2013 SW Avoiding Common Issues and Pitfalls Preparing for an Audit

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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2013 Southwestern National Service ConferenceJuly 24-25, 2013 2

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

2013 Southwestern National Service Conference

July 24-25, 201329


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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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July 24 25 2013

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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

Documents

2013 SW Avoiding Common Issues and Pitfalls Preparing for an Audit