Last month, the U.S. Department of Education (ED) released long anticipated guidance on the fiscal aspects of schoolwide programs. Schoolwide programs, as we know them today, have been a part of Title I since at least 1994. Yet, the fiscal aspects of the schoolwide requirements have remained something of a mystery as state education agencies (SEAs), local education agencies (LEAs) and schools have struggled to implement compliant schoolwide programs.
Section 1114 of the Elementary and Secondary Education Act (ESEA) authorizes eligible schools to consolidate federal, state and local funds to upgrade the entire educational program of the school. A school is considered eligible if it has at least forty percent poverty and it completes a compliant schoolwide plan in accordance with section 1114.
ED’s new guidance finally provides insight into some of the trickiest schoolwide fiscal issues, such as the nature of consolidation, appropriate methods for accounting for consolidated funds and allowable charges in schoolwide programs. The guidance is included in the revised “Non-Regulatory Guidance on Title I Fiscal Issues” and is available at: http://www.ed.gov/programs/titleiparta/fiscalguid.doc.
1. What is consolidation?
According to the new guidance, consolidating funds in a schoolwide program simply means that the school treats identified funds as a single “pool” of money. In other words, the school must identify which programs are considered consolidated in its schoolwide plan and how much each program will contribute to the schoolwide pool. Those identified amounts will be considered the consolidated pool and must be used on allowable schoolwide activities.
The new guidance clarifies that schools do not need to literally combine their funds into a single account in their accounting systems. Rather, the term “pool” is used conceptually to indicate that the identified funds will be used to pay the costs of the schoolwide program without regard to the original source of those funds.
Because consolidation is a conceptual idea (as opposed to a literal combining of funds) the importance of identifying, in the schoolwide plan, the programs that will make up the consolidated pool becomes critically important. Only those funds that are specifically identified in the plan will be considered “schoolwide funds” subject to the schoolwide flexibility.
Unfortunately, identifying programs is easier said than done. Under Title I, Part A, LEAs are required to allocate funds to eligible schools. Thus, each school receives an allocation to support its school-level costs. Outside of Title I, Part A, however, most federal education programs do not contain a process for allocating funds to individual schools. Rather, SEAs allocate funds to LEAs for LEAs to spend in accordance statutory requirements. While LEAs may choose to allocate, or set-aside, some of its funds to pay allowable school-level costs, many LEAs spend the funds at the LEA level and provide services to schools.
If a schoolwide program school does not receive a distinct allocation, how should it identity the funds to be consolidated? In 2004, ED released a notice on schoolwide programs that clarified consolidation also extends to services, materials, and equipment purchased with federal funds and provided to a schoolwide program school.
Thus, schools should identify the services, materials and equipment they receive from the LEA as part of the schoolwide pool in order to make them part of the schoolwide program. Schools may need assistance from their LEAs to identify which services, materials and equipment were purchased with federal funds and are eligible for consolidation.
2. How do you account for consolidated funds?
The new guidance provides several examples of how an LEA may account for funds in a schoolwide pool.
One option is to charge costs proportionally among the programs that make up the schoolwide pool. In other words, the program funds earmarked for the schoolwide pool may be used for any allowable schoolwide activity. Allowable schoolwide costs are then charged back to the contributing programs on a proportionate basis. In other words, if Title I, Part A contributed ten percent of the funds in the consolidated pool, 10 percent of the expenditures from the pool would be charged back to Title I, Part A.
Another option is to charge costs sequentially. In other words, charge costs to state and local funds first, and then to federal programs until those funds are exhausted. Charging costs to state and local funds first ensures SEAs and LEAs stay in compliance with federal cash management rules.
If consolidated funds remain unexpended at the end of the year, ED recommends that LEAs credit the unspent funds back to the contributing programs on a proportional basis.
3. What are allowable costs and how do schoolwide programs prove that funds were spent on allowable costs?
One of the most important clarifications in the guidance concerns the concept of allowable activities in a schoolwide program. Under section 1114, eligible schoolwide program schools may consolidate their federal, state and local funds to upgrade the “educational program” of the school. A schoolwide program school must identify its educational needs in the schoolwide plan by conducting a comprehensive needs assessment and describing the specific strategies it will use to upgrade the educational program in accordance with section 1114. The new guidance clarifies that federal funds contributed to a schoolwide pool may only be used on the educational activities described in the schoolwide plan. Further, costs charged to federal funds must be consistent with the federal cost principles set out in Office of Management and Budget (OMB) Circular A-87.
Thus, in order to be allowable, a cost paid with federal funds in a schoolwide program must be: (1) related to an educational activity that is included in the schoolwide plan; and (2) consistent with federal cost principles.
Federal funds cannot be spent on operational costs such as building maintenance and repair, landscaping, and custodial services. These costs are per-se non-educational; thus, they are not allowable.
This again highlights the importance of the schoolwide plan. Costs are only allowable to the extent they are linked to the educational needs and strategies identified in the plan. It is important to ensure a schoolwide plan is sufficiently detailed to include the educational costs the school will charge to the schoolwide pool and that the school’s budget is well aligned to the schoolwide plan.
The process of proving that a school has spent federal funds on allowable costs depends on how the school has chosen to consolidate its funds:
• If a school consolidates federal, state and local funds, the school does not need to trace its federal expenditures to allowable schoolwide costs. Once federal funds are consolidated with state and local funds they lose their identity as federal funds; thus, they do not need to be tracked to allowable educational costs. However, the school must demonstrate that, in the aggregate, there are sufficient state and local funds to pay for all of the non-educational costs charged to the schoolwide pool. Because federal funds lose their identity in this situation, any employee working exclusively on schoolwide activities and whose salary is charged to the schoolwide pool is not required to maintain any time and effort records.
This distinction between educational and non-educational costs is an important clarification. Title I, Part A contains a supplement not supplant provision, which generally means that Title I funds must be used only to provide additional services, staff, programs, or materials that could not be provided by the SEA or LEA absent the federal funds. In other words, federal funds normally cannot be used to pay for services, staff, programs, or materials that would otherwise be paid with state or local funds. ED has clarified that this restriction applies in schoolwide program schools, but that to demonstrate compliance an LEA simply must ensure that a schoolwide program school receives all of the state and local funds it would receive if it were not a Title I school.
The new guidance provides an additional nuance to this supplanting analysis. Under the new guidance, an LEA must not only provide a school with all of the state and local funds it is entitled to receive, it must ensure the school receives sufficient state and local funds it would otherwise need to operate the school in the absence of federal funds. Thus, LEAs will need to implement a methodology for identifying operational expenses within a schoolwide program school and ensure there are sufficient state and local funds in the schoolwide pool to pay for those expenses.
• If a school only consolidates its federal funds, and does not include any state or local money in the schoolwide pool, it is required to demonstrate the federal funds were spent on educational activities by tracing all costs charged to the pool to a specific allowable educational activity. Employees working exclusively on schoolwide activities and whose salaries are charged to the schoolwide pool must maintain a semi-annual certification. An employee who works on schoolwide and other activities must maintain a monthly personnel activity report.
• If a school operating a schoolwide program does not consolidate its Title I, Part A funds with any other federal, state or local funds, it is required to demonstrate the Title I funds were spent on educational activities by tracking all costs charged to Title I, Part A to a specific allowable educational activity.
Resource:
Non-Regulatory Guidance: Title I Fiscal Issues (United States Department of Education: Revised February 2008), http://www.ed.gov/programs/titleiparta/fiscalguid.doc.
Author: SLK
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