Title
PSA SUBGRANTS - FISCAL/ACCOUNTING PROCEDURES / ID Number
Office & Contact
Office of Education Improvement and Innovation – Public School Academies / Effective Date
1/1/2009
History
Policy was aligned with actual procedures in the 1/3/12 modification. In November, 2012, the policy was amended to establish criteria to define high risk subgrantees and protocols for on site monitoring. / Modification Date
1/3/2012 and 11/19/12
Purpose
Clarifies PSAUFiscal/Accounting Procedures / Page
1/7

Subgrant applicants and subgrantees are required to follow the requirements of the Michigan Public School Accounting Manual and guidance provided within the document regarding classification of expenditures, reporting requirements and requirements for federal programs.

Subgrantees that are public schools are treated as LEAs and must comply with Section 18 of the State School Aid Act of 1976 (MCL 388.1618) and must submit an independent audit to MDE each year by November 15 for the previous school year ending June 30. Subgrantees that are not yet authorized as PSAs must submit a set of basic financial statements for the subgrant project to the PSAU.

The Michigan School Auditing Manual provides extensive direction to public schools regarding accounting and auditing procedures required of public schools and recipients of federal funds. The 2007-08 Michigan School Auditing Manual may be found at the link:

Multiple online resources are available at the website of the MDE of the Office of Audits, which may be found at the link: The Michigan School Auditing Manual provides specific direction regarding procurement in its Compliance Supplement, Procurement, on page 188 of the document. As the manual notes, procurement is a “core compliance requirement” according to state and federal requirements. Pages 137-138 of the Manual also provides direction to schools and subgrantees on procurement which, though written to address Title II, Part A programs, is pertinent to CSP subgrant programs.

PSAU relies upon EDGAR and Section 1274 of the Revised School Code (MCL 380.1274) requiring that schools must have competitive bidding procedures for purchase of supplies, materials and equipment which exceeds a bid threshold. The bid threshold required under Section 1274 is revised on an annual basis based upon the Consumer Price Index. Subgrantees are advised to consult a variety of state and federal documents to ensure compliance with requirements for competition and purchasing, including the Michigan Public School Accounting Manual (Bulletin 1022), which conforms with the 2003 federal Financial Accounting for Local and State School Systems. Bulletin 1022 may be found at the link: The Compliance Supplement section of Bulletin 1022, Procurement (p. 188) provides specific guidance. New subgrantees are provided with copies of EDGAR, OMB Circulars A-87 and A-133.

Disbursement of Subgrant Funds

Subgrant funds may only be accessed through the Cash Management System (CMS), which provides an online and automated subgrant reporting and management system used by MDE and the PSAU for management and control of all state and federal administered program funds. The CMS system is linked to the Michigan Electronic Grants System (MEGS and MEGS+) for management, administration and control of access to funds. Subgrant applicants apply for subgrant funds using the MEGS+ system. Subgrant projects that are approved may access subgrant funds through the CMS system. Persons representing PSAs must have authorization to access and manage subgrant projects from the president of the board of directors of the PSA or nonprofit organization that is awarded CSP funds.

Subgrantees may request draw down of funds approved for their projects on a reimbursement basis. Subgrantees must certify that funds have been expended at the time that draw downs are requested. A video podcast prepared by the Office of Financial Management provides an overview of CMS at:

The process for draw down of funds is entirely electronic and the only paperwork involved is the submission of signed authorization forms to MDE to permit authorized persons access to the CMS and draw down of funds. Payments requested through CMS are generally processed and available within 4 business days. Funds requested may be received for electronic deposit in the subgrantees account, or may be received as a State of Michigan Treasurer’s Warrant sent through the mail.

Monitoring of Subgrant Funds

The PSAU monitors the drawdown of subgrant funds approved for individual subgrantees by accessing the reports available in the CMS system for the projects. Reports are available to the PSAU staff for an individual subgrantee or for all projects approved for funds by Source Code and Project Number. Subgrant activity is also monitored at regular intervals as part of the management activity of the Office of Financial Management and by the budget analyst of the Office of Education Improvement and Innovation.

PSAU staff use the CMS system to monitor multiple subgrant projects in order to provide targeted assistance and oversight of projects that may require additional scrutiny of use of funds and progress reporting. Drawdown of funds by CSP projects is monitored on a monthly basis by PSAU staff and unusual draw downs, e.g. those that are proportionately large for the time that the project has been approved may prompt scrutiny and review of documentation of expenditures by PSAU staff.

Funds for Planning and Implementation (P&I) Subgrants are approved in stages, following completion of stage requirements and progress reporting which includes documentation of activities and expenditures. A rate of draw down which is rapid or which draws down all available funds may prompt PSAU staff to initiate contact with the subgrantee to request documentation of the expenditures related to the draw.Similarly, projects may be reviewed and analyzed for lack of activity or action to access subgrant funds and PSAU staff may be prompted to contact subgrantees that appear to be stalled or inactive in implementation of their projects.

Supporting Information

The PSAU disseminates information regarding allowable expenditures for Planning/Implementation subgrants based upon the language contained in section 5204(f)(3) of the Elementary and Secondary Education Act (ESEA), described above and provides examples of the kinds of typically allowable expenditures. This is disseminated in the MDE CSP Subgrant Announcement and in written and electronic information provided to applicants and subgrantees through the PSAU website and face-to-face orientation sessions held several times each year. The PSAU requires that proposed costs for expenditures must be broken down to unit costs, whenever possible, in order to determine their reasonableness, including costs for purchased services. Purchased services are evaluated as to reasonableness based upon a per hour, or per diem, cost basis and local costs for similar services. Staffing costs proposed are required to be shown on an hourly or full-time equivalent (FTE) basis, plus any additional costs for benefits to be charged to the subgrant. Expenditures must directly support achievement of program performance objectives, tasks/activities, outcomes and products. Expenditures for staff salaries, benefits and any purchased services must be carefully documented to support the approved activities and products articulated in the approved Budget and Management Plan. The reasonableness of costs are evaluated based upon the proposed services or product to be purchased, on a per unit basis.Applicants and subgrantees are urged to contact the PSAU staff to discuss any unusual or extenuating circumstance, or those which are not identified in the MDE disseminated list of allowable purchases.

PSA subgrantees are advised that the use of subgrant funds may supplement but not supplant state and federal resources and operational funding for the school. Use of subgrant funds for staff or consultant cost must be carefully documented and time and effort certified on a regular basis in accordance with Circular A-87, Attachment 8h.

The PSAU reviews proposed subgrant Budgets and Management Plans as to whether costs and activities are reasonable, allowable and allocable. Proposed expenditures must support the activities, outcomes, tasks, deliverables and products of the project. Projects with an approved budget and Management Plan are approved for draw down of funds dependent upon the type of subgrant project and whether the subgrantee is an authorized PSA.

Identification of High Risk Subgrantees

Periodic monitoring (see related policy) of PSA subgrants may lead to identification of high risk subgrantees. Criteria for identification of high risk subgrants include:

  • Anomalies in stage reports such as (but not limited to) lack of proper documentation, significant deviation from the approved project plan, material changes in leadership on the project, inability to document board oversight
  • Excessive delays in meeting requirements for funds release
  • Failure to submit required reports
  • Repeated inaccuracies in submitted reports

Subgrantees identified as “high risk” are subject to corrective action (see related policy on grant monitoring) and/or additional monitoring including on-site visits.

Drawdown Schedule/Timing

P&I subgrantees who receive an award as a nonprofit corporation may be awarded funds in two Stages:

  • Following submission of any additional required information needed for completion of Stage 1 (as set forth in the subgrantee’s funds release document) and an approved project budget, $35,000 in P&I Subgrant funds will be available for drawdown.
  • After the first $35,000 has been spent, a subgrant progress report and a detailed itemized financial accounting of expenditures and supporting documentation are due from the P&I recipient. No additional funds may be drawn down until these reports have been reviewed and approved by MDE. Turnaround time for this approval process is expected to take no longer than ten business days.
  • Prior to (or concurrent with) the progress reporting process described above, subgrantee must bring two portions of their grant narrative to Level 4 on the scoring rubric. Those two areas are Educational Program and Assessment/Evaluation.
  • Following MDE approval of subgrantee progress and financial reports, and submission of Level 4 responses to narrative questions on Educational Program and Assessment/Evaluation, up to $75,000 is made available for drawdown.
  • After the next $75,000 has been spent, a second subgrant progress report and a detailed itemized financial accounting of expenditures are due from the P&I Subgrant recipient. No additional funding can be approved until:
  • These reports have been reviewed and approved by MDE, AND
  • The subgrantee has received a charter from a Michigan PSA authorizer.

Implementation subgrant funding is available to successful P&I subgrantees for up to the first two years of operations of a new PSA for purposes of equipping and supplying the school; developing needed materials and systems; and acquiring curriculum materials, texts, classroom equipment, and supplies. Successful P&I subgrantees apply, but do not compete again for implementation funds.

Two additional subgrants of up to $250,000 for up to 24 months of implementation may be awarded to successful P&I subgrantees for activities consistent with federal law, including but not limited to:

  • Informing the community about the school (for instance radio, print or electronic media development and dissemination costs, but not building signage);
  • Acquiring technology equipment and software for classroom use (e.g., computers, printers, LCD projectors, etc. as well as hook-up and installation costs);
  • Texts and library books for use in the educational program;
  • Desks, tables, chairs and bookshelves, etc., for use in the educational program;
  • Educational supplies and materials (does not include general use office supplies/equipment),
  • Acquiring or developing curriculum materials, aligning with state expectations and preparing staff to use those materials.
  • Implementation subgrant award funds are approved in two authorizations. The first authorization, for half of the available funding,is contingent upon submission of an approvable application on MEGS that outlines a Management Plan and Budget. This Management Plan and budget should build upon the original competitive application approved for the P&I subgrant. Funds are not approved for draw down until a PSAUconsultant has reviewed the proposal carefully and any needed modifications to the application have been made in response to PSAU staff recommendations. This process is designed to ensure that proposed expenditures are allowable, and that activities and cost directly support the subgrant project, that costs are reasonable and staff time proposed will not supplant use of state operational funding and resources. After the first half of the funding has been expended, a subgrant progress report and a detailed itemized financial accounting of expenditures and supporting documentation are due from the P&I recipient. No additional funds may be drawn down until these reports have been reviewed and approved by MDE. Turnaround time for this approval process is expected to take no longer than ten business days.

Dissemination subgrant projects awarded funding through the peer review process must propose expenditures and a Management Plan of activities, tasks and deliverables that directly support the project to the satisfaction of the PSAU staff before and funds are approved for draw down. All dissemination subgrant projects must meet the requirements articulated in the subgrant announcement, and expenditures must be targeted and directly support implementation of the subgrant project.

Using the CMS system, the PSAU staff monitors the use of funds through the draw down data of the individual subgrantees. Subgrant draw down of funds that exceeds a monthly proportional rate of spending may prompt staff to contact the subgrantee about recent expenditures and the subgrantee may be required to provide documentation of those expenditures to date that support the draw down. For the past two years, MDE has implemented a more intensive reporting format requiring that P&I Subgrantees submit Progress and Monthly Reports in a more rigorous and detailed format (see related policy PSA Subgrants – Monitoring).

Data & Reporting

Fiscal data is monitored and reviewed by the PSAU Manager, the budget analyst and Director of the Office of Education Improvement and Innovation, the Manager and Director of the Office of Financial Management. Data is reviewed to ensure that the MDE CSP program is in compliance with federal and state requirements for use of subgrant as well as funds retained by MDE for administration. Fiscal data reporting monitors the use of funds toward ensuring the quality of programs and the most effective use of subgrant award funds possible.

A Single Audit of the federal programs administered by MDE occurs every two years, completed by the Michigan Auditor General. The CSP is considered a major program in the completion of the Single Audit. Questioned costs and findings, if any, are reported to MDE administration and management for resolution, and implementation of change strategies to ensure compliance with all program requirements, federal and state regulations and statutes.

/ Michigan Department of Education
PSA Procedures