Chapter 8 Financial Management

Transcription

1 Chapter 8 Financial Management Intrductin Effective financial management is the heart f successful Cmmunity Develpment Blck Grant (CDBG) administratin. Grantees, r the Unit f General Lcal Gvernment (UGLG), are held accuntable fr all funds, prperty, and assets f the CDBG prgram. The UGLG must maintain a financial accunting system fr the grant that meets federal and state requirements. This chapter prvides guidance n financial management requirements, including applicable regulatins, financial accuntability recrds, authrized signatures fr payments and checks, requests fr payments, bank accunts, chart f accunts, escrw accunts, administrative csts, prperty management, and audit requirements. Sectin 1 Applicable Regulatins and Requirements The Michigan Ecnmic Develpment Crpratin (MEDC) is respnsible fr mnitring the UGLG s cmpliance with applicable financial management standards, fr prcessing CDBG Payment Requests (PRs) fr CDBG funds, and fr audit review. There are tw types f federal financial standards; HUD CDBG specific guidelines and general federal grant guidelines. HUD Guidelines The fllwing is a list f the key federal regulatins gverning financial management. 24 CFR Part 570, Cmmunity Develpment Blck Grant Prgram. Subpart I gverns the State CDBG prgram. Sectin details prgram administratin requirements. 24 CFR Part refers t the administratin f escrw accunts. (The CDBG Entitlement Prgram regulatins n this tpic are cnsidered a safe harbr fr use in the State CDBG Prgram.) 24 CFR Part 85, Administrative Requirements fr Grants and Cperative Agreements t State, Lcal and Federally Recgnized Indian Tribal Gvernments (als called the Cmmn Rule). This regulatin, which applies t gvernment agencies, sets frth unifrm requirements fr financial management systems, reprts and recrds, and grant clse-uts fr UGLGs receiving federal grant funding. Listed belw is the lcatin f specific applicable rules by categry in the Cmmn Rule. Sectin Standards fr financial management systems. Sectin Payment. Sectin Allwable Csts. Sectin Perid f availability f funds. Sectin Matching r cst sharing. Sectin Prgram incme. 1

2 Sectin Nn-federal audit. Sectin Cpyrights. Sectin Sub awards t debarred and suspended parties. Sectin Prcurement. Sectin Sub grants. Sectin Mnitring and reprting prgram perfrmance Sectin financial reprting. Sectin Retentin and access requirement fr recrds. Sectin Enfrcement. Federal Guidelines (general) In December 2013 new unifrm federal grant guidance, 2 CFR Chapter I, and Chapter II, Parts 200, 2015, 220, 225 and 230 Unifrm Administrative Requirements, Cst Principles, and Audit Requirements fr Federal Awards came int effect. This guidance is cmmnly called the Omni Circular, Super Circular r Unifrm Guidance. This new guidance replaces A-87 Cst Principals State and Lcal Gvernments, A-122 Cst Principals - Nnprfit rganizatins, A-89 Catalg f Dmestic Assistance, A-102 Administrative Rules State and Lcal Gvernments, A-133 & A-50 Audit Rules. It is imprtant t nte that fr grant recipients the change frm the previus federal standards (like A-87 & A-133) t the OMNI circular did nt all ccur in December 2013 but instead will apply based n the funding year f the grant award. Unless therwise nted in the grant agreement any grant funds awarded prir t 7/1/2015 will fall under the previus guidance. After that date details regarding which federal guidance shuld be fllwed will be spelled ut in the grant agreements. Key federal guidance fr awards funded prir t 7/1/15 (r later as spelled ut in the grant agreement): OMB Circular A-87 Cst Principles fr State, Lcal and Indian Tribal Gvernments This applies t gvernmental entities and establishes principles and standards fr determining allwable csts under federal grants. OMB Circular A-110 Cst Principles fr Nn-Prfit Organizatins. - This establishes principles fr determining allwable csts fr nnprfit rganizatins. OMB Circular A-133 (Revised June 1997) Audits f Institutins f States, Lcal Gvernments and Nnprfit Institutins. These regulatins refer t audit prcedures and requirements fr States, Lcal Units f Gvernment and Nn-Prfit Organizatins Key sectins f the Omni Circular 1 : Payment Prcurement 1 All references t the Omni Circular refer t the Office f Management and Budget 2 CFR Chapter 1 & 2 Part 200, 215, 220, 225 and 230 Unifrm Administrative Requirements, Cst Principals, and Audit Requirements fr Federal Awards dated 12/26/13, 2

3 Cntracting with small and minrity businesses, wmen s business enterprises, etc. Subpart E Cst Principles Allwability f csts Reasnable csts Allcable csts Cmpensatin persnal services Subpart F Audit requirements ( ) Appendix II t Part 200 Cntracts Sectin 2- Cst Reasnableness The UGLG must ensure that CDBG funds are spent nly n reasnable and necessary csts assciated with apprved grant r lan activities. Sme questins t help guide decisins n cst reasnableness and necessity are: 1. Where the csts incurred using the established practices f the UGLG (prcurement plicy)? 2. Are the gds r services prvided at a fair market cst? 3. Hw wuld yu defend this csts t an auditr r a cmmunity member? 4. Are the csts determined in accrdance with Generally Accepted Accunting Principles (GAAP)? 5. Where the csts incurred in a transparent and cnsistent manner? 6. Is this cst permitted under the term f the grant award and under federal, state and lcal laws and regulatins? 7. Did this transactin avid any cnflict f interest r the appearance f cnflict f interest? Cst Allcatin Plan In additin t being reasnable and necessary all csts charged t a federal grant must be allcable, meaning that any expenses which are incurred that benefit but the CDBG grant and any ther prject/activity/funding surce the csts can nly be charged t the CDBG grant if a prper Cst Allcatin Plan exists and is used. Allcated csts are nt cmmnly included in the prject budget fr CDBG grant awards, hwever if they are a cst allcatin plan is required. Reginal Lan Fund Administratrs will be required t have a cst allcatin plan that at a minimum cvers the methd they will use t allcate genereral adminstratiive csts acrss the funds they manage. A detailed sample cst allcatin plan can be fund in the attachments t this chapter (Frm 8-E). 3

4 Sectin 3 Financial Accuntability and Recrds Internal Cntrls Internal cntrls are plicies and prcedures in place that ensure effectiveness and efficiency f peratins and cmpliance with applicable laws and regulatins. Sme f the main gals f internal cntrls are t: Safeguard assets frm theft, accidental lss, fraud, etc. Ensure that accunting infrmatin is accurate and reliable Ensure cmpliance with GAAP, laws, regulatins and the terms f agreements Assist the rganizatin in accmplishing its gals There are many elements the gd internal cntrls but they shuld always include: Defined rles and clear segregatin f duties including apprpriate managerial versight Dcumented prcesses, plicies and prcedures Restricting access t systems and recrds passwrds, lcked files Prper recrd retentin Recrd recnciliatins Audits/Internal reviews/mnitring Financial Management Systems Requirements and Certificatins UGLGs must: Prvide financial status f each CDBG grant separated frm ther funding surces and ther grants All recrds needed fr a state mnitring r Single Audit shuld be maintained and made available t independent auditrs and state CDBG staff as necessary fr them t cmplete the mnitring r audit. Have financial recrds that are accurate, current and cmplete Shw bth receipt and expenditure f CDBG funds Have sund internal cntrl prcedures and Have cash management prcedures and be able t prvide dcumentatin in the frm f a cash transactin ledger. This shuld include the date f each receipt f federal funds frm the state and the date f each expenditure n the grant, separating funds t be reimbursed frm federal grant dllars, required matching funds and ther funds. Dcument bth CDBG and CDBG matching financial transactins in line with the apprved grant budget Have a budget cntrl system t cmpare actual csts with budgeted csts thrughut the life f the grant prject Keep segregated accunting recrds fr CDBG funds (this culd be dne thrugh the use f fund accunting, the creatin f separate chart f accunt fr CDBG activities) Required Certificatins 4

5 Financial Management System Authrized signatures fr payments and checks Cnflict f Interest Plicy Recrd Retentin The required perid fr retaining all required dcumentatin at the lcal level fr CDBG grants is at least 3 years after the clse f the grant award between HUD and the State f Michigan frm which the prject was funded. It is imprtant t nte that this perid can be much mre than 3 years frm the date the prject is cmpleted. The MEDC will ntify grant recipients when the 3 year perid begins, and UGLGs are encuraged t cntact the MEDC befre dispsing f any recrds t cnfirm that the 3 year retentin perid has lapsed. It is als imprtant t nte the many recrds required fr CDBG grant prjects shuld be retained indefinitely r fr lnger than required by the terms f the CDBG grant in rder t meet ther recrd retentin requirements, like thse f the IRS. Sectin 4 Payment Requests Receiving Payments frm the State f Michigan Befre a payment request is submitted the UGLG must be registered as a vendr fr the state f Michigan. Directins fr registering: G t the Vendr/Payee webpage, Click n the green C&PE arrw Register as a state vendr Register t receive payments via EFT (per State f Michigan Public Act 533 f 2004) PLEASE NOTE: D nt lg ut f the registratin system until yu enter all three f the fllwing: Cmplete address, cntact persn and telephne infrmatin W9 infrmatin Financial institutin and accunt infrmatin (Fr required EFT payments) The same website can be used t edit r add vendr infrmatin like changing the address r setting up a new bank accunts. If yur cmmunity has mre than ne vendr mail cde, r if yu wish t have CDBG funds depsited t a specific accunt please infrm yur prgram specialist which mail cde t use n payments. Payment Request Prcess There are tw methds the UGLG is allwed t use t request payment f CDBG funds frm the MEDC; 1. Cash Advance 2. Cst Reimbursement The cst reimbursement methd f payment cnsists f the payment f CDBG funds t the UGLG based n actual expenditures that the UGLG has paid. Mst payment requests will fall int this categry. 5

6 The cash advance methd allws the MEDC t pay the UGLG CDBG funds in advance f the UGLG incurring the expenditure. Nte, this methd is nly allwed if the UGLG prvides the MEDC with the necessary assurances listed belw, and maintains prcedures t minimize the time elapsing between the transfer f funds and their disbursement. CDBG funds shuld be expended within 3 days f receipt by the UGLG. Requirements fr Submittal f a Payment Request (PR) The UGLG requesting CDBG funds frm the MEDC must use the CDBG Payment Request (PR) frm. The blank frm and instructins may be fund as Frm 8-A1 t this chapter. The UGLG shuld determine their cash requirements prir t requesting CDBG funds. The funds requested shuld be fr amunts necessary t meet current disbursement needs. Current disbursement needs are funds that will be expended as sn as administratively feasible, since it is required that funds in excess f $5,000 be expended within three days f receipt. The fllwing requirements must be met befre the MEDC can prcess the first PR: The Grant Agreement must have been signed and returned t the MEDC. All required dcumentatin in the Pre-Disbursement List must be submitted t the MEDC. Funds must be drawn n a pr rata basis and dcumentatin f the match must accmpany the PR. Depending n the type f match being prvided, supprting dcumentatin may include invices, cpies f checks, time sheets, etc. The fllwing requirements are necessary fr the submittal f any PR: The UGLG must request funds by activity r budget line item. The nly exceptin is that up t $5,000 may be requested n the initial PR withut specifying a budget item. Als, any time the UGLG is required t return cash, the UGLG must submit a PR specifying which activity r budget line item t credit. Additinally, if funds are being drawn dwn at the same time as the refund is being submitted, the refund and draw dwn must be dne n separate PR frms. Ttal funds requested cannt exceed the apprved ttal budget fr any activity withut prir apprval frm the MEDC. An analysis f the budget shuld be cnducted whenever there are ptential line item budget revisins t ensure that the ttal csts are within the ttal prject budget. When using the cash advance methd, the UGLG must prject future expenses and determine their cash requirements prir t requesting CDBG funds. Cash advances shall be limited t the minimum amunt required fr three days. The apprved grant applicatin, alng with the mst recently apprved budget, shuld be used as the basis fr the develpment f the PR. The amunt requested fr each activity must cnfrm t the activities and csts apprved in the grant applicatin budget. When using the cst reimbursement methd, the UGLG simply requests reimbursement fr expenses incurred and paid in cnnectin with the grant. PR Submittal and Prcessing Once the abve listed requirements have been met, the UGLG may draw dwn CDBG funds. There are 2 mechanisms fr submitting a payment request ne is t cmplete the frm attached at the end f this chapter and the ther is thrugh the use f the Salesfrces Prtal. 6

7 Salesfrce Prtal The Salesfrce Prtal is a new tl that the CDBG prgram has that allws UGLGs t lg in and fill ut the required infrmatin and uplad the necessary supprting dcumentatin right int ur payment request system. The benefits t use f the prtal include faster prcessing time fr the payment. If yu are interested in using the Prtal please cntact yur grant specialist t get mre infrmatin. Use f the Payment Request Frm The secnd ptin fr hw t submit a payment request is t cmplete the PR and Invice Summary (Frm 8-A2) and submit it t yur prject specialist via mail, r fax. PRs must be submitted at least quarterly. The UGLG shuld allw 10 t 15 wrking days after required crrespnding dcumentatin has been submitted. Any PR that is nt cmpleted prperly may be returned t the UGLG withut being prcessed. Sme f the reasns a PR may be returned include: Cntract nt apprved by the MEDC (if applicable). Adjustments t amunts previusly drawn nt reprted crrectly r in a timely fashin. Administrative funds nt requested prprtinately t prgress. Budget amunts, amunts previusly drawn, and/r ttal expenditures t date d nt agree with the MEDC s recrds. Required match nt dcumented prir t draw dwn f final CDBG funds, r a pr rata draw is nt requested, if required. Unauthrized signature n PR. There is a reasn t stp payment n the grant (see belw). The MEDC will stp payment f CDBG funds fr the fllwing reasns: Semiannual and/r annual reprts are nt received. Audit reprts nt received. Respnse t mnitring r ther requests nt received. Nncmpliance with ther grant agreement terms. The grantee must submit a Final Clseut PR. This Final PR will reflect any final adjustments and/r refunds draw dwn. The Final PR must be indicated as such n the item #8 n the PR t begin the grant clse-ut prcess. Refer t Chapter 13: Grant Clse-ut Prcess fr detailed infrmatin n the clseut prcess. Sectin 5 Detailed Infrmatin in Specific Types f Csts Acquisitin Csts Estimated csts f real prperty must be budgeted under the Acquisitin line item. Appraisal and review appraisal fees, legal, and title search csts shuld als be listed under the Acquisitin budget item. 7

8 Water/Sewer Tap and Cnnectin Csts Generally, the csts assciated with cnnecting a residential unit t a water r sewer line are cnsidered husing rehabilitatin, which is a prgram administered by MSHDA. Hwever, the MEDC may, in sme situatins, enable the UGLG t assist privately wned businesses t cnnect a business t a water r sewer line as part f an apprved ecnmic develpment initiative. These are activities that ccur n private prperty and are generally cntracted separately frm the main water/sewer line cnstructin. These csts may include service lines and appurtenances n private prperty. CDBG funds may nly be used fr hard cnstructin and installatin csts fr hk-ups/cnnectins t public water and sewer, and nt t pay fr any water r sewer cnnectin, impact, r capacity fees. Any assciated fees that directly impact Lw and Mderate Incme husehlds must be waived r paid with nn-cdbg funds, and may be cnsidered part f the lcal match requirement. Administrative Csts Cmmunity Develpment Blck Grant (CDBG) funds may be available t assist the Unit f General Lcal Gvernment (UGLG) with the management f its CDBG Grant Agreement. The CDBG prgram includes federal and state statues, regulatins, and plicies. UGLGs must use a Certified Grant Administratr (CGA) t utilize MEDC funding. Typically, there are tw types f CGAs: CGA n the UGLG s Staff Administrative dllars are nt available fr emplyees f the UGLG. Federal regulatins d nt allw CDBG funds t be used t supplant available lcal funds. Typically, when a CGA n the UGLG s staff administers its wn grant, the administratin is prvided as in-kind leveraging (abve the required lcal match) and is nt included in the budget. Hwever under specific circumstances, an UGLG can charge time fr a CGA n its wn staff, if the UGLG first submits and the MEDC apprves, a certificatin that the CDBG funds used t pay the emplyee s salary will nt supplant available lcal funds. A cntract must be executed between the UGLG and the emplyee utlining the emplyee s specific duties. CGA Cnsultant The UGLG must fllw apprpriate prcurement requirements when selecting a CGA cnsultant. Please refer t Chapter 14, Frm 14-A fr infrmatin n the prcurement prcess. Additinal Guidance and Pre-disbursement requirements fr bth a CGA Cnsultant and a CGA n the UGLG s Staff Payment t the CGA is based n negtiated terms between the UGLG and the selected CGA. Payment culd be based n: 1. Reimbursement frm the UGLG; r 2. The UGLG s drawdwns frm the Michigan Ecnmic Develpment Crpratin (MEDC). Typically, administrative draws shuld be prprtinate t prject cmpletin. Fr example, a prject which is nly 60% drawn dwn shuld nly have 60% f its administrative csts drawn dwn. This ensures that the State Prgram as a whle des nt exceed HUD limits n administratin csts. 8

9 CDBG Disbursement fr CGA administrative expenses will nt happen until: 1. The envirnmental review has been cmpleted; 2. The grant agreement has been executed; 3. The pre-disbursement requirements in the Grant Agreement and any items requested by the MEDC have been submitted and apprved by the MEDC; 4. The executed administrative cntract has been frwarded t the MEDC. Reimbursement fr bth a CGA Cnsultant and a CGA n the UGLG s Staff Regardless f whether the CGA is a cnsultant r n the UGLG s staff, the prcess fr requesting reimbursement fr administrative csts is the same. The UGLG is required t submit the fllwing dcuments: 1. Frm 8-A (CDBG Grant Payment Request and Instructins); 2. Frm 8-D (Administrative Activity Reprt) which identifies the CGA s daily activities/hurs; and 3. The apprpriate dcumentatin (i.e. invices, travel csts, etc.) fr any ther csts charged. NOTE: Federal regulatins d nt allw CDBG funds t be used t cmplete CDBG applicatins r t be used t administer ther federal r state grant prgrams that may be cnducted in cnjunctin with a CDBG prject. In additin t the abve dcumentatin, the UGLG s files shuld include time sheets supprting the Administrative Activity Reprt. The dcumentatin must be kept n file and will be reviewed at financial mnitring. If the UGLG separately prcures fr bth a CGA and an engineering r architectural cntract and the UGLG determines it is mst advantageus t select the same firm, this wuld be cnsidered a general cnflict. In this case, the UGLG may select the same firm but the CGA may nt versee and apprve its firm s wn wrk. Fr guidance related t Administrative Csts assciated with the CDBG Lan Prgram, refer t Chapter 3 f this manual. Persnnel Csts Federal regulatins d nt allw CDBG funds t be used t supplant available lcal funds. Hwever under specific circumstances, lcal gvernments that wish t charge csts r an emplyee s time fr administratin f the CDBG prject t the CDBG budget must first submit a certificatin that the use f federal grant funds fr a prtin f the emplyee s salary will nt supplant available lcal funds. Any csts and time charged must be dcumented thrugh the apprpriate means (i.e., invices frm lcal newspapers fr advertisements placed fr hearings, travel csts, time sheets indicating wrk perfrmed fr the particular prject, etc.). The dcumentatin must be kept n file, and will be reviewed at financial mnitring. All lcal gvernment emplyees and nn-prfit administratrs, wh charge administrative time t a CDBG grant fr which reimbursements will be requested, are required t fully dcument hw the time was spent. (This requirement des nt apply t private cnsultants wh cntract n a fixed fee basis fr 9

10 CDBG administrative services. These arrangements are subject t prcurement requirements utlined in Chapter 4.) Funds budgeted fr staff cntributing t develpment f a plan under a Lcal Planning grant must be budgeted as Salaries and Fringe under Planning. The staff must keep time sheets and be prepared t shw that the grant is nt supplanting lcal funds budgeted fr the salary f the emplyee invlved. These are activity delivery csts and d nt include csts fr general administratin f the grant, but are dcumented the same as administrative lcal persnnel csts. Time and attendance recrds must be kept t dcument actual hurs wrked and csts charged t the administrative budgets f CDBG prjects. Reimbursements will be allwed based nly n actual csts. Required dcumentatin, an Administrative Activity Reprt (Frm 8-D), is essentially a time sheet that shuld be maintained daily, tracking actual hurs wrked and prvides hurs that are billable t the CDBG accunt (Billable Hurs). An Administratin Activity Reprt may be cmpleted fr each grant, r yu may include mre than ne grant n each sheet. Fr each grant, yu must shw a grant ttal and a billable ttal. This frm was designed fr a biweekly payrll perid, but may be mdified fr a weekly r mnthly pay perid. Dcumentatin f CDBG administrative csts is mandatry. At a minimum, the Administrative Activity Reprt must cntain the fllwing infrmatin: Emplyee name. Pay perid. Hurs wrked by day. Actual hurs charged t the grant. Emplyee signature. Supervisr signature. Hurs billable t the payrll accunt. The Administratin Activity Reprt will be subject t review during regular mnitring visits f CDBG prjects. Sectin 6 Prperty Management Each item f nn-expendable prperty t be acquired with CDBG funds at a cst f $5,000 r mre must be apprved by the MEDC prir t purchase. If the item has a useful life f ne r mre years, the Grantee must maintain adequate prperty inventry cntrls and cmply with the prperty management, use, and dispsitin requirements utlined in 24 CFR Part 85. In additin, a Persnal Prperty Management Reprt, Frm 8-B1 and/r Real Prperty Management Reprt, Frm 8-B2, must be cmpleted shwing pertinent infrmatin regarding the equipment, including the descriptin f item, serial number, lcatin, dispsitin, etc. This frm, which is prvided as an attachment t this chapter, must be cmpleted and returned with the grant clse-ut package. A cpy must als be maintained by the UGLG and updated as necessary until dispsitin. 10

11 Dispsitin When riginal r replacement equipment acquired with CDBG funds is n lnger needed fr the riginal prject r prgram r fr ther activities currently r previusly assisted with federal funds, the fllwing rules f dispsitin will apply t gvernmental grantees. Equipment with a current per-unit fair market value f less than $5,000 may be retained, sld, r therwise dispsed f by the grantee after ntice t the MEDC, subject t the cnditins in 3 belw. Equipment with a current per-unit fair market value f $5,000 r mre may after ntice t the MEDC be retained r sld by the grantee with the MEDC having the right t cmpensatin in an amunt equal t multiplying the current fair market value r the prceeds frm sale by the federal share (percentage) in the riginal acquisitin price f the equipment. Fr example, if the equipment was purchased fr $100,000, utilizing $50,000 in CDBG (50 percent) and $50,000 (50 percent) in private funds and the cmpany sld the equipment fr $60,000 (depreciated value is $50,000). The MSF wuld be repaid $30,000 (the greater f 50 percent f $60,000 r 50 percent f $50,000). The MEDC may reserve the right t transfer title f the equipment t the federal gvernment r a third party (24 CFR 85.32(g)). In additin, per 24 CFR (a) (8), in all cases when equipment purchased with CDBG funds is sld, the net prceeds are cnsidered prgram incme. The use f real prperty is gverned by 24 CFR Fr real prperty acquired r imprved in whle r in part with CDBG funds in excess f $25,000, the grantee cannt change the use r planned use f the prperty (including the beneficiaries f such use) withut first prviding affected citizens ntice and pprtunity t cmment, and determining that either: The cntemplated new use meets ne f the Natinal Objectives and is nt a building fr the general cnduct f gvernment. The cntemplated new use is deemed apprpriate (after cnsultatin with affected citizens) but will nt meet a Natinal Objective. In this latter case, the grantee must reimburse the MEDC CDBG prgram in the amunt f the current fair market value f the prperty, less the value attributable t the nn- CDBG prtin f the acquisitin r imprvements. At mnitring, MEDC staff will ensure that prper inventry cntrls and recrds are being maintained. Cntact the MEDC fr dispsitin instructins prir t transfer, trade, r sale f equipment. Sectin 7 Audit Requirements One f the primary financial management requirements implicit with the use f federal funds pertains t audits. OMB Circular A-133 prvides requirements fr audits f gvernmental entities and nnprfit rganizatins. As an agency administering federal funds, the State is respnsible fr ensuring the UGLGs cmply with OMB Circular A-133 requirements. Determinatin f Single Audit Applicability As a result f the new Omni Circular guidance there are tw sets f audit threshlds, ne fr awards funded frm 2014 and earlier and anther frm 2015 and later. 11

12 If yur grant award was funded frm 2014 r earlier and the UGLG expends mre than $500,000 during its fiscal year, then an A-133, r single audit is required. If yur grant award was funded frm 2015 r later and the UGLG expends mre than $750,000 during its fiscal year than a single audit under the Omni Circular guidelines is required. T dcument the applicability f a single audit under either set f federal guidance, every UGLG must cmplete and submit an Audit Requirements Certificatin Frm (Attachment 8-C) t the MEDC within 60 days f the end f the UGLG s fiscal year. This frm is attached at the end f the chapter. The MEDC des nt permit prgram audits (a mre limited type f federal funds audit) fr any grantee ver the applicable threshld ($500,000 r $750,000). Type f Audit Required All audits cnducted in accrdance with OMB A-133 r the Omni Circular must be perfrmed in accrdance with Generally Accepted Gvernment Auditing Standards, described in GAO s Gvernment Auditing Standards, cmmnly referred t as the Yellw Bk. Accrding t these standards, a financial audit shuld determine whether: Financial infrmatin is presented in accrdance with established r stated criteria. The entity has adhered t specific financial cmpliance requirements. The entity s internal cntrl structure ver financial reprting and/r safeguarding assets is suitably designed and implemented t achieve cntrl bjectives. Even thugh an audit is required because f the use and receipt f specific federal prgram funds, the audit will als serve as the lcal gvernment s agency-wide audit. Therefre, lcal funds shuld be used t pay fr audit csts. Auditr Prcurement and Selectin There are guidelines specific t the selectin f an auditr t cnduct the single audit. The fllwing guidelines apply t auditr selectin under A-133 r the Omni Circular 1 guidance (citatin: A-133 Subpart C Auditees.305; Omni ): Prcurement Auditrs must be prcured under the general applicable prcurement standards that apply t their award Factrs t cnsider is selectin include respnsiveness t RFP, experience, staff availability and capacity, peer reviews/quality reviews by third parties and price. Psitive effrts shuld be taken t utilize small businesses, minrity-wned firms, and wmen's business enterprises Prir t issuing a RFP fr an auditr the grantee shuld carefully review either the A-133 r the Omni Circular whichever is applicable. Requirements fr the Audit Reprt OMB Circular A-133 requires that audit reprts issued upn cmpletin f an audit include the fllwing cmpnents: 12

13 An pinin (r disclaimer f pinin) as t whether the financial statements are presented fairly in all material respects and in cnfrmity with generally accepted accunting principles. An pinin (r disclaimer f pinin) as t whether the schedule f expenditures f federal awards is presented fairly in all material respects in relatin t the financial statements taken as a whle. A reprt n internal cntrl related t the financial statements and majr prgrams describing the scpe f testing f internal cntrls and the results f the tests and, where applicable, refer t the separate schedule f findings and questined csts described belw. A reprt n cmpliance with laws, regulatins, and the prvisins f cntracts r grant agreements; nncmpliance with which culd have a material effect n the financial statements. An pinin (r disclaimer f pinin) as t whether the auditee rganizatin has cmplied with laws, regulatins, and the prvisins f cntracts r grant agreements that culd have a direct and material effect n each majr prgram and where applicable, refer t the separate schedule f findings and questined csts described next. A schedule f findings and questined csts that includes a summary f the auditr s results as described belw, and all audit findings. The summary f audit results must include: The type f reprt the auditr issued n the financial statements. Where applicable, a statement that reprtable cnditins in internal cntrl were disclsed by the audit f the financial statements and whether any such cnditins were material weaknesses. A statement as t whether the audit disclsed any nncmpliance that is material t the financial statements f the auditee. Where applicable, a statement that reprtable cnditins in internal cntrl ver majr prgrams were disclsed by the audit, and whether any such cnditins were material weaknesses. The type f reprt the auditr issued n cmpliance fr majr prgrams. A statement as t whether the audit disclsed any audit findings. An identificatin f majr prgrams. A statement as t whether the auditee qualified as a lw-risk rganizatin. The auditr s reprt(s) may be in the frm f either cmbined r separate reprts, and may be rganized differently frm the manner presented in this sectin. Audit Submissin Generally, the due date fr submissin f the audit reprt is the lesser f 30 days f the cmpletin f the audit r 9 mnths frm the end f the UGLG s fiscal year end date. Please nte that if the UGLG indicates n their Audit Requirements Certificatin Frm (frm 8-C) that an Single Audit is nt required, exempt, fr a particular fiscal year, a cpy f the annual audit r ther financial reprt review must be maintained t dcument the assertin f exemptin. 13

14 If a Single Audit is required, it is requested fr all UGLGs and required fr thse receiving funds frm grant year 2015 and later that the Audit Reprts be submitted t the Federal Audit Clearinghuse (FAC). If submissin t the FAC is nt required and the UGLG prefers nt t submit t the FAC a cpy f the audit reprt must be submitted t: Michigan Ecnmic Develpment Crpratin Attn: CDBG, 300 N. Washingtn Square, Lansing, MI In all cases, the grantee must maintain apprpriate recrds and make them available fr review r audit by apprpriate federal, r state persnnel as necessary t verify infrmatin prvided n the frm. Audit Review and Reslutin The UGLG must establish a system t ensure a timely and apprpriate reslutin t audit findings and recmmendatins. A first step in the reslutin f an audit is the preparatin f Management s Respnse t the findings and recmmendatins cntained in the audit reprt. In its respnse, the UGLG shuld prvide: Fr findings/recmmendatins with which the UGLG agrees, infrmatin n the actins it has taken (r plans t take) t crrect the specified nncmpliance r financial system deficiencies. Fr findings/recmmendatins with which the UGLG des nt agree, the basis (including relevant dcumentatin) fr the subrecipient s belief that an audit finding r recmmendatin is inaccurate r inapprpriate. If in its frmal audit respnse the UGLG has disagreed with any f the audit findings r recmmendatins, the entities issuing and reviewing the audit reprt will re-examine the pints in questin t determine whether any revisins t the reprt s findings/recmmendatins are warranted. Fr thse audit findings and recmmendatins with which the UGLG agrees, and fr any disputed findings r recmmendatins in which the challenge is nt upheld, the next step in the reslutin prcess is the implementatin f prcedures t prevent the deficient cnditins frm re-ccurring. In general, crrective actin t crrect findings r t implement recmmendatins must be cmpleted within ne year f the issuance f the audit reprt. A repeat finding (a deficiency r area f nncmpliance that appears in mre than ne successive audit) will be viewed very seriusly, and can ften result in special cnditins being attached t future federal funding, r ther sanctins. Occasinally, the findings frm an audit will result in questined csts. Csts assciated with federal funding may be questined fr the fllwing reasns: There is inadequate dcumentatin t supprt the expenditure r the amunt f cst charged t the grant. The expenditure des nt appear t be related t the grant prject. The cst was incurred utside the effective perid f the grant agreement, r was a prgram expense incurred befre envirnmental review clearance was achieved. The expense is unallwable under the prgram regulatins and applicable cst principles. The cst required the prir apprval f the UGLG, and n prir apprval was btained. T reslve a questined cst, the UGLG must: Prvide the missing dcumentatin t supprt the expenditure and amunt 14

15 Offer detailed explanatins f hw the cst relates t the grant prgram and/r Seek retractive apprval (which the State may r may nt grant) fr an expense that required prir apprval. If the UGLG is nt able t reslve a questined cst t the satisfactin f the auditr and/r the MEDC, the expense will be disallwed. A disallwed expense fr which federal funds were riginally used must be reimbursed frm nn-federal funds. On ccasin, such reimbursements can be repaid n a payment schedule negtiated with the MEDC. Criteria t Qualify as a Lw Risk Auditee Any UGLG that qualifies as a lw risk auditee is eligible under the OMNI circular guidance t have reduced audit cverage. The full details f what qualifies a grantee fr lw risk status can be fund in the OMNI circular Subpart F Sme f the criteria fr determining status as a lw-risk auditee are as fllws: Unmdified Auditr pinin n the prper use f GAAP fr financial statements Unmdified Auditr pinin n the SEFA N deficiencies in internal cntrls N mdified pinins n any majr prgrams fr preceding tw audit perids If an UGLG believes that they may qualify as a lw-risk auditee after carefully reviewing the OMNI criteria they shuld cntact their prject manager. Chapter 8 Frm(s) 8-A1 Payment Request and Instructins 8-A2 Invice Summary 8-B1 Persnal Prperty Management Reprt 8-B2 Real Prperty Management Reprt 8-C Audit Requirements Certificatin 8-D Administrative Activity Reprt 8-E Cst Allcatin Plan SAMPLE 8-F Prgram Incme Plicy fr CDBG Grantees 8-G UGLG Prgram Incme Decisin Tree 8-H Prgram Incme Certificatin 8-I Time and Effrt Tracking Lg simple 8-J CDBG Lcal Prgram Incme Quarterly Reprt 15