget, follow
this roadmap:
1) Is the item allowable under
a) Perkins
b) State Plan
c) State / Local Policies
d) A-87 Appendix B (43 items)
32
2) Is the item necessary?
33
3) Is the item reasonable?
34
4) Is the cost allocable to Perkins?
35
5) Is the cost adequately documented?
36
OMB CIRCULARS TIME AND EFFORT RULE
Compensation for Personnel Services:
 If federal funds used for salaries, then time
distribution records are required.
 Must demonstrate - If employee paid with
federal funds, then employee worked on that
specific federal program/cost objective.
37
WHO MUST PARTICIPATE?
 Any employee who is
working on a federal
program
◦ Not contractors
◦ All employees paid
with federal funds
◦ Some employees paid
with non-federal
funds
38
NEW TIME AND EFFORT
GUIDANCE BY OCFO!!
http://www2.ed.gov/policy/
fund/guid/gposbul/timeand-effort-reporting.html
39
A-87: IF EMPLOYEE WORKS
100% ON SINGLE COST OBJECTIVE
 Semi-Annual Certification
 Completed at least every six months
 Signed by a supervisor with knowledge
or the employee
 After-the-fact record (dated)
 Accounts for the total activity for which
employee compensated
 Must coincide with one or more pay
periods
40
A-87: IF EMPLOYEE WORKS
100% ON SINGLE COST OBJECTIVE
 Semi-Annual Certification
 “This is to certify that Michael Brustein
has worked 100% of his time for the
period July 1, 2012, through December
31, 2012, on Perkins Administration.”
Signature of employee: /s/
Date: January 5, 2013
41
A-87: IF EMPLOYEE WORKS ON
MULTIPLE COST OBJECTIVES
Personnel Activity Reports
 After-the-fact record (dated)
 Accounts for the total activity for which
employee compensated
 At least monthly
(unless substitute system)
 Signed by the employee
 Must coincide with one or more pay
periods
42
A-87: PARS
 Personnel Activity Reports (PAR)
 “For the month of December 2012, I,
Michael Brustein, spent my time 50% on
the Perkins Basic Grant and 50% on
Perkins Administration.”
Signature of Employee: /s/
Date: January 1, 2013
43
WHAT IS A SINGLE COST
OBJECTIVE???
OCFO: “The criteria for whether
an employee may document time
and effort using a semiannual
certification or must fill out a
monthly PAR can be confusing.”
44
WHAT IS A “COST OBJECTIVE”?
A-87 Definition: A function,
organizational subdivision, contract,
grant or other cost activity for which cost
data are needed and for which costs are
incurred.
45
MULTIPLE ACTIVITIES OR COST OBJECTIVES
FOR WHICH A PAR IS REQUIRED — THAT IS, IF
AN EMPLOYEE WORKS ON
 More than one Federal award.
 A Federal award and a non-Federal award.
 An indirect cost activity and a direct cost
activity.
 Two or more indirect activities that are
allocated using different allocation bases.
 An unallowable activity and a direct or
indirect cost activity.
46
OCFO GUIDANCE
It is possible for multiple programs to
have the same cost objective, which
creates confusion over whether the
presence of a single cost objective or
being funded by multiple programs
should determine what time-and-effort
documentation an employee must
complete.
47
OCFO GUIDANCE (CONT.)
 It is possible to work on a single cost objective
even if an employee works on more than one
Federal award or on a Federal award and a
non-Federal award.
 The key to determining whether it is a single
cost objective is whether the employee ’ s
salary and wages can be supported in full from
each of the Federal awards on which the
employee is working or from the Federal award
alone if the employee ’ s salary is also paid with
non-Federal funds.
48
OCFO GUIDANCE EXAMPLES OF SINGLE
COST OBJECTIVES:
State leadership funds under the Carl D. Perkins Career and
Technical Education Act of 2006 (Perkins IV) and State
funds
 A State curriculum specialist who develops new career
and technical education courses and initiatives is funded
50 percent with Perkins IV funds reserved under section
112(a)(2) for State leadership and 50 percent with State
general funds.
 Career and technical education curriculum development is
a single cost objective because it can be fully supported
with State leadership funds under Perkins IV.
 Only a semiannual certification, therefore, is required
even though the employee’s salary is supported by a
Federal award and State funds.
49
SUBSTITUTE SYSTEMS
AND OCFO CHANGES
50
SUBSTITUTE SYSTEMS GENERALLY
OMB Circular A-87 authorizes the use of
substitute systems for allocating salaries
and wages.
ED must approve SEA’s system.
Can include:
 Random moment sampling
 Case counts
 Other quantifiable measures of employee effort
51
SUBSTITUTE SYSTEMS CHANGES
 An SEA would be permitted to allow an LEA to use
alternative documentation through approved substitute
system.
 For example, could use a teacher's course schedule
(instead of PARs) for an individual who works on
multiple activities or cost objectives
but does so on a predetermined schedule.
 An individual documenting time and effort under the
substitute system would be permitted to certify time and
effort on a semiannual basis, provided certain
requirements are met.
52
SUBSTITUTE SYSTEMS CHANGES
(CONT.)
The SEA must obtain from the LEA a
management certification certifying that:
Only eligible employees will participate
Sufficient controls are in place to ensure
that the schedules are accurate
The certification must disclose any known
deficiencies with the system or known
challenges with implementing the substitute
system.
53
NEW SUBSTITUTE SYSTEMS
REQUIREMENTS
(1) System Guidelines
 To be eligible to document time and effort under the
substitute system, employees must –
 Currently work on a schedule that includes multiple
activities or cost objectives that must be supported by
monthly personnel activity reports;
 Work on specific activities or cost objectives based on
a predetermined schedule; and
 Not work on multiple activities or cost objectives at the
exact same time on their schedule.
54
NEW SUBSTITUTE SYSTEMS
REQUIREMENTS (CONT.)
(2) In lieu of PARs, eligible employees may
support a distribution of their salaries and
wages through documentation of an
established work schedule that meets the
standards under section (3).
An acceptable work schedule may be in a
style and format already used by an LEA.
55
NEW SUBSTITUTE SYSTEMS
REQUIREMENTS (CONT.)
(3) Each Employee’s work schedule must:
Indicate the cost objective(s) that the
employee worked on;
Account for the total hours compensated; and
Be certified:
At least semiannually; and
Signed by the employee and a supervisory
official having firsthand knowledge of the
work performed by the employee.
56
NEW SUBSTITUTE SYSTEMS
REQUIREMENTS (CONT.)
(4) Any revisions to an employee’s
established schedule that continue for a
prolonged period must be documented
and certified.
The effective dates of any changes must
be clearly indicated in the
documentation provided.
57
NEW SUBSTITUTE SYSTEMS
REQUIREMENTS (CONT.)
(5) PARs must be used when there is a
significant deviation.
States should put forth guidelines and
examples for what constitutes a significant
deviation from an employee’s established
schedule that would warrant an individual
reverting to a personnel activity report.
58
(6) PROPOSED SUPER
CIRCULAR
59
WHY “SUPERCIRCULAR”???
1. Greater simplicity
2. Greater consistency
3. Obama Executive Order on
Regulatory Review
60
• Greater “simplicity” means
elimination of several compliance
elements in the Compliance
Supplement
•
14 requirements reduced to 7, eliminating:
1.
2.
3.
4.
Equipment Management
MOE/Ear-Marking
Procurement
Program Income
61
The elimination of the compliance
requirements from A-133 will place the
burden on “Pass-Through” agencies
62
KEY REQUIREMENTS RETAINED
•
•
•
•
•
Allowable Costs
Eligibility
Cash Management
Reporting
Subrecipient Monitoring
63
WHAT IS COVERED?
1. Administrative Requirements (A 102, A-110)
2. Cost Principles (A-87, A-21, A-122)
3. Audit Requirements (A-133)
64
WHO IS COVERED?
All non-federal entities expending
federal awards
65
WHEN IS IT EFFECTIVE?
NPRM – 2/1/13
Close of comment period 06/02/13
Analysis of public comment
Final regulation (2 CFR) – not likely
before 1/1/14
EDGAR revisions – within one year of
final regulation ?
Effective date of 7/1/14 is doubtful
66
MIGHT EDGAR BE INCONSISTENT WITH
SUPERCIRCULAR?
Yes, but federal agencies applying
more restrictive requirements need
OMB approval
Section _.108
67
Agencies can request special tests
for A-133 items removed (e.g.,
equipment management, period of
availability of funds)
68
IF PROGRAM STATUTE DIFFERS
FROM SUPERCIRCULAR,
STATUTE GOVERNS
Section _.106
69
SO WHAT IS NEW?
70
FEDERAL AGENCIES MUST EVALUATE RISKS TO
THE PROGRAM POSED BY EACH APPLICANT
FOCUS NOW ON RISK!
a)
b)
c)
d)
e)
f)
Financial stability
Management system
History of performance
Generally available information
Single audits
Capacity to implement programs
Section _.205
71
FOLLOWING RISK ANALYSIS, AGENCIES
MAY IMPOSE CONDITIONS ON GRANTEE
Section _.205
72
PERFORMANCE EXPECTATIONS
Agencies must include in the award
indication of timing and scope of
expected performance – as related to
outcomes intended to be achieved by the
program
Section _.404
73
PASS-THROUGH AGENCY MAY IMPOSE
“SUPPLEMENTAL REQUIREMENTS”
Section _.501(c)(4)
74
PASS-THROUGH MONITORING SHALL
INCLUDE:
a) Analyzing financial and
programmatic reports
b) Ensure subrecipients take timely
and appropriate corrective action
c) Issue management decision on A 133 finding at subgrantee level
Section _.501(c)(5)
75
MONITORING TOOLS OF PASS-THROUGH
a) On-site reviews
b) Provide training and technical
assistance
c) Arrange for “Agreed Upon
Procedures”
Section _.501(c)(5)
76
RISK FACTORS FOR PASS-THROUGH
MONITORING
a) Results of previous audits
b) New subrecipients
c) New personnel or substantially
changed system
d) Extent of federal monitoring
Section _.501(c)(6)
77
CASH MANAGEMENT
Recipients shall maintain advances
of federal funds in interest bearing
accounts unless…
a) Recipient receives less than
$120,000 in federal $ per year
b) Interest will not exceed $500
c) Bank requires minimum balance
Section _.502(e)(3)(k)
78
INVENTORY MANAGEMENT
Equipment definition same
a) Acquisition cost of $5,000
b) Useful life greater than one year
Section _.503(d)
79
INVENTORY MANAGEMENT
Use/Management/Disposition
Same as EDGAR 80.32
Section _.503(d)
80
“COSTS OF COMPUTING DEVICES” =
“SUPPLIES”
But
 When no longer needed for any other
federally sponsored project, recipient may
a) Retain them
b) Sell them
 But compensate federal government if per
unit value exceeds $5000
But
 Conflicts with C-31(6)
total aggregate
value of $5000 (unused)
Section _.503(e) and Section _ .620
81
COST SHIFTING
Grantee cannot shift cost from one
award to another to overcome
shortfall, unless costs are allowable
under both awards
Section _.607(c)
82
COST ALLOCATION – COST SHARING
If a cost benefits two or more
projects in a proportion that can be
easily determined, then cost should
be allocated on the proportional
benefit
Section _.607(d)
83
COST ALLOCATION – COST SHARING
If proportion cannot be easily
determined then allocate on any
reasonable documented basis
Section _.607(d)
84
SET-ASIDES
If program statute contains reserves
or limitations, amount not used
cannot be charged to other federal
awards
Section _.611
85
ADMINISTRATIVE COSTS –
DIRECT CHARGING OF ADMINISTRATIVE
COSTS
Salaries of administrative and clerical staff
should be treated as indirect, unless
a) Services are integral to project, and
b) Individuals can be specifically identified,
and
c) Costs are explicitly set out in budget,
and
d) Costs not recovered as indirect
Section _.615(d)
86
INDIRECT COSTS
A federally approved negotiated rate
shall be accepted by all federal
agencies
Section _.616(c)(1)
87
INDIRECT COSTS
Pass-through entities must abide by
the federally recognized indirect
cost rate negotiated between the
federal agency and subrecipient
(restricted vs. nonrestricted)
Section _.501(c)(1)(D)
88
INDIRECT COSTS
But if no such rate exists, the passthrough must negotiate the rate, or a
de minimis indirect cost rate equal
to 10% of total modified direct costs
to small entities. (But what about
restricted rates? Most LEAs have
restricted rates in single digits.)
Section _.616(e)
89
TIME AND EFFORT MANAGEMENT
Eliminate reference to PARs
Now “Certified Reports”
Reports may be electronic
Semi-Annual for single cost objective
- same
Section _.621 C-10(9)
90
TIME AND EFFORT MANAGEMENT
After the fact, unless mutually
satisfactory alternative approved by
awarding agency
Certification periods cannot exceed
12 months
Activities may be expressed as
percentages
Section _.621 C-10(9)
91
TIME AND EFFORT MANAGEMENT
Certified Reports on 2 or more cost
objectives certified by employee or
individual responsible for verification
Section _.621 C-10(9)
92
TIME AND EFFORT MANAGEMENT
No additional support other than
certification is necessary
Section _.621 C-10(9)
93
TIME AND EFFORT MANAGEMENT
Substitute systems may be used if
approved by cognizant agency
Federal agencies are encouraged to
approve alternative proposals based
on outcomes
Section _.621 C-10(9)(F)
94
TIME AND EFFORT MANAGEMENT
Awarding agencies may approve
“blended funding” where multiple
programs involved, and
“performance-oriented metrics” are
used
Section _.621 C-10(9)(F)
95
COST PRINCIPLES
CHANGES
Costs for services of counsel (inhouse or Bruman) for administrative
proceedings (OALJ) may not be
charged if the ALJ imposes a
“monetary penalty.” Legal
expenses are allowable if the
proceeding is resolved by consent or
compromise.
Section _.621 C-14(2)
96
COST PRINCIPLES
CHANGES
Cost of Meetings
Costs from meetings and
conferences “beyond the recipient
entity” are allowable
Section _.621 C-32
97
COST PRINCIPLES
CHANGES
Travel Costs
Grantee must retain documentation
a) Participation of individual is
necessary to the federal award
b) Costs are reasonable and
consistent with entity’s established
travel policy
Section _.621 C-53(2)
98
COST PRINCIPLES
CHANGES
Travel
If no institutional travel policy,
GSA rates apply
- 48 CFR 31.205-46(a)
Section _.621 C-53(2)(C)
99
SINGLE AUDITS
Single Audit threshold is raised from
$500,000 in federal annual
expenditures to $750,000
Section _.701(a)
100
AUDIT FOLLOW-UP
Federal awarding agencies shall use
“cooperative audit resolution
mechanisms” to improve federal
program outcomes through better
audit resolution, follow-up and
corrective action
Section _.713(c)(5)
101
COOPERATIVE AUDIT RESOLUTION
Improve communication, foster
collaboration, promote trust, and
develop understanding between
auditor and auditee
Appendix I - Definitions
102
COOPERATIVE AUDIT RESOLUTION
This approach is based upon
“Federal agencies offering
appropriate amnesty for past
noncompliance when audits show
prompt corrective action”
Appendix I - Definitions
103
AGENCY DETERMINATION LETTERS
The federal agency or pass-through
entity may request additional
information from auditee as a way of
mitigating disallowed costs
Section _.714(a)
104
TIME REQUIREMENTS
The federal agency or pass-through
shall make the determination within
six months of the acceptance of the
audit report
Section _.714(d)
105
AUDIT FINDINGS
Revises definition of “major program” to
focus audits on material issues
The auditor shall report known questioned
costs greater than $25,000 for major
programs
If not a major program (auditor normally
will not find questioned costs) but if
auditor becomes aware of questioned
costs greater than $25,000 for non-major
programs – must report
Section _.714(a)
106
QUESTIONS?
107
Disclaimer
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, PLLC. You should not take any action
based upon any information in this presentation
without first consulting legal counsel familiar with
your particular circumstances.
108