In This E-Mail:

• ARRA–The Saga Continues
• DUNS Number and Central Contractor Registration Requirement for American Recovery and Reinvestment Act (ARRA) Reporting
• Clarification of Use of Title I Funds
• Join us for a day of fun at the MSBO Golf Outing

Where are we…
2008-09
We were given an update on the May Revenue Consensus estimates by representatives of both the House and Senate Fiscal Agencies. In short, the situation with the May Consensus figures has gotten a bit worse than originally reported to you after the consensus meeting. The projected shortfall for the current year (2008-09) appears to be at least $429 million in the State Aid Fund, a per student amount for State Aid purposes as a shortfall of $265 per FTE. This morning, a revision has been recommended to the proposed overall shortfall figures. As a result, the district-specific allocations calculated by the Michigan Department of Education (MDE) showing the amount of stabilization funds shifted to offset your State Aid shortfall are being recalculated. The revised total use of stabilization funds to cover the shortfall in 2008-09 as stated in the MDE communication is now estimated at $600 million rather than $429 million. Based on this new information, the projected shortfall, and therefore use of stabilization on a per pupil basis is approximately $370 rather than $265. We will keep you posted on the latest information as it becomes available. The shortfall may increase if economic conditions continue to decline from this projection. Needless to say, this is a significant change and in a direction that we do not like to see…an increasing shortfall. Given the shortfall, the State Stabilization Funding of the ARRA gives the State the ability to “cover” the shortfall in the State Aid Fund to the extent possible. Indications are that the shortfall for this year and next will be greater than the remaining ARRA Stabilization allocation and therefore, a combination of categorical funding reductions and/or a per pupil reduction may be necessary to maintain the foundation funding at the current level of $7,316 in 2009-10.

2009-10
2009-10 also had a significant shortfall projected from the Revenue Conference at an estimated $940 million, in the neighborhood of $590 per student, before the use of stabilization dollars. The final balance after applying available stimulus funds was estimated as a shortfall between $48 million and $113 million, or roughly $30 to $71 per student. These estimates have changed with the increased use of stabilization funding in 2008-09, and look to leave the 2009-10 final ending shortfall, after exhausting the entire $1.3 billion in stabilization funding, between $173 million to $238 million. This equates to a per pupil shortfall of approximately $108 to $149 for 2009-10. This will need to be addressed as you prepare your 2009-10 budget and it is likely that a combination of categorical funding reductions and the potential for an across the board reduction of State Aid may be a reality.

Remember, there is no increase in the foundation expected and the reality of having less revenue next year than the current year is a real possibility. District expenditure increases for wages, retirement, health/life/dental/disability insurance, utilities and other operational increases will need to be covered by fund balance or reductions in overall current operations. Flat revenue is the best case scenario for the near future.

The Process…
The State of Michigan submitted the application for ARRA Stabilization funding on May 27, 2009. Verbal acceptance of the application was given to the State on June 3, 2009, with written confirmation was received June 09, 2009. In other words, the State has been approved to receive the first allocation of funding which in turn will be available at the District level once approved by the legislature.

The legislature will also address the current budget issue by passing a “Negative Supplemental.” The language and financial documentation addressing the shortfall and use of Stabilization funding is prepared and could be acted on by the House this week. This would then be sent to the Senate for discussion and approval, which can be expected to take place as early as next Wednesday, June 17, 2009. The legislation would then go to the Governor for her signature late next week and be appropriated. This would put in place the ability to distribute funds to districts. The budget for 2009-10 is not expected to be passed until later in the summer or early fall. Stay tuned.

What you need to do….
The resolution to the 2008-09 shortfall is in sight. The State Aid and School Finance Department of MDE, reported that the process of identifying the shortfall per district, and the reduction of State Aid payments for July and August is in the works. Due to the fact that the stabilization funding is considered federal funding, the Michigan Electronic Grants System (MEGS) and the Cash Management System (CMS) will be used for the actual application and reimbursement for expenditures of these funds. The shortfall figures will be loaded into MEGS for each district and the application process will need to be initiated by a Level 5 user at each district. The application is available to be initiated today however, the “Submit” function will not be active until later this week. Due to the changes in the overall use of the stabilization funds for 2008-09, revised appropriations have been calculated and are expected to be entered into the districts MEGS application this week. It is recommended that the application be initiated at the earliest possible time by district staff and that they complete the assurances in preparation for submittal. Guidance will be forthcoming from MDE on the process. The application will contain the assurances as stated in the ARRA as well as some additional assurances from the Governor including a text box intended to be used for a description of how you are going to use the funding. This will be a somewhat straightforward entry describing what expenditures will be covered by the stabilization funding. Keeping it simple may be the best advice but being specific is the key. Remember, accountability and transparency are the buzz words we’ve heard since the inception of this Act so be sure you can demonstrate how you have used, or will use these funds. MDE will be reviewing and accepting these applications at an expedited pace so it is anticipated you will not have significant delays in the processing from their end.

How to account for the funds….
The Michigan Public School Accounting Manual has been updated to accept the new funding of the ARRA. Revenue codes have been added as well as program numbers based on the CFDA numbers assigned for federal funding purposes. The Stabilization funds will be accounted for using the “412” revenue code “Unrestricted federal revenues received through the State.” Other funds, such as IDEA and Title I will be accounted for through the “414”, “Restricted federal received through the State.” See page 19 of the Appendix for descriptions. The revenue suffix for all ARRA funds is “0230”, see page 19 of the Appendix for a description. The State has also assigned program numbers for expenditures in the “636x” thru “642x” range, see page 54 of the Appendix for detailed descriptions. Districts may chose to amend their budget to shift State revenues to Federal revenues in the revised amount of $370 per pupil as calculated through the State Aid Status Report calculation. The calculation for State Aid can be found on the MDE website under State Aid and School Finance, State Aid Payment Calculation. Basically, either wait for MDE to calculate your shift in funding or you may estimate it by using the State Aid Payment Calculation less $370 per pupil based on the latest information of this morning. The result will be a shift to federal funds in the amount of your shortfall. From an expenditure standpoint, it is expected that your 2008-09 funds will be used to restore your shortfall. As a result, current expenditures will need to be broken out into account numbers using the program numbers from the identified program range of “636x thru 642x.” It is expected that journal entries will need to be made in order to move these expenditures and it is encouraged that the district keep detailed documentation accessible for review to support the entries. Remember, accountability and transparency are the keys. Your functional level should not be affected by the change to the new state program numbers so a revision to shift expenditures may not be necessary if you budget is approved at the functional level. It was also stated by the MDE Audit staff that the Uniform Budgeting and Accounting Act tests of budget-to-actual final figures will only fail at the “total revenue” and “total expenditure” level, not the functional level. As long as you recognize more revenue than you budgeted and had less expenditure than budgeted, you’ll pass the test.

Reporting?....
The district will need to have the ability to separate expenditures of the various programs based on the above program information. This is not unlike other grant funds we receive and should not cause us too much concern. The component of “Quarterly Reporting” which we heard about at the beginning of the process seems to have settled at the State level with them taking responsibility for pulling information from the MEGS and CMS system in order to report to the U.S. Department of Education. In other words, a local district may not have quarterly reporting requirements at the local level. Once again, accountability and transparency is expected, however the responsibility for the reporting seems to be with MDE rather than the local district. Although final guidelines have not been given by the U.S. Department of Ed for reporting, districts should begin the process of obtaining a DUNS number and register with the Central Contractor Register if you have not registered in the past or do not possess a DUNS number. MDE released an Official Communication explaining the process on June 09, 2009.

The $1.3 Billion Question…..
What are the allowable expenditures for these funds? The best way to answer this is….Title I funds follow Title I guidelines, IDEA funds follow IDEA guidelines etc. The only funds that are flexible are the Stabilization funds. These may be used for any expenditure that is allowable under the Elementary and Secondary Education Act of 1965 (ESEA) (which includes the modernization, renovation, or repair of public school facilities), the Individuals with Disabilities Education Act (IDEA), the Adult Education and Family Literacy Act (Adult Education Act), or the Carl D. Perkins Career and Technical Education Act of 2006 (Perkins Act). The most promising for purposes of 2008-09 is Title VIII Impact Aid. The best guidance we have found on Impact Aid comes from the question and answer guidance given by the U.S. Department of Education in the initial ARRA guidance. See number III-D-6 on page 19 of the State Stabilization Guidance for details. More information may be found on U.S. Department of Education website - search on Impact Aid. The bottom line, you have great flexibility on the use of these funds. An example was given by MDE Audit staff relating to a question on the use of these funds for salary and fringes. The answer was very simple; you may use these funds to support a position that has a “single cost objective.” This means that if an employee works in a designated position that is focused throughout the school year on the same objective, you may use a semi-annual certification to meet the federal timekeeping requirements. An example of a 3rd Grade teacher was given. A certification with the position identified as “3rd Grade Teacher – ARRA Stabilization Funded Position,” which indicates this position is being funded with stabilization funds, is required to meet the federal guideline. Pretty simple. With the fact that salary and fringes can be funded using Stabilization funding, districts may want to stick to the basics and not look any further simply choose employees that fit the description of the single cost objective and fund them in this manner. A “blanket” certification may be signed by the building administrator for all “Single Cost Objective” staff in a building by simply listing the staff with a designation of “- ARRA Stabilization Funded Position” attached to their normal assignment description. Caution, we were originally told that these funds can be used to support expenditures beginning February 17, 2009. As of this morning, MDE has revised this guidance based on the fact that the U.S. Department of Ed has approved the Michigan Application for an April 01, 2009 start date. This means only expenditures from April 01, 2009 to present may be used. We will keep you posted on the latest information as it becomes available. This means that you will have to calculate the actual expenditure from that point forward in identifying staff costs paid. Another consideration should be made relating to staff that are paid over the course of 12 (24 or 26 pays) months rather than those paid during the school year (21 pays). Remember, you will be reimbursed for your expenditures so you must have already paid out the cash in order to request it. If you have fully paid employees at June 30, 2009, you have already expended the cash, which means you can request the reimbursement. Benefits must follow the wages so be careful not to request cash for the summer benefits accrued but not paid. If you have enough staff in this situation, you may be able to fully request your cash in fewer transactions rather than waiting until your chosen staff are paid in the summer, which will require multiple cash requests. More work for the business office.

Bottom Line….
The thirty second conclusion….the stabilization funding can be used for wages of single cost objective staff. As such, many districts will identify staff who have been fully paid at the end of the fiscal year and prepare certification forms to be signed by the building principal which identify the employee name and position title including “- ARRA Stabilization Funded Position.” The level 5 MEGS administrator will initiate the Stabilization funding application and ultimately submit after the administrative assurances have been checked and a simple, detailed description is entered for the use of funds. The CMS system will be loaded with funds after the MEGS application is approved so districts can request the cash. It is very likely that the funds will be available for request prior to July 20, 2009, the normal payment date and the first State Aid payment to be reduced. This could put districts in a better cash flow situation than under current State Aid procedures. Accounting for the funds will be done by adding new accounts to your general ledger and making journal entries to move expenses to the newly created Federal programs as identified in the Accounting Manual. The Michigan Legislature does have a part in the timeline but that process will work itself out and there is no reason a district should be waiting until the final appropriation is signed by the Governor to complete the application process. The sooner you begin the process the better. Time is not on your side.

MSBO will keep you posted on the progress of the above anticipated timelines and any changes as we receive them. Please watch the MSBO website and additional eblasts. MDE will also be sending out official notification that should reiterate some of the above points. Certainly contact MSBO if you have any questions.

For more information, contact Bob Dwan at 517.327.2581or David Martell at 517.327.2580.

DUNS Number and Central Contractor Registration Requirement for
American Recovery and Reinvestment Act (ARRA) Reporting

A Data Universal Numbering System (DUNS) number is required for all recipients of American Recovery and Reinvestment Act (ARRA) funds. This number must be included on all required ARRA reports. In addition to obtaining a DUNS number, your organization must register with the federal Central Contractor Registration (CCR) after receiving a DUNS number. The organization name and location on ARRA reports must match the organization name and location entered in the CCR.

The DUNS number is a unique nine-character number that identifies your organization. It is a tool of the federal government to track how federal money is distributed. The CCR is a government-wide registry for organizations that seek grants from or otherwise do business with the federal government. Most intermediate school districts (ISDs), local education agencies (LEAs), and public school academies (PSAs) already have DUNS numbers and are already registered with the CCR.

If your organization does not have a DUNS number or you need to verify whether or not you have a DUNS number, follow the steps the DUNS Number guide. If your organization needs to register with the CCR or you need to verify whether or not you are registered, you can do so online at www.ccr.gov. CCR has developed a handbook to help you with the process.

It is recommended that you register now, well in advance of any report due date, as the registration process may take several days to be finalized.

You must enter your Data Universal Numbering System (DUNS) Number into the Educational Entity Master (EEM). The checkbox for the Central Contractor Registration (CCR) must also be checked in the EEM. Each entity in the EEM should have an assigned EEM entity authorized user. This person is designated by the superintendent or administrator to make changes in the EEM record(s).

If you do not know the name of your EEM entity authorized user, please send an e-mail message to cepi@michigan.gov or call 517.335.0505 and choose option 3. Please provide your name, entity name, district code, district name (if applicable), CEPI application name, your telephone number (including area code and extension), your e-mail address, and your specific questions.

Questions regarding this memo may be directed to the Grants Administration and Coordination Unit, at 517.373.1806 or mdestabilization@michigan.gov.

Clarification of Use of Title I Funds

After further discussion and consultation, the following information is provided to clarify the Michigan Department of Education May 4, 2009 memorandum regarding Kindergarten and federal funds.

The current Michigan Revised School Code does not require Kindergarten. For districts
that implement Kindergarten instruction, the State Aid Act provides a full-time equivalent membership (funding) for Kindergarten for 549 hours of instruction. Following a building plan that demonstrates the need for supplemental services for Kindergarten students, Title I funds may be used to support supplemental programming under specific conditions that are in compliance with statute and guidance regarding “supplement, not supplant” requirements. For example, if a district has made the decision to offer only a half day of Kindergarten to all students, the district may offer a supplemental, half day program to Kindergartners who are eligible for Title I services in Title I buildings.

However, Title I funds cannot be used to supplant state and local Kindergarten programming. The instances described immediately below constitute unallowable supplanting:

• If a district provided programs in prior year(s) with state and/or local funding, the district cannot use Title I funds in the current year for the same or similar services.
• If full day Kindergarten is offered in non-Title I buildings with state and/or local funds, Title I funds cannot be used to provide the same services in Title I buildings.
• If law requires a district to provide full day Kindergarten, Title I funds cannot be used to provide those services.

Please refer to the May 4, 2009 memorandum for other examples of appropriate use of Title I funds to support Kindergarten students. For all Title I programs, five basic steps must be taken: Comprehensive Needs Assessment, program planning to meet students’ identified needs, implementation of program, evaluation of program effectiveness, and changes to program as needed.

For further information and discussion of your Title I plan, please contact the Field Services Unit in the Office of School Improvement at 517.373.4588.

Join us for a day of fun at the MSBO Golf Outing

Don't forget to treat yourself well! In these tough times it is important to work hard but still take a little time to relax, recharge, and prepare for dealing with the challenges you face. Everyone has a different way of doing that. For those of you who like to get together and hit a little white ball around a beautiful environment with friends, MSBO offers you an opportunity for a day of fun, friendship and...prizes at the Annual MSBO Golf Outing. This year’s outing is Wednesday, July 8 at MSU’s Forest Akers Golf Course in East Lansing. It is just $40 for your cart, 18 holes, more food than you can eat, and prizes. Take a break from the stress of every day work to relax and revitalize!

Register online.

Register by fax.

Call Marte Cadwell at 517.327.5920 with any questions.