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<DIV dir=ltr align=left><FONT face=Arial><STRONG><B><SPAN
style="FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: Tahoma">Subject:</SPAN></B></STRONG><SPAN
style="FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: Tahoma"> RE: Proper Treatment
of Retirement Incentive Payments<SPAN
class=312404915-02042009> </SPAN></SPAN></FONT></DIV>
<DIV dir=ltr align=left><SPAN
style="FONT-SIZE: 10pt; COLOR: navy; FONT-FAMILY: Tahoma"><SPAN
class=312404915-02042009><FONT color=#000080></FONT></SPAN></SPAN> </DIV>
<DIV dir=ltr align=left><FONT face=Arial><SPAN
style="FONT-SIZE: 10pt; COLOR: navy">Based upon </SPAN><FONT
color=#000080><FONT color=#000080><SPAN
style="FONT-SIZE: 10pt; COLOR: blue"><FONT
color=#000080>recent</FONT> </SPAN><SPAN
style="FONT-SIZE: 10pt; COLOR: navy">federal </SPAN></FONT><SPAN
style="FONT-SIZE: 10pt; COLOR: blue"><FONT color=#000080>audit
findings,</FONT> </SPAN><SPAN
style="FONT-SIZE: 10pt; COLOR: navy">the Oregon Department of Education
(ODE) received</SPAN><SPAN style="FONT-SIZE: 10pt; COLOR: blue"> <FONT
color=#000080>a letter from the U.S. Department of Education</FONT><SPAN
class=312404915-02042009><FONT
color=#000080> (USED)</FONT> </SPAN></SPAN><SPAN
style="FONT-SIZE: 10pt; COLOR: navy">related to the issue of severance
costs, specifically retirement incentive payments that are provided to encourage
employees to leave their employment. State and Local Education Agencies
(SEAs/LEAs) may be mistakenly concluding that certain retirement incentive
payments are fringe benefits that can be charged to federal programs,
rather than “abnormal or mass severance pay.” As a result, some SEAs and
LEAs are not obtaining the required prior approval to charge retirement
incentive payments to federal programs. Prior approval to charge such
costs must be obtained from the<SPAN class=312404915-02042009><FONT
color=#0000ff> </FONT><FONT color=#000080>USED</FONT></SPAN> or other
cognizant federal agency.<SPAN
class=312404915-02042009> </SPAN></SPAN></FONT></FONT></DIV>
<DIV dir=ltr align=left><SPAN style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009><FONT color=#000080></FONT></SPAN></SPAN> </DIV>
<DIV dir=ltr align=left><FONT face=Arial><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009> </SPAN></SPAN><SPAN
style="FONT-SIZE: 10pt; COLOR: navy">The USED has
requested the ODE provide information on the prior approval
requirement to our LEAs and subgrantees. The following guidance
should be incorporated into your policies, procedures and practices.<SPAN
class=312404915-02042009> </SPAN></SPAN></FONT></DIV>
<DIV dir=ltr align=left><SPAN style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009><FONT color=#000080></FONT></SPAN></SPAN> </DIV>
<DIV dir=ltr align=left><FONT face=Arial><SPAN
style="FONT-SIZE: 10pt; COLOR: navy">Office of Management and Budget
(OMB) Circular A-87 (<EM><I><SPAN style="FONT-FAMILY: Arial">Cost
Principles for State and Local Governments;</SPAN></I></EM></SPAN><FONT
color=#000080><SPAN style="FONT-SIZE: 10pt; COLOR: blue"> </SPAN><SPAN
style="FONT-SIZE: 10pt; COLOR: navy">see link below<EM><I><SPAN
style="FONT-FAMILY: Arial">)</SPAN></I></EM> establishes standards for
determining costs on federal awards carried out through grants, cost
reimbursement contracts and other agreements. Attachment B of the Circular
addresses selected items of cost and Paragraph 8.g. provides the criteria
for severance pay as follows:<SPAN
class=312404915-02042009> </SPAN></SPAN></FONT></FONT></DIV>
<DIV dir=ltr align=left><FONT face=Arial><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><SPAN class=312404915-02042009><FONT
color=#0000ff></FONT></SPAN></SPAN></FONT> </DIV>
<DIV dir=ltr align=left><FONT face=Arial><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009> </SPAN>1.)</SPAN><FONT
size=2><SPAN
style="FONT-SIZE: 7pt; COLOR: navy; FONT-FAMILY: 'Times New Roman'">
</SPAN><SPAN style="FONT-SIZE: 10pt; COLOR: navy">Payments in addition to
regular salaries and wages made to workers whose employment is being terminated
are allowable to the extent that, in each case, they<SPAN
class=312404915-02042009><FONT color=#0000ff> </FONT></SPAN>are required by
(a) law, (b) employer-employee agreement or (c) established written policy.<SPAN
class=312404915-02042009> </SPAN></SPAN></FONT></FONT></DIV>
<DIV dir=ltr align=left><SPAN style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009><FONT color=#000080></FONT></SPAN></SPAN> </DIV>
<DIV dir=ltr align=left><FONT face=Arial><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><SPAN class=312404915-02042009><FONT
color=#0000ff> </FONT></SPAN>2.)</SPAN><FONT
size=2><SPAN
style="FONT-SIZE: 7pt; COLOR: navy; FONT-FAMILY: 'Times New Roman'">
</SPAN><SPAN style="FONT-SIZE: 10pt; COLOR: navy">Severance payments (but not
accruals) associated with normal turnover are allowable. Such payments
shall be allocated to all activities of the governmental unit as an indirect
cost<SPAN class=312404915-02042009>.</SPAN></SPAN></FONT></FONT></DIV>
<DIV dir=ltr align=left><SPAN style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009><FONT color=#000080></FONT></SPAN></SPAN> </DIV>
<DIV dir=ltr align=left><FONT face=Arial><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><SPAN class=312404915-02042009><FONT
color=#0000ff> </FONT></SPAN>3.)</SPAN><FONT
size=2><SPAN
style="FONT-SIZE: 7pt; COLOR: navy; FONT-FAMILY: 'Times New Roman'">
</SPAN><SPAN style="FONT-SIZE: 10pt; COLOR: navy"><U>Abnormal or mass severance
pay will be considered on a case by case basis and is allowable only if <I><SPAN
style="FONT-STYLE: italic">approved</SPAN></I> by the cognizant federal
agency.</U><SPAN
class=312404915-02042009> </SPAN></SPAN></FONT></FONT></DIV>
<DIV dir=ltr align=left><SPAN style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009><FONT face=Arial></FONT></SPAN></SPAN> </DIV>
<DIV dir=ltr align=left><SPAN style="FONT-SIZE: 10pt; COLOR: navy"><FONT
face=Arial><SPAN class=312404915-02042009> </SPAN>Attachment A of the
Circular contains the principles for determining allowable costs.
Paragraph B.1. of Attachment A explains the meaning of the phrase “approved by
the cognizant federal agency” as follows:<SPAN
class=312404915-02042009> </SPAN></FONT></SPAN></DIV>
<DIV dir=ltr align=left><FONT face=Arial><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><SPAN class=312404915-02042009><FONT
color=#0000ff></FONT></SPAN></SPAN></FONT> </DIV>
<DIV dir=ltr align=left><SPAN style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009></SPAN></SPAN><FONT face=Arial><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><SPAN class=312404915-02042009><FONT
color=#0000ff> </FONT></SPAN>‘Approval or
authorization of the awarding cognizant </SPAN><FONT color=#000080><SPAN
style="FONT-SIZE: 10pt; COLOR: blue"><FONT color=#000080>f</FONT></SPAN><SPAN
style="FONT-SIZE: 10pt; COLOR: navy">ederal agency’ means documentation
evidencing consent prior to incurring a specific cost. If such
costs <SPAN class=312404915-02042009><FONT
color=#0000ff> </FONT></SPAN></SPAN></FONT></FONT></DIV>
<DIV dir=ltr align=left><FONT size=+0><FONT color=#000080><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><FONT face=Arial><SPAN
class=312404915-02042009> </SPAN>are<SPAN
class=312404915-02042009><FONT color=#0000ff> </FONT></SPAN>specifically
identified in the Federal Award document, approval of the document constitutes
approval of costs. If the costs are covered by a state/local
wide <SPAN class=312404915-02042009><FONT
color=#0000ff> </FONT></SPAN></FONT></SPAN></FONT></FONT></DIV>
<DIV dir=ltr align=left><FONT size=+0><FONT color=#000080><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><FONT size=+0><FONT face=Arial><SPAN
class=312404915-02042009> </SPAN>cost allocation
plan or an indirect cost proposal, approval of the plan constitutes the
approval.<SPAN class=312404915-02042009><FONT color=#0000ff><FONT
color=#000080>'</FONT> </FONT></SPAN><SPAN
class=312404915-02042009> </SPAN></FONT></FONT></SPAN></FONT></FONT></DIV>
<DIV dir=ltr align=left><SPAN style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009><FONT color=#000080></FONT></SPAN></SPAN> </DIV>
<DIV dir=ltr align=left><FONT face=Arial><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009> </SPAN></SPAN><I><SPAN
style="FONT-SIZE: 10pt; COLOR: navy; FONT-STYLE: italic">A Guide for State,
Local and Indian Tribal Government </SPAN></I><SPAN
style="FONT-SIZE: 10pt; COLOR: navy">provides assistance to government units in
applying the principles and standards of OMB Circular A-87. This
publication was issued by the U<SPAN class=312404915-02042009>.</SPAN>S<SPAN
class=312404915-02042009><FONT color=#0000ff><FONT
color=#000080>.</FONT> </FONT></SPAN>Department of Health and Human
Services as the OMB Circular A-87 implementation guide (also
known as ASMB C-10</SPAN><FONT color=#000080><SPAN
style="FONT-SIZE: 10pt; COLOR: blue">; </SPAN><SPAN
style="FONT-SIZE: 10pt; COLOR: navy">see link below) and is applicable to grants
and contracts awarded by all federal agencies. In
the section entitled “Questions and Answers on Attachment B”, Item
3-13 provides the following definition of “severance pay” and reiterates the
need for prior approval:<SPAN
class=312404915-02042009> </SPAN></SPAN></FONT></FONT></DIV>
<DIV dir=ltr align=left><SPAN style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009><FONT color=#000080></FONT></SPAN></SPAN> </DIV>
<DIV dir=ltr align=left><FONT face=Arial><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><SPAN class=312404915-02042009><FONT
color=#0000ff> </FONT></SPAN>1)</SPAN><FONT
size=2><SPAN
style="FONT-SIZE: 7pt; COLOR: navy; FONT-FAMILY: 'Times New Roman'">
</SPAN><SPAN style="FONT-SIZE: 10pt; COLOR: navy">Mass severance or termination
benefits would include all expenses associated with the event. This would
include: lump sum payments that may be linked to years of service, increased
pension benefits such as granting additional years or eliminating penalties for
early retirement, payments of unused leave and the cost of any other incentive
offered to employees as an incentive to leave government service, such as
buy-outs.<SPAN class=312404915-02042009> </SPAN></SPAN></FONT></FONT></DIV>
<DIV dir=ltr align=left><SPAN style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009><FONT color=#000080></FONT></SPAN></SPAN> </DIV>
<DIV dir=ltr align=left><FONT face=Arial><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><SPAN class=312404915-02042009><FONT
color=#0000ff> </FONT></SPAN>2)</SPAN><FONT
size=2><SPAN
style="FONT-SIZE: 7pt; COLOR: navy; FONT-FAMILY: 'Times New Roman'">
</SPAN><SPAN style="FONT-SIZE: 10pt; COLOR: navy">The cost of these special
termination benefits must be determined and prior approval of such costs must be
obtained from the<SPAN class=312404915-02042009><FONT
color=#0000ff> </FONT>f</SPAN>ederal cognizant office prior to claiming
these costs directly or indirectly against <SPAN
class=312404915-02042009>f</SPAN>ederal programs. The requests for prior
approval, at a minimum, must demonstrate the reasonableness and allocability of
such costs to <SPAN class=312404915-02042009>f</SPAN>ederal programs.<SPAN
class=312404915-02042009> </SPAN></SPAN></FONT></FONT></DIV>
<DIV dir=ltr align=left><SPAN style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009><FONT color=#000080></FONT></SPAN></SPAN> </DIV>
<DIV dir=ltr align=left><FONT face=Arial><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009> </SPAN></SPAN><SPAN
style="FONT-SIZE: 10pt; COLOR: navy">This additional information and guidance
should clarify the requirements for charging retirement incentive payments to
federal
awards. <STRONG>Please contact </STRONG></SPAN><SPAN
style="FONT-SIZE: 10pt; COLOR: blue"><FONT color=#000080><STRONG>Tomas Flores at
(503) 947-5753 or </STRONG></FONT><A
href="mailto:tomas.flores@state.or.us"><FONT
color=#000080><STRONG>tomas.flores@state.or.us</STRONG></FONT></A><FONT
color=#000080><STRONG> </STRONG></FONT></SPAN><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><STRONG>if you have any
questions.</STRONG> <SPAN
class=312404915-02042009> </SPAN></SPAN></FONT></DIV>
<DIV dir=ltr align=left><SPAN style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009><FONT color=#000080></FONT></SPAN></SPAN> </DIV>
<DIV dir=ltr align=left><FONT face=Arial><SPAN
style="FONT-SIZE: 10pt; COLOR: navy"><SPAN
class=312404915-02042009> </SPAN></SPAN><SPAN
style="FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: Arial"><FONT
color=#000080>Links:<SPAN
class=312404915-02042009> </SPAN></FONT></SPAN></FONT></DIV>
<DIV dir=ltr align=left><SPAN
style="FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: Arial"><SPAN
class=312404915-02042009><FONT face=Arial color=#000080
size=2></FONT></SPAN></SPAN> </DIV>
<DIV dir=ltr align=left><FONT color=#000080><SPAN
style="FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: Arial"><SPAN
class=312404915-02042009> </SPAN></SPAN><SPAN
style="FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: 'Lucida Calligraphy'"><A
href="http://www.whitehouse.gov/omb/circulars/a087/a87_2004.html#8"><SPAN
style="FONT-FAMILY: Arial">http://www.whitehouse.gov/omb/circulars/a087/a87_2004.html#8</SPAN></A></SPAN><SPAN
style="FONT-SIZE: 10pt; COLOR: blue"><FONT face=Arial> <SPAN
class=312404915-02042009> </SPAN></FONT></SPAN></FONT></DIV>
<DIV dir=ltr align=left><SPAN style="FONT-SIZE: 10pt; COLOR: blue"><SPAN
class=312404915-02042009><FONT face=Arial color=#000080
size=2></FONT></SPAN></SPAN> </DIV>
<DIV dir=ltr align=left><FONT face=Arial><FONT color=#000080><SPAN
style="FONT-SIZE: 10pt; COLOR: blue"><SPAN
class=312404915-02042009> </SPAN></SPAN><SPAN
style="FONT-SIZE: 10pt; COLOR: blue"><A
href="http://rates.psc.gov/fms/dca/asmb%20c-10.pdf">http://rates.psc.gov/fms/dca/asmb%20c-10.pdf</A></SPAN></FONT><SPAN
style="FONT-SIZE: 10pt; COLOR: blue; FONT-FAMILY: 'Lucida Calligraphy'"> <o:p></o:p></SPAN></FONT></DIV><p>**********************************************************************<br />This email and any files transmitted with it are confidential and<br />intended solely for the use of the individual or entity to whom they<br />are addressed. If you have received this email in error please notify<br />the sender immediately and delete the communication and any attachments.</p><p>This footnote also confirms that this email message has been swept by<br />MIMEsweeper for the presence of computer viruses.<br />**********************************************************************</p>
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