Transcript A Programmatic Look At Fiscal Monitoring Ted Davis, Manager, Career & Technical Education (CTE) Grants & MIS, Arizona Department of Education.

A Programmatic Look At Fiscal Monitoring
Ted Davis, Manager, Career & Technical Education (CTE)
Grants & MIS, Arizona Department of Education
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• No one in Washington seems to be talking about
the Cooperative Audit Resolution and Oversight
Initiative – CAROI any more.
• The Office of Inspector General (OIG) is
conducting its own audits of eligible recipients and
specific federal programs.
• The Office of the Chief Financial Officer (OCFO),
the U.S. Department of Education, is conducting
assessments of state Title I and III fiscal
monitoring.
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• Questions related to the quality or value of the A–133
audits.
• The realization that smaller federal programs are not
being audited.
 Schools or districts that expend less than the
$500,000.
 Programs like Perkins, under the “risk provisions”
of the A-133 guidelines, are being passed over for
audit.
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• The first warning signs of a new, additional
audit concern surfaced in 2005.
The OIG cited the failure of Louisiana,
Colorado, Idaho and Florida to adequately
conduct fiscal program monitoring activities.
• In 2006 the Arizona Department of Education
was cited for inadequate fiscal program
monitoring of two of its flow-through programs.
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From the Office of the Chief Financial Officer,
USDOE¹
• 249 Findings
• 48% - Related to procurement and distribution
• 38% - Equipment controls
• 9% - Audit issues –
o Inadequate guidance related to recipient corrective plans of
action.
o Inadequate follow-through on corrective plans of action.
o Reports not timely, inadequate or could not be found.
¹Fiscal Components of Title I & III Monitoring and a Summary of Recent Findings, James Evans, Managing Federal Education Grants Fall
Forum, Nov. 30, 2006.
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Labor distribution (Time & Effort Issues)
Eligibility & Comparability (NCLB-Title I Issues)
Documentation of transactions, cash management,
allocations, schoolwide plans, comparability reports,
etc…
Procurement
Supplanting
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EDGAR rule making, which should go into effect in federal FY 2007, will
affect direct/discretionary grant administration, including –
Pre-award review requirements of applicant administrative capability and
financial responsibility.¹
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Financial management.
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Cash management.
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Time accounting (time & effort).
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Property management.
¹ Cost Allocation Confessions ,Ted Mueller, Indirect Cost Group, OCFO Presentation, Dec.1, 2006 Brustein &
Manasevits Fall Forum
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• Compliance with the provisions of your grant/program
regulations and your approved grant application.
• Procurement.
• Property management.
• Time & effort reporting/documentation.
• Grant period issues – When may costs be charged to a
grant; are they charged to the correct grant-year, etc.?
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Yes, even if the recipient has had a A133 Audit.
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It includes recipients who expended less than $500,000.
•
Section 230(b)(2) of A-133 and Attachment B, Section 4.c.of OMB
Circular A-87 make the costs of agreed-upon procedures engagements
on LEA’s and other subgrantees allowable if expenditures are below
the $500,000 threshold.
Two Conditions –
1.
The scope is restricted to mainly program-specific
requirements, rather than organization-wide ones.
2.
The state must arrange and pay for the agreed-upon
procedures engagements.
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• It includes programs that often are not audited –
such as the Perkins vocational programs.
• Fiscal program monitoring is required per:
 34 CFR §80.40
 OMB Circular A-133, Section 400(d)(3)
 OMB Circular A-133, Section M,
Subrecipient Monitoring, Compliance
Requirements
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• Monitoring First
• Audit – When you are out of other options
• Lowers risk of “questioned costs” & having to
return $$$
• Greater flexibility
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• Many professional educational staff “freak” ….
• The basic answers include –
 Staff training
 A well designed monitoring guide
 Recipient training
• CTE director meetings
• ACTEaz
• Other venues..
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• Pay Attention!! Ask your counterparts that are being
monitored, “What are they looking at?”
• Attend any training the state is offering.
• CTE director meetings
• ACTE (state and national)
• NACTEI, AEFFA, Thompson Pub., Brustein
or other vendor, Federal workshops, AASBO
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• Review the areas being monitored in your state.
• If you don’t already have procedures in place relative to
those areas being monitored, set something up then ask
“Does this cut it?”
• You want to have something in place wherever there is a
risk for questioned costs that would result in the state
asking for $$ back…
• A finding that asks you to change something beats the
heck out of one that asks for $$ back…
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• Recipients who fail to submit their required A-133 audits to the
ADE.
• Recipients (under $500,000 in federal funds) who fail to submit
their required financial statement audits per your state’s law.
• Recipients that consistently fail to file their financial completion
reports on time.
• Recipients that consistently fail to file programmatic required
reports on time.
• Program staff identified concerns.
• In response to concerns raised by recipient employees, board
members, parents, etc.
• Check out EDGAR 34 CFR § 80.12 – I talks about “risk”.
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• Compliance with the provisions of your grant/program
regulations and your approved grant application.
 Grant period issues – Costs be charged to the correct
grant and year; no obligations until grant
substantially approved, etc.
• Procurement.
• Property management.
• Time & effort reporting/documentation.
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• Did the recipient perform those grant activities identified in their
approved application?
• Did they submit reports required by the grant, such as:
 Mid-year and final narrative progress reports?
 Financial completion reports?
 Performance measures reports?
 Etc.?
• Did costs and expenditures appear to be allowable under the
allowable costs provisions of the Act or regulations applicable
to the actual grant and the appropriate OMB Circular (A-87 for
K-12 programs) ?
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• Did the recipient buy only items identified in its approved
equipment/capital list?
• Can the expenditure be traced back to the property management
system through a requisition, the claim, the school’s/district’s
general ledger, etc.?
• Do expenditures included on the grant’s fiscal completion report
track back to the correct revenue accounts, the general ledger, etc.?
• Were costs coded correctly, relative to their approved use in the
approved grant and USFR coding guidelines?
• Etc.
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Grant Period • Did the recipient have an approved or substantially approved grant in
place before they began to obligate grant funds?
• Were expenditures charged to the correct fiscal year?
• EDGAR - 34 CFR § 76.707 & 76.708.
• Some states have statutes that allow for the prepayment of certain
expenses.
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• Review your own plan at least quarterly – It says what your district agreed
to do and it is ‘hanging out there’ for an auditor to see, so follow it or
change it
Your budget
Your performance measures targets
• Plan to amend your plan at least twice
 Program modifications
 Compare planned expenditures to actual
• Check with your business manager and/or accounting clerk to insure that
your plan and expenditures appear reasonable and coded to the right cost
lines…
*Covering Your Tush…
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•
Ask questions
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Review your requested and actual expenditures for equipment, training
and other services
• Document changes/amendment and the reason for…
• If your state BG specialist tells you to can do something without an
amendment –
 Confirm the change in writing – email is fine…
 Don’t just rely on a verbal approval –
 Send a email that says something like “Per our discussion I am
buying XXX with my unobligated equipment funds. If I
misunderstood you or I need to do something else to document the
change please let me know as soon as possible, etc.”
Most state email systems allow you to request a confirmation that an
email was received, opened and assumed “read”. USE THE
OPTIONS
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• Keep SEPARATE notebooks for your plan, equipment acquisition, staff,
etc.
• Your “Approved Plan” Notebook should contain –
 A copy of your approved plan
 Any amendments
 Emails related to change
 Communication with your BG specialist
 Changes documented by email
 Anything else you feel is important
• Make sure someone else in CTE in your district knows where this stuff
can be found…
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• Does the recipient have a capital asset list that meets the requirements of
your state’s law? (State Law vs. 34 CFR § 80.32 of EDGAR)
 Equipment costing $5,000 or more with a useful life of one year or
more.
 Addresses all the mandatory required information–
• Location
• ID information (tag, serial number, etc.)
• Does the recipient maintain a stewardship* list for items costing less than
$5,000? (State Law vs. 34 CFR § 80.20(b)(3) EDGAR)
* Arizona’s system, the Uniform System of Financial Records for Arizona School Districts (USFR) defines equipment
subject to stewardship laws, to be equipment costing over $1,000 and less than $5,000.
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34 CFR § 80.20(b)(3) EDGAR
“(3) Internal control. Effective control and accountability must be
maintained for all grant and subgrant cash, real and personal property,
and other assets. Grantees and subgrantees must adequately safeguard all
such property and assure that it is used solely for authorized purposes.”
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• Did the recipient adequately document the acquisition of the asset?
• Can you physically locate selected items of equipment?
• Does the equipment appear to be being used for the purposes for which it was
acquired and in the federal program that paid for its purchase?
• Is there documentation to support the requirement that a physical inventory is
conducted every 2 or 3 years, per the EDGAR or your state’s requirements?
• Did the recipient dispose of assets in accordance with your state’s law or
administrative guidelines?
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• Document, document, document…
• Don’t totally rely on your business office or procurement office.
• Use the “low tech” approach –
 Keep a 3 Hole Binder for each fiscal year in your office.
 Keep copies of your purchase documentation.
• The requisition to buy.
• Receiving documents.
• Claim.
• Etc.
• Maintain your own listing of equipment and where it is located.
• Most districts have an automated inventory/stewardship system –
reconcile it to your notebook at least three times a year.
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• Have your own equipment check-out procedures and logs if you lend
equipment out
• Be sure to note when an item is lost, disposed of, transferred or “ripped
off”
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Monitors need training. The training should cover –
• Their state’s basic requirements, relative to
 Any existing guidance that relates to schools…
 The basics, i.e.
• Where the rules can be found: online at, their state’s
procurement office; professional groups like the
American Association of School Business Officials
(AASBO)
• Your state’s auditor general staffs’ online resources –
guidance, the audit guide they will use, etc.
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• Procurement consortiums.
• What is the threshold above which multiple
verbal quotes are required… written quotes…
quotes vs. written proposals (where price is not
the primary factor), etc.
• Ask to see a copy of the recipient’s procurement
rules.
• Etc.
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The monitor’s goal –
• An educated referral to the monitor’s financial program
staff when there is a perceived concern.
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Recipients need training. The training should cover –
• Their state’s basic requirements, relative to
 Any existing guidance that relates to schools…
 The basics, i.e.
• Where the rules can be found: online at; their state’s
procurement office; professional groups like the
American Association of School Business Officials
(AASBO)
• Your state’s auditor general staffs’ online resources –
guidance, the audit guide they will use, etc.
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• Procurement consortiums.
• What is the threshold above which multiple
verbal quotes are required… written quotes…
quotes vs. written proposals (where price is not
the primary factor), etc.
• Etc.
• Use your regular local director’s meetings, professional
development workshops, etc. to provide procurement
training to your grant recipients.
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Compliance with procurement rules is really the responsibility of a
recipient’s business manager or procurement official, but it pays to
know the basics –
• You may have a new business manager, not familiar with your state’s
rules.
• A basic understanding of the rules helps keep the recipient from
violating his or her institutions’ rules –
 Requesting a conference speaker without a clear understanding
of when quotes or bids are required…
 Obligating your agency relative to a service, buying a piece of
equipment, supplies, repairs, etc. in violation of the procurement
rules
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• Not one approved approach to time and effort
reporting/allocations.
• Employee costs can often represent a major
program cost that are material to many grants.
• Document, document, document.
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Whatever approach you use it should be –
• Reasonable
• Allocable to the grant
• Consistently treated
• In line with the recipient’s own salary and the recipient’s accounting
policies
• Only charged to one source (no duplicate charges)
• Documented, documented, documented…
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• The simplest situation is present when an employee works on
a single program for the entire period funds are budgeted for.
• A periodic certification that the employee works solely on
that program, signed by the employee or supervisory official
having first-hand knowledge of the work performed by the
employee, would meet audit requirements.
• The certifications need to be done at least semi-annually.
(A-87 Attachment B (h)(3)).
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Multiple Activities or Cost Objectives
• When you have staff working on –
 More than one federal award
 A federal and a non-federal award
 More than one allocated indirect activity
• You need personnel activity reports or equivalent documentation
or a statistical sampling system or other substitute system that has
been approved by the cognizant federal agency.
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Multiple Activities or Cost Objectives, Cont.
• “Budgeted” doesn’t cut it…
• You must adjust budgeted to actual at least quarterly
• OMB Circular A-87 allows for reasonable budgeted
charges on estimates, if they can be shown to be within
10% of actual…
• Document, document, document
• Smarter in the long run to just do actual time & effort
reporting?
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Multiple Activities or Cost Objectives, Cont.
Must meet personnel activity reporting standards –
• Must reflect an after-the-fact distribution of the
employee’s actual activity.
• Must account for the Total Activity for which the
employee is being compensated.
• Must be prepared at least monthly and must
coincide with one or more pay periods.
• Must be signed by the employee.
• The employee’s position/job description should
support salary costs being paid from the grant?
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Is There A Way Out Of A Finding In This Area If I
Haven’t Been Keeping Time & Effort Records?
• There is always “credible alternative documentation”.
• Remember Audit Standards of Evidence – GAO Standards, Sections
7.48-7.60.
• A lot of “after-the-fact” work to document staff time. A lot would
depend on how much money is involved…
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An OCFO (USDOE Financial Chief) state finding – inadequate follow-up
procedures.
Monitors need –
• Basic follow-up procedures –
 By desk audit, phone, email, revisit – the reasonable approach
depends on the finding or issue.
 More extreme – schedule a program-specific audit.
 The state program staff may place a “letter of concern” in the
recipient’s A-133 audit folder and send a copy to the recipient’s
current contracted A-133 audit firm, in the hopes that they will
review your concern under the ‘Risk’ provisions on the A-133
guidelines.
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• Anticipate possible findings and attempt to formulate your corrective
action and monitoring response in advance of a monitoring finding.
• Actually implement changes that you promise in response to a
monitoring finding. If problems pop up, contact your state staff contact
as soon as possible and work something out.
• Monitoring visits can result in “questioned costs” and a requirement
that you must return funds. You don’t want a monitoring finding that
the state has given you some “wiggle room” on to turn into a
questioned cost because you failed to implement your agreed-to
corrective action.
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LEA – Eligible Recipients
• Program law & applicable regulations.
• Your school, district or college guidelines related to –
 State financial reporting requirements.
 State and local procurement requirements.
 State and local inventory and personal property control
requirements.
 K-12, OMB Circular A-87.
 College or university, OMB Circular A-21 ( When the college is the
Tech Prep fiscal agent).
 Nonprofits, OMB Circular A-122.
 The consolidated audit requirements – OMB Circular A-133.
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OMB Circular A-133; the Cross Cutting Section and Your ProgramSpecific Compliance Supplement
EDGAR (34 CFR 74 – 99)
Your State Financial Reporting Instructions for Schools/Colleges
Whatever Audit Compliance Questionnaire your state auditors
utilize when they audit school districts or supply to contracted audit
firms doing recipient A-133 audits
Your state’s education code of law
Recent state legislation related to your program
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• Federal Program Offices – http://www.ed.gov
• Perkins Act – http://www.ade.az.gov/cte/downloads/PerkinsIV081206.pdf
• OMB Circulars – http://www.whitehouse.gov/omb/circulars
• EDGAR –http://www.ed.gov/policy/fund/reg/edgarReg/edgar.html
• Title 15, Current Bills, etc. – ALIS www.azleg.state.az.us
• Auditor General – http://www.auditorgen.state.az.us/manuals_schooldistrict.htm
• OIG Website – www.ed.gov (Click on “Offices”, left-hand column, then select
“Offices of Inspector General”, “home-page”.
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Ted Davis –
• Arizona Department of Education
• Career & Technical Education Section
• Phoenix, AZ
• 602-542-5349
•
[email protected]
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