Federal Grant Fiscal Responsibilities

1. Federal Grant Fiscal Responsibilities Presented by: Anthony Hearn, CPA Office of Title I

2. Grant Specific • Title I – Very Programmatic – Be able to identify additional programs in place (that are funded) for low performing students in Targeted Assistance • Title I – Schoolwide – Plan dictates • Other ESEA • Title IIA • Will Sample Staff and HQT Status • Review of Professional Development Plan • Title III • What additional Programs in place

3. Common Issues and ResolutionsSummary • Financial Management, Procurement and EDGAR 80.36 • Time Sheets • Equipment • Non Allowable Uses of Funds • Lack of Identified Programs • Lack of Non Public Consultations (IDEA and Title I)

4. Time Sheets, PARs, Funded Staff, etc • VERY IMPORTANT to Understand • Need to Show • What they are doing (e.g.: In Class Support) • Where they are doing it (e.g.: Room or Ms. Jones Class) • When they are doing it (e.g.: Time Schedule)

5. OIG Time and Effort Findings • 2006 – Columbus - $2.3 million • 2008 – Detroit - $49 million • 2009 – Houston - $238 million • 2010 – Philadelphia - $123 million

6. Staff FundingWhat should be in my Board minutes? • Appointment of Teachers • Name • Salary • School • Funding Percentage for Each Program • Appointment of Secretaries, Aides, Program Directors, etc. • Name • Salary • Work Location • Funding Percentage for Each Program

7. Staff Funding and Time Sheets Fully-funded Salaries Applies to all Fund 20 Federal Grants • Periodic certification signed at least semi-annually • Clarification on Funding vs. Cost Objective – UGH !!!!!! – New Model Implemented • Signed by employee and supervisor • NEW EXAMPLE IN OCT of 2012

8. Staff Funding and Time Sheets Multiple Cost Objectives or Split-funded Salaries • Personnel activity reports • Signed by employee and supervisor • Must be an after-the-fact distribution of actual activity • Prepared at least monthly and must coincide with pay periods • NEW EXAMPLE IN OCT of 2012

9. Select Expenditures and Support Needed Equipment • Maintain master inventory listing • Date, Serial Number, Model, Cost, Location • Each school should maintain subsidiary listing • All equipment should be labeled with Grant Name or equivalent tracking system • Need to keep records for FIVE years past disposition (date needs to be on master list) • Even if not equipment for GRANT purposes, if district has a lower threshold, then tracking of equipment is required • If less expensive to inventory than to replace, it should be inventoried

10. Non-Allowable Uses or What is Allowable • OMB Circular A-87, Attachment B • Supplanting • Schoolwide – Is it in the Plan ? OMB Circular A-87- requires the use of funds for a specific purpose be necessary and reasonable for the proper and efficient performance and administration of the program and be authorized and not prohibited under State and local laws and regulations.

11. Selected Items of Cost • Special rules for specific expenses • Still subject to basic guidelines • Examples: • Alcohol: Never allowable • Salaries and Wages: Allowable if time distribution • Meetings and conferences: Allowable if dissemination of technical information • Entertainment !!!!!!!!!!

12. Non-Allowable Uses or What is Allowable OMB Circular A-87, Attachment B www.whitehouse.gov/omb/circulars/a087/a087_2004.pdf • 1 – Advertising • 14 – Entertainment • 34 – Publication and Printing • 43 – Travel Costs

13. Non-Allowable Uses or What is Allowable Advertising • Advertising and public relations costs. • The term advertising costs means the costs of advertising media and corollary administrative costs.Advertising media include magazines, newspapers, radio and television, direct mail, exhibits, electronic or computer transmittals, and the like. • The term public relations includes community relations and means those activities dedicated to maintaining the image of the governmental unit or maintaining or promoting understanding and favorable relations with the community or public at large or any segment of the public. • The only allowable advertising costs are those which are solely for:(1) The recruitment of personnel required for the performance by the governmental unit of obligations arising under a Federal award ;(2) The procurement of goods and services for the performance of a Federal award;(3) The disposal of scrap or surplus materials acquired in the performance of a Federal award except when governmental units are reimbursed for disposal costs at a predetermined amount; or(4) Other specific purposes necessary to meet the requirements of the Federal award.

14. Non-Allowable Uses or What is Allowable Entertainment (14) Costs of entertainment, including amusement, diversion, and social activities and any costs directly associated with such costs (such as tickets to shows or sports events, meals, lodging, rentals, transportation, and gratuities) are unallowable.

15. Non-Allowable Uses or What is Allowable Publication & Printing (34) • Publication costs include the costs of printing (including the processes of composition, plate-making, press work, binding, and the end products produced by such processes), distribution, promotion, mailing, and general handling. Publication costs also include page charges in professional publications. • If these costs are not identifiable with a particular cost objective, they should be allocated as indirect costs to all benefiting activities of the governmental unit.

16. Non-Allowable Uses or What is Allowable Travel (43) General. Travel costs are the expenses for transportation, lodging, subsistence, and related items incurred by employees who are in travel status on official business of the governmental unit. Such costs may be charged on an actual cost basis, on a per diem or mileage basis in lieu of actual costs incurred, or on a combination of the two, provided the method used is applied to an entire trip and not to selected days of the trip, and results in charges consistent with those normally allowed in like circumstances in the governmental unit’s non-federally sponsored activities. Notwithstanding the provisions of Attachment B, section 19, General government expenses, travel costs of officials covered by that section are allowable with the prior approval of an awarding agency when they are specifically related to Federal awards.

17. Select Expenditures and Support Needed General Purchases • Must have purchase orders • Must have account number on P.O. • Should indicate Grant on P.O. (Not Just Account #) • Signed by Business Administrator • If split P.O., Title I should be easily identifiable REMEMBER Title I – Money spent in Individual Schools should EQUAL amount in Step 4 of Eligibility

20. Supplement Not Supplant • Funds must be “supplemental” to local spending • Supplemental Defined: “In the absence of federal funds, would funds have been spent (prior year funding is one distinguishing factor)”

21. Supplement Not Supplant If it is “REQUIRED”, then you can NOT fund it!

22. Supplement Not Supplant • If all students/classroom get items, district can’t pay for Title I / IDEA part out of grant • Items purchased should not be used by non-eligible students (can have some incidental benefit, but need to document) • Presentations/Trips should not benefit non-eligible students (identify Title I and in IEP for IDEA) • Special rules apply to approved and implemented “Schoolwide Programs”

23. Student Incentives • The US Dept. of Education(ED) has indicated that an LEA may use Title I funds to provide “non-monetary” rewards of “nominal” value (e.g., Plaque, gift certificate, or book, etc.) in an effort recognize Title I students for good performance. • Title I funds may NOT be used to pay students a stipend or provide some other type of award as an incentive for student participation in a Title I program

24. Parent Incentives • To encourage parents of Title I students to participate in school activities in the evening, an LEA may use Title I funds to provide light refreshments. • Note, ESEA § 1118(e)(8) authorizes LEAs to use Title I funds for “parent-related” activities that are reasonable and necessary for expenses associated with parental involvement activities, including child care and transportation to enable parents to attend “school-related” meetings and training sessions

25. Helpful Questions to Ask When Analyzing Costs • Is the proposed cost consistent with federal cost principles? OMB A-87, Attachment B • Is the proposed cost allowable under the relevant program? (Title I, IDEA, etc) • Is the proposed cost consistent with an approved program plan and budget? (EWEG) • Is the proposed cost consistent with program specific fiscal rules? (Supplement not Supplant) • Is the proposed cost consistent with EDGAR?

26. Allowable Costs All Costs must be: • Necessary • Reasonable • Allocable • Legal under state and local law (A5)

27. Allowable Costs • Must be necessary for the performance or administration of the grant • Must follow sound business practices: • Arms length bargaining (hint: procurement processes) • Follow federal, state and local laws • Follow terms of the grant award

28. Schoolwide Program & Expenses • MUST have approved plan that addresses all schoolwide issues • Time sheets are required (except in a blended resource fund, e.g., Fund 15 for former Abbott districts) • Key questions to be addressed: • Do the activities budgeted support the intent of the law? [Federal Register: July 2, 2004 (Volume 69, Number 127)] • Are supplemental services provided to the students enrolled in the school?

29. Lack of Identified Funded Programs • Programs for Title I must be clear and distinct. • Programs for Title I must be the “icing on the cake” for low performing students. • Watch for funded programs that • Are replacement programs (in lieu of math or English) • Pull children away from elective classes

30. Allowable Non Public Expenses • IDEA and Title I have different coverage areas for services to students • Title I – Students that would have attended, but are out of district – anywhere • IDEA – Just resident students • Remember allowable cost rules are the same for Non Public as for Public Schools • If Third Party contractors hired • District needs to maintain plans • Responsibility for all areas should be addressed in the contract • Only allow to bill for actual services, not flat fee monthly

31. Closing Out the Grants • Must be consistent with budget (amendments filed through EWEG) – EWEG Monitors • CANNOT: • Move more than 10% of total funds without State approval (EWEG amendment) - $50K threshold removed • Add a budget category without State approval (EWEG Amendment) • Transfers to and from Equipment Lines • Carryover more than 15% of Title I total amount received more than once every three years without State approval (Must have good reason)

32. Watch Transfers • Must be able to state WHY transfer and how not SUPPLANTING • Transfers: • Just can’t move expenses to “Use up leftover money” • Make sure consistent with program plans • Can’t move ½ a chair

33. Restrictions and Reserves Title I • Parental Involvement • RAC Reserve • Spending by location • Non Public Funds

34. Fiscal News from Washington New Haven Audit Report from Office of Inspector General • Supplanting in a Schoolwide Program http://www.ed.gov/about/offices/list/oig/auditreports/a02f0005.pdf

35. Fiscal News from Washington William Floyd Audit Report from Office of Inspector General • Unsupported Expenses • Unsupported Adjusting Journal Entries • Supplanting of Textbooks • Weak Internal Controls http://www.ed.gov/about/offices/list/oig/auditreports/a02f0030.pdf

36. Fiscal News from Washington City of Detroit and Parent Involvement Fund 2005 • Disallowed Charges for Entertainment, Promotional Items and Public Relations • Need to be necessary, reasonable, allocable and documented • Disallowed items include advertising for an event and live musical entertainment at parent volunteer function http://www.ed.gov/about/offices/list/oig/auditreports/a05f0018.pdf

37. Fiscal News from Washington City of Detroit -Revisit in 2008 • Over $131 Million in 2005 and $126 Million in 2006 • No Time Sheets – Almost $50 Million • Teaching non-Title I students – even though most of Detroit is schoolwide some schools are not (no plan submitted) and OIG looked to these schools and found staff being funded that were teaching non-Title I identified students. Detroit argued they could have been schoolwide if they did a plan and the OIG rejected this argument • Over $21 M for adjusting entries for employees that were charged to other programs and then charged to Title I • Gift cards they could not show got to students • $150,000 for martial arts training

38. Fiscal News from Washington St. Louis OIG Audit • Lost 125 Computers • Serving Ineligible Schools http://www.ed.gov/about/offices/list/oig/areports.html

39. Fiscal News from Washington Philadelphia • Findings totaling $138,376,068 • Unsupported Salaries (some direct and some thru adjusting entries) • School Police paid from Title I Funds • Supplanting (moving company, etc) • No backup for School Choice Charges of $1.3M • Weak internal controls

40. Fiscal News from Washington Maryland Title I ARRA Funds • Findings totaling $540,013 • $8,736 in gifts to staff • $4,352 in Dinner Cruises in Baltimore Harbor • Lack of Receipts for Expenses • $200,323 in Unsupported Title I and IDEA Salaries • 3,922 Tablets with no controls over them or applications that are downloaded (Items against policy – 22%)

41. US Dept. of Education- Office of Inspector General Four Jefferson Parish Public School System Employees Sentenced (Louisiana). • Four former employees of Jefferson Parish Public School System were each sentenced for their roles in an embezzlement scheme. For more than 2 years, two of the former employees submitted fraudulent documents for themselves and the other co-conspirators to receive supplemental pay and stipends for various tutoring, testing, and remediation programs funded by Jefferson Parish Public School System, although none of them were certified teachers or qualified to perform those activities. The scheme’s two ringleaders were each sentenced to serve 6 months of home confinement and 5 years of probation. They were also ordered to pay more than $132,000 in restitution. Their two co-conspirators were sentenced to serve between 3 and 5 years of probation and were ordered to pay $9,700 and $11,800, respectively, in restitution.

42. What Happens When Federal $$$ Are Misspent?????? • Accountability. Efficiency. Effectiveness. Oversight

43. US Dept. of Education- Office of Inspector General • Former Charles County Public Schools Title I Coordinator Sentenced (Maryland). • The former Title I coordinator was sentenced to serve 27 months in prison and 36 months of supervised release. She was also ordered to pay more than $115,300 in restitution for theft. The former official used Title I grant funds to purchase technology items for herself, family, and friends, including computers, video games consoles, portable media players, tablet computers, and televisions.

44. US Dept. of Education- Office of Inspector General Sandra Campbell, 57 a former Detroit Public Schools contract accountant and school board candidate, and her daughter, Domonique Campbell, 38, a Detroit Public Schools teacher, were convicted today by a federal jury in Detroit on charges of program fraud conspiracy, money laundering conspiracy, and tax charges following a five-week jury trial, United States Attorney Barbara L. McQuade announced today. The jury returned its verdict after only one-and-a-half hours of deliberations.McQuade was joined in the announcement by FBI Special Agent in Charge Robert D. Foley, III and Special Agent in Charge, Erick Martinez, Internal Revenue Service, Criminal Investigation.The evidence presented at trial established that between 2004 and 2008, Sandra Campbell and Domonique Campbell obtained in excess of $530,000 from the Detroit Public Schools through a fraudulent scheme in which orders were placed with the Campbells’ sham company for books and educational materials never provided to the schools. Sandra Campbell and Domonique Campbell conspired to launder the fraud proceeds and to defraud the Internal Revenue Service and failed to report the money they fraudulently obtained from the Detroit Public Schools as income on their tax returns.United States Attorney Barbara L. McQuade said, “Anyone who considers stealing from our school children should take note that we are scrutinizing records and conduct, and will prosecute wrongdoers.”

45. Available Research & Where to Find It No Child Left Behind www.ed.gov/legislation/ESEA02/index.html OMB Circular A-87, Attachment B www.whitehouse.gov/omb/circulars/a087/a087_2004.pdf EDGAR http://www.ed.gov/policy/fund/reg/edgarReg/edgar.html Compliance Supplement (A-133) http://www.whitehouse.gov/omb/circulars_a133_compliance_08_08toc/

46. Conclusion Remember: • “If the district takes the money, they are responsible for knowing the rules and regulations concerning the grant.” • If you need further help contact Anthony Hearn • (609) 633-2492 • anthony.hearn@doe.state.nj.us