Michael Brustein, Esq. Tiffany R. Winters, Esq. mbrustein@bruman twinters@bruman

1. AEFFA Conference October 2, 2012 Nashville, TN Michael Brustein, Esq.Tiffany R. Winters, Esq.mbrustein@bruman.comtwinters@bruman.com Brustein & Manasevit, PLLCwww.bruman.com

2. The Effect of the Potential New OMB “Super Circulars” on Federal Education Programs

3. Obama Executive Order 13563 “Regulatory Review”

4. Advanced Notice of Proposed Guidance • February 28, 2012 • OMB announced reform effort to • Strengthen oversight • Align existing administrative requirements • Better address ongoing and emerging risks to program outcomes and integrity • Goals include: • Eliminate unnecessary and duplicative requirements • Standardize information collection • Adopt risk-based model for single audits • Provide new administrative approaches for monitoring allocation of Federal funds.

5. OMB AdvanceNotice of Proposed Rulemaking • Comments Due Past Spring • Notice of Proposed Rulemaking • OMB said it would be released the end of August (clearly no).. So when?? • Then Another Notice and Comment Period • Final Rulemaking??? - TBD

6. Council on Financial Assistance Reform (COFAR) • 10 members from largest grant making agencies: HHS, AG, ED, Energy, HS, HUD, DOL, DOT

7. Expect Revisions to: • Cost Principles • A-21 • A-87 • A-122 • Administrative Principles • A-110 • A-102 • Federal Agency Audit Resolution • A-50 • Single Audit • A-133

8. Super Circular • Increase consistency • Decrease complexity But allows for disparate treatment depending on type of entity

9. Section A. Reforms to Audit RequirementsA-133 and A-50 • Concentrating audit resolution and oversight resources on higher dollar, higher risk rewards.

10. Single Audit Threshold Changes • Under $1 million in total federal expenditures: • No single audit • Augmented pass-through role • Between $1 million and $3 million • More “focused” single audit • Over $3 million • Full single audit

11. “Focused Single Audit” ($1 to $3 Million) • Single auditors to review • 2 Compliance Requirements • Allowable/Unallowable • Federal agency determines – but priority on risk of improper payments, or fraud, waste, abuse (look to Compliance Supplement)

12. “Full Single Audit” Over $3 Million“Universal Compliance Requirements” • Allowable Costs • Eligibility • Reporting • Subrecipient Monitoring • Period of Availability of Federal Funds • Procurement Practices Comply with Suspension/Debarment

13. Will the shifting of Audit Thresholds reduce burden on SEAs? Or • Increase burden on SEA for monitoring and Limited Scope Audits

14. Can SEA impose additional compliance requirements??

15. Streamlining the universal compliance requirements in the Circular A-133 Compliance Supplement • Emphasizing elements that address improper payments, waste, fraud, abuse • Larger sample sizes or lower levels of materiality • Streamlining other elements • Other compliance requirements would either be optional or have smaller sample sizes and higher levels of materiality. • Federal agencies could create their own program specific requirements through compliance supplement process. • ???

16. Strengthening the guidance on audit follow-up for Federal awarding agencies • Requiring agencies to designate a senior accountable agency official to oversee the audit resolution process • Require agencies to implement audit-risk metrics • Encourages CAROI • Encourages pro-active approach to resolving weaknesses and deficiencies

17. OMB proposes that single audits be digitized into a searchable database to support analysis of audit results by pass-through entities

18. Reducing Burden on Pass-Through Agencies (SEA) • Federal Agencies to better coordinate review of subrecipient internal controls when 2 or more federal agencies funding • If entity receives majority of Fed $ directly, not from pass-through, then Federal Agency to conduct follow-up on internal controls

19. OMB wants pass-through to focus on programmatic requirements of subawards

20. Section B. Reforms to Cost PrinciplesA- 21, A-87 and A-122 • Consolidation into single document!!

21. Indirect Cost • OMB proposing a mandatory flat indirect cost rate discounted from recipient’s already negotiated rate • Reduce burden on time associated with indirect cost calculation and negotiation – reduce overall indirect costs, more $ for program

22. Indirect Cost • Discounted Rates 4 years with minimal documentation, or raised through negotiation with full documentation

23. Time and Effort • OMB seeking alternative mechanisms to PARs • Grantee and OIG communities to submit alternative mechanisms • New Guidance to CCSSO from OCFO!!!

24. Charging Certain Computing Devices as Allowable Direct Cost Supplies • Explicitly include the cost of computing divisions not otherwise subject to inventory controls (i.e. equipment threshold) as allowable direct cost supplies. • Documented in separate line item • Not required to conduct more stringent inventory controls in place for equipment!

25. Equipment v. SuppliesWould new guidance actually change equipment thresholds set by auditors?

26. Section C. Reforms to Administrative RequirementsA-102, A-110 and A-89 • Uniform set of administrative rules!

27. Applicant’s Financial Risk • OMB recommends Agencies to consider applicant’s financial risk prior to making the award (for non-formula grants) • Indicators of Risk • Past financial performance • Past programmatic performance • Internal controls

28. New Time and Effort Guidance by OCFO!! http://www2.ed.gov/policy/fund/guid/gposbul/time-and-effort-reporting.html

29. OMB Circular A-87: 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.

30. 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

31. 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

32. A-87: If employee works 100% on single cost objective • Semi-Annual Certification • “This is to certify that Tiffany Winters has worked 100% of her time for the period July 1, 2011, through December 31, 2011, on Title I Admin.” Signature of employee: /s/ Date: January 5, 2012

33. 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

34. A-87: PARs • Personnel Activity Reports (PAR) • “For the month of August 2012, I, Tiffany Winters, spent my time 50% on Title I Program Services and 50% on non-federal programs.” Signature of Employee: /s/ Date: September 1, 2012

35. 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.

36. 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.

37. 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.

38. Examples . . . . • A Minimum Set-Aside or Maximum Cap: • Title I- LEA Parent Involvement minimum (at least 1%); • Title III – Cap on administration (no more than 2%) • Program services • Title I program services

39. 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 and employee must complete.

40. 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.

41. OCFO Guidance Examples of Single Cost Objectives: Title I, Part A funds and State compensatory education funds • An LEA supports a supplemental math teacher to serve low-achieving students with 50 percent Title I, Part A funds and 50 percent State compensatory education funds.

42. OCFO Guidance Examples of Single Cost Objectives: Title I, Part A funds and local funds • A teacher in a Title I schoolwide school is paid with local funds to teach first grade in the morning to decrease class size for reading and is paid with Title I, Part A funds to teach a supplemental reading recovery class in the afternoon. (The school has a sufficient number of first-grade teachers to meet the requirements of ESEA section 1114(a)(2)(B).)

43. OCFO Guidance Examples of Single Cost Objectives: Title I, Part A funds and local funds (cont.) • Because the part-time first-grade teacher is not needed in order to provide the basic education program in the schoolwide program school, her salary could be supported with Title I, Part A funds, even though it is not. • Similarly, her salary for providing reading recovery could be supported with Title I, Part A funds. • Both her functions, therefore, are fully supportable with Title I, Part A funds, and the schoolwide program constitutes a single cost objective.

44. OCFO Guidance Examples of Single Cost Objectives: Funds under Sections 611 and 619 of the Individuals with Disabilities Education Act (IDEA) • A preschool special education teacher is funded with 50 percent IDEA section 611 funds and 50 percent with IDEA section 619 funds. • Teaching preschool special education is an allowable activity under both IDEA sections 611 and 619.

45. OCFO Guidance Examples of Single Cost Objectives: Title I, Part A funds and CEIS (comprehensive early intervening services) funds under IDEA • A teacher works with low-achieving students and is supported with 60 percent Title I, Part A funds and 40 percent CEIS funds. • Teaching low-achieving students is a single cost objective because it can be fully supported under both Title I, Part A and CEIS.

46. OCFO Guidance Examples of Single Cost Objectives: Title I, Part A funds and local funds • An LEA supports an elementary school teacher with local funds but pays her with Title I, Part A funds to provide after-school tutoring for low-achieving students. • Although the teacher could not be paid with Title I, Part A funds to provide elementary education, the portion of her time spent on after-school tutoring is easily separated from her teaching position by her schedule.

47. OCFO Guidance Examples of Single Cost Objectives: ESEA Title VII, Part A formula grant funds and state/local funds • A high school math teacher’s regular salary is paid with State and local funds.  The teacher conducts an after-school support program for Native American students in the school, and also teaches at a summer academic camp for Native American students in the school district; for both of these activities, he is paid from Title VII, Part A funds.  • Although the teacher could not be paid with Title VII, Part A funds to teach high school math, the portion that the teacher is paid with Title VII, Part A funds is easily segregated from his daily teaching schedule. 

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.

49. Bruman Game:Why Are These Examples WRONG?

50. Semi-Annual Certification Examples I, Justin Beiber, certify that I worked solely on the Federal Grant program from January 1, 2012 to June 30, 2012. Signature of Employee ____/s/______________ Date: September 1, 2012