Richmond Chapter of the AGA 2009 Spring Seminar

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Richmond Chapter of the AGA2009 Spring Seminar

Implementing the Requirements of theAmerican Recovery and Reinvestment Act

by State and Local Governments

Presented by Edward J. MazurSenior Advisor for Governmental Financial Management

Cherry, Bekaert & Holland, L.L.P.

Wednesday, May 20, 2009


Agenda Overview of ARRA Impact on State and Local Governments Timelines—Key Deadlines Receiving, Disbursing and Reporting ARRA funds Transparency, Oversight, and Accountability Compliance with ARRA Requirements Internal Control, External Audit and Single Audit Implications Department of Education Illustration GAO’s First Oversight Study Results Progress of ARRA in Virginia Future Guidance Web Resources


The American Recovery and Reinvestment ActCategories of Total Stimulus Funding

Amount (Billions)

*Tax Relief $288*State and Local Fiscal Relief 144Infrastructure and Science 111Protecting the Vulnerable 81Health Care 59Education and Training 53Energy 43Other 8TOTAL $787

Source: www.recovery.gov


Purposes of the Recovery Act (ARRA) Preserve and create jobs and promote economic recovery Assist those impacted by the recession Provide investments needed to increase economic

efficiency by spurring technological advances in science and health

Invest in transportation, environmental protection, and other infrastructure that will provide long-term economic benefits

Stabilize state and local government budgets, in order to minimize and avoid reductions in essential services and counterproductive state and local tax increases


ARRA Targeted Efforts Clean, efficient American energy Transforming our economy with science and

technology Modernizing roads, bridges, transit and waterway Education for the 21st century Tax cuts to make work pay an create jobs Lowering healthcare costs Other Jobs, Jobs, Jobs


Accountability Objectives in Mitigating Risks over ARRA Funds

To award and distribute funds in a prompt, fair and reasonable manner

To report recipients and uses of funds in a clear, accurate, and timely manner

To ensure that funds are used solely for authorized purposes, and that fraud, waste, abuse, & errors are mitigated

To avoid project delays and cost overruns To achieved Goals, including program outcomes and

improved economic conditions


Intended Accountability Outcomes Program/economic outcomes achieved Competitive opportunities maximized Waste, fraud, and abuse identified and minimized Funds obligated/expended timely Improper payments minimized Timely and accurate data reporting***Increased accountability and transparency***

Recovery.gov Recovery Board, GAO, Inspectors General, whistleblowers


Accountability and Transparency Players- Governor or Designee - Community & Econ.

Development- Recovery Czar - Education - State Auditor - Health - State Budget Director - Highways &

Transportation- State Comptroller - Homeland Security- Chief Information Officer - Housing- Chief Procurement Officer - Social Services- State Treasurer - State Evaluation Entity


Overview of ARRA Accounting and Reporting

Accounting and reporting requirements for ARRA funds represent a significant fiscal process

Therefore, you need to ensure that ARRA requirements : Are well documented; Key controls identified, documented & tested; Control weaknesses are identified and mitigated

Additional reporting is required To Federal government (recovery.gov) To States from local gov’t subrecipients To Recipients from subrecipients


State Impact

Estimated Jobs Effect (1,000)AL FL GA NC SC VA51 206 106 105 50 93

80% of funds will have “strings attached”20% of funds can be spent as seen fit

Source: www.recovery.gov

Estimated $275 Billion (34.9%) of ARRA Funds will be distributed to state and local governments via funding formulas.Estimated 90% of ARRA Funds provided to states will be for health, transportation, and education programs.


Virginia allocated $4,768 Million

Expenditure Type*

Amount (Million) Types of Programs

Health and Human

Resources

$ 1,833 Child Support Enforcement, CCDF Childcare, Drinking Water State Revolving Fund, Community Service Block Grant, Foster Care, Adoption, Vocational Rehabilitation, Community Development Block Grant, Head Start Immunization, SNAP, Medicaid, Elderly Nutrition, Emergency Food Assistance Program, Crime Victim Assistance, Independent Living

Education $ 1,495 Title I, Workforce Investment Act, IDEA, Dislocated Workers, Technology, Work Study, School Lunch, Education for Homeless

Transportation $ 811 Highways and Bridges, Transit Capital Grants, Rail ModernizationSource: www.stimulus.virginia.gov


Virginia allocated $4,768 Million

Expenditure Type*

Amount (Million) Types of Programs

Commerce and Trade

$ 309 Weatherization, State Energy Program, HOME, Public Housing, Homelessness Prevention, Unemployment Insurance, Employment Service

Finance $ 218 Capital Planning and Improvements, BRACC, Conservation, Rolls Royce Incentive, Tobacco Settlement, Regional Jail Reimbursement, SRI

Natural Resources

$ 81 Clean Water State Revolving Fund

Public Safety $ 21 Byrne Justice Assistance Grants, Violence Against Women, Internet Crimes Against Children, Crime Victim Compensation.

TOTAL $ 4,768Source: www.stimulus.virginia.gov


Estimated Funding Amount for Richmond and Henrico CountyFunction Program AmountEducation Education Technology $ 268,780Education Fiscal Stability— Higher Ed 41,083,474Education Fiscal Stability—K-12 13,068,657Education IDEA Part B—Preschool 194,995Education IDEA Part B—School-age 7,053,320Public Safety Byrne Justice Grant 1,590,269

Richmond Total: $ 63,259,495

Education Education Technology $ 139,378Education Fiscal Stability—K-12 28,149,208Education IDEA Part B—Preschool 301,973Education IDEA Part B—School-age 10,515,711Public Safety Byrne Justice Grant 458,132

Henrico Total: $ 39,564,402


Timeline – Key DeadlinesPastFeb 17 Obama signed ARRAFeb 18 OMB releases Initial ARRA GuidanceMar 6 Project Solicitation DeadlineApril 3 OMB releases Updated ARRA Agency Guidance &

Announced Proposed Recipient Guidance in Federal Register

Upcoming May 3 Federal Agency Performance Plans become availableMay 20

Federal Agencies begin reporting competitive grants and contracts

July 15 Begin reporting on use of Federal fundsOct 10 1st Quarterly report is due. Subsequent quarterly

reports are due 10 days after the close of each quarter.

Source: www.recovery.gov Source: www.stimulus.virginia.gov


Requesting and Receiving ARRA FundsMethods of Fund Allocation

FormulaMedicaid, State Fiscal Stabilization Fund, Highway Infrastructure Investment, Workforce Investment Act.

Competition National Institutes of Health, National Science Foundation, Broadband Program, Green Jobs Act.

Demand COBRA, Unemployment, Pell Grants, Food Stamps, Small Business Loans, TradeAct.

One-Time Disbursement

Social Security, Veterans, Supplemental Security Income.

Agency Plan Enviromental Clean up, National Parks, Defense and Veteran Programs.


Disbursing and Reporting ARRA Funds

Source: www.stimulus.virginia.gov

Entities must separately account for funds received directly or indirectly. Entities must track how funds are spent. (Projects, subcontractors, services, jobs created, wage rates, etc.)Entities receiving funds directly and have subcontractors or awards sub-grants, must register with the Central Contractor Registration database.Capital projects must use American Iron, Steel and Manufactured Goods.


Unprecedented levels of transparency, oversight and accountability

Recovery funds are awarded and distributed in a prompt, fair, and reasonable manner.Public benefit of funds are reported clearly, accurately and timely:•How funds are used.•Descriptions and status reports•Estimates of jobs saved and created•Estimates of tax increases averted

Prevent instances of fraud, waste, error, and abuse.



Unprecedented levels of transparency, oversight and accountability

Projects to avoid unnecessary delays and cost overruns Programs meet specific goals and targets:•Certification by Governor or local officials.•Pubic access to contract and grant information.•Provisions for federal oversight, review, and audits.•Access by Federal Inspectors General, OMB in selected states, and Recovery Act Accountability and Transparency Board.



ARRA Prohibited Expenditures

State, Local, Private RestrictionsCasinos Aquariums Zoos Golf Courses Swimming PoolsEducation RestrictionsMaintenance Costs Stadiums VehiclesReligious Facilities


Actions to ensure compliance with ARRA requirements

OMB Guidance Agency Specific Guidance State Comptrollers for ARRA Reporting State & External Auditors Under A-133 GAO Reports for Implementation Issues


Internal Controls“A robust system of internal control specifically designed to deal with the unique and complex aspects of the Recovery Act funds will be key to helping management of the states and localities achieve the desired results.” -GAO-09-580Enhancing Internal Controls

Element Suggestions Control Environment

Appoint “Recovery czars,” boards, or working groups focused on the Recovery Act.

Risk Assessments

Weigh results of recent audits and Single Audit reports.

Control Activities

Effectively implement and document required policies, procedures and guidance.

Information and Communication

Develop internal guidance related to ARRA and submit required information to state agencies or recovery.gov.

Monitoring Coordinate with Program Heads; conduct surveys, create oversight boards, monitor sub-recipients


Questions Has your government organized an ARRA program

management office and established vision, strategy, and methodology?

Has your government assessed existing processes, systems, and controls for administering federal funding against ARRA expectations?

Is your government prepared to track and resolve performance and compliance issues?

Have year-end ARRA financial reporting requirements been identified ?

Has your government complied with requirements to report the status of projects or activities for which recovery funds were obligated and expended?


Single Audit ImplicationsSingle Audit Challenges associated with ARRA

New programs and recipients

Lack of management controls and accounting systems to ensure compliance with regulations and objectives.

Sudden increase in funds

Funds may exceed previously effective management controls and accounting systems. May also trigger need for Single audit for entities not previously meeting the threshold.

Extensive accountability and transparency

Requires implementation of new controls and procedures, but lacks funds to manage and oversee entities for accountability and transparency.

Inject funds into Economy

Pressure to spend funds quickly increases risk.

Source: GAO-09-580


Use of Single Audit ProcessPast Audits inform risk assessmentARRA structure to aid Audit process, e.g.

Assignment of separate CFDA’s for ARRA Evaluation of “high risk” programs and grantees Separate reporting on SEFA (including

subrecipient) Federal audit clearinghouse to display all Single

Audit findings--including ARRA


OMB A-133 Compliance Supplement New Compliance Supplement Section on ARRA

Appendix VII – (reserved for advisory announcements)

• Include internal control discussion• VII – highlights of new clusters and major program• June 30 – New addenda including new reporting

requirements New Clusters of Programs Major Program Determination

• New program cannot be low risk Award Terms and Conditions—key for subrecipients


Illustration--Department of Education$44 Billion Available in April 2009 $49 Billion Available late in 2009

Assurances Metrics

College- and career-ready standards

Math and Reading NAEP scoresAction steps to improve assessmentsMeasures for ELLs and disabled test in math and ELA# and % students who graduate and complete one year of college

Pre-K-to higher education data systems meeting America COMPETES Act

Statewide data system includes America COMPETES Act

All teachers receive timely data and estimates of impact on student achievement


Illustration--Department of Education, ContinuedAssurances Metrics

Teacher effectiveness and distribution

# and % teacher in highest/lowest-poverty schools who are highly qualified # and % teachers rated at each level in each LEA’s teacher evaluation system# and % LEA teachers evaluation systems required student achievement outcomes

Intensive support and effective interventions

Schools demonstrating gains in achievement, closed or consolidatedSchools initially in bottom 5% that demonstrate gain in student achievementSchools that made progress in math and ELA


State Fiscal Stabilization Fund One-time appropriation of $53.6 billion DOE will award $48.6 billion by formula to governors

in exchange for education reform commitments Will stabilize State and local budgets to minimize or

avoid reductions in education and other essential public services Avert cuts and retain teachers and professors Support modernization, renovation, and repair of

facilities Significant resources to support education, public

safety and other government services


State Fiscal Stabilization Fund States must apply to US DOE for funds with key

assurances and information on the use of funds For FY09, FY10, FY11, States will maintain state support

at FY06 levels Commitment to advancing education reform in:

• Increasing teacher effectiveness• Establishing state-wide education longitudinal data

systems• Improving the quality of state academic standards &

assessments Baseline data that demonstrates the state’s current

status in each education reform area Description of how state intends to use its stabilization

allocation


State Fiscal Stabilization FundWithin 2 weeks of approved application,

DOE will provide 67% of SFSF allocation (in some cases 90%)

Full peer review of application before final allocations

Once SFSF awards, school districts may use for any allowable purpose under the Elementary and Secondary Education Act (ESEA)


GAO Study of ARRA Recovery Act requires GOA to do bimonthly reviews

of the use of funds by selected states and localities 16 states and D.C. (Southeast: FL, GA, NC, VA not included, but they will be reviewing reports from

states not selected 90% of funds to states and localities in FY09 will be

through health, transportation and education programs 3 largest programs

• Federal Medical Assistance Percentage grant awards• Highway Infrastructure Program• State Fiscal Stabilization Programs


State Concerns with ARRA FundingIdentified by GOA Study

Lack of Recovery Act funding provided for accountability and oversight

How to determine jobs created and retained under the Act Modifications to accounting systems to track ARRA funds

Differences in software Outdated systems Lack of financial system grant module

Identifying and tracking ARRA funds to subrecipients, local governments, and other non-state entities Ability of these entities to separately tag, monitor, track & report Concern over the States being held accountable for these entities


Virginia ARRA Accomplishments to Date

Governor established an ARRA Implementation Team, chaired by Wayne Turnage, Chief of Staff. Includes members with subject matter expertise in each functional area covered by ARRA

Governor provided required ARRA certification to begin receipt of funds on March 3, 2009. Other individual program certifications required on a more piecemeal basis

A Web site was hosted to solicit requests from the state agencies, localities, interest groups, and the public at-large. More than 9,000 projects were submitted to the website totaling close to $466 billion



Virginia ARRA Accomplishments to Date

Web site has transitioned from a portal for data entry to a site that provides information to citizens and tracks the allocation of ARRA funds in Virginia by locality and eventually by program. Website address is: http://www.stimulus.virginia.gov The website is updated at least weekly and includes information on

Competitive Grants available under the ARRA. Regular meetings with the Virginia Association of Counties

and Virginia Municipal League ARRA Implementation Team members are making

presentations on stimulus to a variety of groups. Regular meetings with local governments, businesses, legislators, and citizens.



What to Look For!Guidance from OMB and Federal Agencies

continuing to be developed Still unanswered questions (e.g. shaping Single

Audit)GAO Study of the Recovery Act

As Initial Implementation Unfolds In States and Localities, Continued Attention to Accountability Issues Is Essential

States Concerns (e.g. other non-state recipients)Resources to use (e.g. who pays for state-level

accountability measures)


Future Guidance

Source Guidancewww.FederalReporting.gov

Reporting instructions and data elements.

www.recovery.gov Agency specific:Objectives Guidance Award terms Data metrics

http://www.federalreporting.gov/

http://www.federalreporting.gov/

http://www.recovery.gov/?q=content/agencies


Web Resources www.recovery.gov

Contains links to Federal Agencies’ Recovery.gov websites

www.stimulus.virginia.gov http://www.gao.gov/new.items/d09580.pdf http://blogs.cbh.com/govserv/ Virginia State Comptroller’s Stimulus Webpage

www.doa.virginia.gov/Stimulus/Stimulus_Information.cfm

http://www.recovery.gov/

http://www.stimulus.virginia.gov/

http://blogs.cbh.com/govserv/


CBH Government Service Blog


Provides ARRA information concerning:

• Administrative regulations and guidance

• Activities of Professional organizations

• Stimulus related news articles





Presenter Contact Information

Edward J. Mazur, CPASenior Advisor for Governmental Financial Management

Cherry, Bekaert, & Holland, L.L.P.1700 Bayberry Court, Suite 300

Richmond, VA 23226

804.673.5731 direct804.240.8672 cell

[email protected]

Richmond Chapter of the AGA 2009 Spring Seminar

Documents

Transcript of Richmond Chapter of the AGA 2009 Spring Seminar