1. Department of Child Support Services OFFICE OF AUDITS AND COMPLIANCE

2. Department of Child Support Services Office of Audits and Compliance  We support the efficient and effective operation of the fiscal systems of the department by providing high quality subject matter expertise in accounting and auditing.  This office supports the state and federal mandates for oversight of governmental funds received to support the California child support system.

3. WHAT DO WE DO?  The Office of Audits and Compliance has oversight responsibility for the following audits: Trust Fund Close Out Audits Fiscal Compliance Evaluations (CS 356 Audits) OIG Reviews Internal Control Audits Special Assignments

4. TRUST FUND AUDITS The Department of Child Support Services is mandated to perform all trust fund close out audits within a year of the county completing their trust fund close out reports. Most of the counties have turned in the necessary information and reports. We still have 13 counties remaining that have not turned in their final close out report. We are continuing our efforts to reach out to these counties to assist in the preparation of these reports.

5. Authority and References for Trust Fund Audits  AB 739 “All child support collection remaining undisbursed shall be transferred to the Department of Child Support Services for deposit in the Child Support Payment Trust Fund.”  CSS Letter 05-32 Funds Transition Plan.  CSSIN Letter 06-08 Financial Closeout Report.

6. FISCAL COMPLIANCE EVALUATIONS  DCSS hires outside contractors to perform the Fiscal Compliance Evaluations for the County.  The objectives of these audits: Determine the accuracy of the expenditures and abatements reported on the CS 356. Evaluate compliance with applicable laws and regulations. Evaluate reporting controls.

7. Authority and References Financial Compliance Evaluations  OMB Circular A-87  OMB Circular A-133  45 CFR 302.10 and 302.14 Requires adequate accounting systems to support claims for federal funds. Requires periodic evaluations of local operations

8. Authority and References Financial Compliance Evaluations  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

9. The Audit Process  Planning Audit Selection  Trust Fund Audits –Based on the date the county has completed their trust fund audit  Fiscal Compliance Evaluations – These are based on the following: Assessment of Risk Various input from Regional Administrators and DCSS staff. Available staff and timing issue for the county.

10. On Site Activities  The entrance conference is held Introductions are made Scope of Audit/Evaluation is explained Designation of LCSA contact Facility arrangements  Office Space  Access to phone  Receipt of documentation

11. Reporting Results of the Audit or Evaluation  Walk away meeting is scheduled to present the findings to the county staff. 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 first chance the county has to provide documentation to refute the finding or criteria that resolves the finding.

12. Exit Conference  This meeting is scheduled weeks after the walk away. Discussion again of the findings. Discussion of further information needed. Management Representation Letter requested. Explanation of the report process. Provide estimated date for draft report. This is a second chance for the county to provide supporting documentation to dispute the finding.

13. Post Audit Process  Draft report provided to LCSA to respond to the findings Response can:  Identify further information to refute findings  Dispute findings  Accept findings  This is the last time for the county to dispute the findings. LCSA response is attached to the final report Report is made final and distributed

14. Post Audit Process  A demand letter is sent out by the DCSS LCSA Budget Section  The letter will describe each finding and process for resolution:  May require payment  May require an internal control process change  May require the county to file a supplemental claim

15. Most Common Findings for CS 356 Audits  Unabated Interest Interest earned on child support funds and child support collections must be abated on the CS 356 claim.  Lack of good Internal Controls  Unallowable Costs Cost must be necessary and reasonable for proper and efficient performance and administration of federal awards. Costs of goods or services for personal use of the government’s unit’s employees are unallowable regardless of whether the cost is reported as taxable income to the employees.  Lack of pre-approval from DCSS

16. Most Common Findings for Trust Fund Audits  Using program funds to pay off bad debt.  Late Submission of Trust Fund Close Out reports without a documented exception.  Holding Trust Fund money and not returning the amount to the state.

17. How can the DCSS Office of Audits and Compliance help ?  Attend entrance, walk away, and exit meetings when possible for the Fiscal Compliance Evaluations.  Help to explain the finding.  Provide guidance regarding action to be taken to resolve the finding.  Provide input on how to respond to the finding.  Provide information to counties who need guidance in preparing the closeout reports.

18. Questions?