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That's not allowed!
Texas public school districts spend billions of state and federal grant funds every fiscal year to supplement local funding and to support district and/or campus goals. Although these funds can bring much-needed resources to school districts, they also demand accountability to ensure that the funds are spent in accordance with federal, state and local guidelines. If school districts spend these funds inappropriately, they could be required to use already limited local resources to reimburse the granting agency. To avoid this sticky situation and to ensure all expenditures are allowable costs under state and federal grants, school administrators should consider four major areas. 1. Use the state and federal funds to meet district and/or campus identified needs. The District and Campus Improvement Plans are the core documents to support how you use grant funds. After conducting a comprehensive needs assessment, the district and/or campus should develop goals, strategies and activities to meet identified needs. The available state and federal grant funds should be matched to the identified needs, as appropriate, based on the purpose of the grant funds. For example, identified needs related to staff development for teachers could be funded from Title II, Part A, federal funds, whose purpose is professional development for teachers. 2. Include all planned expenditures in the grant application. Some grant fund applications are more comprehensive than others. While some grant applications require the district to indicate how it intends to use the funds in one of five major categories (salaries, contracted services, supplies, travel and equipment), other grant applications require a list of planned expenditures in much greater detail. For instance, it may require a list of specific staff positions to be filled or equipment to be purchased. If the grant application requires a list of planned expenditures, all stakeholders should come together to develop the grant application. Failure to get the right people at the table during this step could result in spending the grant funds inappropriately due to a breakdown in communication. Or worse yet, your district could end up with an approved grant budget that does not meet identified needs. 3. Ensure that all expenditures are reasonable and necessary. The Texas Education Agency Guidelines Related to Specific Costs (updated September 2011) defines “necessary” as essential to accomplish the objectives of the project. It defines “reasonable cost” as consistent with prudent business practice and comparable to current market value. These are broad definitions that school districts need to define more clearly to ensure that expenditures meet these guidelines. For example, a school district’s local definition of reasonable cost as it relates to student awards may be that all student awards (ribbons, certificates, etc.) must cost less than $5 per item. 4. Comply with the OMB-A87: Cost Principles for State and Local Governments. This is the most comprehensive area of compliance. “State and local governments” include school districts, education service centers and open-enrollment charter schools operated by government entities. The cost principles contain an A to Z list of costs, such as advertising, awards, compensation, entertainment, equipment, field trips, food costs and so on. The guidelines dictate whether the cost is allowable, unallowable or not addressed. In\ some cases, a cost is listed as allowable, but then followed by an extensive explanation that provides guidance on obtaining prior approvals, setting limitations or requiring additional documentation to ensure the cost is allowable. The same holds true for unallowable costs. A sampling of cost items is listed below to illustrate the complexity of this section. Compensation for personnel services Although salaries, wages and fringe benefits are generally allowable costs if they are reasonable, they must be supported with time distribution records. According to TEA’s No Child Left Behind Program Appendices (Appendix 3: “Documentation Required for Charges to Payroll”), the compensation costs must be based on one of the following: certification, time and effort records or a substitute system. Failure to comply with at least one of these requirements could result in all compensation costs being determined as unallowable. Considering many school districts budget a substantial amount of state and federal grant funds for personnel, this should be a critical area of concern and compliance. Food costs To determine which food costs are allowable or unallowable, we need to look at not only why the food is purchased, but what is purchased and for what type of participant. For example, food costs are allowable for light lunch during an allday meeting or training and for a working lunch during an all-day meeting or training. Documentation must support that the meeting and/or training session participants could not obtain the meal on their own or were engaged in activities during their normal mealtime. Clearly, the best type of documentation would be a training agenda that lists the scheduled lunch period. As far as the type of food, the guidelines indicate that nutritional snacks for students and children may be allowable for extended day or child care activities. For parents, the allowable food costs are limited to food used during nutrition classes and refreshments to encourage parents to attend parental involvement activities. The guidelines state that full meals for students and parents are not allowable under any circumstances. There are other food costs that are specifically listed as unallowable, one of which is breakfast. To avoid spending grant funds on food costs that may be deemed unallowable, a school district should develop a list of food items that are or are not allowable by type of event. Share this list with all stakeholders to ensure compliance. Travel costs This cost item contains a lengthy explanation of what is allowable for in-state, out-of-state and foreign travel. It changes constantly due to the economy’s impact on the federal per diem rates for lodging, meals and other travel costs. Therefore, the limits on hotel, mileage and other costs should be read carefully to ensure compliance with the cost principles. Also, school districts should review their local travel reimbursement rates, if any, prior to spending state and federal grant funds for travel costs. The OMB Circular A-87 clearly states that: “Travel costs may not exceed local policy or maximum allowable rates for in-state or out-ofstate travel, whichever is less.” Documentation of travel costs is also critical. A travel voucher or similar document should reflect the name of traveler, the destination, purpose of travel, date(s) of travel, actual mileage or other transportation cost, actual lodging and meal expense and the total amount reimbursed to the employee. If the district advances anticipated travel expenses, it must substantiate all actual travel expenses with a settle-up process. The actual travel costs should be supported by receipts and/or documentation as required by state and federal guidelines. TEA’s letter, “Current Mileage and Travel Reimbursement Rates Applicable to State and Federal Grants from the TEA” (dated Sept. 19, 2011), states that: “Travel allowances for in-state and out-of-state travel, in which the traveler receives a flat per diem for lodging and/or meals, regardless of the amount expended, are not allowable in Texas.” Who’s responsible for compliance? So, who is responsible (or which department is responsible) for verifying that all state and federal grant expenditures meet allowable cost principles? Often it’s the grant administrator — if your district even has one of those — or the business office at central administration. Considering that many Texas school districts are relatively small (a student enrollment of less than 1,000), the grant administrator and business administrator may be one and the same. Even though the largest school districts in Texas have a grants department, that department alone cannot ensure compliance throughout the district. There might be only one or a handful of individuals directly responsible for managing state and federal grants, but it takes the entire school district to be in full compliance. Every campus and department that spends state and federal grant funds should be aware of what is and is not an allowable cost. To accomplish full compliance with the cost principles, every school district should develop, implement, and communicate written policies and procedures for state and federal grant funds. Clearly defined processes will enable all stakeholders in the school district to make knowledgeable decisions about spending state and federal grant money. The processes should include a requirement to submit and/or retain the appropriate documentation for every grant expenditure. This documentation will be critical if your school district is ever subjected to an audit by a federal agency or the Texas Education Agency.
REBECCA ESTRADA is the executive director of finance for Lackland ISD and a former president of the Texas Association of School Business Officials.
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