LGC Update. Melinda Canady

Transcription

1 LGC Update Melinda Canady July 21, 2016

2 Agenda Announcements Iran Divestment Act Single Audit Summary Reporting format Local Current Expense Reporting Capital Outlay Expenses Transparency Legislation Preaudit Touch on GASB 73,74 & 75 2

3 Reminders o Alert our office for Changes in your Finance Officer, Board Chairperson and or Superintendent Additions to our list serve LGC_News Provide me your business card and we will add you or your staff to the list serv Contact Darrus Cofield for staff changes or list serve additions darrus.cofield@nctreasurer.com or GFOA comments on your CAFR If relevant, we will incorporate changes into sample financial statements 3

4 Announcements New LGC Staff Debt Section o Jennifer Wimmer Assistant Manager Fiscal Section o Accounting and Financial Management Advisors oann Cutler odavid Erwin ojim Agar Retired Dianne Kelly - Debt Section Senior Financial Analyst

5 Announcements Pension Attests for 2016 o Units selected, along with auditors of record, were notified earlier this week o OSA memo and additional instructions were sent out o Will publish sample population on website o Units if you change auditors, please make sure you share with new auditor o Auditors if you pick up new clients, ask if they are in the testing sample for

6 IRAN DIVESTMENT ACT Memo # The Iran Divestment Act of 2015 can be found online at: df Divestment List is here: esources/iran_final_divestment_list_ pdf 6

7 IRAN DIVESTMENT ACT Prohibits investing state funds in or contracting with entities engaged in significant investment activities in Iranian energy sector Treasurer identifies entities on Final Divestment List Local governments must require contractors and vendors to certify they are not on the list S.L (S455) 7

8 SCOPE OF IRAN DIVESTMENT ACT WHO? State agencies ALL political subdivisions of the State WHEN? Bidding or Entering into contract or Renewing a contract WHAT? ALL contracts Exceptions: Contracts less than $1,000 Entities identified as withdrawing from Iran investment activities Goods or services only available from that entity (not necessarily all sole source contracts 8

9 FINAL DIVESTMENT LIST Published by State Treasurer Updated every 180 days (6 months) 9

10 10

11 IRAN DIVESTMENT ACT Norma Houston has published a document on Coates Canons regarding this legislation. FAQ linked in the post Please continue to forward your questions to SLGF or to SOG as we will continue to update the FAQ DST does not have any authority to change the dollar threshold or to tell you to not comply with the law 11

12 SINGLE AUDIT CHANGES Memo # Federal Single Audits Threshold for Federal Single Audit increases to $750,000 A/B major program determination increases to $750,000 Low risk auditees have 20% requirement for percentage of federal expenditures audited requirement Non low risk auditees have coverage requirement of 40% State Single Audits State Single Audit threshold will remain at $500,000 Major program threshold will increase to $500,000 Percentage of coverage for State awards drops to 40% No low risk classification 12

13 SINGLE AUDIT CHANGES Effective dates: Federal changes: For years ending on or after December 15, 2015 o June 30, 2016 for most NC local governments State changes: As of June 30, 2016 We present more detail on slides We will probably not have enough time to go over these slides, but you can direct questions to Jim Burke in our office at

14 Compliant PDF Financial Reports Compliant PDF Audit Reports will be: Clearly readable Text searchable documents Unlocked and unencrypted documents Exhibits, Statements and Schedules should have column and row titles on every page Reader should not have to rotate pages to read the information Required for all units for fiscal years beginning on or after June 30, 2015 Review Creating a Compliant PDF Audit Report and use included link to the Federal Audit Clearinghouse test site to determine if your report is a Compliant PDF or go to Please review the electronic copy of your report before sending to us. 14

15 What not to do Row titles should appear on each page to which they apply. 15

16 An Example of a Good Presentation 16

17 or here 17

18 Local Current Expense 18

19 Local Current Expense Budget LCE correctly Report LCE in your audit report correctly Complete the data input worksheet correctly LGC prepares Rpt. to DPI correctly DPI uses the number in various formulas County governments have statutory authorization to provide schools funding for two purposes: operating and capital. Funds for operating expenses can be budgeted in the county budget to the Local Current Expense Fund or Special Revenue Fund, such as Fund 8 in the DPI accounting system. Funds for capital expenses must be appropriated to the Capital Outlay Fund. It is very important that counties identify their appropriations by the correct funds in both their budgets and their accounting records. 19

20 Local Current Expense Budget LCE correctly Report LCE in your audit report correctly Complete the data input worksheet correctly LGC prepares Rpt. to DPI correctly DPI uses the number in various formulas The BOE also must classify revenues received by the county in the same funds to which the county appropriated them. If the BOE wants to move monies from the fund the county appropriated to another fund, the BOE may request that the county amend their appropriation; however the county does not have to honor the BOE request. G.S. 115C-433(d) requires two tests to be met if the School wants to spend local current expense on capital outlay. The transfer of funds from the current budget (or any fund balance resulting from operating funds) must be to meet emergencies unforeseen and unforeseeable at the time the budget resolution was adopted and the county board of commissioners must grant permission. If the county agrees to amend the budget to accommodate the BOE request the county must pass a budget amendment authorizing the change. 20

21 NC State Single Audit Requirements In accordance with federal requirements, beginning in fiscal years ending after December 26, 2015, local governments and public authorities that expend $750,000 or more in NEW federal financial assistance must have a single audit performed Local governments with fiscal years ending June 30, 2016 or later that have expended $500,000 or more in State financial assistance must have a single audit performed in accordance with the State Single Audit Implementation Act. Local governments and public authorities that expend $100,000 or more in combined Federal or State financial assistance must have an audit performed in accordance with Government Auditing Standards (GAGAS). The Federal threshold for a Single Audit increased from $500,000 to $750,000 under Uniform Guidance. There are no changes to the State threshold. 21

22 Uniform Guidance-How Did We Get Here? Developed in response to the November 23, 2009 Executive Order on Reducing Improper Payments President directed OMB to work with Executive Branch agencies; state, local, and tribal governments; and other key stakeholders to evaluate reforms to Federal grant policies COFAR (Council on Financial Assistance Reform) was established in October 2011 to help lead the effort to improve management and accountability of Federal grants 22

23 Uniform Guidance-Impact of This Reform One set of comprehensive regulations that should streamline requirements and supersedes eight existing circulars, including those applicable to State and Local Governments: o A-87, Cost Principles for State, Local and Tribal Governments o A-102, Grants and Cooperative Agreements with State and Local Governments o A-133, Audits of States, Local Governments, and Non-Profit Organizations 23

24 Uniform Guidance-Auditee Responsibilities Arrange for Single Audit in accordance with Prepare appropriate financial statements in accordance with Prepare Schedule of Expenditures of Federal and State Awards in accordance with Provide the auditor with access to personnel, accounts, records, supporting documentation Follow-up and take corrective action on findings Prepare summary of Schedule of Prior Audit Findings Prepare corrective action plan 24

25 Uniform Guidance-Auditee Responsibilities Schedule of Expenditures of Federal and State Awards (SEFSA) Must prepare a SEFSA for the period covered by the entity s financial statements SEFSA includes the total Federal awards expended in accordance with , Basis for Determining Federal Awards Expended. Should reconcile to accounting records or the financial statements themselves Completeness and accuracy are critical to avoid missed programs The State Single Audit Implementation Act follows that same guidance in in determining State awards expended. 25

26 Uniform Guidance-Auditee Responsibilities SEFSA-Required Elements List of individual programs by Federal or State agency For clusters, provide the cluster name, a list of the individual programs within the cluster, and provide the applicable Federal or State agency. A total for each cluster should also be provided. For Federal awards received as a subrecipient, the name of the passthrough entity and identifying number assigned by the pass-through entity Total awards expended for each Federal or State program and the CFDA or other identifying number when CFDA is not available The total amount provided to subrecipients for each Federal program SEFSA must include the total awards expended for loans and loan guarantees NEW NEW Prior year loans and loan guarantees expended in prior years are not considered awards expended when statutes, regulations, and terms and conditions impose no continuing compliance requirements, other than to repay the loans. Therefore these amounts should not appear on the SEFSA. 26

27 Uniform Guidance-Auditee Responsibilities Providing Access Uniform Guidance states that entities must provide access of the following to auditors: o Personnel o Accounts o Books o Records o Supporting Documentation o Other information as needed 27

28 Uniform Guidance-Auditee Responsibilities Internal Controls and Compliance Requirements Establish and maintain internal control over Federal programs Comply with Federal statutes, regulations, and terms of the Federal award Evaluate and monitor compliance Take prompt action when noncompliance is identified Safeguard protected personally identifiable information (PPI) 28

29 Uniform Guidance-Auditee Requirements Internal Controls The internal control process should be designed to provide reasonable assurance regarding the achievement of the following objectives: o Effectiveness and efficiency of operations o Reliability of reporting for internal and external use o Compliance with applicable laws and regulations 29

30 Uniform Guidance-Auditee Responsibilities Subrecipient Monitoring /331 Determine if subrecipient or contractor Clearly identify subawards to subrecipients Provide certain subaward information at the time of subaward Evaluate each subrecipient s risk of noncompliance Consider imposing specific subaward conditions Monitor activities of subrecipients Verify subrecipient has been audited as required by Subpart F Consider results of subrecipient audits Consider taking enforcement action for noncompliant subrecipients 30

31 Uniform Guidance-Auditee Requirements Subrecipient and Contractor Determinations Subrecipient Determine who is eligible to receive federal assistance Has its performance measured according to whether the objectives of a federal program were met Is responsible for program related decision-making Must adhere to applicable Federal program requirements specified in the Federal awards Uses the Federal awards to carry out a program for specific purpose as opposed to providing goods or services for the benefit of the passthrough entity Contractor Has a procurement relationship with the entity Provides goods and services within normal business operations and to many different purchasers Provides goods and services that are ancillary to the operation of the Federal program Normally operates in a competitive environment Is not subject to the compliance requirements of the Federal program as a result of the agreement 31

32 Uniform Guidance-Auditee Requirements Subrecipient Monitoring All subrecipients, regardless of the size of the award, must be monitored Requirements include: o Performing a risk assessment of the subrecipient o Following up on any audit findings or other issues revealed in that process o Ongoing monitoring 32

33 Uniform Guidance-Audit Requirements Single Audit-End Result Contents of the Single Audit Submission o Auditor s report on the financial statements of the entity o Auditor s in-relation-to reporting on the SEFSA o Financial statements prepared by the entity o SEFSA prepared by the entity o Auditor s report on internal control over financial reporting and on compliance and other matters to meet Government Auditing Standards requirements o Auditor s report on compliance and internal control over compliance-major programs 33

34 Uniform Guidance-Audit Requirements Single Audit-End Result Contents of the Single Audit Submission o Auditor s schedule of findings and questioned costs o Includes summary of auditors results and findings o Schedule of prior audit findings prepared by the entity o Corrective action plan prepared by the entity All of the items listed are referred to as the reporting package Reporting package and the Data Collection Form are submitted electronically to the Federal Audit Clearinghouse by the entity 34

35 DST SLG Monitoring and Unit Visits Internal Control issues that need at least a management letter: o Computer software issues o Pre-audit function is not working as planned or has flaws (purchasing, budget amendments, etc.) o Interim reports are not being provided to the governing board timely and with accurate information. o Key accounts are not being reconciled timely, primarily checking accounts. o Segregation of duties 35

36 Local Current Expense Budget LCE correctly Report LCE in your audit report correctly Complete the data input worksheet correctly LGC prepares Rpt. to DPI correctly DPI uses the number in various formulas Schools tend to summarize all monies coming from the County on one line item. This amount might include auditorium rentals, fines and forfeitures and other funds that are not local current expense. 36

37 BOE Sample Financial Statements Major Funds Non-major Fund REVENUES General State Public School Individual Schools Capital Outlay Federal Grants State of North Carolina $ 702,640 $ 118,964,714 $ - $ 411,000 $ - Carolina County Local Current Expense 32,119, Other 1, ,499,557 - Separate Local Current Expense from other revenues sent by the County Please make sure the number you show as Local Current Expense agrees with the County. 37

38 Local Current Expense Budget LCE correctly Report LCE in your audit report correctly Complete the data input worksheet correctly LGC prepares Rpt. to DPI correctly DPI uses the number in various formulas The person filling out Data Input Worksheet picks up an incorrect number out of the audit report. 38

39 Local Current Expense Budget LCE correctly Report LCE in your audit report correctly Complete the data input worksheet correctly LGC prepares Rpt. to DPI correctly DPI uses the number in various formulas 1. Our First step in preparing the report is to run a report on Local Current Expense as indicated on the data input worksheets of both the County and School Systems. 2. If there is a material difference I contact both the County and Schools to ask for an explanation I contact about 1/3 of the Units or 66 Finance Officers 3. Before we asked LEAs and Counties to reconcile their LCE numbers I used to contact 60 out of 100 counties or about 130 finance officers. 39

40 Local Current Expense Budget LCE correctly Report LCE in your audit report correctly Complete the data input worksheet correctly LGC prepares Rpt. to DPI correctly DPI uses the number in various formulas When we issue a report of Local Current Expense (normally in February / March) we also send an Excel worksheet that explains any differences between the Counties and the Schools. This worksheet includes the various communications from the finance officer explaining the differences. Beginning with this last memo - I now send via a draft copy of the memo asking county and school finance officers to review for accuracy. 40

41 Determining Local Current Expense Memo Reporting of School Local Current Expense in the Annual Audit Report-revised discusses this issue including what items are considered local current expense. (Included in your materials) 41

42 Determining Local Current Expense The LGC is making changes to try and provide more accurate information to DPI 1. We now require that the school and county auditors consult with each other before the audit is finalized to ensure they both agree on the local current expense numbers 2. We have modified our sample financial statements for BOEs to provide more detail in the revenue received from Counties in the audit report. 3. We asked that the schools ensure the changes get made in the 2015 audit reports 4. For the 2015 Local Current Expense Report to DPI we sent a draft to County and School finance officers to review before it s final issuance. 42

43 Determining Local Current Expense Fines and Forfeitures o Are not revenues to the County and should not be included as local current expense. o Are direct revenues to the school system. 43

44 Capital Outlay Counties file an annual report to the Fiscal Management Section of the State Treasurer s Office This report has a section that reports all capital spending o Bonds o Capital Outlay Appropriations o Sales Tax o Lottery o Grants, etc. The Local Government Commission must file a report to the legislature no later than May 1 every year that communicates how much money County are spending on capital outlay each year. This annual report is on our web site under memos 44

45 Deposit and Investment Issues LGC-203 Report of Deposits and Investments o Due twice a year: July 25 and January 25 o File with our office o Required by G.S. 115C-446 INV-91 Notification of Public Deposit Now Called COLL-91 o Due annually: July 25 o Notifies depository of collateralization requirement o File with each depository and a copy with our office o Required by G.S. 115C-444(b) and 20 NCAC ) Both required for all units, except Charter Schools 45

46 Transparency Legislation Section of 7.17 of the budget o Office of State Budget and State CIO are coordinating this effort and are working with the LGC o It applies to County, Cities and LEAs o Requires: o Budget spending data to be published in a standardized format on the State Budget Transparency Internet Web site o Site will be user friendly, include budget and actual expenditures, receipts and expenditures from all sources, including vendor payments o Site will be updated monthly According to the State Budget Office there has been no modification to this legislation in the most recent session and they still plan to work with us 46

47 Preaudit 1. Preaudit ensures expenditures follow the budget 2. Alert vendors/contactors that there is budgetary authority for expenditure 47

48 Preaudit Time of Obligation Unit enters into a contract or agreement (or places an order) for goods or services that are accounted for in the budget ordinance or a grant/project ordinance; AND The unit is obligated to pay money by the terms of the contract/agreement/order; AND The authorization for the obligation is in the annual budget ordinance, the unit anticipates paying at least some of the money in the current fiscal year 48

49 Preaudit Time of Obligation Before an obligation is incurred, Finance Officer (or board approved deputy finance officer) must: 1. Check to see if there is an appropriation in the budget ordinance for the amount due this year. 2. Check to see if sufficient funds remain in the appropriation to cover the amount that will come due this fiscal year. 3. Affix signed preaudit certificate to writing that evidences contract/agreement/order, if a writing exists This instrument has been preaudited in the manner required by the School Budget and Fiscal Control Act. 49

50 Preaudit Time of Obligation Exemptions from the Preaudit Certificate Requirement Exemption is only for the stamp step 3 on the previous slide. Units are still required to do steps 1 and 2 Obligation approved by the Local Government Commission Payroll expenditures, including all benefits for employees of the local government Electronic transactions (credit cards, debit cards, gas cards, procurement cards) may in the future also be exemption from requiring a stamp, however the LGC must first adopt rules governing these transactions. 50

51 Preaudit Time of Disbursement Disbursement Preaudit Process: o Finance Officer or deputy finance officer o Checks to make sure amount is payable o Checks to see if there is (still) an appropriation in the budget ordinance for the amount due o Checks to see if sufficient funds remain in the appropriation to cover amount due o Affixes signed disbursement certificate to check or electronic payment Most units have the preaudit language preprinted on the check. 51

52 GASB 68, Lessons Learned from Year 1 52

53 GASB 67 & 68 NETTING DEFERRALS? Can you net the deferred inflow and outflow totals? No. You can aggregate the deferred inflows and aggregate the deferred outflows but you cannot net the two. Aggregate totals must be presented by source in the notes. GASB 63, paragraph 29 o the Board concluded that reporting deferred outflows of resources and deferred inflows of resources should not be presented within a single financial statement section because it could suggest that the deferral amounts are closely related and could imply an offsetting relationship that does not exist. 53

54 GASB 67 & 68 WHERE IS THE INFORMATION I NEED TO Where do I find [fill in the blank]? Pension Standards page s/pension-standards.aspx o General information on standard Memos FAQs o Valuation reports o JE templates 54

55 GASB 67 & 68 ALLOCATING PENSION EXPENSE ACROSS FUNDS How should pension expense be allocated across funds? o Contributing funds o No prescribed allocation method oshould be reasonable and well documented 55

56 GASB 67 & 68 WHAT MAKES UP PENSION EXPENSE? Is pension expense what was paid into the plan in the current fiscal year? No. The amount that the employer contributed to the pension plan in the current (reporting) fiscal year is a deferred outflow of resources. Pension expense is now an actuarially calculated number and is not related to the dollar amount of contributions made by the employer. 56

57 COMPONENTS OF PENSION EXPENSE Pre Employer contributions to the pension plan Service cost (+) Interest on NPL (+) Differences between expected and actual experience (- or +) Member contributions (-) Projected earnings on investments (-) Differences between projected and actual earnings (- or +) Other (- or +) 57

58 GASB 67 & 68 J/E FOR CURRENT YEAR EMPLOYER CONTRIBUTIONS When you post the reporting year s employer contributions to the pension plan as a deferred outflow of resources, what is the offset account to balance the entry? o The offsetting credit goes to your full accrual Pension Contributions, which should zero this account out in preparation of making your remaining GASB 68 entries. o Will not affect pension expense o Will be reversed in 2016 when you prepare to defer that year s contributions. DR Deferred outflows $50,000 CR Pension Contributions $50,000 58

59 GASB 67 & 68 CHANGES FOR 2016 New tables expected Spring, 2016 Two years of deferrals o Second year of 2015 deferrals o New set for 2016 Templates being updated to reflect 2 years Will keep Year 1 template for units with alternate FYE that are implementing for first time Some minor changes to Conversion Workbook Exposure draft out now to change requirement on RSI schedules from covered-employee payroll to covered payroll o Will allow you to use only pensionable payroll and not total payroll 59

60 GASB 73 GASB Statement 73, Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68 o Schools with a pension not in a irrevocable trust o 60

61 OPEB Future GASB Standards 74 & 75 61

62 GASB STATEMENTS 74/75 OPEB Standards Implement regardless of existence of GASB defined trust and regardless of funding status Actuarial study required at least biennially (annual encouraged) o Can be no more than 30 months and 1 day prior to FYE o Measurement date no more than 1 year prior to FYE o Alternative method still an option for units with less than 100 members (not retirees) * o If unit pays for any part of the benefit, actuarial study will be required o Will need beginning balances *If implicit rate subsidy is only benefit offered, alternative measurement method can be used 62

63 GASB STATEMENTS 74/75 OPEB Standards o If unit is paying a stipend to retirees with no accountability required, account for as a pension GASB 73 o Implementation date GASB 74: June 30, 2017 o Implementation date GASB 75: June 30, 2018 o If have assets in GASB defined trust, will implement 74 and 75 o If no assets, or have assets not in GASB defined trust, will implement only 75 63

64 THE BAD: GASBS 74/75 Discount rate for plans with no assets set aside in GASB defined trust will be 20 year tax-exempt GO municipal bond with average AA/Aa rating or higher Liability will be booked on full accrual statements governmentwide and proprietary funds Fully note disclosed, RSI Plan documentation is a concern o GFOA Best Practice o Making changes to your plan? Public Employment Law Bulletin #30 by Diane Juffras, SOG o 64

65 THE BAD: GASBS 74/75 Will be some cost-sharing multi-employer plans o State Health Plan any local entity with retiree health care through SHP schools, charters, a few cities and/or counties o Death Benefit Both TSERS and LGERS members o LEO Separate Insurance Benefit Plan Information will be provided by State similar to LGERS, etc. 65

66 Summary o GASBS OPEB standard o Fiscal year 2018 implementation Closely mirrors the pension standard o For schools offering the State Health Plan State should be able to provide data Units will be responsible verifying allocation percentages, etc. Anticipate significant liabilities o For schools offering any other OPEB plans School will be responsible for actuarial studies, calculations, etc. 66

67 NC State Single Audit Requirements In accordance with federal requirements, beginning in fiscal years ending after December 26, 2015, local governments and public authorities that expend $750,000 or more in NEW federal financial assistance must have a single audit performed Local governments with fiscal years ending June 30, 2016 or later that have expended $500,000 or more in State financial assistance must have a single audit performed in accordance with the State Single Audit Implementation Act. Local governments and public authorities that expend $100,000 or more in combined Federal or State financial assistance must have an audit performed in accordance with Government Auditing Standards (GAGAS). The Federal threshold for a Single Audit increased from $500,000 to $750,000 under Uniform Guidance. There are no changes to the State threshold. 52

68 Uniform Guidance-How Did We Get Here? Developed in response to the November 23, 2009 Executive Order on Reducing Improper Payments President directed OMB to work with Executive Branch agencies; state, local, and tribal governments; and other key stakeholders to evaluate reforms to Federal grant policies COFAR (Council on Financial Assistance Reform) was established in October 2011 to help lead the effort to improve management and accountability of Federal grants 68

69 Uniform Guidance-Impact of This Reform One set of comprehensive regulations that should streamline requirements and supersedes eight existing circulars, including those applicable to State and Local Governments: o A-87, Cost Principles for State, Local and Tribal Governments o A-102, Grants and Cooperative Agreements with State and Local Governments o A-133, Audits of States, Local Governments, and Non-Profit Organizations 69

70 Uniform Guidance-Auditee Responsibilities Arrange for Single Audit in accordance with Prepare appropriate financial statements in accordance with Prepare Schedule of Expenditures of Federal and State Awards in accordance with Provide the auditor with access to personnel, accounts, records, supporting documentation Follow-up and take corrective action on findings Prepare summary of Schedule of Prior Audit Findings Prepare corrective action plan 70

71 Uniform Guidance-Auditee Responsibilities Schedule of Expenditures of Federal and State Awards (SEFSA) Must prepare a SEFSA for the period covered by the entity s financial statements SEFSA includes the total Federal awards expended in accordance with , Basis for Determining Federal Awards Expended. Should reconcile to accounting records or the financial statements themselves Completeness and accuracy are critical to avoid missed programs The State Single Audit Implementation Act follows that same guidance in in determining State awards expended. 71

72 Uniform Guidance-Auditee Responsibilities SEFSA-Required Elements List of individual programs by Federal or State agency For clusters, provide the cluster name, a list of the individual programs within the cluster, and provide the applicable Federal or State agency. A total for each cluster should also be provided. For Federal awards received as a subrecipient, the name of the passthrough entity and identifying number assigned by the pass-through entity Total awards expended for each Federal or State program and the CFDA or other identifying number when CFDA is not available The total amount provided to subrecipients for each Federal program SEFSA must include the total awards expended for loans and loan guarantees NEW NEW Prior year loans and loan guarantees expended in prior years are not considered awards expended when statutes, regulations, and terms and conditions impose no continuing compliance requirements, other than to repay the loans. Therefore these amounts should not appear on the SEFSA. 72

73 Uniform Guidance-Auditee Responsibilities Providing Access Uniform Guidance states that entities must provide access of the following to auditors: o Personnel o Accounts o Books o Records o Supporting Documentation o Other information as needed 73

74 Uniform Guidance-Auditee Responsibilities Internal Controls and Compliance Requirements Establish and maintain internal control over Federal programs Comply with Federal statutes, regulations, and terms of the Federal award Evaluate and monitor compliance Take prompt action when noncompliance is identified Safeguard protected personally identifiable information (PPI) 74

75 Uniform Guidance-Auditee Requirements Internal Controls The internal control process should be designed to provide reasonable assurance regarding the achievement of the following objectives: o Effectiveness and efficiency of operations o Reliability of reporting for internal and external use o Compliance with applicable laws and regulations 75

76 Uniform Guidance-Auditee Responsibilities Subrecipient Monitoring /331 Determine if subrecipient or contractor Clearly identify subawards to subrecipients Provide certain subaward information at the time of subaward Evaluate each subrecipient s risk of noncompliance Consider imposing specific subaward conditions Monitor activities of subrecipients Verify subrecipient has been audited as required by Subpart F Consider results of subrecipient audits Consider taking enforcement action for noncompliant subrecipients 76

77 Uniform Guidance-Auditee Requirements Subrecipient and Contractor Determinations Subrecipient Determine who is eligible to receive federal assistance Has its performance measured according to whether the objectives of a federal program were met Is responsible for program related decision-making Must adhere to applicable Federal program requirements specified in the Federal awards Uses the Federal awards to carry out a program for specific purpose as opposed to providing goods or services for the benefit of the passthrough entity Contractor Has a procurement relationship with the entity Provides goods and services within normal business operations and to many different purchasers Provides goods and services that are ancillary to the operation of the Federal program Normally operates in a competitive environment Is not subject to the compliance requirements of the Federal program as a result of the agreement 77

78 Uniform Guidance-Auditee Requirements Subrecipient Monitoring All subrecipients, regardless of the size of the award, must be monitored Requirements include: o Performing a risk assessment of the subrecipient o Following up on any audit findings or other issues revealed in that process o Ongoing monitoring 78

79 Uniform Guidance-Audit Requirements Single Audit-End Result Contents of the Single Audit Submission o Auditor s report on the financial statements of the entity o Auditor s in-relation-to reporting on the SEFSA o Financial statements prepared by the entity o SEFSA prepared by the entity o Auditor s report on internal control over financial reporting and on compliance and other matters to meet Government Auditing Standards requirements o Auditor s report on compliance and internal control over compliance-major programs 79

80 Uniform Guidance-Audit Requirements Single Audit-End Result Contents of the Single Audit Submission o Auditor s schedule of findings and questioned costs o Includes summary of auditors results and findings o Schedule of prior audit findings prepared by the entity o Corrective action plan prepared by the entity All of the items listed are referred to as the reporting package Reporting package and the Data Collection Form are submitted electronically to the Federal Audit Clearinghouse by the entity 80

81 DST SLG Monitoring and Unit Visits Internal Control issues that need at least a management letter: o Computer software issues o Pre-audit function is not working as planned or has flaws (purchasing, budget amendments, etc.) o Interim reports are not being provided to the governing board timely and with accurate information. o Key accounts are not being reconciled timely, primarily checking accounts. o Segregation of duties 81

82 Contact Information Website: Jones Norris General Questions Jones.Norris@NCTreasurer.com Melinda Canady General Questions Melinda.Canady@NCTreasurer.com Preeta Nayak (GASB 68, Sample F/S) Preeta.Nayak@NCTreasurer.com Becky Dzingeleski (LGC-203, INV-91) Becky.Dzingeleski@NCTreasurer.com 82

83 REMINDER Best way to stay informed is through listserv: LGC_News Register multiple people on your staff in case you are out of the office. Please give Melinda or Jim a business card or send Darrus.Cofield@NCTreasurer.com to register. 83

84 Thank You! Together we can build and maintain a fiscally strong and prosperous North Carolina.