Richmond Chapter of the AGA 2009 Spring Seminar

1. Richmond Chapter of the AGA2009 Spring Seminar Implementing the Requirements of the American Recovery and Reinvestment Act by State and Local Governments Presented by Edward J. Mazur Senior Advisor for Governmental Financial Management Cherry, Bekaert & Holland, L.L.P. Wednesday, May 20, 2009

2. Agenda • Overview of ARRA • Impact on State and Local Governments • Timelines—Key Deadlines • Receiving, Disbursing and Reporting ARRA funds • Transparency, Oversight, and Accountability • Compliance with ARRA Requirements • Internal Control, External Audit and Single Audit Implications • Department of Education Illustration • GAO’s First Oversight Study Results • Progress of ARRA in Virginia • Future Guidance • Web Resources

3. The American Recovery and Reinvestment Act Source: www.recovery.gov

4. Purposes of the Recovery Act (ARRA) • Preserve and create jobs and promote economic recovery • Assist those impacted by the recession • Provide investments needed to increase economic efficiency by spurring technological advances in science and health • Invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits • Stabilize state and local government budgets, in order to minimize and avoid reductions in essential services and counterproductive state and local tax increases

5. ARRA Targeted Efforts • Clean, efficient American energy • Transforming our economy with science and technology • Modernizing roads, bridges, transit and waterway • Education for the 21st century • Tax cuts to make work pay an create jobs • Lowering healthcare costs • Other • Jobs, Jobs, Jobs

6. Accountability Objectives in Mitigating Risks over ARRA Funds • To award and distribute funds in a prompt, fair and reasonable manner • To report recipients and uses of funds in a clear, accurate, and timely manner • To ensure that funds are used solely for authorized purposes, and that fraud, waste, abuse, & errors are mitigated • To avoid project delays and cost overruns • To achieved Goals, including program outcomes and improved economic conditions

7. Intended Accountability Outcomes • Program/economic outcomes achieved • Competitive opportunities maximized • Waste, fraud, and abuse identified and minimized • Funds obligated/expended timely • Improper payments minimized • Timely and accurate data reporting ***Increased accountability and transparency*** • Recovery.gov • Recovery Board, GAO, Inspectors General, whistleblowers

8. Accountability and Transparency Players - Governor or Designee - Community & Econ. Development - Recovery Czar - Education - State Auditor - Health - State Budget Director - Highways & Transportation - State Comptroller - Homeland Security - Chief Information Officer - Housing - Chief Procurement Officer - Social Services - State Treasurer - State Evaluation Entity

9. Overview of ARRA Accounting and Reporting • Accounting and reporting requirements for ARRA funds represent a significant fiscal process • Therefore, you need to ensure that ARRA requirements : • Are well documented; • Key controls identified, documented & tested; • Control weaknesses are identified and mitigated • Additional reporting is required • To Federal government (recovery.gov) • To States from local gov’t subrecipients • To Recipients from subrecipients

10. State Impact Source: www.recovery.gov

11. Virginia allocated $4,768 Million Source: www.stimulus.virginia.gov

12. Virginia allocated $4,768 Million Source: www.stimulus.virginia.gov

13. Estimated Funding Amount for Richmond and Henrico County Function Program Amount Education Education Technology $ 268,780 Education Fiscal Stability— Higher Ed 41,083,474 Education Fiscal Stability—K-12 13,068,657 Education IDEA Part B—Preschool 194,995 Education IDEA Part B—School-age 7,053,320 Public Safety Byrne Justice Grant 1,590,269 Richmond Total: $ 63,259,495 Education Education Technology $ 139,378 Education Fiscal Stability—K-12 28,149,208 Education IDEA Part B—Preschool 301,973 Education IDEA Part B—School-age 10,515,711 Public Safety Byrne Justice Grant 458,132 Henrico Total: $ 39,564,402

14. Timeline – Key Deadlines Source: www.recovery.gov Source: www.stimulus.virginia.gov

15. Requesting and Receiving ARRA Funds

16. Disbursing and Reporting ARRA Funds Source: www.stimulus.virginia.gov

17. Unprecedented levels of transparency, oversight and accountability Source: www.stimulus.virginia.gov

18. Unprecedented levels of transparency, oversight and accountability Source: www.stimulus.virginia.gov

19. ARRA Prohibited Expenditures

20. Actions to ensure compliance with ARRA requirements • OMB Guidance • Agency Specific Guidance • State Comptrollers for ARRA Reporting • State & External Auditors Under A-133 • GAO Reports for Implementation Issues

21. Internal Controls

22. Questions • Has your government organized an ARRA program management office and established vision, strategy, and methodology? • Has your government assessed existing processes, systems, and controls for administering federal funding against ARRA expectations? • Is your government prepared to track and resolve performance and compliance issues? • Have year-end ARRA financial reporting requirements been identified ? • Has your government complied with requirements to report the status of projects or activities for which recovery funds were obligated and expended?

23. Single Audit Implications Source: GAO-09-580

24. Use of Single Audit Process • Past Audits inform risk assessment • ARRA structure to aid Audit process, e.g. • Assignment of separate CFDA’s for ARRA • Evaluation of “high risk” programs and grantees • Separate reporting on SEFA (including subrecipient) • Federal audit clearinghouse to display all Single Audit findings--including ARRA

25. OMB A-133 Compliance Supplement • New Compliance Supplement Section on ARRA • Appendix VII – (reserved for advisory announcements) • Include internal control discussion • VII – highlights of new clusters and major program • June 30 – New addenda including new reporting requirements • New Clusters of Programs • Major Program Determination • New program cannot be low risk • Award Terms and Conditions—key for subrecipients

26. Illustration--Department of Education

27. Illustration--Department of Education, Continued

28. State Fiscal Stabilization Fund • One-time appropriation of $53.6 billion • DOE will award $48.6 billion by formula to governors in exchange for education reform commitments • Will stabilize State and local budgets to minimize or avoid reductions in education and other essential public services • Avert cuts and retain teachers and professors • Support modernization, renovation, and repair of facilities • Significant resources to support education, public safety and other government services

29. State Fiscal Stabilization Fund • States must apply to US DOE for funds with key assurances and information on the use of funds • For FY09, FY10, FY11, States will maintain state support at FY06 levels • Commitment to advancing education reform in: • Increasing teacher effectiveness • Establishing state-wide education longitudinal data systems • Improving the quality of state academic standards & assessments • Baseline data that demonstrates the state’s current status in each education reform area • Description of how state intends to use its stabilization allocation

30. State Fiscal Stabilization Fund • Within 2 weeks of approved application, DOE will provide 67% of SFSF allocation (in some cases 90%) • Full peer review of application before final allocations • Once SFSF awards, school districts may use for any allowable purpose under the Elementary and Secondary Education Act (ESEA)

31. GAO Study of ARRA • Recovery Act requires GOA to do bimonthly reviews of the use of funds by selected states and localities • 16 states and D.C. (Southeast: FL, GA, NC, • VA not included, but they will be reviewing reports from states not selected • 90% of funds to states and localities in FY09 will be through health, transportation and education programs • 3 largest programs • Federal Medical Assistance Percentage grant awards • Highway Infrastructure Program • State Fiscal Stabilization Programs

32. State Concerns with ARRA FundingIdentified by GOA Study • Lack of Recovery Act funding provided for accountability and oversight • How to determine jobs created and retained under the Act • Modifications to accounting systems to track ARRA funds • Differences in software • Outdated systems • Lack of financial system grant module • Identifying and tracking ARRA funds to subrecipients, local governments, and other non-state entities • Ability of these entities to separately tag, monitor, track & report • Concern over the States being held accountable for these entities

33. Virginia ARRA Accomplishments to Date • Governor established an ARRA Implementation Team, chaired by Wayne Turnage, Chief of Staff. Includes members with subject matter expertise in each functional area covered by ARRA • Governor provided required ARRA certification to begin receipt of funds on March 3, 2009. Other individual program certifications required on a more piecemeal basis • A Web site was hosted to solicit requests from the state agencies, localities, interest groups, and the public at-large. More than 9,000 projects were submitted to the website totaling close to $466 billion Source: www.stimulus.virginia.gov

34. Virginia ARRA Accomplishments to Date • Web site has transitioned from a portal for data entry to a site that provides information to citizens and tracks the allocation of ARRA funds in Virginia by locality and eventually by program. Website address is: http://www.stimulus.virginia.gov • The website is updated at least weekly and includes information on Competitive Grants available under the ARRA. • Regular meetings with the Virginia Association of Counties and Virginia Municipal League • ARRA Implementation Team members are making presentations on stimulus to a variety of groups. Regular meetings with local governments, businesses, legislators, and citizens. Source: www.stimulus.virginia.gov

35. What to Look For! • Guidance from OMB and Federal Agencies continuing to be developed • Still unanswered questions (e.g. shaping Single Audit) • GAO Study of the Recovery Act • As Initial Implementation Unfolds In States and Localities, Continued Attention to Accountability Issues Is Essential • States Concerns (e.g. other non-state recipients) • Resources to use (e.g. who pays for state-level accountability measures)

36. Future Guidance

37. Web Resources • www.recovery.gov • Contains links to Federal Agencies’ Recovery.gov websites • www.stimulus.virginia.gov • http://www.gao.gov/new.items/d09580.pdf • http://blogs.cbh.com/govserv/ • Virginia State Comptroller’s Stimulus Webpage • www.doa.virginia.gov/Stimulus/Stimulus_Information.cfm

38. CBH Government Service Blog http://blogs.cbh.com/govserv/ • Provides ARRA information concerning: • Administrative regulations and guidance • Activities of Professional organizations • Stimulus related news articles

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40. Presenter Contact Information Edward J. Mazur, CPA Senior Advisor for Governmental Financial Management Cherry, Bekaert, & Holland, L.L.P. 1700 Bayberry Court, Suite 300 Richmond, VA 23226 804.673.5731 direct 804.240.8672 cell emazur@cbh.com