getting ready to report new financial requirements for first

Getting Ready to Report

New Financial Requirements for First 5

Commissions

Pre-Conference InstituteManchester Grand Hyatt

San Diego, CAMay 24, 2006

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Today’s Presenters

Sheila KruseFirst 5 Tuolumne County

Rick Teichert Formerly of the Children & Families Commission of Orange County

Sarah Sheehan Government Finance Officers Association – Research and Consulting Center

Christina AltmayerAltmayer Consulting

Expanded Audit Guidelines

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http://www.sco.ca.gov/aud/manuals/ccfp_audit_guide.pdf

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Areas covered Contracting and Procurement Policies Administrative Costs Conflict of Interest County Ordinance creating County Commission Long Range Financial Plan Financial condition or commission Amount spent on program evaluation and related

results Salaries and Benefits

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Issues: Documentation that will be required to show compliance Minutes of Meetings adopting policies Legal Representation Letters Management Representation Letter Staff Reports Resolutions adopting contracts Other source documents to meet testing

requirements

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Contracting and ProcurementCompliance requirement: County Commissions must adopt in a public hearing contracting and procurement policies that are consistent with state law. The policies must contain provisions to ensure that the grants and contracts are consistent with the county commission’s strategic plan.

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Contracting and Procurement – Audit Procedure Provide minutes documenting the policies

were adopted in a public hearing Provide copies of the adopted policies to

the auditor Provide a representation letter from legal

counsel stating the policies are consistent with state law (See handout Rick 1)

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Contracting and Procurement – Audit Procedure Test a sample of transactions to source

documents Determine transaction is in compliance with

the adopted policies Determine that the expenditures are consistent

with the contract Verify that the Commission has determined

contract/transaction is consistent with the adopted Strategic Plan (See handouts Rick 2 and 3)

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Administrative CostsCompliance Requirement:

Administrative Cost Definitions must complywith the state commission’s guidelines andthe county commission must have a processin place to monitor these costs

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State Commission Guidelines Defining Administrative Costs

Administrative costs are defined as costs incurred in support of the general management and administration for a county commission for a common or joint purpose that benefits more that one cost objective (other than evaluation) and/or those costs not assignable to a specifically assignable cost objective.

-First 5 California memo to Commission EDs

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Typical Administrative Costs General Accounting/Financial Reporting Financial Planning Procurement Commission Travel Payroll/Benefits/HR Legal/Consulting Contract Compliance Audit Strategic Planning Rent Maintenance Insurance Utilities Janitorial

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Audit Procedure

1) Provide minutes to confirm the adoption of a policy in a public meeting.

2) Determine whether the administrative cost definition is consistent with the state commission guidelines that define administrative functions.

3) Verify that the Commission has implemented a system to monitor its administrative costs.

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Example:San Diego County Administrative Cost Policy 10% of the annual operating budget for the fiscal year (see handout Sarah 1)

The percentage of the Commission’s administrative costs to the total current fiscal year operating budget will be calculated as the total administrative expenses for the fiscal year, divided by the total annual operating budget.

“Administrative costs” are the Commission’s labor and benefits costs, and all services and supplies costs not readily identifiable as costs of the Commission’s evaluation or programmatic activities.

The Commission and the Commission’s Finance Committee will receive financial reports (revenue & expenditure statements) that include year-to-date information on the Commission’s administrative expenditures. Additionally, the statements will include information on the percentage of administrative costs in relation to the Commission’s total annual operating budget. At the end of every fiscal year, the Commission’s total actual administrative expenses will be reported against the Commission’s total expenditures (including encumbrances) for the year.

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The Commission and the Commission’s Finance Committee will receive financial reports (revenue & expenditure statements) that include year-to-date information on the Commission’s administrative expenditures.

Additionally, the statements will include information on the percentage of administrative costs in relation to the Commission’s total annual operating budget.

At the end of every fiscal year, the Commission’s total actual administrative expenses will be reported against the Commission’s total expenditures (including encumbrances) for the year.

Example:San Diego County Administrative Cost Policy

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Conflict of InterestCompliance Requirement:

County commissions must adopt conflict-of-interest policies for commission members that are consistent with applicable state law. These policies must be designed to assure that the county commission complies with all applicable state and local conflict-of-interest statutes and regulations.

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Conflict of Interest – Audit Procedure Provide minutes documenting the policies

were adopted in a public hearing Provide copies of the adopted policies to

the auditor Provide a representation letter from legal

counsel stating the policies are consistent with state law (See handout Rick 1)

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Conflict of Interest – Audit Procedure Determine that the commission is

complying with the adopted policy Review a sample of commission meeting

minutes documenting appropriate abstentions for contract award actions

Review Form 700 filings for timeliness and completeness

Interview the Executive Director, Legal Counsel and a sample of Commissioners to determine the consistent understanding and application of the policy

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County Ordinance creating the County CommissionCompliance Requirement:

The county commission must adopt policies and practices to assure that it is adhering to the county ordinance establishing the commission. The ordinance must be adopted by the county’s board of supervisors and contain the minimum provisions specified in Health and Safety Code Section 130140(a)(1), Section 130140(d)1 and Section 130151(b)(1).

Online Reference: http://www.leginfo.ca.gov/calaw.html

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County Ordinance – Audit Procedure Ensure that the new requirement of AB109

in Health and Safety Code Section 130140(a)(1)(C)(iv) is referenced in the ordinance Requires the county commission to measure

outcomes of county funded programs through the use of applicable, reliable indicators and review that information on a period basis as part of the public review of the county commission Strategic Plan. (See handout Rick 4)

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County Ordinance – Audit Procedure Develop a management representation

letter outlining and detailing the commission’s practices and procedures for ensuring compliance with each relevant ordinance component. (See handouts Rick 5 and 6)

Review source documents to support and corroborate statements in the management representation letter

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County Ordinance – Audit Procedure Provide meeting minutes documenting the

review or adoption of the Strategic Plan in a public meeting/hearing Review of the plan in a public meeting Revisions to the plan in a public hearing

Provide a copy of the adopted Strategic Plan

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Long Range Financial Plan Commission must adopt plan in a public

meeting Plan should conform to the First 5

Financial Management Guide, at a minimum

Provide minutes of the meeting adopting the Plan

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Financial Planning Resources

Found in the First 5 Financial Management Guide

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Financial Planning Resources cont.

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Communicating Financial Position

Compliance Requirement:

The commission must have policies and practices with respect to its financial condition.

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Communicating Financial Condition Annual audit will constitute minimum

verification that policies and practices are in place with respect to financial condition

Leading practice would incorporate a policy of periodically reporting revenues,expenses and budget to actual to commission throughout the year

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Example: Stanislaus CountyStanislaus County Annual Audit of Financial Condition

Policy:Annually, the Commission shall have a financial audit of its accounts and transactions conducted. The results of the audit shall be communicated to the public and to the State of California First 5 Commission. (Handout Sarah 2)

Procedure: Following the close of the County’s fiscal year (July – June), the Commission shall have an independent audit conducted to assess the appropriateness and completeness of its revenue and expenditure transactions for the fiscal year just ended. As permitted by law, the audit can be conducted by the County Auditor’s Office or by an accounting firm with knowledge of governmental fund accounting. Any annual audit conducted shall use audit guidelines issued by the State Controllers Office. (The most recent guidelines are entitled, “Standards and Procedures for Audits of California Counties Participating in the California Children and Families Program”.) Within two months of receipt of the audit, the Commission shall hold a public hearing on the audit to discuss the report and any response to the findings. Within two weeks of the public hearing, the Commission shall submit a response to the audit findings to the California State Controller.By November 1st of each year, the Commission shall submit the audit report to the State of California First 5 Commission.

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Program EvaluationCompliance Requirement:

The county commission must have policies and practices with respect to the amount that it spends on program evaluation and the documented results of these expenditures.

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Program Evaluation – Audit Procedure Document the amount spent is consistent

with policies and practices Document a definition Provide a budget/appropriation for evaluation Demonstrate reporting of evaluation costs Document that the roll-up and reporting of

Administrative Costs is consistent with the definition

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Program Evaluation – Audit Procedure Confirm the existence of evaluation data

and reports Produce documentation of your Evaluation

Data collection systems and processes Provide a summary of reports presented to the

Commission on program evaluation/outcomes (See handout Rick 4)

Meeting minutes reflecting presentation, copies of the reports, etc. (See handout Rick 7)

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Program EvaluationGuideline required language for Notes to the

Financial Statements:

The commission spent $______ on program evaluation during the audit period.

Or  

The commission did not maintain documentation to identify the amount spent on program evaluation during the audit period.

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Salaries and Benefits Policy

Compliance Requirement:

The county commission must adopt, in a public hearing, policies and procedures for establishing salaries and benefits for its employees.

The salaries and benefits must comply with those set forth in the commission policies or the county government policies.

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Example: Solano County

SALARY AND BENEFITS OF COMMISSION STAFF POLICY 

Adopted March 7, 2006 The First 5 Solano Children and Families Commission, as part of Solano County, hereby affirms the use of the Solano County Human Resources Personnel and Salary Resolution Policies. Any updates to the Solano County Human Resources Personnel and Salary Resolution Policies document will be strictly adhered to by the First 5 Solano Commission. The Internal Systems Committee will notify the First 5 Solano Commission of updates at the next regularly scheduled meeting following an update.

(Handout Sarah 3) 

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Expanded Audit Pre-Audit Package Consider preparing a comprehensive package of

required policies and documents to initiate the audit work (See handout Rick 8) Orient the auditors to the scope of work required by the

SCO Guidelines quickly Make the auditors field work efficient to minimize the

added audit costs Will demonstrate to the auditors that you are “on top of”

the new requirements and well prepared Begin the Expanded Audit early, in May or June,

since there has been no relief in the timing of submitting both the financial and expanded audits

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Small Group DiscussionKey Issues

Legal representation letter with regard to procurement

Agreements consistent with strategic plan

Administrative cost monitoring system

Long range financial plan

Others?