1. Office of Audits and Compliance Moving Forward

2. 2 LCSA 356 AUDITS –This year State Auditor of California found in the Single Audit of the Department that we did not have proper oversight of the counties. –Federal requirements state that the Department is responsible for all subrecipient monitoring of grant funds. While there is no specific number or percentage the two completed last year by the Department did not meet the reasonableness test.

3. 3 CS 356 Review The Office of Audits and Compliance will be performing these fiscal reviews of the 356 Claim by: –Performing desk reviews of a years worth of quarterly claims for the 2007-2008 time frame. –Risk assessment will be used to designate which counties to review within a 6 month period of time.

4. 4 Risk assessment was performed by OAC including the following factors to determine who to audit and in what priority: 1. Total Cases2. Total Allocation 3. Cost Efficiency4. Late Submittals 5. Overspent Allocation6. Single Audit Issues 7. Trust Fund Issues8. Compliance Issues 9. Audited Prior by DOF Risk Assessment

5. 5 Changes Ahead OAC and management are in discussions regarding a better way to perform a more up to date audit service. The new audit review would be to audit the quarterly claims. This will benefit the counties because: –The finding can be fixed quickly. –A learning tool for counties to ensure they are completing the claim accurately. –Prevention of having costly findings after the fact. –Documentation to support the claim should be readily available.

6. 6 The Basic Components Reviews will be covering the basic areas of the 356 to ensure compliance by counties: –Internal Controls, –Operating Expenses, –All Contracts, –EDP Staff and EDP Expenses, –Lab Expenses, –Personnel Services, –Incentives and Grant Programs, –Abatements, –Walk-In-Payments.

7. 7 General Internal Controls Review process and controls in place to ensure only allowable and reasonable costs are claimed on the 356. Inquire where county maintains their overhead or indirect cost charges. Determine if inventory counts are being performed. Determine if the LCSA receives other funding sources. Review procedures and document overall assessment of the internal controls in place for the CS 356 revenues and expenses.

8. 8 Operating Expenses/Direct Service Contracts References for compliance –CS 356.1 –OMB A-87 –45 CFR Sections 304.20-304.23,95.13,74.35 and 74.41-74.48

9. 9 Space Costs –Does the amount paid and reported on the CS 356 agree with the monthly lease and common area costs? –Is the lease signed? –Was the expense incurred during the engagement period? Documents Requested by auditors –Lease agreement

10. 10 Other Facility Operations Were expenditures such as utilities, maintenance, janitorial, repairs, alterations, etc. incurred by the LCSA and paid during the period under review Was the expense amount reported incurred by the county? Ensure that expenses incurred in this category are not already covered in the lease agreement. Types of documents requested by auditors. –Lease agreement –Documentation of expenditures spent in this area.

11. 11 Payments to Other County Agencies Review of any agreement regarding payments to other county agencies to ensure expenditures were spent on child support related costs. Was the payment made during the period under review? Types of documents requested –Detailed list of all LCSA contracts in effect during the engagement period. –Copy of inter-agency agreements in effect during the engagement period. –Copy of any MOU, other contract or arrangement agreement with any public agencies during the engagement period.

12. 12 Other Contractor Expenses Non- EDP If DCSS negotiated contract for LCSAs, do all invoices go directly to DCSS? Did the LCSA have a contract with public or private entities not included in “payment to other county agencies” as required? Was the expenditure incurred and paid during the period under review? Trace the expenditures to the general ledgers and invoices. Ensure adequate monitoring by the LCSA. Types of documents requested: –List of LCSA personnel that were authorized to request and approve contracts during the engagement period. –Detailed list of all the other contractor’s expenditures incurred and paid during the engagement period. –List of other contracts and/or agreements that were negotiated and signed by the LCSA during the engagement period. –Copies of all other contracts and/or agreements in effect during the engagement period.

13. 13 All Other Operating Expenses Determine the composition of the expenditure. Verify the claimed amount reflects the amount paid. Was the expenditure claimed during the appropriate period and child support related?

14. 14 Direct Service Contracts Verify amount paid by the LCSA was amount claimed. Determine if the expenditure was made during the correct period. Determine if it was child support related. Ensure there was adequate monitoring. Documents to be Reviewed –Detailed list of all “Direct Service Contracts” that were in effect during the engagement period. –Detailed list of all “Direct Service Contracts” expenditures that were incurred and paid during the engagement period. –List of LCSA personnel that were authorized to request and approve direct service contracts during the engagement period.

15. 15 EDP Staff and EDP Expenses References –45 CFR Sections 304.22- 304.23,95.601,95.701,74.34,95.13,74.41 –OMB A-87 –All pertinent LCSA Letters –Correspondence between DCSS and LCSA

16. 16 EDP Staff and EDP Expenses Ensure that expenditures are authorized and recorded properly to EDP account numbers. Verify if the expenditure was incurred and paid during the engagement period. Verify that the actual EDP expenditure paid is the amount claimed in the 356. Determine if the LCSA followed the DCSS EDP equipment procurement specifications. Verify the LCSA followed DCSS instructions on the required contract language for MOU with the county’s information technology department. Ensure there was adequate monitoring of the contract. Ensure breakout of expenditures are correct with dropdown account numbers. Documents Requested –Copy of listing of equipment for EDP purchases during the engagement period. –List of LCSA personnel that were authorized to request and/or approve EDP purchases during the engagement period. –Copy of EDP physical inventory report that were generated during the engagement period. –Detailed list of EDP equipment allocated expenditures for administrative services and EDP program during the engagement period. –List of LCSA EDP staff for EDP operations during the engagement period.

17. 17 Laboratory References –45 CFR Sections 304.20-304.22374.41-74.48 –OMB A-87 –All pertinent LCSA Letters –Correspondence between DCSS and LCSA

18. 18 Laboratory Expenses Verify the LCSA had a contract with a vendor. Trace and agree the amount reported on the 356 to supporting documents. Ensure contract was adequately monitored. Determine if the expenditure was child support related. Ensure the expenditure was incurred during the period of review. Ensure lab expenses recovered are documented and claimed. Requested Documents –Copy of contract for the Lab expenses pertinent during the engagement period. –Supporting documentation of amounts reported on the 356 during the period under review.

19. 19 Personnel Services References OMB A-87, Attachment B, Section 11 All CSSIN and LCSA Letters pertinent to the area.

20. 20 Personnel Services Ensure the LCSA completed time certification or time studies. Verify costs charged on the 356 related only to wages, salaries and fringe benefits. Trace employees who worked on the program to time sheets/time cards, duty statements and to personnel documents to determine whether the employee worked on the child support program for the amount of time charged on the CS 356. Determine adequate controls are in place for determination of benefit payments. Ensure the salary paid to employee is the amount claimed on the 356. Determine the wages were paid prior to LCSA claiming expenditure on the 356 and in the correct period. Documents Requested –Separation of Duties matrixes. –Payroll Register from the LCSA. –Timesheets/Timecards used for Time Study or Time Certification signed by Employee’s and Immediate Supervisors for the engagement period. –Copy of payroll authorization signature and approvers lists. –Duty Statements for all LCSA Management and staff.

21. 21 Incentives References –Family Code Section 17714 –CSS Letters

22. 22 Incentives Determine the amounts of incentive money received by the county. Determine amount of incentive money expended. Verify the funds have been reconciled and deposited into the correct account. Determine interest earned.

23. 23 Other Fees or Program Income Determine if fees/other program income were earned. Determine if the County followed their procedures regarding disposition. Verify the LCSA reported the income on the CS 356 as abatement and document their analysis. Documents Requested –Itemized list of deposits, accumulation, and expenditures of Fees or program income during the engagement period. –Copy of any grant received by the state and the disposition of those funds.

24. 24 Abatements Reference –45 CFR Section 74.24, –Government Code Sections 29802, 50050, 50051 and 50055 – Unclaimed Property, –California DSS Policies and Procedures Manual, Section 12- 430(k) – Treatment of Undeliverable and Uncashed Warrants, –LCSA Letter 03-10 – CS 34 and CS 356 Reporting Instructions for Undistributable/Abandoned Collections, –CSS Letter 04-22 – Undistributed Collections Instructions and Disbursement Policies, –45 CFR Subtitle A, Section 74.22 – Payment, –Family Code Section 17714, –LCSA letter 02-36 – Interest Earned on Child Support Funds –Disposition of Equipment, –45 CFR Section 74.34 – Equipment.

25. 25 Abatements Review the status of any undistributed/unreconciled funds. Determine if the county has escheated and abated any funds on the 356 during the period under review and quantify. Determine any interest earned on funds still not returned. Documents Requested –Detailed list of undistributable or abandoned collections during the engagement period. –Itemized list of fees or program income received during the engagement period. –Detailed list of interest income received during the engagement period.

26. 26 Walk in Payments Ensure all cash walk-in payment records are maintained, reviewed, and up to date. Review proper segregation of duties. Review bonding of all employees that handle IV- D funds. Verify amounts are recorded and reconciled appropriately. Documents requested –Records documenting all cash payments. –Past reconciliations performed.

27. 27 Review Activities The entrance conference is held via telephone conference or onsite. –Introductions are made. –Scope of Evaluation is explained. –Designation of LCSA contact. –Auditor Updates to County Management During the course of the audit the audit staff will keep management apprised of any findings or issues that may come up. This is the first chance the county has to provide documentation to refute the finding or criteria that resolves the finding.

28. 28 Reporting Results of the Audit or Evaluation In most cases a telephone conference is held to present the findings to the county staff which includes discussion of: Control or compliance findings and discussion items. Request for any documentation that may change current issues discussed. The county has a chance to respond to the findings by: Asking for an explanation of the criteria used. Provide documentation to refute the finding. This is the second chance the county has to provide documentation

29. 29 Post Audit Process Draft report provided to LCSA to respond to the findings –The LCSA response may: Identify further information to refute findings, Dispute findings, Accept findings. This is the last time for the county to dispute the findings.

30. 30 Final Report Issuance Final Report is Issued and the following occurs: –The LCSA’s response is included in the draft report. –The final is created from the draft and the responses of the LCSA. –Report is made final and distributed. Copies are distributed to the following parties: Director of the LCSA and any other parties the counties requested be included, Executive Office of the Department of Child Support Services (Director, Chief Deputy Director, and Assistant Director), DCSS, Office of Audits and Compliance, DCSS, County Allocations.

31. 31 Most Common Findings for CS 356 Reviews Health Incentive Funds –Health incentive funds not reverted to the state –Unexpended health insurance incentives –Unallowed health expenditures claimed Lack of Internal Controls –Fixed assets –CS 356 Preparation –Fiscal Controls/Accounting Procedures –Commingling of program expenditures and program income –Incomplete information of property ledger –Inappropriate classifying of county DCSS charges –Inadequate policies and procedures Surplus Fund Balance

32. 32 Most Common Findings for CS 356 Reviews Expenditures –Improper reporting of expenditures –Expenditures not reviewed and inadequate supporting documentation –Double claiming of expenditures –Unallowable operating expenditures-purchasing personal use items, using administration funds to pay off bad debt –Unnecessary expenditures- renting a postage meter instead of requesting mail services from the county. Fixed Assets –Improper reporting of fixed assets expenditure –Inaccurate property accounting –Improper property tagging –Overstated fixed assets

33. 33 Most Common Findings for CS 356 Reviews Abatements –Revenue not reported as abatement –Understated interest abatements Capital Expenditures –No prior approval by the Department –Not claiming expenditures in the period incurred Personnel –Time study and time certifications not prepared –Inappropriate Personnel Expenditure EDP –Improper allocation of EDP –Purchased with Non-EDP funding

34. 34 TIPS FOR PREPARING FOR AN AUDIT Understand the auditor’s questions; many times findings are problems with semantics and misunderstandings. –Explain processes clearly –Help the auditors to resolve the issues Keep your management in the loop about what is going on during the audit.

35. 35 TIPS FOR PREPARING FOR AN AUDIT DOCUMENT, DOCUMENT, DOCUMENT! Documentation for expenses, Appropriate Approvals, Audit Trails, Knowledge of Policies and Regulations Remember it is the responsibility of the county to keep adequate documentation to back up any questions auditors may have during the performance of the audit.

36. 36 Question 1 George worked 176 hours in November 2009, and reported 88 hours of work as Child Support Function and 88 hours as C&D SDU Costs. His Salary and benefits for the month was $3600 even. How would this be claimed on the CS356.2? A.$3600 reported under column 2 “Direct Personnel Services Expenses” and 176 hours recorded under column 4 “Time Study Hours” all on Child Support Function line. B.$3600 split in half and recorded under column 2 “Direct Personnel Services Expenses”. Half on C&D SDU Costs line and half on Child Support Function line. C.Subtract $3600 from salaries to be recorded in column 2 “Personnel Services Expenses”, $1800 from amount on Child Support Function line and $1800 from amount on C&D SDU Costs line. Record 88 on Child Support Function line and 88 on C&D SDU Costs line under column 4 “Time Study Hours”. D.Subtract $3600 from CS356.1 Line 1. Total Personnel Services Expenses (Non-EDP) and on CS356.2, record 88 on Child Support Function line and record 88 on C&D SDU Costs line under Column 4 “Time Study Hours”.

37. 37 Answer for Question 1 C -- Person is using time study because the hours are mentioned and November is not one of the normal time certification months. For time studies, salaries and benefits are included on the CS356.1, not included in the CS356.2 column 2 Direct Personnel Services Expenses, this column is only used for personnel that are time certifying. Then when the hours are included in the time study hours column, the ratios are created to allocate the salaries and benefits that flow to the Column 6 “Allocable Personnel Services Expenses”.

38. 38 Question 2 Your LCSA has a contract with E-Oscar, how do you include costs on the CS356? A.After including E-Oscar line on the CS356.2, record costs on Line 2 “Direct Personnel Services Expenses” B.After including E-Oscar line on the CS356.2, record costs on column 7 “Direct Services Contracts” of the CS356.3 on line for E-Oscar. C.Record E-Oscar costs on Line B-B-2 on CS356.1 “Operating Expenses (Non-EDP)” “Contractor Expenses” “Other Contractor Expenses” then after including E-Oscar line on the CS356.2, record costs on Line 4 “Direct Operating Expenses” of the CS 356.3 on line for E-Oscar. D.Record E-Oscar costs on Line B-B-2 on CS356.1 “Operating Expenses (Non-EDP)” “Contractor Expenses” “Other Contractor Expenses” then subtract amount of costs from CS356.3, column 4 “Direct Operating Expenses” so that contracts costs will allocate to all lines of costs in column 5 “Allocable Operating Expenses”.

39. 39 Answer for Question 2 B -- alternative answer C but be consistent. Best answer is b, because the E-Oscar has it’s own activity line and since the contract is a direct cost to E-Oscar only, it should be included on the CS356.3 in column 7 “Direct Services Contracts”. If you include it here, then it should not be included on the CS356.1 under Operating Expenses. If you have consistently been including it on the.1 and claiming it on line 4 of the CS356.3 “Direct Operating Expenses” on the E-Oscar line, it is OK to continue, do not change. Most important is to be consistent.

40. 40 Question 3 Your LCSA is paid every two weeks on a Friday and your last pay period started on June 24, your next pay date is July 7th. How do you claim the two weeks pay of $20,000? A.Record all $20,000 on 4th quarter’s claim B.Record $10,000 on 4th quarter’s claim and hold $10,000 to record on next quarter’s claim C.Record all $20,000 on next claim since that’s the quarter when you are getting paid. D.None of the above.

41. 41 Answer for Question 3 C – It’s a cash basis claim, If you pay the payroll in July, you record it in July.

42. 42 Question 4 The County Auditor/Controller notifies you that your 3rd quarter interest was $3000. 3 days later, the Auditor/Controller calls and lets you know that they had made a mistake and given you $2000 too much interest in both the 4th quarter of last fiscal year and the 2nd quarter of this fiscal year and they want the funds returned to them now. How do you claim this? A.Hurry up and create a supplemental claim for the 4th quarter of last State Fiscal Year to subtract the interest in Section VII of CS356.1. Create a supplemental claim for the 2nd quarter and reduce the interest in section VII of CS356.1. Then start your 3rd quarter claim and include the $3000 you’re getting this quarter in Section VII of CS356.1. B.Start a 2nd quarter supplemental CS356 and record both the $2000 reductions in this Fiscal year. C.In the 3rd quarter claim, add the $3000 to Section VII, line A “Interest” and then on Line B “Misc. Program Income” put the ($4,000). D.In the 3rd quarter claim, record ($1,000) to Section VII, Line A “Interest”.

43. 43 Answer for Question 4 D – Again, it’s a cash basis claim, if they are taking the money away in the third quarter, that’s when you declare it’s cost

44. 44 Question 5 Your 2010 Countywide Cost Allocation Plan Negotiation Agreement from the State Controllers Office is sent to you from the County Auditor/Controller. The A/C let’s you know that your indirect costs this year are going to be $1000 a month. The Negotiation agreement for your column, bottom line adjusted costs is negative ($20,000). What are you going to be claiming in Section IV, CS356.1? A.Since you have to pay the County $3,000 a quarter, that is what you will record. B.Your adjusted amount is ($5,000) a quarter and you have to pay the County $3,000 so it would be ($2,000) you would be claiming per quarter. C.You would be claiming ($5,000) a quarter. D.None of the above.

45. 45 Answer for Question 5 C – The Countywide Cost Allocation Plan and the Negotiation Agreement, declares the maximum you may claim. But even if it is a negative amount, you must claim this amount for the Fiscal Year.

46. 46 Question 6 Your LCSA is wanting to create an exhibit at a local street fair about the Department of Child Support Services. Of the following activities, which ones are not allowable according to Code of Federal Regulations, Title 2 Part 225 (formerly OMB A-87)? A.The cost of the exhibit. B.The salaries and wages of employees setting up the exhibit. C.The cost of beer given out at the exhibit. D.All of the above.

47. 47 Answer for Question 6 D – See Attachment of CFR Title 1 Part 225 with #6 on it.

48. 48 Question 7 The out-houses behind your office are termite ridden and need to be replaced. You decide you also need to make the area look a little better and also need to improve some equipment inside the office too. Which of the following statements are false? A.Besides putting in two replacement out-houses, you decide you need one more, that would be two for the women and one for the men. Because each one does not exceed $2,000 each, you do not need to get prior approval in advance from the awarding agency. B.You decide to replace your worn down letter processing machine. Because the old machine was bought by the LCSA using 66% Federal & 34% State funds, so you can trade in the old machine or sell it and use the proceeds to offset the cost of the new machine. C.The out-houses need to be protected from view, so you are also getting $8,000 in shrubs to hide the out-houses and protect them against the wind. This increases the value of the property, but only by $8,000. Since the value did not increase by $10,000, you do not need to get prior approval in advance from the awarding agency. D.Equipment and other capital expenditures are not allowable as indirect costs.

49. 49 Answer for Question 7 A and C – See, I told you there could be more than one correct answer. See Attachment of CFR Title 1 Part 225 with #7 on it.

50. 50 Question 8 Which of the expenses below would not be claimed on the CS356.1, “All Other Operating Expenses (Non-EDP)”? A.Postage Expenses B.Parking Fees C.Professional Membership Dues D.Grounds Maintenance

51. 51 Answer for Question 8 D -- No question, grounds maintenance should be claimed in the Other Facility Operations section.

52. 52 Question 9 Your LCSA has purchased an approved Over the Counter (OTC) Payment Processing system (hardware) in the current fiscal year to comply with SDU turn around requirement at a cost of $30,000.00. How would you claim this purchase on your current year CS 356? A.As a $30,000 EDP non-recurring expenditure in the current year. B.As a $6,000 EDP non-recurring expenditure in the current year C.As a $30,000 All Other Operating Expense in the current year D.As a $6,000 All Other Operating Expense in the current year

53. 53 Answer for Question 9 B See LCSA Letter 09-08 Depreciable Equipment – Per the Office of CSE Action Transmittal (AT) 94-5 dated July 22, 1994, EDP equipment exceeding a total acquisition cost of $5,000 must be depreciated and claimed over a five-year period. This applies for the first and following four years of a five year depreciating schedule. Additional info: See Interim Systems EDP M&O Funding Requests Budget Line Item Definitions, Attachment II Table 3 (Hardware Depreciable).

54. 54 Question 10 The Plan of Cooperation (POC) is a document that reflects DCSS and LCSA program responsibilities. In the POC Section IV Fiscal Administration, under Accounting and Record Keeping, which of the statements below is not true? A.The LCSA shall have in place and maintain accounting standards and systems consistent with uniform accounting procedures prescribed by federal and State requirements. B.The LCSA shall establish surety bonds in amounts sufficient to protect the county against loss from employee dishonesty C.The LCSA shall have policies and procedures to ensure timely tracking and monitoring of expenditures. D.The LCSA shall allow federal, State or contract auditors to conduct required audits.

55. 55 Answer for Question 10 B -- Plan of Cooperation Section IV Fiscal Administration

56. 56 Question 11 John is an LCSA support staff assigned to perform administrative support activities (clerical) 40% of the time. John went back to school and took computer classes, because of John’s new computer skills, he is also assigned to perform activities directly related to the maintenance and operations of the CSE system 60% of the time. How much of John’s salary is chargeable to EDP Salaries? A. 60% B.100% C.40% D.None of the above

57. 57 Answer for Question 11 A -- Interim Systems EDP M&O Funding Requests Guideline and Instructions, Attachment II Table 2.A LCSA Personnel

58. 58 Question 12 Ted is an LCSA new hire with an MIS degree. Ted was hired to perform technical activities directly related to the maintenance and support of the CSE system, but because he is new, he needs to go to training. How will you charge his training expense? A.Under EDP OE&E B.Under Admin Personnel Services Expense C.Under Admin Other Operating Expense D.Under E-Oscar

59. 59 Answer for Question 12 A -- Interim Systems EDP M&O Funding Requests Guideline and Instructions, Attachment I.E

60. Questions?

61. 61 References –The Federal Government requires the state to perform oversight of federal funds for the child support program to ensure the counties remain in compliance with Federal Regulations. This includes the following requirements: OMB Circular A-87 /2 CFR Part 225 This circular establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments and federally recognized Indian Tribal Governments. OMB A-87 WEBSITE http://www.whitehouse.gov/omb/circulars/a087/a87_2004.html OMB Circular A-133 This circular sets forth standards for obtaining consistency and uniformity among federal agencies for the audit of states, local governments, and non- profit organizations expending federal awards. OMB A-133 WEBSITE http://www.whitehouse.gov/omb/circulars/a133_compliance/08/08toc.html

62. 62 References 45 CFR 302.10 and 302.14 Uniform Administrative Requirements for Grants and Cooperative Agreements to State, Local and Tribal Governments –Requires adequate accounting systems to support claims for federal funds. –Requires periodic evaluations of local operations LCSA Letters –05-09 Agreed Upon Procedures of Local Child Support Agency Administrative Costs. Agreed Upon Procedures – February 15, 2005 CSS Letter 04-20 Clarification of Child Support Administrative Claiming and Financial Policies CSS Letter 05-05 Clarification of Non-Electronic Data Processing Automation Requests and Cost Threshold for Equipment Inventories 45 CFR, Part 95 General Administration, Grant Programs

63. 63 References Welfare and Institutions Code, Section 10084- State funding for automation and Annual Cooperation Agreement. Family Code 17702-17714- Performance incentive/excess funds. CSS letter No. 00-12 – The LCSA must submit their supplemental claims within nine months after the end of the quarter in which the costs were paid. CSS Letter No. 04-02 – Clarification of Child Support Administrative Claiming and Financial Policies. (Clarification in CSS Letter No. 05-19)

64. 64 References 45 CFR, Part 304 Federal Financial Participation 45 CFR, Part 305 Program Performance Measures, Standards, Financial Incentives, and Penalties 45 CFR, Part 307 Computerized Support Enforcement Systems State Plan.

65. 65 References Plan of Cooperation between LCSA and DCSS states that: –Have in place and maintain accounting standards and systems consistent with uniform accounting procedures prescribed by Federal and State requirements. –Maintain accounting and fiscal record keeping systems sufficient to ensure that claims for available funds are submitted and retained in accordance with State and Federal regulations. –Have policies and procedures in place to ensure timely tracking and monitoring of expenditures compared to budgeted and allocated amounts.