u.s. department of education, office of career,...

F I N A N C I A L & M A N A G E M E N T I N S T I T U T E

U.S. Department of Education, Office of Career, Technical, and Adult Education

June 3, 2016


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Welcome


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Welcome (Continued)


Edward R. SmithOffice of Career, Technical, and Adult EducationU.S. Department of Education

Introduction


U.S. Department of Education Office of Career, Technical, and Adult Education (OCTAE) Division of Academic and Technical Education (DATE)

Sharon Miller, Director


Financial Management And ReportingPresented by Len Lintner

Office of Career, Technical, and Adult Education


Identifying what a financial status report is Understanding applicable regulations Understanding the two components of the FSR report Identifying types of financial status reports Identifying uses of a financial status report Identifying Perkins IV financial status reports—additional

Information Completing the financial status report

Module 101.1: Financial Status Report—Objectives


A record of expenditure activities of a Federal grant award • The FSR provides expenditure activities for the grant

Financial Status Report (FSR)


Provisions relating to the financial status reports can be found in the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) at 2 CFR 200.327

Federal Regulations That Are Applicable To The Financial Status Report


These provisions were previously located in the Education Department General Administrative Regulations at 34 CFR 80.41

Federal Regulations That Are Applicable To The Financial Status Report—Notes


Interim financial status report • The first 12 to 15 months of the Perkins grant for each FY grant award

Final financial status report• The entire 27 months of the Perkins grant

– Federal funding period - 1st 15months– Tydings amendment - final 12 months

Two Types Of Financial Status Reports


States have 27 months to obligate Perkins grant funds and an additional 3 months to liquidate any outstanding obligation incurred

Two Types Of Financial Status Reports—Notes


To determine how quickly states are obligating and liquidating grant funds As a tool by the Federal reviewer/auditor to identify

possible compliance problems

Uses Of Interim Financial Status Reports


If potential problems are identified by Federal staff after the reports are submitted, the state will be contacted and technical assistance to the state will be provided to resolve the problems before the grant ends.

Uses Of Interim Financial Status Reports—Notes


To determine that states have met the compliance requirements of Perkins• Section 112 set-asides (examples)

– Not greater than 5% administration and 10% state leadership– Not less than 85% to subrecipients – Not less than $60,000 and not more than $150,000 for non-traditional activities– Not more than 1% of the Perkins Basic grant for state institutions

Uses Of Final Financial Status Reports


If compliance concerns are identified by the Federal office reviewing the report, the state will be contacted and technical assistance will be provided to the state to determine if the issues can be resolved. If the issue cannot be resolved, the state auditor may also be contacted to investigate the potential compliance issue in more detail. State auditors may also review source documentation

(summary ledgers) maintained by the state to ensure that they reconcile the information provided to the Federal government on the financial status reports.

Uses Of Final Financial Status Reports—Notes


A report is not “final’ until all funds have been obligated and liquidated or have lapsed and reverted back to Treasury.

When Is A Report Final?


Go to Consolidated Annual Reporting system (CAR): User’s Guide section • https://s3.amazonaws.com/PCRN/docs/CAR_User_Guide_2015.pdf

See FSR Instructions (Basic Reporting Requirements) See FSR Expenditure Report For more help, see the flowchart on the next slide

Instructions For Completing The Financial Status Report

https://s3.amazonaws.com/PCRN/docs/CAR_User_Guide_2015.pdf

Completing the Consolidated Annual Report (CAR)



Block 1 - state name Block 2 - Federal funding period: the first 15 months of the

grant for both interim and final FSRs Block 3 - reporting period: interim report (the first 12 or 15

months); final report (27 months) Block 4 - accounting basis: cash or accrual Block 5 - grant award numbers: Basic Grant Block 6 - Title I award amount Block 7 - amended FSR and date of filing amended FSR

Completing Grant Information (Blocks I–XII) Of The Interim And Final Financial Status Report


See FSR Instructions (Basic Reporting Requirements) and template of Interim FSR Go to: Resources

• Line Items: Rows A–S– These are programmatic setasides of the Perkins IV legislation for the Basic Grant.

• Line Items: Columns 1–11– Column I on the interim FSR will always be zero– Column 10 is the Federal Funds Authorized– Column 11 is the balance of unobligated funds that must be obligated before the end of the 27

month grant period for Perkins

General Information For Completing The Interim Financial Status Report


See FSR Instructions (Basic Reporting Requirements) and template of Interim FSR Go to: Resources

• Line Items: Rows A–S– These are programmatic setasides of the Perkins IV legislation for the Basic Grant.

• Line Items: Columns 1–11– Column 1 is the same amount as column 5 of the Interim FSR for the same grant– Column 11 should reflect balances of zero if the entire grant has been obligated and liquidated.

If not, remaining unobligated funds should be returned to the Federal government.

General Information For Completing The Final Financial Status Report


The state director will receive a PIN (personal identification number) The state fiscal agent (lead individual who prepares the

FSR at the state) will receive a separate PIN The state fiscal agent must be identified in the cover CAR

(Consolidated Annual Report) cover page

Additional Information To Consider When Completing The FSR


For assistance with CAR reporting requirements, CARinstructions, or requesting a PIN, please contact:• Sharon Head – (202) 245-6131 or [email protected]

For assistance with uploading or entering data to thedatabase, CAR error messages, or system problems withthe final CAR submission:• John Vavricka at [email protected]

For assistance on how to complete a financial statusreport, please contact:• Andrew Johnson – (202) 245-7786 or [email protected]

Technical Assistance Available When Completing The FSR

mailto:[email protected]




Gain a better understanding of the statutory requirements of the Perkins IV law• Identify the within state setaside requirements of Perkins • Allowable uses of administration funds• Allowable uses of state leadership funds• Allowable uses of funds to secondary and postsecondary sub-recipients of

Perkins funds

Gain a better understanding of relevant regulatory requirements • EDGAR• Uniform Guidance

Module 101.2: Perkins Grant/Statutory And Regulatory Requirements (Allowable And Unallowable Costs)—Objectives


Section 112—within state allocations• Administration—not more than 5% or $250,000 whichever is greater• State leadership—up to 10%

– Nontraditional—$60,000 to $150,000– State Institutions—-up to 1% of the Perkins Basic Grant

• Flow thru funds to secondary and postsecondary sub-recipients—not less than 85%– 10% reserve—up to 10% of the 85%

Statutory Requirements In The Perkins IV Law With Regard To Within State Allocations


Section 3(1) of Perkins defines administration Section 112(a)(3) provides examples of administrative

activities• Developing state plan• Reviewing local plan• Monitoring and evaluating program effectiveness• Assuring compliance with all applicable Federal laws• Providing technical assistance• Supporting the development of state data systems

Allowable Uses Of Funds For State Administration Funds


Administration funds are to be used to support activities that are directly related to properly administering the Perkins Grant.

Allowable Uses Of Funds For State Administration Funds—Notes


Section 124 of the Perkins IV law—programmatic allowable uses of funds Section 124(b)9 required uses of funds Section 124(c)17 permissive uses of funds Section 124(d) state leadership funds must not be used for

administrative costs

Allowable Uses Of State Leadership Funds


State leadership funds are to be used to support activities that improve career and technical education programs and services statewide.

Allowable Uses Of State Leadership Funds—Notes


Section 135 of the Perkins IV law provides allowable uses of funds Section 135(b): 9 required uses of funds Section 135(c): 20 permissive uses of funds Section 135(d): administration cap of 5% for sub-recipient

Perkins grant

Allowable Uses Of Flow Thru Funds To Secondary And Postsecondary Sub-Recipients


Flow thru funds are used to support programs and services for career and technical education that directly benefit the secondary or postsecondary recipient receiving these funds.

Allowable Uses Of Flow Thru Funds To Secondary And Postsecondary Sub-Recipients—Notes


Additional Federal requirements for the Perkins Grant where the law is silent (information is not addressed in the Perkins Statute) Most relevant section of EDGAR

• 34 Code of Federal Regulations Parts 76

34 CFR Part 76-State administered programs• Covers topics such as

– How a state applies for a grant– How a grant is made to a state– How to apply to the state for a subgrant– How a subgrant is made to an applicant– Conditions that must be met by the state and its subgrantees

The Most Relevant Sections Of The Perkins Grant With Regard To The Education Department General Administrative Regulations (EDGAR)


34 CFR parts 74 and 80 of EDGAR have been integrated into the Uniform Guidance

The Most Relevant Sections Of The Perkins Grant With Regard To The Education Department General Administrative Regulations (EDGAR)—Notes


2 CFR Part 200—Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards• Covers topics such as

– Pre-award requirements (Subpart C)o Ex. state plans

– Post award requirements (Subpart D)o Ex. allowable costs/equipment/financial reporting

– Cost Principles (Subpart E)o Are the selected costs “necessary and reasonable?

– General provisions for selected items of costo 55 selected items of cost are analyzed

The Most Relevant Sections Of The Perkins Grant With Regard To The Uniform Guidance


Questions and Answers


Break


Maintenance Of Effort And MatchingPresented by Len Lintner



Define Maintenance of Effort Provide background of Maintenance of Effort Provide introduction to Maintenance of Effort

requirements/general principles Provide explanation of MOE waiver authority Provide explanation and examples of Decrease in Federal

Support Provision

What Are The Objectives Of This Module?


A Federal requirement that requires grant recipients to maintain a certain level of state fiscal effort to be eligible for participation in Federal grant funding unless waived by the Federal agency. Grant recipients not meeting MOE requirements face the

potential of an audit finding and the potential for recovery of funds by the Federal government. 1976 Amendments-Effort maintained at both the state and

local levels Perkins I thru the current Perkins IV legislation effort

maintained at the state level only

What Is Maintenance Of Effort?


Note: from the compliance supplement: “A State must maintain its fiscal effort in the preceding year from State sources for career and technical education on either an aggregate or a per-student basis when compared with such effort in the second preceding year, unless this requirement is specifically waived by the Secretary."

What Is Maintenance Of Effort?—Notes


Perkins I thru the current Perkins IV legislation effort maintained at the state level

Background—Maintenance Of Effort


Located in section 311(b) of Perkins IV Maintained in one of two ways: aggregate expenditures or

fiscal effort per student Use the method more beneficial to state State can change method from year to year Exclude tuition revenue from calculation-EDGAR 76.534

What Are The Requirements Of Maintenance Of Effort?


Exclude capital expenditures, special one-time project costs and costs of pilot program To maintain effort for a given year, a state must ensure that

the previous years effort equaled or exceeded the effort (either aggregate or per-student) in the second year preceding the year for which the determination is made Example for fiscal year 2016

– Fiscal year 2015 (7/1/14 to 6/30/15) $ 9,500,000– Fiscal year 2014 (7/1/13 to 6/30/14) $9,450,00– State is in compliance with effort for fiscal year 2016 under this scenario

What Are The Requirements Of Maintenance Of Effort? (Continued)


Calculate effort consistently Include all state level costs that meet the definition of

career and technical education Sources of data for expenditures must be auditable Controls and procedures in place to ensure accuracy of

student enrollment data if calculating on per-student basis Student enrollment counts non-duplicated

What Are Some General Principles Of Maintenance Of Effort?


Yes-section 311(b)(2) Allows for a one-time waiver of up to 5% of expenditures

by any eligible agency for 1 fiscal year only due to exceptional or uncontrollable circumstances affecting the ability of the eligible agency to meet such requirements, such as a natural disaster or an unforeseen and precipitous decline in financial resources

Is There A Waiver Authority For Maintenance Of Effort?


No level of funding permitted under such a waiver may beused as the basis for computing the fiscal effort oraggregate expenditures required under this section foryears subsequent to the year covered by such waiver. Thefiscal effort or aggregate expenditures for the subsequentyears shall be computed on the basis of the level offunding that would, but for the waiver, have been required.

Is There A Waiver Authority For Maintenance Of Effort? (Continued)


Example 1

What Are Some Examples Of Maintenance Of Effort Waiver Authority?


This example illustrates that after a waiver of 5% that was granted for FY 2015 expires, the state must return to the original level of effort in FY 2016 ($20,000,000). The new floor for effort cannot be the one-time waiver floor of $19,000,000 established in FY 2015.

What Are Some Examples Of Maintenance Of Effort Waiver Authority?—Notes


Section 311(b)(1)(C) If the amount made available for career and technical

education …programs under this Act for a fiscal year is less than the amount made available for career and technical education …programs under this Act for the preceding fiscal year, then the fiscal effort per student or the aggregate expenditures of a state required by subparagraph (B) for such preceding fiscal year shall be decreased by the same percentage as the percentage decrease in the amount so made available.

What Is The Decrease In Federal Support Provision In Perkins IV?


Example 1

Example 2

What Are Some Examples Of Decrease In Federal Support?


Under this example, due to the fact that the federal allotment to the state did not decrease ($1,000,000), the state is not able to reduce the floor for the level of effort ($20,000,000) In this example, due to the fact that the federal allotment to

the state decreased by 10% between FY 2015 and FY 2016, the state is able to reduce the state floor for level of effort between FY 2015 and 2016 by the same 10%.

What Are Some Examples Of Decrease In Federal Support?—Notes


Section 112(b)• Each eligible agency receiving funds made available under section

112 (a)(3) shall match, from non-Federal sources and on a dollar for dollar basis, the funds received under section 112 (a)(3).

What Is The State Administration Matching Requirement?


The state (non-Federal) expenditure for administration should be expended on activities that would be allowable administration activities under the Perkins legislation.

What Is The State Administration Matching Requirement?—Notes


Section 323(a)• . . . The eligible agency shall provide, from non-Federal sources for the costs

the eligible agency incurs for administration of programs under this act, an amount that is not less than the amount provided by the eligible agency from non-Federal sources for such costs for the preceding fiscal year.

What Is The State Administration Hold-Harmless Provision?


This means that if a state overmatched their Federal administration expenditures, they must maintain that level of state expenditures for administration in subsequent years even it is higher than the Federal administration expenditures.

What Is The State Administration Hold-Harmless Provision?—Notes


Section 323(b)• If the amount made available from Federal sources for the administration of

programs is less than the amount made available from Federal sources for the administration of programs under this act for the preceding fiscal year,

• Then the amount the state is required to provide from non-Federal sources for costs the state incurs for the administration of programs under this act [for the current year] shall bear the same ratio to the amount the state provided from non-Federal sources for such costs for the preceding fiscal year.

• Simply put-if, for example, the percentage of Federal funds expended for state administration falls 5 percent from one year to the next, the non-Federal match may fall a comparable 5 percent

What Is The State Administration Hold-Harmless Provision?


Example 1

What Is An Example Of An Allowable Section 323(b) Reduction?


In this example the state is allowed to reduce their administrative expenditure amount by 10% between FY 2015 and FY 2016 due to the fact that the Federal expenditures between FY 2015 and FY 2016 were reduced by 10%.

What Is An Example Of An Allowable Section 323(b) Reduction?—Notes


Example 2

What Is An Example Of Decrease In Federal Support In The Context Of 323(b) Reductions?


In this example the state was able to reduce their non-Federal administration expenditures by 10% between FY 2014 and FY 2015 due to the fact that the amount of Federal funds for administration decreased by 10%between FY 2014 and FY 2015. However, the state can maintain their level of funding ($540,000) between FY 2015 and FY 2016 even though the Federal amount increased between FY 2015 and FY 2016. This is because their new floor of $540,000 is still above the new match level of $300,0000.

What Is An Example Of Decrease In Federal Support In The Context Of 323(b) Reductions?—Notes


The Single Audit Process: Understanding And Applying The Uniform Guidance And

The OCTAE Audit ProcessPresented by Rosanne Andre

Audit Resolution SpecialistOffice of Career, Technical, and Adult Education


Purpose of the Uniform Guidance - Subpart F–Audit Requirements Outline the Office of Career, Technical, and Adult

Education / Division of Adult and Technical Education (OCTAE/DATE) audit process under Subpart F Present an overview of the internal controls and other audit

related information

What Are The Objectives Of This Module?


Discuss the purpose of the Uniform Guidance, at 2 CFR Part 200, specifically Subpart F, Audit Requirements Outline OCTAE’s and specifically DATE’s audit process

under Subpart F Present an overview of the importance of internal controls

as they relate to the single audit process, and provide other related information concerning the single audit process

What Are The Objectives Of This Module?—Notes


Ensures accountability for federal awards—over $400 billion in grants awarded by the federal government Single Audit Act of 1984 Single Audit Act Amendments of 1996

What Is The Importance Of A Single Audit?


The single audit is the primary mechanism used by federal agencies and pass-through entities to ensure that federal funds are used for the purposes intended. This is extremely important since according to OMB, the federal government awards over $400 billion in grants to state, local and tribal governments, colleges, universities and other non-profit organizations.

What Is The Importance Of A Single Audit—Notes


Historically, the Single Audit Act of 1984 was established to ensure uniform audit requirements across state and local governments. Additionally, it served to reduce the administrative burden of submitting individual audits on federally funded programs.



The single audit, usually prepared annually, encompasses both financial and compliance sections, covering an examination of a recipient’s financial records, the organization’s financial statements, an accounting of federal award expenditures during the audit period, and the organization’s internal control systems. The Single Audit Act Amendments of 1996 extended the

statutory audit requirements to non-profit organizations, placing states, local governments, universities, and non-profit organizations under the same audit process.



Subpart F – Audit Requirements at §200.500 of the Uniform Guidance replaces OMB Circular A-133 Assurance of consistency and uniformity among federal

agencies Subpart F provides required policies and procedures

What Is The Purpose Of Subpart F –Audit Requirements At §200.500?


As part of the implementation of the Single Audit Act Amendments of 1996, OMB Circular A-133 set the standards for the single audit. OMB Circular A-133 was replaced by the requirements set forth in 2 CFR 200.500 (Subpart F) of the Uniform Guidance and is applicable for audit periods beginning on or after December 26, 2014. Subpart F sets the standards for obtaining consistency and

uniformity across federal agencies for audits of non-federal entities expending federal award funds.

What Is The Purpose Of Subpart F – Audit Requirements At §200.500?—Notes


Subpart F provides specific policy, procedures, and criteria which federal agencies, auditees, and non-federal auditors are required to follow to ensure consistency and uniformity for the single audit process.

What Is The Purpose Of Subpart F – Audit Requirements At §200.500?—Notes


How Is Subpart F Organized?


General: The purpose of Subpart F – Audit Requirements (§200.500) Audits: Specific information on audit requirements and

other information related to the performance of the audit (§200.501-7) Auditees: Specific information on the responsibilities of

auditees (§200.508-12)

How Is Subpart F Organized?—Notes


Auditors: Specific information on the responsibilities of auditors (§200.514-20) Management Decisions: Specific information on the

management’s decision with respect to the audit findings (§200.521) Federal agencies: Specific information on the

responsibilities of federal agencies (§200.513)

How Is Subpart F Organized?—Notes


Purpose of the compliance supplement Matrix of compliance requirements Annual revision

What Is The Compliance Supplement At Appendix XI To Part 200?


Following Subpart F in the Uniform Guidance are the appendices to the Uniform Guidance. Appendix XI to Part 200 contains the Compliance Supplement. The purpose of the Compliance Supplement is to provide

guidance to the auditor regarding testing of federal program compliance requirements. It serves as the “road map”, if you will, directing the auditor to general and specific program compliance testing.

What Is The Compliance Supplement At Appendix XI To Part 200?—Notes


The Compliance Supplement includes a Matrix of Compliance Requirements that identifies which of the 12 types of compliance requirements pertain to a specific federal program. The Compliance Supplement is updated annually to reflect

new, revised, or terminated programs, and to reflect any changes to program compliance requirements. In addition, non-federal officials can suggest improvements to OMB through an annual notice in the Federal Register requesting comments.

What Is The Compliance Supplement At Appendix XI To Part 200?—Notes


Annual audit submission Audit requirement - for non-federal entities expending

$750,000 or more Audit requirement - for entities expending less than

$750,000.

What Are General Compliance Audit Requirements?


Each state or entity is required to submit an annual financial statement and compliance audit, the Single Audit, under 2 CFR 200.501. Note: Some states and local governments are required by constitution or statute (as of 1/1/1987) to undergo audits less frequently than annually. These entities are permitted to undergo the single audit biennially, or once every two years. Non-federal entities that expend $750,000 or more in a

year in total federal funds are subject to the annual single audit requirement.

What Are General Compliance Audit Requirements?—Notes


Each state or entity is required to submit an annual Non-federal entities expending less than $750,000 in a

year in total federal funds are exempt from federal audit requirements. Additionally, non-federal entities, must make records available for review or audit by federal agencies, pass-through entities (non-federal entities from whom they receive federal funds), and the Government Accountability Office (GAO) if requested.

What Are General Compliance Audit Requirements?—Notes


Identify federal awards received and expended - SEFA Prepare financial statements Engage auditor Complete corrective action plan Submit audit and Data Collection Form (form SF-SAC) to

Federal Audit Clearinghouse Promptly take corrective action

What Are The Auditee's Primary Responsibilities?


Identifying the federal awards received and expended, then preparing the Schedule of Expenditures of Federal Awards (SEFA) Preparing the organization’s financial statements for

auditor examination Engaging the auditor to perform the audit and ensuring that

the audit is performed in accordance with the Uniform Guidance requirements

What Are The Auditee's Primary Responsibilities?—Notes


Completing the corrective action plan (CAP) for auditor identified findings, and submitting the CAP to the auditor for insertion in the final audit package Submitting the audit reporting package and Data Collection

Form (form SF-SAC) to the federal Audit Clearinghouse (FAC) and pass-through entities – 2 CFR §200.512 Promptly taking corrective action on audit findings reported

in the single audit

What Are The Auditee's Primary Responsibilities?—Notes


Aligned with the Uniform Guidance Single Audit package Submission due date Review and resolution of audit findings Cross-cutting findings Issuance of PDL

What Is OCTAE’s Audit Process?


OCTAE’s audit process follows the OMB/Uniform Guidance guidelines for audit resolution. Guidelines can be found at 2 CFR Part 200, EDGAR and Perkins specific regulations. As required by Subpart F of the Uniform Guidance – Audit

Requirements, the Single Audit package, comprised of audited financial statements and a compliance section of the audit, must also include the Auditee’s response and a Corrective Action Plan.

What Is OCTAE’s Audit Process?—Notes


The complete single audit package is then electronically submitted to the Federal Audit Clearinghouse the earlier of nine (9) months after the end of the grantee’s fiscal year, or 30 days after receipt of the auditor’s report. Once the Federal Audit Clearinghouse completes its initial

review of the audit, the audit is forwarded to the appropriate federal agencies for resolution. Perkins’ audit findings are reviewed and resolved by an Audit Resolution Specialist in OCTAE.



Audit findings that cross more than one federal program, known as cross-cutting findings, are jointly resolved in coordination with other ED Program Offices. Once the audit findings are resolved, OCTAE issues a

Program Determination Letter (PDL) showing the disposition of all findings; noted as either Resolved, requiring additional corrective action from the grantee, or Resolved and Closed if there are no remaining audit issues.



Unallowable costs or activities Reporting Property & procurement Subrecipient monitoring Cash management

What Are The Most Common Single Audit Findings?


These are the types of findings we find most often in single audits. Unallowable costs or activities, of course, refer to audit

findings that identify improper uses of federal program funds. In recent audits FFATA findings were noted under the

Reporting category. This category would also include instances where the auditee was unable to support amounts reported to the federal government.

What Are The Most Common Single Audit Findings?—Notes


An example of a property and procurement finding would be where the auditee may not have followed the policies and procedures it uses for procurements from its non-federal funds. The procurement standards are comprehensive and attention to these requirements is recommended.



Subrecipient monitoring findings are regularly noted in single audits. All pass-through entities must follow the requirements set forth in the Uniform Guidance at 2 CFR 200.331 with respect to its subrecipients. These requirements are discussed in detail in a separate Subrecipient Monitoring FMI Module.



Cash management findings include internal controls overcash receipts, cash disbursements and overall cashmanagement. Lastly, repeat findings, i.e., findings that have not been

sufficiently corrected are indicators of the lack of internalcontrols. This leads us to the next slide, “What are InternalControls?”



Designed to mitigate risks of waste, fraud, and abuse Reference 2 CFR 200.303 of the Uniform Guidance System of procedures to detect fraud or errors Assurance that the organization can achieve its objectives

What Are Internal Controls?


An effective internal control system, designed to mitigate risks of waste, fraud, and abuse, is the foundation of every organization. As required under the Uniform Guidance 2 CFR 200.303, each non-federal entity must establish and maintain effective internal controls over federal awards to ensure compliance with federal statutes, regulations, and the terms and conditions of the federal award.

What Are Internal Controls?—Notes


An effective internal control system will ensure that it’s system of procedures will detect fraud or errors in the normal course of business, in conjunction with a management process designed to provide reasonable assurance that the organization can achieve its objectiveeffective internal control system, designed to mitigate risks of waste, fraud, and abuse, is the foundation of every organization. As required under the Uniform Guidance 2 CFR 200.303, each non-federal entity must establish and maintain effective internal controls over federal awards to ensure compliance with federal statutes, regulations, and the terms and conditions of the federal award.



An effective internal control system will ensure that it’s system of procedures will detect fraud or errors in the normal course of business, in conjunction with a management process designed to provide reasonable assurance that the organization can achieve its objectives.



Segregation of duties Dual-signature checks Frequent bank reconciliations

What Are Some Examples Of Internal Controls?


Proper segregation of duties—A separation of operational and administrative duties, where, if combined, theft may occur. Dual-signature checks—Many organizations require two

authorized signatures to ensure that a payment is legitimate. Frequent bank reconciliations—An internal control that

ensures that physical cash transactions have been recorded during a specific period. The task is performed by someone other than the transaction clerk.

What Are Some Examples Of Internal Controls?—Notes


1. Control Environment2. Risk Assessment3. Control Activities4. Information & Communication5. Monitoring

How Can We Improve Our Internal Controls?


What are the internal control processes that assure our objectives are achieved efficiently, effectively, and with reliable, compliant reporting: A Control Environment that sets the tone for the

organization. A Risk Assessment process that involves the identification

and analysis of relevant risks.

How Can We Improve Our Internal Controls?—Notes


Control Activities that include the policies and procedures that help ensure management directives are carried out and documented. Information and Communication systems or processes that

support the exchange of information. Monitoring processes used to assess the quality of internal

control performance over time.

How Can We Improve Our Internal Controls?—Notes


Single Audit process - 2 CFR Part 200 OCTAE’s Single Audit process Internal controls

What Have We Learned Thus Far?


The single audit process is important as it ensures accountability for federal awards. As stated earlier in this presentation, over $400 billion in grants are awarded by the federal government. In addition, 2 CFR Part 200 of the Uniform Guidance assures consistency and uniformity of the single audit process among federal agencies. OCTAE’s single audit process and its’ contribution in

achieving the single audit goals.

What Have We Learned Thus Far? —Notes


Internal controls give reasonable assurance that the organization will achieve its objectives through: • Effective and efficient operations • Reliable reporting • Compliance with applicable laws and regulations

What Have We Learned Thus Far? —Notes


Your department program officer The department’s one-stop shop for information

• Uniform Guidance Technical Assistance for ED Granteeshttp://www2.ed.gov/policy/fund/guid/uniform-guidance/index.html

Email questions to• [email protected]

Federal Audit Clearinghouse (FAC)• http://harvester.census.gov/sac/dissem/disclaim.html

Resources

http://www2.ed.gov/policy/fund/guid/uniform-guidance/index.html

http://harvester.census.gov/sac/dissem/disclaim.html



Your Education Program Officer will be the most knowledgeable on your program. The Department’s one-stop shop for everything Uniform

Guidance can be accessed at the URL provided on this slide. There is a wealth of information, training resources and FAQs that you will find extremely helpful. The site includes links to COFAR, OMB and EDGAR, FAQs, and helpful crosswalks between Parts 74 and 80 of EDGAR and the Uniform Guidance.

Resources—Notes


Any questions concerning the Uniform Guidance can be emailed to [email protected]. Finally, the Federal Audit Clearinghouse (FAC) is the

depository for all single audits and the submission portalfor the annual single audit. You will want to bookmark both the Uniform Guidance and

the FAC links for future reference.

Resources—Notes



Break


Perkins And Workforce Innovation and Opportunity Act (WIOA): The

IntersectionsPresented by Len Lintner



Recap of WIOA Definitions State Workforce Development Board Combined State Plan Local Workforce Development Boards Local Plans One-Stop Delivery Systems

Topics For Discussion


Strategic alignment Requires states to strategically align key employment,

education, and training programs provided by the four core programs at the Federal, state, and local levels: (1) The adult, dislocated worker, and youth formula programs administered by DOL under title I of WIOA; (2)

the AEFLA program administered by ED under title II of WIOA; (3) the Wagner-Peyser Act employment services program administered by DOL under title III of WIOA; and (4) the vocational rehabilitation program administered by ED under title IV of WIOA.

Goals Of WIOA


NOTE: ED and DOL are still in the process of finalizing the WIOA implementing regulations and when the regulations are released this summer there will be much greater clarity about the requirements as they impact Perkins, and particularly much greater detail about the requirements of the one-stop system in which local Perkins post-secondary recipients are required partners.

Goals Of WIOA—Notes


Increased accountability Promotes program accountability and improvement to

increase access to high quality services and opportunities for individuals with barriers to employment

Goals Of WIOA (Continued)


Core program Career and technical education Career pathways Area career and technical education school One-stop—partner, center, operation, partner program

Important WIOA Definitions


Reduces size of workforce development boards Includes business majority, labor organizations,

apprenticeship (new), and organizations serving individuals with barriers to employment Includes the lead state official with responsibility for the

core programs No representation in multiple categories

Changes to State Workforce Development Boards


The state board may include state agency officials responsible for education programs in the State, including chief executive officers of community colleges and other institutions of higher education

Membership Of State Boards


(b) MEMBERSHIP.— (1) IN GENERAL.—The State board shall include—(A) the

Governor; (B) a member of each chamber of the State legislature (to the extent consistent with State law), appointed by the appropriate presiding officers of such chamber; and (C) members appointed by the Governor, of which—(i) a majority shall be representatives of businesses in the State, who—(I) are owners of businesses, chief executives or operating officers of businesses, or other business executives or employers with optimum policymaking or hiring authority, and who,

Membership Of State Boards—Notes


in addition, may be members of a local board described in section 107(b)(2)(A)(i); (II) represent businesses (including small businesses), or organizations representing businesses described in this subclause, that provide employment opportunities that, at a minimum, include high-quality, work-relevant training and development in in-demand industry sectors or occupations in the State; and (III) are appointed from among individuals nominated by State business organizations and business trade associations; (ii) not less than 20 percent shall be representatives of the workforce within the State, who—



(I) shall include representatives of labor organizations, who have been nominated by State labor federations;(II) shall include a representative, who shall be a member of a labor organization or a training director, from a joint labor-management apprenticeship program, or if no such joint program exists in the State, such a representative of an apprenticeship program in the State; (III) may include representatives of community-based organizations that have demonstrated experience and expertise in addressing the employment, training, or education needs of individuals with barriers to employment, including



organizations that serve veterans or that provide or support competitive, integrated employment for individuals with disabilities; and organizations that have demonstrated experience and expertise in addressing the employment, training, or education needs of eligible youth, including representatives of organizations that serve out-of school youth; and (iii) the balance—(I) shall include representatives of government, who—(aa) shall include the lead State officials with primary responsibility for the core programs; and (bb) shall include chief elected officials (collectively representing both cities and counties, where



appropriate); and (II) may include such other representatives and officials as the Governor may designate, such as—(aa) the State agency officials from agencies that are one-stop partners not specified in subclause (I) (including additional one-stop partners whose programs are covered by the State plan, if any); (bb) State agency officials responsible for economic development or juvenile justice programs in the State; (cc) individuals who represent an Indian tribe or tribal organization, as such terms are defined in section 166(b); and (dd) State agency officials responsible for education programs in the State, including chief executive officers of community colleges and other institutions of higher education.



Assist the Governor in developing and implement the WIOA Unified or Combined State Plan Assist the Governor in aligning workforce development

programs in the State, including:• Developing strategies to support the use of career pathways• Developing and working to continuously improve the one-stop delivery

system in local areas• Identifying regions and local areas

Establish state performance measures and targets to assess effectiveness of core programs

Functions Of The State Workforce Development Board


Assist the Governor in developing policies to coordinate the provision of services through the one-stop delivery system, including developing: • Criteria and procedures for local boards to use in assessing the

effectiveness and continuous improvement of one-stop centers• Guidance for the allocation of one-stop center on infrastructure funds• Policies defining the appropriate role and contributions of one-stop partners,

including approaches to facilitate equitable and efficient cost allocation

Functions Of State Workforce Development Board (Continued)


Assist the Governor in developing:• Strategies for technological improvement to facilitate access to, and improve

the quality of, services and activities provided through the one-stop deliverysystem

• Technological improvements to:– enhance digital literacy skills, accelerate the acquisition of skills and recognized postsecondary

credentials by participants;– strengthen the professional development of providers and workforce professionals; and– ensure such technology is accessible to individuals with disabilities and individuals residing in

remote areas;

Functions Of State Workforce Development Board (Continued)


A Combined State Plan gives states the option to incorporate other key partners. For example, Perkins, Temporary Assistance for Needy Families (TANF) in the alignment of the state workforce investment, education, and economic development systems Plans must include:

• Description of methods used for joint planning and coordination• Assurance allowing core programs to review and comment on all portions of

the Combined State Plan

Combined State Plans


If a Combined State Plan includes the Perkins program, then it is subject to the state plan requirements specified in Perkins Section103 (c)(4) of WIOA – Special Rule regarding Perkins

• “… requirement for agreement between the State and the appropriate Secretaries regarding State performance measures or State performance accountability measures, as the case may be, including levels of performance.”

Combined State Plans (Continued)


(4) SPECIAL RULE.—In paragraph (3), the term ‘‘criteria for approval of a plan or application’’, with respect to a State and a core program or a program under the Carl D. Perkins Career and Technical Education Act of 2006 (20 U.S.C. 2301 et seq.), includes a requirement for agreement between the State and the appropriate Secretaries regarding State performance measures or State performance accountability measures, as the case may be, including levels of performance.

Combined State Plans (Continued) —Notes


Important Dates• WIOA Unified or Combined State Plans were due March 2016• Generally, the appropriate Secretary must approve within 90 days of the

date that the plan is submitted.

WIOA State Plan Approvals


Perkins postsecondary sub-grantees are not required members However, Local Workforce Development Boards must

include, among other members, a representative of institutions of higher education providing workforce investment activities (including community colleges) Local boards are still required to coordinate activities with

education and training providers in the local area, including providers of career and technical education

Local Workforce Development Boards


(iii) may include representatives of local educational agencies, and of community-based organizations with demonstrated experience and expertise in addressing the education or training needs of individuals with barriers to employment;

Local Workforce Development Boards—Notes


Each Local Board must develop and submit to the Governor a comprehensive 4-year local plan Contents – examples of what must be included:

• Description of the strategic planning elements • Description of the workforce development system in the local area

– Note: identify how the local board will work with the entities carrying out … programs of study authorized under Perkins that support the strategy identified in the State.

• Description of the one-stop system in the local area

Local Plans


Each entity that carries out career and technical programs at the postsecondary level in a local area, as authorized under Perkins IV, is a mandatory one-stop partner.

One-Stop Delivery Systems


Section 121 of WIOA

One-Stop Delivery Systems—Notes


What is required by the Perkins entity that is the one-stoppartner?• Enter into MOU with the local board and other one-stop partners in the local

area• Provide access to programs and activities carried out by one-stop partners

(Perkins programs), among other things• Provide infrastructure funding consistent with the sec. 121(h) of WIOA and

the forthcoming regulations

One-Stop Delivery Systems (Continued)


Partners are required to maintain the one-stop delivery system The local workforce board and the one-stop partners,

through an MOU, establish one-stop contributions• If no agreement is reached, State infrastructure funding mechanism is

triggered (See Section 121(h)(2) of WIOA)

One-stop contributions cannot exceed 1.5% of the amount of federal funds provided to carry out the Perkins program in the state for a fiscal year

One-Stop Infrastructure Costs


NOTE: Again, there will be greater clarity provided on implementation of the WIOA requirements related to One-Stop Infrastructure Costs in the forthcoming regulations

One-Stop Infrastructure Costs—Notes


One-stop partners must also contribute funds or in-kind resources to pay for services and the operating costs of the one-stop system Method for determining appropriate amount established in

the local MOU State workforce development board must provide guidance

to facilitate these determinations

Other One-Stop Costs


OCTAE Website: http://www2.ed.gov/about/offices/list/ovae/pi/AdultEd/wioa-reauthorization.html Department of Labor, ETA Website:

http://www.doleta.gov/WIOA/ Perkins Collaborative Resource Network:

http://cte.ed.gov

Resources

http://www2.ed.gov/about/offices/list/ovae/pi/AdultEd/wioa-reauthorization.html

http://www.doleta.gov/WIOA/

http://cte.ed.gov/


Note: OCTAE will provide an additional WIOA training when the final WIOA regulations are published

Resources—Notes


NOTE: Stress that there will be much we cannot answer until the WIOA regulations are published

Questions and Answers—Notes


Effective Career And Technical Education Subrecipient Monitoring

Presented by Edward R. SmithOffice of Career, Technical, and Adult Education

U.S. Department of Education


Today’s VFMI topic is subrecipient monitoring, one of the most difficult federal requirements to fulfill, and a frequent source of audit and Department program findings. As you’re aware, recipients of federal awards are required by law to monitor the use of funds passed through to subrecipients. This requirement is especially important to the US Department of Education, since the vast majority of the Department’s grant awards are passed through prime recipients, down to school districts, institutes of higher education, non-profit providers and other subrecipients.

Effective Career And Technical Education Subrecipient Monitoring—Notes


Despite the focus placed on subrecipient monitoring by the Department and auditors, a common finding in both single audit and program monitoring reports is a failure to adequately monitor subrecipients. A grantee’s failure to adequately monitor subrecipients has serious repercussions because it can lead to poor program performance and the waste, fraud and abuse of program funds. Effective subrecipient monitoring by a grantee involves effective and thorough assessment of a subrecipient’s compliance with fiscal management and programmatic requirements, including the grantee’s efforts to implement effective corrective actions.



In order for states and other grantees to maintain the same level of effective oversight of federal programs, dollars spent on monitoring activities will have to be stretched further, and be used with greater efficiency.



The Department is aware that grantees are being asked to do more with less. With that in mind, the goal of this webinar is to provide you with ideas and tools to improve both the effectiveness AND the efficiency of your monitoring activities. The Department is also aware that what works for one grantee, does not necessarily work for another. Consequently, we’ll discuss several overarching monitoring principles, such as using a risk-based monitoring approach, that are being used by a variety of states—both large and small-to use monitoring dollars efficiently, while reasonably ensuring that federal dollars are being spent for their intended purposes.



Review department requirements and expectations Examine best practices

• Use a risk-based monitoring approach• Monitoring subrecipients for financial risk

Objectives


Grantees are responsible for monitoring subrecipients to ensure that they administer federal awards in compliance with federal requirements and the terms and conditions of contracts and grant agreements, and to ensure that subrecipients meet programmatic performance goals. Monitoring can take many forms, such as onsite reviews, desk audits, and reviewing financial and performance reports and subrecipient audits; however, absent program-specific monitoring requirements, it is ultimately left to the grantee to determine how it will fulfill its duty to monitor subrecipients.

Objectives—Notes


We will discuss what is required of grantees under federal law and regulations:• Uniform Guidance at 2 CFR § 200.331

– This will consist of a brief overview of what is required of grantees under federal law and regulations.

Objectives—Notes


The second section, best practices, will take up the majority of our time today. By “best practices” we mean general monitoring principles that can be used in any subrecipient monitoring plan, regardless of whether the grantee has 1 or 1,000 subrecipients. We’ll discuss several methods currently used by grantees that are shown to be effective in ensuring compliance with federal law and regulations, but are done in a cost effective manner. We’ll also discuss additional monitoring requirements under the Perkins Act.

Objectives—Notes


More than on-site visits Any action taken by grantee throughout the life of a grant

to ensure legal compliance and program performance Ongoing process

What Is Subrecipient Monitoring?


Before we begin, let us discuss the term monitoring. Monitoring covers far more than performing onsite visits. The Department encourages grantees to take a comprehensive approach when thinking about monitoring. A monitoring plan should encompass all actions taken throughout the life cycle of a grant award, from drafting the grant agreement, during-the-award review, including self-assessments, desk reviews and onsite visits, to following up on actions taken to address monitoring and audit findings.

What Is Subrecipient Monitoring? —Notes


*NOTE: Let us discuss the term “subrecipients.” Subrecipient means a non-federal entity that expends federal awards received from a pass-through entity to carry out a federal program, but does not include an individual that is a beneficiary of such a program. A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency. Guidance on distinguishing between a subrecipient and a contractor is provided in 2 CFR § 200.330.



Although the Uniform Guidance provides a definition of the term subrecipient at 2 CFR §200.93, Perkins IV does not contain the term subrecipient in its definition section. However, SEA and LEA fiscal and audit staff use the term subrecipients. The term grantee does not include any secondary

recipients such as subgrantees, contractors, etc., who may receive funds from a grantee pursuant to a grant (34CFR77.1, p.195-197).



The Department encourages grantees to take a comprehensive approach when thinking about monitoring. A monitoring plan should encompass all actions taken throughout the life cycle of a grant award, from drafting the grant agreement, during-the-award review, including self-assessments, desk reviews and onsite visits, to following up on actions taken to address monitoring and audit findings.



Monitoring should not be viewed as a series of distinct events, but as an ongoing conversation between the grantee and subrecipient, which helps identify areas of non-compliance or non-performance in need of corrective action and technical assistance. Monitoring also identifies areas of strength, and provides an opportunity for grantees to recognize a subrecipient’s successes.



2 CFR § 200.331 Requirements for pass-through entities:• Grantees are responsible for monitoring the day-to-day operations of grant

and subgrant supported activities.

2 CFR 200.331(d) [Grantees must] Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Pass-through entity monitoring of the subrecipient must include:

What Does The Uniform Guidance Say About Subrecipient Monitoring?


(1) Reviewing financial and programmatic reports required by the pass-through entity.(2) Following-up and ensuring that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, on-site reviews, and other means.(3) Issuing a management decision for audit findings pertaining to the Federal award provided to the subrecipient from the pass-through entity as required by §200.521Management decision.

What Does The Uniform Guidance Say About Subrecipient Monitoring? (Continued)

https://fawiki.fws.gov/pages/viewpage.action?pageId=24707630


What is the Uniform Guidance? The uniform administrative requirements, cost principles, and audit requirements for federal awards. 2 CFR § 200.331, applicable to state, local and Indian

tribal governments, requires grantees to monitor the “day-to-day operations” of subaward-supported activities for compliance and performance.

What Does The Uniform Guidance Say About Subrecipient Monitoring?—Notes


Required RISK ASSESSMENT from 200.331 (b) and (e) [this may be worth adding a separate slide] : Under 2 cfr200.331, pass through entities must: (b) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subawardfor purposes of determining the appropriate subrecipientmonitoring described in paragraph (e) of this section, which may include consideration of such factors as:(1) The subrecipient's prior experience with the same or similar subawards;



(2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F—Audit Requirements of this part, and the extent to which the same or similar subaward has been audited as a major program;(3) Whether the subrecipient has new personnel or new or substantially changed systems; and(4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency).



AND(e) Depending upon the pass-through entity's assessment of risk posed by the subrecipient (as described in paragraph (b) of this section), the following monitoring tools may be useful for the pass-through entity to ensure proper accountability and compliance with program requirements and achievement of performance goals:



(1) Providing subrecipients with training and technical assistance on program-related matters; and(2) Performing on-site reviews of the subrecipient's program operations;(3) Arranging for agreed-upon-procedures engagements as described in § 200.425 Audit services.


https://fawiki.fws.gov/pages/viewpage.action?pageId=24707558


Hypothetical: Grantee’s monitoring policy requires a subrecipient assessed as a “significant risk” to undergo an onsite monitoring visit. Thirteen subrecipients are classified as significant risks based on a risk assessment. However, the grantee only has resources available to perform 8 onsite visits that year. Single Audit Finding: SEA is unable to conduct onsite

reviews of all subrecipients within a monitoring review cycle.

Common Single Audit Findings


Possible Solution: Perform a resource assessment as part of a risk-based monitoring approach

– Identify available resources, and/or alternative resources – Tie monitoring activities to budget– Adjust monitoring schedule so that plan can be implemented– Conduct subrecipient activities using technology such as webinars, conference calls, email

documentation such as Portable Document Format (PDF) files.

Common Single Audit Findings (Continued)


You should keep your plan realistic and focused. To illustrate, let us assume a state education agency’s plan requires a subrecipient classified as a “significant risk” to undergo an annual onsite monitoring visit. The SEA’s risk assessment classified 13 subrecipients as “significant risks”. Given the level of monitoring resources, however, the SEA only performs 8 onsite reviews that year.

Common Single Audit Findings—Notes


As a result, the SEA’s single auditor reports a subrecipient monitoring finding, because the SEA was unable to perform all the planned visits. This is a common finding, and is most often due to lack of staff or funding resources. This finding may come with a recommendation to increase monitoring resources, a solution that is often outside the grantee’s control.



This hypothetical illustrates the importance of assessing available resources as part of a risk-based monitoring planning process, and tying monitoring activities to your budget. The audit finding may have been avoided if the grantee had adjusted its monitoring plan to account for its resources. A proper analysis of your budget will help you create, or adjust, your monitoring schedule so you can implement it fully. By performing a budget analysis prior to the fiscal year, you will gain a better understanding of what monitoring methods your resources will allow you to use, and you will be able to better allocate monitoring resources to subrecipients who need to be watched the most.



Returning to the hypothetical, the SEA should have performed a resource assessment to determine its capacity for performing onsite visits. As a result of a resource assessment, the grantee may have adjusted its onsite monitoring schedule so that its 30 “riskiest” subrecipients were monitored annually, while lower-risk entities were monitored less frequently. Portable Document Format (PDF) is an open standard

for document exchange.



Why do state CTE programs have to monitor its subrecipients?

– It’s the law.

What type of subrecipient monitoring activities are state CTE programs required to perform?

– It’s up to the State CTE Program. BUT such activities must meet the requirements/purposes outlined in 2 cfr sec. 200.331, namely to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.

Federal Requirements—Conclusions


This covers almost all federal laws and regulations concerning subrecipient monitoring that apply across the Department’s programs. There’s a couple of questions you should be able to answer at this point: first, “Why do you have to monitor subrecipients”? The answer, as we’ve seen, is: “It’s the law.” SEAs must monitor subrecipientsto reasonably ensure both program compliance and performance.

Federal Requirements—Conclusions—Notes


The second question is, “How do grantees have to monitor subrecipients, or put another way, what type of monitoring activities are grantees required to perform?” As you can see, federal law and regulations are extremely flexible—it generally leaves this decision up to the grantee. Federal regulations mention several methods of monitoring, including site visits, reviewing performance and financial reports, and performing limited scope audits, yet no one method is required, … so long as there’s a reasonable assurance that compliance and performance requirements are met.



The remainder of today’s discussion will center around the final question—how should you monitor. We’ll discuss several best practices in subrecipient monitoring, keeping in mind all the while that these are suggestions, recommendations, but NOT Department requirements.



Subrecipient monitoring included as a compliance requirement Suggested audit procedure:

• Review of subrecipient monitoring policies and procedures to gain an understanding of the scope, frequency and timeliness of monitoring activities

How Can A State CTE Program Avoid Audit And Monitoring Findings?


Single Year Audit Review Scrutiny of Subrecipient Monitoring Plans - Having a

written monitoring plan in place will help you avoid audit and monitoring findings. Your monitoring plan and efforts are scrutinized by auditors, as part of your annual single audit, and by the Department’s monitoring teams.

How Can A State CTE Program Avoid Audit And Monitoring Findings?—Notes


Scrutiny of Subrecipient Monitoring Plans (Continued)• Auditors are required to test whether grantees sufficiently monitor federal

programs to provide a reasonable assurance of compliance. In the Uniform Guidance Compliance Supplement, OMB suggests that auditors review your subrecipient monitoring policies and procedures in order to gain an understanding of the scope, frequency, and the timeliness of your monitoring activities.

How Can A State CTE Program Avoid Audit And Monitoring Findings?—Notes


Risk-Based Approach to Career and Technical Education SubrecipientMonitoring


This brings us to our next SECTION, … using a risk-basedmonitoring approach. Like most grantees, you probably donot have enough resources or staff available to monitorsubrecipients as frequently or as thoroughly as you’d like.Risk-based monitoring is a process used by many of theDepartment’s grantees to address this issue. This is doneby identifying subrecipients that are most likely to haveproblems in meeting the goals of a program, fail to meetfederal fiscal or programmatic requirements, or otherwisepresent a greater risk to the federal interest because of thesheer size of a subrecipient’s grant portfolio.

Risk-Based Approach to Career and Technical Education Subrecipient Monitoring—Notes


By identifying its greatest concentrations of risk, a grantee can adjust its monitoring plan to focus attention and resources on subrecipients and programs that require more intensive monitoring. There is a changing landscape and alternative ways to

conduct monitoring



This brings us to the second part of today’s webinar: best practices in subrecipient monitoring. Monitoring occurs throughout the life cycle of a grant award, and contains many different components. We’ll touch on a few today, beginning with your monitoring plan. Next, we’ll discuss using a risk-based monitoring approach to determine when and how you monitor your subrecipients. Finally, we’ll discuss monitoring challenges presented by the Perkins Act, and discuss a few methods states are using to address these challenges.



Fact: Most states lack the resources or staff to monitor subrecipients as frequently or thoroughly as they would like.

Risk-Based Approach To Subrecipient Monitoring


The second part of today’s webinar is about best practices in subrecipient monitoring. Monitoring occurs throughout the life cycle of a grant award, and contains many different components. We’ll touch on a few today, beginning with your monitoring plan. Next, we’ll discuss using a risk-based monitoring approach to determine when and how you monitor your subrecipients. Finally, we’ll discuss monitoring challenges presented by the Perkins Act, and discuss a few methods states are using to address these challenges.

Risk-Based Approach To Subrecipient Monitoring—Notes


Like most states, you probably do not have enough resources or staff available to monitor subrecipientsas frequently or as thoroughly as you’d like. Monitoring occurs throughout the life cycle of a grant

award, and contains many different components. So how might you go about incorporating a risk-based approach into your overall subrecipient monitoring plan?



Next, we’ll discuss using a risk-based monitoring approach to determine when and how you monitor your subrecipients. Finally, we’ll discuss a 4-step process to identify appropriate risk indicators. This brings us to our next SECTION, … Using a Risk-

Based Approach to subrecipient monitoring. approach. Like most States, you probably do not have enough resources or staff available to monitor subrecipientsas frequently or as thoroughly as you’d like.



Monitoring occurs throughout the life cycle of a grant award, and contains many different components. So how might you go about incorporating a risk-based approach into your overall subrecipient monitoring plan? Next, we’ll discuss using a risk-based monitoring approach

to determine when and how you monitor your subrecipients. Finally, we’ll discuss 4 step process to identify appropriate risk indicators:



Has a history of poor performance Is not financially stable Has a management system that does not meet the

standards Has not conformed to the terms and conditions of a

previous award Or, is not otherwise responsible

How To Identify A High Risk Subrecipient


What does it mean to my program?• NOTE: In instances where a state’s subrecipient monitoring violations are

particularly serious and extensive, a program office may wish to consider imposing a high-risk designation on a CTE subrecipient program or their allocation. The following sections contain model language for placing a grantee on high risk.

How To Identify A High Risk Subrecipient—Notes


4 Step Process To Develop Subrecipient Monitoring Plan


So how might you go about incorporating a risk-based approach into your overall monitoring plan? It’s likely that your organization already considers certain risks formally, or informally, in your planning. Given the amount of attention auditors and the Department pay to your monitoring plan, it’s important to clearly set forth this process. Risk analyses performed by grantees can be broken down into four primary parts, which we’ll go through in further detail.

4 Step Process To Develop Subrecipient Monitoring Plan—Notes


The first step is to identify appropriate risk factors, or indicators, and assign each of these indicators a value, or weight. Second, evaluate your subrecipients and programs against these indicators, and then rank them in order by risk. Third, perform a resource assessment; identify available monitoring resources and staff, and weigh them against your monitoring needs. And finally, adjust your monitoring plan and schedule to address any identified areas of heightened risk, while taking into account limitations on resources.

4 Step Process To Develop Subrecipient Monitoring Plan—Notes


Risk indicators • Program risk

– Program complexity – Percentage of program awards passed through to the subrecipient– Amount of award

Risk Indicators [A-133 Compliance Supplement, Section M]


So what is a risk indicator?—We look to the compliance supplement for guidance. A risk indicator can be anyfactor that increases the potential harm to the federal interest, or the likelihood that a subrecipient will not comply with program requirements or meet performance goals. A risk indicator may be based on internal factors, such as staff turnover or a past history of non-compliance, or based on external factors outside a subrecipient’s control, such as the total amount of federal dollars awarded to a subrecipient.

Risk Indicators [A-133 Compliance Supplement, Section M]—Notes


What are a few indicators that you might consider when evaluating risk?—The compliance supplement lists several factors that, according to OMB, may affect the nature, timing, and extent of your monitoring efforts. Auditors look for the presence of these factors when assessing the adequacy of subrecipient monitoring plans, so it’s a good place to start when trying to determine what factors to weigh when assessing risk.



The first three factors affect the risk associated with a program. First, there’s program complexity. Complex program requirements, such as matching or maintenance of effort, are difficult to comply with. The more complex the program requirements, the harder it is for a subrecipient to stay in compliance, and the greater the risk.



Second, the percentage of a program award that’s passed through. Awards that are mostly passed through to subrecipients, instead of being expended by a grantee, present a greater risk to the federal interest. Why is this? The funds are now another level removed from the funding source—the Department. The Department, consequently, is now reliant on an additional level of monitoring by the grantee.



The third factor: Award amount. The bigger the award, the greater the risk to the federal interest. This factor also applies to subrecipient risk—the larger a subrecipient’sgrant portfolio, the greater the risk it poses. This is true even if a subrecipient has a good track record for compliance and program performance. Consequently, it makes sense to focus monitoring on large programs, and subrecipient with large grant portfolios.



Risk indicators• Subrecipient risk

– Large numbers of LEA’s– Large and complex community college systems– History of non-compliance– New personnel– New or substantially changed systems

Other Subrecipient Risk Factors


Again we look to the Compliance Supplement for further guidance. The other five risk factors listed in the compliance supplement relate to subrecipients. First, new subrecipients will need to be monitored more

closely. They may lack experience with federal programs. Also, the grantee will have less information about their prior performance. On the other hand, a subrecipient that has administered federal programs successfully over a number of years may require less frequent, or less intensive methods of monitoring.

Other Subrecipient Risk Factors—Notes


Second, a subrecipient with a history of non-compliance will require closer monitoring. Findings of non-compliance may arise from an A-133 or other type of audit, through federal program monitoring, or through your own monitoring efforts. These findings may identify systemic risks that affect a subrecipient’s implementation of all federal programs, such as its procurement practices. Or they may identify risks associated with a specific federal program.



Third: new personnel. High staff turnover in critical positions may adversely affect the administration of an award. So, this risk factor should affect how you go about monitoring a subrecipient. Finally, a subrecipient who has recently implemented new

or substantially changed systems, such as a new financial management system, may also pose a greater risk to the federal interest.



This is a good time to stress once again that these are suggested—not required—risk indicators. Grantees are free to choose what risks are appropriate to weigh when determining risk. This makes sense—risks will vary among grantees. However, it is important to keep in mind that auditors and the Department will look to see if your monitoring system incorporates some sort of risk-based approach.



Examples of risk• Subrecipient’s financial instability• Frequent staff turnover• History of poor performance• Failure to implement corrective action plan(s)• Subrecipient CTE program failed to provide valid and reliable data• Has not conformed to the terms and conditions of a previous award

Examples of Subrecipient Risk


This slide provides a list of additional risk indicators used by some of the Department’s grantees. These include: the extent to which it meets performance or academic goals; academic performance; timeliness of CAR/FSR and state plan revisions submissions; financial stability; the adequacy of management systems; stakeholder complaints; the type of entity, and the distance of the subrecipient to the grantee’s main office.

Examples of Subrecipient Risk—Notes


[For grantees subject to 2 CFR § 200.331, Grantees must monitor grant and subgrant supported activities to assure compliance with applicable Federal requirements and that performance goals are being achieved. Grantee monitoring must cover each program, function or activity.] [For grantees subject to 2 CFR § 200.328: Grantees are

responsible for managing and monitoring each project, program, subaward, function, or activity supported by the award. See also 2 CFR § 200.331.



[Program office] has determined that [grantee]’s subrecipient monitoring efforts fail to meet the above requirement, as evidenced by [source of finding(s)] and these findings require imposition of High Risk conditions on [grantee].



Risk assessment• Evaluate subrecipients and programs against risk indicators• Rank subrecipients and programs by risk • Use data analysis and automation to make process more efficient• Perform analysis regularly to assess for changes in risk

Conduct Risk Assessment


Using a risk-based monitoring approach—After identifying risk indicators, the next step is to perform a risk assessment. Evaluate your subrecipients and programs against the set of selected risk indicators, and then rank them based on relative risk. You may also decide that the presence of a certain risk factor alone, such as severe financial difficulties, warrants placing a subrecipient into a higher risk category.

Conduct Risk Assessment—Notes


To keep up with changes, a risk assessment should be performed at least annually, and include any new subrecipient or program. And it should include Perkins Act programs. Additionally, grantees should periodically review and update the indicators used to evaluate subrecipientrisk, and the weight assigned to each indicator, in their monitoring plan.

Conduct Risk Assessment—Notes


Identity scope • Determine the amount and types of resources needed to monitor

subrecipients and programs• Identify available resources• Address resource limitations

Scope Of Your Risk-Based Monitoring Approach


In addition to risk, the frequency and scope of your monitoring will be equally influenced by the amount of resources at your disposal. In conjunction with the risk assessment, grantees should conduct a resource assessment to determine the amount, and types of resources needed to perform monitoring activities. This should then be weighed against what resources are actually available to the grantee.

Scope Of Your Risk-Based Monitoring Approach—Notes


If you perform a resource assessment and find that your monitoring resources doesn’t stretch far enough to cover your plan, you may be able to secure additional resources, or hire or assign additional staff to perform monitoring activities. However, if these options are not available, you’ll need to adjust your monitoring plan based on risk and what resources you have available. This is important so that you don’t maintain a monitoring plan that you don’t have the resource to implement.



Department grantees have used several methods to address resource limitations. Some have supplemented monitoring teams with staff from other parts of their organization, such as legal or accounting staff. Some have trained school-based staff to contribute. Some grantees have outsourced monitoring activities to contractors. For instance, a grantee that finds it lacks sufficient staff with financial expertise to adequately monitor compliance with fiscal requirements, could hire an accounting firm to carry out this task.



Develop monitoring plan• Reconcile difference between need and availability of resources• Adjust monitoring schedule based on identified risks and available resources• Schedule technical assistance based on identified risks

What Do I Do When I Have Identified Where The Greatest Risk Lies?


By performing these assessments, a grantee should have a good idea of where the greatest risks lie among its subrecipients and programs. The final step is to account for the results of the risk and resource assessments in the monitoring plan.

What Do I Do When I Have Identified Where The Greatest Risk Lies?—Notes


As part of the risk assessment, many of the Department’s grantees group their subrecipients and programs by risk level, such as low, medium and high risk. The frequency and scope of monitoring activities are then based, in part, on a subrecipient’s risk level. For instance, a grantee may choose to perform an annual on-site visit to a subrecipientwith a heightened risk level, while performing onsite visits to lower risk subrecipients with less frequency. Or, a grantee may perform less intensive monitoring activities, such as desk audits or self-assessments, for lower-risk subrecipients.



As part of your monitoring plan, you should have a schedule that sets forth the frequency and scope of your monitoring. Your monitoring schedule should be adjusted to account for risk—the greater the risk, the greater the frequency and depth of monitoring, and for resources. Although a risk-based monitoring approach will allow you

to vary the frequency with which your subrecipientsundergo a comprehensive monitoring visit – you are still expected to perform an onsite review of subrecipients and programs with low risk levels on occasion.



You may also choose to perform random visits to a pre-determined number of subrecipients each cycle, regardless of risk level, to address this issue. Risk assessment also identifies areas in which your

subrecipients may require additional training or technical assistance. This should be incorporated in your monitoring plan. For instance, if you have a new or recently changed program, or many new subrecipients, you might schedule training on federal administrative requirements. If your monitoring uncovers subrecipients with cash management problems, you should provide training based on those findings.



Invaluable tool to monitor a subrecipient’s financial performance Maintains a public database of completed audits Identifies material instances of noncompliance, and

questioned costs resulting from noncompliance

Federal Clearinghouse Database


Federal Audit Clearinghouse is a database compiled on behalf of the Office of Management and Budget (OMB) whose primary purpose is to disseminate audit information to federal agencies and to the public, to support OMB oversight and assessment of federal award audit requirements, to assist federal cognizant and oversight agencies in obtaining single audit data and reporting packages, and to help auditors and auditees minimize the reporting burden of complying with the single audit requirements.

Federal Clearinghouse Database—Notes


Reviewing the audit reports on the Federal Clearinghouse Database can be an effective and valuable method for monitoring a recipient’s financial performance, particularly with regard to the adequacy of its internal controls and the extent of its compliance with federal laws and regulations. Most single audit reports also contain some programmatic compliance information, particularly if the auditor was testing programs covered by the Uniform Guidance Compliance Supplement of program-specific audit guides.



For monitoring purposes, you should review audit reports closely to identify any instances of noncompliance, questionable costs, fraud, abuse, or illegal acts that the independent auditor may have discovered. A report that shows material instances of noncompliance, and questioned costs resulting from noncompliance can have very serious implications for continuance of the grant. If the problems are deemed significant, the recipient can be classified as high risk and the grant agreement may be reviewed for possible termination. If issues require audit resolution, you may also be asked to assist you audit resolution office in determining issues such as whether questioned costs should be disallowed.



The Federal Audit Clearinghouse (FAC) operates on behalf of the Office of Management and Budget (OMB). Its primary purposes are to: • Distribute single audit reporting packages to federal agencies• Support OMB oversight and assessment of federal award audit requirements• Maintain a public database of completed audits• Help auditors and auditees minimize the reporting burden of complying with

single audit requirements



Office of Management and Budget • PART 200—Uniform administrative requirements, cost principles, and audit

requirements for federal awards

Partnership for Intergovernmental Management and Accountability, Risk Assessment/Financial and Administrative monitoring tools• http://agacgfm.org/intergovernmental/resources.aspx

Resources

http://www.ecfr.gov/cgi-bin/retrieveECFR?gp=&SID=36937a16bd249898595f6c76f02f5626&mc=true&n=pt2.1.200&r=PART&ty=HTML

http://agacgfm.org/intergovernmental/resources.aspx


Applicable to state, local and Indian tribal governments U.S. Department of Education Grant Bulletin, Assessing

Grant Applicant and Grant Recipient Risk Prior to Making New and Continuation Awards, GB# 11-01, effective June 1, 2011. Available at http://connected.ed.gov/document_handler.cfm?id=21062. Accessible on ConnectEd at

https://connected2/aarts/security/login.cfm?CFID=319743&CFTOKEN=6e7a6a1d1198b7f6-DD99DB10-D665-4E1F-9C5CC09A24332AEA&jsessionid=7030db935e17746c7474.

Resources (Continued)

http://connected.ed.gov/document_handler.cfm?id=21062

https://connected2/aarts/security/login.cfm?CFID=319743&CFTOKEN=6e7a6a1d1198b7f6-DD99DB10-D665-4E1F-9C5CC09A24332AEA&jsessionid=7030db935e17746c7474


OMB Circular A-133__.400(d)(3), issued under the Single Audit Act of 1984, P.L. 98-502, and the Single Audit Act Amendments of 1996, P.L. 104-156. Single Audit Act, 1996 Amendments, 31 U.S.C.

§7502(f)(2)(b). OMB A-133 Compliance Supplement, Part 3, § M. Title 34, Parts 74-99 of the Code of Federal Regulations

(CFR), collectively referred to as the Education Department General Administrative Regulations, or EDGAR. Available on ConnectEd at http://connected.ed.gov/doc_img/edgar2008.pdf.

Resources (Continued)

http://connected.ed.gov/doc_img/edgar2008.pdf


Closing

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