Provider Audit Guidelines

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Berniece Craig
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Washington County Behavioral Health and Developmental Services 100 W. Beau Street, Suite 302 Washington, PA 15301 724.

1 Washington County Behavioral Health and Developmental Services 100 W. Beau Street, Suite 302 Washington, PA Provider Audit Guidelines Effective for all audits submitted for Fiscal Years Beginning on or after July 1, 2015.

2 General Information This manual is designed to assist auditors in performing audits of BHDS providers. These audits must be performed in accordance with Government Auditing Standards (yellow Book), issued by the Comptroller General of the United States, as well as generally accepted auditing standards. The financial statements are to be prepared in conformity with the accounting practices prescribed by the applicable regulations, which may be a comprehensive basis of accounting other than generally accepted accounting principles. The audit reports are used by Washington County BHDS program managers to meet their responsibilities in overseeing programs and assuring the integrity of the funds. The areas of noncompliance and internal control weaknesses noted in these reports must be acted upon by program managers. Due Dates: One copy of the complete audit/review report package, which includes all audit/review reports, opinions, Financial Statements, Supplementary Schedules, Independent Accountant s Report on Applying Agreed-Upon Procedures Report (AUP), corrective action plan (where findings are present), the management letter, and Audit Checklist (Exhibit A), must be received within six (6) months of the provider s fiscal year end date. Provider must request in writing an extension to submit their audit/review if unable to meet the above deadline prior to the due date, stating the reason for delay and date it will be submitted. Should the service provider fail to engage independent accountants approved by BHDS, they shall be permitted at its option to appoint independent accountants to perform such and audit/review at the cost to the provider. Noncompliance with the above provisions could result in the following actions by BHDS: The disallowance of audit costs Withholding or disallowing administrative/overhead costs Suspend subsequent contract funding until the audit is completed satisfactorily and/or the service provider has demonstrated the ability and/or willingness to comply with these contractual audit/review requirements. In addition, all contracts are subject to review or limited scope auditing by County, Federal, State and /or legislative representatives. Comparative Financial Statement: Financial statements should be prepared in a comparative format with the previous year financial information included side by side with the current year information. Form 990: A copy of the most recent form 990 filed must be submitted with the audit information. Board of Directors Review: The provider must have their audit presented to their Board of Directors and must maintain evidence that their Board has been presented the audit and which Board members were in attendance at the meeting where the audit was presented.

3 Audit Requirements Providers of Service are required to comply with all Federal, State, and County audit/review requirements. The required level or type of audit/review is determined by the combined total amount of Federal, State, and County funds expended from all revenue sources for the Provider of Service as a whole. Federal funding includes funds received directly from federal agencies and pass-through entities such as state or local governments. A summary of these requirements is listed below. Funding Required Federal funding $750,000 or more OMB Super Circular (Yellow Book) Single Audit State funding $750,000 or more OMB Super Circular (Yellow Book) Single Audit Combined Federal, State, and County funding: $750,000 or more $100,000 - less than $750,000 OMB Super Circular (Yellow Book) Single Audit SSAE Section 601 Audit (Compliance Attestation) Less than *$100,000 *No annual audit is required for contracted providers who receive under $100,000 in State & Federal Funds from the department in that Fiscal Year. However, the provider must submit a Statement of Revenue & Expenses by Cost Center. Also the providers are still required to maintain auditable records and make them available upon request. Financial Statement Review Report

4 A Yellow Book Audit is acceptable for any funding level; a Section 601 Audit is acceptable for any funding level of $750,000 or less; a Review Report is acceptable only for funding of $100,000 or less. A higher level requirement is acceptable for any lower level requirement. A lower level requirement is not acceptable for any higher level requirement. A. General Washington County BHDS requires the Provider of Service to secure, if applicable, at the Provider of Service's expense, an annual audit in accordance with generally accepted government audit standards (GAGAS) as specified in Government Auditing Standards published by the Comptroller General of the United States (the Yellow Book}, U. S. Office of Management and Budget (OMB) Super Circular (applicable to non-profit organizations), and guidelines published by federal program agencies, the Pennsylvania Department of Human Services (including Chapter 4300 County MH/El/ID Program Fiscal Manual Section , and the Single Audit Act of 1984) and County Human Services. The audit must be performed by a qualified independent certified public accountant. This section applies to any Provider of Service receiving County, State, or Federal funds. The following section pertains to only Providers of Service that are required to submit audits/review reports. Among the State requirements and guidelines that must be addressed are: An audit of the schedule of contractual performance that is of sufficient depth and detail for the auditor to render an opinion that invoicing is based upon the terms and conditions negotiated in developing the agreement budget or unit costs and an opinion on whether the methodology used to apportion indirect costs among services results in a fair and equitable distribution of costs (in accordance with applicable OMB Circulars). The evaluation of compliance with the agreement provisions shall include the compliance with allowable cost standards in sections through of the Mental Health/Intellectual Disabilities fiscal regulations. The auditor, in meeting the agreement audit requirements, shall provide for the determination of allowable costs. The audit shall determine the final allowable cost up to the agreement limits less any questioned costs and including allowable 3% retained revenue. The audit shall include verification that the units of service billed and/or reported were accurately reported, provided, and if unit of service funded actually were billed at the proper rate based on the establishment of actual unit costs. The audit shall review for compliance with sections through of the Mental Health/Intellectual Disabilities fiscal regulations. The Provider of Service shall disclose to Washington County BHDS any related party as defined by the Pennsylvania Department of Human Services' Chapter 4300 County MH/El/ID Program Fiscal Regulations and hereby grants Washington County BHDS permission to audit any sister corporations, subsidiary corporation or related parties, profit or non-profit, that are financially or programmatically involved with the provider of service in the receipt, use or expenditure of BHDS program funds. B. Accounting Procedures The Provider of Service shall maintain books, documents, and records regarding services furnished under this agreement sufficient to justify costs incurred. The Provider of Service is responsible for the fair presentation of the financial statement and the accompanying supplemental and additional information. The Provider of Service must give full and free access to: Washington County BHDS, the Commonwealth, the U. S. Comptroller General, federal auditors, and/or authorized representatives of any of these parties. Such records must be retained for four (4) years after expiration of the agreement, or until all audit issues and any litigation are resolved, whichever is later. Maintenance of records

5 shall include audit working papers in addition to Provider of Service records. The Provider of Service is responsible for developing and maintaining a system of internal accounting and administrative controls. C. Audit Exceptions, Unused Funds, Retained Revenue (1) Over-expenditures Over-expenditures and costs that are disallowed as determined by audit reports are the responsibility of the Provider of Service. In the event that payments have been made to the Provider of Service, the disallowed costs or over-expenditures and unused funds must be returned to the Washington County BHDS program. (2) PROGRAM FUNDED/BLOCK GRANT ONLY: Washington County BHDS will allow the Provider of Service to retain excess revenue up to 3% of that portion of total audited allowable funds that would be reimbursed to the Provider of Service provided the following criteria are met: a. Provider of Service revenues directly or indirectly associated with programs involving Washington County BHDS funding exceed all allowable costs for those same programs. b. Audit Exception: Early Intervention (El) (1) Audit Requirement The Pennsylvania Office of Child Development and Early Learning (OCDEL) issued a Communique in September This communication rescinds Announcement El-2010 #01 that was effective from January 2010 until September The updated information defines all early intervention Providers of Service that deliver services to children from birth to three years of age as vendors. OCDEL eliminates the audit requirement in the Communique; however, counties are permitted to request an audit. Washington County BHDS continues to require audits as stated herein. Although an audit may not be necessary under Federal requirements, DPW and/or County audit/review requirements may be applicable and must be met. Submit a complete audit/review report package, which includes all audit/review reports, opinions, financial statements, supplemental schedules, Independent Report on Applying Agreed-Upon Procedures Report (AUP) Corrective Action Plan (if applicable), Form 990, Consolidated financial statements for affiliated groups, and the Management Letter (if issued). All June 30 th fiscal year end audit/review report packages are due within 180 days of the year end. However, once a Provider of Service agency receives its final allocation, earlier submission is encouraged. When the Provider of Service s fiscal year differs from Washington County s June 30 th fiscal year, the audit/review is due by the last day of the sixth month following the Provider of Service s fiscal year end. Furthermore, the Provider of Service s audit/review report must provide Washington Counties BHDS supplemental schedules presented on the Washington County s fiscal year that ended within the Provider of Service s fiscal year end. If the audit/review report package cannot be submitted by the due date, a written request for an extension must be submitted to the Washington County BHDS Chief Financial Officer 30 days before the above due dates.

6 At Section 601. Compliance Attestation Agreed Upon Procedures Engagement I. Program Service Areas A. Mental Health, Intellectual Development Disability & Early Intervention Supplemental Schedules The supplemental financial schedules and the corresponding Independent Auditor s Report on applying Agreed- Upon Procedures is required for all BHDS contracts from $100,000 to $750,000. These schedules are to be submitted on a July 1 through June 30 fiscal year regardless of the provider s accounting period; and they are required for all programs in which the provider participates. List of Universal Supplementary Schedules Statement of Functional Expenditures, Revenues, Contract Amounts, and Changes in Fund Balance Summary All Programs Statement of Administrative Costs All Programs Schedule of Funding Sources Schedule of Functional Expenditures Schedule of Units of Service by cost center Independent Accountant s Report on Applying Agreed-Upon Procedures To (Auditee) We have performed the procedures enumerated below, which are agreed to by Washington County BHDS, the Commonwealth of Pennsylvania, DPW and (Auditee) solely to assist you with respect to the Supplemental Schedules and exhibits required by this agreement. This engagement to apply agreed-upon procedures was performed in accordance with standards established by the American Institute of Certified Public Accountants. The sufficiency of the procedures is solely the responsibility of the Washington County BHDS and DPW. Consequently, we make no representation regarding the sufficiency of the procedures described below either for the purpose for which this report has been requested or for any other purpose.

7 The procedures and associated findings are as follows: a. We have verified by comparison the amounts and classifications that the supplemental financial schedules and/or exhibits listed below which, summarize amounts reported to DPW for fiscal year ended June 30,, have been accurately compiled and reflect the audited books and records of (Auditee). We have also verified by comparison to the example schedules that these schedules are presented, at a minimum, at the level of detail and in the format required by the Washington County BHDS and DPW Single Audit Supplement pertaining to this period. Program Name Washington County All Programs Referenced Schedule/Exhibit Statement of Functional Expenditures Statement of Administrative Costs Mental Health Intellectual and Development Disability Early Intervention Schedule of Funding Sources Schedule of Functional Expenditures Schedule of Units of Service b. We have inquired of management regarding adjustments to reported revenues, expenditures or units which were not reflected on the reports submitted to Washington County BHDS and DPW for the period in question. c. The processes detailed in paragraphs (a) and (b) above disclosed the following adjustments and/or findings which have/have not been reflected on the corresponding schedules: (List each separately. Indicate whether it has/has not been reflected on the schedule or state none if applicable) We were not engaged to, and did not perform, an audit, the objective of which would be the expression of an opinion on the specified elements, accounts, or items. Accordingly, we do not express such an opinion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you. This report is intended solely for the use of the Washington County BHDS and the Commonwealth of Pennsylvania DPW and should not be used by those who have not agreed to the procedures and taken responsibility for the sufficiency of the procedures for their purposes. However, this report is a matter of public record and its distribution is not limited. (Date) (Signature)

8 Schedule of Findings of Noncompliance and Questioned Costs For all BHDS providers, each audit finding will include an explanation of questioned costs and other audit adjustments. Testing should include but not be limited to the following: Method of procurement, record-keeping, and control over fixed assets purchased with County allocated funds Method of procurement, record-keeping, and/or control of property (buildings and land) purchased with County allocated funds Discrepancies between actual units of service supplied, units of service submitted for reimbursement, and units credited by the County Indirect Cost Allocation Plan (refer to user Fiscal Manual) Health Insurance Portability and Accountability Act (HIPAA) Agency s noncompliance with the handling of client s accounts (Office of Mental Retardation Bulletin. # must be noted. Agency s noncompliance with Pennsylvania 6200 Regulations (room and board) must be noted. Agency s noncompliance with Pennsylvania 4305 Regulations (client liability) must be noted. If deemed material the above examples should be identified as a finding; otherwise each immaterial noncompliance should appear in the Agency s Management Letter. It is intended that each of the items, as listed above, be disclosed as a separate finding. For each finding, the auditor of record must list recommendations for corrective action to be taken by the management of the agency. Management must comment to each audit finding and recommendation reported. A separate report should also be made on the status of any prior year findings. The provider must prepare a Corrective Action Plan to address all findings of noncompliance or internal control weaknesses disclosed in the audit report agreed upon procedures report. For each finding noted the Corrective Action Plan should include a brief description identifying the finding, whether the provider agrees with the finding, the specific steps to be taken to correct the deficiency or specific reasons why corrective action is not necessary, a time table for completion of the corrective action steps, and a description of monitoring to be performed to ensure that the steps are taken.

9 APPENDIX A AUDIT CHECKLIST

10 WASHINGTON COUNTY HUMAN SERVICES AUDIT REVIEW FOR THE YEAR ENDED JUNE 30,20XX Provider Auditor of Record Yes No 1. Two copies of audit report and supplemental information enclosed? 2. Was a management letter issued? If yes, a copy must be enclosed 3. Management s response to Management Letter enclosed? 4. Is a Corrective Action Plan necessary? 5. Is a copy of the Corrective Action Plan enclosed? 6. Are there any reportable conditions or material weaknesses? 7. Are there any questioned costs? 8. Is most recent 990 attached? Fiscal Year: 9. Date audit was presented and reviewed with the Provider s Board of Directors. Date: BY: Auditor Date: BY: Executive Director Date:

FAYETTE COUNTY MH/MR PROGRAM AUDIT GUIDE EFFECTIVE FISCAL YEAR

FAYETTE COUNTY MH/MR PROGRAM AUDIT GUIDE EFFECTIVE FISCAL YEAR 2008-2009 ISSUED APRIL, 2009 FAYETTE COUNTY PROVIDER AUDIT GUIDELINES TABLE OF CONTENTS I. General Information. 1 II. General Audit Requirements