Department of Children and Youth Services. Fiscal Management Training Workshop Kennedy King College. Auditing

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1 Department of Children and Youth Services Fiscal Management Training Workshop Kennedy King College Auditing March 17 and 18,

2 Audits Unit: Purpose and Objectives To conduct annual program and fiscal audits on each delegate agency and partner. An exception to this policy may be granted in certain cases where CYS determines that it is necessary to conduct a special review or investigation of an agency in lieu of a standard audit. Using evidence and facts to document potential areas of compliance ce and noncompliance based on the funding source program and fiscal requirements. Investigating complaints as it relates to program and fiscal concerns cerns of a CYS delegate agency. Assisting and supporting the CYS Children Services and Youth Units in ensuring delegate agency compliance with the funding sources program and fiscal requirements. 2

3 Contacts Fiscal Audits David M. Stafford Auditor IV Simeon Franks Auditor III Alma Alvarez Auditor II Tracie Berry Auditor II Yolanda Owens Auditor II Program Audits Darlene Perez Assistant Director Carmen Pacheco Supervising Prg.. Auditor Lois Dixon Program Auditor II Sandra Kidd Program Auditor II Elizabeth Matias Program Auditor II Edrina McDonald Program Auditor II James Rodgers Program Auditor II Jeanette Helm-Tolbert Program Auditor II Shawntia Robinson Program Auditor II chicago.org 3

4 Overview Fiscal Audits Programs Audited: HS/EHS Child Care CDBG Corporate Regional Consortium Center Youth Career Development Center WIA Youth (Monitored by MOWD) Office of Compliance / Internal Audits 4

5 Overview Fiscal Audits Key Regulations Uniform Administrative Requirements 2 CFR Part 215 (OMB Circular A-110A 110) Cost Principles 2 CFR Part 230(OMB Circular A-122) A OMB Circular A-133, A Audit requirements Contract Terms and Conditions City and/or Department requirements Refer to summary of OMB Circulars 5

6 Federal Regulations Requirements Educational Institutions State and Local Government Non-Profit Organizations Commercial Organizations Cost Principles 2 CFR 220 (OMB A-21) A 2 CFR 225 (OMB A-87) A 2 CFR 230 (OMB A -122) 48 CFR 31 Uniform Administrative Requirements 2 CFR 215 (OMB A-110) A 45 CFR 74 (HS/EHS) 24 CFR 84 (CDBG) 29 CFR 95 (WIA) OMB A-102A 2 CFR 215 (OMB A-110) A 45 CFR 74 (HS/EHS) 24 CFR 84 (CDBG) 29 CFR 95 (WIA) 2 CFR 215 (OMB A-110) A 45 CFR 74 (HS/EHS) 24 CFR 84 (CDBG) 29 CFR 95 (WIA) Audit Requirements OMB A-133A OMB A-133A OMB A-133A OMB A-133A 29 CFR 96 6

7 Uniform Administrative Requirements: 2 CFR Part 215 (OMB Circular A-110) A Circular sets forth administrative standards for both nonprofit and commercial organizations. Items covered: Standards for Financial Management Systems - Accurate and complete disclosure of financial results of each federally funded program - Records that identify the source application of funds. - Effective control over and accountability for all funds, property and other assets - Comparison of outlays with budget amounts for each award - Written procedures determining the reasonableness, allocability and allowability in accordance with applicable cost principles. - Accounting records that are supported by source documentation. 7

8 Uniform Administrative Requirements: 2 CFR Part 215 (OMB Circular A-110) A Procurement Procedures Principles applies to ALL grantees, subgrantees, subrecipients & sub-awards Must maintain a system for administration of contracts Must provide for full and open competition Supported by documentation Property Standards Access and Retention Requirements for Records 8

9 Cost Principles: 2 CFR Part 230 (OMB Circular A-122) A Circular establishes principles for determining allowable costs for nonprofit organizations. General principles: Costs need to be reasonable, necessary and allocable Costs must follow additional principles listed in Attachment A of the Circular. Reasonable Consistent with other organization activities Treated consistently In accordance with Generally Accepted Accounting Principles Be adequately documented 9

10 Cost Principles: 2 CFR Part 230 (OMB( Circular A-122) A Attachment B of the Circular prescribes treatment of 52 costs. Direct Costs Costs that can be identified with a final cost objective Indirect Costs Costs incurred for common or joint objectives such as depreciation, rent, maintenance Cost Classification Allowable: (example: salaries, travel) Unallowable: (example: fines, penalties, donations) Allowable with conditions: (example: advertising) Allowable with prior approval: (example: equipment) Inclusion in approved budget 10

11 Cost Allocation Plan Process of assigning the cost of an item shared by two or more funding sources (HS, CDBG and WIA), programs (Adult and Youth) and categories within a program (Administrative and program); fair share In writing formal comprehensive plan Supported by formal accounting records and other documentation Covers all direct and indirect costs and the method used Contains extent of services provided and relevance to the program Consistently followed and documented after appropriate approval Auditable 11

12 Allocation Analysis Identify funding sources Identify services to be provided Identify clients to be served Identify relationship between various programs Identify costs to be allocated (group similar costs) Determine appropriate base Allocations must be reasonable and based on actual costs 12

13 Audit Requirements: OMB Circular A-133A Applies to: Nonprofit Organizations Educational Institutions Commercial Organizations Threshold - $500,000 Total expenditures from Federally Funded programs during the organization s fiscal year Audit results should be communicated directly to Executive Director and Board of Directors Due 6 months after the end of the fiscal year Follow Procurement Procedures Agreed Upon Procedures 13

14 Non Federal Match In-Kind Criteria for acceptable In-Kind Verifiable from recipient s records Not included as a cost or match to any federally funded program Necessary and reasonable for accomplishment of program objectives Not financed by any other Federal program Provided for in approved budget Benefits program during the project period 14

15 Web Sites US Government Printing Office Provides links to Code of Federal Regulations. Office of Management and Budget Provides links to all OMB Circulars such as A-133. A Head Start Fiscal Assistant Child Care Assistance (IDHS Child Care Manual)

16 Monitoring Process Audit is scheduled, 2 to 3 weeks in advance Records Request is sent about the same time the appointment is scheduled. Program and Fiscal monitoring instruments are available at On-Site Review Debriefing Exit Report / Improvement Plan Follow-up on conditional or non-compliance issues 16

17 Areas covered Accounting records General Ledger Chart of Accounts Bank Statements Cash Receipts and Disbursements Journal Vouchers To Be Submitted Monthly Confirm payment of vouchers Child Care Billings, attendance sheets and co-payments In-Kind, Kind, non-federal match Reasonable, necessary to HS program Disbursements - Allowability of Costs Charged to the Program - Adequate Supporting Documentation (Purchase Orders, Invoices, Cancelled Checks, etc.) 17

18 Areas covered Internal Controls Proper Authorization Segregation of duties Financial Status Report to Board Financial Procedures Manual Include at a minimum the following policies: Financial Reporting Payroll Purchasing/Procurement Cash Management Cost Allocation Plan Property Management Record Retention Payroll record review Payroll register Time Records 18

19 Areas covered Bank Reconciliations - Deposits are done in a timely manner - Adjusting items are researched and resolved in a timely manner - Bank account balance reconciles with cash account balance in the general ledger Filing and Payment Confirmation - Federal Payroll (941), State Payroll Tax (IL941), - IRS 990 for exempt 501(c), AG 990, Secretary of State, - Consultants

20 Common Findings Inadequate Policies & Procedures Lack of proper financial records Inadequate supporting documentation No bank reconciliation Costs are not consistent with budget, revision is needed Time activity not approved by supervisor Lacks adequate segregation of duties Inadequate contract for consultants. Contracts must specify rate of pay and length of time Improper cost allocations 20

21 Examples of Audit Questions Does the agency have internal controls for mail processing, cash receipts and cash disbursements? Are delegate agency bank statements reconciled on a monthly basis? Has the agency implemented procedures to determine allowability, allocability and reasonableness of costs as required? Has the agency provided adequate documentation for the expenditures charged to the contract? Are employee benefits paid timely? 21

22 Examples of Audit Questions Does the agency s accounting system identify the receipt and expenditure of funds separately for each contract? Are financial reports current and available? Do they contain information pertaining to grant expenditures and income? Have prior year salaries or other prior year costs been charged to the current year? Does agency have procedures in place for collecting child care co-payments? 22

23 Ways For Improvement Read contract, understand requirements Costs must be separated by fund Fiscal Policies should be reviewed at least annually, approved by the board of directors and should be distributed to all appropriate staff Document and monitor non-federal In-Kind costs monthly Procurement procedures should be followed and supported by documentation Have records ready for audit Implement recommended corrective actions 23

24 Fiscal Audits Questions? 24