Comptroller Fiscal Year Memo Letter Head


M E M O R A N D U M

To:Legislative Leadership, Judicial Branch Administrators, Elected Officials, Secretariats, Department Heads, Chief Fiscal Officers, General Counsels and Payroll Directors
From:Martin J. Benison, Comptroller
Date:March 25, 2009
Re:American Recovery and Reinvestment Act: Accounting and Reporting - Update #1Comptroller Memo
FY#2009-26

 

Executive Summary

This is the initial update of The American Recovery and Reinvestment Act of 2009 ("ARRA" or "Federal Stimulus Funds") Accounting and Reporting Policy doc format of po_fed_grant_ARRA_policy.doc
that was released on March 6, 2009 (See Federal Grants and Cost Accounting ). It includes an announcement of the United States General Accountability Office oversight of ARRA funds and the continuous review of those funds in the Commonwealth of Massachusetts. Frequently asked questions are also included. Finally, the memo announces the initiation of a weekly conference call to maintain a dialogue between the Comptroller, ANF and departments on emerging issues. Additional guidance from other control agencies will be sent separately.


Managing Accountability With Prompt ARRA Fund Disbursement

This update identifies the co-equal goals of ensuring accountability along with the prompt disbursement of ARRA funds. As you will see, although the primary purpose of the federal stimulus funds is to provide immediate assistance to the Commonwealth, the Federal Government has also made it very clear that this goal is coupled with the need to ensure that ARRA funds are properly managed for maximum effectiveness and to prevent fraud, abuse and waste. Therefore, this update and future guidance will provide information to support Departments with the proper management, accounting and reporting of ARRA funds. Existing accounting rules are designed to support Departments with effective fiscal management and accountability rather than creating impediments to the effective use of ARRA funds. Therefore, Departments are strongly urged to seek guidance from CTR and ANF throughout the ARRA lifecycle to ensure compliance with ARRA requirements and support the prompt disbursement and effective use of ARRA funds. As always, if a Department feels these policies adversely impact program goals, the Department should immediately contact this Office to discuss options.

GAO Engagement with the Commonwealth

On March 5, 2009, the acting director of the United States General Accountability Office (GAO) announced that the Commonwealth of Massachusetts would be one of sixteen states and the District of Columbia that GAO "will follow over the next few years to provide an ongoing longitudinal analysis of the use of funds under the Recovery Act." The states chosen contain about 65% of the U.S. population and are estimated to receive about two-thirds of the intergovernmental grants funds available through the ARRA. GAO formally began its engagement last week.

The GAO is required to produce bi-monthly reports to Congress on the status of states' management of ARRA funds. To meet this goal, the GAO has asked the Executive Office for Administration and Finance (ANF) and the Comptroller's Office to coordinate that data collection as much as practical. MMARS has been designated as the central reporting system for ARRA data and all ARRA expenditure, revenue, and grant activity must be made in MMARS.

Given that Massachusetts has been chosen for review, it is imperative that Departments continue to work with all staff to ensure continuing compliance through the life of the Stimulus program. Although the federal government has maintained that this will be an interactive, constructive engagement, the GAO has also confirmed that all instances of suspected fraud, abuse, waste and ineffective planning, spending or unfulfilled mandates will be reported. The GAO may request meetings with recipient departments of federal funds and departments should identify staff who will be made available to explain department operations, especially those relating to federal programs and how the department will implement their portion of the Stimulus Act. Care should be taken to ensure that documentation and procedures, internal controls and protocols support the ARRA grant requirements and do not merely represent the status quo.

There are 4 key areas that GAO has asked Massachusetts agencies to document:

  • Continuous tracking of federal stimulus monies from Federal Agencies to the Commonwealth and to all recipients
  • What is being done with the funds? - What sort of review into the various stages of spending; review of the planning, decision making, priority setting, administrative and programmatic goals and the justification is being used?
  • What safeguards are in place to manage funds flow? What are the internal controls and are these being routinely and consistently followed? What is the data reliability? What are the procurement practices and are the funds being disbursed properly to effectuate the mandates? Are there measureable goals?
  • What has the funding accomplished? What jobs were created? How did the funding meet the original plan? Has the State verified completion of the goals and how the funds were actually spent?

The GAO will issue it first report in early April and intends to include a report of awards and actual funds received through March 20 th. The Comptroller will prepare this report centrally using the data coding structure outlined in the March 6 th Accounting and Reporting Policy doc format of po_fed_grant_ARRA_policy.doc
memo. The results will be shared with departments prior to submission to GAO. We anticipate this central reporting model will be used for financial data. In addition, we believe this initial round of data gathering and reporting will be completed with little required interaction with departments. The Comptroller and ANF are currently working closely with GAO to coordinate this engagement. Future updates will include status of the GAO review and specific guidance to departments receiving ARRA funds. Questions or concerns on the GAO engagement can be directed to Eric Berman, Deputy Comptroller or Jennifer Hewitt, ANF Operations Director.

Weekly Conference Calls with OMB, GAO and the Recovery Board

The Office of the Comptroller is coordinating with the National Association of State Auditors, Comptrollers and Treasurers in leading weekly conference calls with the federal Office of Management and Budget (OMB), GAO and the Recovery Board. The information from these calls will be disseminated as needed as part of additional updates. If departments have questions for OMB or GAO, please email Deputy Comptroller Eric Berman, who is the vice-chair of the NASACT committee coordinating these calls.

Granting Department Responsible for ARRA compliance even if funds are "Pass through" funds to other entities.

ARRA funds disbursed by any state department as "grants" or "federal sub-grants" are subject to 815 CMR 2.00 and the State Grants and Federal Subgrants policy doc format of po_procon_state_grants_fed_sub.doc
, including procurements and posting requirements. Please note that when departments are granting federal funds (often referred to as "pass-through" funds) even though the department does not expend the funds for its own use, the department remains responsible for sufficient oversight of the funds to ensure that expenditures are in accordance with Commonwealth and federal grant requirements. The same oversight responsibility applies regardless of the type of funds granted by a department, even if the funds are earmarked to another entity and considered pass-through funds. Departments are also responsible for sub-recipient monitoring. See Internal Control - Sub-recipient Monitoring doc format of Sub-Recipient Monitoring
.

Initiation of Weekly Informational Conference Calls for Departments Receiving ARRA Funds

Beginning Tuesday, March 31 st at 11:00 a.m., the Office of the Comptroller and ANF will begin hosting weekly conference calls on various topics for budgeting, planning, implementing, tracking and reporting the American Recovery and Reinvestment Act (ARRA) funds, also referred to as Federal Stimulus funds. Over the coming weeks, key fiscal staff including Chief Fiscal Officer, Legal Counsel, Procurement, Program, Grants Manager, Payroll Director, Contracts Manager, Single Audit Liaison and others will have the opportunity to hear the latest updates, ask questions, review current requirements and comment on draft policies and procedures. Any Department that anticipated receiving ARRA funds either directly or as a sub-recipient (through an Interdepartmental Service Agreement-ISA) should participate. Detailed instructions for the call will be forwarded beforehand.

Application of Current Statutes, Regulations, Policies, Procedures and Forms

Unless otherwise specified, guidance issued by CTR applies to all state departments in all branches of government. Unless specifically modified by general or special law or an oversight agency directive, all current statutes, regulations, policies, procedures and forms apply to ARRA funds. Please note that legislation has been filed related to ARRA procurement issues. Departments will be informed when any legislation has been enacted. All obligations must follow guidance in the Expenditure Classification Handbook doc format of Expenditure Classification Handbook
, Fiscal Year Close and Opening Instructions , applicable CTR policies and Fiscal Year Updates .

The oversight agencies responsible for issuing guidelines on procurement, personnel, contracts, budgeting, cash management, accounting, payroll, payments and reporting shall issue guidance related to the implementation of ARRA funding, including any prior approvals of anticipated use of ARRA funds or plans for ARRA expenditures through ANF. Departments are responsible for ensuring that all staff are properly trained and instructed to follow current protocols as well as additional ARRA guidance associated with receipt of ARRA funds.

Responsibility of Key Contact Staff in Departments

Each Department Head has certified that they will appoint staff into the Key State Finance Law Compliance Roles of Chief Fiscal Officer, Security Officer, Payroll Director, Internal Control Officer, MMARS Liaison, General Counsel, GAAP Liaison and Single Audit Liaison, and that these individuals will be responsible for the duties prescribed by the Comptroller related to state finance law compliance. Departments should review these responsibilities to ensure compliance and that designated staff receive all communications from CTR. See State Key Contact Responsibilities doc format of dept_key_fin_law.doc
.

ALL DEPARTMENT HEAD SIGNATORIES MUST BE REGISTERED IN MMARS

Please note that all Authorized Signatories of a Department Head who are approving contracts or any other obligation or expenditure, approving hiring, or making any other legal obligation on behalf of the Department must be assigned a MMARS UAID indicating DHSA delegation even if they will never access MMARS. Audits of DHSA rely on reports from MMARS identifying who are authorized signatories. If individuals are acting as authorized signatories and are not recorded in MMARS with DHSA authorization, the Department may be subject to an audit, quality assurance or internal control finding for a DHSA irregularity. See Department Head Signature Authorization and MMARS Security Policy doc format of po_sec_mmar_security.doc
.

FREQUENTLY ASKED QUESTIONS (Fiscal Questions related to ARRA should be directed to the <strong>CTR Helpdesk</strong> [(617) 973-2468] or comptroller.info@state.ma.us ).

We will continue to post Frequently Asked Questions as part of these updates. Below are frequently asked questions and answers received thus far from Departments.

Q: My department received a new federal grant under ARRA, what do I do now?

A: Contact the Comptroller Federal Grants Unit to begin account setup. They will coordinate with ANF, per usual federal grant procedure. Every new ARRA award will receive its own appropriation number, program, major program, revenue source and other related accounting elements in MMARS.

Q: My department is receiving additional funds from the ARRA under an existing grant program AND/OR catalog of federal domestic assistance (CFDA) number. Can I increase the award's amount in the existing grant on MMARS?

A: All ARRA funds must be set up in an account on MMARS separate from all other federal funds and use the coding structure issued by the Comptroller on March 6 th ( ARRA Accounting and Reporting Policy doc format of po_fed_grant_ARRA_policy.doc
) to facilitate both state and federal reporting requirements. OMB guidance has discouraged federal agencies from supplementing funds through existing CFDA's. Regardless of federal allocation decisions, the Comptroller requires that all ARRA funds be set up in separate accounts and use this coding for reporting purposes.

Q: Are there any additional processes or approvals for spending ARRA funds?

A: ANF is currently developing guidance in conjunction with the Governor's Office and will issue it shortly.

Q: How do I track ARRA spending?

A: Both CTR and ANF will provide guidance on the correct coding for ARRA expenditures. To accurately and effectively track revenue and spending of ARRA funds, it is critical that the correct elements are created in MMARS BEFORE any activity occurs. The Comptroller's Federal Grants Unit will help departments create the necessary major program codes and program budgets to capture all ARRA activity.

Reports and queries are being created by ITD and the Comptroller's Office to allow for departments to view daily activity.

Q: What happens if I mistakenly incurred expenses from the wrong account that should be charged to my ARRA account?

A: All ARRA expenditures must be made from the correct accounts. The Comptroller's Office will not generally approve EX documents to move expenditures into ARRA accounts that occurred prior to receipt of ARRA funds. EX's that do not go to Comptroller workflow will be reviewed on a post audit basis to assure compliance with this policy. Departments will be required to reverse these EX transactions. Therefore, it is incumbent that Department fiscal staff follow prescribed guidance on ARRA coding for all obligations (Including payroll) BEFORE the obligation is incurred to ensure that these are properly coded. Departments MAY NOT incur obligations in non-ARRA accounts "in anticipation" of ARRA funding and then request EXs to move charges to the ARRA accounts. Please note that the use of ARRA funding for payroll, personnel and other administrative costs is strictly limited by each grant. ANF and other control agencies will be issuing guidance on the appropriate use of ARRA funds for personnel. Departments are strongly encouraged to consult with CTR PRIOR to incurring any ARRA obligation that may trigger a need for an EX not in compliance with this policy to ensure ARRA requirements and the Expenditure Correction (EX) Policy doc format of po_budget_expenditure_corrections.doc
are met.

Q: My Department's ARRA grant specifically allows for obligations to be incurred as of the grant approval date. I haven't issued grants yet. Can grants pay for obligations as of the grant approval date but prior to the execution of the Standard Contract Form?

A: Please review the State Grants and Federal Subgrants policy doc format of po_procon_state_grants_fed_sub.doc
, which outlines grants payments. It is incumbent upon Departments to determine eligible costs that can be charged to the ARRA grants and to ensure that the grant expenditures are made for costs that fulfill the ARRA mandates. Departments will be required to document how the grantees fulfilled the ARRA purposes with measureable performance criteria. See Internal Control - Sub-recipient Monitoring doc format of Sub-Recipient Monitoring
. Amounts found to be improperly charged to ARRA funds may later be disallowed so Departments must scrutinize eligible costs in advance of grant disbursement to ensure that allowable costs are carefully identified and tracked by both the Department and grantee (sub-recipient). The Settlement process in the Standard Contract Form is used for any obligations incurred prior to the execution of the Standard Contract Form. Departments should contact CTR to determine if the Settlement Process is appropriate for individual circumstances.

Q: How do I handle reporting Seller Account expenditures under an ISA?

A: Seller accounts (sometimes referred to as child account) under Interdepartmental Service Agreements (ISAs) will have the same appropriation and ARRA coding as the Buyer; therefore, all spending activity will roll up to the chart of account elements created upon appropriation set up. Therefore, it is critical that ISAs are signed prior to any ARRA obligations and the child accounts are established in time for all ARRA costs to be properly coded in the ISA accounts. Since MMARS has been designated as the central reporting system, all ARRA activity (including Higher Education Departments that provide or receive ARRA funds through ISAs) will be required to conduct all ARRA activity on MMARS.

Q: Who is responsible for preparing the ARRA reports to the federal government? Is it the secretary or the individual departments? Will the seller department need to prepare any reports, or will the parent department be responsible?

A: That guidance is being developed in conjunction with ANF. However, initially, for only the first report due from agencies, federal agencies will be the recipient of reports, based on guidance received to date from the US Office of Management and Budget. However, all Departments involved with ARRA activity must be ready to provide whatever documentation is necessary to provide the necessary reports and to document compliance with the federal grant requirements, including all documentation related to obligations and expenditures.

Q: How do I track my ARRA-related revenue?

A: During the set up process, accounts that will be receiving ARRA revenue will be issued a unique revenue source code created for that specific award using the CFDA number to allow reporting by award.

Q: Should I update my internal control plan for ARRA funds?

A: Yes. Departments must immediately review their Internal Control Plans and make any updates to ensure that all of the ARRA guidance issued by any control agency (GOV, ANF, CTR, HRD, ITD, AGO, SEC, TRE, IGO, SAO etc.) are included and distributed to all program, fiscal, human resource, payroll and executive staff. See Quality Assurance and Internal Control Guidance . Staff must be adequately trained on the internal controls and all applicable policies, guidelines, job aids and other rules. The fact that procedures have always been done a certain way or there have been significant staff reductions are not acceptable reasons for non-compliance or sloppy compliance. Internal controls and policies are made available to be continually reviewed and used as working documents each time a Department is engaged in a certain activity. Staff must be continually reminded to review and re-review guidance to ensure compliance because these are the audit standards that will be used when each Department receiving ARRA money is audited on a monthly basis.

Q: Do different procurement and contracting rules apply to the use of ARRA funds?

A: All current rules apply. Unless a specific exception is made in general or special law or an oversight agency responsible for procurement has issued a directive relative to ARRA, all current procurement and contracting rules apply, including the use of standard contract boilerplates. Additional reporting and other requirements are embedded in the ARRA provisions, and must also be met. Given that Massachusetts is under heightened scrutiny by the GAO, the Legislature through the Joint Committee on Federal Stimulus Oversight, and other audit entities (such as the State Auditor's Office and the Inspector General's Office) we strongly urge Departments to coordinate all staff who will be handling ARRA obligations or expenditures at any point in the process (program, planning, procurement, contracts, payments, etc.) to ensure that all staff coordinate the process for managing and tracking ARRA documentation and to ensure ARRA compliance. See State Finance Law and General Requirements doc format of po_procon_state_finan_law_gen_con_req.doc
and Contract Policies . See also OSD Procurement Information Center (PIC).

Q: Will this change my department's role in the Commonwealth's Single Audit?

A: Potentially. All grants that exceed $30 million are automatically included as part of the Commonwealth's annual single audit. Furthermore, all grants that are judged as high risk by the federal agency are also included. GAO's reviews will not replace the work of the State Auditor, the Inspector General or the Commonwealth's independent auditor. Further guidance will be forthcoming on departmental roles and responsibilities in the Commonwealth's single audit.

Q: Are ARRA funds subject to fringe and indirect charges?

A: Yes, unless specifically exempted by law. Departments must budget for any charge-backs for indirect or fringe that will be made for personnel or overhead, since these costs must be included within the allowable percentages. ANY personnel charged to ARRA funds must be assigned to ARRA work and must document every hour of ARRA and non-ARRA work. Personnel performing ARRA work may not be charged to any other item of appropriation and then EX the charges at a later date to the ARRA funds. All personnel must be coded for ARRA positions and hours in accordance with issued guidance.

Q: Are any departments, agencies, institutions or commissions exempt from ARRA rules?

A: No. All departments, agencies, institutions or commissions, regardless of branch of government must comply with ARRA rules and policies and procedures issued by the Office of the Comptroller.

Q: Are there any things my department should consider in terms of records management?

A: Departments must immediately review and update their Records Management Inventories to ensure that all records in any medium (paper or electronic) are CLEARLY coded with ARRA and doc ids (including coding related emails and correspondence) to ensure that records can be easily and quickly accessed and reviewed for audit purposes. Failure to maintain accurate records, provide quick access to all records in a centralized location, inconsistencies, lack of supporting documentation, plans, justification and documents outlining decision making and how the ARRA mandates are being met, will subject a Department to additional scrutiny and negative findings. We urge Departments to coordinate all staff who will be handling ARRA documentation at any point in the process (program, planning, procurement, contracts, payments, etc.) to ensure that all staff coordinate the process for managing and tracking ARRA documentation.

Information Sources

Related policies

Legal Authority

General Laws Chapter 7A, Section 4 Federal grants and reimbursements; annual reports

Links - United States Office of Management and Budget



 

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