Federal Fiscal Monitoring: Fostering Continuous Improvement

Transcription

1 Federal Fiscal Monitoring: Fostering Continuous Improvement Title I New Director Training July 20, 2016 Division of School Business

2 The most terrifying words in the English language are: I m from the government and I m here to help. President Ronald Reagan

3 Objectives The purpose of today s training is to provide a high level understanding of the following: Division of School Business Monitoring & Compliance Section roles and responsibilities Federal and State Guidelines governing fiscal management of federal grants at LEAs/charter schools Fiscal requirements and procedures necessary for responsible financial management of ESEA/NCLB/ESSA grant programs. Steps to prepare for fiscal monitoring.

4 Subrecipient Responsibilities Manage every federal award with fidelity. Develop internal policies and procedures to ensure effective management of the federal award and compliance with the terms and conditions of the grant award. Have a compliant financial management system. Establish a budget of the costs required to manage a program and a method of monitoring actual costs against the budget Keep abreast of changes in polices, procedures, or requirements. Request prior approvals, when necessary Prepare and submit required reports on time Keep the pass-through entity informed about subaward performance and changes, if necessary.

5 Who are we? Division of School Business: Monitoring and Compliance Section Designed to improve the effectiveness and efficiency of NC DPI s internal controls over federal funds. M&C staff consists of: Section Chief (currently vacant) 3 Fiscal Monitors 1 Accountant

6 What does the Monitoring and Compliance Section do? Functions: Fiscal Monitoring Audit Resolution Technical Assistance Audit Compliance Supplements Indirect Cost Rates Carryover and administrative costs compliance for applicable federal programs Maintenance of Effort compliance DUNS and SAM.gov compliance

7 What is the purpose of fiscal monitoring? Federal and state laws require the North Carolina Department of Public Instruction (NC DPI) to monitor implementation of federal programs operated by local educational agencies(leas) and charter schools. Monitoring reviews of federal grant subrecipients are designed to ensure that federal awards are used for authorized purposes in compliance with laws, regulations, and the provisions of contracts or grant agreements.

8 What does it mean to monitor? Pass-through must monitor its subrecipients to assure compliance and performance goals are achieved, 2 CFR (d) Monitoring must include: 1. Review of financial of financial system, reports, documentation, etc. 2. Evaluation of subrecipient s compliance 3. Issuance of a written report identifying deficiencies 4. Follow-up processes to ensure timely appropriate actions are taken or completed on a subrecipient s reported deficiencies ( (d)(2))

9 Who sets the ground rules for fiscal monitoring? Statutes Federal (Congress) General Education Provisions Act (GEPA) Program Statutes (NCLB/ESSA, IDEA, SIG) State (Legislature) Elementary and Secondary Education Act (GS 115C) NC Charter Schools Act (GS 115C-238.9) Regulations and Circulars (ED/OMB) Education General Administrative Regulations (EDGAR) Uniform Grant Guidance (formerly OMB Circulars A -87, A-133, and A-122)

10 How do we decide who to monitor? Annual Risk Assessment, 2 CFR, (b): Passthrough entities must evaluate each subrecipient s risk of non compliance (federal statute / regulations / terms of award) for purpose of monitoring. Risk factors include, but are not limited to: 1. Audit Findings 2. New Personnel 3. Prior Experience/Performance 4. Prior Monitoring Findings 5. Late Reporting 6. Allocation Amount 7. Overpayments/Refunds 8. Data Submission Errors 9. Lapsed Funds/Carryover Amounts 10. Financial Distress 11. Indications of Fraud and Abuse 12. Impending School Closures

11 What are implications for High Risk Subrecipients? Pass-through must consider imposing additional federal award conditions, if appropriate, such as: 1. Require reimbursement; 2. Withhold funds until evidence of acceptable performance; 3. More detailed reporting; 4. Additional monitoring; 5. Require grantee to obtain technical or management assistance; or 6. Establish additional prior approvals.

12 How do we monitor higher risk grantees? Depending on assessment of risk, the following monitoring tools may be used to ensure proper accountability and compliance with program requirements and achievement of performance goals: 1. Training + technical assistance on program-related matters 2. On-site reviews 3. Arranging for agreed-upon-procedures engagements (described in Audit Services)

13 What happens before the on-site visit? Notice of impending onsite fiscal monitoring visit Electronic mail to Finance Officer / Principal / School Director List of documentation to provide prior to or at the time of the visit. Includes, but is not limited too, the following: General Ledger Payroll journal Time and Effort documentation Policies and Procedures / Finance Manual Contracts Inventory Records Bank statements and reconciliations Supporting documentation

14 What happens during the on-site fiscal monitoring visit? Meet with Finance Officer and key program staff Discuss fiscal monitoring process Provide sample selection for review Conduct interviews Review sample items Discuss preliminary findings during exit conference last day onsite Request any additional documentation needed to complete review

15 What Happens After the On-Site Visit? Written report issued within 60 days of last day of site visit Report addressed to school Finance Officer / Principal / School Director with copies to Superintendent and appropriate DPI program directors Report identifies: Deficiencies noted Corrective actions required Repayments due (if applicable) General recommendations LEA/ Charter School s written response, including requested documentation, due 30 days from date of report Closure notification

16 What do we monitor? Financial Management/Separate Tracking Internal Controls Time and Effort Reporting Procurement and Contracted Services Equipment and Property Management Cash Management Period of Availability/Obligations Allowable Use of Funds Supplement/Supplant Requirement Capital Outlay (non-equipment)

17 Financial Management Systems 2 CFR Part The non-federal entity s financial management system, including records documenting compliance with federal statues, regulations, and terms and conditions of the federal award, must be sufficient to permit the preparation of reports and the tracing of funds to a level of expenditures adequate to establish that funds have been used according to the federal statutes, regulations and the terms and conditions of the grant award.

18 What are Internal Controls? Internal controls consist of measures to improve: o Effectiveness and efficiency of operations o Reliability of financial reporting o Compliance with applicable laws and regulations o Safeguarding assets Components of internal controls include: o Control Environment o Risk assessment o Control Activities o Information and communication o Monitoring

19 How do we monitor Internal Controls? Conduct Interviews with staff and review of Policies and Procedures, source/supporting documents, job descriptions, etc. Written policies and procedures explaining Internal Controls should, at minimum, include the following: Segregation of Duties Authorization of Transactions Supervision/Monitoring of Operations Retention of Records Physical Safeguards IT Security Risk Assessment

20 How do we monitor Internal Controls? (continued) Review of required written policies and procedures for the following: Procurement Standards Cash Management Conflict of Interest Travel Reimbursement Time and Effort

21 What are the requirements for Time and Effort? The federal time-and-effort reporting requirement comes from the new EDGAR. EDGAR requires employees who work on multiple activities or cost objectives to document their time and effort in one of two ways: By meeting the characteristics in 2 CFR (i) Through an approved "substitute system"

22 What is appropriate documentation for personnel expenses, (i)? Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. How staff demonstrate allocability If employee paid with federal funds, then must show that the employee worked on that specific federal program cost objective (a)

23 Who must participate? (i)(1)& (i)(4) All employees whose salaries are: Paid in whole or in part with federal funds Used to meet a match/cost share requirement NOT contractors

24 How do we monitor Time and Effort documentation? Type of documentation depends on how many cost objectives the employee worked on These cost objectives must be connected to the employee s salary source What is a cost objective? (Cost Objectives ) o A specific grant award, or other category of costs, that requires the grantee to track specific cost information. Program, function, activity, award, organizational subdivision, contract, or work unit for which cost data are desired and for which provision is made to accumulate and measure the cost of processes, products, jobs, capital projects, etc.

25 How do we monitor Time & Effort? Review Time and Effort Documentation (payrolls, time and attendance records) Semi-annual certification applies to employees who do one of the following: Work 100% of their time under a single grant program Work 100% of their time under a single cost objective Semi-Annual Certification After the fact Account for the total activity Signed by employee or supervisor every six months Prepared at least twice a year Example: I hereby certify that for the period January 1, 2016 through June 30, 2016 one-hundred percent (100%) of my time and effort was spent on Title I Administration.

26 How do we monitor Time & Effort? Review Time and Effort Documentation (payrolls, time and attendance records) Personnel Activity Reports (PARs) or equivalent documentation apply to employees who work on multiple cost objectives After the fact Account for total activity Signed by employee Prepared at least monthly and coincide with one or more pay

27 Distribution of Payroll Costs Estimate how employee will work Must produce reasonable approximations of the activity actually performed Quarterly comparison of estimates to actual costs If difference is less than 10% - annual adjustment If difference is more than 10% - quarterly adjustment

28 How do we monitor procurement and contracted services? Review to determine expenditures are: Allowable Allowable under the relevant program Consistent with federal cost principles Consistent with EDGAR Reasonable and Necessary Necessary for the performance or administration of the grant Does not exceed that which would be incurred by a prudent person Follows sound business practices Reflects market prices for comparable goods or services Allocable Can only charge in proportion to the value received by the program Adequately documented

29 How do we monitor procurement and contracted services? (2 CFR ) A documented contract administration system will have controls to ensure that contracts are in writing and include clearly defined deliverables and elements such as: Description of services to be performed or goods to be delivered Rate of compensation Description of dates when services will be performed or goods delivered Description of locations where services will be performed or goods will be delivered Description of number of students/ teachers/etc., to be served (if applicable) Remedies for breach, sanctions and penalties Termination for cause and convenience State language (in the case of charter schools) Signature and date of all parties prior to execution

30 How do we monitor procurement and contracted services? (2 CFR ) Review of documentation to verify procedures adhere to procurement policies designed to ensure compliance with the following: Conflicts of interest (c)(1) Fostering economy and efficiency Identifying responsible contractors (h) Recordkeeping (i) Competition Methods of procurement Micro Purchases Small Purchases Sealed Bids Competitive Proposals Sole Source Contract cost and price

31 How do we monitor procurement and contracted services? (2 CFR ) Suspension and Debarment -Three Ways to Comply: Checking SAM registration Collecting a certification from the entity providing goods or services Adding a clause or condition to the covered transaction

32 Supporting Documentation and Maintenance of Records Records to be maintained include the following: Purchase requisitions Purchase orders Payment authorization forms Payroll authorization forms Travel reimbursement forms Employee reimbursement forms Original third-party itemized invoices/receipts Contracts, including amendments Bank statements, including cancelled checks

33 Purchase Orders Should include the following clearly defined deliverables: Description of services to be performed or goods to be delivered Description of dates when services will be performed or goods delivered Description of locations where services will be performed or goods will be delivered Description of number of students/teachers/etc., to be served (if applicable)

34 Invoices Payments for goods and/or services should based on written invoices which include: Services performed or goods delivered Dates services were performed or goods delivered Location services were performed or goods delivered List students/teachers, etc., served (if applicable)

35 Procurement - Red Flags Lack of adequate system of internal accounting control over purchasing Lack of adequate segregation of duties Missing purchase orders or purchase orders lacking detail Insufficient detail on invoices Lacking or inadequate receiving documentation Vendors unknown, related to someone in the organization, or are otherwise not vetted properly. Vendor pricing is out of line with the marketplace. Unsubstantiated travel expenses Undocumented credit card purchase Non-competitive contracts

36 How do we monitor property and equipment? (2 CFR Part ) Property records must be maintained that include: a description of the property, a serial number or other identification number, the source of property, who holds title, the acquisition date, cost of the property, percentage of Federal participation in the cost of the property, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property.

37 How do we monitor property and equipment? (2 CFR Part ) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft shall be investigated. Adequate maintenance procedures must be developed to keep the property in good condition.

38 How do we monitor Equipment and Inventory? Review of records Include description, location, serial number, funding source percentage, use and condition, acquisition cost and date and final disposition Capture significant technological items, regardless of threshold Maintained for FIVE years past disposition Physical verification through observation All equipment should be labeled with Grant Name or equivalent tracking system Verify physical inventory Required at least once every two years Evidence of compliance Remember - If it s less expensive to inventory than to replace, it should be inventoried.

39 Property and Equipment Best Practices Physical Inventory Listing Organization Serial / Fixed Item Asset / Identification Funding Acquisition Acquisition Percentage of federal Description Number Source Date Cost participation Location Condition Disposition Computer ABC Title I 09/01/04 1, % Room 212 New Date of Reconciliation

40 Why do we monitor Cash Management? Cash Management Improvement Act (CMIA) Implemented to prevent interest earnings on federal funds. Grantee (DPI) must monitor for adherence to CMIA LEA/charter school must calculate and remit interest earned on any federal funds at least quarterly to the federal agency (through the Department). Up to $500 per year may be retained by the school for administrative expenses. Section 2 CFR Methods and procedures for payment shall minimize the time elapsing between the transfer of funds and disbursement by the DPI and the LEA/charter school.

41 How do we monitor Cash Management? Review of documentation including: LEA/charter school s cash management policies and procedures General ledger for documentation of revenue and expenditures to ensure: Disbursement transactions are recorded on the LEA/charter school s books and funds delivered within 3 days of drawdown Journal voucher entries (in instances when expenditures made with state and local funds need to be charged to federal funds) completed within three days of the federal funds receipt

42 Common Fiscal Monitoring Findings Internal controls: Conflicting policies Outdated policies and procedures Non-existent policies Time and Effort Semi annual certifications or personnel activity reports are not on file Semi annual certifications or personnel activity reports are not in compliance (e.g. not signed, signed/dated prior to end of time covered)

43 Common Fiscal Monitoring Findings (continued) Procurement Lack of Documentation - Support for events not sufficient enough to determine that it is allowable, reasonable and necessary. Unallowable - Activity or events are not for the benefit of funding program or targeted recipient Contracted Services: Contracts not on file Contracts lacking critical elements Scope of services, Defined compensation, Signatures of all parties, Defined period of performance, Inclusion of remedy, termination and/or state language clauses Lack of supporting documentation

44 Common Fiscal Monitoring Findings (concluded) Equipment and Inventory: Improper Coding Prior Approval not obtained from Board Not tagged Not inventoried Cannot be located Not used for the purpose of the grant Cash management Cash requested prior to disbursement held longer than three business days Interest on cash held longer than three business days not calculated Interest due not repaid

45 Contact Information Leigh Ann Kerr, Assistant Director, School Business Services; ; (919) Irwin Benjamin, Acting Section Chief; ; (919) Pam Hill, Fiscal Monitor; (919) Gene Bruton, Accountant; ; (919) Tabitha Mbaka, Fiscal Monitor, (919)