advanced financial and grants management: federal audits & common pitfalls and issues
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Advanced Financial and Grants Management: Federal Audits & Common Pitfalls and Issues. Session Objectives. Learn about Federal audits and how to prepare. Learn about common audit pitfalls and issues. What is an Audit. Examines a Corporation program or activity Financial Audits - PowerPoint PPT PresentationTRANSCRIPT
Advanced Financial and Grants Management:
Federal Audits&
Common Pitfalls and Issues
Session Objectives
Learn about Federal audits and how to prepare
Learn about common audit pitfalls and issues
What is an Audit
Examines a Corporation program or activity1. Financial Audits
• Audits of costs incurred on grants and contracts, indirect costs, and internal controls
2. Performance Audits• Audits of economy and efficiency of programs
– Measure achievement of desired results or benefits
Office of Inspector General
OIG – Who are They?
• Office of Inspector General = OIG or IG• Independent organization• The Inspector General has the authority to:
– Have access to all Corporation documents and records– Subpoena documents– Administer oaths– Have direct and prompt access to the Chief Executive
Officer • Debar and obtain reimbursement of funds from
AmeriCorps programs that have been found to have committed serious violations of program requirements
OIG – What’s their Mission?
• Conducts & supervises – audits – investigations
• Works to prevent and detect fraud, waste, and abuse
• Promotes economy, efficiency and effectiveness
• Keeps the CEO and Congress informed about problems and deficiencies
Who Performs an OIG Audit?
Auditors:– OIG Staff
OR– OIG Representative - Independent Public
Accounting Firm (IPA) selected by the OIG
All audits are managed by an OIG Audit Manager regardless of who is performing the audit
How are OIG Audits Selected?
• Risk-based process on the basis of a range of factors
• Annual OIG Audit Plan– Legislatively mandated audits – Discretionary audits– Corporation requested audits
What’s the OIG Audit Process?
1. Notification Letter in writing
2. Entrance Conference • To provide audit scope and objectives
3. Survey Phase (planning phase) • To obtain grantee’s background, mission,
resources, responsibilities, key personnel, operating systems and controls
What’s the OIG Audit Process?
4. Develop the Audit Program• A set of procedures for auditors to follow
5. Field Work• Auditors complete the audit following the
procedures in the audit program
6. Exit Conference• A verbal briefing of auditor’s findings work with the
opportunity to confirm information, ask questions, and obtain clarifying information
What’s the OIG Audit Process?
7. Draft Report• Issued to the auditee and Corporation officials a
request to provide written comments in 30 days
8. Corporation & Grantee Response• The Corporation and Grantee each respond in writing to
the draft report and comments are published in the final report
9. Final Report• Issued after reviewing auditee’s and Corporation’s
comments with complete description of findings and recommendations for corrective action
Audit Resolution Process
• Corporation management (Office of Grants Management, or its representative) works with the grantee to determine if the audit findings are founded
• OGM prepares a Management Decision based on grantee input and works with OIG management to agree on proposed corrective actions needed
• OGM takes action to improve operations or correct deficiencies identified in the Final Audit Report
– Corrective action required to be completed within 1 year
The Auditors are Coming, What Should I Do?
• Locate all grant records and A-133 reports
• Be familiar with the grant provisions and regulations
• Check financial and program records to ensure there is support for all costs and compliance with all AmeriCorps grant provisions and Federal regulations
The Auditors are Coming, What Should I Do?
• Ensure written policies and procedures are in place to comply with Federal regulations
• Accounting systems should:
– record operating costs separately from grant costs
– record costs separately for each grant
Common Pitfalls and Issues
Member Eligibility
Findings: Lack of documentation of Participant’s• Age • Criminal record/sex offender check if working with vulnerable
populations• Citizenship
Consequences: • May disallow all payments (any stipends/living allowances, health
and child care benefits, or participant reimbursements)• May disallow Education Awards for AmeriCorps participants• May terminate grant or be disbarred depending on the extent and
severity of findings• May disallow all Federal funds if all or most of the participants are
undocumented or ineligible
Member Eligibility
Preventive Actions: • Document how eligibility was confirmed
• Understand and document program specific participant requirements for eligibility
• Conduct appropriate National Service Criminal History Checks
• Understand requirements for Staff & Participants with involvement with children or vulnerable populations
• Customize member contracts if necessary to exclude working with vulnerable populations
• Create written policies and procedures that clearly outline the requirements for eligibility, documentation, screening, and maintaining records
• Initiate necessary reviews for deciding eligibility with final signoff for “hiring”
• Incorporate internal controls that include a review of decisions and documentation by the Project Director
AmeriCorps MembersFindings:• Member timesheets not signed by both member and supervisor
• Member timesheet does not add up to the number required to earn an Education Award for that term of service
• Members start serving before they sign the contract
• Members start serving before the grant award period
Consequences: • May disallow all payments (any stipends/living allowances, health and
child care benefits, or participant reimbursements)
• May disallow Education Awards for AmeriCorps participants
• Member hours served prior to grant or before signing contract may not be counted towards education award or term of service
AmeriCorps Members
Preventive Actions:• Complete service log daily and submit in a timely manner• Document only hours served, do not include lunch or breaks as
service hours• Record hours according to the activities performed (direct
service, training or fundraising), and record these hours in separate columns
• Check the math! All totals should be mathematically correct• Member and site supervisor must sign and date all service logs• Sites must maintain a file with the original service logs• Never use whiteout to make corrections• Use a permanent means to document all time, i.e., never use
pencils or erasable pen• Periodically do a random check of member timesheets
MatchFindings:• Match requirement not met• Cash and in-kind amounts were not supported by adequate
documentation or not verifiable by grantee’s records• In-kind contributions were not supported with after-the-fact
documentation (promissory note is not acceptable)• Other Federal funds were used as match without
authorization• Match claimed was not necessary to operate grant• Match amounts were unreasonable or excessive• Match was inadequately supported to determine if it was
allowable and allocable• Match was not related to a cost included in the approved
budget• Match covered expenses incurred outside of the grant award
period
Match
Consequences: • May disallow match causing minimum match to not be met• May disallow some Federal funds if minimum match cannot be met• May decide to audit all match or question all match if unable to
confirm if match is reasonable or allocable
Preventive Actions:• Ensure documentation is adequate for all match• Review all match to ensure it is necessary and reasonable • Followup on promises to provide in-kind and obtain documentation• Obtain written approval from other Federal agency to its funds• Request budget amendments to include new sources of match• Determine if costs are allowable – ask questions, don’t risk it!• Know the regulatory and other match requirements
– AmeriCorps § 45 CFR 2521
Match Basics
The same requirements apply to match and direct costs so that all costs must be:
• reasonable • allocable• allowable • provided consistent treatment• expensed in the accounting system • supported by adequate & appropriate documentation
1. Document the basis for determining value of personal services, material, equipment, building, and land
2. Obtain written acknowledgement of the contribution including:
Name and signature of donor Date and Location of donation Detailed description of item/service Estimated value of contribution, how value
was determined, who made the determination
Was the contribution obtained with Federal funds
*** Keep a copy of the receipt in your files ***
Documenting In-Kind Contributions
Sample In-Kind Contribution Form
See Handout
Time & Attendance – StaffFindings: • Inadequate documentation to support salary expenses• Staff allocating time to more than one grant were not keeping
timesheets that show actual time spent on each grant• Lack of proper timekeeping systems • No timesheets or activity reports maintained or retained• No reconciliation between estimates and actual time• Non-compliance with OMB requirements• Salaries and wages charged to the grant:
– On the basis of budgeted amounts instead of actual after-the-fact time
– Based on estimates– Unsigned or unapproved timesheets by employee or
supervisor– Time not allocated among activities
Time & Attendance – Staff
Consequences: • May disallow entire claim for salary for all staff over the
course of the entire grant• Unmet match requirement
Preventive Actions:• Use timesheets that align with the payroll period that reports
all activities of the employee, both on the grant and other projects
• Implement procedures whereby all timesheets are reviewed and approved by a supervisor before sent to payroll
• Reconcile budgeted salaries to actual time spent on the grant• Know the regulatory and other requirements
Common Pitfalls & Issues7 Main Areas:
1. Member Eligibility
2. Member Files & Records
3. Member Costs
4. Match
5. Reports
6. Administrative Areas
7. General Management See Handout
Auditor RecommendationsOIG Recommendations• Disallow expenses, which may result in
– repayment of Federal funds– disallowed match funds causing minimum match
to not be met. • Disallow education award, which may result in
– a pro-rated education award, – the grantee/subgrantee repaying the amount of
disallowed education award already used by the member
– the member not being allowed to use his/her education award.
AmeriCorps Self-Checks
Do member files contain all required eligibility documentation?• Citizenship, age, parental consent, HS diploma/GED,
background check, documented compelling reason for early exit
Do member contracts comply with grant requirements?• Work description, service location, evaluations, entry & exit
forms [see AmeriCorps provisions for complete list]
Have required member mid-term and exit evaluations been prepared, discussed, signed and filed?
Do the hours reported in WBRS agree with the member timesheets?
Are member timesheets signed by both member and supervisor?
CaliforniaVolunteers and the OIG Audit
• Audit Period = January 1, 2001 through March 31, 2004
• 10 subgrantees audited
– 8 of these had findings
• Final Corporation Management Decision
– Federal Questioned Costs: Disallowed $383,723 of the $1,041,476 (37%)
– Education Awards: Disallowed $53,588 of the $414,260 (13%)
– Match Costs: Disallowed $3,425,099 of the $8,694,506 (39%) [$3,422,854 due to administrative error]
• Website: www.cncsig.gov/PDF/AuditReports/fy05/05-24.pdf
CaliforniaVolunteers and the OIG Audit
Member Costs Questioned:• Questioned excess member benefits paid to members after exiting
• Questioned living allowance and fringe questioned for members due to: – missing file
– no citizenship documents
– terminated member
– no citizenship documents
• Questioned living allowances paid to non-members
• Questioned living allowance for member paid while working another job, questioning living allowance and fringe
• Questioned overclaimed living allowances for members
• Unsupported member hours
CaliforniaVolunteers and the OIG Audit
Other Grant Costs Questioned: • Administrative costs due to salaries that could not be supported• Claimed costs on FSR exceeded general ledger costs for living
allowances and fringe• Travel costs paid in excess of allowed California state rate for grant
staff • Unallocable non-salary administrative costs• Unallowable costs for
– direct costs, fringe benefits, member support costs, mileage, meals, exceeding consultant rate, late fees, administrative costs, overclaimed costs
• Match and in-kind costs with – no documentation– inadequate documentation– unreasonable – missing files
CaliforniaVolunteers and the OIG Audit
Member Education Awards Questioned:
• No HS diploma documentation
• Insufficient hours
• No member records
• No citizenship documents
• No age verification
• Exited for nonqualifying compelling reasons
• Missing files
Prepare now,
so you don’t have
to pay later!
Surviving an OIG Audit
A-133 Audits
A-133 Audits
• Ensures consistency and uniformity among Federal agencies for the audit of non-Federal entities expending Federal grant awards
• Required annually for entities expending $500,000 or more of Federal funds during its fiscal year
• Audit must be performed by an independent Certified Public Accountant
• Cost of audit should be recorded as an administrative (indirect) cost
A-133 Audits
If an A-133 audit is required, an independent auditor must audit your organization to assess:
– The reliability and accuracy of your organization’s financial statements and financial position
– The adequacy of your organization’s internal control structure
– Your organization’s compliance with applicable laws and regulations that may materially affect your financial statements
A-133 Corrective Action Plans
If an A-133 audit report identifies findings, your organization must develop a Corrective Action Plan for each finding to include:
• The reference numbers the auditor assigns to audit findings • Name of Contact Person Responsible for corrective action• Corrective Action Planned or Taken• Anticipated Completion Date
If your organization does not agree with the audit findings or believes corrective action is not required, then the Corrective Action Plan shall include an explanation and specific reasons
www.whitehouse.gov/omb/circulars/a133/a133.aspx#c
Submit A-133 Reports
• Submit A-133 audit report to: – Federal Clearinghouse– CaliforniaVolunteers
• Submit to CaliforniaVolunteers:– One copy of the reporting package when the schedule
of findings and questioned costs disclosed audit findings relating to CNCS Federal awards that the CaliforniaVolunteers provided
Fraud
What is Fraud?
An intentional misrepresentation of facts made by an individual to deprive
another of something of value
OR
Larceny by trickery
Common Fraud Areas
Misuse of grant funds
Timesheet fraud
Embezzlement
Theft
Misuse of Grant funds
Non-grant related expenditures during a time when CNCS grant is the only funding source
Receipts for what appears to be non-grant expenditures being charged to the grant
Funds drawn down on unoccupied member slots
Unauthorized personnel expenses charged against the grant
Misuse of Grant funds
Drawdown of all or most of the grant funds well before the end of the program year
Documents not signed or dated
Changing or falsifying documents
Preparing documents the night before an inspection, site visit, or audit
Timesheet Fraud
Documents that appear to have all been prepared at the same time
Hours claimed are not reasonable and/or allowable
Members hand carry timesheet from sites to program office
Member time not charged to correct grant when hosting multiple programs with multiple grants
Other logged hours do not match timesheets
Staff percentage of time charged to two or more programs in greater than 100%
Embezzlement No secondary endorsements on checks when required
Members and staff are not being paid or checks bounce
Double payments or payments to ghost individuals
Frequent use of white out, pen and ink changes, or strikeouts
Missing documents or using copies instead of originals
Funds missing with no sign of break-in or burglary
Theft
Purchasing items not used by the organization
Receipts for items that cannot be traced to a valid purchase receipt
Property and controlled, inventoried, or missing
Charge card purchases not monitored
Excessive mileage claimed for travel to project sites
Mailing, telephone, or supply costs increase suddenly
Red Flags – Employees
Personal problems or pressures
Dramatic lifestyle changes (increases or excesses)
Close relationship with suppliers or vendors
Does not take vacation or sick leave
Reluctance to share information
Fraud & Your Responsibility
Per AmeriCorps grant provisions, General Provisions, Section V.C.
The Office of Inspector General.– The OIG is available to offer assistance to
AmeriCorps grantees that become aware of suspected criminal activity in connection with the AmeriCorps program
– Grantees should immediately contact OIG when they first suspect that a criminal violation has occurred
CaliforniaVolunteers must report issues to the OIG when issues are brought to its attention by grantees
OIG HotlineOIG HotlineReport suspected fraud, waste, or abuseReport suspected fraud, waste, or abuse
All Information is confidentialAll Information is confidential
You can remain anonymousYou can remain anonymous
1-800-452-82101-800-452-8210oror
[email protected]@cncsig.govWebsite: Website: www.cncsig.gov
CaliforniaVolunteers Monitoring
• Desk Reviews– Member File Reviews– Fiscal Desk Reviews– Program Desk Reviews
• Followup Audits
• Site Visits– Program Visits– Fiscal Visits
Questions?Questions?