NACTEI – New Mexico 2009

Ted Davis –

• Arizona Department of Education

• Career & Technical Education Section

• Phoenix, AZ

• 602-542-5349

• ted.davis@azed.gov

• Ted’s doing the best that he can…

• The greater the “Risk” the more you need to check out any answers discussed and “document” the how’s and why’s of the option you choose…

Current Audit Issues

Grant Period

Maintenance of Effort (MOE)

Supplanting

Fiscal Monitoring – Risk-Based Monitoring

ARRA, Title XIV – Stabilization Funds

Written Guidance

Most useful Where to find it

Use of Perkins Funds

Questions & Attempted Answers

• OMB Circular A-133

Look at the matrix & cross-cutting sections of the compliance requirements

Look at the Vocational Compliance Supplement

• 4-84.048

• Basically two specific requirement questions –

Did the recipient follow its approved application?

Did the recipient “Supplant”?

http://www.whitehouse.gov/omb/circulars/a133/a133.html

OMB Circular A-133

Criticism of the A-133 Process

• More aggressive audits needed

• Expansion of audits under the “risk” provisions of A-133 (§ ___ . 520 - .525.)

• Encouraged to focus on more than just Type ‘A’ programs

States - $50 Mill

Locals - 50% of federal awards expended

• In Arizona more CTE audit findings are being seen

OMB Circular A-133

2009 OIG Audit Activities

March 2, 2009

• If everyone is operating on a “reimbursement” basis how can there still be cash management issues?

At the local level we see districts and colleges requesting funds to buy equipment before they are actually ready to make the actual purchase –

Most vendors that work with governmental entities give them 60-90 days to pay. Order the items, get a projected delivery date, then order the $$

Staff turnover – Individuals that don’t understand the cash management rules

Intentional excessive draws??

(34 CFR 74.22 & 80.21, 31 CFR 205, A-133 Compliance Requirement C.)

Cash Management

• The Audit Finding That Won’t Die & I Don’t Get It?

Inadequate documentation

A system to safeguard equipment that costs less than $5,000

….34 CFR §80.20(b)(3)… “safeguard all”

Inaccurate property/inventory listings –

You have to be able to physically find equipment you have placed. Conduct your own inventory periodically…

Remove equipment from the list that has been disposed of, transferred, sold, lost, etc.

If necessary, keep your own ‘handy dandy’ inventory & stewardship list – the “3 hole binder” backup approach…

In many cases your state and LEA inventory laws are more restrictive than the 34 CFR § 80.32 equipment guidelines. If so, you need to comply with your local or

state guidelines

Property Management

Procurement

• Follow your state’s procurement rules –

34CFR §80.36 leaves the procurement rules up to each state’s laws

• Leave procurement up to your agency’s experts – However, you still need a working awareness of your state’s procurement requirements

Go to your own state’s Auditor General or Inspector General website and look for the laws relative to your type of agency and the audit guide a state auditor would use to audit your procurement rules compliance… “You can see the test before you potentially have to take it” …

Anything you purchase must align with your approved application, plan or grant

Use the “reasonable person approach”

Use the “Would it be OK to see on the evening news?” approach

Document, document, document…. Keep copies of the essential documents yourself.

Time & Effort

• (OMB Circular A-87, Attachment B, Item .8.h. (secondary) Or OMB Circular A-21, J.8. (Higher Ed.)

• Almost Everyone Has A System – So Why Findings?

Budgeted vs. actual

A lack of semi-annual certifications for 100% grant employees

Failure (colleges in AZ) that fail to have T&E reports approved by a manager or supervisor

Position descriptions that don’t even mention CTE or Perkins …

EDGAR 34 CFR § 34 CFR 76.707 & 76.708.

• Perkins is not an “entitlement” grant – You cannot carry over unexpended funds at the local level – SO WHAT?

• A grant recipient cannot obligate Perkins funds prior to their grant being “approved” or the state receives a “substantially approvable” application (as determined by the state) …

• While the fiscal year starts 7/01/XX you can’t obligate your new dollars until your application is approved or at least substantially approved.

If your application is not received in a substantially approvable form until (let’s say) July 15th, you cannot use any of your new Perkins funds to cover the cost for anything for the period 7/01/XX to 7/14/XX.

• In the absence of new guidance from the USDOE the Perkins MOE requirements have not changed.

• The MOE guidance in Title XIV of the American Recovery & Restoration Act (ARRA) focuses on local MOE and ESEA and IDEA programs – Not Perkins.

• Perkins MOE is still measured at the state level

Aggregate MOE

MOE relative to state administration expenditures

Plus a dollar-for-dollar match requirement on your state administration expenditures

States may request a waiver. The maximum waiver amount is 5% and you must apply for each year separately. Historically waivers are very rare.

• Perkins is a “supplement” not supplant program.

• You cannot request a waiver to the non-supplanting provisions of Perkins.

• The only successful argument I am aware of relative to “beating” a supplanting finding is based on a 2003 letter from Eugene Hickok wherein they dismissed a State of Oklahoma supplanting finding based on the fact that in –

That the position would have been eliminated “in the absence of Federal funds”.

You can find the letter at –

http://www.ed.gov/policy/elsec/guid/secletter/030306.html

http://www.ed.gov/policy/elsec/guid/secletter/030306.html

• With as many states and school districts potentially in the “RED” relative to money and their annual budgets, auditors will be looking for evidence of supplanting.

• A significant amount of documentation is required and it has to reflect decisions that are not arrived at easily – public Education Board meeting minutes is one example that documents that in the absence of the Federal funds the education activity, program, staff position would disappear….

• Also look at –

http://www.ed.gov/programs/titleiparta/fiscalguid.pdf

• Everyone says they monitor – The problem is a lack of “fiscal” monitoring.

• Have you heard this one? – “My people are not auditors!”

Not that hard –most states have “monitoring guides”.

Build fiscal questions into them–

• Property Management -

Ask if they have an inventory system for items $5,000 or per their state threshold

Ask about “stewardship” systems – 34 CFR §80.20(b)(3)… “safeguard all”

Ask them to sample their own equipment purchases, to review the documentation and to physically locate randomly selected items

• T&E –

Ask about individuals that work on more than one program

Ask if they do biannual certifications for individuals who only work 100% on CTE programs

Ask if each T&E report is approved by a supervisor

Ask if they can be tracked back to the entity’s general ledger information

Ask if the duties being performed align with the employee’s job description

• Their Approved Grant Application - Ask –

Do their written narrative reports align with their approved application’s goals and objectives?

Do the expenditures, in general, “align and support their approved application?” – If not why?

Fiscal Completion Report

Compare to the their approved application, in particular approved equipment costs

Compare completion report expenditures to their procurement records and general ledger

For Example …

4. (Where the employee works on multiple activities or cost objectives….services). Does the district have a formal time and effort reporting system in place? Yes No

If yes,

Does the district time and effort reporting system meet the following standards: (For any “no” response , provide a corrective action plan to address deficiency.)

a. Reflect an after-the-fact distribution of the actual activity of each employee ? Yes No

b. Account for the total activity for which the employee is compensated?

Yes No

c. Are the reports prepared…

To See Arizona’s complete Monitoring Document go to –

www.ade.az.gov/cte/PerkinsAcct/BGMonitoringDocumentDESK.doc

• Other Recommendations –

TRAIN, TRAIN, TRAIN !!!

Train your educational specialists

Train your own fiscal staff

Take advantage of regional conferences and meetings and train your grant recipients…

Share your monitoring document with as many of your recipients as possible. The questions and documentation you ask for should not be a surprise

Risk-Based Monitoring – on the USDOE’s “radar”

Arizona uses a weighting system, but the final choice is up to the people that do the actual visits

Factors include –

• The amount of $$ received

• Specialist input from programmatic visits

• Desk audit guides returned by the LEA

• State or A-133 audit findings – questioned costs are weighted more than other types of findings

• LEA has only one or two approved programs

• Last date monitored – over four years is a concern

• Funding hold status – reason for hold

• Compliance with approved grant application

• Fiscal completion report

• Cash management issues

• High staff turnover

• Performance measures outcomes

While there is a score generated, the final ranking plus the determination how many sites will be monitored and in what order is determined by our federal program staff

The American Recovery & Reinvestment Act - (ARRA)

Title VIII - $0 For CTE – $$$ primarily for Title I & IDEA

Title XIV – The Stabilization Fund

CTE - An “After Thought” it would appear

Use of $$$ Determined at the Local Educational Level (LEA)

TITLE XIV - SEC. 14003. USES OF FUNDS BY LOCAL EDUCATIONAL AGENCIES.

(a) In General. _ A local educational agency that receives funds under this title may use the funds for any activity authorized by the Elementary and Secondary Education Act of 1965 (20 U.S.C. 6301 et seq.) ("SEA''), the Individuals with Disabilities Education Act (20 U.S.C. 1400 et seq.) ("IDEA''), the Adult Education and Family Literacy Act (20 U.S.C. 9201 et seq.), or the Carl D. Perkins Career and Technical Education Act of 2006 (20U.S.C. 2301 et seq.) ("the Perkins Act'') or for modernization, renovation, or repair of public school facilities, including modernization, renovation, and repairs that are consistent with a recognized green building rating system.

• How you view the “Bailout” Bill depends primarily on whether your state is

In the “black” or in the “red”?

Arizona’s percent of revenue lost is among the worst in the nation - the last data I saw put my state’s projected revenue shortfall at 17.8¹ %; second only to California...

If you are Nebraska you will still receive Title XIV Stabilization funds regardless of the fact that you are in the black.

¹ January 15, 2008, Ctr. On Budget & Policy Priorities, “29 States Faced Total Budget Shortfall of at Least $48 Billion in 2009”

The funds come with new reporting requirements and funding that will end in 2011… But it beats layoffs and some of the issues recipients’ in states who are in the red are dealing with are…

These funds must still be spent under the provisions of the Perkins Act

The decision as to how these monies are spent will be made at the local level and there is no guarantee that a recipient would choose to spend any of the money on CTE as I currently read the provisions of Title XIV

Do we have anyone here from an “in the black” state? How is your state proceeding?

TITLE XIV - SEC. 14002. STATE USES OF FUNDS.

(a) Education Fund.

(1) In general. For each fiscal year, the Governor shall use 81.8 percent of the State's allocation … for the support of elementary, secondary, and postsecondary education…

(2) Restoring state support for education.

(A) In general. The Governor shall first use the funds described in paragraph (1)—

(i) to provide the amount of funds… that is needed—

(I) to restore, in each of fiscal years 2009, 2010, and 2011, the level of State support provided ….to the greater of the fiscal year 2008 or fiscal year 2009 level; and… RESTORE

The State must still “maintain effort” (MOE) Remember, Perkins MOE is measured at the “state

level”. The language regarding MOE at the 2006 level implying that a state may request to have their MOE waived by the Secretary is really talking about MOE at the local level – Title I & IDEA… not Perkins

You still cannot “supplant”

You will need to push for CTE’s share of the Stabilization funds

Reporting requirements – they must tell –

How many teachers were saved…

Etc…

Push for equity relative to CTE staffs

Use charm, guilt … whatever works for you in your districts

Spending $$$$$

Most Used

• Your Approved Plan

• 2006 Perkins – Section 135, Local Uses of Funds

• 2006 Perkins – Section 203, Tech Prep Programs

• Equipment – EDGAR 34 CFR § 80.3, 80.20 & 80.32

• Assigning Cost To The Correct Fiscal year – EDGAR

34 CFR § 76.707

• K-12 – OMB Circular A-87, Attachment B (Allowable Costs)

• Colleges – OMB Circular A-21, Section J (Allowable Costs)

• Request For Guidance – EDGAR 34 CFR § 81.33

• Single Audit – OMB Circular A133; the Cross-Cutting” matrix, the actual Vocational Education Compliance Supplement

• Request For Guidance – EDGAR 34 CFR § 81.33

• State statutes (yours) – education, procurement, etc.

• State educational financial reporting guidelines (yours)

• Any specific guidance from your state agency responsible for Perkins

• State audit guidelines. Ideally, you want a copy of what your auditors will use to review your fiscal practices if you are audited

• Etc.

Most Used (Cont.)

• Any time you have to look up a law or regulation, make a copy and keep the cite, some history, etc. in a paper or digital folder so it’s easier to find the next time around

• Transfer notes from you prior year’s state education law documents every time you receive the newest edition – the same would be true if a new edition of EDGAR were to come out, audit guidance, etc.

• The three-hole-binder approach or a digital folder on your desktop will save you time later when you attempt to hunt down guidance you don’t use every day

YOURS

• Any time you give someone fiscal advice, make a significant fiscal decision, etc…. document, document, document. Save your backup.

• It makes it easier to consistently respond to a similar question in the future…

• If any answer can cost you your job, document, document, document…

• Federal Program Offices – http://www.ed.gov

• Perkins Act – http://www.ade.az.gov/cte/downloads/PerkinsIV081206.pdf

• OMB Circulars – http://www.whitehouse.gov/omb/circulars

• EDGAR – http://www.ed.gov/policy/fund/reg/edgarReg/edgar.html

• Your state’s educational statutes

• Your state’s Auditor or Inspector Generals website(s)

• OIG Website – www.ed.gov (Click on “Offices”, left-hand column, then select “offices”, then “offices” again, then select the “Office of Inspector General “ and “home-page”.)

Make sure you have the most current document…

General Test of Allowability

• Fits with your application

• Allowable per the appropriate Circular

• Reasonable

• Allocable

• Consistently Treated

• Consistent with your organization’s policies

• Incurred in accordance with GAAP

• Not charged elsewhere

• Adequately Documented..

Eligible Recipient

Secondary Postsecondary.

Carl D. Perkins Section 135 – Local Uses of Funds & 203 Tech Prep

Your Approved Local Plan

OMB Circular A-87; Selected Items of Cost

OMB Circular A-21; Selected Items of Cost

State Statutes -

• Procurement

• Capital Assets

• Gifts

• Travel

• Pre-paid costs

Carl D. Perkins Section 135 – Local Uses of Funds & 203 Tech Prep

Your Approved Local Plan

Sole State Agency

Carl D Perkins Act

• Section 112(a)(3) – 5% Administration

• Section 124 – State Leadership Activities

State Approved Plan

Under OMB Circular A87 – However, depending on the recipient you are working with you will use both –

• OMB Circular A87 (Secondary)

• OMB Circular A21 (Postsecondary)

State Statutes - • Procurement• Capital Assets• Gifts• Travel• Pre-paid costs• Etc.

• If you attended my presentation last year in Idaho – some of these slide will look familiar…

• Need to be repeated – especially for anyone new to Perkins…

• Take a nap or be thinking of questions you wish to ask in a few minutes…

Zzz

• Yes

• Don’t forget –

• To include the costs in your application for approval

• “Time & Effort” reporting requirements (Item 8 in both the OMB Circulars A87 & A21)

• The individual has to be working on Perkins-related activities

The definition of “equipment” in EDGAR (34 CFR 80.1) aside, anything that your state defines as equipment (can be less than $5,000) needs to take into consideration –

• “General purpose equipment” is not allowed – A87 & A21 Selected Items of Cost

• Definition – A87.15.a.(4) & A21 Section J.16.b(1)

• Restriction – A87.15.b.(1) & A21 Section J.16.b(1)

“Examples of general purpose equipment include office equipment and furnishings, … reproduction and printing equipment,… automatic data processing equipment.”

• Get it written into your approved application

• Items like your CTE computer lab

• Specialized workstations

• The cost of connecting equipment

• Etc.

• Avoid paying for stuff your district typically supplies to all your district’s educational programs – desks, chairs, PCs

• USE NON-PERKINS FUNDING WHERE POSSIBLE

• Trade Perkins-funded CTE costs for those CTE costs funded with non-federal $$$

• Pursue donated equipment where possible

• “NO”

• Unless it is related to –

• Approved travel (subject to your state’s per diem guidelines)

• Included in your approved registration

• Not considered entertainment

• Included as part of an approved conference or meeting

• A consumable training supply (culinary arts)

• Alcohol never allowed

Read Goods or services for personal use – A87 Attch B.20 & A21 Section J. 19.

• Travel is allowable when it supports your approved grant or plan

• Meals, lodging, all the usual stuff is allowable, when approved

• Should be reasonable

• DOES NOT INCLUDE ENTERTAINMENT COST

What about those conferences I go to where entertainment is included in the registration fee?

There are two lines of thought – I participate as long as the cost can’t be broken out from the registration fee with the end result being a lower registration fee

Ultra conservative managers will tell their staff they can’t participate in the activity even if it appears to be free… Individual state’s call

A87 Attch. B.43 or A21 Section J.48

A-87 Attch. B.27 (Comparable language in A-21 Section J.28)

“Meetings and conferences. Costs of meetings and conferences, the primary purpose of which is the dissemination of technical information, are allowable. This includes costs of meals, transportation, rental facilities, speakers fees, and other items incidental to such meetings or conferences. But see Attachment B, section 14, Entertainment costs”.

• Must be reasonable

• Must be able to stand the, “Would you like to see this on the six o’clock news?” test

• Does NOT mean your Monday morning CTE teachers meeting, with coffee and donuts provided courtesy of the federal grant

• Etc

Prepaid Fees – Early Registration

Are they a professional service fee or part of your travel?

• Prepaid registration fees can lead to accounting headaches related to the issue of “when is a cost incurred”

• May need to transfer the expense from one fiscal year to the next if the fee is paid prior to the fiscal year in which the activity will occur

Little Guidance – the Feds typically refer you back to 34 CFR §403.71(c) – The last regulator guidance for Perkins, under Perkins II

• Allowed – Instructional related costs (very narrow)

• Disallowed – All the fun stuff…

(i) Lodging, feeding, conveying, or furnishing transportation to conventions or other forms of social assemblage;

(ii) Purchase of supplies, jackets, and other effects for students' personal ownership;

(iii) Cost of non-instructional activities such as athletic, social, or recreational events;

(iv) Printing and disseminating non-instructional newsletters;

(v) Purchase of awards for recognition of students, advisors, and other individuals; or

(vi) Payment of membership dues;

(d) Leadership and instructional programs in technology education; and

(e) Data collection.

34 CFR §403.71(c)

(3) The support of vocational student organizations may not include—

My guess, they mean, non-instructional, out of the classroom type activities that don’t meet the conditions of 34 CFR § 403.71(c)(2)(iv) & – “all students…”

• Memberships for the state or district are OK – but not individuals

• Should be a “reasonable fit” for your grant

• If a significant cost, it is recommended that you utilize your procurement system procedures

• Significant cost

• Sole source provider (speakers, intellectual property, copyrighted, etc.)

• Must be reasonably related to Perkins activities

• Awards or Gifts -Typically Not Allowed

• However you can purchase nice frames through your approved state or local office supply contract, print out a nice certificate on your color laser printer and hand the result to folks..

• Handout donated items from your state’s Chamber of Commerce, local industry groups, etc

• Alcohol

• Entertainment expense

• Awards (gifts)

• Promotional items (freebies)

• Promotional advertising

• You can always ask the federal program office for an exception….

• I have never been successful – Typically you need to figure out another way to get what you want if it’s that important

• Use State/Local CTE funds

• If your first thought is “you can’t use state or local funds for that!” - THEN WHY DO YOU EXPECT THE FEDS TO PAY FOR IT?

• Seek donations from :

• Professional organizations

• Fraternal organizations

• Business and Industry (can include new or used equipment)

• Work with your local and state professional CTE organizations –

• ACTE/Az – Arizona’s ACTE organization

• ACOVA – Arizona Council of Vocational Administrators

Co-Sponsorship of Activities

• Let the other group pick up the cost of those things you can’t –

• Give-Away’s (need to fit the definition for “nominal value” under your state’s law)

• Typically more flexible procurement restrictions (however “don’t be stupid”.. The “Would you like to see it on the six-o’clock news?” rule still applies)

Conference Registration Fees

• Typically treated differently than federal funds

• Have lot more flexibility

• You can build in the cost of “stuff” –

• Give-Away’s (nominal value)

• Awards

• Activities that could be classified as entertainment – that sight-seeing bus tour of Atlanta, Boise, where ever…

• Warning – If your conference receipts exceed your conference costs you basically have “program income”. A “gray area” for most states

Questions?