112 th Annual Conference May 6-9, 2018 St. Louis, Missouri

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1 Moderator/Speakers: 8:30 am 10:10 am May 9, 2018 Room MELANIE S. KEETON 112 th Annual Conference May 6-9, 2018 St. Louis, Missouri ASSISTANT FINANCE DIRECTOR, CITY OF SAN ANTONIO HEATHER ACKER PARTNER, BAKER TILLY VIRCHOW KRAUSE, LLP Session Name: Aftershock: Avoiding Compliance Complications with Federal Disaster Aid #GFOA2018

2 INTRODUCTIONS Melanie S. Keeton, CPA Assistant Finance Director City of San Antonio Heather S. Acker, CPA Partner Baker Tilly Virchow Krause, LLP

3 SETTING THE STAGE Predominant Federal Disaster Funding Agencies Department of Homeland Security (DHS), Federal Emergency Management Agency (FEMA) Department of Housing and Urban Development (HUD) Unprecedented disaster losses and federal funding awards in 2017 Federal focus on preventing fraud, waste, and abuse DHS Office of Inspector General recommending more FEMA oversight and monitoring 3

4 GOALS OF THIS SESSION Understand challenges in administering federal disaster aid Share advice in planning, preparing, and submitting reimbursement claims Become familiar with document retention requirements Learn ways to avoid common noncompliance audit findings 4

5 AREAS OF COMMON COMPLIANCE CHALLENGES Personnel Costs Procurement Equipment Claims and Record Retention 5

6 PERSONNEL COSTS DOCUMENTATION REQUIREMENTS According to Federal cost principles (2 CFR (c)), allowable costs must be consistent with policies and procedures that apply uniformly to both Federal awards and other activities of the non-federal entity Follow the allowable cost principles of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards ( Uniform Guidance ) 2 CFR 200, subpart E. Compensation personal services Compensation fringe benefits According to 44 CFR (a)(2)(iii), straight- or regular-time salaries and benefits of permanent employees engaged in emergency work (other eligible emergency protective measures) are generally not eligible for FEMA public assistance funding. 6

7 PERSONNEL COSTS DOCUMENTATION REQUIREMENTS Direct Administrative Charges Federal regulations (44 CFR 207.5) identify management costs that are eligible under the public assistance program. FEMA lock-in rates established after declaration (preliminary, interim (6 month), and final (12 month)) Major declarations have lock-in rate of 3.34% (disaster) and 3.9% (emergency) The Public Assistance Program and Policy Guide (PAPPG) clarifies the process through which recipients and subrecipients can request reimbursement for these costs. Direct Administrative Costs Indirect Costs Management costs = indirect costs, administrative expenses, and any other expenses not directly chargeable to a project (44 CFR 207.2) Consistent Treatment PPAG states that recipients cannot charge costs directly if it previously allocated similar costs as indirect costs. 7

8 PERSONNEL COSTS Inception to Completion Create & use templates from the beginning Detailed sign-in sheets Detailed fiscal workbook by employee Obtain remuneration statements for each employee activated Retain copies and update as needed personnel pay and benefit policies, CBAs, and pay schedules Determine best method to record time and costs in system of record During event through new project; fund; etc. After close out of event with journal entry from originating fund; department to event Financial Closeout Ensure match between hours logged; amount charged to event; to actual remuneration statements paid 8

9 PERSONNEL COSTS PITFALLS AND RECOMMENDATIONS Pitfalls Duplication of employees time Employees forgetting to sign out Missing or illegible information on sign in sheets Missing sign in sheets for employees working remotely Event is over but accounting and pay lag behind Recommendations Runners for collecting sign in sheets/ ability for electronic sign in? Communication with field staff and fiscal staff Just-In-Time Training Ensure fiscal and payroll staff are at the table before, during, and after the event Event is not done until the administrative work is complete need same focus 9

10 PROCUREMENT Requirements: According to Federal regulations (2 CFR to.326), all nonfederal entities (other than states) must comply with the Uniform Guidance procurement standards. Highlights: Conduct all procurement transactions in a manner providing full and open competition (2 CFR (a)) Noncompetitive procurement may be used when the public exigency or emergency will not permit a delay resulting from competitive solicitation(2 CFR (f)(2)) Exigent requiring immediate aid or action Emergency an unforeseen combination of circumstances 10

11 PROCUREMENT Requirements (cont.): Maintain oversight to ensure contractors perform according to the terms, conditions, and specifications of their contracts or purchase orders (2 CFR (b)) Maintain written standards of conduct covering conflicts of interest and governing the actions of employees engaged in the selection, award, and administration of contracts (2 CFR (c)(1)). Maintain records sufficient to detail the history of the procurement. These records will include, but are not limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price (2 CFR (i)). 11

12 PROCUREMENT Requirements (cont.): Use time-and-material-type (T&M) contracts only after a determination that no other contract is suitable and if the contract includes a ceiling price that the contractor exceeds at its own risk. (2 CFR (j)(1)). Take all necessary affirmative steps to assure that minority businesses, women s business enterprises, and labor surplus area firms are used when possible (2 CFR )) Perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications (2 CFR (a)). Negotiate profit as a separate element of the price for each contract in which there is no price competition and in all cases where cost analysis is performed (2 CFR (b)). 12

13 PROCUREMENT Requirements (cont.): Ensure required bonds are included in construction or facility improvement contracts or subcontracts exceeding the simplified acquisition threshold (2 CFR ). Include required provisions in all contracts awarded as outlined in Appendix II in Part 200 (2 CFR ). 13

14 PROCUREMENT Inventory Replacements Document usage of existing inventory Procure replacement of inventory following procurement guidelines Documentation Requirements Ensure complete package of information for purchases from quotes, bids, packaging slips to copy of check of other payment method 14

15 PROCUREMENT PITFALLS AND RECOMMENDATIONS Pitfalls Not obtaining bids or quotes when required Not replacing inventory items Need to purchase items immediately Recommendations Consider bidding for recurring emergency items up front and having oncall vendor contracts ahead of time Have procurement on site before and during event for quote/bid requirements Create log or request forms for all good and service needs to use in event Consider alternate methods of payment (Pcard assigned to EOC) 15

16 EQUIPMENT FEMA Rates When using own equipment, federal regulations (44 CFR (a)(1)) require local governments use the FEMA schedule of equipment rates or their local rates, whichever are lower. If no local rate, must use FEMA rate. Obtain list of equipment and vehicles annually to have on hand Document condition of equipment before and after event (pictures) Usage of Equipment and Vehicle tracking forms that link equipment to individual personnel. 16

17 EQUIPMENT PITFALLS AND RECOMMENDATIONS Pitfalls Not using the correct rates Not having all required support, documentation, pictures, etc. Recommendations update vehicle listing with new rates annually Require an activation form for usage of equipment that triggers need for photos; and maintaining equipment tracking forms and logs 17

18 CLAIMS & RECORD RETENTION Federal cost principles (2 CFR (g)) require recipients and subrecipients adequately document costs that they claim under Federal programs. Non-federal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of federal awards. (2 CFR ) Ensure controls include verification that expenditures are authorized under the project scope of work Maintenance of Records 18

19 CLAIMS & RECORD RETENTION Avoiding duplication of cost recovery - Section 312 of the Stafford Act (see also 44 C.F.R ) prohibits duplication of benefits Insurance Federal funding State or local funding Donations 19

20 CLAIMS & RECORD RETENTION PITFALLS AND RECOMMENDATIONS Pitfalls Forgetting to file or consider claims incurred Not having all required support, documentation, pictures, etc. Recommendations Follow standard operating procedures to report an injury and inform EOC Ensure event costs include inception to completion for all purchases and related expenses (log requests to check issuance) Create a filing system easily accessed by you, grantor and auditor Consider digital copy of event support 20

21 TIPS FOR MAINTAINING COMPLIANCE Create policies and procedures Train in advance of a disaster Annual refreshers Just-In-Time training on forms/documentation/etc Be alert for fraud schemes 21

22 TIPS FOR MAINTAINING COMPLIANCE Ensure Finance Department Involvement Identify who has primary responsibility for records Structure or modify general ledger to separately track FEMA revenue and expenditures Consider using federal award identifying number in structure Federal regulations (44 CFR ) require recipients to maintain a system that accounts for FEMA funds on a project-by-project basis 22

23 TIPS FOR MAINTAINING COMPLIANCE Continue working until complete Provide same focus and resources from beginning until the end to obtain all documentation and wrap up event Consider need for temps to help gather and compile data 23

24 TIPS FOR MAINTAINING COMPLIANCE Reporting Federal Expenditures on Schedule of Expenditures of Federal Awards for the Single Audit Record expenditures on SEFA when: (1) FEMA has approved the project worksheet AND (2) The eligible expenditures have been incurred 24

25 TIPS FOR MAINTAINING COMPLIANCE Subrecipient contracting and monitoring Pass-through entities must clearly identify the federal award information in the subaward (list at 2 CFR (a)) Evaluate each subrecipient s risk of noncompliance (2 CFR (b)) Monitor the activities of all subrecipients (2 CFR (d)) Review financial and performance reports Follow up on audit findings Issue a management decision Additional monitoring activities as determined necessary from risk assessment (2 CFR (e)) Verify subrecipients are audited, as required (2 CFR (f)) Adjust records as needed based on results of monitoring (2 CFR (g)) 25

26 TIPS FOR MAINTAINING COMPLIANCE Prepare for questions Maintain documentation (potentially past normal record retention policy) Organize records Document major decisions and communications Maintain open communicate with Auditors 26

27 RESOURCES Title 44 CFR: Robert T. Stafford Disaster Relief and Emergency Assistance Act, as amended (Stafford Act) Stafford Act Link Title 2 CFR Part 200: Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) Uniform Guidance link Public Assistance Program and Policy Guide (PAPPG) PAPPG link 27

28 Speaker Contact Information: Melanie S. Keeton Phone: (210) Heather Acker Phone: (608) / (312) Questions: 112 th Annual Conference May 6-9, 2018 St. Louis, Missouri Speakers will take questions and comments. This session is being recorded, please utilize the microphone in the aisle to ask all questions. Provide Feedback: Please take a few minutes to provide your feedback at Discuss/Comment: Join the discussion at #GFOA2018 Contact GFOA: To contact GFOA about session topics please research@gfoa.org #GFOA2018

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