I Can’t Buy What? An Overview of GEAR UP Fiscal Operations

I Can’t Buy What? An Overview of GEAR UP Fiscal Operations Stephen Hart Susan St. George Arizona GEAR UP Washington State GEAR UP (602) 776-4614 (360) 753-7834 stephen.hart@nau.edususans@wsac.wa.gov

SESSION OBJECTIVES • ► Carefully walk you through the world of federal cost principles. • ►Help you better understand GEAR UP’s 1:1 match • obligation and how you can help your GEAR UP • project satisfy it. • ►Answer your specific questions about GEAR UP • fiscal operations. • ►Provide you with some tools and resources that • may address some of your specific GEAR UP grant administration concerns.

Background • ►The “Misuse of Public Monies” Top 6 http://www.bizjournals.com/washington/print-edition/ 2012/04/06/the-general-services-administration.html • M. Johnson, B. Peck, S. Leeds, former GSA officials (Washington, DC)“…GSA’s planning and expenditures for the 2010 Western Region Conference were incompatible with its obligation to be a responsible steward of the public’s money...” -- Brian Miller, U.S. Inspector General http://www.azauditor.gov/pastIR.htm • J. Thor, former school principal (Tempe, AZ) • G. Conway, former district superintendent (Page, AZ) • R. Canchola, former county superintendent (Nogales, AZ) • C. Ballard, former university business manager (Tucson, AZ) • J. Wimmer, former university accountant (Salt Lake City, UT)

Burning Issues ►What GEAR UP finance-related topics or issues would you like to see addressed in today’s workshop? ►Standard Disclaimer► Standard Plea For Mercy

OUTLINE • ►Introduction • Background • Burning Issues • ►Federal Cost Principles • The Allowability Test • Hierarchy of Governing Docs • Match • ►Special Topics • Fiscal Agent; Audit Readiness; Pro-Rating Costs; Time & Effort • Teacher Time; Volunteer Time; Public Relations; Food • Facilities; Discounts; Indirect Costs; Scholarships • ►Q&A

The Allowability Test Is the expense: ►Allowable and necessary to implement the program; ► Reasonable; ► Allocable to program objectives; and ►Compliant with the program’s federal administrative regulations ►Consistently treated (i.e. a cost your organization can normally pay for)?

Hierarchy of Governing Docs ►Statute: Public Law 110-315, GEAR UP program legislation (very broad) ► Program Regulations: EDGAR and 34 CFR Part 694 (much more detailed) ► Federal Cost Principles: OMB Circulars (even more detailed)

Hierarchy of Governing Docs The documents that govern GEAR UP:► are diverse and sometimes confusing► may have inconsistencies that come from government and agency policies trying to accommodate many unique grant programsWhen you encounter conflicts or inconsistencies: ► begin with the GEAR UP statute► move through the hierarchy (program regulations, OMB Circulars)► seek clarification from USDOE Program Officer

Statute ► The statute is a federal law that authorizes or governs a program. In the case of GEAR UP, the term statute refers to the program legislation found in Title IV of the 1998 Amendments to the Higher Education Act (HEA) of 1965 [P.L. 105-244]. ► The statute sits at the top of the hierarchy but affords the Secretary of Education the authority to set program-specific policies, which are commonly known as program regulations. The statute only broadly defines how the program should operate. http://www.ed.gov/policy/highered/leg/hea98/sec403.html

Program Regulations ► Program regulations provide additional guidance when the statute is silent or vague on an issue. They provide details that govern the application competition, dictate how programs will be implemented, and other implementation details. ► There are two types of regulations that you should become familiar with – EDGAR and GEAR UP program regulations.

EDGAR ► The Education Department General Administrative Regulations (EDGAR) are agency-wide and set broad administrative policies that impact nearly all grant programs funded at the USDOE. The regulations are published in Title 34 of the Code of Federal Regulations (CFR). The pertinent sections of EDGAR to your grant administration are 34 CFR parts 74, 75, 77, 79, 80, 81, 82, 84, 85, 86, 97, 98, and 99. http://www.ed.gov/policy/fund/reg/edgarReg/edgar.html

GEAR UP Program Regulations ► Whereas EDGAR sets broad agency-wide policies, the GEAR UP program regulations addresses the very unique administrative matters associated with GEAR UP. ► GEAR UP program regulations are published in 34 CFR parts 694. http://www.ecfr.gov/cgi-bin/text-idx?c=ecfr&tpl=/ecfrbrowse/Title34/34cfr694_main_02.tpl

OMB Circulars ► Cost principles A-21, Educational Institutions. A-87, State, Local Governments and Indian Tribe Governments (Includes School Districts). A-122, Non-Profit Organizations. ► Administrative Requirements A-102, State and Local Governments. A-110, Institutions of Higher Education, Hospitals, and Other Non-Profit Organizations. ► Audit Requirements A-133, States, Local Governments, and Non-Profit Organizations. OMB Circulars: http://www.whitehouse.gov/omb/circulars/

Match? In-Kind? In-Kind Match? ► “Match” is a general term that refers to anything donated to the project, regardless of who paid for it. In the case of GEAR UP grants, it means the non-federal share of program costs. ► "In-Kind" refers to non-cash contributions of goods or services made by third party individuals or organizations to GEAR UP Projects. ► Match must follow the same rules as the money you spend – allowable, reasonable, and allocable.

GEAR UP Matching Requirements ► Dollar-for-dollar or 1:1 match - for every dollar of federal grant money spent on the project, the grantee must find an equal dollar amount of match in the form of state, local, or donated funds. ►It is the grantee’s job to generate and document this match with the same care and attention to accuracy, accountability, and timeliness as documenting the use of federal grant funds. ►If a grantee does not meet the match requirement, they could have their federal funds reduced, or their award could be terminated.

Why Match???? ► When Congress created the GEAR UP program, they wanted to create partnerships that would sustain themselves. ►The result is the dollar-for-dollar match requirement. The total project cost is shared between federal and non-federal sources. ►Match helps ensure that local partnerships are created and that GEAR UP grant resources are being directed to communities.

And, the Details … ► Match can be counted only ONCE. ► Matching contributions cannot be shifted from one project to another. ► Matching contributions must be obligated during the grant period. ► Match cannot be claimed from other sources/ programs that are federally funded.

Ask yourself: ► When considering match, could I pay for this (item or service) using my federal GEAR UP funds? ► Is it legal and ethical? ► Does it pass the “headline test”? If in doubt, contact your grant’s fiscal agent or, if you are the fiscal agent, your Program Officer.

Match Documentation Must: ► Capture the match identified with a particular project; ► Contain adequate source documentation for claimed match; and ► Provide clear valuation of in-kind match documentation.

Special Topic: Fiscal Agent • ► The Fiscal Agent is the entity that wrote the GEAR UP grant and is named specifically as the grantee in the annual Grant Award Notification (GAN). • ► The Fiscal Agent bears primary responsibility for fiscal reporting, compliance with federal cost principles, and satisfying the match obligation. • ► The Fiscal Agent chooses partners and creates the terms/conditions that formalize and govern those partnerships. • If in doubt about who your fiscal agent is, ask your GEAR UP Director.

Special Topic: Audit Readiness • ► Fiscal Agents must maintain accurate, current and complete records that disclose financial results and connect financial data to program data. • ► What keeps Fiscal Agents up at night? • Anytime a GEAR UP cost is incurred, or a cost share claim is made, you have to think: • What will a stranger from Washington DC, think of this cost, based on the available documentation, assuming (s)he is armed only with: an accounting degree; a cursory understanding of college access / GEAR UP; a calculator; and a mandate to find something to report to his/her chain of command?

Special Topic: Pro-Rating Costs ► The “allocable” test: GEAR UP costs / cost share must be applied in proportion to relative benefits, as approximated through reasonable methods. ► In other words, if the benefits of a good or service extend beyond the GEAR UP cohort, pro-rate the associated costs / cost share. ► The “room on the bus” caveat: it is not necessary to pro-rate if the primary reason a good or service is procured is to satisfy a GEAR UP objective, and the benefits spill over to others.

Special Topic: Time and Effort ► Federal regulations require that every GEAR UP staff whose salary is supported in full or in part need to document the time, effort, and activities during any given pay period. ► Develop a process for collecting time and effort sheets regularly and accurately. ► When you use in-kind personnel contributions as match, they have to fulfill the same reporting obligations as if they were paid with federal funds.

Special Topic: Teacher Time ► Generally, on-contract teacher time (salaries + benefits) cannot count as match because of the perception that compensating teachers during the contracted school day cannot be directly related to the GEAR UP grant. ► If, however, teachers are being paid by the school district (from a non-federal source) or are volunteering their time to conduct activities outside their normal duties that are specifically related to the GEAR UP grant, the hours of those activities (valued at that teacher’s salary+benefit rate) may count as match.

Special Topic: Volunteer Svcs ► If volunteers provide services in their profession, that time is valued at their rate of pay and benefits. EX: A university admissions officer gives a presentation to GEAR UP families on college admissions requirements. ► If volunteers provide services other than their profession, they should be valued at the rate of what someone would ordinarily be paid to do the work rather than their actual paid wage.

Volunteer Services (continued) ► If the organization has no one doing similar work, then the value needs to be consistent with what is paid for that type of work in the local area or you can use the value of volunteer time for your state. www.independentsector.org/volunteer_time ► Keep supporting documentation on how the rate was determined.

Special Topic: Public Relations • ► Use caution when incurring public relations costs or counting them as match. • ► OK: briefing current and potential stake-holders and communicating with parents and students by highlighting GEAR UP activities in websites, newsletters, and other similar media. • ► OK: promoting a college-going culture with strategic and/or inspirational messages using selected forms of media and/or guest speakers. • ► Not OK: lobbying; fundraising; advertising; entertaining; socializing; sales/marketing. • anything designed “solely to promote the governmental unit.”

Special Topic: Food ► Food is not specifically prohibited by OMB Circulars, but entertainment expenses are. ► Some GEAR UP programs will adhere to policies that prohibit the purchase of any kind of food under any circumstances, or require specific permission from your fiscal agent, who in turn must secure it from your federal program officer. ► If food purchases are permitted, make sure the use of public funds to buy food is well-justified (i.e. the success of the event depends on it).

Special Topic: Facilities ► Use caution when counting facilities as match. ►The space must be justified, allowable or reasonable – generally this should be approved as part of your grant agreement. ►Avoid counting classroom space used during the school day. ► It is likely that your organization uses depreciation or cost allowance to value facilities match.

Special Topic: Discounts ► Use caution when counting discounts and/or waived fees as match. ► Ask vendors, in their quotes and/or invoices, to specify the exact amount of the discount they are providing, and indicate that it is specifically for GEAR UP. ►Best Practice: instead of getting 25% off four items, pay for three and have the vendor specify that the fourth is free.

Special Topic: Indirect Costs ► These are “overhead” costs which are difficult to readily and specifically identify with a particular grant project or institutional activity (e.g. centralized services; lighting; electricity). ►Are allowable, as GEAR UP costs and/or match, but are limited to 8% of the approved federal direct costs under the award, or your indirect cost rate agreement (whichever is less). ► Can only be captured/reported if you have a formally stated negotiated indirect cost rate, resulting from a formally submitted proposal, from a cognizant federal agency.

Special Topic: Scholarships • ► Scholarships are a common component of GEAR UP programs, esp. State grants. • ► Know which basic statutory requirements your grant adheres to: • either the existing Higher Education Act (HEA)… http://www2.ed.gov/policy/highered/leg/hea98/sec403.html • or the recently reauthorized HEA…http://edocket.access.gpo.gov/2010/2010-4869.htm ► Scholarships are specifically authorized as matching by Section 404(c) of the HEA, but use caution when valuing them • Carefully document the amount of waivers or financial assistance paid to students from NON-FEDERAL sources (State, local, institutional, or private funds)

Some Good Online Resources GEAR UP Statutes, Regulations, and Circulars: http://www2.ed.gov/programs/gearup/legislation.html Washington GEAR UP resource list: http://www.gearup.wa.gov/resource-list Arizona GEAR UP policies, procedures, forms, etc: http://www4.nau.edu/gearup/fiscalop.html USDOE’s “Fiscal Accountability for Administering ED Grants”: http://www2.ed.gov/programs/nathawaiian/fiscal.pdf USDOE’s “GEAR UP Matching Requirements”: http://www.edpartnerships.org/Content/NavigationMenu/Events/2012_NCCEP_GEAR_UP_Annual_Conference/Session_Presentations_and_Files/Session_Files_and_Presentations.htm

Questions? Stephen Hart Susan St. George Arizona GEAR UP Washington State GEAR UP (602) 776-4614 (360) 753-7834 stephen.hart@nau.edususans@wsac.wa.gov

I Can’t Buy What? An Overview of GEAR UP Fiscal Operations