Presented by Michael Brustein, Esq.

www.bruman.commbrustein@bruman.com

NACTEI PRE-CONFERENCEPHOENIX, AZMAY 6, 2013

FLYING UNDER THE RADAR:

MEASURING COMPLIANCE WITH

FEDERAL RULES

1. Update on Perkins Funding2. Perkins Reauthorization Status3. WIA Reauthorization Status4. Navigating the Legal Authorities5. New OCFO Guidance on Time and Effort6. Proposed Super Circular

AGENDA

1. Perkins Q & A2. OCFO Guidance3. Perkins Statute4. Federal Education Audit Resolution - Key

Events Timeline

APPENDICES

4

FY 13 (7/1/12 – 6/30/13)$1,123,030,274

FY 14 (7/1/13 – 6/30/14)$1,066,878,760

FY 15 (7/1/14 – 6/30/15) $?

(1) CTE FUNDING

5

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%

SEQUESTRATION

6

No State to receive less than base amount received in 1998

Payments to all states shall be ratably reduced

PERKINS HOLD HARMLESS – SECTION 111(a)(5)

7

Depending on population growth since 1998, some states witnessing disproportionate reductions

OVAE INTERPRETATION

8

OVAE estimates do not reflect bifurcation of Perkins findings

25% - 7/1/1375% 10/1/13

9

Because ED deferred March 1, 2013 cut 5.2% deducted from 7/1/13 25% amount

10

There will be a second cut on October 1, 2013, because 75% award is based on next year’s appropriation

11

What will amount be of second cut?Not uniformIn range of 8%

12

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 FlatFocus on Competitive Grants (RTT) and Pre-K

OBAMA 2014 BUDGET

13

(2) PERKINS V REAUTHORIZATION

Perkins IV authorized from 7/1/06 through June 30, 2012

Congress will continue to fund Perkins until reauthorized (GEPA)

14

WILL PERKINS BE REAUTHORIZED IN 2013?

1. ESEA2. IDEA3. AEFLA4. WIA

15

OBAMA ADMINISTRATION ISSUED “BLUEPRINT”

Alignment Allow states to identify in demand occupations in high growth industry sectors

16

Collaboration Consortia funding to ensure collaboration, with private sector match

17

Accountability Move from formula funding to competitive funding

Common definition

Incentives for high performance

18

Innovation A competitive innovation and transformation fund

19

NASDTEC Base funding on POS

20

(3) STATUS OF WIA REAUTHORIZATION

21

113TH CONGRESS WIA PROPOSAL

Supporting Knowledge and Investing in Lifelong Skills (SKILLS) Act (H.R. 803)

Sponsor: Representative Virginia Foxx (R-NC)

Introduced February 25, 2013House 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

22

CONSOLIDATION OF PROGRAMS

Proposed elimination of “duplicative” and “ineffective” workforce programs

35 programs would be consolidatedProvides authority to Governors to consolidate additional workforce programs

Consolidated programs would be part of a single funding stream called the Workforce Investment Fund (WIF)

23

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 businessesEliminates the requirement that unions be represented on WIBs 

24

COMMUNITY COLLEGES ROLE

State agency offi cials 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

25

(4) NAVIGATING THE LEGAL AUTHORITIES FOR THE ALLOWABLE USES OF PERKINS FUNDS

1.Perkins Act2.EDGAR3.OMB Circulars

26

PERKINS ACT

1. Serve only CTE students2. Meet the Local Plan requirements

on Section 134 (Budgets)3. Satisfy the Section 135

requirements on uses of funds4. Accountability – Section 1135. Local Improvement Plans –

Section 123

27

SECTION 135

a) Improveb)Mandatory usesc) Permissive usesd)Administrative costs

28

EDGAR

Part 76 – State Administrative Rules

Part 80 – General Administrative Rules

29

OMB CIRCULARS

A-87 / A-21 Cost PrinciplesA-133 Audit Principles

30

EDGAR PART 80

1. Standards for Financial Management

2. Payments3. Allowable Costs4. Period of Availability of Funds5. Program Income6. Non Federal Audit

31

EDGAR PART 80 (CONT.)

7. Changes8. Equipment9. Supplies10.Procurement11.Monitoring12.Retention of Records

32

A-87 / 21 COST PRINCIPLES

In developing your Perkins Budget, follow this roadmap:1) Is the item allowable under

a) Perkinsb) State Planc) State / Local Policiesd) A-87 Appendix B (43 items)

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2) Is the item necessary?

34

3)Is the item reasonable?

35

4) Is the cost allocable to Perkins?

36

5) Is the cost adequately documented?

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/time-and-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

periods42

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

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 SINGLE COST OBJECTIVE???

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 samplingCase countsOther 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 GuidelinesTo 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

59

(6) PROPOSED SUPER CIRCULAR

WHY “SUPERCIRCULAR”???

1. Greater simplicity2. Greater consistency3. 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. Equipment Management2. MOE/Ear-Marking3. Procurement4. 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 – 2/1/13Close of comment period 06/02/13Analysis of public commentFinal regulation (2 CFR) – not likely before 1/1/14

EDGAR revisions – within one year of final regulation ?

Effective date of 7/1/14 is doubtful66

MIGHT EDGAR BE INCONSISTENT WITH SUPERCIRCULAR?

Yes, but federal agencies applying more restrictive requirements need OMB approval

67Section _.108

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

69Section _.106

SO WHAT IS NEW?

70

FEDERAL AGENCIES MUST EVALUATE RISKS TO THE PROGRAM POSED BY EACH

APPLICANTFOCUS NOW ON RISK!

a) Financial stabilityb) Management systemc) History of performanced) Generally available informatione) Single auditsf) Capacity to implement programs

71Section _.205

FOLLOWING RISK ANALYSIS, AGENCIES MAY IMPOSE CONDITIONS

ON GRANTEE

72Section _.205

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

73Section _.404

PASS-THROUGH AGENCY MAY IMPOSE “SUPPLEMENTAL

REQUIREMENTS”

74Section _.501(c)(4)

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

75Section _.501(c)(5)

MONITORING TOOLS OF PASS-THROUGH

a)On-site reviewsb)Provide training and technical

assistancec) Arrange for “Agreed Upon

Procedures”

76Section _.501(c)(5)

RISK FACTORS FOR PASS-THROUGH MONITORING

a)Results of previous auditsb)New subrecipientsc) New personnel or

substantially changed systemd)Extent of federal monitoring

77Section _.501(c)(6)

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 $500c)Bank requires minimum

balance

78Section _.502(e)(3)(k)

INVENTORY MANAGEMENT

Equipment definition samea)Acquisition cost of $5,000b)Useful life greater than one

year

79Section _.503(d)

INVENTORY MANAGEMENT

Use/Management/DispositionSame as EDGAR 80.32

80Section _.503(d)

“COSTS OF COMPUTING DEVICES” = “SUPPLIES”

But When no longer needed for any other

federally sponsored project, recipient maya) Retain themb) Sell them

But compensate federal government if per unit value exceeds $5000

But Conflicts with C-31(6) total aggregate

value of $5000 (unused)81Section _.503(e) and Section

_ .620

COST SHIFTING

Grantee cannot shift cost from one award to another to overcome shortfall, unless costs are allowable under both awards

82Section _.607(c)

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

83Section _.607(d)

COST ALLOCATION – COST SHARING

If proportion cannot be easily determined then allocate on any reasonable documented basis

84Section _.607(d)

SET-ASIDES

If program statute contains reserves or limitations, amount not used cannot be charged to other federal awards

85Section _.611

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, andb) Individuals can be specifically

identified, andc) Costs are explicitly set out in

budget, and d) Costs not recovered as indirect

86Section _.615(d)

INDIRECT COSTS

A federally approved negotiated rate shall be accepted by all federal agencies

87Section _.616(c)(1)

INDIRECT COSTS

Pass-through entities must abide by the federally recognized indirect cost rate negotiated between the federal agency and subrecipient

(restricted vs. nonrestricted)

88Section _.501(c)(1)(D)

INDIRECT COSTS

But if no such rate exists, the pass-through 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.) 89Section _.616(e)

TIME AND EFFORT MANAGEMENT

Eliminate reference to PARsNow “Certified Reports”Reports may be electronicSemi-Annual for single cost objective - same

90Section _.621 C-10(9)

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

91Section _.621 C-10(9)

TIME AND EFFORT MANAGEMENT

Certified Reports on 2 or more cost objectives certified by employee or individual responsible for verification

92Section _.621 C-10(9)

TIME AND EFFORT MANAGEMENT

No additional support other than certification is necessary

93Section _.621 C-10(9)

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

94Section _.621 C-10(9)(F)

TIME AND EFFORT MANAGEMENT

Awarding agencies may approve “blended funding” where multiple programs involved, and “performance-oriented metrics” are used

95Section _.621 C-10(9)(F)

COST PRINCIPLES CHANGES

Costs for services of counsel (in-house 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. 96Section _.621 C-

14(2)

COST PRINCIPLES CHANGES

Cost of MeetingsCosts from meetings and conferences “beyond the recipient entity” are allowable

97Section _.621 C-32

COST PRINCIPLES CHANGES

Travel CostsGrantee 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 98Section _.621 C-

53(2)

COST PRINCIPLES CHANGES

TravelIf no institutional travel policy, GSA rates apply

- 48 CFR 31.205-46(a)

99Section _.621 C-53(2)(C)

SINGLE AUDITS

Single Audit threshold is raised from $500,000 in federal annual expenditures to $750,000

100Section _.701(a)

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

101Section _.713(c)(5)

COOPERATIVE AUDIT RESOLUTION

Improve communication, foster collaboration, promote trust, and develop understanding between auditor and auditee

102Appendix I - Definitions

COOPERATIVE AUDIT RESOLUTION

This approach is based upon “Federal agencies offering appropriate amnesty for past noncompliance when audits show prompt corrective action”

103Appendix I - Definitions

AGENCY DETERMINATION LETTERS

The federal agency or pass-through entity may request additional information from auditee as a way of mitigating disallowed costs

104Section _.714(a)

TIME REQUIREMENTS

The federal agency or pass-through shall make the determination within six months of the acceptance of the audit report

105Section _.714(d)

AUDIT FINDINGS

Revises definition of “major program” to focus audits on material issuesThe 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

106Section _.714(a)

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