Date post: | 26-Dec-2015 |
Category: |
Documents |
Upload: | neil-hamilton |
View: | 215 times |
Download: | 2 times |
1
Michigan Association of State and Federal Program Specialists
“Federal Grants Management”
Traverse City, MichiganNovember 11, 2007
Leigh ManasevitBrustein & Manasevit
3105 South Street NW Washington, DC 20007
[email protected](202) 965-3652
2
Agenda Overview of EDGAR How to analyze allowable costs
Time distribution Grants management systems
Financial management Procurement Inventory management
3
Legal Structure of Federal Programs Statutes
Program statutes (NCLB, IDEA, Perkins) General Education Provisions Act (GEPA)
Regulations Program regulations Education Department General Administrative
Regulations (EDGAR) OMB Circulars Guidance
4
General Management Rules Education Department General Administrative
Regulations: 34 CFR pts. 74-99 Part 74: Administration of Grants to Institutions of
Higher Education, Hospitals, and other Nonprofit Organizations
Part 75: Direct Grant Programs Part 76: State-Administered Programs Part 77: Definitions Part 80: Uniform Administrative Requirements for
Grants and Cooperative Agreements to State and Local Governments
6
Helpful Questions to Ask Is the proposed cost consistent with
federal cost principles? Is the proposed cost allowable under the
relevant program? Is the proposed cost consistent with
program specific fiscal rules? Is the proposed cost consistent with
EDGAR?
8
Practical Question Is the proposed cost
consistent with the underlying needs of the program Data driven decision
making Target funds to areas of
weakness
9
Federal Cost Principles A-21 Educational Institutions A-87 State, Local & Indian
Tribal Governments A-122 Non-Profit Organizations 48 CFR pt. 31 For-Profit
Organizations
10
Cost Principles: Basic Guidelines All Costs Must Be:
Necessary Reasonable Allocable Legal under state and local law
11
Basic Guidelines (cont.) In addition, all costs must:
Conform with federal law & grant terms Consistently treated In accordance with GAAP Not included as match Net of applicable credits Adequately documented
12
Necessary & Reasonable
Necessary and Reasonable Must be necessary for the performance or
administration of the grant Must follow sound business practices:
Arms length bargaining (hint: procurement processes) Follow federal, state and local laws Follow terms of the grant award
Fair market prices Act with prudence under the circumstances No significant deviation from established prices
13
Necessary & Reasonable (cont.) Data driven decision making
Strategic Goal
Measurable Objective
Current Performance
(based on data)
CriticalNeeds
14
Necessary & Reasonable (cont.) Practical aspects of “necessary”
Do I really need this? Surplus property/existing resources Lease vs. purchase
Is this the minimum amount I need to spend to meet my need?
15
Necessary & Reasonable (cont.) Practical aspects of “reasonable”
Is the expense targeted to valid programmatic/administrative considerations?
Do I have the capacity to use what I am purchasing?
Did I pay a fair rate? Can I prove it? If I were asked to defend this purchase, would I
be comfortable?
16
Allocable Allocable
Can only charge in proportion to the value received by the program
Example: LEA purchases a computer to use 50% in the Title IV program and 50% in a state program – can only charge half the cost to Title IV
2 Methods of allocating costs: Direct cost allocation Indirect cost allocation
17
Basic Guidelines (cont.) Legal under state and local law
If you can’t do it under state law, you can’t pay for it with federal funds
Conform with federal law & grant terms Example: Match Requirements
18
Basic Guidelines (cont.) Consistently treated
Must follow uniform policies that apply equally to federal and non-federal activities
Cannot assign cost as direct cost if indirect under state programs
19
Basic Guidelines (cont.) In accordance with GAAP Not included as match Net of applicable credits
Examples: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, adjustments of overpayments
20
Basic Guidelines (cont.) 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
21
Federal Cost Principles: Selected Items of Costs
43 specific costs detailed Listed in alphabetical order
22
Selected Item of Cost (cont.)
Salaries and Wages Allowable if proper time distribution records
Fringe Benefits Allowable if: (1) established written leave policies; (2) cost
equitably allocated to all related activities; and (3) accounting basis consistently followed
Severance Pay/Terminal Leave Normal: Allowable as indirect cost Abnormal: Allowable if approved by cognizant federal
agency
23
Compensation for Personal Services Overview of process:
Estimate how employee will work Pay based on estimate Reconcile estimates to how actually worked
Necessary documentations Payroll records Time and effort records
24
Support of Salaries and Wages Payroll must be documented in
accordance with SEA/LEA’s generally accepted accounting practice
Charges must be approved by a “responsible official” of the SEA/LEA
25
Time DistributionOMB Circular A-87
If federal funds are used for salaries “time and effort records” must be kept
Must demonstrate that employees paid with federal funds actually worked on the specific federal program
Applies to all employees who are paid with federal funds
26
General Requirement 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
27
Cost Objective For example:
Federal Program: Title I, Part A Reading First IDEA
Federal Program Cost Objective: Title I, Part A School Improvement Title I, Part A Program Reading First Administration IDEA, Early Intervening Services
29
Cost Objective (cont.) Multiple cost objectives:
More than one Federal award A Federal award and a non-Federal award; A Federal award with specific earmarking (set-asides) or
matching requirements; An indirect cost activity and a direct cost activity; Two or more indirect activities which are allocated using
different allocation bases; or An unallowable activity and a direct or indirect cost
activity.
30
Single Cost Objective If an employee works on a single cost
objective: Semi-Annual Certification Signed by employee or supervisor every six
months Example: “I hereby certify that for the period
January 1, 2005 through June 30, 2005 one-hundred percent (100%) of my time and effort was spent on Title III Administration.”
31
Single Cost Objective (cont.)Flexibility Payroll certification in lieu of semi-annual
certification1. Single cost objective2. Supervisor cannot assign multiple functions3. Employee coded to dedicated function not
benefiting multiple functions Blanket certification
32
Multiple Cost Objectives If an employee works on multiple cost
objectives: Personnel Activity Report (PAR) or equivalent
documentation After the fact Account for total activity Signed by employee Prepared at least monthly and coincide with
one or more pay periods
33
Multiple Cost Objectives (cont.) Time increments reported on PARs should
be sufficient to recognize: Number of different activities performed The dynamics of these responsibilities
36
Distributing Payroll Costs1. Estimate how employee will work
Must produce reasonable approximations of the activity actually performed
2. Quarterly comparison of estimates to actual costs
If difference is less than 10% - annual adjustment
If difference is more than 10% - quarterly adjustment
37
Special Rules for Schoolwide Programs New fiscal guidance May 2006
If a school consolidates its funds into a single account it is not required to keep any time distribution records
If a school does not consolidate its funds into a single account, it must follow the normal rules
Single cost objective – semi-annual certification Multiple cost objective - PAR
38
Schoolwide programs (etc.) What does it mean to consolidate funds
into a single account? Single bank account? Single accounting code? Single cost objective?
40
Grant Administration
Three major “systems” in grants management: Financial Management Inventory Management Procurement
41
What Rules Apply? State and local agencies must use fiscal
control and fund accounting procedures that will ensure the proper disbursement of, and accounting for, federal funds Section 441 of GEPA (general assurances) Section 9306 of NCLB (program assurances) Section 76.702 of EDGAR
42
Systems Requirements (cont.)EDGAR §§ 80.20, 80.32, 80.36
State may follow own laws and procedures
43
Systems Requirements (cont.) “All other grantees
and subgrantees” must implement systems that meet specific requirements FMS = 80.20(b) Inventory = 80.32(c)-(e) Procurement =
80.36(b)-(i)
45
Rules for LEAs Direct grants
LEA is considered grantee – specific EDGAR rules apply
State-administered grants 1988 preamble to A-102
Defer to principles of Federalism LEA must follow state law and procedures
However, in practice, ED holding LEAs to very high standards
47
FMS Rules for LEAs (cont.) 7 requirements:
Financial Reporting Accounting Records Internal Control Budget Control Allowable Cost Source Documentation Cash Management
48
FMS Rules for LEAs (cont.)Financial Reporting Accurate, current and complete disclosure of
financial information All financial reports required by ED Consistent with GASB Rule 34
NCES Manual: Financial Accounting for Local and State School Systems Chapter 5: Financial Reporting http://nces.ed.gov/pubs2004/h2r2/ch_5_1.asp
49
FMS Rules for LEAs (cont.)Accounting Records Must identify source and application of funds (expenditure
level detail) Must contain information related to:
Award amount Authorizations Obligations Unobligated balances Assets Liabilities Outlays or expenditures Income
50
FMS Rules for LEAs (cont.)Internal Controls ED is subject to laws requiring it
to monitor internal controls Improper Payment Act of 2002 Federal Managers’ Financial
Integrity Act of 1982 Single auditors are required to
test internal controls
51
FMS Rules for LEAs (cont.)Internal Controls Internal controls are tools to help
program and financial managers achieve results and safeguard the integrity of their programs Includes processes for planning, organizing,
directing, controlling, and reporting on agency operations
52
FMS Rules for LEAs (cont.)Objectives of Internal Control Effectiveness and efficiency of operations Reliability of financial reporting Compliance with applicable laws and
regulations Safeguarding assets
53
FMS Rules for LEAs (cont.)Components of Internal Control Control Environment Risk Assessment Control Activities Information and
Communications Monitoring
54
FMS Rules for LEAs (cont.)Budget Control Must compare actual
expenditures to budgeted amounts on a routine basis
55
FMS Rules for LEAsAllowable Cost Must follow applicable cost principle to
determine reasonableness, allowability, and allocability of all costs A-21 Educational Institutions A-87 State, Local & Indian Tribal Governments A-122 Non-Profit Organizations 48 CFR pt. 31 For-Profit Organizations
56
FMS Rules for LEAs (cont.)Source Documentation Type of documents:
Canceled checks (or similar bank record) Paid bills Payrolls Time and attendance records Contract and subaward documents
Electronic copies ok Must retain for at least 3 years, but statute of
limitations = 5 years
60
Obligations (cont.)
Acquisition 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
61
Obligations (cont.) Every grant has a “period of availability” =
period in which grantee can obligate funds In general, ED cannot extend the period of
availability But – NCLB waiver authority
62
Obligations (cont.) Grantees and subgrantees
may begin to obligate funds when: Awarding agency approves
application; or Awarding agency
determines application is “substantially approvable”
Reimbursement subject to final approval
63
Obligations (cont.) 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)
64
Obligations (cont.) 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 long after the period of availability ends
65
Obligations (cont.) “Linking” example:
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)
But keep in mind the concept of allocability
66
Obligations (cont.) Under Tydings, unobligated funds can
usually be “carried over” from first year Generally, no limit on “carryover” unless
stated Title I, Part A = 15%, SEA may waive every 3
years Perkins = No carryover
68
Liquidations (cont.) State 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 subgrantee
69
Payments Special rules if receive advance payment
Must expend funds within 3-days Must maintain written procedures for timing
drawdowns and payments Interest must be paid back to ED (over $100)
71
Ensuring Purchases are Necessary
All costs have to be necessary for the performance or administration of the federal grant
Therefore, must review all proposed purchases to avoid unnecessary or duplicative items Surplus property Structure procurement to obtain most economical purchase Intergovernmental agreement for common goods or services Lease vs. purchase
72
Open Competition All procurement transactions must be
conducted with full and open competition: Must have written code of conduct for all
employees engaged in the award and administration of contracts (must address conflicts of interest)
Must have protest procedures to handle disputes
73
Open Competition (cont.) Situations that restrict competition:
Unreasonable requirements on vendors to qualify to do business
Pre-qualified lists should not limit competition Requiring unnecessary experience or excessive bonding Noncompetitive pricing practices Noncompetitive awards to consultants on retainer Organizational conflicts of interest Specifying a brand name In-state or local preferences
74
Role of Cost/Price All costs must be reasonable:
Fair market value Arms length bargaining Act with prudence under the circumstances
75
Role of Cost/Price (cont.) Must perform a cost or price analysis in
connection with every procurement action, including contract modifications Cost analysis generally means evaluating the
separate cost elements that make up the total price (including profit)
Price analysis generally means evaluating the total price
76
Role of Cost/Price (cont.) Method and degree of cost or price
analysis depends on the particular facts and circumstances
Must make independent estimate before receiving bids or proposals
Goal of analysis is to determine reasonableness
77
Vendor Selection Process Must have written selection procedures Procedures must ensure all solicitations:
Include a clear and accurate description of technical requirements
Identify all requirements vendor must fulfill Identify evaluation factors
78
Vendor Selection Process (cont.) Method of procurement:
Small purchase procedures Competitive sealed bids Competitive proposals Noncompetitive proposals
79
Vendor Selection Process (cont.) Noncompetitive proposals appropriate only
when: The good or services is available only from a
single source (sole source) There is a public emergency The awarding agency authorizes After soliciting a number of sources,
competition is deemed inadequate
80
Vendor Selection Process (cont.) Must perform a cost analysis in
connection with every noncompetitive contract Must ensure contractor price is reasonable Must ensure contractor not using market
power to force higher price
81
Vendor Selection Process (cont.) As a practical matter,
noncompetitive contract raises “red flags” Ensure persuasive and adequate
documentation to facilitate audit
82
Vendor Selection Process (cont.) Can only contract with responsible
contractors possessing the ability to perform successfully: Contractor integrity Compliance with public policy Record of past performance Financial and technical resources
83
Vendor Selection Process (cont.) Cannot contract with vendor who
has been suspended or debarred Must verify if contract is $25,000 or
more http://www.epls.gov/
84
Vendor Selection Process (cont.) Retain records to document:
Rationale for the method of procurement
Selection of contract type Contractor selection or rejection Basis for contract price
85
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
86
Contract Administration (cont.) Must maintain a contract
administration system that ensures contractors perform in accordance with the terms, conditions, and specifications of the contract
87
Contract Administration (cont.) As a practical matter:
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)
88
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
90
Inventory Management34 CFR 80.32
Different rules for equipment and supplies Equipment
Federal Definition of Equipment Tangible personal property Useful life of more than one year Acquisition cost of $5,000 or more
State may use another definition as long as it includes all property described above
Supplies Everything else
91
Inventory Management (cont.) ED expectations
Track all tangible personal property regardless of acquisition cost
Generally not consumables – but: Still need to verify systems ensure sufficient level of
control Still need to show that program received the item
(recent OIG audit of composition notebooks)
Strategies? Emerging issues – personally identifiable
information
92
Equipment Must have adequate controls in place to
account for: Location of equipment Custody of equipment Security of equipment
93
Equipment (cont.) Property records
Description, serial number or other ID, title info, acquisition date, cost, percent of federal participation, location, use and condition, and ultimate disposition
Physical inventory At least every two years
Control system to prevent loss, damage, theft All incident must be investigated
94
Equipment (cont.) Must protect against unauthorized use
May use for other projects as long as use is incidental and does not interfere
When property no longer needed, must follow disposition rules: Transfer to another federal program Over $5,000 – pay federal share Under $5,000 – no accountability
95
Supplies Must maintain effective control and
accountability Must adequately safeguard all such
property Must assure that it is used solely for
authorized purposes
96
This presentation is intended solely to provide general information and does not constitute legal advice. Attendance at the presentation or later review of these printed materials does not create an attorney-client relationship with Brustein & Manasevit. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances.