EDGAR & More -- Federal Grant Holders Guide to Understanding Financial & Administrative Regulations Presenters: Gayle Palumbo and Bob Michaels. >> OPERATOR: Good afternoon and welcome to the NCIL EDGAR Part 1 Conference Call. Today's moderator will be Mr. Bob Michaels. During the discussion, all participants will be muted. You will be able to ask questions by pressing 01 on your telephone keypad. And now without further delay, I'll turn the conference call over to Mr. Bob Michaels. >> BOB: Thanks, Michelle. Hi, everyone. I will be the moderator of the call today. My name again is Bob Michaels. We're very glad you could join us for EDGAR & More, Federal Grant Holders Guide to Understanding Financial and Administrative Regulations. This training is being presented in two parts, today and on June 15th on Wednesday. As I'm sure you know, this teleconference is brought to you by IL NET which is a collaborative project of ILRU and NCIL. If you're not familiar with the IL NET, it's a national training and technical assistance project serving to strengthen the independent living movement by supporting centers for independent living and statewide independent living councils. IL NET offers workshops, webcasts, teleconferences, technical assistance, online workshops, training materials and other resources on operating CIL's and SILC's. Our trainer for today is Gayle Palumbo. And this training is being presented by both teleconference and webcast. Today we have 35 different sites representing 21 states and approximately 120 participants in the teleconference alone. We also have many joining us by webcast and about halfway through this training, we'll update you on the webcast numbers. I'd like to thank our site coordinators across the country for your participation and interests and for the preparations for your site participants. We're taping this call so that you will receive a copy of that tape as part of your registration. So if you don't want to take notes, you'll be able to refer to the tape. The webcast is also archived and will be available shortly after on the IL NET website at www.ilru.org and follow the links for training. Also the webcast is realtime captioned and the transcript will be available on that page. Please keep in mind your feedback on this call is very important to us because it helps us in our future trainings. So if you'd take just a moment right now to pull out your copy of the evaluation form included in your participants' materials, it will remind you to fill it out at the end of the call. There are actually two evaluation forms. One is titled teleconference evaluation form which is the one that you should be sending to NCIL and the other is entitled the site coordinator evaluation form, which your site coordinator should have given you. The latter form is for your coordinator at your location to assist them in knowing how they're doing in meeting your needs on the site. I want to thank the site coordinators for making copies of the manual for all the participants. There is also a link on the webcast page for webcast participants to complete and submit an evaluation. You're going to find the agenda for today on Page IV and site coordinators just a reminder to you, you're going to need to point out corresponding page numbers in Braille and large print to your participants. So I'd like to introduce you to Gayle Palumbo. Dr. Gayle Palumbo has worked for RSA since 1992 and has worked in other parts of the Department of Education since 1984. Gayle has considerable knowledge and experience in working with EDGAR and working on this particular set of regulations during most of her tenure at the Department of Ed. She has had -- she has been a management and program analyst, grants management specialist and a grant regional grants representative. She currently manages the discretionary grants program of RSA's Region IX office in San Francisco. So without any further ado, I'm going to turn this over to Gayle. >> GAYLE: Hello, everyone. I'm going to begin with a general introduction to EDGAR that answers the questions what is it and where can I find different requirements in EDGAR? EDGAR as I think most of you probably know is an acronym that stands for the Education Department General Administrative Regulations. It consist of several chapters of regulations that are published and included in the Code of Federal Regulations, which includes all regulations of the federal government. The Code of Federal Regulations is very frequently referred to by its acronym CFR, and EDGAR is published in Title 34 of the CFR which includes regulations applicable to all U.S. Department of Education funded programs. Because the independent living programs authorized by The Rehabilitation Act of 1973 as amended are funded through the Department of Education, and within the Department of Education by the Rehabilitation Services Administration or RSA, the independent living programs must abide by EDGAR. So today we'll be talking specifically about the centers for independent living programs funded under Title VIIc of the Rehab Act and EDGAR's applicability to the Title VII Part C program. In addition, we'll touch on some other documents that contain fiscal management and administrative requirements. EDGAR contains various fiscal and administrative requirements for programs funded by the U.S. Department of Education. There are a number of parts to EDGAR or chapters, if you like; but they don't apply to all grantees. EDGAR contains Parts 74, 75, 76, 77, 79, 80, 81, 82, 84, 85, 86, 97, 98 and 99; but the EDGAR parts that apply to you as nonprofit discretionary grantees and centers for independent living are Parts 74, 75, 77, 79, 81, 82, 84 and 85. The other parts of EDGAR apply only to other types of grantees or to other types of grants. Although Parts 79 and 81 do apply to you, we will not be discussing those particular parts today since they're applicable only for organizations that are applying for grants for the first time or only in a very limited number of situations. Briefly, I'll run through the types of topics covered by the other parts of EDGAR that apply to nonprofit, independent living centers. Parts 74 and 75 are the most used parts of EDGAR and we'll be discussing a number of aspects of those parts today. Part 74, which you can find on Page -- beginning on Page 101 of your training manual -- covers the majority of general, fiscal and administrative requirements applicable to grant management. In Part 74, you'll find information on fiscal recordkeeping requirements in very general terms and other financial management standards, program income, what kinds of budgetary and programmatic changes require RSA approval, independent audit requirements, very general allowable cost requirements, managing equipment purchased with federal funds, procurement standards when making procurements with federal funds, and general reporting requirements for grants. Part 75, which begins on Page 143 of your manual, covers grant application requirements for agencies applying for grants for the first time, and how grants are made by the Department of Education, indirect cost rate information and some general administrative and allowable and unallowable cost requirements. Part 77, which is on Page 202 of your manual, is definitions; and Part 82, which begins on Page 206 of your training manual, are the lobbying restrictions. Part 84, which begins on Page 221, is requirements pertaining to the maintenance of a drug-free workplace. For an electronic copy of EDGAR and updates, you can visit our website at http://www.ed.gov/policy/fund/reg/edgarreg/edgar.html. We do produce some hard copy bound editions of EDGAR every couple of years, but you'll find the more up to date information online. So, Bob, you want to open it up for questions at this point? >> BOB: Okay, Michelle, is there anybody in line? >> OPERATOR: Thank you, sir. If anyone has a question at this time, please press zero one on your telephone keypad. Once again, if you have a question, you may press zero one on your telephone key pad. There is one question in the queue. It comes from Mr. Lawrence (Inaudible). Go ahead, sir. >> CALLER: Yeah, I'd like to know the scope of this lecture today and -- because I have never done that before so I'd just like to learn what is the procedure? I have a little confusion here so can somebody answer this? >> GAYLE: Well, the scope of what we'll be covering today is pretty much in the agenda that's outlined in the training manual. >> CALLER: Right. who is this speaking? >> GAYLE: This is Gayle Palumbo. >> CALLER: Yeah, yeah, Gayle, how are you. So we will just follow the scope -- the book that you send us, right? >> GAYLE: Yes. >> CALLER: I read that you will send us an audio cassette. That will be after the lecture or... >> GAYLE: Bob, can you handle that? >> BOB: I'm sorry? >> CALLER: I read the letter you sent us. It says all teleconference participants will receive one audio cassette copy of each EDGAR session. >> BOB: Right. Yes, you will receive that afterwards. >> CALLER: Okay, afterwards, so you will refer us to sections. >> BOB: Right. >> CALLER: So that means we will just proceed for somebody to give us a lecture, right, right now? >> BOB: Right. >> CALLER: Okay. How will we proceed then? >> BOB: I'm not sure I understand your question. >> CALLER: Sir, my question is really that so normally if we attend some lectures -- the lecture, we'll start giving the instructions and go through the content of the lecture and then if we have a question to ask afterwards, is that -- >> GAYLE: We're just trying to do the training -- the 12 to 1:30. Is there an online training today? This is the training today. You can reference it by teleconference or webcast. We will be going through each of the sections that's identified in your agenda and then taking questions at the end of each session. So, yeah, I'm not sure if that answers your question. >> BOB: And if there are any questions after this is over, please send them in and we'll try to make sure we answer those either directly to you and probably directly to you and also on the ILRU website. >> CALLER: Okay. >> OPERATOR: Thank you. There are no further questions in the queue at this time. >> BOB: Yeah, I had -- you know, I had one here as well, Gayle, and I think you already answered it when you were saying periodically they produce a hard copy of EDGAR. How often -- how long -- how often is it they do that? >> GAYLE: It used to be annually, although we haven't been doing the hard copy bound editions of EDGAR annually any longer. It's every couple of years; but for the most recent edition of EDGAR, the best thing to do is go to the online version because that will have any -- any recent updates that were made or changes that were made. >> BOB: Yeah, the question we received online here said that -- I believe it was eight years ago -- so they're looking for another one. >> GAYLE: Yeah, and if you would like a bound copy of EDGAR, there is a limited supply that is published every couple of years and you can check with your RSA program officer and hopefully they can provide you with one. >> BOB: Okay, Gayle, you want to just go ahead and start on the next section? >> GAYLE: Sure. Okay, so you should be aware there are other documents outside of EDGAR that contain fiscal and administrative requirements as well. The Rehabilitation Act of 1973 contains a few general fiscal requirements, for example, as do the federal independent living regulations and the federal independent living regulations are found, again, in Title 34 of the Code of Federal Regulations at Parts 364 and 366. As examples, the Rehab Act contains requirements pertaining to carrying federal funds from one year to the next; and the independent living regulations contain requirements pertaining to program income. The other place to look for fiscal and administrative requirements is in Office of Management and Budget or OMB Circulars. The two most used circulars which we will be talking about a little bit later today are OMB Circular A-122 entitled cost principles for nonprofit organizations and OMB Circular A-133 on independent audit requirements. There is a particular order of precedence that various federal documents take so that if there are any consistencies -- I'm sorry -- if there are any inconsistencies in requirements, one document will take precedence over another. The law that authorizes the program always takes precedence over other requirements, whether in regulation or policy. Therefore, the Rehab Act will always take precedence over EDGAR, the independent living regulations or OMB Circulars if there is any inconsistent information on requirements. And there sometimes is. The next document after the law in order of precedence, is the federal program regulations. Those are the independent living regulations found at Title 34 of the CFR, parts 364 and 366. Next would come EDGAR in the order of precedence, and after EDGAR would come OMB Circulars and any other policy issued by RSA or the Department of Education. So let me stop there and see if there are any questions at this point. >> OPERATOR: If there are any questions at this time, please press zero one on your telephone key pad. We do have two questions in the queue and the first one comes from Mr. Joseph (Inaudible). Go ahead, sir. >> CALLER: Yeah, my question is how are we following -- are we following the manual that we were provided with? Because I don't know where to look or we just listen? >> GAYLE: The manual is provided with -- is provided for you with a number of reference materials, but we are not -- we are not going through them -- >> CALLER: Because the manual is in front of me and sometimes I don't know where you are. >> GAYLE: I'm not anywhere in the manual. We're not going through the manual with you. Those are provided more as reference materials. I will let you know throughout the teleconference where you can find certain information in the manual, you know, when we're talking about particular sections of EDGAR, what pages of the manual those are on if you want to look at them, but we're not following the manual. >> CALLER: So mainly now just listen to you. >> GAYLE: Yes. >> CALLER: Okay. That's what I need to know. >> GAYLE: Yeah, thank you for asking. >> OPERATOR: The second question comes from Ken Nicholson. >> CALLER: Did I understand you to say the Rehab Act takes presence over OMB Circulars? >> GAYLE: It does. >> CALLER: So if we were to change the Rehab Act to get rid of some of the requirements of OMB Circulars and we could get it passed, then -- then that would happen, right? >> GAYLE: Yes, it would. >> CALLER: Oh, Bob, that opens up all sorts of opportunities, doesn't it? >> GAYLE: You let you on this call? >> CALLER: Thank you. Who let me on it? I signed up under my finance person's name because I knew you guys wouldn't let me on. >> GAYLE: No wonder. >> CALLER: Thank you. >> OPERATOR: The next question comes from Laurie. Go ahead, please, ma'am. >> CALLER: I just want to say good job, Kent! >> GAYLE: Thanks. >> CALLER: And also for the gentleman that asked about having something to go follow, there is the agenda to follow, which is on Page 4 of the book, and that's kind of helping you stay focused. That may help him. I don't know. >> GAYLE: Thanks, Laurie. >> OPERATOR: If there are any further questions or comments, you may press zero one on your telephone key pad. There are no questions in the queue at this time. >> BOB: Yeah, I have none here either, Gayle. Why don't you go ahead. >> GAYLE: So we're going to proceed then with general fiscal requirements. There are some general rules and guidelines to keep in mind when considering overall fiscal requirements and they are, first of all, all aspects of a clear audit trail should be present in your fiscal records. Second, you must have internal controls in your fiscal systems so that federal funds are safeguarded or protected and used only for allowable purposes. And then third, you must maintain records that are clear and complete in terms of how federal funds are being spent and that it's for allowable purposes. So I'll talk about each one of those aspects. A clear audit trail is a paper trail that allows you, your auditor, or your federal reviewers to follow money from the issuance of a grant award notification to you to drawdowns against that authorization, to your receipt of federal cash, to how you spend those funds, to whether there is any cash left after you've made payments against the drawdowns. So a clear audit trail allows you to follow money from receipt to expenditures to cash on hand after expenditures by virtue of the records you keep. All those pieces of information must be maintained in your records, in order for you to have a clear audit trail. In terms of records of expenditures, since you have approved line item budgets, you must maintain expenditure information by line item. You muscles maintain what's referred to as sort documentation of expenditures. And source documentation is original documents that show the expenditure is a legitimate one. It's receipts and invoices and time sheets for salaries, for example. Source documentation should include information that clearly shows the expenses and allowable ones to the program. So, for instance, if you're spending money on travel, we'd want to know that the travel is related to your Title VIIc activities if VIIc is paying for it. So that kind of justification information would be on your source documentation. When looking at source documentation, it should be clear what funding source paid for the expense also. And if it's split between funding sources, then that split would be indicated on the source document. Internal controls are ways of ensuring federal funds are protected or safeguarded when you're handling them. Separating functions is an important way of ensuring federal cash is protected. What this means is that a single person at your organization should not be responsible for approving purchases and disbursing cash or signing checks. That kind of process gives that one person too much control over federal cash and there are no appropriate checks and balances in the system then. You must have at least two people involved in the process, one who is approving purchases, and the other who is disbursing cash or signing checks. And actually, we prefer two signatures on checks, but one is acceptable as long as there are appropriate checks and balances in your fiscal systems so someone else is involved in what's being spent for what purposes. There is one other point I want to make here, and it has to do withdrawing down federal funds. As many of you are aware, there is a rule whereby you may only drawdown the funds you need to spend at that time. The rule of thumb is three days. You may drawdown what you need to spend in a three day period of time, but you may not drawdown more than that. And for that reason, you can draw funds as often as you need them so that you don't have to hold on to excess federal cash. You can find general fiscal requirements in EDGAR at 34 CFR Part 74 .21 and 22 which are located on Pages 112 and 113 of your manual. We also rely on the standards of the government accountability office, the American Institute of Certified Public Accountants and the Financial Standard Accounting Board for determining whether an organization has fiscal systems that are acceptable and is compliant with generally accepted accounting standards. You may look up information on this at the general accountability office's website at www.gao.gov. And visit the American Institute of Certified Public Accountants website and the Standard Accounting Board's website. So let me stop there for questions. >> BOB: Okay, Michelle. >> OPERATOR: Thank you, sir. If there are any questions or comments, please press zero one on your telephone key pad. We do have a question that comes from Kent. Go ahead, sir. >> CALLER: Gayle, what happens when we have all this federal stuff and then we have a state law that is stronger than the federal stuff. How does that interact and match up and what happens then? >> GAYLE: If you have a state law that's stricter than the federal law or regulations, then you must comply with the state law. >> CALLER: Okay. As long as we -- now, if it's weaker obviously we have to do the stronger federal, right? >> GAYLE: That's right. That's right, yes. >> CALLER: I just wanted to clarify that because we recently had a bunch of stuff pass for nonprofit audits and so forth, and so it is actually stronger than the federal audit requirements. Okay, thanks. >> GAYLE: Okay, yeah. Whatever is stricter, whether it's the federal or the state, you must comply with. >> OPERATOR: The next question comes from Joseph. Go ahead, sir. >> CALLER: Another thing I wanted to clarify or make sure I am in violation, because I've been drawing down for one month. I've been drawing down, you know, funds for one month. Is that a violation? >> GAYLE: Yes. Yes, you shouldn't -- if you're not spending funds within three days of drawdown, in other words, if you're drawing down funds that you're going to spend outside of that three day period of time, then yes, it is a violation. You should drawdown only what you need to spend immediately and you can drawdown more than once a month so that prevents you from having to hold on to federal cash. >> CALLER: Thank you. And I will do that. >> OPERATOR: There are no further questions at this time. >> BOB: Okay. Why don't we just go on with written fiscal policies and procedures. >> GAYLE: Okay. There are some very specific topics you need to address in your written fiscal policies and procedures, and these are noted in EDGAR, but first let me point out that just as a matter of good fiscal practice, you should have a comprehensive set of policies and procedures on fiscal management. These should address major internal controls processes and all your fiscal procedures so that a new staff person can understand your operations without much difficulty when that person comes on board. More specifically, EDGAR at Part 74 .21 requires written procedures to minimize the time elapsing between the transfer of funds to your center from the Department of Education and the issuance of checks from those funds, and the second thing is written procedures for determining the allowability, allocability and reasonableness of costs in accordance with OMB Circular A-122, which we will be talking about a few minutes from now, including the definitions of allowability, allocability and reasonableness. So your written procedures need to deal with how you're going to minimize the time between drawdowns and paying out money in the form of checks, and what your procedures are for determining that expenditures are reasonable, allocable, and allowable. In addition, EDGAR requires at Part 74 .42, which is on Page 128 of your manual, that you have written codes of conduct regarding the award and administration of contracts. Conduct or rules whereby no one connected with the center would be involved in the award or administration of a contract if that center staff person or board member has a financial interest in the perspective contractor. So, for example, if your spouse is employed by a contractor that is bidding for a contract at your center, then you should not be involved in the selection of contractors in that competition, and the center should have written codes of conduct that prevent that from happening. EDGAR also requires that you have certain procurement procedures in writing. Those are specifically stated in Part 74 .44 of EDGAR. That's on Page 129 of your manual and include procedures that guide against purchasing unnecessary items that provide for analysis between leasing and purchasing alternatives to determine which is the most practical and economical and solicitations for goods and services contain certain required information that is listed in EDGAR. Those are pretty self-explanatory if you take a look at Part 74 .44 of EDGAR, I won't read what needs to go into the written procedures on solicitations for goods and services, but they do need to be in your written procedures. So let me stop again there for questions. >> OPERATOR: Thank you. If there are any questions at this time, you may press zero one on your telephone keypad. We do have a question that comes from bonnie. Go ahead, ma'am. >> CALLER: Hi, this is (Inaudible) and my question is -- I know this is relating to Part C dollars, but if a center gets any of the Part B money or a sill k getting Part B that goes through the state, does EDGAR still apply? >> GAYLE: EDGAR still does apply to Part B money, but it would be different sections of EDGAR. If it is a SILC that is a nonprofit SILC, they would still comply with part 47 of EDGAR, so all the 74 sections that we're talking about would apply to that SILC. If it is a state agency in terms of the management of the funds or a SILC that is a state agency, then they would comply with Part 80 of EDGAR, which is actually very similar to Part 74, it's just written with some slightly different terminology in it and more applicable to state government agencies. The other thing about Part B funding is that Part 76 of EDGAR applies to Title VII b funding whether you're a SILC or a state agency because Part 76 is what's applicable to formula grant funding. And Part 76 you will notice, if you look at it, is very similar to Part 75 which is the part that's applicable to discretionary grant funding. That's probably a more long-winded answer than you really needed, but I hope that answered the question. >> CALLER: Thank you. >> OPERATOR: The next question comes from Kent. Go ahead, sir. >> CALLER: Gayle, I had a question. I'm a standing member of the SILC here in California, and they allow me to vote on grants that my center potentially might get but it's a competitive grant open to all centers and I'm not on the part of deciding which center gets it, but they tell me that's not a conflict of interest. Is that correct? >> GAYLE: As long as you're not part of the group that determines the outcome of the competition, I think that's not a conflict of interest, yes. >> CALLER: Okay, I just wanted to make sure. I've never -- I've never felt it was, but I just wanted to clear it with you. Thank you. >> GAYLE: Okay. >> OPERATOR: There are no further questions at this time. >> BOB: Yeah, I have one question here, Gayle. Are centers that receive Part C money allowed to charge for core services? >> GAYLE: Allowed to charge consumers, you mean, Bob? >> BOB: or V. R. or whoever, I suppose. >> GAYLE: Yes, there is no prohibition for charging for core services. If you charge consumers for services, you should have written policies on that in your internal policies and procedures, but there is no prohibition against charging for services. >> BOB: Okay. By the way, there are 73 listeners tuned in to the webcast right now. >> GAYLE: Thanks. That actually is in the independent living regulations, by the way, at 364.59 is the citation with respect to charging consumers for services. >> BOB: Okay. >> GAYLE: Okay, so we'll move on to a discussion of OMB Circular A-122 on cost principles for nonprofit organizations. And all ea see in EDGAR at part 47.27, which is on Page 121 of your manual, it says all nonprofit organizations must comply with OMB Circular A-122. This OMB Circular is a primary document independent living centers use to determine whether particular expenses are allowable or unallowable under Title VIIc award. OMB Circular A-122 also contains rules with respect to direct and indirect costs and definitions of both of those. A-122 is where you'll find the definitions of allowable, allocable, and reasonable costs, and these definitions begin on Page 6 of your training manual. An allowable cost is one that is reasonable and allocable, it meets the provisions of the OMB Circular, it's treated consistently, whether it's funded with federal funds or some other funding source, one that is made in accordance with your internal policies and procedures, is determined in accordance with generally accepted accounting principles, is not used to meet the cost sharing requirements of another federal program and is adequately documented. Reasonable costs are those that do not exceed what a prudent person would spend under the circumstances. Some rules of thumb that are used here include whether the cost is ordinary and necessary for the operation of the organization or the performance of the award, whether the cost complies with the terms and conditions of the award, and whether the cost is consistent with the established practices of the Center for Independent Living. Allocable costs are those that are (Inaudible) when giving cost objectives by virtue of your cost allocation plan. And we will not be discussing cost allocation plans today because this topic is included in Wednesday's training session. So we'll have a complete discussion of it there. Attachment B to OMB Circular A-122 give you followings on allowable and unallowable costs and certain costs when you need to request approve for spending money on those items. In general, if you include a particular item in your line item budget, and that budget is approved by us, by our RSA, then the items are allowable expenses because we've already checked to make sure there are no unallowable costs there before approving it. And provided you provided us with enough information to make the determination that they are allowable costs. If you're in doubt about any specific item, you should check the circular or check with your RSA program officer, but I do want to mention a few items from the OMB Circular, perhaps the most pertinent items for independent living centers and based on questions I received as things I've seen in onsite reviews over the years. In terms of public relations costs, we do not allow costs of promotional items, including things like T-shirts, pens with your agency name on them, things like that. Entertainment costs and social activities are unallowable. We consider things like awards banquets to be entertainment. So they would be unallowable, but this does not include recreational activities for consumers if those are a part of your center's activities and since those are acceptable independent living services. Equipment costs are allowable only if they are approved in advance by your RSA program officer. And equipment here is items that cost $5,000 or more and have a useful life of more than one year. There are very few items actually that meet the definition of equipment anymore because most items cost less than this. Anything less than the 5,000-dollar threshold is considered a supply and does not need special approval. I want to talk a bit about fund-raising costs because although the OMB Circular says that fund-raising costs are not allowable for independent living centers, they actually are allowable. This is because the Rehab Act requires that centers conducts resource development activities in order to raise funds outside of Title VII for center activities. So because the Rehab Act essentially requires fund-raising activities, we must allow those activities to be paid for with Title VII funds. So this is an example of where the law, the Rehab Act, takes precedence over the OMB Circular because there is a conflict in requirements. So I'll stop there and take questions on OMB Circular A-122. >> BOB: Michelle. >> OPERATOR: Thank you. If anyone has a question at this time, please press zero one on your telephone keypad. We do have a question from Joseph. Go ahead, sir. >> CALLER: My question is if (Inaudible) is allowed, how about depreciation on those equipment? Say the equipment is over 5,000, is depreciation allowed? That's the first question. Two, how about auditing cost, is it allowed? >> GAYLE: I believe depreciation costs are allowed, but I would recommend that you check the OMB Circular to be sure because I'm sure we've talked specifically about depreciation in there, and I don't want to mislead you, but I believe it is an allowable expense. Independent audit costs are an allowable expense provided you are required to have an independent audit. We'll be going over this again on little bit later when we talk about independent audits, but if you are required to have an independent audit and that means if you expend $500,000 or more in federal funds a year, then costs associated with the independent audit are allowable against your VIIc award, yes. >> CALLER: Thank you. >> GAYLE: The other piece of that is if you are not required to have an independent audit, you don't meet that 500,000-dollar threshold, then the cost associated with an independent audit if you choose to have one are not allowable. >> CALLER: Thank you, Gayle. >> GAYLE: You're welcome. >> OPERATOR: The next question comes from (Inaudible). Go ahead. >> CALLER: Yeah, this is Lee actually. The question is -- would expenses related to like recognition of volunteers or a volunteer banquet be allowable costs? >> GAYLE: I would have to say that those are not allowable because those kinds of recognition events, banquets and so forth, are generally considered to be entertainment expenses. >> CALLER: Okay. >> OPERATOR: We do have four further questions in the queue. The next one comes from Kent. Go ahead, sir. >> CALLER: Gayle, we annually give pens out to volunteers as a reward for volunteering for our center. About 150 people. Sometimes they have our name on them and sometimes they don't. Is that an allowable expense? >> GAYLE: It sounds like it would not be allowable, Kent, because any kind of -- I mean, in addition to just promotional items being unallowable, awards are generally -- or gifts are generally not allowable either and I think it would probably fall in that category. >> CALLER: Okay, thank you. >> OPERATOR: The next question comes from Mary Ann Hernandez. Go ahead, ma'am. >> CALLER: I have two questions: One in regards to the T-shirts and pens with center information on it or center logo, if that is couched in the area of buying like uniforms for center staff and so, and somebody might couch it in the form of boosting morale, is that an allowable expense? >> GAYLE: Well, that's an interesting question. We do -- the OMB Circular allows expenses that are related to employee morale. So you could possibly justify it in that respect. It's probably something you would want to talk to your program officer about and make sure there wouldn't be a problem with it before an auditor found it and disallowed it or something, but I think if you justified it as an employee morale expense, then it would probably be okay. >> CALLER: Okay, the second question has to do with fund-raising activities. When you said that fund-raising activities are allowable because the Rehab Act allows it, if it's fund-raising for the sake of just raising money unallowable under I. R. S. restrictions for 501(c)(3) organizations? >> GAYLE: That would be a question for the I. R. S. I mean, we do require resource development activities for independent living centers. I don't believe there has ever been anything brought to our attention that that's in conflict with IRS rules. So -- but you know, I can't really speak to what IRS rules are. >> CALLER: Okay, thank you. >> OPERATOR: The next question comes from Kenneth. Go ahead, sir. >> CALLER: Yes, a question again about fund-raising. We attended EDGAR training in Denver and at least there they definitely said something different. They said that fund-raising costs had to be private funds and that any money that you made had to be utilized by your center, not within that same fiscal year, but within the next fiscal year, but they made it very clear that you could not use federal dollars to do fund-raising. So I've got two different -- I've got conflicting statements now. >> GAYLE: In the case of Title VII part C funds, you absolutely can. We've had our general counsel look at that issue and issue an opinion, along with the our inspector general for audit and their determination was that the Rehab Act requires fund-raising and therefore it super seeds the OMB Circular. So I'm sorry you received different information at the Denver training, but I can assure you that it is an allowable expense. I can take it up with other RSA folks to make sure everyone understands that. >> CALLER: Okay. That was put on by RSA. That's why I just want the make sure. >> GAYLE: Yeah, I know. >> CALLER: Okay. >> OPERATOR: The next question comes from Sandra. Go ahead, Sandra. >> CALLER: Yes, I was just wondering if there was any way in your manual if you've got a list or if you can get a list of the allowable expenses and the nonallowable ones, the costs? Is that in the circular A-122, it lists out each and every one of them? >> GAYLE: The ones I just talked about are all in OMB Circular A-122. But it will tell you that fund-raising costing are unallowable when they actually are because I said the Rehab Act supersedes that. >> CALLER: Are they going to change that part? >> GAYLE: No because the OMB Circular applies to all grantees of federal government monies and all other discretionary grantees, all other grantees of Department of Education funds are not allowed to spend money -- federal money on fund-raising costs. You know, the exception is for independent living centers because of Title VII of the act. >> CALLER: Okay. Thank you. >> OPERATOR: We do have two further questions in the queue. The next one comes from Jeff. Go ahead, sir. >> CALLER: Hi, yes, this is Kay and our question goes back to the banquets and dinners for the volunteers and so forth. Here our volunteers are consumers and we do it kind of a recreation dinner, recognizing our volunteers, especially during the holidays. Are those allowable? >> GAYLE: Probably not. You would probably have to find a source of funding for those particular banquets that are not your Title VII funds. >> CALLER: Even though they're for our consumers? >> GAYLE: Well, they're for your consumers or your volunteers? >> CALLER: Both, because our volunteers are consumers. >> GAYLE: The best thing to do is probably to check with your program officer and it sounds like something that might have to be looked into a little bit and that person could research a little bit more. It doesn't sound like something that's really all that clear-cut in terms of an answer. >> CALLER: Okay, thank you. >> OPERATOR: The next question comes from Joseph. Go ahead, sir. >> CALLER: Yeah, this could be redundant regarding the fund-raising and it makes me excited when -- if you can tell me whether I could pay my fund-raiser from the federal funds from the Title VII money. Is that allowable if I can pay his or her salary from these funds? >> GAYLE: You can pay a fund-raiser with Title VIIc funds. >> CALLER: That makes me happy because I didn't know that. >> GAYLE: Yeah, that is an allowable expense, yes. >> CALLER: All right. Great. Thank you. >> OPERATOR: There are no further questions at this time. >> BOB: Okay, Gayle, why don't we go ahead with programmatic revisions. >> GAYLE: Okay, there are some instances where you want to make changes to your approved line item budgets to personnel in your centers or to programmatic operations that do require RSA approval before those changes are made. Those kinds of changes that require RSA approval are relatively found far between anymore, particularly since 1997 when we amended EDGAR to include what are now known as the expanded authorities. And the expanded authorities to previous rules needing prior approval for some actions and opened then up so approval is not needed as frequently anymore. So let me tell you what approval is still needed for. Of course anything that is noted in the OMB Circular A-122 as needing prior approval still does. In addition, Part 74 .256 EDGAR which is on Page 18 of mawr your manual tells you when you need approval for actions you might want to take. If you want to transfer money from indirect costs to direct costs, provided you have an approved indirect cost rate and an indirect cost budget line, or vice versa from direct costs to indirect costs, that would require approval. The contracting out of any programmatic work required approval, that doesn't include contracts to purchase supplies, materials or general support like janitorial services. It includes substantive programmatic work, for example, contracting out to folks who are going to provide independent living services. Any substantive change in your approved work plan or objectives requires approval, even if there is no resulting change in your budget, and when in doubt regarding whether something is a substantive change, you should contact your RSA program officer. Any change in a person specified as key personnel in your grant award notification requires approval. Key personnel frequently includes only the official project director who is often, but not always, the Executive Director of a center, but key personnel may include others like supervisors or other decision-makers with authority at the center. The absence for more than three months of a project director requires approval. So if you are between Executive Directors and you anticipate that situation lasting longer than three months, then you need to get approval of an interim project director until a permanent one is on board and then you would need approval for the permanent one. The reduction in project director time devoted to the VII c project of 25 percent or more requires approval. And I know this is some source of confusion for some, but transfers between budget line items do not require approval as long as one of the other reasons for needing approval is not also met. When in doubt about whether approval is needed, again, check with your program officer. In order to obtain approval, you would write to your program officer with a description of the changes you're requesting and a revised budget would be submitted if there are changes in the budget. And then changes should be approved within 30 days of the request and you do need to receive the approval before actually instituting the changes. So I'll stop there then for questions. >> OPERATOR: If there are any questions at this time, you may press the zero one on your telephone keypad. We have two questions in the queue, and is the first one comes from Ellen. Go ahead. >> CALLER: Yes, how do we ask like financial questions when the RSA offices -- original offices are closed and we have to go to the Washington D. C. and how if we have established a relationship with somebody there that we can ask and feel good about asking? >> GAYLE: That's a good question. Of course we're still open at this point. I, myself, am in the San Francisco regional office. We expect to be open until September 30th. And I would expect that you'll get some communication from RSA, either before that time, before September 30th, or shortly afterwards, that lets you know who you need to contact for technical assistance and other matters in the future. There should be a primary point of contact that you will be -- that you'll be given. I think the grant -- that the grants will be managed by a team of people, although there will be a primary person who will be your contact person and that hopefully you could establish a relationship with. But we've not been provided with any specific information on how that's going to work. I expect that you would receive some form of communication from them. >> CALLER: Okay. >> OPERATOR: The next question comes from Sally. Go ahead. >> CALLER: Hi, Gayle, could you repeat the part where you said about the independent contractors for the -- under the IL specialist? >> GAYLE: Sure. What I was saying is that if you contract out any programmatic work, then that contracting out requires RSA approval before you do it. And that doesn't include contracting for supplies or materials or general support like janitors, maintenance people. But it includes programmatic work, people that provide core services or any kind of independent living services, then that would require approval. If you have already received approval for that because it's in your line item budget, then you don't need to get another approval for it; but if you haven't already received approval for it, then you would have to ask your program officer for that approval. >> CALLER: Thank you. >> OPERATOR: There are no further questions at this time. >> BOB: Gayle, I have a question that relates back to the allowable and nonallowable costs. By the way, there are 81 webcasters on right now. Are stipends for volunteers allowable? >> GAYLE: Stipends for volunteers are an allowable cost. It's probably something you would want to address in your written policies and procedures just as a matter of good form, but yes, they are allowable expenses. >> BOB: Okay. There is another question I have and I think this relates back to that three day window for drawdown money, and the question says what about matching social security and Medicare, which may be due within three days for some employers or if the employer was smaller and the matching should be available to deposit? >> GAYLE: So are you saying that you would need to hold on to the funds for longer than the three day period of time? >> BOB: Yeah, my sense of reading this -- this is a webcast question and my sense of -- so it came over the Internet and I don't have access to the person that put it in, but my sense about what they're asking here is there are some situations when you have to use matching social security and money for matching social security and Medicare that you may need to have that money on hand for longer than three days. >> GAYLE: Well, the U.S. treasury department issues is rules regarding the three-day limitation. To my knowledge, there are no exceptions to that and we can't -- we can't waive that for any -- any particular purpose. So I guess -- I guess maybe the thing to do would be to talk about your specific situation with your program officer, but I really don't think there is any waiving of the three-day rule. >> BOB: Okay. If they have a follow-up question, if they'll send me another note. >> OPERATOR: Mr. Michaels, we have two further questions in the queue at this time. >> BOB: Okay. >> OPERATOR: The first one comes from (Inaudible). Go ahead, please. >> CALLER: Hi, my question is regarding stipend for volunteers, does it have to be minimum wage -- I mean, do I have to make sure that they are paid minimum wage per hour according to the federal requirements of labor law, or it can be a lump sum amount for whatever work that they are doing? >> GAYLE: We're not talking about paying them salaries. So there is no minimum wage involved. We're talking about a stipend -- a stipend in my mind, and I know some centers do this, might cover expenses like transportation expenses and lunch or something like that. >> CALLER: Well, we were thinking more like giving them a monthly stipend. Let's say a woman here works for four hours a week, then we were thinking that we can compensate them with the stipend money like a fixed amount per month. Now how does that work? >> GAYLE: And you're talking about volunteers, right? >> CALLER: Yes. >> GAYLE: If they're volunteers and not employees, they're not earning wages. >> CALLER: Okay, so the labor law doesn't apply then. All right. Then the second question is these stipends are allowable on the type of VII c money, then should it go under person Nell expense or should it go under operating expense? >> GAYLE: No, it should not be under personnel. It should come under the other category. You just want to indicate that it's a volunteer stipend and justify it, but it would not be under personnel because they are not staff of the center. >> CALLER: Okay. Sounds good. Thank you. >> OPERATOR: the next question comes from Lawrence. Go ahead, sir. >> CALLER: Yeah, how do we get on to the webcast? There is no instruction anywhere that says that. >> GAYLE: I'm sorry, Bob, go ahead. >> BOB: I don't really know how to answer that. You get on the webcast by coming down through the IL Net website at ILRU.org. >> CALLER: IL -- >> BOB: ILRU.org. >> CALLER: Okay. >> BOB: And just look in there and they have webcasts and you should have an item -- a thing to click on just to pull up your RealPlayer or your windows Media Player right now to listen to it. >> CALLER: All right. So that means that we can do both at the same time? >> BOB: Yes. >> CALLER: Okay, let me try that. Sorry. >> BOB: Okay. Are there any other questions, Michelle? >> OPERATOR: No, sir, there are no further questions in the queue. >> BOB: Yeah, we're running a little bit behind, Gayle, if you want to go ahead. >> GAYLE: Okay, sure. The next topic is financial reporting requirements. There is one annual financial report that must be submitted by all independent living centers and it is the SF-269 financial status report. There is also an independent audit report of course that's required of many centers, independent audits, we're going to discuss separately in this training. The financial status report is a one-page report that all centers must file annually. They're due at the same time as your annual 704 reports, although you should send your SF-269 in a separate envelope because they're frequently reviewed separately and by individuals other than those who review the 704 reports. Again, the reports are due at the end of December each year. Basically, the financial status report is a report on how much of your federal award has been expended and how much you earned and spent in program income and we will be talking more about program income during Wednesday's training. We're primarily concerned in these reports with the amount of federal award you spent and whether you have any unobligated or unspent funds remaining at the end of the year. So that's, you know, basically what we're looking for in those reports. Independent living centers are one of a few discretionary grants programs that still do file financial status reports, but we still find them useful for determining how much centers are spending and how much is left at the end of the year. So I'll stop there for questions on financial status reports or anything we've previously covered. >> OPERATOR: If you have a question at this time, please press zero one on your telephone keypad. We do have a question from Lawrence. Go ahead, sir. >> CALLER: Yeah, I'm online right now. I got into the webcast and so under the ILRU website and I forgot exactly what the next procedure should be to get on that webcast. >> BOB: We're right in the middle of the webcast right now. So it's pretty self-explanatory. They have a frequently asked questions place you can use right there. Why don't you go ahead and try that right now and we'll go on with other questions. >> CALLER: I see what you mean. Click on frequently asked questions. >> OPERATOR: Thank you. And the next question comes from Suzanne. Go ahead. >> CALLER: Our question regards the retention period for fiscal documents and financial records. Are either of these covered in the circulars or federal law? >> GAYLE: Retention requirements are covered in EDGAR and I have to think about it. In Part 74 of EDGAR, I can just real quick give you a citation. 74.53 of EDGAR talks about retention requirements for records, and that includes all records, whether programmatic or fiscal. >> CALLER: Thank you. >> OPERATOR: There are no further questions in the queue. >> BOB: Gayle, I have one other question here that relates back to -- can you please provide some examples of the types of fund-raising activities that have been allowed in the past? >> GAYLE: Well, it's pretty wide open. There are some centers that have hired research development specialists or fund-raisers or grant writers with VII c funds and those are allowable expenses. If you have expenses related to your annual bake sale or golf tournament or those kinds of activities you conduct, those are allowable expenses. It's pretty wide open in terms of whatever kinds of fund-raising proposal development activities you conduct. >> BOB: Okay. These are excellent questions we're getting. >> GAYLE: Yeah. >> BOB: Why don't you go ahead with obligating funds and carryover. >> GAYLE: We're now going to obligating funds and carry over provisions and independent audit requirements. Under independent living center grants, all funds that are awarded to you for a given year, the year being October 1st through September 30th, must be obligated no later than that September 30th date and an obligation is a commitment to spend funds, even if you haven't actually paid those funds out yet. EDGAR at Part 75 .707, which begins on Page 196 of your manual, tells you when obligations happen and for certain types of expenses. For example, obligation for personnel salaries happen when services are performed by the staff person. So all work performed by staff up through September 30th of a given year, get paid from that year's independent living center award. And any work performed as of October 1st of the following budget period gets paid from that new budget period's award. An obligation for contractual services happens when a binding written commitment is made with the contractor. So if the contract is signed by both parties on or before September 30th of a given year, then the expenses for that contract are paid from that year, the signature by both parties would be the binding written commitment. Even if the contractor has not yet performed the work under the contract. Travel funds are obligated when the travel is taken. Rental property is obligated when the property is used, despite a lease you may have that's signed for a longer period of time. And again, these are all outlined in EDGAR. You must liquidate all obligation, in other words, actually pay the money out, within 90 days of the end of the budget period or by the end of December after the year because that's when your financial status report is due and we require all funds to be liquidated by that date. At the present time, in terms of carrying funds from one budget period to another, centers may not carry funds from one year to another to be spent. Other discretionary grantees are allowed to do this, but centers are not because of language that's in the Rehab Act that prevents this from happening. However, we're anticipating that this language will be changed when the Rehab Act is reauthorized in the very near future and if it is, then centers will be allowed to carry funds from one year to the next. So you'll have an additional year in which to obligate funds when that happens. Bob, do you want me to stop here for questions before I go on to A-133? I don't think there is a question period here in the agenda. >> BOB: No, why don't you just go ahead. >> GAYLE: Let me move on to independent audit requirements and OMB Circular A-133. Independent audit requirements are prescribed by the Single Audit Act of 1984 as amended and by OMB Circular A-133. And OMB Circular is in your training manual beginning on Page 64. The Single Audit Act requires that all organizations that are recipients of federal government funds, and that expend at least $500,000 or more in federal government funds in a year, are subject to the requirements to have independent audits conducted. So if you are in that category, in other words, if you expend $500,000 or more in federal funds each year, you must have an annual audit conducted by an accounting firm that is independent of your organization. To determine whether you meet the 500,000-dollar threshold, you should include all federal funds you receive either directly or indirectly as funds that pass through another organization, such as a state government organization. Therefore, you would include any, for example, Title VII Part B funds you receive via your state vocational rehabilitation agency because those are federal funds. You would include any Community Development Block Grant funds you received because, again, those are federal funds, even though they are administered by local government agencies. You would include any social security reimbursement funds you may receive, again, through your state vocational rehabilitation agency. You would include any federal funds, whether you get them directly from a federal agency or they pass through somebody else. If you're not required to have an independent audit, in other words, if you don't meet the 500,000-dollar threshold, then you may not spend federal funds on having an audit conducted even if you choose to have one done. And that is a requirement of the Single Audit Act and OMB Circular A-133 also. Independent audit reports are due within nine months of the end of a reporting year. And the reporting year is your fiscal year, and are to be sent to the Federal Audit Clearinghouse at 1201 East 10th Street in Jeffersonville, Indiana. And the zip code on that is 47132. And that address is in attachment C. to your grant award notification that tells you where to send your annual independent audits. So I think we're ready at this point then to take questions on these last sections that we covered, and anything else that we've done today as well. >> OPERATOR: Thank you. If anyone has a question or comment at this time, you may press zero one on your telephone keypad. We have your questions in the queue. The first one comes from Joseph. >> CALLER: Thank you. I have two questions: One is on publication on getting funds. If an employee -- under vocation in the current fiscal year and leaves or maybe fired in September of last year, but then I pay him -- I pay that person maybe October 15th using the federal funds -- the federal funds in the past fiscal year. Is that allowed? If someone in this fiscal year and was let go -- when should that person be paid? >> GAYLE: So I think -- >> CALLER: Maybe I'm not very -- >> GAYLE: No, I think I understand. You're saying this person didn't work past September 30th? >> CALLER: They worked and they're on vacation and they are gone on September 30th. When should I -- should I pay -- >> GAYLE: They earned vacation wages before September 30th? >> CALLER: And the payroll is not due until -- October 15th in the new fiscal year. Which funds should I use? >> GAYLE: If the person worked and earned vacation in the previous fiscal year that ended September 30th, you should pay him out of that previous fiscal year. >> CALLER: On September 30th? >> GAYLE: Yes. >> CALLER: I can release the check on October 15th of the following year, fiscal year? >> GAYLE: What matters is when the obligation happens, not when you pay the money out. >> CALLER: Okay. >> GAYLE: It sounds to me like the money was obligated that previous fiscal year that ended September 30th. That's the year -- the year's funds out of which that person should be paid. >> CALLER: Okay. >> GAYLE: Does that answer your question? >> CALLER: Yeah, a little bit. >> GAYLE: You want to ask again? >> CALLER: Maybe I'm not articulating this question very well because, you know, someone is on vacation in the previous year, out of which funds should I pay that person from the fund -- the new fiscal year or the previous year? >> GAYLE: If he was on vacation or earned vacation during the previous fiscal year, you would pay it out of the previous fiscal year. >> CALLER: But I have closed the fiscal year on September 30th? You know, if I close the fiscal year on September 30th, when should I pay that person? Out of what funds? Out of September of that year I'm not supposed to pay anything that was earned before? >> GAYLE: Well, some payments will be made after September 30th even though they were obligated the previous year. >> CALLER: Now let me go to the second question because there is no time. The second question was about independent audit because I -- this is good. You articulated this very well because I was only looking at Title VIIc money if I wasn't receiving 5,000, then I thought maybe I was no longer getting to have an independent audit, but now you are including state money, you are including about (Inaudible) service and all that. Is that -- because right now, you know, we receive (Inaudible) -- I'm in Missouri and receive Missouri money and Kansas money and also receive social security money and so forth. So it seems we are being pushed into being required to be audited. Is that correct? >> GAYLE: Well, I'm not pushing you into anything. >> CALLER: Well, we are very new to the 500,000. >> GAYLE: You are supposed to include any federal funds you receive. So if the ultimate source of the funds is federal money, you know, if they are Title I Rehab Act moneys, then, yes, they have to be included in that -- in determining whether you meet that 500,000-dollar threshold, even though they may come from the state. >> CALLER: How about the Medicaid money? >> GAYLE: I would -- I would check with your auditor, but I would think that that would be included as well in federal funds. >> CALLER: The auditors don't know. I don't think the auditors we hired know about this regular and the EDGAR requirements. >> GAYLE: There is a number that you can call for questions for independent audits and the inspector general for audit in the U.S. Department of Education that deals with these specific questions and their number is on attachment C to your grant award notification. >> CALLER: Okay. >> GAYLE: The number that you call depends on the state you're located in and I don't know right off the top of my head which office deals with your state, but attachment C to your grant award notification if you have single audit questions, call this number and it will have a number based on what state you're located in. >> CALLER: Thank you very much, Gayle. >> OPERATOR: There are five further questions. The next one comes from Suzanne. Go ahead. >> CALLER: Hi, I have a question I think I already know the answer, but I'll just do it anyway, our state VR has some money that they're going to put out for bids in August, and if that -- they get their money from the Feds, right? So would we have to claim that as part of our federal money? >> GAYLE: It depends on what the source of that money is. I don't know if they have state appropriated money. It's possible that it could be pure state money. >> CALLER: Okay. >> GAYLE: But in all likelihood, if it's a state V. R. agency, it is federal money in all likelihood. >> CALLER: But I can clarify that with them? >> GAYLE: Yes, you should ask them. >> OPERATOR: The next question comes from Laurie. Go ahead, ma'am. >> CALLER: You had mentioned the reauthorization of the Rehab Act was going to be happening soon. What is soon? >> GAYLE: I don't -- you know, we can't provide a time line on that. I mean, it's up to congressional action. NCIL may have more of a sense than I do. Bob, do you? >> BOB: Yeah, we don't know. It won't take effect before October 1st any rate. >> CALLER: I knew that, I just was wondering if we're expecting this in the next year? >> BOB: We're expecting it in the next several months. >> CALLER: Okay. >> OPERATOR: The next question comes from (Inaudible). Go ahead, please. >> CALLER: Hi, I wanted to find out how do I get hold of Rehab Act? Is there a website we can download it from? Because it's not included in the manual that you sent. >> BOB: The copy of the Rehab Act is -- you can find it up on the IL NET website. So go to ilru.org and go to their programs and one of the programs is IL NET and when you get in there, what you're going to find is a section or a question about -- I can't think -- if you just write in the search engine Rehab Act, it will pull up a copy of the Rehab Act and all the regulations. >> CALLER: Okay. >> BOB: Title VII and everything else. >> CALLER: Do you guys have a hard copy of it anywhere that we can get it from you guys? That would be the best source? >> BOB: That would be your best source. >> GAYLE: I was just going to say our RSA doesn't have any hard copies -- I mean, we could print it out for you, but that would -- >> CALLER: That would be okay. I will check out the ILRU website and see if I can get it. And if I don't, then I'll give you a call. >> BOB: Write me an E-mail message, and I'll make sure you can find it. >> CALLER: Okay. Thank you. >> OPERATOR: The next question comes from Mary Ann Hernandez. >> CALLER: Yes, I have a question on the fund-raising, since it now has become an allowable expense, does that mean that the monies raised from those fund-raising events are program income or is RSA going to say they're unrestricted funds? >> GAYLE: They are program income. If you spend Title VII money to earn the program income, then it is program income. >> CALLER: And then on the auditing area, you are including service money, if they are federal monies being channeled through the state and you have a fee-for-service contract, that is federal money and it would be part of the pot that you count towards the 500,000? >> GAYLE: Fee-for-service money is a bit different than grant money. I'm -- I think -- that's a question really for the inspector general for audit offices. I'm not -- I want to say that it is included, but I'm not entirely sure. So I think that would be a question worth asking the -- calling the number on your attachment C to your grant award notification and asking them about. >> CALLER: Okay, thank you. >> OPERATOR: The final question comes from Kathleen. Go ahead, please. >> CALLER: Yes, my question goes back to the quarterly taxes, Medicare and social security and such. If you using a payroll company, that's automatically built in in every payroll period and they're the ones that often do the taxes and pay the requirements on the quarterly period. So would that be under a contractual agreement rather than paying your taxes yourself or do you tell them you need to pay them only every quarterly -- every quarter for that so they can make the payment for you? >> GAYLE: Do you have a contractual agreement with the payroll company? >> CALLER: Yes. >> GAYLE: Although they are paying a third party for that. It's not the fee that you pay to them? >> CALLER: No, they bill us how much our taxes and Medicare and social security are every payroll. We pay that. They keep it in their bank account and then pay it at the quarterly time. >> GAYLE: I believe those are -- those would be considered, along with any other kinds of fringe benefits, in the same vein as employee expenses, payroll expenses. So that it's a matter of they are charged to the year when the employee worked. Does that make sense? >> CALLER: No. I'm sorry. Can you try wording it a different way? >> GAYLE: Are those part of your fringe benefits line item in your budget? >> CALLER: I'm talking about mandated social security, Medicare. Earlier someone said can you keep that in the bank and then pay it quarterly and when it's due and you said, no, it should be drawn out when it's due, but if you're paying a company to do your taxes for you, that's taken out every payroll period. >> GAYLE: Right. And those would be -- so I guess I'm not understanding your question. So what's the question? >> CALLER: My Medicare and social security and the employer's -- and the other employer's share is automatically taken out every payroll period so, therefore, that money is being -- my drawback is coming every payroll period for example vs. quarterly every three months when they are paid. Earlier you said they shouldn't be put aside in the bank. They should be paid and not held because they need to be paid within three days. >> GAYLE: So the question is when you're allowed to draw them down? When you're ready to pay them out? >> CALLER: I have an agreement with my payroll company that pays them out. So do I need to make my payroll company ask me three days ahead of time for the bill for Medicare and social security and such for the quarterly payment or can I continue to do as I've been doing paying the payroll company do hold the funds and then automatically do it at the three months? >> GAYLE: I think you can continue to do what you have been doing and then pay them every three months. Those are -- yeah, it is kind of mixing apples and oranges here, but those are -- I guess I would see that as funds that have already been earned by the -- by Medicare and social security and so forth, by the tax entities and they're not really -- once they're drawn down, they're not really fed Raul funds any longer. They're already due to the tax company even though you're not actually paying them outright then. >> CALLER: Okay. Thank you. >> GAYLE: Confusing, but I think it's okay with the way you've been doing it. >> CALLER: Thank you for the clarification. >> BOB: Gayle and Michelle. We're out of time and I guess we've got to move on here. What we'll do is -- I have about half a dozen questions through the webcast as well that have not been asked so I'll try to weave those in the presentation on Wednesday. We understand that almost everybody who has set up to attend this webcast will also be attending the one on Wednesday. In addition, what we'll do is we'll work on and make sure we answer these questions and put it up on the IL NET website in their IL coach area. That's under message forums, so we want to encourage everybody to take a look at that. So I want to thank you for all the excellent questions you've raised today and please complete the evaluations that were included in your information packets and return them to the NCIL office and if you were on a webcast, we put the evaluation on the webcast site so we can continue to provide you with high quality training activities. I'd like to thank Gayle again for her time and effort to make this teleconference a success and thanks to all of you and goodbye for now. Gayle and the staff you need to stay online. >> OPERATOR: Thank you. And that concludes today's conference call.