ED’s Schoolwide Guidance Provides Key Insights

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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ED Releases New Title I Fiscal Guidance (2/8/2008)

This week, the U.S. Department of Education (ED) issued non-regulatory guidance regarding various Title I fiscal issues. This non-regulatory guidance updates Section E of the Title I fiscal issues guidance released in May 2006 and addresses consolidating funds in schoolwide programs. In addition to revising the introduction to Section E, this guidance adds several new questions that clarify the purpose for consolidating funds in a schoolwide program, provides more detail on what it means to consolidate funds in a schoolwide setting, and describes how an LEA might account for State, local, and Federal funds that are consolidated in a schoolwide program. This guidance does not impose any requirements beyond those that the law specifies.

Any requirements referred to in this guidance are taken directly from the statute and the Title I regulations, with citations provided throughout. The examples shown in this revised guidance illustrate possible ways to account for Federal funds in a schoolwide setting and do not constitute endorsement of the processes shown or imply that there is a requirement to use those processes. The guidance in this document supersedes all prior non-regulatory guidance issued by ED concerning Title I fiscal issues

You can view the new guidance at: http://www.ed.gov/programs/titleiparta/fiscalguid.doc.

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Appropriators Close to Omnibus Deal

Congress may finally come to an agreement regarding fiscal year 2008 (FY08) spending. House Appropriations Committee Chairman David Obey (D-WI) plans to introduce an omnibus spending package that he and his colleagues drafted on Monday. The omnibus bill includes funding for the eleven appropriations bills for FY08 that have yet to pass. The new deal, which brings total spending down nearly to the President’s request of $933 billion, signals Democrat’s willingness to submit to Republican demands for lower spending in order to avert a government shutdown.


Although the newest proposal is closer to the President’s request, Democrats are working to make sure this does not translate into significant program cuts from their original proposal. Instead, Chairman Obey is removing a majority of earmarked spending projects, in order to bring spending down to the levels desired by the President and his supporters in Congress. Nevertheless, many programs may still receive less funding than they would have under the Democrats’ original proposed levels. Lawmakers on both sides of the aisle are unhappy with losing their spending projects, but most are still willing to support any deal that will avoid a government shutdown. Senate leaders have yet to confirm their assent to such a proposal, though the time crunch may not leave them with much of a choice.
The government is currently operating under a continuing resolution (CR), funding agencies at FY 2007 levels. That CR runs out at midnight tonight. On Thursday, Congress passed an additional CR to run through Friday, December 21, giving them a week to get the omnibus bill through both Houses of Congress and onto the President’s desk. The president signed the CR today. House Majority Leader Steny Hoyer (D-MD) hopes to be able to adjourn next week, allowing members to go home for Christmas, but the adjournment date will rely heavily on whether or not Congress can pass the omnibus. If negotiations falter, Congress may pass a fourth CR, carrying over until January, preventing a government shutdown over the holidays.

The debate centers over the President’s unwillingness to compromise on his proposed total discretionary spending level of $933 billion. The Democrats in Congress originally came out with over $955 billion in discretionary spending, more than $22 billion over the President’s request. Under those spending levels, the Defense appropriations bill is the only one that became law. The President vetoed the Labor-HHS-Education bill, the largest domestic spending bill, back in November. After a failed override attempt, appropriators decided to “meet the President halfway” by bringing the total spending level down to about $944 billion. Over the weekend, after a series of failed negotiations with Congressional Republicans and the White House, Chairman Obey dropped the proposal, claiming that the other side was not proceeding in good faith.

This debate is largely one of political impression. The President is trying to prove that he is relevant and a true fiscal conservative. He has the support of Congressional Republicans that can either claim a victory by getting the $933 billion cap or cite the fiscal mess as evidence of poor Democratic leadership. The Democrats loath the capitulation but they have few options at this point. They cannot fail to pass their appropriations as the Republicans did in 2006, nor can they tolerate a government shutdown. Historically, government shutdowns reflect more negatively on Congress than the White House. These political obstacles make it difficult for Democrats to negotiate with any authority, which is why they are now proposing the lower spending level. The lack of earmarks may simply be Chairman Obey’s way of trying to retaliate at Republicans who support the President.

Although neither the President nor Republicans in Congress have openly supported the new proposal, opting to wait until Obey shares the bill with the public this weekend, the White House has hinted that it would support the bill, so long as it comes in, at, or close to the $933 billion cap. Republicans criticized the Democrats for taking so long to compromise on spending. Democrats held to their initial proposals for months, trying to make political statements regarding priorities for programmatic spending. Possibly holding on a bit too long, Democrats have left themselves only a week to reach a deal before the holiday recess. Meanwhile, Democrats contend that Republicans are to blame for their refusal to negotiate at all. Regardless of which side bears the blame, the White House will reap the benefits as it can claim a victory over Congress, assuming the $933 billion cap holds.

Resources:
David Clarke and Liriel Higa, “Lawmakers Edging Toward Final Deal on Year-End Appropriations Plan,” CQ Today, December 13, 2007.
Author: SAS

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Congress Ready to Push Forward with Omnibus

Congress is moving forward on a large omnibus spending bill that will include funding for fiscal year 2008 (FY08) for every government agency except for the Department of Defense, whose appropriations bill was signed into law last month. The omnibus will contain more than $520 billion in discretionary spending, bringing the total spending for FY08 to about $944billion, just $11 billion over the President’s request. This constitutes an $11 billion cut from the Democrats preferred spending levels, a sign that Democrats are much more willing to compromise now that time is short for completing appropriations work. Despite these concessions, the White House shows no sign of backing down from its threat to veto any spending bill that is above the president’s request.

The decision to move forward on an omnibus bill is somewhat risky. Although Congress has only two weeks before the targeted adjournment date, the President has said that he will not sign any omnibus bill. Instead, with the support of some Republicans in Congress, the President continues to advocate for passing each individual spending bill. However, since FY08 officially began over two months ago, Democratic leaders are more concerned with getting the bills passed, and are less concerned with the methods they use to pass them. However, appropriators are working to sweeten the deal, both for the President and Republicans in Congress.

Attempting to meet the President and his supports halfway, Democrats are now proposing total spending for FY08 at just $11 billion over the President’s request. Through the joint budget resolution, Congress had originally decided on levels that came in $22 billion above the President. The omnibus bill, which will make its way through the House by next week if Democrats have their way, also contains about $30 billion for war funding, and up to $7 billion in emergency funding for programs favorable to Republicans. Appropriators are hoping this will keep the President from vetoing the omnibus bill, which would leave the government without any funding authority, causing a government shutdown. The House Appropriations Committee is currently working on their proposal, scheduled for release next week.

Appropriators are using a somewhat interesting tactic for proposing the bill. Rather than proposing it as a standalone bill, they plan to attach the omnibus to H.R. 2764, the State-Foreign Operations bill, which has already passed both the House and the Senate. Now, the House can vote on the Senate-passed bill, and attach the omnibus as an amendment. From there, the Senate can debate and amend the bill. Normally, there are no amendments to conference reports, but this tactic allows for a quicker process. Once the Senate amends the bill, the House can vote solely on the amendments from the Senate. This allows Congress to bypass the normal process where each House passes the bill, goes to conference with each other and then passes it again through each house.

The government is currently operating under a continuing resolution (CR) that runs through next week. The CR is funding government agencies at the fiscal year 2007 (FY07) levels. A CR usually provide short term funding, to prevent a government shut down despite Congress’ failure to pass the fiscal year’s appropriations bills on time. Last year, Congress passed a long-term CR to run for the duration of FY07. Democrats, blaming the decision on the former Republican majority’s inability to finish their own work, promised during the 2006 midterm elections that such drastic measures would not be necessary if they were in the majority. As such, leaders are hesitant to pass another CR, even if it is intended to run only through January. However, both Senate Majority Leader Harry Reid (D-NV) and House Majority Leader Steny Hoyer (D-MD) have conceded that another CR may be required if the President vetoes an omnibus bill with enough Republican support to sustain it.

Throughout the entire appropriations process, the White House has maintained that the President will veto any spending bill that is too far above his budget request. Democrats promised fiscal responsibility in the last elections, and the President seems intent on enforcing that promise. This year, he vetoed both the State Children’s Health Insurance Program (SCHIP) bill, as well as the FY08 Labor-HHS-Education bill because of excessive spending. In both cases, Congress was unable to override the veto because at least 145 Republicans in the House voted with the President. Those same Republicans will decide the outcome of this standoff.
Politically, President Bush has no reason to compromise with Democrats since he does not have to worry about another election. Therefore, the Democrats’ only leverage lies with Republicans in the House who do have an election to get past next year. That is not to say that the President does not have a stake in the deal, but Democrats are not likely to withhold war funding over the standoff. No one wants to be accused of withholding money from troops because of political reasons. Therefore, Democratic leaders are working hard to win over their Republican colleagues, in hopes that passing an omnibus by a veto-proof majority will prevent the President from following through on his threats. If not, Democrats will still have additional time to get the votes they need to override a veto.
Resources:\
David Clarke and Liriel Higa, “Democrats Come Up With a Procedural Gambit to Complete Fiscal 2008 Spending,” CQ Today, December 6, 2007.
Ashley Roque, “Democratic Leaders Raise Prospect of Another CR as Spending Stalemate Continues,” Congress Now, December 5, 2007.
Author: SAS

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Final Regulations on Direct Grant Programs

The Office of the Chief Financial Officer at the U.S. Department of Education (ED) posted final regulations regarding Direct Grant Programs today in the Federal Register. Through these regulations, ED’s prior regulations governing the determination and recovery of indirect costs by grantees are amended to address procedural aspects related to the establishment of temporary indirect cost rates.

The final regulations specify the temporary rate that will apply to grants generally and clarify how indirect costs are determined for a group of applicants that apply for a single training grant. These regulations are effective January 7, 2008.
According to ED, these final regulations impose no additional burdens on applicants for discretionary grants or recipients of those grants. The final regulations merely specify the rate at which grantees can recover indirect costs during a temporary period when the grantee does not have an indirect cost rate recognized by the Federal Government and establish procedural requirements regarding temporary indirect cost rates. While these final regulations prohibit a grantee from recovering indirect costs if the grantee has not submitted its indirect cost proposal within the 90 days after the date ED issues the Grant Award Notifications, the burden and timing of submitting an indirect cost rate proposal under the procedures in the Federal cost principles do not change at all.

You can view the Federal Register notice at http://www.ed.gov/legislation/FedRegister/finrule/2007-4/120707a.html.

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Omnibus Bill Likely for Final Appropriations Measure

With only three weeks before the current continuing resolution (CR) runs out, Congress has very little time to complete work on a final appropriations for fiscal year 2008 (FY08). Under a time crunch like this, it is likely that appropriators will choose to move forward with an omnibus package, covering various government agencies and programs. Meanwhile, President Bush continues to issue a veto threat to any omnibus package sent to his desk. If the two sides cannot reach an agreement in by the end of the month, the country may face a government shutdown.

The President already vetoed the Labor-HHS-Education appropriations bill last month. Congress originally allocated about $10 billion more that the President requested for those agencies. Overall, Congress is calling for $22 billion more for FY08 appropriations that the president requested in his budget proposal. Due to what he deems as “excessive spending,” Bush continues to levy veto threats at any bill that comes in too far above his budget requests.

Appropriators in both chambers have already offered to “meet the president halfway,” by bringing the total appropriation levels to just $10 billion over the president’s request, but the White House has not shown any sign of compromising. If the two sides cannot come to an agreement, and if the final omnibus package is not passed by a veto-proof majority, then Congress will either have to pass a CR or face a possible government shutdown.

Meanwhile, appropriators plan to attach a new state children’s health insurance program (SCHIP) proposal into the omnibus bill. Within that proposal, lawmakers intend to include language that would place a two-year moratorium on any changes to payments for school-based services under Medicaid. A similar provision made it through with the first SCHIP proposal, but died when Congress failed to override the President’s veto.

The final showdown will come towards the end of month, with various possibilities determining the outcome. Politically, vetoing an omnibus bill that funds multiple government agencies is more difficult than killing individual bills. However, since the president does not need to seek reelection, his personal political concerns are not as complicated as they have been in previous years. If he chooses to veto the bill, Congressional Republicans will have to decide if they will back his veto, possibly hurting their own chances at reelection. If a veto is not possible, Democrats will have to decide if they will risk a government shutdown by making a stand against the president, or if they will let down their own constituency by bringing spending levels down to the President’s budget request. Whichever path the process decides to follow, this should be an interesting Holiday season.

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President Issues Executive Order for Government Program Efficiency

On Tuesday, the President issued an Executive Order on “Improving Government Program Performance”. This Order sets forth a policy of spending “taxpayer dollars effectively, and more effectively each year. Agencies shall apply taxpayer resources efficiently in a manner that maximizes the effectiveness of Government programs in serving the American people.” The Order calls for the heads of the various executive agencies to approve clear annual and long-term goals defined by objectively measurable outcomes and specific plans for achieving the goals.


Plans should include assignments to specified agency personnel of the duties necessary to achieve the goals and the authority and resources necessary to fulfill such duties. The plans should also provide ways to measure progress toward achievement of the goals and efficiency in use of resources in making that progress. Finally, the plans should also include mechanisms for ensuring continuous accountability of the specified agency personnel to the head of the agency for both achieving the goal, as well as effectively using resources to do so. Agencies are also directed to keep their websites updated with information relating to program performance, as well as updates on implantation of the achievement goals.
Furthermore, the Order calls on heads of agencies to assist the Director of the Office of Managements in Budget (OMB) in making appropriations recommendations to Congress that are justified based on objective performance information and accurate estimates of the full costs of achieving the annual and long-term goals. The Director of OMB is instructed to keep the information relating to the various agencies’ efforts readily available to the public, through the internet or the Federal Register.
The Order directs heads of agencies to designate Performance Improvement Officers. These officers are employees of an agency who is a member of the Senior Executive Service or equivalent service. Their duties include:
• Supervising the performance management activities of the agency;
• Advising the head of the agency with respect to a program administered in whole or in part by the agency;
• Convening specified agency personnel or appropriate subgroups thereof regularly throughout each year to assess performance of each program administered in whole or in part by the agency;
• Assisting the head of the agency in the development and use within the agency of performance measures in personnel performance appraisals, and, as appropriate, other agency personnel and planning processes; and
• Reporting to the head of the agency on the implementation within the agency of the policy of effectively spending tax payer dollars.
Finally, the Order creates an Operation of Performance Improvement Council, under OMB. The council will consist of the OMB Deputy Director for Management (who shall serve as Chair), agency Performance Improvement Officers, and such other full-time or permanent part-time employees of an agency, as determined by the Chair with the concurrence of the head of the agency concerned. The Council’s objective is to effectively implement the policy set forth on the Order by:
• Developing and submitting recommendation to the OMB Director regarding performance management policies and requirements as well as criteria for evaluation of program performance;
• Facilitating the exchange among agencies of information on performance management, including strategic and annual planning and reporting, to accelerate improvements in program performance;
• Coordinating and monitoring a continuous review by heads of agencies of the performance and management of all Federal programs that assesses the clarity of purpose, quality of strategic and performance planning and goals, management excellence, and results achieved for each agency's programs, with the results of these assessments and the evidence on which they are based made available to the public on or through the internet;
• Developing an internet website that provides the public with information on how well each agency performs;
• Monitoring implementation by agencies and reporting to the OMB Director, together with any recommendations of the Council for more effective implementation of such policy;
• Promptly reviewing and providing advice, at the request of the head of an agency, on a proposed action by that agency to implement the policy; and
• Obtaining information and advice, as appropriate, in a manner that seeks individual advice and does not involve collective judgment or consensus advice or deliberation.

You can view the text of the Executive Order at: http://www.whitehouse.gov/news/releases/2007/11/20071113-9.html.
Author: SAS

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Consolidated Education Tax Credits Proposed

On Tuesday, Representative Rahm Emanuel (D-IL), introduced H.R. 2450, the Universal Education and Lifetime Learning Act, a bill to consolidate and expand the Hope Credit, the Lifetime Learning Credit, and a tuition and fees credit into one education tax credit worth up to $3,000 annually.


A full credit would be available to families making $100,000 annually, while partial credit would go toward families making as much as $160,000. The bill would also provide a refundable 50 percent credit, which could be used for tuition and, notably, for non-tuition costs, such as room and board, books and other supplies. According to Rep. Emanuel, “This bill makes college more affordable and accessible for the middle class and provides a significant investment in ensuring that our workforce remains the envy of the world.” While that statement may be more bravado than reality, a simplification of the IRS paperwork in conjunction with an expansion of the tax benefits is certainly welcomed.
The Senate Finance Committee is scheduled to mark up the bill after the week-long Memorial Day break. We will continue to track its progress throughout the year.
Resources:
“Emanuel, Camp, Bayh Introduce Bipartisan, Bicameral Tax Bill to Make Higher Education Universal,” Congressman Rahm Emanuel, Press Release, May 27, 2007, http://www.house.gov/apps/list/press/il05_emanuel/highered.html
Author: DAD

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Congress Passes New Supplemental Appropriations Bill

On Thursday, Congress passed another emergency supplemental appropriations bill (ES) for spending in Iraq, Afghanistan, and numerous domestic projects. The current ES, H.R. 2206, does not contain the binding withdrawal language of the version that President Bush vetoed, but it still contains about $20 billion more then the President’s request, funding various domestic programs. The Senate passed the $120 billion ES last night, by a vote of 80-14. The House Democratic leaders decided to split the ES vote up by two amendments. One amendment focused solely on the $22.2 billion in domestic spending, which passed 348-73. The other amendment, which contained funding for military operations in Iraq, Afghanistan, and other areas, passed by a vote of 280-142, with 140 Democrats and 2 Republicans voting in opposition.

Similar to the first ES, H.R. 2206 contains $425 million for a one-year extension of the Secure Rural Schools (SRS) Act. The SRS program allocates funds to support more than 4,400 rural schools and to help maintain county road systems. The program expired in 2006, and many rural schools have operated with massive budget cuts, or have shut down altogether, due to the loss of funds. When the first ES, H.R. 1591, passed through the Senate in April, it contained an amendment that provided $5 billion for a five-year reauthorization of the program. That amendment did not make it into the conference report for H.R. 1591, and neither chamber made any significant push to add it to H.R. 2206.
The vote is considered a defeat for the new Democratic Congress because the Senate Democratic leadership could not establish enough bipartisan support to override Bush’s veto on troop withdrawal. Democratic leaders have vowed to continue the debate on the war in Iraq, but for now the President is getting his money with no stings attached.
Resources:
Liriel Higa and Josh Rogin, “Democrats Vow to Fight Another Day on Iraq,” CQ Today, May 24, 2007.
Author: SAS

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New Rulemaking on Direct Grants

On Thursday, the U.S. Department of Education (ED) released a notice of proposed rulemaking (NPRM) regarding the determination and recovery of indirect costs in direct grant programs. The proposed regulations would amend sections 75.560 (dealing with temporary indirect cost rates), 75.562 (dealing with indirect costs in training grants) and 75.564 (dealing with group awards under training grants) of the Education Department General Administration Regulations (EDGAR).

Temporary indirect cost rates: Under current regulations, grantees must have negotiated indirect cost plans in place in order to charge indirect costs to federal grants. ED has the authority to approve a temporary rate for grantees who do not have existing indirect cost plans in place; however, as a practical matter this is rare. The proposed regulations would make it easier to obtain a temporary rate.
Under the proposed rule, grantees must submit indirect cost plans to their cognizant agencies (the agency responsible for approving indirect cost plans) within ninety days after receiving a direct grant from ED. During that time, ED can authorize the grantee to charge a temporary rate of 10% of the direct salaries and wages included in the grantee’s approved budget. If the grantee submits a plan to its cognizant agency within the first ninety days of the grant award, then it may continue to use the temporary rate until the plan is approved. If the grantee does not submit a plan to its cognizant agency by the ninetieth day, the temporary rate expires and the grantee must discontinue charging indirect costs to the grant.
Once a final rate is approved, the grantee must make adjustments to ensure its total recovery does not exceed the approved rate.
Training grants: Part 75 of EDGAR provides special rules for indirect costs in educational training grants. Training grants generally support instructional activities such as summer institutes, training programs for selected participants, or the introduction of new or expanded courses, as opposed to activities simply related to the development or dissemination of educational materials. Grantees under training grants may recover their actual indirect costs (as determined under a negotiated indirect cost plan); however, the recovery of non-governmental grantees is capped at eight percent.
Indirect cost plans generally determine the ratio of a pool of indirect costs (numerator) to a base of direct costs (denominator). The base consists of “modified total direct costs.” Current regulations define modified total direct costs as all total direct costs minus stipends, tuition and related fees, and capital expenditures of $5,000 or more. The proposed regulations would remove the reference to “capital expenditures of $5,000 or more” and replace it with “equipment.” They would also clarify that any amount of a sub-award exceeding $25,000 must be excluded from the base as well.
The NPRM addresses two somewhat controversial issues. Regarding equipment, ED’s Office of the Chief Financial Officer (OCFO) has been somewhat inconsistent in how it treats items purchased with federal funds. EDGAR defines equipment as all tangible personal property with a useful life of more than one year and an acquisition cost of $5,000 or more unless the state sets a lower threshold. EDGAR then requires grantees and subgrantees to track equipment as part of an inventory management system. Notwithstanding EDGAR’s clear definition of equipment, OCFO monitors have cited state and local education agencies for failing to track items below the $5,000 threshold – items that legally constitute supplies and do not need to be tracked. At the same time, the preamble to the proposed indirect cost regulations make clear the OCFO will follow the EDGAR definition for purposes of indirect costs. Thus, the OCFO seems to apply different criteria for “equipment” in different contexts.
Regarding sub-awards of more than $25,000, OMB Circular A-87 requires state and local education agencies to exclude “major” contracts from their indirect cost calculations. Neither A-87 nor EDGAR currently defines what constitutes a “major” contract; however, OMB Circulars A-21 and A-122 do set the threshold at $25,000. In order to be consistent, federal agencies have generally agreed that a major contract is a contract exceeding $25,000. The proposed regulations would finally clarify this rule in the context of direct training grants. It is important to note, however, that ED applies the same limitations in state-administered programs as well.
Group Grants: The proposed regulations would clarify that when a training grant is provided to a group of eligible recipients, the grant funds allocated between group members do not constitute sub-awards for purposes of calculating and applying indirect cost rates.
Interested parties can comment through June 25, 2007.
Author: SLK

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