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Fiscal Requirements for Federal Programs. NEW FEDERAL PROGRAMS DIRECTORS TRAINING November 15, 2011. Session Topics & Group Assignments. Overview of Fiscal Information Related to: Legal Structures for Fiscal Accountability Allowable Costs and Procurement Procedures Inventory

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fiscal requirements for federal programs

Fiscal Requirementsfor Federal Programs


session topics group assignments
Session Topics & Group Assignments

Overview of Fiscal Information Related to:

  • Legal Structures for Fiscal Accountability
  • Allowable Costs and Procurement Procedures
  • Inventory
  • Time and Effort
  • Indirect Costs
  • Maintenance of Effort
  • Supplement/Supplant
  • Grant Awards
  • Transferability
  • Availability of Funding
  • Carry Over
  • Comparability
  • Review of LEA Fiscal Section Monitoring Document
a legal structures
A. Legal Structures

1. From what government documents are the basic fiscal requirements derived?

2. Which OMB Circular identifies allowable expenditures under general cost cutting principles?

3. Which OMB Circular provides the guidelines for fiscal audits?

4. Which OMB Circular provides the guidelines for the submission and approval of plans?

legal structures
Legal Structures
  • Program statutes
    • NCLB (No Child Left Behind Act of 2001)
    • GEPA (General Education Provisions Act )
  • Regulations
    • EDGAR (Education Department General Administrative Regulations)
    • Federal Program Regulations – Title I, Title II, Title III
  • OMB Circulars (Office of Management and Budget)
    • A 87 – allowable costs
    • A 110 – approved plan for issuance of grant
    • A 133 – fiscal audits
  • Guidance
    • Non regulatory guidance for all federal programs
federal grants resources
Federal Grants Resources
  • Program
    • Statutes
    • Regulations
    • Guidance
  • General Education Provisions Act (GEPA):

  • Education Department General Administrative Regulations (EDGAR):
federal grants resources1
Federal Grants Resources
  • Office of Management & Budget (OMB) Circulars:
    • Circular A-87 principles for allowable costs
    • Circular A-122-cost principles for non-profit organizations
    • Circular A-133 Compliance Supplement-audit
b allowable costs and procurement procedures
B. Allowable Costs and Procurement Procedures

1. List several questions that should be asked before approving expenditures.

2. Describe some components of procurement procedures.

3. What information should be included at a minimum in all contracts?

4. What information should be provided on all invoices for contracted services?

allowable costs
Allowable Costs
  • Necessary? Reasonable?
  • Legal under state and local law?
  • Allowable?
    • Check Circulars A-87 & A -133
    • Does it supplement not supplant the program?
  • Do you have money allocated in your approved budget to cover the expense?
  • Is it supported by a scientific research base?
written procurement procedures
Written Procurement Procedures
  • Grantees and LEAs receiving federal education funds must follow the procurement rules contained in the Education Department General Administrative Regulations (EDGAR).
  • Some federal program statutes also contain procurement guidelines (for example, Title I Part A contains contract requirements for SES contracts).
written procurement procedures1
Written Procurement Procedures
  • Section 80.36(a), allows states and local educational agencies (LEAs) to use the same procurement policies and procedures they use for procurements made with state funds.
  • Director or designee should sign off at all levels-requisition, PO and invoice
  • When purchases are made with a credit card utilizing federaI funds, the LEA must obtain written preauthorization for the purchase from the federal program director.
written procurement procedures2
Written Procurement Procedures
  • Written contracts for any contractual service (e.g., interventionists; professional development presenters; academic coaches)
  • A contract should include:
    • Description of services, including the location at which the services will be provided
    • Number of days of contracted service – include starting and ending dates
    • Total cost of all services described in the agreement
    • The federal grant project code matching the county budget from which the services will be paid
    • Appropriate signatures from both entities.
written procurement procedures3
Written Procurement Procedures

Invoices submitted for payment on contract

  • must be written and describe services performed or goods delivered
  • include dates services were performed or goods were delivered
  • state location services were performed or goods were delivered
  • include description of students/teachers/etc. served

(if applicable)

  • be reviewed and approved prior to payment.
c inventory
C. Inventory

1. What information is required on an inventory form for federal programs?

2. What two parts of a property management system (inventory) are required, but most neglected within district procedures?

3. How often is a physical inventory and reconciliation required?


Inventory items purchased with federal funds

are divided into three categories:

  • real property (land and structures);
  • equipment (tangible, nonexpendable property that has a useful life of more than one year); and
  • supplies (consumables)

Under Section 80.32(c) of EDGAR, grantees and subgrantees must maintain specific property records that include:

  • a description of the property;
  • a serial number or other identification number;
  • the acquisition date and cost of the property;
  • the percentage of federal participation in the cost of the property;
  • the location, use and condition of the property, and
  • any ultimate disposition data including the date of disposal and sale price of the property
inventory control
Inventory Control
  • Control system to ensure adequate safeguards to prevent loss, damage or theft of the property. Any loss, damage or theft must be investigated by the grantee or subgrantee.
  • Check out procedures for equipment used off property
inventory control1
Inventory Control

ED determined that an adequate internal control system must include a process for labeling and locating property purchased with federal funds

(e.g., Title I FY 12 or Title I ARRA FY10)

physical inventory
Physical Inventory

Subgrantees must take a physical inventory of equipment at least every two years and must reconcile the results. The person conducting the physical inventory should sign and date the inventory form.

If any equipment is missing, the grantee or subgrantee must indicate on an inventory form.

d time and effort
D. Time and Effort

1. What employees are required to maintain time and effort documentation?

2. Describe the two types of time and effort documentation and describe the use for each.

3. How often must the amount of payment from each cost objective be adjusted for a staff member who is funded by more than one cost objective?

time and effort
Time and Effort
  • If federal funds are used for salaries “time distribution records” must be kept
  • Must demonstrate that employees paid with federal funds actually worked on the specific federal program for the percentage of time for which the individual is being paid
time and effort1
Time and Effort
  • Type of documentation depends on how many “cost objectives” the employee worked on
  • These cost objectives must be connected to the employee’s salary source
  • What is a cost objective?
    • A specific grant award, or other category of costs, that requires the grantee to track specific cost information
time and effort2
Time and Effort
  • If an employee works on a single cost objective:
    • Semi-Annual Certification
    • Signed by employee and supervisor every six months
    • Example: “I hereby certify that for the period January 1, 2011 through June 30, 20101 one-hundred percent (100%) of my time and effort was spent on Title I Administration.”
time and effort3
Time and Effort

If an employee works on multiple cost objectives:

  • Personnel Activity Report (PAR)
    • After the fact
    • Account for total activity
  • Prepared at least monthly and coincide with one or more pay periods
  • Signed by employee and supervisor
time and effort4
Time and Effort
  • Determine estimates for budgeting
    • Estimates must produce reasonable approximations of the activity actually performed
    • Quarterly comparison of estimates to actual costs
      • If difference is less than 10% - annual adjustment
      • If difference is more than 10% - quarterly adjustment
e indirect costs
E. Indirect Costs

1. Do federal programs utilize the restricted or unrestricted indirect cost rate?

2. Why are most indirect charges expensed at the end of the year?

3. Which indirect cost rate must be applied to carryover funds-the grant year or the current fiscal year’s cost rate?

indirect costs
Indirect Costs
  • Rate is based on expenditures during past year
  • Calculated by entering amounts into a spreadsheet that contains a formula approved by the USDE.
  • Restricted / Unrestricted Rate
indirect costs1
Indirect Costs
  • The amount of indirect charge expensed should be based on actual expenditures for the year
  • Use the rate that is applicable for the year in which expenditures occur
  • A change in the county’s indirect rate from year to year may be attributed to a change in the expenditures of the LEA (particularly if there was a change from one year to the next in the way expenses are coded)
three primary fiscal requirements of 1120a of nclb
Three Primary Fiscal Requirements of §1120A of NCLB
  • Maintenance of Effort
    • MOE looks across the district to ensure that roughly the same amount of state and local funding is being contributed district-wide from one year to the next.
  • Comparability
    • Looks more narrowly at individual schools and inquires whether Title I schools and non-Title I schools are being treated fairly.
  • Supplement Not Supplant
    • Narrows the focus even more to individual expenditures and asks whether each unique expenditure of federal funds would have still been made if the federal funds were not available.
f maintenance of effort
F. Maintenance of Effort

1. Define Maintenance of Effort.

2. What percentage of the combined fiscal effort per student or the aggregate expenditure of the LEA from state and local funds for free public education in the LEA must the LEA maintain from the preceding year?

3. If a LEA fails to maintain this percentage, what are the consequences?

maintenance of effort
Maintenance of Effort
  • The statue states that an LEA may receive Title I funds only if the SEA determines that the LEA has maintained its fiscal effort.
  • SEA distributes a report that provides the combined fiscal effort per student from state and local funds for each LEA. This amount is entered into the LEA Title I application for funding.
  • Upon review of the application, the SEA must determine that either the combined fiscal effort per student or the aggregate expenditure of the LEA from state and local funds for free public education in the LEA for the proceeding year was not less than 90% of the combined fiscal effort for the second proceeding year.
maintenance of effort1
Maintenance of Effort
  • Results of Failure to Document MOE
    • WVDE will reduce the amount of the allocation of federal program funds by the percentage by which a LEA fails to meet the requirement by falling below the 90% of the combined fiscal effort per student or the aggregate.
    • This money is then returned to the State for reallocation to other districts according to need.

WAIVER – The USED Secretary may waive the requirements of maintenance of effort if it is determined that a waiver would be equitable due to exceptional or uncontrollable circumstances. Such exceptions may include a natural disaster or a precipitous decline in the financial resources of the LEA.

g supplement not supplant
G. Supplement not Supplant

1. Discuss the supplement not supplant regulation as it applies to federal programs.

2. Provide a key question one should ask when trying to determine a supplant situation.

3. List three situations where an auditor will presume use of federal funds will violate the “supplement, not supplant” requirement.

supplement not supplant
Supplement NOT Supplant
  • Federal program funds may not be used to pay for services, staff, programs, or materials that would otherwise be paid with state or local funds.
  • Key question: “How would the district/school have paid this expenditure in the absence of federal funds?”
supplement not supplant1
Supplement NOT Supplant
  • A-133 Compliance Supplement provides three general situations where an auditor will presume use of federal funds will violate the “supplement, not supplant” requirement:
    • Use of federal funds to provide services the SEA or LEA is required to make available under other federal, state or local laws
    • Use of federal funds to provide services the SEA or LEA provided with state or local funds in the prior year
    • Use of Title I, Part A funds to provide the same services to Title I students that the LEA or SEA provides with state or local funds to nonparticipating students
h grant awards
H. Grant Awards

1. When may a district obligate funds from a current grant?

2. What are some key parts of the grant award of which one should make note?

3. Why is important to track the entire grant award as well as individual school allocations?

4. What WVEIS reports are most helpful and what resources are available on the WVDE website?

allocation procedures sea to leas
Allocation Procedures SEA to LEAs
  • Approved Plan Required (OMB A-110, Subpart C .10)
  • Financial and Program Requirements (OMB A-110, Subpart C .21)
  • Revision of Budget and Program Plans (OMB A-110, Subpart C .25)
grant award
Grant Award
  • Letter of Explanation
  • Assurance statements
    • Included within the strategic plan
  • Grant Award
    • Amount
    • Obligation and liquidation dates
    • Commitment number
    • Project code
    • Scope and conditions
tracking budget expenditures
Tracking Budget Expenditures
  • Total composite budget
  • Administrative budget
  • Individual school budgets

i transferability
I. Transferability

1. From which NCLB programs may funds be transferred?

2. Which NCLB program may accept funds, but may not have funds transferred to another program?

3. What restrictions exist for districts which are identified for improvement?

4. What restrictions exist for districts which are identified for corrective action?

5. What effect do the fiscal year and the period of obligation have on transferred funds?

transferability lea
Transferability (LEA)
  • An eligible LEA may transfer up to 50% of the formula funds allocated under any of the following programs:
    • Teacher and Principal Training and Recruiting Fund - §2121
    • State Technology (formula grants only)-§2412(a)(2)(A)*
    • Safe and Drug Free Schools-§4112(b)(1)
    • Innovative Programs-§5112(a)
  • An LEA may transfer funds from any of these covered programs to Title I, Part A, but not out of Title I.

*Applies only to portion of funds subgranted on a formula basis.

transferability lea1
  • The transfer of funds within the LEA are not limited to administrative funds, but apply to all funds (both administrative and programmatic).
  • An LEA identified for improvement under §1116(c) of the statute may not transfer more than 30% of the funds allocated under any of the four covered programs. Moreover, any funds that are transferred may only be used for school improvement activities.
  • An LEA loses its transferability authority immediately upon being identified for corrective action.
  • Funds may not be transferred across fiscal years.
  • Transferability does not affect the period in which the SEA or LEA may obligate the funds.
  • Prerequisites for SEA and LEA Transferability:
    • Consult with private schools
    • Determine funds to be transferred
    • Determine amount of fiscal year
    • Modify each affected State or LEA plan
    • Establish an effective date
    • Notify and obtain approval from the SEA
  • Accountability Requirements
    • Programmatic accountability
      • The statute mandates that the transferred funds be subject to the rules and requirements of the programs to which they are transferred.
    • Fiscal accountability
      • Records must permit normal monitoring, evaluation and auditing activities
      • Agency must be able to produce reports on transfers as requested
j availability of funds
J. Availability of Funds

1. Who authorizes the availability of federal funds and why is a time limit placed on the funds?

2. What is the obligation period of the federal grants?

3. Define the “tydings period” and of what benefit is this provision?

k carryover
K. Carryover

1. What percentage of the fiscal year’s allocation may a LEA carry into the “tydings period” for the Title I and Title II programs?

2. What procedures must a LEA follow if it is determined that the LEA exceeds the permissible amount of carry over?

3. If a waiver cannot be granted, what action must the state take?

4. Name the three ways that Title I carryover funds may be utilized when planning the proceeding year’s budget.

availability of funding
Availability of Funding
  • Funds become available for obligation on July 1 of each year, and remain available for a total of 15 months (until September 30 of the succeeding year).
  • To avoid hasty, “use it or lose it” expenditure of leftover funds at the end of this period, the General Education Provisions Acts gives SEAs and LEAs the authority to carry over their grants for an additional year, for a total availability of 27 months. This extra 12 months is called the “Tydings Period”.
carry over
Carry Over

Title I and Title II are subject to a cap on amount that be carried forward into the “Tydings Period” which provides another 12 months for the use of funds.

  • 15% of the grant can be carried forward into the Tydings period
    • LEAs wishing to carry over a greater percentage may request a waiver once every three years.
carry over1
Carry Over
  • An LEA has significant discretion in handling its Title I carryover funds.
  • Funds may be added to the LEA’s subsequent year’s allocation and redistributed to participating schools in accordance with normal allocation procedures – decreasing amount of allocation based on highest to lowest poverty. *
  • Funds may be added to the LEA’s subsequent year’s allocation and redistributed to participating schools equitably based on a per pupil amount times the number of low income students in each school. *
  • Funds may be designated for district wide activities that could best benefit from additional funding (e.g. parent involvement activities, professional development, pre-K, services for extended day/year programs).

* The requirement for equitable services to private schools also applies to carryover funds.

The LEA is not permitted to use Title I carryover funds in a school that is not eligible for Title I funding.


1. Define comparability of services.

2. How often must a district demonstrate comparability?

3. How would you determine if a district does not have to demonstrate comparability?

4. What is the purpose of excluding “all federally funded” staff when determining comparability calculations?

  • Requires that LEAs be able to document that the services provided with state and local funds in Title I schools are comparable to those provided in non-Title I schools in the LEA.
      • State and local funds must be used in participating schools to provide services that, taken as a whole, are “at least comparable” to services in schools that do not participate in Title I schools.
    • Comparability must be met by LEAs on an annual basis.
  • Comparability requirements do not apply to a district that does not have more than one building per grade span
  • Federally funded staff are excluded from comparability calculations because the purpose of comparability is to determine if the LEAs are allocating Title I schools a fair share of nonfederal funds.
fiscal monitoring requirements
Fiscal Monitoring Requirements

Section VII of the LEA monitoring document