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2012 ESG Implementation Training KHC Compliance. What is Compliance Monitoring?

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Presentation on theme: "2012 ESG Implementation Training KHC Compliance. What is Compliance Monitoring?"— Presentation transcript:

1 2012 ESG Implementation Training KHC Compliance

2 What is Compliance Monitoring?

3 What is the monitoring process?

4 Monitoring Process Agencies are selected for review based on an ongoing risk analysis of several criteria: Amount of funds awarded. Expenditure levels. Staff experience. Results of previous reviews. Length of time since previous monitoring.

5 Have I been selected? A representative from the Compliance Department will contact you. When a date is confirmed, you will be sent a scheduling letter. Please read it!

6 How do I prepare? A list of files and documents needed will be provided with your scheduling letter. Some items will be requested in advance. Please send these items by the requested date.

7 Can I get through this quickly? Arrange for a quiet space for the monitor to work, with as little interruption as possible. Ensure a working electrical outlet is available in the space. The monitor will ask you to give a brief about your program when they arrive. Once the monitor is oriented you may proceed with your day.

8 During the Review Remember, your monitor will have questions. Don’t panic!

9 After the Review You will have an exit conference with the monitor to discuss the results of the review. Don’t panic!

10 After the Review Within a few weeks, you will receive a letter with the final results. The letter may be: All clear Concerns Findings

11 If you’re not “All Clear” The letter will: Detail the findings/areas of concern. Outline the program requirement and/or regulation. Provide a recommended method of correction.

12 What is a finding? A finding is non-compliance with an ESG program requirement. If you have findings, please do NOT panic. However, be aware a finding is a serious matter. If left uncorrected, it will jeopardize future funding from KHC and HUD.

13 A response to the finding(s) is required in 45 calendar days.

14 Frequent Areas of Non-Compliance Documenting homelessness Calculation of income Rent reasonableness Ineligible and undocumented costs Segregation of duties Time and activity reporting Documenting required match

15 Documenting Homelessness

16 Best Practices Step 1: Be familiar with HUD’s definition of homelessness, as it applies to your program. Step 2: Obtain adequate information to determine the eligibility of the person you are trying to assist. Step 3: Obtain the required documentation, as referenced in the Recordkeeping Requirements Section of the Homeless Definition Insert and the Interim rule. Step 4: Always maintain the documentation in the client file.

17 HUD Preferred Order of Documentation Third-party source documentation. Documentation from staff, based on observation. Client self-certification – This should be your last resort.

18 Calculating Income

19 Calculating Annual Income Always use the standard for calculating income under 24 CFR Area Median Income (AMI) is available at

20 Calculating Annual Income 1.If paid by the hour: Hourly rate x Hours x 52 weeks = Annual Income 2.If paid salary by the week: Weekly salary x 52 weeks = Annual Income 3.If paid salary on a bi-weekly basis (every other week): Bi-weekly salary x 26 pay periods = Annual Income 4.If paid salary on a bi-monthly basis (twice per month): Bi-monthly salary x 24 pay periods = Annual Income 5.If paid salary on a monthly basis (or a government benefit): Monthly amount x 12 pay periods = Annual Income

21 Special Circumstances School personnel and bus drivers Most jurisdictions now allow these employees to choose either year-round pay or seasonal pay. If seasonal, you must confirm with the Board of Education’s personnel department what the number of paid weeks are per year.

22 Special Circumstances (cont.) Self-employed housekeepers, babysitters, and caretakers Use one of the five methods discussed earlier that best fits the pay pattern. Self-employed business owners (including construction) Review the client-completed, self-employment affidavit and most recent tax return. Compare income and expenses. Any large discrepancies must be explained in writing.

23 Averaging Pay Fluctuations Obtain pay data for 30 days or more. For hourly employees: –Add the hours on each pay stub and divide by the number of pay stubs. This is the average number of hours. Follow the hourly employee method. For Salary Employees: –Add up the gross amount received on each pay stub and divide by the number of pay stubs. This is the average salary. Follow the appropriate salary equation method.

24 Best Practices Be consistent. Use current income. Use gross pay (before taxes). Show your calculations. Don’t forget to count overtime, bonuses, and holiday pay. Follow up on incomplete verification forms

25 Best Practices (continued) All household members who are 18 and older with zero income must complete zero-income certifications. Do not assume 4 weeks per month

26 Documenting Rent Reasonableness

27 What is Rent Reasonableness? It is different than Fair Market Rent. Agencies must establish policies for determining and documenting rent reasonableness. Assistance cannot be provided for units that do not meet this standard. Required for both Prevention Rapid Re- housing, and for all programs using HUD leasing dollars.

28 Checklist and Certification Form Available on HUD’s Web site: library/forms/rentreasonablechecklist.doc

29 Common Mistakes Missing address of proposed unit or does not match Missing addresses of comparable units Missing number of bedrooms for proposed and comparable units Missing utility types Missing utility allowance Gross rent not figured. Incomplete certification (not signed or dated)

30 Ineligible/ Undocumented Costs

31 What is an ineligible cost? Costs are eligible when they are allowable under the grant, able to be allocated to the grant, and are determined to be reasonable.

32 Examples of ineligible costs Costs incurred for ineligible clients or an ineligible unit. Costs for items or activities that are not approved in the grant agreement. Salary incurred for a case management supervisor when not working directly on participant issues. Conferences, fund raising, and training in professional fields. Salary of an organization’s executive director, unless carrying out documented eligible activities. Costs associated with the organization rather than the ESG project (fundraising, advertising pamphlets, etc.)

33 What is an undocumented cost? Costs without supporting documentation or having inadequate documentation. There must be clear source documents on all transactions!

34 What is source documentation? A bill or invoice from the source of the expense. Examples 1.Utilities: Bill or letter from utility company 2.Rent: Copy of lease or letter from landlord 3.Supplies and Equipment: Copy of invoice from the supplier of the merchandise 4.Travel: Mileage and travel logs

35 What is NOT source documentation? 1.Purchase order 2.Check request or requisition form 3.Other internal documents created by the agency and not the source of the expense * Having a receipt only can be “iffy” because it shows the amount paid, but not the amount that was due. However, a receipt with an invoice or bill is perfect!

36 Segregation of Duties

37 What is segregation of duties? An internal control, which helps reduce the risk of mistakes and inappropriate actions.

38 How do we achieve it? Ensure that no single person does all of the following. Initiates a transaction Approves a transaction Records a transaction Reconciles balances Handles assets Reviews reports

39 For example… The person who prepares the draw request should not be the one who approves the request. The person who approves the draw should not be the one who reconciles the financial reports or have possession of the checks. The person who maintains and reconciles the accounting records should not have access to the checks. The person who opens the mail and prepares a list of checks received should not be the person who makes the deposit or maintains the accounts receivable.

40 Remember! Family members may not approve other family members’ transactions or sign checks made to themselves or other family members.

41 We’re a small agency… How will we keep our books? Don’t panic! Develop formal financial management policies, which ensure two sets of eyes review all transactions. Use your Board! When in doubt, contact your program representative for assistance.

42 Time and Activity Reporting

43 What is required? HUD requires all salaries paid from McKinney Act funds be supported by detailed time and activity reports. KHC requires that time be tracked in a minimum of one-hour increments.

44 What must be included? Staff person’s name and title. The date. The employee’s and the supervisor’s signature. A detailed description of the eligible activities and hours the work is performed for HUD grants by category. Example: Date: Monday December 1 Time: 9:00-10:00 a.m. Activity: Conducted initial evaluation Client: Joe Jackson (unsheltered client) Cost Category: ESG Street Outreach case management

45 Hourly Breakdown Sample Date: Monday December 1 Time: 8:00- 9:00 Activity: Preparing ESG draw request Cost Category: ESG Admin Time: 9:00-10:00 Activity: Conducted initial evaluation of needs Client: Joe Jackson Cost Category: ESG Street Outreach Engagement Time: 10:00-11:00 Activity: Attended staff brunch Cost Category: General – Not billed to grant Time: 11:00-12:00 Activity: Developed housing plan for shelter client Client: Tina Green Cost Category: ESG Emergency Shelter case management

46 Hourly Breakdown Sample (cont.) Time: 12:00-1:00 Activity: Developed housing plan for shelter client Client: Amy Archer Cost Category: ESG Emergency Shelter case mgt. Time: 1:00-1:30 Activity: Traveled to Second Avenue Park for scheduled meeting with homeless client (Timmy Smith ) Cost Category: ESG Street Outreach Case management Time: 1:30-2:30 Activity: Met with homeless client to review eligibility documents and begin to develop a housing plan Client: Timmy Smith Cost Category: ESG Street Outreach Case Management Time: 2:30 -3:30 Activity: Helped with Head Start party (not billable to HUD grants) Time 3:30-4:00 Activity: HMIS Data Entry Timmy Smith Cost Category: ESG HMIS Data Entry

47 Things to Remember Activity and hours worked must be reported by category and be a true accounting of actual hours worked. Time and activity reports must be completed after the time is worked. A time sheet that looks the same every week is a red flag! Sample time and activity logs are available by request from your program representative.

48 Documenting Required Match

49 What is documentation? A written record of who, what, when, where, why, and how.

50 How to Document Must keep records of the source and use of funds to meet the match requirements. Records must show how the value placed on third-party, non-cash contributions is determined. Match must be traceable through the agency’s financial records. Must be spent on eligible ESG costs that supplement the ESG program. Volunteer services must be supported by time and activity records.

51 Remember… Document!

52 That’s all folks!


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