On December 19, 2014, the U.S. Department of Education (ED) released the newly updated Education Department General Administrative Regulations (EDGAR). This change was due to the Office of Management and Budget’s (OMB) publication of the final Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (known as the Uniform Grants Guidance or UGG) in 2013, which consolidated OMB Circulars A-21, A-87, A-89, A-102 and A-110, A-122, A-133 into a uniform set of rules.
New Federal Program Coordinators and school business officials at the state and local level, as well as incumbent employees, are encouraged to familiarize themselves with this manual, EDGAR, as well as 2 C.F.R. Part 200 inasmuch as they useful tools to understand the often confusing landscape of federal education grants management.
If the program statute differs from the Uniform Grant Guidance, then the program statute governs.
Fiscal Grants Management and Compliance with EDGAR There are certain federal fiscal grants management requirements that apply to all grants generated by the U.S. Department of Education (“ED”), including the Perkins grant. These requirements can be found in the Education Department General Administrative Regulations (“EDGAR”). Grant recipients must not only comply with all aspects of the grant statute itself, but also with all applicable EDGAR requirements. This section discusses the applicable EDGAR requirements.
Financial Management SystemEDGAR Requirements
The financial management system of a grantee of federal funds is the system in place that tracks the expenditure and accounting of grants funds. Certain fiscal controls and procedures must be in place to ensure that all financial management system requirements are met. Failure to meet a requirement may result in return of funds or termination of the award.
EDGAR contains the standards for financial management systems. The standards include:
Financial Reporting. Accurate, current, and complete disclosure of the financial results of financially assisted activities must be made in accordance with the financial reporting requirements of the grant or sub-grant.
Accounting records. Grantees and sub-grantees must maintain records which adequately identify the source and application of funds provided for financially-assisted activities. These records must contain information pertaining to grant or sub-grant awards and authorizations, obligations, unobligated balances, assets, liabilities, outlays or expenditures, and incomes.
Internal controls. Effective control and accountability must be maintained for all grant and sub-grant cash, real and personal property, and other assets. Grantees and sub-grantees must adequately safeguard all such property and must assure that it is used solely for authorized purposes.
Budget control. Actual expenditures or outlays must be compared with budgeted amounts for each grant or sub-grant. Financial information must be related to performance or productivity data, including the development of division cost information whenever appropriate or specifically required in the grant or sub-grant agreement. If division cost data are required, estimates based on available documentation will be accepted whenever possible.
Allowable cost. Applicable OMB cost principles, agency program regulations, and the terms of grant and sub-grant agreements will be followed in determining the reasonableness, allowability, and allocability of costs.
Source Documentation. Accounting records must be supported by such source documentation as cancelled checks, paid bills, payrolls, time and attendance records, contract and sub-grant award documents, etc.
Cash management. Procedures for minimizing the time elapsing between the transfer of funds from the U.S. Treasury and disbursement by grantees and sub-grantees must be followed whenever advance payment procedures are used. Grantees must establish reasonableprocedures to ensure the receipt of reports on sub-grantees’ cash balances and cash disbursements in sufficient time to enable them to prepare complete and accurate cash transaction reports to the awarding agency.
Arkansas is a reimbursement state; payments are made within 30 calendar days after receipt of the billing. District General Business Managers upload data into Arkansas Public School Computer Network (APSCN). Loaded data is in Cognos and pulled once a month (second Monday of each month) and reimbursements are made on negative fund balances. Pass through cannot require separate depository accounts. Accounts must be interest bearing (unless otherwise stated), and interest up to $500 may be retained by the non-federal entity for administrative purposes. C.F.R. 200.305 (Bonding Requirements)
Overview of Financial Management/Accounting System Arkansas Public School Districts will use APSCN as the financial management and accounting system. The ADE must expend and account for the federal award in accordance with state laws. In addition, the ADE financial management systems, including records documenting compliance, must be sufficient to permit the preparation of reports required; and the tracing of funds to expenditures adequately to establish that funds have been used according to Federal statutes, regulations, and the terms and conditions of Federal award.
C.F.R. 200.302 (Financial Management) Budget
Federal grant allocations are communicated to public school districts on an annual basis via commissioner’s memos generated by the Arkansas Department of Education. By September 30th of every year, all public school districts’ budgets are entered into eFinancePlus, and each federal grant and funding source is coded so that it can be easily tracked. The finance office of each school district is responsible for managing its federal grants’ budgets throughout the fiscal year.
Budget Revisions: Budget revisions for federal grants may be made throughout the fiscal year upon approval from the Arkansas Department of Education. The annual deadline to submit budget revisions is determined by ADE.
Purchases involving federal funds shall be made in accordance with each school district’s purchasing guidelines, Arkansas Annotated Code, and applicable EDGAR requirements.
Funding for federal grants distributed through the Arkansas Department of Education is remitted to public school districts on a reimbursement basis. ADE monitors each school district’s federal expenditures in APSCN on a monthly basis and reimburses districts accordingly through electronic funds transfer.
Basic Cost ConsiderationsAllowable C.F.R. 200.402
Uniform Grant Guidance (UGG) establishes “federal cost principles” for states, local, and Indian tribal governments. As a state agency, is subject to UGG. Postsecondary Institutions are subject to UGG, cost principles for educational institutions. The cost principles of UGG are the basic guidelines describing permissible ways federal funds may be spent. The general principles in UGG state that for costs to be allowable, they must be:
Reasonable and necessaryC.F.R. 200.404
A cost may be reasonable if the nature of the goods or services acquired and the amount involved reflect the action that a prudent person would have taken under the circumstances prevailing at the time the decision to incur the cost was made.
Don’t buy a BMW when a Ford can get you to your destination.
Allocable to the federal awardC.F.R. 200.405 (meaning that the federal grant program derived a benefit in proportion to the funds charged to the program – for example if 50% of an instructor’s salary is paid with Perkins funds, then that instructor must spend at least 50% of his or her time on a Perkins program);
Legal under state and local law;
Are properly documented (and accounted for on a consistent basis with generally accepted accounting principles);
Consistent with the provisions of the grant program; and
Not used for cost-sharing or matching any other grants agreement.
Applicable Credits Reference: C.F.R. 200.406
The term "applicable credits" refers to those receipts or negative expenditures that operate to offset or reduce expense items allocable to the federal award. Typical examples of such transactions are:
Rebates or allowances;
Recoveries or indemnities on losses; and
Adjustments of overpayments or erroneous charges.
Financial Record Keeping
To the extent that such credits accruing to or received by the state relate to the federal award, they shall be credited to the federal award, either as a cost reduction or cash refund, as appropriate.
Prior Written Approval Reference: C.F.R. 200.407
Under any given Federal award, the reasonableness and allocability of certain items of costs may be difficult to determine. In order to avoid subsequent disallowance or dispute based on unreasonableness or non-allocability, the non-Federal entity may seek prior written approval from the cognizant agency (for indirect cost rate) or Federal awarding agency in advance of the incurrence of special or unusual costs.
Prior Written approval should include the time frame and scope of agreement.
Direct v. Indirect Costs C.F.R. 200.413
Direct costs generally include:
Salaries are wages (including vacations, holidays, sick leave, and other excused absences of employees working specifically on objectives of a grant or contract – i.e., direct labor costs).
Other employee fringe benefits allocable on direct labor employees.
Consultant services contracted to accomplish specific grant/contract objectives.
Travel of (direct labor) employees.
Materials, supplies and equipment purchased directly for use on a specific grant or contract.
Communication costs such as long distance telephone calls or telegrams identifiable with a specific award or activity.
Indirect costsC.F.R. 200.414 are costs that are not classified as direct. Examples of indirect costs are:
Salaries of administrative and clerical staff providing normal support activities in the department
Salaries of administrative and clerical staff should be treated as “indirect” unless all of following are met:
Individuals can be specifically identified with the activity
Such costs are explicitly included in the budget or have the prior written approval of the federal awarding agency
To assure that expenditures are proper and in accordance with the terms and conditions of the award, vouchers requesting payment must include a certification, signed by an official who is authorized to legally bind the non-Federal entity, which reads, “By signing this report, I certify to the best of my knowledge and belief the report is true, complete, and accurate, and the expenditures, disbursements and cash receipts are for the purposes and objectives set forth in the terms and conditions of the Federal award. I am aware that any false, fictitious, or fraudulent information, or the omission of any material, fact, may subject me to criminal, civil or administrative penalties for fraud, false statements, false claims or otherwise.”
Selected Items of Cost C.F.R. 200.420
This section provides principles to be applied in establishing the allowability of certain items in determining costs. In all cases federal costs must have prior approval.
Advertising/PR C.F.R. 200.421
Allowable for programmatic purposes including:
Procurement of goods
Disposal of materials
Public relations (in limited circumstances)
Alcohol C.F.R. 200.423
Professional Development C.F.R. 200.432
Prior Rule: Generally allowable
Includes Meals / Conferences / Travel and Family Friendly Policies
Allowable conference costs include rental of facilities, costs of meals and refreshments, transportation, unless restricted by the federal award
Costs related to identifying, but not providing, locally available dependent-care resources
But C.F.R. 200.474 “travel” allows costs for “above and beyond regular dependent care”
Conference hosts must exercise discretion in ensuring costs are appropriate, necessary and managed in manner than minimizes costs to federal award