1. Office of Field Services Fiscal Review Process Becky Pennington Susan Szymas February 7, 2013

2. 2 Program Fiscal Reviews The program fiscal review process complements the On Site Review process Goal: Review all LEAs within a 5-year cycle Program fiscal reviews have a different scope and do not replace Single Audits

3. 3 Fiscal Review Process Selection Risk-based criteria Notice Date and required documentation On Site Visit Audit fiscal records Prepare report Require compliance plan for findings

4. 4 Risk Factors Size of Title I Allocation Late application or amendment submission when “Grant Funds Available” Deviations found on Final Expenditure Reports (FERs) LEAs reporting a deficit Single Audit findings

5. 5 Risk Factors Low Graduation Rate Not making proficiency targets for Reading or Mathematics A school on the Persistently Low Achieving (PLA) List And …

6. 6 Risk Factors The degree to which: 1.This LEA has excellent educational program and business office staff working cooperatively to manage grant programs 2. This LEA produces excellent comprehensive needs assessments and school improvement plans likely to accelerate student achievement

7. 7 Risk Factors The degree to which: 3.This LEA respects all of the major laws, regulations, and guidance for OFS grant programs All risk factors are considered in identifying highest priority for fiscal reviews

8. 8 Documents Requested Prior to Visit Staff list for those funded by each Consolidated Application program FTEs and their respective assignments List should identify the staff and specific funding source(s) General ledger expenditure summary (both payroll and non-payroll) including grant source cost centers for each grant for prior fiscal year General ledger expenditure detail for Title I, Part A

9. 9 Documents Requested Prior to Visit Policies and Procedures for: Cash Management, Procurement, and Payroll Inventory list of all equipment purchased with Consolidated Application funds (list needs to identify which federal program the equipment was charged to) General ledger account description

10. 10 Documents Made Available During Visit For selected employees, the following original documentation: Payroll summaries for selected sample for a selected pay period Personnel activity reports (PARs), semi-annual certifications Teacher certifications Professional licenses Evidence of criminal background checks Employee contracts, bargaining unit step information

11. 11 Documents Made Available During Visit General Ledger detail for payroll and benefit expenditures for Consolidated Application funded staff Final Expenditure Reports (FERs) For selected supplies and materials: Invoices/Receipts Purchase Orders/Requisitions Duplicate checks Travel Reimbursements forms (when applicable)

12. 12 Documents Made Available During Visit For selected contracted services: Original Contracts Bid documents Invoices for selected services Evidence of criminal background checks on contracted individuals For selected equipment purchases: Inventory Listing Invoices, approvals Physical inspection (location, use, tag identifications)

13. 13 Scope of Program Fiscal Reviews Staff Provide evidence the employee is highly qualified Provide evidence the employee has had criminal background screening Teacher certificates or professional licenses

14. 14 Scope of Program Fiscal Reviews Policies and Procedures Provide Board approved Policies and bylaws for Cash Management, Payroll, and Procurement; Business office Manuals/Procedures/Internal Controls Narratives are not considered policies and procedures Policies and procedures need to be on school letterhead OFS will examine these documents and compare them to actual LEA operations

15. 15 Scope of Program Fiscal Reviews Cash Management System (CMS) Copies of the LEAs cash draws from CMS and the supporting documentation from the general ledger for each cash draw during the grant period Payroll Expenditures Provide a payroll summary for each employee, indicating all the accounts the selected employee is charged to for the selected pay period OFS may use this information to decide if an employee should have completed a PAR or a semi-annual certification

16. 16 Scope of Program Fiscal Reviews Payroll Expenditures (continued) Time cards for hourly staff for the selected pay period; we compare hours worked to the hours charged to the grant If a specified percentage of time is charged each pay period through the payroll accounting system, then we expect to see a quarterly reconciliation of the actual hours worked versus hours charged If time cards do not clearly indicate the hours staff worked on a grant, then detailed logs will be used to define this information

17. 17 Scope of Program Fiscal Reviews Payroll Expenditures (continued) PARs or semi-annual certifications for all selected employees; OFS will verify the hours/FTE to the time and effort documents for accuracy Step, level and education criteria will be compared to the bargaining agreements If paraprofessionals are not part of a bargaining agreement, then an LEA wage scale document will be used for the same purpose

18. 18 Scope of Program Fiscal Reviews Budget Provide a general ledger summary, complete with budget information OFS compares the LEA’s board approved budget to the budget in the Consolidated Application and to actual LEA expenditures The scope of the budget comparison is by function code, object code 10% rule applies to subtotal in approved function code Budget changes need prior approval from OFS Consultant (EDGAR 80.30)

19. 19 Scope of Program Fiscal Reviews Budget (continued) If two different projects for Title I, Part A have expenditures in a single fiscal year, (i.e. the grant for 2011/2012 and the grant for 2012/2013) then OFS expects to see two separate cost centers, one for each project Expenditures should not be coded in the cost center, if they are not approved in the Consolidated Application Some LEAs want to track all expenses related to Title I and record them in the grant cost center which may be considered commingling of federal and local funds

20. 20 Scope of Program Fiscal Reviews General Expenditures Provide a detailed, non-payroll general ledger of Title I, Part A OFS will compare actual expenditures with approved budget items in the Consolidated Application Expenditures should be readily identified in the Consolidated Application and should be classified as they were approved in the Consolidated Application

21. 21 Scope of Program Fiscal Reviews Final Expenditure Reports (FERs) Provide a general ledger summary for the prior grant year (i.e. July 1, 2011 through Sept. 30, 2012) OFS will compare the FER to the general ledger summary The general ledger summary should match the FER Only record expenditures that have been approved in the Consolidated Application to grant cost centers

22. 22 Scope of Program Fiscal Reviews Contracted Services If the LEA has expenditures for purchased services, these services will be part of the expenditure test sample OFS will review the contract between the LEA and the contractor (even PESG or Will Sub) OFS will verify that criminal background screening has been done on contractors who have contact with children or are regularly in the school building If purchased services are for in-house professional development and/or Community Services for Parent Activities, then agendas and sign-in sheets must be kept by the LEA

23. 23 Scope of Program Fiscal Reviews Equipment/Inventory An ongoing listing should be kept by the LEA for all equipment/inventory the LEA has purchased with Title I, Part A funds For purposes of this list, all items $100.00 or greater and a life expectancy greater than one year should be included

24. 24 Scope of Program Fiscal Reviews Equipment/Inventory (continued) The list should be in accordance with EDGAR (34 CFR 80 SS. 80.32) regulations, and should include: A description of the item (each item listed separately) The item’s serial number (if applicable) The LEA assigned asset number (if applicable) The cost of the item The location of the item The funding source of the item Each item should be tagged with the funding source. Acquisition Date of the property Use and condition of property Disposal date and sale price

25. 25 Common Findings – 2011-12 Semi-annual certifications and PARs: Not completed Not signed by employee and/or supervisor Criminal background checks are missing from proof of certifications, salaries, and contracts Expenditures are not specifically approved in the Consolidated Application Questioned costs Misclassified costs

26. 26 Common Findings – 2011-12 Lack of policies and procedures to ensure proper internal controls are in place, implemented, and properly monitored Written procedures (and policies) are not detailed and specific to the LEA LEA could not provide adequate documentation for cash draws LEA’s budget approved by Board does not align with LEA’s Consolidated Application

27. 27 Common Findings – 2011-12 Inventory list of items purchased with Title I, Part A funds are not maintained Equipment purchased with Title I, Part A funds are not tagged with the funding source

28. 28 Common Issues with PARs and Semi-Annual Certifications Historical LEA non-compliance of federal requirements Staff performing one job all day long (one cost objective) are required to complete a semi-annual certification. Staff performing multiple jobs (more than one cost objective) are required to complete a PAR.

29. 29 Common Issues with PARs and Semi-Annual Certifications Cost Objective –a function, organizational subdivision, contract, grant, or other activity for which cost data are needed and for which costs are incurred

30. 30 Common Issues with PARs and Semi-Annual Certifications PARs must be prepared at least monthly, be signed and dated by the employee, and account for the staff person’s total activity for all pay periods Staff members hired for a fully federally funded Title I summer school are required to have a separate certification for that time period

31. 31 Timekeeping: Decision Making Rubric

32. 32 Timekeeping: Decision Making Graphic

33. 33 Questions? Financial Unit Office of Field Services Michigan Department of Education OFSFinancial_Unit@michigan.gov 517-373-2519