Michael Brustein, Esq. Tiffany R. Winters, Esq. mbrustein@bruman twinters@bruman

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Brustein & Manasevit, Brustein & Manasevit, PLLCPLLC

Michael Brustein, Esq.Tiffany R. Winters, [email protected]@bruman.com

AEFFA Conference

October 2, 2012Nashville, TN

Brustein & Manasevit, PLLCwww.bruman.com

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The Effect of the Potential New OMB “Super Circulars” on Federal Education

Programs

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Obama Executive Order 13563

“Regulatory Review”

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Advanced Notice of Proposed Guidance

February 28, 2012 OMB announced reform effort to Strengthen oversight Align existing administrative requirements Better address ongoing and emerging risks to program

outcomes and integrity

Goals include: Eliminate unnecessary and duplicative requirements Standardize information collection Adopt risk-based model for single audits Provide new administrative approaches for monitoring allocation

of Federal funds.

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OMB Advance Notice of Proposed Rulemaking

Comments Due Past Spring

Notice of Proposed Rulemaking OMB said it would be released the end of August (clearly no).. So

when??

Then Another Notice and Comment Period

Final Rulemaking??? - TBD

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Council on Financial Assistance Reform (COFAR)10 members from largest grant making agencies: HHS, AG, ED, Energy, HS, HUD, DOL, DOT

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Expect Revisions to:

1) Cost Principles A-21 A-87 A-122

2) Administrative Principles A-110 A-102

3) Federal Agency Audit Resolution A-50

4) Single Audit A-133

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Super CircularIncrease consistencyDecrease complexity

But allows for disparate treatment depending on type of entity

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Section A. Reforms to Audit RequirementsA-133 and A-50

Concentrating audit resolution and oversight resources on higher dollar, higher risk rewards.

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Single Audit Threshold Changes

a) Under $1 million in total federal expenditures:No single auditAugmented pass-through role

b) Between $1 million and $3 millionMore “focused” single audit

c) Over $3 millionFull single audit

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“Focused Single Audit” ($1 to $3 Million)

Single auditors to review2 Compliance Requirements

1) Allowable/Unallowable

2) Federal agency determines – but priority on risk of improper payments, or fraud, waste, abuse

(look to Compliance Supplement)

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“Full Single Audit” Over $3 Million

“Universal Compliance Requirements”1. Allowable Costs2. Eligibility3. Reporting4. Subrecipient Monitoring5. Period of Availability of Federal Funds6. Procurement Practices Comply with

Suspension/Debarment

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Will the shifting of Audit Thresholds reduce burden on SEAs?

Or Increase burden on SEA for monitoring and Limited Scope Audits

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Can SEA impose additional compliance requirements??

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Streamlining the universal compliance requirements in the Circular A-133 Compliance Supplement

Emphasizing elements that address improper payments, waste, fraud, abuse Larger sample sizes or lower levels of materiality

Streamlining other elements Other compliance requirements would either be optional or have smaller

sample sizes and higher levels of materiality.

Federal agencies could create their own program specific requirements through compliance supplement process. ???

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Strengthening the guidance on audit follow-up for Federal awarding agencies Requiring agencies to designate a senior accountable

agency official to oversee the audit resolution process

Require agencies to implement audit-risk metrics

Encourages CAROI

Encourages pro-active approach to resolving weaknesses and deficiencies

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OMB proposes that single audits be digitized into a searchable database to support analysis of audit results by pass-through entities

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Reducing Burden on Pass-Through Agencies (SEA)

Federal Agencies to better coordinate review of subrecipient internal controls when 2 or more federal agencies funding

If entity receives majority of Fed $ directly, not from pass-through, then Federal Agency to conduct follow-up on internal controls

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OMB wants pass-through to focus on programmatic requirements of subawards

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Section B. Reforms to Cost PrinciplesA- 21, A-87 and A-122Consolidation into single document!!

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Indirect Cost

OMB proposing a mandatory flat indirect cost rate discounted from recipient’s already negotiated rate

Reduce burden on time associated with indirect cost calculation and negotiation – reduce overall indirect costs, more $ for program

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Indirect Cost

Discounted Rates 4 years with minimal documentation, or raised through negotiation with full documentation

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Time and Effort

OMB seeking alternative mechanisms to PARs

Grantee and OIG communities to submit alternative mechanisms

New Guidance to CCSSO from OCFO!!!

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Charging Certain Computing Devices as Allowable Direct Cost Supplies

Explicitly include the cost of computing divisions not otherwise subject to inventory controls (i.e. equipment threshold) as allowable direct cost supplies.

Documented in separate line item

Not required to conduct more stringent inventory controls in place for equipment!

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Equipment v. Supplies

Would new guidance actually change equipment thresholds set by auditors?

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Section C. Reforms to Administrative RequirementsA-102, A-110 and A-89

Uniform set of administrative rules!

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Applicant’s Financial Risk

OMB recommends Agencies to consider applicant’s financial risk prior to making the award (for non-formula grants)

Indicators of RiskPast financial performancePast programmatic performanceInternal controls

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New Time and Effort Guidance by OCFO!!

http://www2.ed.gov/policy/fund/guid/gposbul/time-and-effort-reporting.html

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OMB Circular A-87:

Compensation for Personnel Services: If federal funds used for salaries, then time

distribution records are required.

Must demonstrate - If employee paid with federal funds, then employee worked on that specific federal program/cost objective.

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Who must participate?

Any employee who is working on a federal program◦ Not contractors

◦ All employees paid with federal funds

◦ Some employees paid with non-federal funds

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A-87: If employee works 100% on single cost objective

Semi-Annual Certification Completed at least every six months Signed by a supervisor with knowledge or the

employee After-the-fact record (dated) Accounts for the total activity for which

employee compensated Must coincide with one or more pay periods

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A-87: If employee works 100% on single cost objective

Semi-Annual Certification

“This is to certify that Tiffany Winters has worked 100% of her time for the period July 1, 2011, through December 31, 2011, on Title I Admin.”

Signature of employee: /s/Date: January 5, 2012

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A-87: If employee works on multiple cost objectives

Personnel Activity Reports After-the-fact record (dated) Accounts for the total activity for which employee

compensated At least monthly

(unless substitute system) Signed by the employee Must coincide with one or more pay periods

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A-87: PARs

Personnel Activity Reports (PAR)

“For the month of August 2012, I, Tiffany Winters, spent my time 50% on Title I Program Services and 50% on non-federal programs.”

Signature of Employee: /s/Date: September 1, 2012

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WHAT IS A SINGLE COST OBJECTIVE???

OCFO: “The criteria for whether an employee may document time and effort using a semiannual certification or must fill out a monthly PAR can be confusing.

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What is a “Cost Objective”?

A-87 Definition: A function, organizational subdivision, contract, grant or other cost activity for which cost data are needed and for which costs are incurred.

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Multiple activities or cost objectives for which a PAR is required — that is, if an employee works on

More than one Federal award. A Federal award and a non-Federal award. An indirect cost activity and a direct cost activity. Two or more indirect activities that are allocated using

different allocation bases. An unallowable activity and a direct or indirect cost activity.

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Examples . . . .

A Minimum Set-Aside or Maximum Cap: Title I- LEA Parent Involvement minimum (at

least 1%); Title III – Cap on administration (no more than

2%)

Program services Title I program services

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OCFO Guidance

It is possible for multiple programs to have the same cost objective, which creates confusion over whether the presence of a single cost objective or being funded by multiple programs should determine what time-and-effort documentation and employee must complete.

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OCFO Guidance (cont.)

It is possible to work on a single cost objective even if an employee works on more than one Federal award or on a Federal award and a non-Federal award.

The key to determining whether it is a single cost objective is whether the employee’s salary and wages can be supported in full from each of the Federal awards on which the employee is working or from the Federal award alone if the employee’s salary is also paid with non-Federal funds.

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OCFO Guidance Examples of Single Cost Objectives:

Title I, Part A funds and State compensatory education funds

An LEA supports a supplemental math teacher to serve low-achieving students with 50 percent Title I, Part A funds and 50 percent State compensatory education funds.

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Title I, Part A funds and local fundsA teacher in a Title I schoolwide school is paid with

local funds to teach first grade in the morning to decrease class size for reading and is paid with Title I, Part A funds to teach a supplemental reading recovery class in the afternoon. (The school has a sufficient number of first-grade teachers to meet the requirements of ESEA section 1114(a)(2)(B).)

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Title I, Part A funds and local funds (cont.) Because the part-time first-grade teacher is not needed in

order to provide the basic education program in the schoolwide program school, her salary could be supported with Title I, Part A funds, even though it is not.

Similarly, her salary for providing reading recovery could be supported with Title I, Part A funds.

Both her functions, therefore, are fully supportable with Title I, Part A funds, and the schoolwide program constitutes a single cost objective.

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Funds under Sections 611 and 619 of the Individuals with Disabilities Education Act (IDEA)

A preschool special education teacher is funded with 50 percent IDEA section 611 funds and 50 percent with IDEA section 619 funds.

Teaching preschool special education is an allowable activity under both IDEA sections 611 and 619.

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Title I, Part A funds and CEIS (comprehensive early intervening services) funds under IDEA

A teacher works with low-achieving students and is supported with 60 percent Title I, Part A funds and 40 percent CEIS funds.

Teaching low-achieving students is a single cost objective because it can be fully supported under both Title I, Part A and CEIS.

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Title I, Part A funds and local funds An LEA supports an elementary school teacher with local funds

but pays her with Title I, Part A funds to provide after-school tutoring for low-achieving students.

Although the teacher could not be paid with Title I, Part A funds to provide elementary education, the portion of her time spent on after-school tutoring is easily separated from her teaching position by her schedule.

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ESEA Title VII, Part A formula grant funds and state/local funds

A high school math teacher’s regular salary is paid with State and local funds. The teacher conducts an after-school support program for Native American students in the school, and also teaches at a summer academic camp for Native American students in the school district; for both of these activities, he is paid from Title VII, Part A funds.

Although the teacher could not be paid with Title VII, Part A funds to teach high school math, the portion that the teacher is paid with Title VII, Part A funds is easily segregated from his daily teaching schedule.

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State leadership funds under the Carl D. Perkins Career and Technical Education Act of 2006 (Perkins IV) and State funds

A State curriculum specialist who develops new career and technical education courses and initiatives is funded 50 percent with Perkins IV funds reserved under section 112(a)(2) for State leadership and 50 percent with State general funds.

Career and Technical Education curriculum development is a single cost objective because it can be fully supported with State leadership funds under Perkins IV.

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Bruman Game:Why Are These

Examples WRONG?

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Semi-Annual Certification Examples

I, Justin Beiber, certify that I worked solely on the Federal Grant program from January 1, 2012 to June 30, 2012.

Signature of Employee

____/s/______________

Date: September 1, 2012

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I, Taylor Swift, certify that I worked 100% of my time on Title I,A Administration from January 1, 2012 to June 30, 2012.

Signature of Employee

____/s/______________

Date: June 20, 2012

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I, Julia Roberts, certify that I worked 100% of my time on Title I,A program teaching class from January 1, 2012 to June 30, 2012.

Signature of District Superintendent

____/s/______________

Date: July 2, 2012

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January 1 through June 30, 2012

I, Barack Obama, certify that I worked solely on project, initiatives, and issues which have implications and consequences based and/or related to Federal programs and policies.

Signature of Employee Signature of Supervisor

____/s/______________ ____/s/_______________

Date: June 30, 2012 Date: August 2, 1012

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PAR ExamplesI certify that for the month of December 2011 I, Lady Gaga, spent

my time working on the following programs:

Title I, Admin 100%

State programs 100%____

Total 200%

Signed: ___/s/____

January 5, 2012

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PAR Examples

I certify that for the month of August 2012 I, Michelle Obama, spent my time working on the following programs:

Title I, Admin 20%


Total 50%

Signed: ___/s/____

September 10, 2012

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PAR ExamplesDear Employee:

Please sign the pre-populated form if accurate.

I certify that for the month of July 2012, Ashton Kutcher, spent my time working on the following programs:

Title I, Admin 75%


Total 100%

Signed: ___/s/_______

August 5, 2012

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Substitute Systems and OFCO Changes

Currently Used in North Carolina, Florida, Michigan and California… Anyone Else?

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Substitute Systems Generally

OMB Circular A-87 authorizes the use of substitute systems for allocating salaries and wages.

ED must approve SEA’s system. Can include:

Random moment samplingCase countsOther quantifiable measures of employee

effort

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Substitute System Changes

An SEA would be permitted to allow an LEA to use alternative documentation through approved substitute system.

For example, could use a teacher's course schedule (instead of PARs) for an individual who works on multiple activities or cost objectives

but

does so on a predetermined schedule.

An individual documenting time and effort under the substitute system would be permitted to certify time and effort on a semiannual basis, provided certain requirements are met.

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Substitute Systems Changes (cont.)

The SEA must obtain from the LEA a management certification certifying that: Only eligible employees will participate Sufficient controls to ensure that the schedules are

accurate

The certification must disclose any known deficiencies with the system or known challenges with implementing the substitute system.

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New Substitute Systems Requirements

(1) System Guidelines To be eligible to document time and effort under the substitute

system, employees must – Currently work on a schedule that includes multiple activities

or cost objectives that must be supported by monthly personnel activity reports;

Work on specific activities or cost objectives based on a predetermined schedule; and

Not work on multiple activities or cost objectives at the exact same time on their schedule.

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New Substitute Systems Requirements (cont.)

(2) Under the substitute system, in lieu of personnel activity reports, eligible employees may support a distribution of their salaries and wages through documentation of an established work schedule that meets the standards under section (3).

An acceptable work schedule may be in a style and format already used by an LEA.

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(3) Employee schedules must: Indicate the specific activity or cost objective that the

employee worked on for each segment of the employee’s schedule;

Account for the total hours for which each employee is compensated during the period reflected on the employee’s schedule; and

Be certified at least semiannually and signed by the employee and a supervisory official having firsthand knowledge of the work performed by the employee.

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(4) Any revisions to an employee’s established schedule that continue for a prolonged period must be documented and certified.

The effective dates of any changes must be clearly indicated in the documentation provided.

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(5) PARs must be used when there is a significant deviation.

Any significant deviations from an employee’s established schedule, that require the employee to work on multiple activities or cost objectives at the exact same time, including but not limited to lengthy, unanticipated schedule changes, must be documented by the employee using a personnel activity report that covers the period during which the deviations occurred.

States should put forth guidelines and examples for what constitutes a significant deviation from an employee’s established schedule that would warrant an individual reverting to a personnel activity report.

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Questions?

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This presentation is intended solely to provide general information and does not constitute legal advice or a legal service. This presentation does not create a client-lawyer

relationship with Brustein & Manasevit, PLLC and, therefore, carries none of the protections under the D.C. Rules of

Professional Conduct. Attendance at this presentation, a later review of any printed or electronic materials, or any follow-up questions or communications arising out of this

presentation with any attorney at Brustein & Manasevit, PLLC does not create an attorney-client relationship with Brustein &

Manasevit, PLLC. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular

circumstances.

Documents

Michael Brustein, Esq. Tiffany R. Winters, Esq. mbrustein@bruman twinters@bruman