Annual Federal Fiscal Risk Assessment

As a pass-through entity, TEA awards federal grant funds to eligible subrecipients, including local educational agencies (school districts and open-enrollment charter schools), Education Service Centers, and non-profit organizations. The responsibilities of pass-through entities are given in Title 2 of the Code of Federal Regulations, Part 200.331, which requires TEA to “evaluate each subrecipient’s risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring.”

To comply with this requirement, the Federal Fiscal Monitoring Division conducts an annual risk assessment of all subrecipients, to determine their potential risk of noncompliance. Based on the outcome of the risk assessment, subrecipients are assigned a risk level of low, medium, or high. The risk assessment includes weighted risk indicators derived from multiple sources. The division updates the risk assessment model annually to ensure risk indicators and weights accurately reflect the potential risk posed to the agency in awarding funds to each subrecipient.

Criteria Used in Risk Assessment for 2016-2017 

The following are the criteria used to determine the risk level of subrecipients for the 2016–2017 school year:

  • The subrecipient did not submit the required annual financial and compliance report (AFR), including the single-audit report, to TEA by the required due date or did not submit an AFR.
  • The independent auditor who prepared the subrecipient’s AFR, including the single-audit report, did not express an unqualified opinion.
  • The subrecipient was not required to have a single audit conducted under Office of Management and Budget (OMB) Circular A-133 because it did not meet the federal grant spending threshold.
  • The subrecipient’s independent auditor identified, in the single-audit report, at least one of the following: (1) an instance of material noncompliance; (2) material weaknesses in internal controls; (3) questioned costs of federal funds; (4) a finding that was also a finding in the prior year.
  • The subrecipient has a large amount of federal expenditures compared to total operating costs.
  • The subrecipient has been referred by other agency divisions for significant issues or deficiencies that may affect its use of federal grant funds or its implementation of federal grant programs.
  • The subrecipient has not been monitored recently by the Federal Fiscal Monitoring Division.
  • The subrecipient has not drawn down federal funds by January of the current school year for one or more of the following federal grant programs:  Title I, Part A, Carl D. Perkins, or IDEA-B Formula.
  • The subrecipient has lapsed funds for grants awarded in the NCLB consolidated grant application.
  • The subrecipient has lapsed funds for grants awarded in the IDEA-B Formula grant.
  • The subrecipient has carried over excessive amounts of funds for federal grants awarded in the NCLB consolidated grant application.
  • The subrecipient has changed the primary contact and/or authorized official two or more times in the past three years in the programs in the NCLB consolidated, special education consolidated or Carl D. Perkins grant applications.

How You Can Access Your Risk Level 

TEA has assigned all subrecipients a risk level for the 2016–2017 school year. You may learn your risk assessment level by accessing the GFFC Reports and Data Collections secure application, where you will find your risk level notification letter that states your 2016–2017 risk level. Follow these steps to access your letter:

  1. Log on to TEASE or TEAL.
  2. Select “GFFC Reports and Data Collections.”
  3. Select “Risk Assessment Level” from the report title drop-down menu.
  4. Select “2016-2017” from the school year drop-down menu.

Purpose of the Annual Risk Level 

The risk assessment determines the likelihood that a subrecipient may fail to comply with applicable rules. If your organization is assigned a high risk level, it does not indicate that your organization has failed to comply with the requirements of your federal grant. Similarly, a low risk level does not indicate that your organization is compliant with the specific requirements of your federal grant programs. Only your independent auditor or a TEA monitor can determine if your organization is compliant or noncompliant.

The risk assessment is conducted annually, so your organization’s risk level can change from year to year. A subrecipient assigned a high risk level for 2016–2017 may be assigned a medium or low risk level in 2017–2018.

Effect of Different Risk Levels 

An organization’s risk level will be used by TEA in the following ways:

  • Differentiated Grant Negotiation. TEA uses a differentiated grant negotiation process for federal grant applications. Organizations with a medium or high risk level are subject to a more stringent grant negotiation review than those with a low risk level.
  • Subrecipient Monitoring. Each year, TEA selects subrecipients for fiscal monitoring, according to their risk levels. The higher your organization’s risk level, the more likely you are to be selected for monitoring.

Notice of Agency Policy

TEA conducts federal fiscal grant subrecipient monitoring and compliance reviews, and implements related enforcement actions, in accordance with its established policies and procedures. These policies and procedures incorporate best practices and standards that may be similar to common auditing standards, but the agency does not apply a specific set of external standards, such as the US Government Accountability Office’s Generally Accepted Government Auditing Standards (Yellow Book), nor is it required to do so.