1 Florida Department of Education Division of Vocational Rehabilitation Grants Management Workshop Michael Brustein, Esq. Brustein & Manasevit 3105 South

1 Florida Department of Education Division of Vocational Rehabilitation Grants Management Workshop Michael Brustein, Esq. Brustein & Manasevit 3105 South Street, NW Washington, DC 20007 [email protected] www.bruman.com

2 Federal Rules That Apply to the State Vocational Rehabilitation Program 1.EDGAR 2.VR Program Regulations 3.WIA Regulations

3 EDGAR http://www.ed.gov/policy/fund/reg/edgarReg /edgar.html Part 74 Administration of Grants with Nonprofits Part 76 State-Administered Programs Part 77 Definitions Part 79 Intergovernmental Review Part 80 Uniform Administrative Requirements*

4 EDGAR cont Part 81 Enforcement Part 82 Lobbying Part 85 Debarment and Suspension Part 86 Drug and Alcohol Abuse

5 EDGAR Part 80 1.High Risk Grantees 2.Standards for Financial Management 3.Payments 4.Allowable Costs 5.Availability of Funds 6.Cost Sharing 7.Program Income 8.Non-Federal Audit 9.Changes 10.Real Property 11.Equipment 12.Supplies 13.Copyright 14.Debarment 15.Procurement 16.Monitoring 17.Financial Reporting 18.Retention of Records

6 VR Program Regulations Part 361 State VR Services Program Part 363 State Supported Employment Services Part 364 General Provisions State Independent Living Services Program Centers for Independent Living Programs

7 VR Program Regulations cont Part 365 State Independent Living Services Part 366 Centers for Independent Living Part 367 Independent Living Services for Older Individuals who are Blind Part 369 VR Service Projects Part 370 Client Assistance Program

8 WIA Regulations 20 CFR Part 662 One-Stop Service Delivery System 29 CFR Part 37 DOL Non-discrimination Regulations If VR activities are conducted as part of the One-Stop System

9 Legal Structure of Federal Programs Statutes Program statutes (VR, WIA) General Education Provisions Act (GEPA) Regulations Program regulations Education Department General Administrative Regulations (EDGAR) OMB Circulars Guidance

10 VR/WIA Crosswalk State VR unit must carry out the following: 1.Make core services available to VR participants through the One-Stop System 2.Use a portion of the VR funds to a.Create and maintain the One-Stop service delivery system b.Provide core services 3.Enter into MOU with WIB 4.Participate in the organization of the One-Stop System consultant with MOU 5.Provide representation on local WIB 300 CFR 361.23

11 Resource Sharing / Cost Sharing under VR/WIA

12 The One-Stop is not a direct recipient of federal funds. It is a location through which several federal programs operate their programs

13 One-Stop partner programs must maintain appropriate accounting of federal funds.

14 In the One-Stop environment, some costs benefit more than one program or organization.

15 Costs must be allocated to the benefiting program based on benefits received, not availability of funds.

16 No one partner should pay a disproportionate share of the One-Stop costs.

17 Cost Pooling- distributes both shared direct and indirect costs, and involves the accumulation of costs to pools for later allocation to final cost objectives.

18 Appropriate to use cost pooling if direct charging requires disproportionate effort to determine the precise charge to the individual cost objective used for common costs in a One- Stop.

19 Once costs are accumulated in the One- Stop, they must be allocated to the benefiting programs. e.g. - % of salary costs / time assigned to activities % of units of service provided % of usage of space

20 Application of A-87 Attachment A, paragraph C.3 When an item of cost is allowable under and allocable to two or more awards, the costs may be charged to: 1.Any one of the awards 2.All of the awards based on benefits received 3.Awards based on mutually agreeable methodology

21 A program that does not benefit from the cost cannot pay for it Cost Shifting

22 Helpful Questions to Ask Is the proposed cost consistent with federal cost principles? Is the proposed cost allowable under the relevant program? Is the proposed cost consistent with program specific fiscal rules? Is the proposed cost consistent with EDGAR?

23 Federal Cost Principles http://www.whitehouse.gov/omb/circulars/ A-21 Educational Institutions A-87 State, Local & Indian Tribal Governments A-122 Non-Profit Organizations 48 CFR pt. 31 For-Profit Organizations

24 Cost Principles: Basic Guidelines All Costs Must Be: Necessary Reasonable Allocable Legal under state and local law

25 Basic Guidelines (cont.) In addition, all costs must: Conform with federal law & grant terms Consistently treated In accordance with GAAP Not included as match Net of applicable credits Adequately documented

26 Basic Guidelines (cont.) Necessary and Reasonable 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 Fair market prices Act with prudence under the circumstances No significant deviation from established prices

27 Basic Guidelines (cont.) Allocable Can only charge in proportion to the value received by the program Example: One-Stop purchases a computer to use 50% in the VR program and 50% WIA Title I Program can only charge half the cost to VR Legal under state and local law If cannot do under state law, cannot pay with federal funds

28 Basic Guidelines (cont.) Conform with federal law & grant terms Example: Match Requirements Consistently treated Must follow uniform policies that apply equally to federal and non-federal activities Cannot assign cost as direct cost if indirect under state programs

29 Basic Guidelines (cont.) In accordance with GAAP Not included as match Net of applicable credits Examples: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, adjustments of overpayments

30 Basic Guidelines (cont.) Adequately documented Amount of funds under grant How the funds are used Total cost of the project Share of costs provided by other sources* Records that show compliance Records that show performance Other records to facilitate an effective audit

31 Federal Cost Principles: Selected Items of Costs 43 specific costs detailed Listed in alphabetical order

32 Selected Items of Cost (cont.) Advertising/PR Generally not allowable, except as specified in Attachment B Alcohol Not allowable Audit Costs Allowable to the extent provided under A-133 Other audit costs are allowable if included in a cost allocation plan

33 Selected Item of Cost (cont.) Salaries and Wages Allowable if proper time distribution records Fringe Benefits Allowable if: (1) established written leave policies; (2) cost equitably allocated to all related activities; and (3) accounting basis consistently followed Severance Pay/Terminal Leave Normal: Allowable as indirect cost Abnormal: Allowable if approved by cognizant federal agency

34 Compensation for Personal Services Overview of process: Estimate how employee will work Pay based on estimate Reconcile estimates to how actually worked Necessary documentations Payroll records Time and effort records

35 Support of Salaries and Wages Payroll must be documented in accordance with grantee/subgrantees generally accepted accounting practice Charges must be approved by a responsible official of the grantee/subgrantee

36 Time Distribution OMB Circular A-87 If federal funds are used for salaries time and effort records must be kept Must demonstrate that employees paid with federal funds actually worked on the specific federal program Applies to all employees who are paid with federal funds

37 General Requirement Type of documentation depends on how many cost objectives the employee worked on These cost objectives must be connected to the employees salary source What is a cost objective? A specific grant award, or other category of costs, that requires the grantee to track specific cost information

38 Cost Objective Multiple cost objectives: More than one Federal award A Federal award and a non-Federal award; A Federal award with specific earmarking (set- asides) or matching requirements; An indirect cost activity and a direct cost activity; Two or more indirect activities which are allocated using different allocation bases; or An unallowable activity and a direct or indirect cost activity.

39 Single Cost Objective If an employee works on a single cost objective: Semi-Annual Certification Signed by employee or supervisor every six months Example: I hereby certify that for the period January 1, 2005 through June 30, 2005 one-hundred percent (100%) of my time and effort was spent on VR Administration.

40 Definition of Administrative Costs Under the State Plan 1.Quality Assurance 2.Budgeting, Accounting, Financial Management, Information Systems, Data Processing 3.Providing Information to Public 4.T/A to other state agencies, nonprofits, businesses, except those not subject to ADA

41 Definition of Administrative Costs Under the State Plan cont 5.State Rehab Council and Other Advisory Committees 6.Professional Organization Membership Dues for Designated State Unit Employees 7.Removal of Architectural Barriers in State VR Facilities 8.Operating and maintaining State unit facilities, equipment, grounds

42 Definition of Administrative Costs Under the State Plan cont 9.Supplies 10.Personnel Development 11.Admin Salaries 12.Travel costs related to carrying out the program, other than travel costs related to provision of services 13.Costs of Eligibility Determinations, Mediations, Due Process Hearings 14.Legal Expenses

43 Single Cost Objective (cont.) Flexibility Payroll certification in lieu of semi- annual certification 1.Single cost objective 2.Supervisor cannot assign multiple functions 3.Employee coded to dedicated function not benefiting multiple functions

44 Multiple Cost Objectives If an employee works on multiple cost objectives: Personnel Activity Report (PAR) or equivalent documentation After the fact Account for total activity Signed by employee Prepared at least monthly and coincide with one or more pay periods

45 Multiple Cost Objectives (cont.) Time increments reported on PARs should be sufficient to recognize: Number of different activities performed The dynamics of these responsibilities

46 Sample PAR

47 Sample PAR

48 Flexibility Substitute systems Must be approved by state (if ED has approved state procedures) Can include: Random moment sampling Case counts Other quantifiable measures of employee effort

49 Distributing Payroll Costs 1.Estimate how employee will work Must produce reasonable approximations of the activity actually performed 2.Quarterly comparison of estimates to actual costs If difference is less than 10% - annual adjustment If difference is more than 10% - quarterly adjustment

50 Selected Items of Cost (cont.) Defense and Prosecution of Criminal and Civil Proceedings, and Claims Legal expenses required in the administration of federal programs are allowable Legal expenses for prosecution of claims against the federal government are not allowable

51 Selected Items of Cost (cont.) Employee Morale, Health and Welfare Health or first aid clinics, recreational activities, employee counseling services are allowable Entertainment Amusement, diversion, and social activities are not allowable Fines and Penalties Not allowable

52 Selected Items of Cost (cont.) Lobbying Costs of activities that are meant to influence the grant process are unallowable Maintenance, Operations & Repairs Utilities, insurance, security, janitorial services, elevator service, upkeep of grounds, necessary maintenance, normal repairs & alterations are allowable if: 1.Keep property in efficient operating condition 2.Do not add to permanent value or appreciably prolong propertys intended life

53 Select Items of Cost (cont.) Memberships, Subscriptions and Professional Activities Meetings and conference where the primary purpose is dissemination of technical information are allowable Includes costs of meals, transportation, facility rental, and speakers fees

54 Selected Items of Cost (cont.) Training Training for employee development is allowable Travel costs, including transportation, lodging, subsistence, and related items, when traveling on business are allowable with certain restrictions

55 Financial Management

56 Understanding the Nature of the Federal Funding Cooperative Agreement Direct Grant Subgrant Contract

57 Nature of Funding Cooperative Agreement Very similar to a grant Substantial involvement is expected between the executive agency and recipient

58 Nature of Funding (cont.) Direct Grant (e.g., funds received directly from ED) Very similar to a cooperative agreement No substantial involvement between agency and recipient allowable activities based on applicable statute, approved project plan

59 Nature of Funding (cont.) Subgrant (e.g., pass-through funds from state administered program) Allowable activities based on applicable statute, local plan, state rules

60 Nature of Funding (cont.) Contract Allowable activities based on terms and conditions of contract Management rules: Terms of the contract State contract law

61 Subgrant vs. Contract Sugrantee Determines who is eligible to participate in a federal program Has its performance measured against whether the objectives of the federal program are met Is responsible for programmatic decision making Is responsible for complying with federal program requirements Uses the federal funds to carry out a program as compared to providing goods or services for a program

62 Subgrant vs. Contract (cont.) Contractor Provides the goods and services within normal business operations Provides similar goods or services to many different purchasers Operates in a competitive environment Provides goods or services that are ancillary to the operation of the federal program Is not subject to compliance requirements of the federal program

63 What rules apply to matching under VR?

64 The Commissioner shall pay to a state an amount equal to the federal share of the cost of VR services under the plan, including expenditures for administration of the plan. Sec. 111(a) of Rehabilitation Act

65 The Federal Share is 78.8%

66 Nonfederal share Subject to: 34 CFR 80.24 of EDGAR

67 But third party in-kind contribution may not be used Cash contributions by private entities generally may be used as match 361.60

68 FMS Rules for States 34 CFR 80.20(a) State may follow own laws and procedures, as long as FMS sufficient to: Permit preparation of all required reports Permit tracing of funds to specific expenditures

69 FMS Rules for Grantees/Subgrantees 34 CFR 80.20(b) All other grantees and subgrantees must implement an FMS that meets 7 specific requirements

70 FMS Rules for grantees/subgrantees 7 requirements: Financial Reporting Accounting Records Internal Control Budget Control Allowable Cost Source Documentation Cash Management

71 Financial Reporting Accurate, current and complete disclosure of financial information All financial reports required by ED Consistent with GASB Rule 34

72 Accounting Records Must identify source and application of funds (expenditure level detail) Must contain information related to: Award amount Authorizations Obligations Unobligated balances Assets Liabilities Outlays or expenditures Income

73 Internal Controls ED is subject to laws requiring it to monitor internal controls Improper Payment Act of 2002 Federal Managers Financial Integrity Act of 1982 Single auditors are required to test internal controls

74 Internal Controls Internal controls are tools to help program and financial managers achieve results and safeguard the integrity of their programs Includes processes for planning, organizing, directing, controlling, and reporting on agency operations

75 Objectives of Internal Control Effectiveness and efficiency of operations Reliability of financial reporting Compliance with applicable laws and regulations Safeguarding assets

76 Budget Control Must compare actual expenditures to budgeted amounts on a routine basis

77 Allowable Cost Must follow applicable cost principle to determine reasonableness, allowability, and allocability of all costs A-21 Educational Institutions A-87 State, Local & Indian Tribal Governments A-122 Non-Profit Organizations 48 CFR pt. 31 For-Profit Organizations

78 Source Documentation Type of documents: Canceled checks (or similar bank record) Paid bills Payrolls Time and attendance records Contract and subaward documents Electronic copies ok Must retain for at least 3 years, but statute of limitations = 5 years

79 Cash Management

80 Cash Management Payment Process Obligation Liquidation Drawdown Payment

81 Obligations 34 CFR 76.707, 34 CFR 80.23 Obligation = Transaction that requires payment

82 Obligations (cont.) Acquisition of PropertyDate of binding written commitment Personal Services by Employee When services are performed Personal Services by Contractor Date of binding written commitment TravelWhen travel is taken

83 Obligations (cont.) Every grant has a period of availability = period in which grantee can obligate funds In general, ED cannot extend the period of availability

84 Obligations (cont.) Grantees and subgrantees may begin to obligate funds when: Awarding agency approves application; or Awarding agency determines application is substantially approvable Reimbursement subject to final approval Pre-award costs Only for obligations made after the period of availability begins but before application approved Must have prior approval from awarding agency

85 Obligations (cont.) Tydings Amendment Allows extra year to obligate funds Does not apply to all grants Under Tydings, funds are available for 24- 27 months: 12-15 months under the grant award (July 1, 2006 September 30, 2007) Plus 12 months (October 1, 2007 September 30, 2008)

86 Obligations (cont.) In order to have a valid obligation there must be: A transaction giving rise to an obligation within the period of availability; and A linking of the transaction with funds that were available during the period of availability. Linking a transaction to particular grant funds can occur long after the period of availability ends

87 Obligations (cont.) Linking example: Transaction occurs on August 1, 2005 Available funds include: 2003-2004 Funds (became available 7/1/03) 2004-2005 Funds (became available 7/1/04) 2005-2006 Funds (became available 7/1/05)

88 Liquidations 34 CFR 80.23 Liquidation = Settle an obligation by paying funds

89 Cash Management (cont.) State must liquidate all obligations within 90 days after the end of the period of availability Example: Period of availability: July 1 September 30 Liquidation period ends: December 30 State may impose shorter deadline on subgrantee

90 Liquidations (cont.) Lapsed funds is a risk factor To avoid lapsing: Obligate oldest funds first First In First Out (FIFO) method of accounting Remember linking

91 Payments Special rules if receive advance payment Must expend funds within 3-days Must maintain written procedures for timing drawdowns and payments Interest must be paid back to ED (over $100)

92 Procurement

93 Rules for States 34 CFR 80.36(a) States may use their own policies and procedures to procure goods and services But, must include required provisions in all contracts supported with federal funds

94 Rules for Grantees/Subgrantees All other grantees and subgrantees must follow policies and procedures that meet the standards set out in 34 CFR 80.36(b)-(i)

95 Ensuring Purchases are Necessary All costs have to be necessary for the performance or administration of the federal grant Therefore, must review all proposed purchases to avoid unnecessary or duplicative items Surplus property Structure procurement to obtain most economical purchase Intergovernmental agreement for common goods or services Lease vs. purchase

96 Open Competition All procurement transactions must be conducted with full and open competition: Must have written code of conduct for all employees engaged in the award and administration of contracts (must address conflicts of interest) Must have protest procedures to handle disputes

97 Open Competition (cont.) Situations that restrict competition: Unreasonable requirements on vendors to qualify to do business Pre-qualified lists should not limit competition Requiring unnecessary experience or excessive bonding Noncompetitive pricing practices Noncompetitive awards to consultants on retainer Organizational conflicts of interest Specifying a brand name In-state or local preferences

98 Role of Cost/Price All costs must be reasonable: Fair market value Arms length bargaining Act with prudence under the circumstances

99 Role of Cost/Price (cont.) Must perform a cost or price analysis in connection with every procurement action, including contract modifications Cost analysis generally means evaluating the separate cost elements that make up the total price (including profit) Price analysis generally means evaluating the total price

100 Role of Cost/Price (cont.) Method and degree of cost or price analysis depends on the particular facts and circumstances Must make independent estimate before receiving bids or proposals Goal of analysis is to determine reasonableness

101 Vendor Selection Process Must have written selection procedures Procedures must ensure all solicitations: Include a clear and accurate description of technical requirements Identify all requirements vendor must fulfill Identify evaluation factors

102 Vendor Selection Process (cont.) Method of procurement: Small purchase procedures Competitive sealed bids Competitive proposals Noncompetitive proposals

103 Vendor Selection Process (cont.) Noncompetitive proposals appropriate only when: The good or services is available only from a single source (sole source) There is a public emergency The awarding agency authorizes After soliciting a number of sources, competition is deemed inadequate

104 Vendor Selection Process (cont.) Must perform a cost analysis in connection with every noncompetitive contract Must ensure contractor price is reasonable Must ensure contractor not using market power to force higher price

105 Vendor Selection Process (cont.) As a practical matter, noncompetitive contract raises red flags Ensure persuasive and adequate documentation to facilitate audit

106 Vendor Selection Process (cont.) Can only contract with responsible contractors possessing the ability to perform successfully: Contractor integrity Compliance with public policy Record of past performance Financial and technical resources

107 Vendor Selection Process (cont.) Retain records to document: Rationale for the method of procurement Selection of contract type Contractor selection or rejection Basis for contract price

108 Contract Administration All contracts supported with federal funds must contain certain required provisions: Remedies for breach, sanctions, penalties Termination for cause and convenience Compliance with federal statutes and executive orders Reporting requirements Patent rights Copyrights Access by federal agency, Comptroller General of US to records of contractor Retention of records for 3 years after final payment

109 Contract Administration (cont.) Must maintain a contract administration system that ensures contractors perform in accordance with the terms, conditions, and specifications of the contract

110 Contract Administration (cont.) As a practical matter: Must have written contracts (purchase order ok) Contract should include clearly defined deliverables Description of services to be performed or goods to be delivered Description of dates when services will be performed or goods delivered Description of locations where services will be performed or goods delivered Description of number of students/teachers/etc. to be served (if applicable)

111 Contract Administration (cont.) As a practical matter (cont.) Must have written invoice Description of services performed or goods delivered Description of dates services were performed or goods delivered Description of location services were performed or goods delivered Description of students/teachers/etc. served (if applicable Invoice should be reviewed & approved before payment Segregation of duties Documented approvals

112 Inventory Management

113 Rules for States 34 CFR 80.32(b) States may use their own policies and procedures to use, manage, and dispose of equipment

114 Inventory Management 34 CFR 80.32 Different rules for equipment and supplies Equipment Federal Definition of Equipment Tangible personal property Useful life of more than one year Acquisition cost of $5,000 or more State may use another definition as long as it includes all property described above Supplies Everything else

115 Equipment Must have adequate controls in place to account for: Location of equipment Custody of equipment Security of equipment

116 Equipment (cont.) Property records Description, serial number or other ID, title info, acquisition date, cost, percent of federal participation, location, use and condition, and ultimate disposition Physical inventory At least every two years Control system to prevent loss, damage, theft All incident must be investigated

117 Equipment (cont.) Must protect against unauthorized use May use for other projects as long as use is incidental and does not interfere When property no longer needed, must follow disposition rules: Transfer to another federal program Over $5,000 pay federal share Under $5,000 no accountability

118 Supplies Must maintain effective control and accountability Must adequately safeguard all such property Must assure that it is used solely for authorized purposes

119 This presentation is intended solely to provide general information and does not constitute legal advice. Attendance at the presentation or later review of these printed materials does not create an attorney-client relationship with Brustein & Manasevit. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances.

Documents

1 Florida Department of Education Division of Vocational Rehabilitation Grants Management Workshop Michael Brustein, Esq. Brustein & Manasevit 3105 South