1. Presented by: Michele A. Huntoon, CPA Associate Vice President
American Recovery and Reinvestment Act (ARRA) Accountability and Reporting
Presented by: Michele A. Huntoon, CPA Associate Vice President

2. American Recovery and Reinvestment Act (ARRA)
Largest funding sources include:
State Fiscal Stabilization Funds (SFSF) – $4.9 billion, including a portion for higher education
Revenue limit cut
Categorical cut
Title I – $1.1 billion
Individuals with Disabilities Education Act (IDEA) – $1.3 billion
Special Education Local Plan Areas (SELPAs) are the direct recipients, with LEA members as the subrecipients

3. SFSF
The state has distributed $2.5 billion of the anticipated $3.2 billion for K-12 education
This funding was provided based on the level of reductions to revenue limits and categorical programs
There was approximately $700 million remaining, but the method that is used to allocate the funds will depend in part on the outcome of ABX3 56 regarding the Quality Education Investment Act (QEIA) funding issue
Depending on how the QEIA situation works out, this could mean fewer resources for all school agencies

4. SFSF
ABX3 56 includes the reduction of $355 million in federal SFSF funds that would have been used to offset previous reductions to revenue limits and categorical programs to hold the General Fund harmless for the QEIA obligation
Estimated loss to districts of roughly $59 per ADA if the bill is passed
An additional $165 million in federal Title I funds may offset this loss by freeing up General Fund support for QEIA
This would reduce the net loss to all districts from $59 to $32
We will be watching ABX3 56 as it moves to the Assembly for a vote

5. SFSF
Resource code established by the state for tracking as a federal funding source – Resource Code 3200
Utilize the mandatory components of the standardized account code structure (SACS) to track and report revenues and expenditures
Locally designated fields can also be used to track expenditures for reporting purposes that will:
Save jobs
Stimulate the economy
Improve academic outcomes and support school reform

6. SFSF SFSF has the broadest flexibility in terms of expenditures
See the “Allowable Uses Matrix” located in the Appendix
Expenditures should be charged directly to Resource Code 3200
Classified salaries charged to Resource Code 3200 will be subject to the Public Employees’ Retirement System (PERS) Reduction in Object 8092
This is the only federal resource that the PERS Reduction will apply, because the funding is not subject to the supplement, not supplant guidelines

7. Title I 40% of the funds were issued as of June 2009
The release of the funds was accelerated to ensure that the funds were being distributed for use by the LEAs

8. Title I
The ARRA Title I funding amounts are based on formulas used for Targeted and Education Finance Incentive Grant formulas for Title I funding
These two funding streams require a minimum formula count of ten students and a poverty rate greater than or equal to 5% of the student population

9. Title I
Follow existing Title I rules when determining how to use the new Title I ARRA funds
A general rule to follow – Title I funds may be used only at Title I schools and targeted to the needs of Title I-eligible students for activities that are supplemental to the core program
This could include supplemental support, such as pre-K, after school, summer school, and other support programs

10. Title I
Funding must be used and accounted for consistent with current rules
Office of Management and Budget (OMB) Circulars A-87 and A-133
Complete Consolidated Application Part I to determine Title I school eligibility
Carryover limited to 15% of entitlement
Set asides required for Title I also apply:
1% Parent Involvement
Homeless Children
Private Schools (if requested)

11. Title I
In addition, the set asides apply, but the California Department of Education (CDE) has applied for a waiver of the following requirements:
5% Highly Qualified Teachers (if 100% of teachers are not Highly Qualified)
10% Professional Development (Program Improvement districts and/or sites)
Up to 20% Supplemental Education Services and Choice (Program Improvement schools)

12. Title I
The CDE has established specific Resource Codes for the revenues and expenditures to be tracked:
Resource 3011 – NCLB: ARRA Title I, Part A, Basic Grants Low Income and Neglected
In addition to activity and reporting requirements noted from all ARRA funds, per-pupil expenditure reporting for all Title I schools will be required
First report of such data due from the CDE to the USDE by March 31, 2010
Reports from the sub recipients (California LEAs) to CDE is by December 1, 2009

13. Individuals with Disabilities Education Act (IDEA)
CDE issued the first 20% of the grant award upon receipt of the signed assurance from the SELPA
In order to comply with the state’s cash flow agreement with the federal government, subsequent payments to SELPAs are made based on evidence of expenditures
The quicker a SELPA spends what’s been received, the quicker the cash will flow
Quarterly expenditure reports will be used to evaluate whether SELPAs will get another payment
CDE expects to have access to 100% of the funding by October

14. IDEA, Part B – Maintenance of Effort (MOE)
There are two options for flexibility under IDEA – both are options, but only one may be used at a time
Use up to 15% of IDEA funding for early intervention support
Use up to 50% of “new” IDEA funding to offset local contributions

15. IDEA, Part B - MOE The 50% local contribution free-up option
To use this provision, a district must meet all program compliance requirements
Unfortunately, we still do not have reports from CDE regarding which districts are eligible
When do we need them – now!
When will we have them – soon?
The “freed up” local general fund dollars must be directed to activities allowed under the No Child Left Behind Act (NCLB)
This also means that districts have 50%-100% of IDEA ARRA that must go towards new program costs

16. IDEA
Each year, the level of local support provided to fund special education programs must be sustained – this calculation is formally referred as maintenance of effort (MOE)
Special education MOE calculations/reports are required to be submitted at the SELPA level to the CDE
However, the member districts must also meet the MOE requirements
There are three tests to determine MOE:
Expenditure comparison – compare current-year expenditures to prior-year expenditures, either in total or on a per-capita basis
Expenditure comparison adjusted for “new” federal revenue – utilize up to 50% of “new” IDEA, Part B, funds as a reduction to state and local expenditures or local expenditures
Expenditure comparison adjusted for allowed conditions

17. IDEA, Part B - MOE
Step 1 – Determine if your district meets the eligibility requirements for using the 50% reduction to state and local expenditures or local expenditures under the IDEA Act of 2004 for IDEA, Part B, funds
Step 2 – If you are eligible, calculate the 50% increase in new IDEA, Part B, funds
To calculate the total funding, include both the regular entitlement and ARRA funds
For MOE purposes, the ARRA funds received over the two years can be used only in the fiscal year calculation, even though the funding was received over two years ( and )

18. IDEA, Part B - MOE
Step 3 – Identify those expenditures in Special Education Resource Code 6500 that can legitimately be reduced and charged to IDEA ARRA funds (Resource 3313), which will reduce the local contribution on the natural
Step 4 – Prepare a plan for the decrease in ARRA funds in and beyond and the impact on the MOE calculation

19. IDEA, Part B - MOE If the flexibility is used:
This does not equate to transferring funds from ARRA Resource Code 3311 into Special Education Resource Code 6500
Expenditures in Resource Code 6500 must be reduced, which in turn reduces the local contribution
In order to maintain the lower MOE, an LEA must sustain the lower state and local expenditures
Otherwise the MOE will increase on the natural

20. IDEA, Part B - MOE
The 50% should be used as a targeted goal to be able to maximize the reduction of the local contribution
However, this may or may not be attainable depending on the expenditures in Resource Code 6500 and the dollar amount of the 50%
No matter the level of reduction and the length of time the reduction is in place, LEAs should work to minimize the impact on the unrestricted program where possible
This is one-time funding, so the impact on future budgets could be significant without a plan in place to ratchet the revenues down and the expenditures up in those programs supported by the ARRA funds

21. AB 602 State and Federal Funding
IDEA
$500,000 ARRA
$1.0 million
Local Contribution
$3.5 million
AB 602 State and Federal Funding
$500,000 ARRA Offset
$5.0 million
$5.5 million
$1.5 million
$2.0 million
$1 million ARRA
Local G.F. Freed up $500,000
ARRA
No ARRA Left
If new costs are ongoing, local contributions will go up once ARRA funds are gone. This is also the case if LEAs reduce contributions – once ARRA is gone, if expenses remain, the contribution comes back!

22. IDEA
The basic rule is that the funds can be used in any way that’s permitted under the non-ARRA portion of funding
In other words, this means the funds must meet the following:
Be used to support special education-specific program requirements
This generally includes those expenses associated with Individualized Education Programs (IEPs); however, other program-related costs – such as staff development, equipment, and supplies – are options
At this point, funds cannot be used for capital expenses such as facilities or vehicles, but there may be some flexibility coming through waivers

23. IDEA Examples of one-time investments: Staff development
Support for instruction
Credentialing and certification
IEP development – focus on compliance and efficiency
Short-term assistance
Policies and procedures
Developing new programs
Technology
Instructional
Adaptive
IEP management
Assessments

24. IDEA Examples of other uses: Paying new excess costs
Retaining program administrators
Backfilling for reductions in transportation funding
Supporting behavior intervention
Transitioning support programs
Providing academic coaching

25. IDEA
The CDE has established specific Resource Codes for the revenues and expenditures to be tracked:
IDEA – Special Education
Resource 3313 – Special Education: ARRA IDEA Part B, Sec 611, Basic Local Assistance
Resource 3314 – Special Education: ARRA IDEA Part B, Sec 611, Local Assistance Private School ISPs
Resource 3319 – Special Education: ARRA IDEA Part B, Sec 619, Preschool Grants
Resource 3322 – Special Education: ARRA IDEA Part B, Sec 611, Local Assistance Early Intervening Services
Resource 3324 – Special Education: ARRA IDEA Part B, Sec 611, Preschool Local Entitlement
Resource 3404 – Special Education: ARRA IDEA Part B, Sec 611, State Institutions

26. ARRA
Now is the time to ensure that there is a good process and procedure set up for tracking and reporting the funds in order to withstand any reviews that could be completed by independent, state, and federal auditors
The independent auditors have been given their marching orders relating to the auditing of the ARRA funds
They are to leave no rock unturned
All funding is considered high risk, no matter the dollar amount
But it will be included in the annual audit for testing

27. ARRA
Unfortunately, the deadlines are such that LEAs must plan ahead and know that the timeline locally will be pushed back a few days
For example, the October 10 deadline is for the period ending September 30, but the deadline for LEAs is September 23
This timeline is before all of the final expenditures will actually be posted in the financial system
Specifically, the payroll for the end of the month was not posted to the financial system on September 23, but LEAs should have included the expenditures in the report that they know would be posted in the financial system
In addition, it will be important to maintain supporting documentation that will demonstrate the expenditures that were reported to the CDE
This will be particularly important for future reporting periods

28. Time Limitation
Funds must be fully expended and obligated by September 30, 2011
Encumbrances are not counted as obligations – plan on spending the funds by this date
Each LEA determines whether it makes sense to spend 100% of the funds in or to spread them across and

29. Thank you!