CBO Subject to Audit | Consumer Counseling | Device Leasing Program | Interest Income | Investment of Funds | Loans for Training, Repairs, Warranties | Match Funds
From Jeremy Buzzell February 2, 2005
Frequently, States ask questions about the administration of AFPs that may be of interest to all of the grantees. When this occurs, I will do my best to provide this information to everyone (without revealing who asked or why).
The two most recent questions to which I have provided answers are the following:
Hopefully this information is helpful and this is a helpful forum for providing it.
Thanks.
Jeremy Buzzell
Program Specialist
US Department of Education
Rehabilitation Services Administration
550 12th Street, SW
Room 5025
Washington, DC 20004
202-245-7319
Jeremy.Buzzell@ed.gov
From Jeremy Buzzell, February 10, 2005
As I stated in a previous e-mail, from time to time individuals or States pose questions to me that may be of interest to all AFPs. I will post the answers on the listserve so that they may benefit everyone.
Question: Under an AFP grant, is the CBO subject to the audit requirements of OMB Circular A-133?According to OMB Circular A-133:
(a) Audit required. Non-Federal entities that expend $300,000 ($500,000 for fiscal years ending after December 31, 2003) or more in a year in Federal awards shall have a single or program-specific audit conducted for that year in accordance with the provisions of this part.
This question was raised because there was some confusion regarding whether or not the CBO was considered a contractor [vendor] for the State (in which case the CBO is not subject to the A-133 requirements) or a subrecipient of a federal award (in which case the CBO is subject to the A-133 requirements).
According to OMB Circular A-133:
Federal awards expended as a recipient or a subrecipient would be subject to audit under this part. The payments received for goods or services provided as a vendor would not be considered Federal awards. The guidance in paragraphs (b) and (c) of this section should be considered in determining whether payments constitute a Federal award or a payment for goods and services.
(b) Federal award. Characteristics indicative of a Federal award received by a subrecipient are when the organization:
(1) Determines who is eligible to receive what Federal financial assistance;
(2) Has its performance measured against whether the objectives of the Federal program are met;
(3) Has responsibility for programmatic decision making;
(4) Has responsibility for adherence to applicable Federal program compliance requirements; and
(5) Uses the Federal funds to carry out a program of the organization as compared to providing goods or services for a program of the pass-through entity.
(c) Payment for goods and services. Characteristics indicative of a payment for goods and services received by a vendor are when the organization:
(1) Provides the goods and services within normal business operations;
(2) Provides similar goods or services to many different purchasers;
(3) Operates in a competitive environment;
(4) Provides goods or services that are ancillary to the operation of the Federal program; and
(5) Is not subject to compliance requirements of the Federal program.
(d) Use of judgment in making determination. There may be unusual circumstances or exceptions to the listed characteristics. In making the determination of whether a subrecipient or vendor relationship exists, the substance of the relationship is more important than the form of the agreement. It is not expected that all of the characteristics will be present and judgment should be used in determining whether an entity is a subrecipient or vendor.
The characteristics of CBOs that operate AFPs are clearly more similar to (b)(1)-(5) above than (c)(1)-(5) - making them subrecipients of Federal awards that are subject to the A-133 audit requirements.
I know that many States are already following the A-133 audit requirements. States that would like to know more can access the entire OMB Circular at the link below:
http://www.whitehouse.gov/omb/circulars/a133/a133.html
Jeremy Buzzell
Program Specialist
US Department of Education
Rehabilitation Services Administration
550 12th Street, SW
Room 5025
Washington, DC 20004
202-245-7319
Jeremy.Buzzell@ed.gov
From Jeremy Buzzell February 11, 2005
As a follow-up to my latest posting on AFPs being subject to A-133 audits, I was asked about how the exemption for expenditures of less than $500,000 limitation is applied. According to the OMB Circular:
(d) Exemption when Federal awards expended are less than $300,000 ($500,000 for fiscal years ending after December 31, 2003). Non-Federal entities that expend less than $300,000 ($500,000 for fiscal years ending after December 31, 2003) a year in Federal awards are exempt from Federal audit requirements for that year, except as noted in §___.215(a), but records must be available for review or audit by appropriate officials of the Federal agency, pass-through entity, and General Accounting Office (GAO).
Question: How do you determine whether or not you have reached the $500,000 threshold? Is it based on how much was awarded to the State, or how much was spent by the CBO?
Answer: You determine how much was expended based on how much the CBO actually spent (this would include not only how much Federal money was used for loans, but also how much Federal money you used for administrative costs). According to the OMB Circular:
§___.205 Basis for determining Federal awards expended.
(a) Determining Federal awards expended. The determination of when an award is expended should be based on when the activity related to the award occurs. Generally, the activity pertains to events that require the non-Federal entity to comply with laws, regulations, and the provisions of contracts or grant agreements, such as: expenditure/expense transactions associated with grants, cost-reimbursement contracts, cooperative agreements, and direct appropriations; the disbursement of funds passed through to subrecipients; the use of loan proceeds under loan and loan guarantee programs; the receipt of property; the receipt of surplus property; the receipt or use of program income; the distribution or consumption of food commodities; the disbursement of amounts entitling the non-Federal entity to an interest subsidy; and, the period when insurance is in force.
(b) Loan and loan guarantees (loans). Since the Federal Government is at risk for loans until the debt is repaid, the following guidelines shall be used to calculate the value of Federal awards expended under loan programs, except as noted in paragraphs (c) and (d) of this section:
(1) Value of new loans made or received during the fiscal year; plus
(2) Balance of loans from previous years for which the Federal Government imposes continuing compliance requirements; plus
(3) Any interest subsidy, cash, or administrative cost allowance received.
(c) Loan and loan guarantees (loans) at institutions of higher education. When loans are made to students of an institution of higher education but the institution does not make the loans, then only the value of loans made during the year shall be considered Federal awards expended in that year. The balance of loans for previous years is not included as Federal awards expended because the lender accounts for the prior balances.
(d) Prior loan and loan guarantees (loans). Loans, the proceeds of which were received and expended in prior-years, are not considered Federal awards expended under this part when the laws, regulations, and the provisions of contracts or grant agreements pertaining to such loans impose no continuing compliance requirements other than to repay the loans.
I spoke with my Audit Liaison Officer, who explained it like this:
Say your State was given a $1 million AFP grant, and that $1 million was subsequently passed onto the CBO. In the first year, the CBO expended only $400,000 of its Federal funds (by giving out loans and covering administrative costs). For that year, the AFP would not be subject to the audit requirements of A-133. Then, in the second year of the program, the AFP expended $750,000 of its Federal funds. For that year, the AFP would be subject to the audit requirements.
I hope that this additional information is helpful.
Jeremy Buzzell
Program Specialist
US Department of Education
Rehabilitation Services Administration
550 12th Street, SW
Room 5025
Washington, DC 20004
202-245-7319
Jeremy.Buzzell@ed.gov
From Jeremy Buzzell - April 12, 2005
As I have done in the past, when questions from States come in that I think would be of interest to all AFP programs, I like to share them with everyone. The latest question and answer are below.
Q: Are there any restrictions placed on the Community Based Organization (CBO) regarding the amount of funds that are invested vs. kept in liquid accounts?
A: Based on a review of the statute and the grant priority published in the Federal register, it appears that there is no specific restriction placed on the amount of grant funds that may be placed in long-term investments. In addressing the issue of investing funds, title III of the AT Act of 1998 states that (1) funds must be invested in low-risk securities in which a regulated insurance company may invest under the law of the State; and (2) the organization administering the funds must do so with the same judgment and care that a person of prudence, discretion, and intelligence would exercise (section 303(b)(5)(B) and (C)).
However, the concern raised by placing money in long-term investments is whether or not this money will be available for its intended purpose, which is providing loans to individuals with disabilities. It is expected that AFPs will operate in a manner that balances the need to maintain or expand the program with the need to maximize the amount of loans that can be made to individuals with disabilities so that they may purchase assistive technology. A CBO's plans for investing grant funds should be made accordingly.
Hopefully this information is of interest and help to everyone.
Jeremy Buzzell
Rehabilitation Services Administration
From Jeremy Buzzell - April 27, 2005
I recently responded to a question about AFP and Telework grants, and thought the information in my response would be of interest to all AFP and Telework programs. Please see below, and don't hesitate to contact me with further questions.
Q: Can AFP or Telework funds be used to pay for training, repair, maintenance, upgrades, extended warranties, or insurance for devices or equipment?
A: The answer to this question depends upon whether or not funds are being used to pay for training, repair, maintenance, upgrades, warranties, or insurance. It also depends upon whether or not the payment is being made as part of a loan for equipment or an AT device or to exclusively to pay for training, repair, maintenance, upgrades, warranties, or insurance.
Training, Warranties, and Insurance: If an individual with a disability is approved for a loan from a Telework program or AFP in order to purchase equipment or an AT device, the cost of an extended warranty, insurance, or training that will assist in use of the device or equipment can be built into the loan. However, a loan cannot be provided exclusively for training, or to pay for insurance or an extended warranty for a device that has previously been purchased and is not a part of the loan.
Repair, Maintenance, or Upgrades: There may be circumstances in which a device or piece of equipment currently being used by an individual with a disability is no longer meeting that individual's needs. Rather than purchasing a new device or piece of equipment, in some cases the current device or piece of equipment can continue to be used if it can be upgraded or repaired. The AFP or Telework program in each State should decide whether or not an individual can take out an AFP or Telework loan to pay for repair, maintenance, or an upgrade of a device or piece of equipment. If it has not done so already, an AFP or Telework program is encouraged to determine whether or not it will allow loans for such purposes, develop a policy based upon this decision, and develop guidelines for implementing that policy. As applies to all Telework activities, the result of repairing, maintaining, or upgrading equipment should be that an individual with a disability can begin teleworking, can continue teleworking, or can improve his or her teleworking situation.
From Jeremy Buzzell - April 28, 2005
I recently responded to a question about AFP and Telework grants, and thought the information in my response would be of interest to all AFP and Telework programs. Please see below, and don't hesitate to contact me with further questions.
Q: Can AFPs or Telework programs use their Federal funds to pay for financial literacy training, debt repair, consumer credit counseling, and/or microenterprise skills training for pre-applicants or borrowers?
A: The answer to this question depends upon how the AFP or Telework program plans to provide for the cost of such training or services. While the purpose of an AFP or Telework grant is to establish or expand a program that provides loans to individuals with disabilities, there are some scenarios under which providing such training or services, herein referred to as "consumer counseling," would be allowed.
Scenario #1: An AFP or Telework program may directly provide consumer counseling to an applicant who has not yet been approved for a loan. This consumer counseling would be paid for as part of the administrative cost of operating the AFP or Telework program. This would also apply if the AFP or Telework program was not providing the service directly, but instead was providing payment to another entity to provide consumer counseling.
Scenario #2: An AFP or Telework program may directly provide consumer counseling to an applicant who has been approved for, or has received, a loan. Some AFPs or Telework programs may choose to add the cost of consumer counseling to this loan or build the cost into any loan processing fees. If the consumer counseling is not paid for as part of the loan, it would be an administrative cost of operating the AFP or Telework program. This would also apply if the AFP or Telework program was not providing the service directly, but instead was providing payment to another entity to provide consumer counseling.
From Jeremy Buzzell June 29, 2005
I was recently asked a question that may be of interest to all AFP Programs. I am providing the question and answer below.
Question: Is interest income derived from federal AFP funds considered federal funds, and can this interest income be used for matching purposes for other programs?
Answer: All funds placed in the permanent, separate account -- both Federal funds and State matching funds -- and the accrued interest on those funds become part of the Federal program. As a result, the interest earned on either State matching funds or Federal funds cannot be used for other purposes, such as meeting the match requirements for other programs. However, if a grantee closes down its AFP prematurely, only the Federal percentage of interest earned consistent with the original Federal/State match must be returned to the Department of Education.
From Jeremy Buzzell February 13, 2006
Question: Can AT device leasing program could be considered an alternative financing mechanism under title III of the Assistive Technology Act of 1998 (AT Act).
Answer: According to the title III of the AT Act, alternative financing mechanisms may include-- (1) a low-interest loan fund; (2) an interest buy-down program; (3) a revolving loan fund; (4) a loan guarantee or insurance program; (5) a program operated by a partnership among private entities for the purchase, lease, or other acquisition of assistive technology devices or assistive technology services; or (6) another mechanism that meets the requirements of this title and is approved by the Secretary. Depending on how the leasing program is structured, it may qualify as an alternative financing mechanism under (5) or (6). However, the AFP must ensure that its lease program is operated in compliance with all requirements of title III, including: a.. It must be administered by a CBO that has individuals with disabilities involved in organizational decision making at all levels; b.. It must continue on a permanent basis and have consumer-controlled oversight; c.. All funds must remain available to support the program; d.. The leasing activity cannot supplant other Federal, State, and local public funds; e.. Access to it must be given to consumers regardless of type of disability, age, income level, location of residence in the State, or type of assistive technology device or assistive technology service for which financing is requested through the program.