Transcript Legislative Update

Federal Grants Management Training
May 6, 2013
Renaissance Downtown
Phoenix, AZ
Presented by
Michael Brustein, Esq.
Brustein & Manasevit, PLLC
[email protected]
www.bruman.com
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Agenda
1. The State of Congress
2. Fiscal and Budgetary Developments
(Sequestration)
3. The State of the Federal Role in Education
4. A Test on Federal Grants Management
5. EDGAR and OMB Tutorial
6. Questions
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The State of Congress
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Congressional Productivity
The 112th Congress was the least productive since analysts started keeping track
Clinton
impeachment
112th: 283
Public laws
passed
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Congressional Productivity
• Lack of Productivity is a result of:
▫ Gridlock in legislative process
▫ Divides between parties and within parties
 Divided Congress, continued influence of “Tea
Party”
▫ Significant focus on “must-pass” legislation in
contentious policy areas like federal spending
• 113th Congress not doing much better
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Congressional Popularity
>
Source: PPP poll January 2013
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Congressional Popularity
• Root Canals
• Lice
• Colonoscopies
Source: PPP poll January 2013
>
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The Good News
>
Source: PPP poll January 2013
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Retirements and Turnover
• Significant numbers of Representatives and
Senators have retired or announced
pending retirement in recent years.
• Most cite age, but also driven out by
gridlock, partisan politics, etc.
▫ Voter dissatisfaction means greater electoral
turnover in Congress
▫ Lucrative post-Congressional job opportunities
add incentive to retire at younger age
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Largest Turnover Since 1970’s
• Current announced
retirements, plus defeats in
last election, means largest
turnover in Congress since
1970’s
▫ Especially pronounced in
Senate
• Expect continued turnover in
next few years
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The State of Congress
• Overall:
▫ Continued partisanship
▫ Significant turnover on
education-relevant Committees
and Committee leadership
▫ Loss of institutional
knowledge/relationships
▫ Focus on fiscal policy above all
else
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Fiscal and Budgetary News
Sequestration
The Fiscal Cliff Deal
FY 2013 Appropriations
How Cuts Will be Implemented
FY 2014 and Beyond
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Sequestration
• Also known as “the
sequester”
• A series of automatic,
across-the-board budget
cuts
• Amount and type of cuts
depends on category of
spending
• Following procedures laid
out in 1985 law
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Where does sequestration come from?
• Budget Control Act of 2011
▫ Set deficit reduction targets
▫ Created Congressional debt “supercommittee”
▫ If supercommittee failed to come up with a
deficit reduction plan meeting targets,
automatic cuts triggered
 Sequestration as failsafe/threat  not really
meant to go into practice
 Because supercommittee did not come up
with a plan, sequestration is triggered
• American Taxpayer Relief Act
▫ Also known as the fiscal cliff deal
▫ Modified sequestration amounts, timing
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How does sequestration work?*
• Triggers procedure set out in Balanced Budget
and Deficit Control Act of 1985
• Congress identifies total amount to be cut and
time period over which cuts occur
• Cuts are divided evenly by year
• Cuts are split between defense and nondefense spending
• Exempt programs (outlined in law) are removed
from equation
• All other programs see equal, across-the-board
cuts in first year (in this case, modified procedure
for subsequent years)
• General procedure is subject to modification by
Congress
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The Fiscal Cliff Deal
• In the days leading up to the end of 2012,
fiscal picture looked dire
▫ Temporary (“Bush-era”) tax cuts set to expire
▫ Sequestration set to go into effect January 2nd
▫ Concerns about how sequestration, increase
in tax rates would affect economy
▫ No alternatives in place
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The Fiscal Cliff Deal
• Congress passed comprehensive
spending/tax package known as “American
Taxpayer Relief Act” early on New Year’s Day
• Extended most of the Bush-era “middleclass” tax cuts (though not payroll tax cuts)
• Raised marginal income tax rates on those
with incomes above $400,000 for individuals
($450,000 for couples)
• Made changes to implementation
date of sequestration and total
cut amount
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Changes to Sequester
• Delays start by two months (was January 2;
now March 1, 2013)
• Reduces FY 2013 cut by $24 billion to
compensate for shorter time period
• Offsets reduction in cuts with:
▫ $12 billion in new taxes to IRAs that are
converted from traditional to Roth plans
▫ $12 billion in cuts to annual spending caps
 Split evenly between Defense and non-defense
• Cut now at 5% of FY 2013 funding
• Sequestration still applies for remainder of FY
2013 and for FY 2014 through FY 2021
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Vanishing Sequestration Cuts
• Fiscal cliff deal creates $24 billion in offsets to pay for
delay
• Half will come from spending cuts ($12 billion)
• Split evenly between defense and non-defense
discretionary (“NDD”) funding (includes
education) ($6 billion each)
• One-third of cuts to be applied in FY 2013, remaining
two thirds in FY 2014)
•  $2 billion in NDD cuts for FY 2013
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Vanishing Sequestration Cuts
• Fiscal cliff deal spending cuts will be applied
through reductions in Congressional spending
caps
• Cuts to caps =/= cuts to funding
• These cuts are in addition to any across-theboard cuts from sequestration
• Due to differences between spending and
caps, little anticipated effect this year
• Takes originally estimated 8.2% cuts down to 5%
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Two major factors in determining
federal funding under sequestration:
1. Congressional
spending caps
2. Regular-year
federal
appropriations
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Regular-Year Appropriations
• Still important!!!
• For FY 2013, sequestration cuts represent
reductions below the “budget baseline”
(current federal spending levels)
• Funding for FY 2013 set by two continuing
resolutions (CRs) (temporary budget measures)
• Second FY 2013 CR set funding at FY 2012
levels, with some exceptions
• E.g. Head Start (additional $33.5 million)
• For FY 2014 and beyond, cuts are incorporated
into funding levels through regular
appropriations process
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How Sequestration Cuts are Calculated
• Adjust total cut for interest to reflect lesser debt principal
▫ $1.2 trillion  $984 billion
• Divide by year from FY 2013 through FY 2021  $109.3 billion
▫ Reduce FY 2013 cuts by $24 billion, to $85.3 billion*
• Split function between defense and non-defense spending
(about $42.7 billion each in FY 2013, $54.5 billion each per
subsequent year)
• Take exempt programs out of the equation
• Spread cuts equally among remaining programs in FY 2013
▫ Cut is taken at federal “program, project, or activity” level
▫ Sequestration cut will be 5% of FY 2013 funding*
(*change due to fiscal cliff deal)
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The Impact of Sequestration
(after the fiscal cliff deal)
$0
For FY 2013, in millions of dollars, assuming a 5% cut
-$500
-726
-$1,000
-$1,500
-$2,000
-$2,500
-87
-124
-2,271
-579
-86
-149
-408
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How Cuts will be Implemented
• All funds allocated October 2012 and later are
subject to cuts starting March 1
• Single allocation or monthly programs affected
starting with first allocation after sequester date
(e.g. April 1)
• For competitive grants, funds previously awarded
will remain unaffected(even for multiyear/continuation grants)
• Cuts will be implemented in next competition
• For bifurcated funding programs*:
▫ Advance funding received in October of 2012 did
not see cuts when allocated
▫ BUT cuts will be calculated and total FY 2013 cut
deducted from July 2013 allocation
*Per a July 2012 memorandum, confirmed in February 26 conference call.
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FY 2013 Funding Under Sequestration
Sequestration
Cut
July 2013
Oct. 2012
October 2012
July 2013
(allocated without
sequestration cut)
In programs with bifurcated funding, grantees usually receive about 75% of
program funds in October, and the remaining 25% the following July. Though
sequestration cuts represent approximately 5% of year’s allocation, that entire
amount will be taken out of July 2013 funds.
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Sample Sequestration Cut
• Assume the (fictional) “School is Cool” (SIC)
grant program provides $100,000 per year to
your State
• As with most bifurcated funding programs, 75%
of SIC funds ($75,000) are distributed to States
in October, with the remaining 25% ($25,000)
available in July
• Under sequestration, ED* provided the full
funding amount in October of 2012. However,
it will calculate a cut for the full fiscal year
(approximately 5%, or $5,000) and will apply
that full year’s cut against July 2013 funds.
*Per a July 2012 memorandum, confirmed in February 26 conference call.
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Sample Sequestration Cut – FY 2013
Sequestration
Cut
• Your State received its
regular SIC appropriation
($75,000) on October 1, 2012.
July
2013
• The full-year sequestration
cut of $5,000 will be taken
out of July 2013 funding
October 2012
(allocated
without
sequestration
• So the SIC funds sent out on
July 1, 2013 will be $20,000
($25,000 - $5,000)
*Per a July 2012 memorandum, confirmed in February 26 conference call.
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NOTE: Actual allocations may
shift by more or less than 5%
• Because of variations in census data, poverty
data, and per pupil expenditures, FY 2013
allocations under Title I and other formula
programs will be different from FY 2012
• In addition, ED will not reduce small or shrinking
districts below hold-harmless amount, leaving
other district to share that cut
• Result: actual cuts from 2012 to 2013 at district
level can range from 0% to approximately 10%
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NOTE: Second CR Means
Additional Across-the-board Cut
• Second FY 2013 CR contains provision that
triggers automatic cuts if appropriations
were above spending caps
• OMB says this has occurred
• Will mean 0.2% across-the-board cut in
addition to sequestration in FY 2013
• Unclear at this point how this cut will be
implemented, but likely through
sequester process
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Sequestration in 2014 and Beyond
• For FY 2014 through 2021, cuts are applied
through reductions in annual spending caps
as part of regular Congressional
appropriations process
• Cuts will be applied to both allocations for
bifurcated programs (October and July)
• Total cut is estimated at 8.2% of nondefense discretionary spending
• But actual cut for each program depends
on appropriation bills
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Sample Sequestration Cut – FY 2014
 For FY 2014 and beyond,
July 2014
sequestration cuts (and cuts
from the fiscal cliff deal) are
taken out of 302(b)
appropriations caps
 Sequestration will not be applied
October 2013
as a percentage cut
 Appropriators have discretion in
distributing spending/cuts
 So 75% of SIC funds will be sent
out in October, and 25% in July
 The only variable here is total
program funding – the size of
the pie.
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Sequestration in 2014 and Beyond
• Reductions in caps give appropriators more
discretion in choosing where to spend or trim
(as opposed to automatic cuts)
▫ Can preserve some programs entirely
 Expect preservation, in large part, of Title I, IDEA
funds
▫ Can “zero out” programs entirely
• Can be unpredictable
▫ In years where budget set
late, funding is up in the air
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The FY 2014 Double Whammy?
• States and school districts generally structure budget
cycles differently from the federal government
▫ For federal government, FY13 funding = October
2012 + July 2013 allocations
▫ For States/districts, SY 2013-14 = July 2013 + October
2013
• Assuming FY 2014 program funds are cut, SY 2013-14
will see a double reduction:
▫ July 2013 funding will be cut proportionate to full FY
2013
▫ October 2013 funding will be cut by up to 8.2%,
depending on Congressional appropriations
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FY 2014 Appropriations Progress
• Both House and Senate have passed nonbinding budget resolutions
▫ House: cut $5.7 trillion over next decade
▫ Senate: cut $975 billion in spending over next
decade, matched with $975 billion in new
revenues
• President released annual budget proposal
April 10th
• Both chambers determined to get budget
done on time
The State of the Federal
Role in Education
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• 1960s: Congress began recognizing unmet
educational needs
▫
▫
▫
▫
▫
Children in Poverty
Students with Disabilities
Vocational Training
Limited English Proficient Students
Homeless Students
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• Federal education programs
▫ Designed to address specific unmet needs
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Limited Federal Capacity
• State administered programs created
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Department of
Health Education and Welfare
• Education responsibility generally given to the
U.S. Department of Health, Education, and
Welfare (HEW)
• United States Office of Education
▫ Divided into program bureaus with specific
responsibility
 Elementary and Secondary Education
 Vocational Education
 Special Education, etc.
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Office of Education
• Bureaus: Responsibility for individual
program
• Individual programs contained separate
administrative rules
▫ Not always consistent
▫ Burdensome due to differing requirements
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U.S. Department of Education (ED)
in 1980
• Education responsibility transferred
• HEW becomes ED and Health & Human
Services (HHS)
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ED
• Separation of program function is
preserved
▫ Funds allocated to States for program
administration
▫ Funds allocated to States for distribution to school
districts – local education agencies (LEAs)
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State Education Agencies (SEAs)
• SEAs expanded
▫ Significant function: Administer federal programs
▫ Divided into program offices
 Generally reflect federal organization
 Examples
 Elementary and Secondary
 Students with Disabilities
 Career Education
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• Federal Government
recognizes inefficiency!
▫ Programs with separate
administrative requirements
 Duplication of efforts
 Inconsistent requirements
 Changes need to be program by
program
▫ Leads to administrative
standardization
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Administrative Standardization
• General Education Provisions Act (GEPA)
• Education Department General
Administrative Regulations (EDGAR)
• Single Audit Act
• Office of Management and Budget (OMB)
Circulars
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GEPA
• Part of the organic law establishing ED’s
structure
• Cross-cutting provisions
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EDGAR
• Department of Education administrative
rules covering all ED programs
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Single Audit Act
OMB Circular A-133
• Standardized audit requirements for all
entities expending > $500,000 federal $
annually
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OMB Circulars
• Government-wide principles for determining
what costs are allowable
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How can we spend these funds?
• Always begin with program statute…
▫ Ask:
a) What can we do?
b) Who can we serve?
c) Any specific restrictions?
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What controls the
State – LEA relationship
regarding the federal programs?
• Part 76 – 34 CFR Part 76 (Code of Federal
Regulations)
• LEA applies to the State for funding
• State notifies LEA
– Amount
– Timing
– Federal requirements applicable
• SEA assures intended uses are within the law
• LEA commits to follow the plan it submits to SEA
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General Education
Provisions Act (GEPA)
• GEPA: Is the program subject to the crosscutting authority of ED on State
Administered Programs?
• “Applicable program”
▫ Program for which the Secretary of
Education has administrative responsibility
 No Child Left Behind
 Individuals with Disabilities Education Act
 Carl Perkins Career and Technical
Education Act
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GEPA – EDGAR
• EDGAR applies and expands GEPA
requirements
• Application Process
▫ State applies to ED
▫ Local Education Agency (LEA) applies to
State (SEA)
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GEPA – EDGAR
• Funds flow ED  SEA  LEA
• States are responsible for and must
monitor LEA compliance
• SEAs are responsible to ED to properly
administer federal grant funds
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GEPA – EDGAR
• Funds flow to SEA after ED approval of
application
• Funds flow to LEA after SEA approves local
application
• Available for 27 months for obligation
• Obligation is not expenditure
• 90 days additional for liquidation
▫ Obligation defined
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Single Audit Act – OMB Circular A-133
• Historically:
– Audit requirements historically separate and within
program statutes
– Requirements inconsistent
• Single Audit Act (A-133)
– Requires audit by independent auditor of federal
programs whenever recipient expends over $500,000
federal funds – all services
– Creates uniform standards of
• Independence
• Selection of items to be audited
• Auditing standards
– Contains program guides for auditor use
• Compliance supplements
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Single Audit Act – OMB Circular A-133
• Compliance Supplement
▫ Each major program
▫ Guide developed by ED/OMB
▫ Important resource
 ED view of important elements
 Auditor responsibility
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OMB Circulars
• Government-wide
• Contain general principles for
determining allowable costs
• http://www.whitehouse.gov/omb/circ
ulars_default
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OMB Circular A-87
• Covers state-local governments
• Applicable to SEAs, LEAs
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OMB Circular A-87 –
43 Items of Cost
• Can I pay for attendance at a
professional development meeting for
a Title I teacher?
• What documentation do I need to
support salary payments?
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Possible Massive Changes to
Circulars
• NPRM – 2/1/13
• Close of comment period:
Extended 06/02/13
• Analysis of public comment
• Final regulation – not likely before
1/1/14
• EDGAR revisions – within one year
of final regulation ?
• No splitting FY
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Why “Supercircular”???
1. Greater simplicity
2. Greater consistency
3. Obama Executive Order on
Regulatory Review – 2011
 Increase efficiency
 Strengthen oversight
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What is covered?
1. Administrative Requirements (A102, A-110)
2. Cost Principles (A-87, A-21, A122)
3. Audit Requirements (A-133)
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GEPA
• And finally…
▫ What happens if I don’t follow the rules?
▫ Enforcement procedures
 Recovery of funds
 Termination of program
 High Risk States
 Compliance Agreement
Grants Management Test
EDGAR and OMB
Circular Tutorial
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Key Questions
1. What is the significance of EDGAR?
2. Which OMB Circulars apply?
3. What is the relationship to program
regulations?
4. What legal authorities do you rely on?
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Anatomy of EDGAR
• Administrative Rules
▫
▫
▫
▫
▫
▫
▫
▫
▫
SEAs / LEAs – Part 80
Postsecondary – Part 74
Non Profits – Part 74
State Administered Programs – Part 76
Direct Grant – Part 75
Enforcement – Part 81
Lobbying – Part 82
Debarment / Suspension – Part 85
FERPA – Part 99
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Roadmap
1. Standards for Financial Management
2. How to Determine if a Cost is Allowable
3. Cash Management Controls and
Obligations
4. Asset Controls
5. Procurement Controls
6. Selected Cost Items
7. Audits and Enforcement
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Roadmap of EDGAR and OMB
Circulars
a) 80.20(b) (p. 107) – Standards for Financial
Management Systems
b) 80.22 (p. 108) – Allowable Costs
c) A-87 Basic Guidelines (p. 291-292)
d) A-87 Composition of Cost (p. 292)
e) 80.23 (p. 108) – Period of Availability of Funds
f) 76.707 (p. 87) – When Obligations Are Made
g) 76.708 (p. 87) – When Certain Subgrantees
May Begin to Obligate Funds
h) 76.710 (p. 88) – Obligations Made During a
Carryover Period are Subject to Current
Statutes, Regulations, and Applications
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Roadmap of EDGAR and OMB
Circulars
i) 80.32 (p. 114) – Equipment
j) 80.36 (p. 115) – Procurement
k) 80.42 (p. 124) – Retention and Access
Requirements for Records
l) 76.730 (p. 89) – Records Related to Grant Funds
m) 80.40 (p. 122) – Monitoring and Reporting
Program Performance
n) 80.43 (p. 126) – Enforcement
o) 76.401 (p. 74) – Disapproval of an Application –
Opportunity for a Hearing
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Roadmap of EDGAR and OMB Circulars
p) Appendix B to A-87 (p. 293) – Selected Items of Cost
+ Advertising (p. 294) (outreach)
+ Personnel Costs (p. 295)
+ Meetings (p. 305)
+ Travel (p. 308)
q) A-133 – Single Audits
r) + 210 (p. 358) – Subrecipient and Vendor
Determinations
+ Compliance Supplement (p. 354)
+ 200 (p. 357) – Audit Requirements
+ 320 (p. 363) – Report Submission
+ Pass-Through (p. 367)
s) 81.32 (p. 134) – Proportionality
t) Appendix to Part 81 (p. 139) – Illustrations of
Proportionality
u) 81.33 (p. 135) – Mitigating Circumstances
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Disclaimer
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, PLLC. You should not take
any action based upon any information
in this presentation without first consulting
legal counsel familiar with your particular
circumstances.