Funding and Disbursements

FY 2012 Federal Grants Distribution - Update

April, 2011

Earlier this year the ISBE announced a major policy change that will impact the way Federal grant dollars are distributed to all local education agencies (LEAs) beginning in FY 2012. The policy change was in response to findings issued by the Federal Office of Inspector General (OIG) during an audit of ISBE’s internal controls and cash management procedures for funds distributed under the American Recovery and Reinvestment Act (ARRA) as well as non-ARRA programs. In February 2010, the OIG issued a final audit report which stated, among other concerns, that “ISBE’s system of internal control is not adequate to ensure LEAs are complying with Federal cash management requirements.”

The OIG cited the Education Department General Administrative Regulations (EDGAR) at 34 C.F.R. § 80.21 which prescribes the standards under which grantees (e.g. ISBE) make payments to subgrantees (e.g. LEAs). “Grantees and subgrantees shall be paid in advance, provided they maintain or demonstrate the willingness and ability to maintain procedures to minimize the time elapsing between the transfer of the funds and their disbursement by the grantee or subgrantee. Reimbursement shall be the preferred method when the [Advance] requirements are not met.” The OIG recommended that the Assistant Secretaries for various Federal agencies require ISBE to “strengthen procedures for monitoring excess cash balances at LEAs before approving cash disbursements.”

An initial webinar was conducted on January 13, 2011 to provide an overview of the OIG findings and outlined a proposal to change ISBE’s Federal grant distribution method beginning in FY 2012 http://www.isbe.net/funding/ppt/2012_reimb_webinar.pdf. Since the webinar, ISBE staff have incorporated stakeholder input with regard to the Traditional Reimbursement model that was considered for some of the larger Federal programs. These concerns prompted ISBE to group all Federal programs under a Modified Advance Reimbursement model. ISBE is finalizing details of the new process which we believe balances the priority to resolve the findings by the OIG and the financial concerns of LEAs.

A follow-up webinar is scheduled for Thursday, May 5, 2011, from 2-3 p.m. to update the details of the FY 2012 Federal reimbursement process. A question and answer session will follow. You may register at https://www1.gotomeeting.com/register/982072824.

The Modified Advance Reimbursement model gives LEAs flexibility in that it combines the features of the preferred Traditional Reimbursement method (i.e. receiving payments through a cumulative expenditure report) but allows LEAs the option of an advance payment (i.e. requesting a month end advance payment that is expected to be fully expended by the end of the next month).

All cumulative (i.e. year-to-date) expenditures and requests for payment under the Traditional or Modified Advance reimbursement model described below will be reported using the Electronic Expenditure Reporting System in IWAS.

Both Methods:

Monthly payment schedules will be removed from Federal grant applications.
Per Illinois statute (PA 96-0795), LEAs must submit cumulative quarterly expenditures reports. These reports are due within 20 days following the end of each quarter (i.e. Sept. 30, Dec. 31, March 31, and June 30).
LEAs will not be allowed to submit outstanding obligations except on the completion report submitted at the end of the project year (e.g. June 30, Aug. 31, etc.). The current 90 day period is still in effect to liquidate and report outstanding obligations. Payments will be distributed based on actual payments made towards the obligations reported in the 90 day liquidation period.

Traditional Reimbursement Method – Preferred:

Once the LEA receives notification that their Federal grant has been approved by ISBE, LEAs will enter cumulative expenditures for reimbursement on a cash basis as Federal funds are needed. LEAs will be reimbursed for actual costs as they are reported.
ISBE’s Funding and Disbursements staff will voucher every Wednesday, instead of once a month, to ensure that the latest submitted cumulative expenditures are paid in a timely manner. NOTE: Unlike State funds, Federal funds are not delayed and are normally received by the LEA within 3-5 business days from the voucher date.
Cumulative expenditure reports may be submitted weekly, bi-monthly, monthly or quarterly at the discretion of the LEA.

Modified Advance Reimbursement Method – Optional:

In addition to the LEA entering cumulative expenditures for reimbursement on a cash basis, LEAs will have the option in all Federal programs to request a 'Month End Advance’ at the end of the expenditure report, (e.g. Cumulative expenditure report through date is September 30, 2011, next Month End Advance request would be for actual expenditures anticipated through October 31, 2011).

**IMPORTANT**: The Month End Advance requested amount must be in alignment with the actual expenditures anticipated through the end of the next month.
If an LEA requests a Month End Advance, a subsequent month end cumulative expenditure report must be submitted that demonstrates that the advance was expended.
If the subsequent month end cumulative expenditure report reflects cash on hand, the excess amount will be deducted from the next Month End Advance payment if requested. If a Month End Advance payment is not requested, the LEA must submit an interim report that reflects the expenditure of the cash on hand. LEAs that continue to have cash on hand each month may be requested to return the excess funds and/or be required to use a more strict reimbursement method.
LEAs can only submit cumulative expenditures that include a Month End Advance request once each month.

If you have immediate questions, please contact Kim Lewis at klewis@isbe.net, Marj Beck mbeck@isbe.net or Sally Cray at scray@isbe.net in the Division of Funding and Disbursement Services at 217-782-5256.