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7/27/2019 2013 SW Avoiding Common Issues and Pitfalls Preparing for an Audit
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2013 Southwestern National Service Training
ConferenceJuly 24-25, 2013 1
Audits & Avoiding Common
Issues and Pitfalls
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You need to know . . .The information in this session is based onCNCS and Federal laws, rules, andregulations; CNCS grant terms and
provisions; generally accepted accountingand financial principles and practices.
Some state commissions, national grantees, orparent organizations may imposeadditional requirements.
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Welcome! Who is here?
Special Note for Fixed-Amount Grantees Fixed-Amount grants include Education Award programs,
Professional Corps and other national service Fixed-AmountGrants for both AmeriCorps and Senior Corps
Ask clarifying questions and provide yourexperiences as we go
Well have time for questions at the end
We will do a small group activity
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Session Objectives1. Understand an OIG Audit
2. Recognize the primary compliance findings
from OIG audits & CNCS site visits3. Understand the Potential Consequences of
common pitfalls
4. Identify Preventive Actions toSail throughCNCS site visits & survive the choppy seas
of audits
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OIG Audits
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How are Subjects
for OIG Audits Selected? Legislation
Risk:
Federal dollars expended New program
No recent monitoring
Audit Leads: Requests from CNCS Program or
Grants Officers, leads from investigations, newsreports, FOIA requests
OIG Hotline reports (whistleblowers)
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The Audit Process Notification
Planning
Entrance Conference Fieldwork/Testing
Exit Conference
Draft Report CNCS and Grantee Response
Final Report
See Handout 1
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Exit Conference This discussion takes place when fieldwork is
finished and the results are compiled
It provides CNCS and auditee officials with an opportunity
to confirm information, ask questions, and provideclarifyingdata
An exit briefing also takes place at eachsubgrantee/site if any were tested
Parent organizations should attend or otherwise find outwhat the findings are at each subgrantee or site
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Draft Report and
Responses to Draft Reports The draft report is issued to the auditee and CNCS
officials with a request that they provide writtencomments, usually within 30 days
The Draft Audit Report is a work-in-progress and is nota public document
The Grantee and CNCS each have the opportunityto comment on the draft report
Responses are included as attachments to the finalreport (a public document)
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Response SuggestionsMake it Meaningful and Something You Want
the Public to Understand
If there is agreement with a finding, say so, and
include a corrective action plan
If there is disagreement, state the case based oncontrolling rules (law, regulations, grant provisions)
If the audit report recommendation does not workfor your organization, propose an alternative
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Audit Resolution CNCS and Grantee management agree or disagree
on proposed corrective actions
OIG is given an opportunity to review the proposed
corrective actions Final decisions are made by the CNCS
CNCS and Grantee management take action toimprove operations or correct deficiencies identified
in the Final Audit Report Debts, if applicable, are established:
Collected
Payment Schedule
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Final Report
The auditor(s) incorporate the responsesor comments and include their views on
them The final report is
Issued to the CNCS
With a copy to the grantee Is posted to the OIGs publicly accessible
website: www.cncsoig.gov
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Common Findings: Reflections fromsite visits, audits and grantee experiences
Participant eligibilityto serve is not documented
Funded staff eligibilityto work on project is unclear
Criminal History Check not properly done ordocumented
Inadequate time and activity records for grant staff
Deficientparticipant management: Service hours record-keeping
Participant contracts/agreements and job descriptions; incorrectstipends and living allowances
Education award certifications for hours & eligibility
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Common Audit Findings
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Common Findings Inadequate or no documentation for match Inadequate documentation ofin-kind donations Financial reportsdont reconcile with general
ledger Inadequate processes forsubgrantee
monitoring
Inadequate financial systems and internal
controls Lack ofwritten policies and procedures Program specificrequirements not met
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Consequence Costs Questioned A sample year:
Federal Costs claimed = $228M
Costs Questioned:
Federal Funds: $ 8M Participant Stipends $ 1.3M
Unallowable costs $ 2.7M
Budget & Reporting $ 4.0M
Match Funds: $ 18.5M
Education Awards: $ 3.7M** Grantee liability can extend beyond the amount of Federal grant funds
awarded to include inappropriate education awards to AmeriCorps members
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Major Findings,
Consequences, andPreventive Actions
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Participant Eligibility
Finding:Lack of documentation of
Participants age
Criminal record/sex offender check
Note:All participants must have a National CriminalHistory Check
Orprogram specificeligibility:
AmeriCorps: U.S. Citizen or Permanent Resident Alien Senior Companion/Foster Grandparent: Income
limitations
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Participant Eligibility
Potent ial Consequences:
All payments (any stipends, health/child care or otheror other participant reimbursements) disallowed
Education Awards for eligible participants disallowed
Extent and severity of findings could result in granttermination or other actions
If all/most participants are undocumented orineligible, all grant funds may be disallowed
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Participant Eligibility (contd)Prevent ive Ac t ions :
Ensure staff understand detailed regulatory requirements
Document age eligibility, educational attainment and any relatedagreement and preserve copies of documents
Conduct appropriate National Service Criminal History Checks
Understand requirements for staff & participants
On all Section I.A/I.B staff (including match) & enrolledparticipants. This applies to both planning and operating
grants. Understand and documentprogram specificparticipant
requirements for eligibility, such as qualifications for tutoringprograms or for professional corps - high school or other degree &curriculum requirements
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Participant Eligibility (contd) Create written policies and procedures that clearly
delineate the requirements for eligibilitydocumentation, screening, and maintenance of
records Initiate necessary reviews, decisions on eligibility
and final signoff forenrolling participants
Incorporate internal controls that provide review of
decisions and documentation by the ProjectDirector, in addition to someone else at a higherlevel
Conduct periodic sampling of participant files
See Handout 2
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Time & Attendance Participant
Finding:Timesheets:Stipended Volunteers (FGP/SCP) &Members (AmeriCorps) :
Not signed by supervisor and participant Dont add correctly
Missing timesheets
AmeriCorps Members:
Training/fundraising hours are not segregated or hoursexceed limits
Timesheets do not support certification of hours foreducation award
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Time & Attendance Participant Potential Consequences:Unsupported time can
result in disallowed stipends, benefits or educationawards
Prevent ive Act ions:Written Policies & Procedures;
periodic sampling; use timesheets aligned with theproject type that contain required information for theparticipant: Daily record all time and activity Participant and supervisor: sign & date
Time allocation for fund-raising, if required
Note: Professional Corps programs may follow thetimekeeping practices of their profession (with approval from
CNCS) and certify participant required hours
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Other Participant Findings Member Service Agreementsare signed late, after
beginning of service; not prepared; or do not meetCNCS grant provisions and regulations Note: For AmeriCorps beginning in 2010, the member
service agreement must specify the amount ($) of theeducation award upon successful completion
Participant Appraisals/Evaluations are not conductedor maintained; participants serve a second term without
formal evaluations supporting successful completion ofthe first term
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Match (not applicable to Fixed-Amount Grants)Findings: Match not met, undocumented, unreasonable, not
approved in budget or uses unauthorized Federal funds:
Cash & in-kind (not SIF or NCBP) not supported byadequate documentation or verifiable grantee records
Other Federal funds used as match (OK - AmeriCorps;not OK - Senior Corps, SIF, NCBP, VGF)
Match claimed was not necessary to operate grant or
outside of grant period
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MatchPotential Consequences: Undocumented, unmet or unacceptable match can reduce some or
all of the allowable costs paid with Federal funds by the amount ofrequired match not met for the program
Prevent ive Act ions: Know the statutory, regulatory and other match requirements
For example - AmeriCorps:
Minimum statutory match of 24%
Statutory match for years of AmeriCorps grants: 24 -50% SIF no Federal $ except block grants
NCBP no Federal $ except block grants
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Expenditures & Reconciliation(Excludes Fixed-Amount Grants)
Findings: Grantees/subgrantees not reconcilingexpenditures in their accounting systems to amounts innew SF-425 FFR (Federal Financial Report)
Potential Consequences: Costs not allowed fordifferences between accounting system and FFR
Preventive Action s: By policy, regularly reconcile differences among the reports
and the accounting system
Prepare cross-walks, if necessary, to track FFR reports to theaccounting system detail and HHS
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Subgrantee Monitoring Finding:Grantee does not have adequate fiscal
monitoring procedures in place to ensure subgranteesystems can manage Federal funds and participant
compliance requirements For example: subgrantee monitoring plan not implemented; no
documentation of monitoring; or follow-up to resolve findings
Potential Consequences:Grantee can lose Federalfunds due to unallowable, undocumented subgrantee
costs and/or inadequacies of subgrantee financialaccounting system & practices and/or failure to meetmatch
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Subgrantee MonitoringPrevent ive Act ions:
The primary grantee needs to develop po l ic ies andpract icesthat assure subgrantee compliance and fiscal
performance Efforts should focus on:
1. Pre-Award
2. Post-Award
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Subgrantee MonitoringPre-award
Survey the potential subgrantees accounting system, policiesprocedures & internal controls
Review organizations OMB A-133 audit, if applicable, and IRSForm 990
Ascertain experience with Federal, state and/or foundationgrants & project cost accounting
Construct a well-developed subgrantee agreement/contractincorporating required Federal and any state provisions
Use information to develop a fiscal, technical assistance orcorrective action plan, if needed
Develop a r isk-based monito r ing strategy
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Subgrantee Monitoring(contd)Post-award Provide start-up training commensurate with the pre-award review,
identified needs and risk-assessment
For higher risk subs, implement early desk and site reviews
Site reviews should include tracking expense and financial reportswith the accounting system
Provide timely feedback to subgrantees from all reviews includingpositives and improvement needed
Establish corrective action plans, where needed, with specific
expectations & timelines
Follow up on a regular basis
Take action when necessary, including withholding of paymentswith notification and suspension or termination when warranted
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Other FindingsFinancial Systems and Internal Controls Findings:
Accounting systems and internal controls are inadequate to reportgrant expenditures, or management controls are insufficient tosafeguard Federal funds
Financial reporting is incomplete, most recent A-133 audit has notbeen sent to the Federal Clearinghouse yet
Records do not identify cost by programmatic year, by budget lineitem, or do not differentiate between direct and indirect costs oradministrative costs
Lack of written pol ic ies and pro cedures
Inadequate internal controls for separation of duties
See Handouts 3, 4, 5
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Other Findings (contd) Program Responsibility Findings:
Grantee did not fulfill its FGP responsibilities for the following:
Documentation of volunteer orientation and in-service training
Documentation to support annual volunteer evaluations
Documentation of written assignment/care plans for FGP volunteersduring the review period
Documentation regarding the eligibility of the children to be served
Memoranda of Understanding with volunteer stations missing or didnot include all required elements
Member Agreements and Volunteer Assignment Plans are late,
not prepared, or do not meet CNCS grant provisions and regulations
Senior Corps/AmeriCorps Appraisals/Evaluations are notconducted or not maintained; AmeriCorps members serving a secondterm without appropriate evaluations supporting successful completionof the first term
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Activity This Activity will consist of small groups
examining different scenarios and:
Reviewing specific issues
Considering potential consequences
Identifying remedies
See Activity 1
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Taking it Home!
1. Learn from the mistakes of others
2. Use information to review organization
strengths, challenges3. Create systems and written policies andprocedures to rectify challenges
4. Resources and sample forms may befound at the Resource Center
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Questions?Open
Wrap Up
Evaluation
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For More Information Contact your Commissions Program Officer
Contact your CNCS Grants Officer E-mail or call your Grants Officer
Visit the Resource Center Online tools and training www.nationalserviceresources.org/financial-and-grants-management
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