Integrated Fiscal Accountability (IFA)

1. Integrated Fiscal Accountability (IFA) Cynthia Bryant Debra Jennings Charles Kniseley Lisa Pagano Deborah Morrow Slide presentation by Anthony White RRC Fiscal Subgroup Integrated Fiscal Accountability

2. Policies, Procedures, and Effective Implementation State Performance Plan Integrated Monitoring Activities Data on Processes and Results Targeted Technical Assistance & Professional Development Improvement, Correction, Incentives & Sanctions Effective Dispute Resolution “The Puzzle Palace” General Supervision RRC Fiscal Subgroup Integrated Fiscal Accountability

3. Policies, Procedures, and Effective Implementation State Performance Plan Integrated Monitoring Activities Data on Processes and Results Integrated Fiscal Accountability Targeted Technical Assistance & Professional Development Improvement, Correction, Incentives & Sanctions Effective Dispute Resolution “The Puzzle Palace” General Supervision RRC Fiscal Subgroup Integrated Fiscal Accountability

4. Regulations CrEAG IFA: Risk Assessment & Internal Controls Compliance Supplement & OMB A-133 OMB A-87 RRC Fiscal Subgroup Integrated Fiscal Accountability

5. Risk Assessment And Internal Controls Integrated Fiscal Accountability IFA RRC Fiscal Subgroup Integrated Fiscal Accountability

6. Risk Assessment and Internal Controls Risk Assessment • Identify vulnerability and what could go wrong • Internal Controls • An integral component of an organization’s management that provides reasonable assurance that the following objectives are being achieved: • Effectiveness and efficiency of operations • Reliability of reporting, and • Compliance with applicable laws and regulations RRC Fiscal Subgroup Integrated Fiscal Accountability

7. Risk Assessment and Internal Controls Effective Tools for Internal Control and minimizing risks: • Management control reviews • Automated tools – “self-reporting” • Monitoring checklists • Policy and procedures manuals • Management directives • Memos and emails • Internet and intranet • Speeches and briefings RRC Fiscal Subgroup Integrated Fiscal Accountability

8. Risk Assessment and Internal Controls Control activities: • Preventative • Deters risk from being realized • Detective • Determines if risk could be realized • Corrective • Detects if risk has been realized and reacts RRC Fiscal Subgroup Integrated Fiscal Accountability

9. IFA: Risk Assessment & Internal Controls RRC Fiscal Subgroup Integrated Fiscal Accountability

10. CrEAG IFA: Risk Assessment & Internal Controls RRC Fiscal Subgroup Integrated Fiscal Accountability

11. Critical Elements and Analysis Guide (CrEAG) • CrEAG is a tool for organizing and analyzing data to identify what will be addressed during an OSEP verification visit • CrEAG contains Critical Elements for each focus area – including Fiscal • CrEAG contains related questions for each Critical Element RRC Fiscal Subgroup Integrated Fiscal Accountability

12. Critical Elements and Analysis Guide (CrEAG) Critical Element 1: • Does the State have procedures that are reasonably designed to ensure the timely obligation and liquidation of IDEA funds (Parts B and C)? Critical Element 2: • Does the State have procedures that are reasonably designed to ensure appropriate distribution of IDEA funds within the State (Part B)? Critical Element 3: • Does the State have procedures that are reasonably designed to ensure appropriate use of IDEA funds? (Parts B and C)? RRC Fiscal Subgroup Integrated Fiscal Accountability

13. CrEAG IFA: Risk Assessment & Internal Controls RRC Fiscal Subgroup Integrated Fiscal Accountability

14. CrEAG IFA: Risk Assessment & Internal Controls OMB A-87 RRC Fiscal Subgroup Integrated Fiscal Accountability

15. OMB Circular A-87Allowable Costs • Establishes principles and standards for determining allowability of costs • You have to read A-87 in conjunction with the IDEA to understand how it applies • To the degree there is any conflict, IDEA requirements take precedence RRC Fiscal Subgroup Integrated Fiscal Accountability

16. OMB Circular A-87Allowable Costs • Costs must be necessary and reasonable for proper and efficient performance • Costs are necessary and reasonable if, in nature and amount, they do not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost RRC Fiscal Subgroup Integrated Fiscal Accountability

17. OMB Circular A-87Allowable Costs • Costs must be allocable to Federal awards • A cost is allocable to a particular cost objective if the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received RRC Fiscal Subgroup Integrated Fiscal Accountability

18. OMB Circular A-87Allowable Costs Costs may be either direct or indirect • No universal rule for classifying costs as one or the other Direct costs are those that can be identified specifically with a particular cost objective (e.g., IDEA) Indirect costs are those: • Incurred for a common or joint purpose benefiting more than one cost objective (e.g., both IDEA and Title I) • Not readily assignable to the cost objective specifically benefited, without undue effort RRC Fiscal Subgroup Integrated Fiscal Accountability

19. OMB Circular A-87Allowable Costs Typical Direct Costs • Employee compensation • Cost of materials acquired, consumed or expended • Equipment and other capital expenditures • Travel expenses incurred to carry out the Federal grant award RRC Fiscal Subgroup Integrated Fiscal Accountability

20. OMB Circular A-87Allowable Costs Typical Indirect Costs • Renting of a shared facility • Payment of proportionate amount for utilities • Payment for proportionate share for services • Distribution of cost pool so as to produce equitable results Indirect Cost Rate • Ratio of indirect costs to a direct cost base RRC Fiscal Subgroup Integrated Fiscal Accountability

21. OMB Circular A-87Allowable Costs Appendix B of A-87 lists 43 selected items of cost – examples • Alcoholic beverages are unallowable • Conference/meeting costs are allowable if primary purpose is dissemination of technical information (meals, transportation, rental of facilities, speakers’ fees, etc.) but see Appendix B, item 14 regarding Entertainment Costs • Costs of professional organizations and subscriptions are allowable • Memberships in civic, community or social organizations are allowable with the approval of the Federal awarding agency • Costs of membership in organizations whose primary purpose is lobbying are unallowable RRC Fiscal Subgroup Integrated Fiscal Accountability

22. OMB Circular A-87Allowable Costs Allowable costs under Part C include: • Maintaining statewide interagency system • Direct intervention services for infants/toddlers • Expanding and improving services • Part B FAPE services from 3rd birthday • Strengthen services for at-risk infants/toddlers RRC Fiscal Subgroup Integrated Fiscal Accountability

23. OMB Circular A-87Allowable Costs Capital Expenditures • Capital expenditures for general purpose equipment, buildings, and land are unallowable as direct charges except where approved in advance by the awarding agency (See Appendix B, Section 15b and 34 CFR §300.718) • Capital expenditures for special purpose equipment are allowable as direct costs, provided that items with a unit cost of $5000 or more have the prior approval of the awarding agency (See Appendix B, Section 15(b)(2)) RRC Fiscal Subgroup Integrated Fiscal Accountability

24. OMB Circular A-87Allowable Costs Capital Expenditures • Capital expenditures for improvements to land, buildings or equipment which materially increase their value or useful life are unallowable as a direct cost except with the prior approval of the awarding agency RRC Fiscal Subgroup Integrated Fiscal Accountability

25. CrEAG IFA: Risk Assessment & Internal Controls OMB A-87 RRC Fiscal Subgroup Integrated Fiscal Accountability

26. CrEAG IFA: Risk Assessment & Internal Controls OMB A-87 Compliance Supplement & OMB A-133 RRC Fiscal Subgroup Integrated Fiscal Accountability

27. Single Audit Act and A-133 Requires annual audit • Type A programs (>$500,000) • At-risk Type B programs (>$100,000) Completed audit reports to Federal Audit Clearinghouse which distributes to Federal agencies Agencies have 6 months from issue date of report to resolve audit findings RRC Fiscal Subgroup Integrated Fiscal Accountability

28. Single Audit Act and A-133 OMB Circular A-133 • Guidance for auditors under the SAA • Describes allowable activities (SEA/LEA) • Identifies amount of funds to distribute (earmarking) • Base-population-poverty • Matrix of 14 types of Requirements • Level of Effort (MOE) • LEA Risk Pool (option to reserve 10%) • Preschool Grants reservation (25% adjusted) • CEIS • Unduplicated reporting (section 618 of the IDEA) RRC Fiscal Subgroup Integrated Fiscal Accountability

29. OMB A-133 Compliance Supplement • Establishes specific requirements within the 14 areas for Federal programs across all Federal agencies • Not all of the 14 areas apply to all Federal programs • Updated annually • Using the Supplement, auditors identify findings specific to different Federal programs, including those within the Department of Education (e.g., IDEA, Title I, etc.) RRC Fiscal Subgroup Integrated Fiscal Accountability

30. OMB A-133 Compliance Supplement IDEA-Related Requirements • Period of Availability • Reporting – related to IDEA requirements • Subrecipient Monitoring - related to IDEA fiscal requirements • Level of Effort and Earmarking • Equipment and Real Property Management RRC Fiscal Subgroup Integrated Fiscal Accountability

31. OMB A-133 Compliance Supplement Common Audit Findings • Time and effort documentation • State MOE • LEA MOE • Subrecipient monitoring (fiscal requirements) • Procurement, suspension and debarment • Allowable costs • Reporting RRC Fiscal Subgroup Integrated Fiscal Accountability

32. CrEAG IFA: Risk Assessment & Internal Controls OMB A-87 Compliance Supplement & OMB A-133 RRC Fiscal Subgroup Integrated Fiscal Accountability

33. CrEAG IFA: Risk Assessment & Internal Controls Regulations OMB A-87 Compliance Supplement & OMB A-133 RRC Fiscal Subgroup Integrated Fiscal Accountability

34. Critical Elements and Analysis Guide (CrEAG) Critical Element 1: • Does the State have procedures that are reasonably designed to ensure the timely obligation and liquidation of IDEA funds (Parts B and C)? Critical Element 2: • Does the State have procedures that are reasonably designed to ensure appropriate distribution of IDEA funds within the State (Part B)? Critical Element 3: • Does the State have procedures that are reasonably designed to ensure appropriate use of IDEA funds? (Parts B and C)? RRC Fiscal Subgroup Integrated Fiscal Accountability

35. Fiscal CrEAG Crunched Document addresses a State’s fiscal system through the critical elements of the CrEAG for both Part C and Part B Incorporates relevant references from: • EDGAR • IDEA • OMB Circular A-87 • OMB Circular A-133 • Compliance Supplement relevant to IDEA Purpose is to tie together, and demonstrate the integrated nature of, the fiscal requirements RRC Fiscal Subgroup Integrated Fiscal Accountability

36. Critical Element 1 – an Example CE 1: Does the State have procedures that are reasonably designed to ensure the timely obligation and liquidation of IDEA funds (Parts B and C)? Questions for CE1: • How does the State obligate Part B/C funds to ensure timely expenditures (27 months – 15 months plus the 12-month Tydings period)? • How does the State ensure that all obligations are liquidated no later than 90 days after the end of the obligation period (e.g., 90 days after the end of the 27 months; 30 months after the grant is awarded)? RRC Fiscal Subgroup Integrated Fiscal Accountability

37. Critical Element 1 – an Example • EDGAR – defines the period of availability of funds (§80.23) as well as describing when subgrantees may obligate funds, carry-over periods, financial reporting and so on • IDEA – describes how allocations are made to States and to subgrantees (§300.705) and provides application requirements – these requirements provide the foundation for making the funds available for obligation by the States and subgrantees RRC Fiscal Subgroup Integrated Fiscal Accountability

38. Critical Element 1 – an Example • OMB Circular A-87 – describes the allowable costs for which States and subgrantees can obligate and expend IDEA funds (Appendix B) • OMB Circular A-133 – includes a requirement (page 19) for auditors to verify that auditees complied with the applicable period of availability of funds (§__.320(b)(2)(xii)(H) • Compliance Supplement – section H requires reasonable assurance that Federal funds are used only during the authorized period of availability RRC Fiscal Subgroup Integrated Fiscal Accountability

39. Critical Element 1 – an Example • OSEP looks for answers to the CrEAG questions as part of verification as they relate to the requirements under EDGAR and IDEA • Auditors look for answers to these questions in response to the requirements of A-87, A-133 and the Compliance Supplement RRC Fiscal Subgroup Integrated Fiscal Accountability

40. Critical Element 1 – an Example It is important that Special Education Directors, Part C Coordinators, financial staff members and Audit Resolution specialists understand the various requirements and the impact of noncompliance on risk management and internal controls (IFA) RRC Fiscal Subgroup Integrated Fiscal Accountability

41. IFA: Risk Assessment & Internal Controls RRC Fiscal Subgroup Integrated Fiscal Accountability

42. CrEAG IFA: Risk Assessment & Internal Controls Regulations OMB A-87 Compliance Supplement & OMB A-133 RRC Fiscal Subgroup Integrated Fiscal Accountability

43. Integrated Fiscal Accountability “The Puzzle Palace” General Supervision RRC Fiscal Subgroup Integrated Fiscal Accountability

44. Policies, Procedures, and Effective Implementation State Performance Plan Integrated Monitoring Activities Data on Processes and Results Integrated Fiscal Accountability Targeted Technical Assistance & Professional Development Improvement, Correction, Incentives & Sanctions Effective Dispute Resolution “The Puzzle Palace” General Supervision RRC Fiscal Subgroup Integrated Fiscal Accountability