Leigh Manasevit, Esq. Tiffany R. Winters, Esq. Brustein & Manasevit August The New EDGAR

Plano Independent School District (Texas)  Between 2004 and 2013, former manager and security and fire system security support specialist (and two coconspirators) set up two fake companies that were allegedly maintaining fire safety systems and security systems.  They generated fraudulent invoices and submitted them to district for payment.  The official used his position to approve the fraudulent invoices knowing that services and products were never provided or delivered.  They embezzled $2.5 Million 3

Beaumont Independent School District (Texas)  Former finance director and comptroller had the authority to conduct wire transfers of district money without notifying anyone. They transferred over $4 Million in 18 separate wire transfers to bank accounts in their names and other accounts under their controls.  They were sentenced for stealing more than $4 Million. 4

Shorewood School District (Wisconsin)  A former Shorewood School District administrative assistant was sentenced to prison for stealing more than $310,000 in Federal special education funds.  Over a 13-year period, the administrative assistant created bogus purchase orders to use school district funds for vacations and household items.  The woman was sentenced to serve a year and a day in prison and 2 years of supervised release, and she was ordered to pay more than $310,000 in restitution. 5

Nonprofit Center for Independent Living (Florida)  The former executive director of the Center for Independent Living of Southwest Florida was sentenced to 39 years in prison for stealing more than $900,000 intended for the nonprofit center, which provided services to people with disabilities in a number of Florida counties.  The former official used the money to fund an extravagant lifestyle that included international travel.  The center closed in 2011 due to a lack of operational funds. 6

Midwestern Intermediate Unit IV (Pennsylvania)  The former executive director pled guilty to program fraud.  During her tenure, the former executive director charged more than $71,000 on the agency’s American Express card on questionable purposes, including restaurant meals, DVD rentals, and department store purchases that she misrepresented were business-related, when in fact they were not. 7

Nia Community Public Charter School (Washington, D.C.)  The cofounder and former executive director was sentenced to 9 months in prison and 3 years of supervised release, and she was ordered to pay more than $40,000 in restitution and forfeit about $29,000 for embezzlement.  From March 2008 through August 2008, the former official signed five checks totaling more than $29,000 on the charter school’s account for her own personal use.  After leaving the charter school, she was hired as an assistant director at the Cody Development Center in Virginia, where she was provided with a government purchase card for buying work-related items. She used the purchase card to buy nearly $12,000 in unauthorized gift cards. 8

Greenville Public School District (Mississippi)  The former superintendent pled guilty to charges of bribery, kickbacks, and embezzlement.  He conspired with the owner of Teach Them To Read, Inc., a company that provided reading services for at-risk youth, to award $1.4 million in district contracts in exchange for monetary kickbacks.  The former superintendent was sentenced and the owner of the company pled guilty for their roles in this scam.  The former superintendent was sentenced to 76 months in prison and 3 years of supervised release, and he was ordered to pay more than $1.2 million in restitution. 9

GOALS OF THE UGG/ PART 200 REGS 1. Reduce Fraud, Waste and Abuse in Federal Funds 2. Simplicity and Consistency Created by COFAR Council on Financial Assistance Reform and Key Stakeholders 11

KEY PARTS OF THE NEW EDGAR  Title 34  Part 75 – Direct Grant Programs  Part 76 – State-Administered Programs  Part 77 – Definitions  Part 81 – General Education Provisions Act (GEPA)  Title 2  Part 200 – Cost/Administrative/Audit Rules  Part 3474 – USDE Exceptions – Adopts Part 200  Part 3485 – Nonprocurement Debarment and Suspension  Incorporates 2 CFR Part 180, OMB’s Guidelines on Debarment and Suspension 12

PRIOR RULES (INCORPORATED INTO THE NEW EDGAR)  A-21 – Cost Rules – Rules – IHEs  A-87 – Cost Rules – State / Local Gov’t  A-122 – Cost Rules – Nonprofit  A-102 – Administrative Rules State / Local Gov’t  A-110 – Administrative Rules IHEs  A-133 – Audit Rules 13

EFFECTIVE DATES  December 26, 2014 – Direct Grants from ED  July 1, 2015 – State Administered Programs  July 1, 2016 – Procurement Rules (One Year Grace Period for IHEs and Nonprofits ONLY)  Indirect Cost Rates When Due For Renegotiation 14

WHO IS COVERED?  All “nonfederal entities” expending federal awards  Some Federal agencies have applied subparts A through E to for-profit entities, foreign public entities or foreign organizations (c)  Audits: Subpart F applies to all as required under the Single Audit Act 15

APPLICABILITY TO FEDERAL AWARDS  Applies to new federal awards if a federal awarding agency considers its incremental funding actions to be opportunities to change terms and conditions of previously made awards.  Federal awarding agencies may apply UGG to the entire Federal awards that is uncommitted or unobligated as of the Federal award date or first increment after 12/26/14. (COFAR FAQ and (Aug 29, 2014)) 16

APPLICABILITY TO SUBAWARDS  The effective date is the same as the effective date of the Federal award from which the subaward is made.  Does not matter when the subaward is made – but the original Federal award from the Federal awarding agency. (COFAR FAQ (Aug 29, 2014)) 17

PROGRAM STATUTES CONTROL  If federal program statute differs from Part 200, then the Statute or Regulation governs.  (b)(3) 18

FEDERAL AGENCY CHANGES 19 All exceptions and more restrictive requirements MUST be approved by OMB (c). Entities MUST check their applicable federal regulations to ensure compliance with specific agency exceptions

PART 3474 USDE ADOPTION AND EXCEPTIONS 20

USDE ADOPTS PART 200 WITH EXCEPTIONS NEW: USDE Adopts Part 200 into EDGAR  Except for 2 CFR (a) and 2 CFR (a). Thus, this part gives regulatory effect to the OMB guidance and supplements the guidance as needed for the Department. 21

USDE EXCEPTION TO Clarification regarding 2 CFR  Retained “High-Risk” Language  Previously Under and  The Secretary or a pass-through entity may, in appropriate circumstances, designate the specific conditions established under 2 CFR as “high- risk conditions” and designate a non- Federal entity subject to specific conditions established under § as “high-risk”. 22

PART 200 UNIFORM ADMINISTRATIVE REQ, COST PRINCIPLES, AND AUDITS FOR FEDERAL AWARDS 23

THE NEW 2 CFR PART 200  Subpart A – Definitions  Subpart B – General Provisions  Subpart C – Pre Award Requirements  Subpart D – Post Award Requirements  Subpart E – Cost Principles  Subpart F – Audit Requirements 24

DEFINITIONS (EXAMPLES)  Acquisition Cost  Cognizant Agency for Audit  Cognizant Agency for Indirect Cost  Cooperative Audit Resolution  Corrective Action  Disallowed Cost  Improper Payment  Major Program  Performance Goal  Questioned Cost  Unobligated Balance

EFFECT ON OTHER ISSUANCES  All administrative requirements, program manuals, handbooks and other non-regulatory materials that are inconsistent with the requirements of this part must be superseded upon implementation of this part

THE MAJOR CHANGES IN FEDERAL GRANTS MANAGEMENT 1. Focus on Outcomes 2. Performance Metrics 3. Risk Assessments 4. Financial Management Policies 5. Equipment Use 6. Micro Purchases 7. Corrective Action 8. Family Friendly Policies 9. False Claims Certifications 10. Audit Thresholds 27

This presentation is intended solely to provide general information and does not constitute legal advice. Attendance at the presentation or later review of these printed materials does not create an attorney- client relationship with Brustein & Manasevit. You should not take any action based upon any information in this presentation without first consulting legal counsel familiar with your particular circumstances. 28