Another wrinkle:
The Department has experienced two cases where the independent auditors have proposed the use of an Agency Fund treatment for the Federal grant activities between entities.
One case involved the IDEA (Special Education) grant funding being provided to one district as the Administrative Unit (AU) for the support of multiple districts. The independent auditor identified the net portion of the funding that was “flow-thru” to the other district as being purely a conduit arrangement between the two districts. The AU district claimed no responsibility or compliance requirements related to the activities of the other district.
Under current statutes, rules, and regulations of the Department and the Federal agency, the AU for the IDEA grants is responsible for accounting for all of the Federal funding that it received from the Department (CDE). The AU is the subgrantee of the Federal grant funds. The AU is responsible for reporting all of the activity related to the implementation of the IDEA grants. CDE does not allow the entity that the Department provides with the Federal funding (the AU) to subgrant the Federal funding to another entity. In the cases were the AU involves another entity, the Financial Policy and Procedures (FPP) committee established the flow-thru coding concept. This flow-thru coding (not to be confused with the Federal grant pass through funding concept) was established to allow the other non-AU entity to report the activities they performed on behalf of the AU. For the IDEA grants, the other non-AU entity is not a subgrantee of the Federal funding. For the AU to claim no responsibility for compliance is admitting that they are in violation of such compliance requirements.
The other case involved the child nutrition programs being supported by a Charter SFA. Again, the independent auditor identified the portion of the funding that was “flow-thru” to the other schools as being purely a conduit arrangement between the schools. The Charter SFA claimed no responsibility or compliance requirements related to the activities of the other schools.
Again, under current statutes, rules, and regulations of the Department and the Federal agency, the Charter SFA for the Child Nutrition grants is responsible for accounting for all of the Federal funding, as well as for all of the program income, related the activities of the child nutrition program. That was the reason behind the Department establishing the new coding structure for Charter SFAs. Such coding was approved at the February 2010 FPP committee meeting. For the Charter SFA to claim no responsibility for compliance is admitting that they are in violation of such compliance requirements.
Question: What are your thoughts? Do we need to rethink the whole “flow-thru” and AU reporting concepts?