Office of Special Education (OSE) PROGRAM FISCAL REVIEWS Presenters: Michael Wynn, CFE

1. Office of Special Education (OSE)PROGRAM FISCAL REVIEWS Presenters: Michael Wynn, CFE Grants Management Certified Nancy Jo Serna, CPA Grants Management Certified

2. Our disclaimer(Just Sayin’)

3. Program Fiscal Review (PFR) A PFR is the review of IDEA federal grant expenditures to ensure compliance with Federal and State rules and regulations as they relate to fiscal management and specific programmatic aspectsof the grant. A PFR may result in a recoding of expenditures or repayment of funds.

4. Rules and Regulations • Federal Cost Principles, 2 CFR 225 • OMB Circulars A133 and A102 • Education Department General Administrative Regulations (EDGAR), 34 CFR 80 • Individuals with Disabilities Education Act (IDEA) is the law, codified in 34 CFR 300 • Michigan Administrative Rules for Special Education • State School Act, Section 51a • Office of Special Education Allowable Cost Guide

5. Uh……no!

6. Scope of PFR • Expenditures must be: • Allowable to the grant • Reasonable and Necessary to the grant • Allocable to the grant • Adequately documented 2 CFR 225 Basic Guidelines

7. Scope of PFR (continued) • Expenditures must be: • Recorded properly (B2011 Accounting Manual & OSE Allowable Cost Guide) • Reported properly (MEGs system, GL Accounts, A133 SEFA – all should match) • Employees must be approved SE personnel (Administrative Rules for Special Education) • Time and Effort documentation must be on file (2 CFR 225)

8. Definitions (2 CFR 225)Allowable • To determine if a cost is allowable: • The proposed cost is consistent with: • Federal Cost Principles • IDEA program specific rules • OSE Allowable Cost Guide (and any others that may apply)

9. Definitions (continued) Reasonable • A cost is reasonable if it: • does not exceed that which would be incurred by a prudent person. • follows sound business practices; arm's-length bargaining; Federal, State and other laws and regulations; and, terms and conditions of the Federal award. • reflects market prices for comparable goods or services.

10. Definitions (continued)Necessary • A cost is necessary if it: • is of a type generally recognized as ordinary and necessary for the operation of the governmental unit or the performance of the Federal award.

11. Definitions (continued) Allocable • A cost is allocable if • the goods or services involved are chargeable or assignable to such cost objective in accordance with relative benefits received. • All activities which benefit from the governmental unit's indirect cost, will receive an appropriate allocation of indirect costs.

12. Grants that OSE reviews OSE administers IDEA, Part B, Section 611 grants, which are: • Flowthrough • Transition Services • Enhancing Opportunities for Students with Disabilities (EOSD) • Mandated Activity Projects (MAPs)

13. Limited Desk Reviews (non OSE grants) OSE may conduct limited desk reviews for the Office of Great Start (OGS), which are: • Preschool • Early On These limited desk reviews are forwarded to OGS for their information and follow up.

14. Review Process Preliminary Analytical • Desk Review • Performed on grants less than or equal to 5% of the total dollar amount to be reviewed. • Is a limited review in scope • Site Visit • Performed on grants more than or equal to 5% of the total dollar amount to be reviewed • Is an extensive review of transactions

15. Selection Process for PFR’s • ISD’s are on a Rotation Schedule • As determined by OSE • LEA’s within ISD’s are selected based on risk factors (such as, but not limited to) • Single Audit Findings • Last time reviewed • Issues or problems (timely drawdowns, reporting, sig dispro, etc.) • Management request

16. Communications prior to PFR • Announcement Letter to ISD • Auditor contacts ISD Special Ed Director and/or Financial Manager to schedule visit • Engagement Letter to ISD • Auditor selects LEAs and asks ISD to provide contact names/emails/phone numbers • Auditor contacts LEAs Special Ed Director and/or Financial Manager to schedule visits

17. Documentation requested prior to visit (electronically) • General Ledger summaries for all grants that will be reviewed • General Ledger detail of transactions for all grants determined to be site visits • Completed questionnaire of processes • Auditor selects samples from GL detail and sends via email to have ready for review

18. During Site Visit Process • Meet with Business official and Special Education Director, other key people • Discuss your processes • Review sample items • Ask questions • Ask more questions (until we are done)

19. End of Review Process • At end of site visit (at each LEA) • Discuss tentative findings • LEA/PSA/ISD may need to provide information via email to complete review • Corrective action • May provide corrective action prior to report writing, and it will be noted in the findings OR will have 30 days after report is mailed to provide corrective action.

20. End of Review Process (continued) • After all LEAs/PSAs and ISD is visited and information is reviewed • ISD is informed of all tentative findings noted, including possible repayment of funds • ISD will be responsible for repayments to MDE

21. Report Process • Report is written, processed and reviewed by OSE management • Report is sent to ISD, each LEA/PSA will have a separate report within the whole report • ISD disseminates individual LEA/PSA reports • Corrective actions and repayments are due 30 days after report is mailed

22. (just kidding, boss)

23. Any Questions So Far?

24. Documentation for Payroll • Names of employees charged to the grants • For selected employees • Background checks • Time and Effort documentation • Teacher certifications • Professional licenses • MDE approvals • Step and level of employee and bargaining unit salary rates

25. Common Findings for Payroll • Time and Effort Reporting • Semi annual certifications or personnel activity reports are not on file • Semi annual certifications or personnel activity reports are not in compliance 2 CFR 225, Attachment B, Item 8h

26. Common Findings for Payroll (continued) • Unallowable Costs • Teachers are not special education endorsed • Teacher consultants, transition coordinators, social workers, supervisors do not have MDE approval • Other professionals (OT, PT, Psyches, Speech, etc.) do not have licenses. • Position is not an approved position for special education Michigan Administrative Rules for Special Education OSE Allowable Cost Guide

28. Documentation for Contracted Services • For selected transactions • Signed contract • Invoice, Agenda, Sign In Sheets • Copy of check • Background checks, if applicable • Professional Licenses or Certifications, if applicable • Evidence that excluded party list was checked NOTE: a purchase order alone, is not adequate documentation

30. Common Findings for Contracted Services • Contracts not on file • Contracts do not have necessary elements • Scope of services, Defined compensation, Not signed by all parties, No period defined, No background checks • Lack of Documentation • No support for services 2 CFR 225

31. Common Findings for Contracted Services (continued) • Cost Allocation-Professional Development • Generally, IDEA must be used for the excess costs of providing special education to students with disabilities • Schoolwide professional development activities not allowable or not allocated (prorated) • Professional development of general education teachers not related to meeting the needs of students with disabilities 34 CFR 300.202

32. Documentation for Supplies/Materials • For selected transactions not considered items of interest (books, classroom supplies, etc) • Invoice and copy of check • Items of interest are items that are less than $5,000 but have longer than 1 year life or are easily pilfered (computers, iPads, iPods, etc.) • Invoice and copy of check • Evidence of tracking or tagging of items

33. Common Findings for Supplies/Materials • Lack of Documentation • Support for purchases not sufficient enough to determine that it was received, is allowable, reasonable, necessary and allocable. • Unallowable Costs • Purchases not for the benefit students with disabilities 2 CFR 225, 34 CFR 300, OSE Allowable Cost Guide

34. Documentation for Capital Outlay • For selected transactions • Invoice • Copy of check • Inventory list and evidence of tracking • Evidence of MDE prior approval Note: Capital outlay must be coded as such in accounting system and MEGs. Indirect costs do not apply.

35. Common Findings for Capital Outlay • Accounting Procedures/Improper Coding • Capital Outlay is coded as supplies • Capital Outlay is reported in MEGS as supplies • Prior Approval • Did not obtain prior approval from MDE B2011 Accounting Manual EDGAR 34 CFR 80

36. Common Findings for Capital Outlay or Items of Interest • Property Management • Items purchased: • are not tagged • are not inventoried • can not be located • are not used for the purpose of the grant OMB Circular A102 Subpart C

37. Documentation for Other transactions • Other transactions include, but not limited to, conferences, inservice workshops, travel, field trips, etc. • Registration information • Travel logs • Actual receipts for meals, airlines, rental cars • Sign in sheets • Agendas Note: Budgets, lesson plans, requests for reimbursement are not adequate documentation

38. Common Findings for Other transactions • Lack of Documentation • Support for events not sufficient enough to determine that it is allowable, reasonable and necessary. • Unallowable Activity • Events are not for the benefit of students with disabilities (may need to be prorated) 2 CFR 225 OSE Allowable Cost Guide

39. Documentation for Journal Entries • For selected journal entries: • Actual transactions in the original accounts of general ledger detail, to select a sample • Supporting documentation for selected transactions, including payroll records, invoices, agendas, logs, contracts, etc. NOTE: Journal entry showing accounts debited andcredited is not supporting documentation

40. Common Findings for Journal Entries • Lack of Documentation • The JE of debits/credits is not adequate documentation

41. Common Findings for Journal Entries (continued) • Accounting Procedures/Audit Trail • Numerous JE transactions not charged directly to the grant causes errors or lack of audit trail. • Unallowable Costs • Items or payroll reclassified are unallowable OSE Allowable Cost Guide

42. Documentation for Proportionate Share • Separate calculations for Preschool 619 and Flowthrough 611 • Evidence that the proportionate share was spent out of the Federal grants, based on actual time • Names of employees that provide services to non-public schools • GL detail showing total charged to the Federal grants for non-public services • Time and Effort documentation-PARs

43. Common Findings for Proportionate Share • Proportionate Share • Not charged to the federal grant • Did not meet the requirement amount • Time and Effort documentation not on file (PAR) 34 CFR 300.133 and Appendix B

44. Documentation for Maintenance of Effort • Evidence that you plan to meet MOE • Preliminary worksheet should be done in beginning of year and monitored periodically to ensure you will meet MOE. • See IDEA Maintenance of Effort Planning Tool at: http://www.michigan.gov/mde/0,1607,7-140-6530_6598_8391-140285--,00.html

46. Upcoming Additions to PFR • Review of State Aid • Review of expenditures reported on SE-4096 • Time and Effort documentation • Excess Costs • Calculation • Review of expenditures • Charter Schools • New and Significantly Expanding

47. Contact Information • For questions related to Program Fiscal Reviews for IDEA Special Education • Nancy Jo Serna, CPA sernan@michigan.gov • Michael Wynn, CFE wynnm@michigan.gov