By: Harold Arlen and Edgar HarburgHarold Arlen Edgar Harburg.
1 Agenda 1. Pre Site Visit Information Request 2. OFCO Monitoring 3. EDGAR Requirements 4. Contract...
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Transcript of 1 Agenda 1. Pre Site Visit Information Request 2. OFCO Monitoring 3. EDGAR Requirements 4. Contract...
1
Agenda
1. Pre Site Visit Information Request
2. OFCO Monitoring
3. EDGAR Requirements
4. Contract Administration
5. Regulatory vs. Non-regulatory Guidance
2
Richard Rasa (OIG)May 2, 2007
OIG FY 2008 Workplan will include Audits of the Perkins Program at Federal, State, and Local levels
3
James Evans (OFCO)May 1, 2007
Districts have inadequate internal controls Single audit process has weaknesses
5
OCFO Monitoring Objectives Conduct a Risk Analysis of Erroneous
Payments in Education Programs
Review the Adequacy of Internal Controls
6
What is the definition of Internal Controls? US Government Accountability Office (GAO)
definition…
An integral component of an organization’s management that provides reasonable assurance that the following objectives are being achieved: - effectiveness and efficiency of operations,- reliability of reporting, and- compliance with applicable laws and regulations
7
Summary of Last Year’s OCFO Findings Procurement and Disbursement Controls (120
Findings, 48%) Controls over Equipment (95 Findings, 38%) Audits (22 Findings, 9%) Drawdown and Disbursement of Title I Funds (12
Findings, 5%)
8
Procurement and Disbursement Controls
Inadequate controls over purchase orders Inadequate controls over processing and payment
of vendor invoices Inadequate controls over contracts with vendor
and service providers
9
Controls Over Equipment
Accurate equipment records not maintained on a current basis
Lack of adequate controls to account for location and custody of equipment
Inadequate process for conducting regular physical inventory of equipment
10
Audits Corrective action plans to address audit findings
in the A-133 single audit reports were either unavailable for review, inadequately prepared, or not timely
Management and internal control letters addressing A-133 and financial statement audit reports were unavailable for review
Inadequate guidance provided to LEAs on form and content of corrective action plans
11
Drawdown and Disbursement of Funds
SEA did not ensure timely drawdown and application of Federal funds to the grant year that resources were intended to support
Inadequate monitoring of LEAs application
12
OCFO FY-2007 Review Process Criteria for review
-Recent audit findings
-Findings from recent monitoring reports
-Program Office review schedule
-Consideration of other risk factors
OCFO review may be scheduled
-Concurrent with Program Office site visit
-Independently
14
State-administered programs
Part 76 applies Applicant applies to SEA Can be formula or discretionary, or combination,
but typically formula SEA approves application
15
State-administered programsSubpart B and Subpart C
Subpart B – “How a State Applies for a Grant” General state application State plan definition Multi-year state plans Required certifications Plans (including subgrant applications) as public documents Amendments to state plans
Subpart C – “How a Grant Is Made to a State” an must meet statutory and regulatory requirements Opportunity for hearing before plan disapproved Notification of grant award
16
State-administered programsSubpart D
“How to apply to the State for a Subgrant” – highlights: Application procedures General application requirements (GEPA) Notice requirement Joint application and projects Public availability
17
State-administered programsSubpart E
“How a Subgrant is Made to an Applicant” – highlights: State procedures for reviewing applications Disapproval (opportunity for hearing) SEA hearing procedures
18
State-administered programsSubpart F
“What Conditions Must Be Met by the State and Its Subgrantees” –highlights: Allowable costs Indirect cost rates Evaluation Construction Participation of Students Enrolled in Private Schools Other requirements
19
State-administered programsSubpart G—IMPORTANT– ED FOCUS!!
“What Are the Administrative Responsibilities of the State and Its Subgrantees” –highlights: Compliance with statutes, regulations, state plan,
and applications State or subgrantee directly administers or
supervises the admin of each project Fiscal control and fund accounting procedures
required
20
State-administered programsSubpart G— (cont’d)
When a state may begin to obligate funds “Substantially approvable” Good examples of timing in EDGAR (76.703)
When obligations are made When certain subgrantees may begin to obligate funds
“Substantially approvable” Carryover Reports Records Privacy
21
State-administered programsSubpart G— (cont’d)
Use of funds – more than one program may assist a single activity (with sufficient accounting system)
State must have procedures to ensure compliance****
Reviewing and approving apps, technical assistance, evaluating projects, “other administrative responsibilities” to ensure compliance
Subgrantee hearing opportunities (when required)
22
State-administered programsSubpart I
“What Procedures Does the Secretary Use to Get Compliance?” Cross reference to GEPA, including:
Recovery of funds Withholding Cease and desist Other proceedings
Judicial review Cooperation with audits
23
How to Carry Out Requirements? Programmatic requirements Fiscal/administrative requirements: rule for state-
administered programs: State and local agencies must use fiscal control and fund
accounting procedures that will ensure the proper disbursement of, and accounting for, federal funds
HOW??
Threshold systems
24
Threshold System Requirements for Recipients of Federal Grants
Financial Management Systems (internal controls, cash management and payment)
Procurement Systems Inventory Management Systems
Overarching concept: Internal Controls Requirements for systems:
Primarily EDGAR and A-87 ED may issue guidance or regulations on internal
controls – clarity needed! ED monitoring threshold systems – check EDGAR and
monitoring documents
25
Important Concept: Distinction between Subgrantee and Contractor
Subgrantees mandated by statute (typically direct grantees are prohibited from making subgrants – 75.708)
Can have an entity that is both in different contexts
A-133 outlines basic rules
26
Difference between Subgrantee (subrecipient) and Contractor (vendor)
Subgrantee (A-133): Determines who is eligible to participate in a federal
program; Has its performance measured against whether the
objectives of the federal program are met; Is responsible for programmatic decision making; Is responsible for complying with federal program
requirements; and Uses the federal funds to carry out a program as
compared to providing goods or services for a program.
27
Difference between Subgrantee (subrecipient) and Contractor (vendor)
Vendor (A-133): Provides the goods and services within normal business
operations; Provides similar goods or services to many different
purchasers; Operates in a competitive environment; Provides goods or services that are ancillary to the
operation of the federal program; and Is not subject to compliance requirements of the federal
program.
28
Difference between Subgrantee (subrecipient) and Contractor (vendor)
Why does this matter? Clean audit trail (make it easy for auditors!) VERY different responsibilities depending on
classification of entity Likely an increased focus as result of increased
contracting by SEAs and LEAs
30
Typically July 1st
Pre-award Grant Start Post-award Close-outPlanning
Period of Availability Begins IF
Application Approved or Substantially Approvable
Typically September
30th for State as a
Whole
Typically December 30th for
State as a Whole
Liquidate Funds & File FSRs
Time to Obligate
Funds (Period of Availability)
33
Obligations: DefinitionAcquisition of Property Date of binding
written commitment
Personal Services
by Employee
When services
are performed
Personal Services
by Contractor
Date of binding
written commitment
Travel When travel is taken
34
Obligations: Period of Availability
Every grant has a “period of availability” = period in which grantee can obligate funds Therefore, must be able to relate all costs to a
specific transaction that occurred during the period of availability
Substantial difference between discretionary and formula funds
35
Obligations: Period of Availability
Grantees and subgrantees may begin to obligate funds when: Statutory start date (typically July 1st)
AND Awarding agency approves application; or Awarding agency determines application is
“substantially approvable” Reimbursement subject to final approval
36
Obligations: Period of Availability Tydings Amendment
Allows extra year to obligate funds Does not apply to all grants
Under Tydings, funds are available for 24-27 months: 12-15 months under the grant award
(July 1, 2006 – September 30, 2007) Plus 12 months
(October 1, 2007 – September 30, 2008)
37
Obligations: Carryover Under Tydings,
unobligated funds can usually be “carried over” from first year Statute may impose
limitations on carryover
38
Obligations: Linking In order to have a valid “obligation” there must be:
A transaction giving rise to an obligation within the period of availability; and
A “linking” of the transaction with funds that were available during the period of availability
“Linking” a transaction to particular grant funds can occur after the period of availability ends Method of linking varies from state-to-state SEA may link transactions for LEA
39
Obligations: Linking
“Linking” example from Tydings grant: Transaction occurs on August 1, 2005 Available funds include:
2003-2004 Funds (became available 7/1/03) 2004-2005 Funds (became available 7/1/04) 2005-2006 Funds (became available 7/1/05)
40
Obligations: Linking vs. Allocation Linking
Accounting flexibility that applies to programs with multiple open grant years (e.g., Tydings)
Allocation Legal requirement that applies to all grants Basic Rule: can only charge in proportion to the value
received by the program
41
Linking vs. Allocation (cont.) Obligation = professional development
conference on August 1, 2005 Available grants:
Title I, Part A (FY 03-04, 04-05, 05-06) Title II, Part A (FY 03-04, 04-05, 05-06) Title V, Part A (FY 03-04, 04-05, 05-06)
42
Bottom Line: Why is This Important?
Must be able to document that all transactions relate to timely obligation
Date of transaction Payee Invoice number Purchase order number Amount of transaction Accounts debited and credited
45
Liquidations: Timeline Must liquidate all obligations within 90 days
after the end of the period of availability Example:
Period of availability: July 1 – September 30 Liquidation period ends: December 30
State may impose shorter deadline on LEAs ED may extend this deadline
But only to liquidate valid & timely obligations
46
Payments: Drawdown by State Drawdowns by states are governed by the
Cash Management Improvement Act (CMIA) Applies to all federal funds transferred to states
Goal of CMIA is to improve the transfer of federal funds between the federal government and the states
47
Payments: Drawdown by State If advance payment authorized, must
minimize payout time Subpart A
3-day rule Subpart B
“As close as administratively feasible”
48
Payments: Drawdown by State State Liability for Interest
Incurred if funds are not spent within 24 hours of drawdown
Accrues from the day funds are credited to state account until the day funds are paid out
Federal Liability for Interest Incurred if state must use own funds to pay valid,
authorized obligation Accrues from day state pays its own funds until the day
federal funds are credited to state account
49
Payments: Drawdown by Non-State Grantee & Subgrantee
EDGAR authorizes 3 methods for transferring funds from ED to a non-state grantee:
1. Advance
2. Reimbursement
3. Working Capital Advance
50
Payments: Drawdown by Non-State Grantee & Subgrantee Advance payment
Must be willing and able to maintain procedures to minimize the time elapsing between transfer and disbursement in accordance with CMIA guidelines
Must return interest earned on advances May keep up to $100/year for administrative expenses
51
Payments: Drawdown by Non-State Grantee & Subgrantee As a condition of
drawing down advance funds from GAPS, grantee must agree to disburse funds within 3 business days
52
Payments: Drawdown by Non-State Grantee & Subgrantee Grantees must
monitor subgrantee to ensure timely payments
53
Drawdown by Non-State Grantee & Subgrantee
Reimbursement Preferred method if
subgrantee does not satisfy requirements for advances
54
Drawdown by Non-State Grantee & Subgrantee If grantee does not satisfy the requirements for
advances but reimbursement is not feasible: Advance limited funds for initial period
State practice: 30 days State practice: advance for specific cost, e.g., payroll
After that, reimbursement
May not use if grantee simply unwilling to minimize time
55
Bottom Line: Why is This Important? OIG report criticizing
ED for insufficient monitoring of excessive drawdowns (a sign of potential cash management problems)
57
Contract Administration All contracts supported with federal funds must
contain certain required provisions: Remedies for breach, sanctions, penalties Termination for cause and convenience Compliance with federal statutes and executive orders Reporting requirements Patent rights Copyrights Access by federal agency, Comptroller General of US to
records of contractor Retention of records for 3 years after final payment
58
Contract Administration SEA/LEAs in state-admin
program: must ensure POs/contracts include clauses required by Fed stat or executive orders
Direct grant programs: must maintain a contract administration system that ensures contractors perform in accordance with the terms, conditions, and specifications of the contract
59
Contract Administration As a practical matter (RECENT FOCUS BY
ED!!!): Must have written contracts (purchase order ok) Contract should include clearly defined deliverables
Description of services to be performed or goods to be delivered
Description of dates when services will be performed or goods delivered
Description of locations where services will be performed or goods delivered
Description of number of students/teachers/etc. to be served (if applicable)
60
Contract Administration (cont.) As a practical matter (cont.)
Must have written invoice Description of services performed or goods delivered Description of dates services were performed or goods
delivered Description of location services were performed or goods
delivered Description of students/teachers/etc. served (if applicable
Invoice should be reviewed & approved before payment Segregation of duties Documented approvals
61
Contract Administration (cont.) As a practical matter (cont.)
Through performance-based monitoring, ED/SEAs increasingly likely to determine if contracting expenditure is “worthwhile”
Make sure to retain documents that demonstrate a contracted service was programmatically permissible, as well as necessary, reasonable, allocable, and legal (and other applicable requirements)
63
Retooling of Monitoring Documents
ED significantly revised program monitoring documents More rigorous More specific New attention to:
SEA monitoring of subrecipients Fund allocation requirements Procurement Equipment and inventory management
64
Subrecipient Monitoring
Driven by ED capacity issues Increased focus by ED – an “overarching
requirement” OIG auditing subrecipient monitoring
65
Subrecipient monitoring From Title I ED monitoring document:
An established cycle of monitoring; Monitoring policies and procedures; Data collection instruments (interview guides, document review
checklists); A sample of letters to local education agencies (LEAs),
checklists, forms, etc.; A process for identification of ‘high risk’ grantees; A process for follow-up/verification of implementation of
required corrective actions; and Monitoring reports, corrective actions from the LEAs visited as
part of the onsite review.
66
Subrecipient monitoring
Monitoring should be broad, both programmatic and fiscal
Cross-cutting monitoring teams most effective
Should be risk-based No specific guidelines, developed by ED,
but factors to consider
67
Subrecipient monitoring Risk-based – factors to examine:
Volume and experience with federal funds Audit Lapsed funds Financial health Performance measurements Assessments of internal controls Changes in the operating environment
Good resource: Guide to Opportunities for Improving Grant Accountability http://www.epa.gov/oig/dwg/reports/dwg-grants.pdf.
68
Enforcement tools GEPA, EDGAR, statutes have enforcement tools Remedies for Existing Violations (GEPA):
Withhold payments Cease and desist order Compliance Agreement “any other action” authorized by law
Regardless, ED can always seek to recover funds for misexpenditures
69
High-risk grantees (80.12)
State may designate LEA as “high-risk” under “awarding agency” authority
Remember the MIT is assessing risk. MIT has extensive experience with high-risk grantees
70
Special Conditions
If special conditions, must notify in writing:
Nature of the special conditions Reasons for imposing them Corrective actions that must be taken before removed
and the time allowed for corrective actions Method of requesting reconsideration
73
Hierarchy of Legal Authority Perkins Statute Perkins Regulations EDGAR Guidance in the Fed. Reg. Guidance on the Web State Plan Guide OVAE Emails OVAE Telephone Calls OVAE Monthly Calls
75
The 90 Day Letter34 CFR 81.33-
A State or LEA that has made an unallowable expenditure is not required to return the funds
if the violation was caused by erroneous guidance from ED.
76
The guidance must be provided in response to a specific request from the recipient to the Asst.
Secretary.
77
What are “Regulations”? Formally promulgated rules in the Federal
Register General Applicability Based on GEPA
78
“The Secretary is authorized to prescribe such rules and regulations as the Secretary determines necessary, or appropriate to administer and manage the functions of the Department.”
-20 U.S.C. 3474
GEPA
79
What if Regulation Conflicts with
Perkins?
ALJ may not invalidate regulations.
-34 CFR 81.5
But no such prohibition on guidelines
80
Evolution of Perkins Regs. 63 VEA Program/Fiscal 68 VEA Program/Fiscal 76 VEA Program 84 Perkins Program/Negotiated
Rulemaking 90 Perkins Program/Negotiated
Rulemaking 94 Regs. Repealed 98 Perkins III No Regs.
81
Congress did not require negotiated rulemaking in Perkins
IV, as in NCLB, IDEA, HEA, because Congress did not
envision regulations for Perkins
84
ED not authorized to approve or certify academic / technical
content standards or achievement standards
- Sec. 8(c)
86
Indicators of performance shall be established by the state with input from locals
-Sec. 113(b)(2)(E)
87
Role of Secretary limited to reaching agreement on % or
numbers of students who attain state adjusted levels of
performance
-Sec. 113(b)(3)(A)
88
The Secretary may issue regs. “only to extent necessary to
administer and ensure compliance with the specific
requirements of the Act.”
-Sec. 318
91
The OVAE Q & A issued in January, 2007 to the
October 6, 2006 Questions-
“This Document is advisory only”
92
Some states formally requested that ED issue regs on content,
achievement, performance standards.
93
“The Secretary is considering whether to issue regulations requiring states to agree to adjusted performance levels under the
Perkins Act that are the same as the State’s AMOs or targets for graduation rate under
ESEA.”
-January ’07 Justesen Memo to OMB
94
February 14, 2007 FR
OVAE invited comment on 06-07 CAR, included math, reading
assessments, graduation rates.
97
Failure to submit reports as prescribed constitutes a failure under Section 454 of GEPA to
comply substantially.
98
RESOURCES: 2 BOOKS The Tech Prep Guide to Perkins IV
CORD 1-800-231-3015 Ext. 328
Perkins Act of 2006: The Official Guide ACTE http://iweb.acteonline.org/Purchase/ProductDetai
l.aspx?Product_code=BPERKINS06
100
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