Office of Special Education (OSE) PROGRAM FISCAL REVIEWS

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

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Program Fiscal Review (PFR)

• A PFR is the review of expenditures for IDEA
  federal grants and State Aid SE-4096
  reimbursements to ensure compliance with Federal
  and State rules and regulations as they relate to
  fiscal management and specific programmatic
  aspects of the grant or State Aid.

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Rules and Regulations

• Federal Cost Principles, 2 CFR 225 (A-87)
• OMB Circulars A-133 and A-102
• Education Department General Administrative
  Regulations (EDGAR), 34 CFR 80
• Changes coming with OMB Uniform Guidance
• Individuals with Disabilities Education Act
  (IDEA) is the law, codified in 34 CFR 300
• Michigan Administrative Rules for Special
  Education
• State School Act, Section 51a
• Office of Special Education Allowable Cost
  document

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Uhno!
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Scope of PFR

• Expenditures must be
• Allowable
• Reasonable and Necessary
• Allocable
• Adequately documented
• 2 CFR 225 Basic Guidelines
• OSE Allowable Cost Document

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Scope of PFR (continued)

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

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Definitions (2 CFR 225)Allowable

• To determine if a cost is allowable
• The proposed cost is consistent with
• Federal Cost Principles
• IDEA program specific rules
• State Aid Act
• OSE Allowable Cost document
• (and any others that may apply)

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Definitions (continued) Reasonable

• A cost is reasonable if it
• does not exceed that which would be incurred by a
  prudent person.
• follows sound business practices arm's-length
  bargaining Federal, State and other laws and
  regulations and, terms and conditions of the
  Federal award or State Aid Act.
• reflects market prices for comparable goods or
  services.

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Definitions (continued)Necessary

• A cost is necessary if it
• is of a type generally recognized as ordinary and
  necessary for the operation of the governmental
  unit or the performance of the Federal award (or
  State Aid Act).

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Definitions (continued) Allocable

• A cost is allocable if
• the goods or services involved are chargeable or
  assignable to such cost objective in accordance
  with relative benefits received.
• All activities which benefit from the
  governmental unit's indirect cost, will receive
  an appropriate allocation of indirect costs.

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Grants that OSE reviews

• OSE administers IDEA, Part B, Section 611 grants,
  which are
• Flowthrough
• Transition Services
• Enhancing Opportunities for Students with
  Disabilities (EOSD)
• Mandated Activity Projects (MAPs)
• In addition, State Aid reimbursements

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Limited Reviews (non OSE grants)

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

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Review Process

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

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Communications prior to PFR

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

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Documentation requested (electronically)

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

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During Site Visit or (In Office) Process

• Meet with or (call) Business official and Special
  Education Director, other key people
• Discuss your processes
• Review sample items
• Ask questions
• Ask more questions
• (until we are done)

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End of Review Process

• At end of reviews
• Discuss tentative findings
• LEA/PSA/ISD may need to provide information via
  email to complete review
• Corrective action
• May provide corrective action prior to report
  writing, and it will be noted in the findings OR
  will have 30 days after report is mailed to
  provide corrective action.

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End of Review Process (continued)

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

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Report Process

• Report is written, processed and reviewed by OSE
  management
• Report is sent to ISD, each LEA/PSA will have a
  separate report within the whole report
• ISD disseminates individual LEA/PSA reports
• Corrective actions and repayments are due 30 days
  after report is mailed

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(just kidding, boss)
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Follow up

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

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Any Questions So Far?
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Documentation for Payroll

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

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Common Findings for Payroll

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

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Common Findings for Payroll (continued)

• Unallowable Costs
• Teachers are not special education endorsed
• Teacher consultants, transition coordinators,
  social workers, supervisors, directors do not
  have MDE approval
• Other professionals (OT, PT, Psyches, Speech,
  etc.) do not have licenses.
• Position is not an approved position for special
  education
• Michigan Administrative Rules for Special
  Education
• OSE Allowable Cost document

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Documentation for Contracted Services

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

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Common Findings for Contracted Services

• Contracts not on file
• Contracts do not have necessary elements
• Scope of services, Defined compensation, Not
  signed by all parties, No period defined
• Lack of Documentation
• No support for services
• 2 CFR 225

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Common Findings for Contracted Services
(continued)

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

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Documentation for Supplies/Materials

• For selected transactions not considered items of
  interest (books, classroom supplies, etc)
• Invoice and copy of check
• Items of interest are items that are less than
  5,000 for Federal but have longer than 1 year
  life or are easily pilfered (computers, iPads,
  iPods, etc.)
• Invoice and copy of check
• Evidence of tracking or tagging of items

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Common Findings for Supplies/Materials

• Lack of Documentation
• Support for purchases not sufficient enough to
  determine that it was received, is allowable,
  reasonable, necessary and allocable.
• Unallowable Costs
• Purchases not for the benefit students with
  disabilities
• 2 CFR 225, 34 CFR 300,
• OSE Allowable Cost Guide

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Documentation for Capital Outlay

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

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Common Findings for Capital Outlay

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

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Common Findings for Capital Outlay or Items of
Interest

• Property Management
• Items purchased
• are not tagged
• are not inventoried or tracked
• can not be located
• are not used for students with disabilities
• OMB Circular A102 Subpart C

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Documentation for Other transactions

• Other transactions include, but not limited to,
  conferences, inservice workshops, travel, field
  trips, etc.
• Registration information
• Travel logs
• Actual receipts for meals, airlines, rental cars
• Sign in sheets
• Agendas
• Note Budgets, lesson plans, requests for
  reimbursement are not adequate documentation

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Common Findings for Other transactions

• Lack of Documentation
• Support for events not sufficient enough to
  determine that it is allowable, reasonable and
  necessary.
• Unallowable Activity
• Events are not for the benefit of students with
  disabilities (may need to be prorated)
• 2 CFR 225
• OSE Allowable Cost Guide

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Documentation for Journal Entries

• For selected journal entries
• Actual transactions in the original accounts of
  general ledger detail, to select a sample
• Supporting documentation for selected
  transactions, including payroll records,
  invoices, agendas, logs, contracts, etc.
• NOTE Journal entry showing accounts debited and
  credited is not supporting documentation

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Common Findings for Journal Entries

• Lack of Documentation
• The journal entry of debits/credits is not
  adequate documentation

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Common Findings for Journal Entries (continued)

• Accounting Procedures/Audit Trail
• Numerous journal entry transactions not charged
  directly to the grant causes errors or lack of
  audit trail.
• Unallowable Costs
• Items or payroll reclassified are unallowable
• OSE Allowable Cost Guide

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Documentation for Proportionate Share (Federal
grants only)

• Separate calculations for Preschool 619 and
  Flowthrough 611
• Evidence that the proportionate share was spent
  out of the Federal grants, based on actual time
• Names of employees that provide services to
  non-public schools
• GL detail showing total charged to the Federal
  grants for non-public services
• Appropriate Time and Effort documentation
• NOTE Function code 371 added to MEGS reporting

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Common Findings for Proportionate Share

• Proportionate Share
• Not charged to the federal grant
• Did not meet the requirement amount
• Time and Effort documentation not on file (PAR)
• 34 CFR 300.133 and Appendix B

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Documentation for Maintenance of Effort (Federal
grants only)

• Evidence that you plan to meet MOE
• Preliminary worksheet should be done in beginning
  of year and monitored periodically to ensure you
  will meet MOE.
• See IDEA Maintenance of Effort Planning Tool at
  http//www.michigan.gov/mde/0,1607,7-140-6530_6598
  _8391-140285--,00.html

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Upcoming Additions to PFR

• Excess Costs
• Still in development
• Charter Schools (PSAs)
• New
• Significantly Expanding

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Upcoming Additions (continued)

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

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Contact Information

• For questions related to Program Fiscal Reviews
  for IDEA Special Education
• Nancy Jo Serna, CPA sernan_at_michigan.gov
• Michael Wynn, CFE wynnm_at_michigan.gov