COMPLIANCE & ACCOUNTABILITY

1. COMPLIANCE & ACCOUNTABILITY Presented at the National Association of HBCU Title III Administration, Inc. 2014 Technical Assistance Workshop June 24, 2014 Presenter: Perry L. Herrington Director of Title III & Strategic Initiatives Clark Atlanta University

2. The Fundamentals • Day-to-day; adhere to program objectives, laws, regulations, and guidance • Do the specific things that the funded program should be doing per OMB Circulars, the program regulations, and the terms of the grant award (including the grant application) • Properly execute responsibilities • Properly account for federal funds • Only use funds for intended purposes • Adequately document program activities and use of funds • Perform internal audits

3. At Your Fingertips… Program “Legislation” Application CDP/Plan EDGAR OMB Circulars University Policies

4. G P R A - 1993 • Ties federal funding to results • Greater accountability Government Performance and Results Act • GPRA indicators reflected in objectives and activities

5. Guidance from OMB Circulars • A-21 – J.: General provisions for selected items of cost • .20 Fund raising and investment costs. a. Costs of organized fund raising, including financial campaigns, endowment drives, solicitation of gifts and bequests, and similar expenses incurred solely to raise capital or obtain contributions, are unallowable. • A-110 – Subpart A - General • .28 Period of availability of funds Where a funding period is specified, a recipient may charge to the grant only allowable costs resulting from obligations incurred during the funding period and any pre-award costs authorized by the Federal awarding agency. • A-133 – Subpart B - Audits • (a) Audit required. Non-Federal entities that expend $300,000($500,000 for fiscal years ending after December 31, 2003) or more in a year in Federal awards shall have a single or program-specific audit conducted for that year in accordance with the provisions of this part. Guidance on determining Federal awards expended is provided in §___.205. • OMB Circulars A-21, 110, and 133

6. Revisions to Program Budget and Plan ED requires prior approval for the following: • Change in scope or objectives, • Change in Budget (usually 10%), • Change in key personnel, • Absence of Project Director/PI for more than three months or a 25% reduction of time to the project. EDGAR §74.25

7. Guidance from Legislation • Higher Education Act (HEOA) of 1965; as amended in 2008 • ‘‘(d) MINIMUM ALLOTMENT.—Notwithstanding subsections (a) through (c), and subject to subsection (h), if the amount of an award under this section for a part B institution, based on the data provided by the part B institution and the formula under subsections (a) through (c), would be; (1) an amount that is greater than $250,000 but less than $500,000 • CFR-2012-title34–vol3-part 608 • (b) Unallowable activities. A grantee may not carry out the following activities under this part: (1) Activities that are not included in the grantee’s approved application; (2) Activities described in paragraph (a)(12) of this section that are not approved by the Secretary. • CFR-2012-title34–vol3-part 609 • (d) A description of how the grant funds will be used so that they will supplement, and to the extent practical, increase the funds that would otherwise be made available for the activities to be carried out under the grant and in no case supplant those funds, for the activities described in § 609.10(a)(1) through § 609.10(a)(14).

8. CDP Application /Plan A Comprehensive Development Plan (CDP) must describe an institution’s strategy for achieving growth and self sufficiency by strengthening its - (1) Financial management; (2) Academic programs; and (b) The comprehensive development plan must include the following: • (1) An assessment of the strengths and weaknesses of the institution’s financial management and academic programs. • (2) A delineation of the institution’s goals for its financial management and academic programs, based on the outcomes of the assessment described in paragraph (b)(1) of this section. • (3) A listing of measurable objectives designed to assist the institution to reach each goal with accompanying timeframes for achieving the objectives. • (4) A description of methods, processes and procedures that will be used by the college or university to institutionalize financial management and academic program practices and improvements developed under the proposed funded activities. - CFR: part 609 • Activity budgets The Annual Plan is submitted via the Phase II process during the final four years.

9. ED’sGrant Monitoring

10. ED’s “Drawdown” Policy • Request funds for immediate needs • Minimize time between requests & expenditures • Draws commensurate with approved scope ED’s Concerns • Large amounts of unobligated funds • Excessive / Infrequent requests • Project goals not met - ED monitors

11. G5 System Monitoring Using G5 Why: • Identify performance issues • Identify financial issues Tracks spending patterns for each grant Work in partnership to resolve

12. GAPS Monitoring Report: Excessive Drawdowns By end of budget period’s: 1st Quarter: More than 50% drawn 2nd Quarter: More than 80% drawn 3rd Quarter: 100% drawn Must return excess cash & interest to government

13. GAPS Monitoring Report: Large Available Balance • Within 90 days, “flags” grants with 70% or more • Verifies financial data on annual performance report • Discrepancies clarified before award

14. Audits Findings & Consequences

15. Audit Requirements • Non-Federal audit if expending $500,000 or more annually in Federal awards • Mail to Federal Audit Clearinghouse • Review Attachment C OMB Circular A - 133

16. Common Audit Exceptions • Poor recordkeeping / management • Unallowable costs / activities • Failure to follow standards • Lack of internal controls • Failure to obtain prior approval • Incorrect / no indirect cost rate

17. HOW IS NON-COMPLIANCE DISCOVERED? • Single Audits (A-133) • OIG Audits • Program Monitoring: • G5 irregularities (frequent draws and adjustments) • Consistent large Carry-forwards balances • Disclosure/Reporting SYMTOMS • Whistle – Blowers • U.S. Department of Education Enforcement tools: • GEPA • EDGAR • Program-specific enforcement provisions

18. HIGH-RISK FLAGS • History of unsatisfactory performance • Not financially stable • Management system does not meet standards • Has not conformed to terms of previous awards • Is otherwise not responsible – may be placed on special conditions or restrictions

19. High-Risk Institutions • Serious implication • Special terms/conditions added • Unsuccessful implementing project • More tech assistance • Notified by correspondence

20. HIGH-RISK GRANTEE: SPECIAL CONDITIONS • Special conditions may include: • Payment on reimbursement basis • Withholding authority to proceed until acceptable performance is shown • Requiring more detailed financial reports • Additional project monitoring • Requiring additional technical or managerial assistance • Establishing additional prior approvals • Suspension/Termination

21. Roles & Responsibilities

22. Administration/Management • As stated in approved package • Key personnel changes need ED approval • Staff made aware of project’s : purpose, duration, objectives Lines of Authority

23. Grantee’s Responsibilities • Project’s success and financial accountability • Submit annual & final performance reports EDGAR §§74.51 & 80.40 • Valid & reliable data • Report on GPRA standards & indicators

24. Grantee’s Responsibilities • Funded application & Grant awards • Previous audits / site visit reports • Annual performance reports • Project revision(s) documentation • Current budget & personnel list On Site:

25. Budget Items • Allowable - permitted or not specifically prohibited • Allocable - necessary for project’s success • Reasonable - costs incurred by a “prudent” person Must be:

26. Grantee Flexibility

27. Project Revisions GOALS: • Increase flexibility • Increase accountability • Reduce paperwork burden • Develop partnerships Promote successful project outcomes

28. Pre-Award Costs Incurred up to 90 days before budget period begins • No prior approval required • Applies to New and NCC awards

29. Pre-Award Costs: Overview • Reasonable expectation of receiving a grant • Incurred at own risk • Funds not available until the budget period begins • Not for cost over-runs

30. Pre-Award Costs Incurred more than 90 days before budget period begins: OK Requires prior approval

31. Carryover • Unexpended funds “forwarded” without prior approval • For any allowable cost within the approved scope • Complete unfinished activities • New activities w/i scope – Program Staff

32. Carryover cont. Program Office may require a written statement: • How will unexpended funds be used? • When: At time of funding decision • New funds can be reduced Large Available Balance? Written statement required!

33. Budget Transfers • No prior approval required for most • Exceptions listed in EDGAR: • Transfer training funds • Transfer / contracting-out work Check OMB Cost Principles for other exceptions

34. EDGAR Prior Approval Requirements • Changes in project scope / objectives • Changes in key personnel • IHE & non-profit project directors > absent for more than 3 months > 25% reduction in time • Need for additional Federal funds

35. Time Extension Final Year: • One-time extension up to one year without prior approval • Grantees should carefully consider time extension needs

36. Time Extension cont. Send written notice to Program Officer: • No later than 10 days before project ends • State reasons for extension • Include revised expiration date

37. Time Extension“Not – No – No” • Not just for using unexpended funds • No additional Federal funds • No change to scope or objectives

38. EDGAR § 74.71 § 80.20 Closeout Procedures • Pre-expiration letter – 60 days • Requirements reminder • Financial obligation during liquidation • Submit req’d reports • Final Performance • Financial Status – ED 524B • Fail to adhere… Grant Closed in “Non-Compliance”

39. Maintaining Adequate Records • Recipients responsible for proper recordkeeping • Recipients responsible for proper retention • Recordkeeping should be sufficient to establish an audit trail • When in doubt, keep it!

40. BASIC GUIDELINES • Necessary and Reasonable • Must be necessary for the performance or administration of the grant • Follow federal laws and the terms of the grant award • Fair market prices • Act with prudence under the circumstances • No significant deviation from established prices • Allowable- permitted or not specifically prohibited • Allocable • Charge expenses only according to the approved plan • Can only charge in proportion to the value received by the program

41. BASIC GUIDELINES (CONTINUED) • Conform with federal law & grant terms • Example: Match Requirement (Not allowed in HBCU Program) • Consistently treated • Must follow uniform policies that apply equally to federal and university activities

42. BASIC GUIDELINES (CONTINUED) • Adequately documented • Amount of funds under grant • How the funds are used • Total cost of the project • Share of costs provided by other sources • Records that show compliance • Records that show performance • Other records to facilitate an effective audit

43. SUPPLEMENT NOT SUPPLANT • Cannot use federal funds to pay for services, staff, programs, or materials that would otherwise be paid with institutional funds. • Always ask: “What would have happened in the absence of federal funds?” • Be careful how Carry-forward funds are used: • Substantial progress does not equal large carry-forward balances in accounts. • Carry-forward balances do not document substantial progress.

44. Executing Title III Procedures

45. WHAT RULES APPLY? • Institutions must use fiscal control and fund accounting procedures that will ensure the proper disbursement of, and accounting for, federal funds. • Seven Requirements include: • Financial Reporting • Accounting Records • Internal Controls • Budget Control • Allowable Cost • Source Documentation • Cash Management

46. BUDGET MANAGEMENT • General Ledger (A direct path to accountability) • Current information for each category • Grant Accountant should reconcile the general ledger (GL) monthly with the PI’s project ledger • Grant Accountant or Contracts and Grants Office should provide the PI with monthly print-out from the GL from the grantee’s integrated software • Limit the number of budget modifications • Stop spending at least 30 days before the end of the grant period to close out the year.

47. Common Problems/Pitfalls

48. COMMON AUDIT EXCEPTIONS • Poor recordkeeping / management • Unallowable costs / activities • Failure to follow standards (policies and procedures • Lack of internal controls • Failure to obtain prior approval • Incorrect / no indirect cost rate

49. Common Problems/Pitfalls • Payroll distribution system (time and attendance records inadequate) • Supplanting/maintenance of effort (using grant funds when institutional funds should have been used) • Services delivered to those other than the intended recipients

50. COMMON PROBLEMS/PITFALLS(CONTINUED) • No written policies and procedures • Lack of controls over computer systems and computer equipment • Inadequate financial management systems (do not clearly show how grant funds used or how the use of funds ties to the budget)