Program Fiscal Reviews for IDEA Grants and State Aid Compliance

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

2. Program Fiscal Review (PFR) A PFR is the review of expenditures for IDEA federal grants and State Aid SE-4096 reimbursements to ensure compliance with Federal and State rules and regulations as they relate to fiscal management and specific programmatic aspectsof the grant or State Aid.

3. Rules and Regulations • Federal Cost Principles, 2 CFR 225 (A-87) • OMB Circulars A-133 and A-102 • Education Department General Administrative Regulations (EDGAR), 34 CFR 80 Changes coming with OMB Uniform Guidance • 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 document

4. Uh……no!

5. Scope of PFR • Expenditures must be: • Allowable • Reasonable and Necessary • Allocable • Adequately documented 2 CFR 225 Basic Guidelines OSE Allowable Cost Document

6. Scope of PFR (continued) • Expenditures must be: • Recorded properly (B2011 Accounting Manual & OSE Allowable Cost Document) • Reported properly (MEGs system, GL Accounts, A133 SEFA, SE4096) • Employees must be approved SE personnel (Administrative Rules for Special Education) • Time and Effort documentation must be on file

7. 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 • State Aid Act • OSE Allowable Cost document (and any others that may apply)

8. 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 or State Aid Act. • reflects market prices for comparable goods or services.

9. 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 (or State Aid Act).

10. 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.

11. 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) • In addition, State Aid reimbursements

12. Limited Reviews (non OSE grants) OSE may conduct limited reviews for the Office of Great Start (OGS), for the following: • Preschool (IDEA Part B, Section 619) These limited reviews are forwarded to OGS for their information and follow up.

13. Review Process Preliminary Analytical • Limited Review • Performed on grants less than or equal to 5% of the total dollar amount to be reviewed. • Full Review • Performed on grants more than or equal to 5% of the total dollar amount to be reviewed • Performed on State Aid reimbursement

14. Communications prior to PFR • Announcement Letter to ISD • Auditor contacts ISD Special Education Director and/or Financial Manager • Auditor selects LEAs/PSAs and asks ISD to provide contact names/emails/phone numbers • Auditor contacts LEAs/PSAs Special Education Director and/or Financial Manager • Engagement Letter to ISD (if a site visit is planned) NOTE: Charter Schools aka PSAs

15. Documentation requested (electronically) • General Ledger (GL) summaries for all grants and SE-4096 that will be reviewed • GL detail of transactions for all grants and State Aid determined to be full reviews • Completed questionnaire of processes • Auditor selects samples from GL detail and sends via email. Note: It may be determined that a site visit is not necessary to complete full review.

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

17. End of Review Process • At end of reviews • 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.

18. End of Review Process (continued) • After all LEAs/PSAs and ISD are completed • ISD is informed of all tentative findings noted, including possible repayment of federal funds • ISD will be responsible for repayments to MDE for federal grants • OSE may adjust future State Aid payments for LEAs/PSAs and ISD

19. 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

20. (just kidding, boss)

21. Follow up Follow up to ensure that issues noted have been corrected is required. • May be done when corrective action plan is submitted • May require follow up phone call and submission of documentation at a later date • May require a follow up visit

22. Any Questions So Far?

23. Documentation for Payroll • Names of employees • For selected employees • Time and Effort documentation • Teacher certifications • Professional licenses • MDE approvals • Step and level of employee and bargaining unit salary rates

24. Common Findings for Payroll • Time and Effort Reporting • Semi annual certifications or personnel activity reports are not on file (PARs also required for split funded aides on SE-4096) • Semi annual certifications or personnel activity reports are not in compliance 2 CFR 225, Attachment B, Item 8h

25. Common Findings for Payroll (continued) • Unallowable Costs • Teachers are not special education endorsed • Teacher consultants, transition coordinators, social workers, supervisors, directors 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 document

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

29. 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 • Lack of Documentation • No support for services 2 CFR 225

30. Common Findings for Contracted Services (continued) • Cost Allocation-Professional Development • Generally, IDEA and State Aid reimbursements must be used to provide special education to students with disabilities • Professional development activities not allowable or not allocated (prorated) in relation to the benefits of students with disabilities. • Professional development of general education teachers not related to meeting the needs of students with disabilities 34 CFR 300.202 and State Aid Act

31. 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 for Federal 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

32. 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

33. Documentation for Capital Outlay • State Aid = $1,000 or greater, and Federal = $5,000 or greater • For selected transactions • Invoice • Copy of check • Inventory list and evidence of tracking • Evidence of MDE prior approval Note: Capital outlay must be reported as such on SE-4096 and MEGs. Indirect costs do not apply.

34. Common Findings for Capital Outlay • Accounting Procedures/Improper Coding • Capital Outlay is coded as supplies • Capital Outlay is reported in MEGS or SE-4096 as supplies • Prior Approval • Did not obtain prior approval from MDE B2011 Accounting Manual EDGAR 34 CFR 80

35. Common Findings for Capital Outlay or Items of Interest • Property Management • Items purchased: • are not tagged • are not inventoried or tracked • can not be located • are not used for students with disabilities OMB Circular A102 Subpart C

36. 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

37. 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

38. 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

39. Common Findings for Journal Entries • Lack of Documentation • The journal entry of debits/credits is not adequate documentation

40. Common Findings for Journal Entries (continued) • Accounting Procedures/Audit Trail • Numerous journal entry 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

41. Documentation for Proportionate Share (Federal grants only) • 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 • Appropriate Time and Effort documentation NOTE: Function code 371 added to MEGS reporting

42. 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

43. Documentation for Maintenance of Effort (Federal grants only) • 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

45. Upcoming Additions to PFR • Excess Costs • Still in development • Charter Schools (PSAs) • New • Significantly Expanding

46. Upcoming Additions (continued) • OMB Uniform Guidance requirements • Effective for grants beginning after 12/26/14 • Consolidate and streamline eight previous federal regulations below, codified at 2 CFR, Part 200 • A-21, A-87, A-122 Cost Circulars • A-133 Single Audit Guidance • A-89 Catalog of Federal Domestic Assistance • A-102, A-110 Uniform Administrative Requirements • A-50 Audit Follow-up

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