Making it Through the Maze

1. Making it Through the Maze Accounting for Stimulus Funds Linda S. Howard Cristi Valdes

2. Agenda • Overview and Background • Guidance Governing Compliance • Accounting, Reporting and Auditing • Resources

3. Stimulus Bill Overview The American Recovery and Reinvestment Act of 2009 (ARRA) was signed into law by President Obama on February 17, 2009. The stated purposes of the law include the following: To preserve and create jobs and promote economic recovery. To assist those most impacted by the recession. To provide investments needed to increase economic efficiency by spurring technological advances in science and health. To invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits. To stabilize state and local government budgets, in order to minimize and avoid reductions in essential services and counterproductive state and local tax increases.

4. OUC Proposed Projects (excluding SMART GRID)

5. Smart Grid Investment Grant Characteristics • Small: Federal share between $300K - $20M • Large: Federal share between $20M - $200M • Period of performance: 3 years (shorter periods favored) • Federal Cost share: up to 50% of total allowable costs

6. OUC Draft Proposal • Expand our Elster Energy Axis System • Smart Meters • Communications System • IT Improvements • Enterprise Service Bus • Meter Data Management System • Customer Information System • Demand Response Program • Residential TOU Rates • Web-based Customer Portal • Customer Education • Pre-Pay Program • Outage Management System • Energy Management System

7. DoE Smart Grid Investment Grant • Total Estimated Cost: $32 million • Letter of Intent: July 16, 2009 • Application Deadline: August 6, 2009 • Anticipated Awards Announcement: Within 90 days of application • Acceptance conditioned on approval of OUC Commission

8. Financing Options • Clean Renewable Energy Bonds (CREBs) • Additional $1.6 billion in new money • Smaller projects accepted first – no good matches for OUC • “Build America Bonds” • Will explore on our next new financing deal

9. Guidance Governing Compliance • The use of government funding may create new compliance issues for recipients. • Government contracting requirements include: • Federal Acquisition Regulation (FAR) • Cost Accounting Standards (CAS) • American Recovery and Reinvestment Act of 2009 (ARRA) – Section 1512 • Office of Management and Budget regulations • OMB M-09-21 reporting guidance • OMB Circular A-133

10. Federal Acquisition Regulation (FAR) • Primarily for companies entering into contracts > $5 million and lasting more than 120 days • Key compliance requirements include: • Periodic training related to the application of regulation requirements including: • Training for principals, employees and agents and subcontractors as appropriate • Preparation and demonstration of effective communication to contractors related to the government’s standards, procedures, ethic programs and internal controls

11. Federal Acquisition Regulation (FAR) • Key compliance requirements (cont.): • Demonstrated system of internal controls • Human Resources policies • Monitoring activities to ensure ethical compliance and code of conduct • Proper segregation of duties • Periodic program reviews • Monitoring and auditing of programs to detect criminal conduct • Timely disclosure and reporting requirements

12. Cost Accounting Standards (CAS) • If the grant requires compliance with this standard the key requirements will include: • Separate accumulation and reporting of grant receipts and program costs • Annual true up of direct and indirect costs • Identification and exclusion of unallowable costs, such as: • Interest • Limits on compensation • Limits on travel

13. American Recovery and Reinvestment Act of 2009 (ARRA) • OMB M-09-21 issued June 22, 2009 • Compliance requirements include: • Transparency of use, benefits and avoidance of fraud, waste, error and abuse. • Controls related to the mitigation of delays and cost overruns. • Separate tracking of ARRA funds if used in conjunction with other funding sources.

14. http://www.recovery.gov/ 14

15. http://www. federalreporting.gov/ 15

16. FederalReporting.gov and Recovery.gov • FederalReporting.gov is the central nationwide data collection system for Federal Agencies and Recipients of Federal awards under Section 1512 of the ARRA. • Reporting obligations accessed at www.FederalReporting.gov including report submittals, view, update and corrections. • Submitted and reviewed reports will be available to the public via Recovery.gov. • At Recovery.gov, taxpayers can also access Agency Reports, subscribe to web feeds for ARRA news, and access other links associated to the ARRA.

17. ARRA Reporting Requirements • Definitions • An Awarding Agency may provide a grant, loan, or contract on behalf of the federal government (funding agency) to achieve the goals of the Act. The awarding agencies must report on all disbursements and review reports submitted by Prime Recipients. • Prime Recipients are non-Federal entities that receive ARRA funding. These recipients are responsible for all reporting requirements of ARRA. • Sub Recipients are non-Federal entities that are awarded ARRA funding through a legal instrument from a Prime Recipient to support performance of any portion of a project or program funded with Recovery dollars. A Prime Recipient may delegate responsibility to its Sub Recipient to report information into FederalReporting.gov.

18. ARRA Reporting Requirements • Central Contractor Registration (CCR) • The primary registrant database for the U.S. Federal Government. • CCR collects, validates, stores, and disseminates data in support of agency acquisition missions, including Federal agency contract and assistance awards. • The term "assistance awards" includes grants, cooperative agreements and other forms of federal assistance. • All Prime Recipient and designated Sub Recipient organizations must be registered in the CCR database. • Register with CCR at http://www.ccr.gov

19. ARRA Reporting Requirements • Registration • Who should register at FederalReporting.gov? • Funding/Awarding Agencies • Prime Recipients • Sub Recipients who have been delegated reporting responsibility • The registration period opens on August 17, 2009. Recipients should register within 10 business days of receiving an award. Advance registration is highly recommended. • DUNS number is required for registration. If you need a DUNS number, visit D&B at fedgov.dnb.com/webform. To register, you must know the DUNS Number associated with your award.

20. ARRA Reporting Requirements • Report Timelines • Prime and sub-recipients must report 10 days after each calendar quarter beginning on October 10, 2009. • The first reporting period starts at the date of award and should include data through September 30, 2009. • Reporting should be based on cumulative data. • The FederalReporting.gov system opens for reporting on October 1, 2009 and is available 24 hours, 7 days a week. • Submitted report will be available for public view at Recovery.gov beginning October 11, 2009.

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22. ARRA Reporting Requirements • Required Information • Total amount of funds received from each federal agency • Amount of funds received that were obligated (encumbered) and expended to projects or activities • Awarded funds must be reported at the award value. If you have not received or spent any of the funds, you must report "$0" for funds expended.

23. ARRA Reporting Requirements • Required Information (cont.) • A listing of all awarded ARRA projects and activities including: • The name, description and completion status of each project or activity. • An estimate of jobs created and retained • Infrastructure projects also require submitting the purpose, cost, justification and primary contact for project. • Aggregate reporting of 3 separate categories: • Sub awards of less than $25,000, • Sub awards to individuals • Payments to vendors of less than $25,000

24. ARRA Reporting Requirements • Recipient Reporting Data Model • Created for Recovery Act standardization • Different reporting requirements for prime recipients, sub recipients and vendors • Can be downloaded from www.FederalReporting.gov

25. Other ARRA Reporting Issues • Sub recipients may need to report information to enable prime recipients to report up to Recovery.gov • You will need to work with your Prime Recipient to identify what reporting is required under your federally awarded contract.

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27. Recovery Act Risks • Many entities spending federal funds who have never gotten them before • Act provides no funding for recipients to administer the awards • Many programs will significantly increase the amount of the federal funding they expend • Staffing must be sufficient to monitor grant requirements and provide required reporting • Internal controls must be sufficient to properly expend funds • ARRA programs will be highly visible • Prepare plan to answer why you are receiving Recovery Act funds, what you are doing with the funds, and the number of jobs created or retained. • Meet project and reporting deadlines.

28. Single Audit Act Amendments of 1996 and OMB Circular A-133 • Non-Federal entities that expend $500,000 (for fiscal years ending after December 31, 2003) or more in a year in Federal awards shall have a single or program-specific audit conducted for that year • Identify Federal awards received and expended • Prepare financial statements and a Schedule of Expenditures of Federal Awards (SEFA) • Obtain a single audit, which combines the annual financial statement audit with additional audit coverage of Federal funds • Submit the audit reporting package and Data Collection Form (form SF-SAC) to the Federal Audit Clearinghouse (FAC) and pass-through entities • Take corrective action on audit findings

29. OMB Circular A-133 Compliance Supplement - March 2009 • High level Appendix (VII) on the ARRA • Specifically identify ARRA awards, regardless of whether funding is provided under a new or existing Catalog of Federal Domestic Assistance (CFDA) number • All Type A programs with ARRA funding must be audited as major in the first year that the program or cluster has ARRA money in it • Cannot use the fact that the non-ARRA funds portion of the program was audited once in the last two years to call it low risk and not audit it as a major program in the current year

30. OMB Circular A-133 Compliance Supplement - March 2009 • Used for risk assessment • Quality Control Reviews (QCR’s) of A-133 audits performed on entities receiving Recovery Act money • Results of QCR’s to be placed on Recovery.gov • Full A-133 audit reporting packages to be made available at the OMB’s federal audit clearinghouse web site

31. OMB Circular A-133 Compliance Supplement - March 2009 • Used for monitoring program • Assignment of separate ARRA CFDA • Evaluation of high risk programs and grantees • Separate reporting on SEFA and data collection form • Federal audit clearinghouse to display all ARRA findings

32. OMB Circular A-133 Compliance Supplement - March 2009 • A-133 reporting package is publicly available in the federal audit clearinghouse for fiscal years ending on or after June 30, 2009 • Keep confidential information out of the findings and corrective action plans to avoid privacy violations

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34. Accounting and Auditing Considerations • Financial Statement presentation • Footnote and Management Discussion & Analysis disclosures • Additional external audit fees for Single Audit and special reports • Anticipate governmental audit of internal controls and cost accounting practices

35. Internal Control Considerations • Consider whether control procedures in place over federal expenditures are appropriate, operating as intended, and designed to prevent unallowable expenditures. • Consider whether additional controls and system requirements will be needed to ensure that ARRA funds are separately identified and tracked. • Evaluate reporting controls to meet ARRA requirements • If ARRA funds will be passed down to sub recipients, evaluate sub recipient controls, monitoring and reporting responsibilities.

36. Resources • Consult APPA’s Stimulus Information page for updates on the latest stimulus opportunities (http://www.appanet.org/legislative/index.cfm?ItemNumber=24024) • Read OMB implementation guidance and newsletter alerts (http://www.whitehouse.gov/omb/management) • Consult Recovery.gov and FederalReporting.gov for updates in transparency and reporting requirements

37. Questions? 37