Presentation on theme: "External Auditors – Common Findings in Federal Programs Allen, Green & Williamson, LLP."— Presentation transcript:
External Auditors – Common Findings in Federal Programs Allen, Green & Williamson, LLP
Brief Overview of Audit Process Auditors use the Compliance Supplement issued by Office of Management and Budget (OMB) Updated annually by federal agencies Includes information such as program objectives, suggested audit procedures, and source of regulations There are 14 compliance requirements that could apply Auditors will document and test controls over compliance requirements that are direct & material and also test compliance with the requirements
Compliance Requirements Most Common Requirements Tested: Activities Allowed/Un-allowed Normally use the budget to determine this Allowable Costs Improper payments is the focus of federal agencies What controls are in place to ensure expenditure is allowable? Does employee coding expenditures have a copy of A-87, Cost Principles Circular? Expenditure is budgeted Expenditure meets requirements of A-87 Cost Principles
Compliance Requirements Allowable Costs Expenditure is in accordance with state laws Bid laws Budget laws Ethics laws – what procedures are in place to ensure that federal program does not contract with a business owned by a board member or administrative employee? Expenditure is in accordance with board policy Procurement policy (is bid threshold different?) Ethics policy
Compliance Requirements Salaries are supported by employee certifications What is the process to ensure that all employees sign certifications? What about employees who leave before the certifications are signed? Must be dated after period of certification Findings with this requirement can result in questioned costs of a persons entire salary & benefits Travel expenditures should be in accordance with board policy Should be reasonable Attach the agenda for the conference, meeting, etc.
Compliance Requirements Cash Management Who approves the claims for reimbursement? Is this someone other than the preparer? Is approval documented? One exception in testing of claims where approval is not documented could result in a finding for internal control weakness Disbursement is made before funds are requested for cost reimbursement grants
Compliance Requirements Eligibility Targeting Keep documentation used in preparing targeting Enrollment – Public & non-public % of low income Pre-school should not be included Does someone other than the preparer check for accuracy?
Compliance Requirements Matching, Level of Effort, and Earmarking Maintenance of effort Timely submission – know when reports are due and follow up to ensure reports are filed If maintenance of effort is not met determine why and document Supplement not supplant In the following instances it is presumed that supplanting has occurred: LEA used federal funds to provide services that the LEA was required to make available under other Federal, State or local laws.
Compliance Requirements Supplement not supplant In the following instances it is presumed that supplanting has occurred: LEA used federal funds to provide services that the LEA provided with non-federal funds in the prior year LEA used Title I, Part A or MEP funds to provide services for participating children that the LEA provided with non-federal funds for nonparticipating children These presumptions are rebuttable if the LEA can demonstrate that it would not have provided the services with non-federal funds if the federal funds were not available
Compliance Requirements Period of Availability of Federal Funds Are costs charged to the correct period?
Compliance Requirements Procurement and Suspension and Debarment Was state bid law followed on all procurements If Board policy is more restrictive, Board policy should be followed Procurement findings can result in the entire contract amount being reported as questioned costs
Compliance Requirements What are the procedures for suspension and debarment? Required for all vendors paid more than $25,000 in one year How are these vendors identified? 3 ways to comply Check SAM website for vendor name Collect certification from the entity Add clause or condition to the covered transaction Do procedures cover all transactions? Contracts Purchase orders
Compliance Requirements Reporting Keep documentation used for reports Periodic expense reports Keep general ledger printout or worksheet used to complete the report Income and Expense report for CNP Most common finding for CNP because the report is submitted before all entries are made in the general ledger. Keep the general ledger or worksheet used to complete the report
Compliance Requirements Special Test and Provisions Participation of private school children Documentation of timely consultation with private school officials Expenditure records of services provided Per pupil allocation of private school children School Wide Programs Check for 3 core elements Comprehensive needs assessment Comprehensive plan based on needs assessment Annual evaluation of results
Compliance Requirements Special Test and Provisions School Wide Programs Check for the following components School wide reform strategies Instruction by highly qualified professional staff Strategies to increase parental involvement Additional support to students experiencing difficulties Transition plans for assisting preschool children
Compliance Requirements Special Test and Provisions Comparability Who prepares the report? Does someone other than the preparer review the report? Keep the documentation used to prepare the report Annual report card, High School graduation rates Test documentation to support the removal of a student from the regulatory adjusted cohort
Compliance Requirements Special Test and Provisions Access to federal funds for new or significantly expanded charter schools If the State considers a charter school to be a public school within the LEA under a covered program, this requirement applies to the LEA Were there any new charter schools under the LEA or charter schools that significantly expanded enrollment such as adding a grade? If prior year data was used for allocations, was it updated to reflect current year data?
Compliance Requirements Special Test and Provisions Highly qualified teachers & paraprofessionals What are procedures to ensure hiring of highly qualified teachers of core academic subjects? What are procedures for hiring qualified paraprofessionals in programs supported by Title I? What documentation is retained to support highly qualified determination?
OMB’s Uniform Grant Guidance Background Response to 2009 Executive Order on Reducing Improper Payments and the 2011 Presidential Memorandum on Administrative Flexibility, Lower Costs, and Better Results for State, Local, and Tribal Governments The Council on Financial Assistance Reform (COFAR) was established in 2011 and were in charge of developing the uniform guidance Established to deliver on the promise of a 21 st Century government that is more efficient, effective, and transparent
OMB’s Uniform Grant Guidance Takes what was 8 separate circulars and combines them into one document. A-87, the cost principles circular is one of the documents Will be effective for fiscal years beginning on or after December 26, Circular has 6 subparts and 11 appendices A through D Administrative requirements E is cost principles F Audit requirements
OMB’s Uniform Grant Guidance Subpart D – Post federal award requirements standards for financial and program management Financial management Financial management system should include: Identification of all federal awards including CFDA title & number, federal award identification number & year, name of the federal agency & name of pass through entity Accurate, current, & complete disclosure of the financial results of each Federal award or program Records that identify adequately the source & application of funds for federally-funded activities
OMB’s Uniform Grant Guidance Subpart D – Post federal award requirements standards for financial and program management Financial management Financial management system should include: Effective internal control over, & accountability for, all funds, property & other assets Comparison of expenditures with budget Written procedures to implement the requirements of section Payment.
OMB’s Uniform Grant Guidance Subpart D – Post federal award requirements standards for financial and program management Financial management Financial management system should include: Written procedures for determining the allowability of costs in accordance with subpart E-Cost Principles and the terms & conditions of the Federal award
OMB’s Uniform Grant Guidance Subpart D – Post federal award requirements standards for financial and program management Internal controls requires that the non- federal entity must: Establish & maintain effective internal control Internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” (Green Book) and “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations (COSO) Comply with Federal statutes, regulations & terms & conditions of the award
OMB’s Uniform Grant Guidance Subpart D – Post federal award requirements standards for financial and program management Internal controls requires that the non- federal entity must: Evaluate & monitor compliance Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings Take reasonable measures to safeguard protected personally identifiable information & other information that is considered sensitive
OMB’s Uniform Grant Guidance Subpart D – Post federal award requirements standards for financial and program management Payment Must have written procedures to implement requirements of this section Equipment Procedures for managing equipment acquired in whole or in part under a Federal award include:
OMB’s Uniform Grant Guidance Subpart D – Post federal award requirements standards for financial and program management Equipment Description Serial number Source of funding Who holds title Acquisition date Cost % of federal participation Location Use Condition Date of Disposal
OMB’s Uniform Grant Guidance Subpart D – Post federal award requirements standards for financial and program management Equipment Physical inventory must be taken every 2 years and the results reconciled with the property records Procurement standards Non-federal entity must use its own documented procurement procedures which include state and local laws provided the procurements conform to applicable federal law and the provisions of this section
OMB’s Uniform Grant Guidance Subpart D – Post federal award requirements standards for financial and program management Procurement standards Must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, & specifications of their contracts or purchase orders Must maintain written standards of conduct covering conflicts of interest and governing the performance of its employees engaged in the selection, awards & administration of contracts
OMB’s Uniform Grant Guidance Subpart D – Post federal award requirements standards for financial and program management Methods of procurement Micro purchases – do not exceed $3,000 Small purchase procedures Sealed bids Competitive proposals Non-competitive proposal – one source May be used only under certain conditions
OMB’s Uniform Grant Guidance Subpart D – Post federal award requirements standards for financial and program management Closeout Non-federal entity must submit, no later than 90 calendar days after the end date of the period of performance, all financial, performance, & other reports
OMB’s Uniform Grant Guidance Subpart E – Cost Principles General criteria to be allowable Necessary & reasonable Conforms to any limitations or exclusions set forth in these principles Be consistent with policies & procedures that apply uniformly to both federally-financed & other activities of the non-Federal program Be accorded consistent treatment Be determined in accordance with generally accepted accounting principles (GAAP)
OMB’s Uniform Grant Guidance Subpart E – Cost Principles General criteria to be allowable Not be used as a cost or used to meet cost sharing or matching requirements of any other federally- financed program in either the current or a prior period Be adequately documented Required certifications Annual & final fiscal reports or vouchers requesting payment must include a certification signed by an official who is authorized to legally bind the entity
OMB’s Uniform Grant Guidance Subpart E – Cost Principles Required certifications Wording must be exactly as outlined in this section General provisions for select items of cost through Details various classifications of costs and the treatment of those costs.
Helpful Links OMB Website for 2014 Compliance Supplement pplement_2014 pplement_2014 Uniform Grant Guidance pdf pdf Crosswalk and additional detail for Uniform Grant Guidance