BE A FI$CAL $.T.A.R.

1. BE A FI$CAL $.T.A.R. VR PRACTICES

2. MONITORING FINDINGS AND VR FISCAL PRACTICES Presenters: David Steele, Chief, SMPID Fiscal Unit Larry Vrooman, Vocational Rehabilitation (VR) Program Specialist, SMPID VR Unit

3. To highlight key concepts related to monitoring findings; • To provide specific examples of circumstances leading to the findings; and • To describe the process used to determine the nature and scope of the finding. Purpose of Session:

4. VR program expenditures must be allowable under the Rehabilitation Act of 1973, as amended (the Act) and the Federal Cost Principles. DETERMINING PROGRAM ALLOWABILITY

5. Determining Program Allowability: VR Regulations • The VR regulations require that: • As a recipient of Title I VR funds, the VR agency must maintain procedures to ensure that it administers the VR program in an efficient and effective manner and accounts for the proper expenditure of VR funds (34 CFR 361.12); • The VR agency must ensure that VR funds are spent solely on the provision of VR services and the administration of the VR program under the State Plan (34 CFR 361.3);

6. Determining Program Allowability: VR Regulations (cont.) • The costs must be expenditures incurred in the performance of administrative functions under the vocational rehabilitation program carried out under this part, including expenses related to program planning, development, monitoring, and evaluation (34 CFR 361.5(b)(2)); and • The costs must be incurred in the provision of VR services to individuals in accordance with their approved IPEs (34 CFR 361.48), or to groups of individuals with disabilities (34 CFR 361.49).

7. Determining Program Allowability: VR Regulations (cont.) • Establishment and Third-Party Cooperative Arrangements • VR agencies may incur allowable expenditures under the Establishment Authority (34 CFR 361.5(b)(17); 34 CFR 361.5(b)(18); and, 34 CFR 361.49); or

8. Determining Program Allowability: VR Regulations (cont.) • Establishment and Third-Party Cooperative Arrangements • The VR agency may enter into a third-party cooperative arrangement for providing or administering vocational rehabilitation services with another state agency or a local public agency that is furnishing part or all of the non-federal share, with certain requirements and restrictions. (34 CFR 361.28) • VR expenditures under other Establishment Authority (34 CFR 361.5(b)(17) and (18); 34 CFR 361.49) or third-party cooperative arrangements (34 CFR 361.28) are also allowable.

9. Federal Cost Principles (2 CFR 225, Appendix A, Part C.1, C.2., C.3.) provide 10 general criteria for determining allowable costs to a federal award. Costs must be: DETERMINING ALLOWABILITY: FEDERAL COST PRINCIPLES

10. Determining Allowability: Federal Cost Principles (cont.) • Necessary and reasonable; • Allocable to the award; • Authorized under state or local law; • Conform to limitations; • Consistent with policies regulations and procedures;

11. Determining Allowability: Federal Cost Principles (cont.) • Accorded consistent treatment; • In accordance with generally accepted accounting principles; • Not used to satisfy cost sharing or matching requirements of any other federal award; • Net of applicable credits; and • Adequately documented.

12. To determine whether expenditures made are allowable VR expenditures, the state must have two processes in place: • An effective accounting system which allows the state to expend and account for grant funds in accordance with state laws; and • Procedures for expending and accounting for its own funds. DOCUMENTING AND MONITORING ALLOWABILITY

13. Documenting and Monitoring Allowability (cont.) Fiscal control and accounting procedures must be sufficient to: (1) Permit preparation of required reports, and (2) Permit the tracing of funds to a level of expenditures adequate to establish that such funds have not been used in violation of the restrictions and prohibitions of applicable statutes. (34 CFR 80.20(a))

14. Documenting and Monitoring Allowability (cont.) • In order to determine that expenditures are allowable and allocable to VR, the state must manage the day-to-day operations of grant supported activities. • States, as grantees, must monitor grant supported activities to assure compliance with applicable federal requirements and that performance goals are being achieved. • The state’s monitoring must cover each program, function or activity. • (34 CFR 80.40(a))

15. To the extent that any portion of a service is not for the benefit of an individual or group eligible for services under the VR regulations, it is not an allowable cost; • To the extent any portion of a service is not allowable, federal funds cannot be used to provide the unallowable portion of the service; and • State funds used to provide any unallowable portion of a service cannot be used as match. This results in related areas of noncompliance (unallowable VR expenditure and unallowable match). PROVISION OF VR SERVICES: KEY CONCEPTS

16. PROVISION OF VR SERVICES: EXAMPLES OF UNALLOWABLE EXPENDITURES

17. Inappropriate Provision of VR Services Under the Services to Groups Authority • EXAMPLE: • The VR agency used the services to groups authority at 34 CFR 361.49(a)(7) to provide a variety of VR services to students with disabilities, including vocational guidance, career exploration, vocational assessment, job search skills, and work experiences prior to being determined eligible for VR services. • WHAT IS ALLOWABLE UNDER THE AUTHORITY? • 34 CFR 361.49(a)(7) provides for only consultation and technical assistance services to assist educational agencies in planning for the transition of students with disabilities.

18. Inappropriate Provision of VR Services Under the Services to Groups Authority (cont.) • THE BASIS OF THE FINDING: • 34 CFR 361.49(a)(7) does not authorize the provision of transition services directly to students with disabilities; • The portion of the agency’s policy that allows for the provision of direct services to individuals is beyond the scope of this particular services to groups authority and is not in compliance with federal requirements; and • Consequently, provision of those services is not an allowable expenditure.

19. Inappropriate Provision of VR Services Under the Services to Groups Authority (cont.) THE RESULTS OF THE FINDING: The agency must cease and desist providing individual services to transition students prior to eligibility and IPE development. The unallowable costs cannot be used as match.

20. VR Services Provided Outside an Order of Selection (OOS) • EXAMPLE: • The VR agency implemented an OOS in January, 2009. The agency served transition-age youth through a third-party cooperative arrangement, in which another public agency provided services in a transition program. The VR agency used program income generated through SSA reimbursement to fund the program, thinking this eliminated the need to adhere to the requirements of the OOS.

21. VR Services Provided Outside an Order of Selection (OOS) (cont.) • WHAT IS ALLOWABLE UNDER THE AUTHORITY? • Third-party cooperative arrangements can be used, provided they are administered in a manner consistent with the State Plan, including adherence to an OOS if the state is operating under an OOS. • SSA reimbursements/payments are considered to be program income; however, program income not transferred to other allowable programs must be used in the same manner as all other Title I VR program funds.

22. VR Services Provided Outside an Order of Selection (OOS) (cont.) • THE BASIS OF THE FINDING— • A significant number of the youth served did not meet the OOS criteria and did not have IPEs in place prior to the implementation of the OOS. • This was not consistent with 34 CFR 361.28(a)(4) and 34 CFR 361.36(e)(4), which require the program, as a third-party cooperative arrangement, to comply with the OOS implemented in the State Plan. • 34 CFR 361.63(c)(1) states that program income, whenever earned, must be used for the provision of vocational rehabilitation services and the administration of the State Plan. • Program income, when not transferred to an allowable program, must be used for VR services and administration of the program in a manner consistent with other Title I funds.

23. VR Services Provided Outside an Order of Selection (OOS) (cont.) • THE RESULTS OF THE FINDING: • The agency was instructed to cease and desist providing individual services to transition students prior to eligibility and IPE development; • The federal funds spent on those services were determined to be unallowable; • The agency had to return the federal funds expended on the unallowable services; and • State funds used to provide the unallowable services were not an allowable source of match. • Under Section 453(a)(1) of GEPA a recipient that 1) makes an unallowable expenditure or that 2) fails to discharge his or her responsibility to account properly for those funds is required to return funds in the amount proportionate to the extent of the harm caused to the federal interest. (20 USC Section 1234 b(a)(1))

24. Unallowable Services Provided Under a Contract • EXAMPLE: • The VR agency contracted with a nonprofit organization, for the costs associated with the salary of a part-time volunteer services coordinator, mileage; costs related to the recruitment of additional volunteers; administrative costs; and fringe benefits.  

25. Unallowable Services Provided Under a Contract (cont.) • The specific services provided under the contract included: • The employment of one part-time volunteer services coordinator to recruit, train and match appropriate volunteers with individuals who are blind and visually impaired that need services; and • The provision of volunteer services in the areas of taping, Brailing, reading, transportation, and companionship.

26. Unallowable Services Provided Under a Contract (cont.) • The persons benefitting from the services included: • Applicants and eligible individuals for VR services; and • Persons with disabilities who were not applicants or eligible individuals for VR services. • We’ll analyze each service individually to see if it is allowable.

27. Unallowable Services Provided Under a Contract (cont.) • Reading-Related Services • Reading services are included under 34 CFR 361.48. • In addition, 34 CFR 361.49(3) permits the use of VR program funds for the provision of services for the benefit of groups of individuals with disabilities, including: “Special services to provide nonvisual access to information for individuals who are blind, including the use of telecommunications, Braille, sound recordings, or other appropriate media.” • Thus, this service is allowable to all individuals served under the contract – individuals and groups of individuals with disabilities.

28. Unallowable Services Provided Under a Contract (cont.) • Transportation • 34 CFR 361.48(h) permits the use of VR program funds for “transportation…that is provided in connection with the provision of any other service described in this section and needed by the individual to achieve an employment outcome.” • However, unlike the reading-related services, VR program funds cannot be used to provide transportation services for the benefit of groups of individuals who are blind and visually impaired.

29. Unallowable Services Provided Under a Contract (cont.) • Transportation (cont.) • 34 CFR 361.49(a)(6) allows for the provision of “other services” to groups of individuals with disabilities that “promise to contribute substantially to the rehabilitation of a group of individuals but that are not related directly to the individualized plan for employment of any one individual.” • The examples contained in the regulatory provision reinforce that the “other services” authority, unlike some of the other provisions of 34 CFR 361.49(a), is intended to be used for the provision of VR services to groups of VR applicants and VR eligible individuals – not a more general group of individuals with disabilities.

30. Unallowable Services Provided Under a Contract (cont.) • Transportation (cont.) • Consequently, the agency can use VR program funds for expenditures for the provision of transportation, including mileage costs, by volunteers to: • individuals for whom it is identified on the IPE as required for the provision of other services necessary for the achievement of employment. • However, the agency cannot provide this service to groups of persons with disabilities.

31. Unallowable Services Provided Under a Contract (cont.) • Companionship • Companionship is not specifically identified as a VR service under 34 CFR 361.48; • 34 CFR 361.48(t) permits the use of VR program funds for the provision of “Other goods and services determined necessary for the individual with a disability to achieve an employment outcome….” However, when asked, agency management and staff described “companionship” as a service that may include taking an individual to the grocery store, shopping, or to address “whatever the individuals needs may be,” including activities that may not be in support of the achievement of an employment goal.

32. Unallowable Services Provided Under a Contract (cont.) • Companionship (cont.) • Companionship services under the contract is not an allowable VR service: • As an individualized service listed under 34 CFR 361.48 since it is not necessary for the achievement of an employment goal; or • As a service to groups of individuals because such assistance does not promise to contribute substantially to the rehabilitation of VR program applicants and eligible individuals as required by 34 CFR 361.49(a)(6).

33. Unallowable Services Provided Under a Contract (cont.) In the example, because reading-related services are allowable under the VR program when provided to: program applicants and eligible individuals; or to groups of individuals who are blind and visually impaired; the delivery of these services by volunteers under the contract is allocable to the VR program without the need to trace their associated expenditures to specific individuals served.

34. Unallowable Services Provided Under a Contract (cont.) • Documentation and Monitoring • Since transportation services can be provided only to applicants and eligible individuals pursuant to their IPEs, the agency must be able to determine the costs allocable to the VR program by tracing the associated expenditures, such as mileage, to individual VR program consumers. • The agency did not use the documentation it received from the vendor in a manner that enabled it to ensure that transportation services billed for were actually provided to applicants or eligible individuals for VR services.

35. Documentation and Monitoring • EXAMPLE: • Finding Background: • A VR agency entered into contractual agreements structured so that a payment of 25 to 100 percent of the contract amount is paid to the vendor at signing and the remaining funds are disbursed according to a schedule, usually quarterly; • Payments were made based on budgets listed in the agreements; and • The agency did not have a monitoring process to ensure the invoiced amounts billed were only for allowable VR program costs.

36. Documentation and Monitoring (cont.) • As a result, the VR agency was found to be in non-compliance with: • 34 CFR 361.3, which states that the purpose of the VR award is to provide vocational rehabilitation and to support administrative costs under the State Plan; • 34 CFR 361.12, which requires the state to employ methods for efficient administration of the plan, including financial accountability; • 34 CFR 80.40(a), which states that grantees are responsible for managing the day-to-day operations of grant supported activities; and • 34 CFR 80.20(a), which requires a state to expend and account for grant funds in accordance with state laws and procedures for expending and accounting for its own funds.

37. Documentation and Monitoring (cont.) • Without appropriate documentation, the agency was also found to be in non-compliance with: • 2 CFR 225 Appendix A, paragraph C to the degree that it may have expended VR program funds on individuals who are not VR applicants or VR consumers, and therefore may have made unallowable VR expenditures; and • 34 CFR 361.3 and 361.60(b)(1); 34 CFR 80.24(a) to the extent that expenditures may have been unallowable, under the VR program, these expenditures would also not be allowable as a source of non-federal match.

38. QUESTIONS?