Audits: Assisting You In Managing Your Federal Program

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Audits Assisting You In Managing Your
Federal Program!

• Peter Vien Suzanne Hatfield
• March 5, 2008

Georgia Department of Auditsand Accounts
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FY 2006 ITQ Audit Results

• ITQ Program Reviewed _at_ 36 Boards
• Findings By Compliance Requirement
• Allowable Costs/Cost Principals
• Cash Management
• Financial Reporting /Completion Report
• Special Provisions/Schoolwide Implementation

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FY 2006 Audit Findings

• What is the common thread in most of the audit
  findings?
• Lack of Internal Controls!

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Objectives of Internal Control

• Financial Reporting
• Is the data reported reliable?
• Operations
• Are the operations of the organization efficient
  and effective to meet our objectives?
• Compliance
• Are procedures in place to ensure that all
  applicable laws and regulations are followed?

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Components of Internal Control

• Internal control consists of five interrelated
  components
• Control environment sets the tone of an
  organization, influencing the control
  consciousness of its people. It is the foundation
  for all other components of internal control,
  providing discipline and structure.
• Risk assessment is the identification and
  analysis of relevant risks to achievement of
  objectives, forming a basis for determining how
  the risks should be managed.
• Control activities are the policies and
  procedures that help ensure that management
  directives are carried out.

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Components of Internal Control

• Internal control consists of five interrelated
  components
• Information and communication systems support the
  identification, capture, and exchange of
  information in a form and time frame that enable
  people to carry out their responsibilities.
• Monitoring is a process that assesses the quality
  of internal control performance over time.

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Give Me Your Thoughts

• Which are the Five Components of Internal Control
  Might Be the Most Critical/Valuable to You?
• Risk Assessment?
• Control Environment?
• Control Activities?
• Information/Communication?
• Monitoring?

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Reporting of Deficiencies

• New auditing standards (SAS 112 and Yellow Book)
  require us to formalize communication of noted
  deficiencies
• Three levels of deficiencies
• Deficiency
• Significant Deficiency
• Material Weakness

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Reporting of Deficiencies

• Deficiencies
• Will be reported to you either in
• Verbal form at post-audit conference
• same as management points for discussion in the
  past
• Management letter (new for FY07)
• Significant Deficiencies and Material Weaknesses
• Will be reported as findings in the audit report
  in the same manner as Reportable Conditions and
  Material Weaknesses in the past

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Audit Report Key Components

• Schedule of Expenditures of Federal Awards (SEFA)
• Report on compliance applicable to each major
  program and on internal control over compliance
• Summary schedule of prior year findings and
  questioned costs
• Schedule of findings and questioned costs
• Schedule of managements responses

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Compliance Requirements Covered in A Single Audit

• OMB Circular A-133 Compliance Supplement
  Provides The 14 Compliance Requirements That Are
  Covered In a Single Audit
• The Compliance Requirements Specific to the ITQ
  Program Are Included In The CS Forms the Basis
  For Our Review of ITQ

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Compliance Requirements Covered in ITQ Review

• Activities Allowed/ Unallowed and Allowable Costs
  Cost Principles
• Review these two Compliance requirements
  Concurrently
• Activities Allowed/Unallowed
• Are activities allowed or Unallowed by
  law/regulation/policy, USED Regulation
  policies, GDOE Policy
• For ITQ Program, Based On Local Assessment

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Compliance Requirements Covered in ITQ Review

• Allowable Costs/ Cost Principles Provisions of
  OMB Circular A-87
• Are Costs Necessary/ Reasonable/ Allocable/
  Authorized/ Not Prohibited Under State or local
  Law
• Direct Costs benefits to program directly
  related to expenditure
• Indirect Costs Joint purpose but benefits not
  readily assignable to a specific objective/program

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Compliance Requirements Covered in ITQ Review

• Two Types of Direct Costs
• Personnel Service Costs
• Personnel Working All Time on Program
• Personnel Working Part Time on Program
• Hourly Paid Personnel
• Other Operating Costs
• Travel
• Professional Development
• Consultants

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Compliance Requirements Covered in ITQ Review

• Personnel Service Costs
• Required Support of Salaries and Wages
• Provisions Included in 8h of Attachment B of OMB
  Circular A-87
• Personnel engaged in Single Federal Activity
• Semi-Annual Certification
• Signed by Employee or Supervisory Official

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Compliance Requirements Covered in ITQ Review

• Personnel Service Costs
• Personnel Engaged in Federal/Non-Federal Multiple
  Activities
• Personnel Activity Reports (PARs)
• Account For Employees Total Time
• Signed by Employee Prepared Monthly
• 10 Variance of Activity, Then Quarterly
  Adjustments
• PARs Serve As Only Means of Certifying/Documenting
  Actual Time Performed By Personnel on Federal
  Activity

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Compliance Requirements Covered in ITQ Review

• Other-Than Personnel Service Costs
• Consultant Costs
• Professional Development
• Travel
• Equipment
• Procurement Process Applies
• Delivery of Services/Goods Documented

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Compliance Requirements Covered in ITQ Review

• Indirect Costs
• Apply GDOE Approved Indirect Cost Rate (ICR) to
  Base To Determine Amount of I/C Costs
• Base Includes Direct Charges To ITQ Program
• Cannot Include extraordinary Items in Base
• A Board May Have an Approved Restricted and
  Unrestricted ICR
• Only Restricted ICR Can Be Applied To the ITQ
  Program

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Compliance Requirements Covered in ITQ Review

• Cash Management
• Request ITQ Funds on a Reimbursement Basis From
  GDOE
• Request Based On Disbursed Amount
• Timely Basis (Monthly)
• Little or No Balance Carried Forward

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Compliance Requirements Covered in ITQ Review

• Period of Availability
• Expenditures are Expended in Proper Period
• Cannot Be Expended Before or After Grant
  Award Period

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Compliance Requirements Covered in ITQ Review

• Level of Effort
• Basis For Receiving FY 2007 ITQ Funds
• In FY 2006, Board Expended An Amount of
  State/Local Funds For Free Public Education That
  Was At Least 90 of the Amount Expended in FY
  2005
• Calculated By Either in the Agggregate or by Per
  Student

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Compliance Requirements Covered in ITQ Review

• Supplement Vs Supplant
• Cannot Use ITQ Funds To Provide Services That
  Are
• Required To Be Made Available Under Federal,
  State or Local Law
• Board Provided In Previous Year W/ Non- Federal
  Funds

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Compliance Requirements Covered in ITQ Review

• Transferability
• Movement of Funds Among Four Federal Programs
  Including The ITQ Program
• Can Move Funds Only to Title I Program
• 50 Limit Except
• 30 Where an LEA is Identified For School
  Improvement
• No Transferred Funds Where An LEA IS Identified
  For Corrective Action

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Compliance Requirements Covered in ITQ Review

• Procurement / Suspension and Debarment
  Requirements
• Written Policies Followed for Proper Procurement
  of Services/Goods
• A Bidder cannot Be Involved in the Writing of the
  Bids
• No geographical boundaries

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Compliance Requirements Covered in ITQ Review

• Procurement / Suspension and Debarment
  Requirements
• Suspension/Debarment Provisions
• Individual Transactions 100,000 or more
• Nonprocurement Transaction of 25,000 or more
• All subgrantees

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Compliance Requirements Covered in ITQ Review

• Procurement / Suspension and Debarment
  Requirements
• Suspension/Debarment Provision
• Included in Request for Bid of Goods and Services
• Executed Contract - Includes Suspension/Debarment
  Requirement
• List of S/D Parties on GSA website

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Compliance Requirements Covered in ITQ Review

• Financial Reporting
• ITQ Funds Reported Accurately To GDOE Via GAORS
  System ( Electronic)
• Includes Only The Amount of Expenditures Incurred
  As of Conclusion of Grant Period
• Properly Reflects Transferred ITQ Funds

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Compliance Requirements Covered in ITQ Review

• Special Tests Provisions
• Participation of Private School/Educators
• Conduct Timely Consultation With Private School
  Officials
• Plan and Provide Equitable Educational Services
  to Private School Educators on an Equitable Basis
  

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Compliance Requirements Covered in ITQ Review

• Special Tests Provisions
• Assessment of Need
• Directed at Professional Development and Hiring
• As Identified by the LEA and School Staff
• Involve Teachers, Including Those Work In Target
  Assistance and Schoolwide Programs
• NOTE Prioritizes as to How Title II-A Funds
  Are To be Expended

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Compliance Requirements Covered in ITQ Review

• Special Tests Provisions
• Schoolwide Program
• Includes 3 Core Elements Dealing W/ Comprehensive
  Needs Assessment
• Includes Five Basic Components Such as
• Reform Strategies
• Highly Qualified Staff
• Parental Involvement
• Support to Those Students W/ Difficulties
• Transition of Pre School Children To SP
  Environment

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Compliance Requirements Covered in ITQ Review

• Special Tests Provisions
• Schoolwide Program
• If the Board Combines Federal Funds, Then It
  Should Be Based On Its Assessment and a
  Reasonable Amount Provided From Different Federal
  Funding Sources
• 1,000 of ITQ Funds Combined With the Schools
  Title I Allocation Does Not Constitute a
  Reasonable Amount From Different Federal Sources.

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Compliance Requirements Covered in ITQ Review

• Special Tests Provisions
• Schoolwide Program
• Follow GDOE Guidelines For
• Developing a Budget From Different Federal
  Sources
• Creating 400 Fund To Allocate SWP Costs To
  Specific Participating Federal Funds
• Allocation of Expenses Should Be Performed At
  Least Monthly
• Cash Management
• Reporting
• Managing Each Federal Progam

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Compliance Requirements Covered in ITQ Review

• Special Tests Provisions
• Schoolwide Program
• If It Is Decided Not To Combine Federal Funds For
  A Schoolwide Program, Then Each Individual
  Expenditure Charged to The ITQ Program Will Have
  to Be Identified With a Specific ITQ Activity!!

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Schoolwide Program

• Schoolwide Findings
• Boards Have Only Combined a Small Amount of ITQ
  Funds With Each Schools Title I Allocation
• No Consideration Given To Combining Other Funds
  From Other Federal Sources
• No Relationship Between A Schools Assessment and
  Funds Budgeted/Combined

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Pop Quiz
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Pop Quiz

• Which one of the below is the Primary Cause for
  Audit Findings?
• __ Unfamiliar W/ Federal requirements.
• __ Poor Attendance
• __ Lack Of Supervision
• __ Lack of Internal Controls
• __ Inexperienced (new) In the Position
• Answer Lack of Internal Controls

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Pop Quiz

• True or False Development and monitoring of
  internal controls are the responsibility of the
  auditors.
• FALSE Internal controls are the responsibility
  of Management. Only management can effectively
  monitor the organizations activities. Auditors
  are required to maintain their independence and
  cannot be a part of the internal control
  structure. Do not wait for the auditors to detect
  Non-Compliance.

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POP QUIZ

• Are Internal controls too costly to implement?
• FALSE While you should perform risk
  assessments to determine the cost/benefit of
  specific controls, it is generally much more
  costly to deal with the aftermath of
  Non-Compliance Issues and/or Audit Findings

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POP QUIZ

• True or False Only Part Time Personnel are
  Required To Document/Certify Their Actual Time
  Expended On a Federal program?
• FALSE Both Part-Time and Full-Time Personnel
  Who Work on a Federal Program are Required To
  Certify The Time Each Expends On a Federal
  Program?

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POP QUIZ

• True or False At Least Once Every 6 Months All
  Personnel Who Work On A Federal Program Have to
  Certify Their Actual Time Expended On a Federal
  program.
• FALSE Full-Time Personnel Certify Their Time
  AT Least Once Every 6 Months..
• Part-Time Personnel Certify Through a Personnel
  Activity Report (PAR) every Month!

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POP QUIZ

• True or False Combining Only a Little Amount of
  Funds From One Federal Source With Title I Funds
  will Satisfy Federal Requirements With Regard To
  Combining Funds In Support of A Schoolwide
  Project.
• FALSE A School Should Combine A Fair And
  Reasonable Amount of Funds From Different Federal
  Sources In Line With That Schools Needs
  Assessment.

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POP QUIZ

• True or False Schoolwide Program Expenses
  Combined in a 400 Fund Only Need To Be
  Allocated Once A Year to the Participating
  Federal Programs To Meet Federal Requirements.
• FALSE A School Should Allocate Expenses at
  Least Once A Month To Properly Manage Each
  Federal Program.

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QUESTIONS?