Fiscal Compliance: Desk Audit and Fiscal Monitoring Reviews

Fiscal Compliance: Desk Audit and Fiscal Monitoring Reviews Denise Dusek, MPA Federal Funding Specialist ESC 20 Image obtained from google.com Education Service Center, Region 20 May 2018 2 1

Participants will: Objectives Review payroll and non payroll attributes tested by TEA during fiscal reviews Examine common audit findings, including TEA observations and findings from actual desk audits Gain knowledge of best practices to ensure fiscal compliance Education Service Center, Region 20 May 2018 3 Personal Progress Bar Shade in the progress bars to show your current levels, at the beginning of this session: My knowledge related to strategies for ensuring fiscal compliance with payroll transactions My knowledge related to strategies for ensuring fiscal compliance with non payroll transactions My knowledge related to required elements in written policies and procedures Education Service Center, Region 20 May 2018 4 2

Fiscal Monitoring TEA s Federal Fiscal Monitoring Division: Monitors LEA expenditures from federal funds 1) Findings identified during an LEA s independent single audit TEA issues management decision to sustain or not sustain the findings Corrective actions Disallowed costs must be refunded to TEA 2) TEA s selection of LEAs for Monitoring Reviews and Grant Reviews Current year review Corrective actions Most findings can be corrected without repayment TEA webpage Federal Fiscal Monitoring Division Education Service Center, Region 20 May 2018 5 Monitoring Review Monitoring Review: Determines if federal funds were obligated and expended in accordance with the approved grant application Limited in scope Focuses on allowability of selected expenditures TEA provides recommendations for strengthening internal controls and financial management systems TEA webpage Federal Fiscal Monitoring Division Education Service Center, Region 20 May 2018 6 3

Grant Review: Grant Review Determines whether the LEA complied with applicable federal statutes, regulations, and grant requirements, including EDGAR More comprehensive than monitoring review Focuses on LEA s financial management system, including Policies and procedures Accounting software Record keeping systems Also tests allowability of expenses charged to federal grant and compliance with federal program requirements TEA webpage Federal Fiscal Monitoring Division Education Service Center, Region 20 May 2018 7 Process When Selected by TEA TEA requests documents from the LEA TEA reviews the documentation TEA issues Preliminary observations and findings LEA responds within ten business days Concurs or does not concur Submits corrective actions and additional documentation to address the observations, recommendations, and required actions TEA issues Final report Education Service Center, Region 20 May 2018 8 4

LEA Response Concurs Your organization concurs with TEA staff s observations, findings, general conclusion, and recommendation Additionally, your organization encloses a proposed corrective action to address TEA staff s observations and findings Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 9 Organization s Proposed Corrective Action Finding # Questioned Cost: Actions taken or planned for correction: Numbered attachment(s): (Documentation demonstrating that actions have been taken to address the finding and related questioned costs.) Implementation timetable: Starting date of corrective action: / / Ending date of corrective action: / / Person(s) responsible for implementation: Education Service Center, Region 20 May 2018 10 5

LEA Response Does Not Concur Your organization does not concur with TEA staff s observations, findings, general conclusion, assessment of risk and recommendation and encloses a written response discussing its disagreement. Your organization also encloses copies of documents that support its disagreement with TEA staff s Preliminary Report of Observations and Findings. Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 11 Organization s Disagreement with TEA Staff s Findings Finding # Questioned Cost: Organization s Specific Disagreement: The following statement discusses in detail my organization s specific disagreement with TEA staff s finding. (Attach supporting documentation as needed.) Response Prepared By: Name of Preparer: Functional Title: Telephone Number: Email Address: Education Service Center, Region 20 May 2018 12 6

Results from 2016 2017 1) LEA s independent single audit 651 Single Audit Reports reviewed by TEA 28 Management Decision Letters issued by TEA $157,411 in Total Questioned Costs collected by TEA 2) TEA s Monitoring and Grant Reviews 57 Desk and Onsite Reviews conducted by TEA $563,394.82 Total Questioned Costs identified by TEA $456,727.08 resolved through Corrective Actions $106,667.74 in Final Questioned Costs must be refunded to TEA Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 13 ELEMENTS REVIEWED Education Service Center, Region 20 May 2018 14 7

Elements Reviewed TEA reviews your financial management system: Internal Controls Budgetary Controls Financial Reporting Accounting Records (Source Documentation) Compliance with procurement requirements Expenditures of program funds Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 15 Financial Management System Internal Controls: Written policies and procedures Compliance with Conflict of Interest Cash Management requirements Procurement of goods and services Travel authorization and reimbursement Written policies and procedures are the foundation of internal controls for managing federal funds Reporting fraud, waste and abuse of federal funds Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 16 8

Financial Management System Budgetary Controls: Planning for Budget Allocate and adjust appropriations in financial records to match planning amounts, final amount, and carryover amount approved by TEA Appropriations for set asides/reservations Use of encumbrances Knowing when to amend Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 17 Financial Management System Financial Reporting: Use of appropriate account codes to document revenue and expenditures Use of local option codes, if necessary, to differentiate funds reserved for specific activities; set asides Amendments to program budget to reflect the changes in the funds reserved in the application Financial records updated to reflect changes in funding Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 18 9

Financial Management System Accounting Software: Incorporates all account codes per FASRG ISDS: Module 1 Financial Accounting and Reporting (FAR) Charter Schools: Module 11 Special Supplement Generates chart of account of all account codes used for recording all transactions of grant funds Generates detailed general ledger with required detail Generates payroll journals Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 19 Elements Reviewed TEA examines your organization s: Detailed general ledger Payroll journals Expenditure reports Policies and procedures Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 20 10

Elements Reviewed Detailed General Ledger should include: Transaction Date Account Codes (per FASRG) Reference Numbers (such as check number, purchase order number, or journal voucher number) Vendor Name Brief Description of the Transaction Budgetary information (initial appropriations, encumbrances, final balance) Expenditures Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 21 Education Service Center, Region 20 May 2018 22 11

Elements Reviewed Maintain General Ledger to ensure: Transactions are recorded to appropriate account codes Transactions are recorded in cost categories approved in the grant application Appropriations are updated to reflect funds added to the grant Total expenditures recorded in the general ledger match or exceed the amount of funds claimed for reimbursement Encumbrances are documented to reflect the correct balance available Expenditures recorded are supported by adequate documentation Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 23 Elements Reviewed Payroll Journals should include: Full Name of the Employee/Identification Number Pay Period Check Date and Check Number Gross Salary, Other Income, and Net Earnings Deductions Fund Code(s) charged to report the payroll cost Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 24 12

Education Service Center, Region 20 May 2018 25 Elements Reviewed TEA assesses your organization s internal controls over: Quality of data, Budgetary processes, and Use of program funds TEA places an emphasis on internal controls Written policies and procedures are the foundation of internal controls for managing federal funds Should include responsibilities of both fiscal and program staff Should be adopted by either the board or governing body/superintendent Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 26 13

Effect of Findings Your organization s failure to implement an adequate system of internal controls may place grant funds at risk of being misused and may impede your organization s ability to expend grant funds for the purposes stipulated and within costs allowed in federal law and rules. Excerpt from Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 27 General Conclusion Regarding Findings Your organization did not adequately implement certain fiscal controls to ensure the proper administration of the grant and to facilitate compliance with applicable standards and criteria. Excerpt from Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 28 14

Recommendations Regarding Findings Your organization should review its existing policies and procedures and update and/or implement adequate internal control policies and procedures to give reasonable assurance that it is managing federal awards appropriately and is complying with laws, regulations, and the provisions of grant agreements. Excerpt from Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 29 REQUIRED ELEMENTS OF ADMINISTRATIVE PROCEDURES MANUAL (APM) Education Service Center, Region 20 May 2018 30 15

Administrative: Did your organization s governing body (board of trustees) and/or its chief administrative officer (superintendent) formally adopt the APM? If the APM does not include a copy of the resolution adopted by the governing body and/or the chief administrative officer s signature and date indicating approval of the APM, attach a copy of the resolution and/or chief administrative officer s approval Education Service Center, Region 20 May 2018 31 Administrative: Does the APM include procedures specific to the administration of federal grants? Does the APM include policies and procedures that require your organization to disclose, in a timely manner and in writing to the federal awarding agency or pass through entity [TEA], all violations of federal criminal law involving fraud, bribery, or gratuity violations that potentially affect the federal award? Education Service Center, Region 20 May 2018 32 16

Financial Reporting, Accounting, and Budget: Does the APM include policies and procedures that identify an official responsible to certify expenditures reported to TEA by your organization are proper and in accordance with the terms and conditions of the grant program? Education Service Center, Region 20 May 2018 33 Financial Reporting, Accounting, and Budget: Does the APM identify the financial accounting system report used to prepare your organization s expenditure reports (drawdown requests) submitted to TEA? Education Service Center, Region 20 May 2018 34 17

Financial Reporting, Accounting, and Budget: Does the APM require your organization to use an accounting code structure that conforms to TEA s Financial Accountability System Resource Guide (FASRG)? Education Service Center, Region 20 May 2018 35 Financial Reporting, Accounting, and Budget: Does the APM include a specific administrative accounting procedure that addresses your organization s use of encumbrances for purchase orders and other obligations? Note: Encumbrances are important toward ensuring commitment of funds Education Service Center, Region 20 May 2018 36 18

Financial Reporting, Accounting, and Budget: Does the APM include a specific administrative procedure that describes the process used by your organization to develop and amend its budget? Education Service Center, Region 20 May 2018 37 Cash Management: Does the APM include specific administrative procedures to minimize the time that elapses between the transfer of funds from TEA and the disbursement by your organization? Education Service Center, Region 20 May 2018 38 19

Cash Management: Does the APM include policies and procedures that require your organization to deposit advance payments of federal funds in an insured and interest bearing account? Education Service Center, Region 20 May 2018 39 Procurement Standards: Does the APM include procurement policies and procedures that conform to applicable state, local, and federal laws and standards? Education Service Center, Region 20 May 2018 40 20

Procurement Standards: Does the APM include new procurement policies and procedures, or a written statement claiming an extension to implement policies and procedures that comply with procurement standards given in 2 CFR 200.317 326? Education Service Center, Region 20 May 2018 41 Procurement Standards: Does the APM include policies and procedures to maintain standards of conduct that cover conflict of interest and govern the actions of any of your organization s employees that engage in the selection, award, and administration of contracts? Education Service Center, Region 20 May 2018 42 21

Procurement Standards: Does the APM include policies and procedures to maintain oversight to ensure that your organization s contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders? Education Service Center, Region 20 May 2018 43 Procurement Standards: Does the APM include policies and procedures for procurement transactions that ensure that your organization s solicitations meet the requirements given in 2 CFR 200.319(c)(1) and (2)? Education Service Center, Region 20 May 2018 44 22

Procurement Standards: Does the APM include policies and procedures to ensure that your organization follows the methods of procurement given in 2 CFR 200.320? These methods include procurement by: Micropurchase Small purchase procedures Competitive sealed bids Competitive proposals Noncompetitive proposals Education Service Center, Region 20 May 2018 45 Procurement Standards: Does the APM include a specific administrative procedure describing your organization s use of purchase requisitions and purchase orders? Education Service Center, Region 20 May 2018 46 23

Procurement Standards: Does the APM include policies and procedures to ensure that your organization determines the allowability of costs in accordance with the cost principles described in 2 CFR 200, Subpart E and with the terms and conditions of the grant? Education Service Center, Region 20 May 2018 47 Procurement Standards: Does the APM include a specific administrative procedure for general expense authorization and for the expense reimbursement process for employee reimbursements? Education Service Center, Region 20 May 2018 48 24

Procurement Standards: Does the APM have specific policies and procedures that describe the circumstances under which your organization must follow competitive bidding requirements? Education Service Center, Region 20 May 2018 49 Procurement Standards: Does the APM include a specific administrative procedure describing the thirdparty documentation, such as invoices, required to support the disbursement of grant funds? Education Service Center, Region 20 May 2018 50 25

Procurement Standards: Does the APM include a specific administrative procedure regarding selection and administration of contracts? Education Service Center, Region 20 May 2018 51 Credit, Debit, Gift, and Procurement Accounts: Does your organization permit the expenditure of grant funds through the use of credit, debit, gift, or procurement cards? Education Service Center, Region 20 May 2018 52 26

Credit, Debit, Gift, and Procurement Accounts: Does the APM include a specific administrative procedure that describes how your organization maintains control over the use of credit, debit, gift, and procurement cards? Education Service Center, Region 20 May 2018 53 Credit, Debit, Gift, and Procurement Accounts: Does the APM include a specific administrative procedure that your organization s employees are required to follow when they spend grant funds using credit, debit, gift, and procurement cards? Education Service Center, Region 20 May 2018 54 27

Credit, Debit, Gift, and Procurement Accounts: Does the APM include a specific administrative procedure that identifies who in your organization is authorized to use credit, debit, gift, and procurement cards? Education Service Center, Region 20 May 2018 55 Credit, Debit, Gift, and Procurement Accounts: Does the APM include a specific administrative procedure that requires your organization s employees to submit original, itemized, thirdparty invoices or receipts and a standard internal accounting form (such as payment authorization form, purchase order, or expense reimbursement form) to the central administrative office whenever they use credit, debit, gift, and procurement cards? Education Service Center, Region 20 May 2018 56 28

Travel: Does the APM include a specific administrative policy that defines the reasonable and allowable costs to be reimbursed by your organization for travel? Education Service Center, Region 20 May 2018 57 Travel: Does the APM include a specific administrative procedure that describes your organization s travel authorization and travel reimbursement process? Education Service Center, Region 20 May 2018 58 29

Travel: Does the APM include a specific administrative policy that requires that participation in an activity by an employee be necessary to the federal award for the reimbursement of related travel costs? Education Service Center, Region 20 May 2018 59 Travel: Does the APM include a specific administrative policy that describes the conditions that must be met for dependent care directly resulting from travel to conferences to be allowable? Education Service Center, Region 20 May 2018 60 30

Travel: Does the APM include a specific administrative procedure that identifies the forms and third party source documentation that your organization requires to be attached to travel reimbursement requests? Education Service Center, Region 20 May 2018 61 Property and Equipment: Does the APM include a specific administrative procedure describing your organization s property control and management? Education Service Center, Region 20 May 2018 62 31

Property and Equipment: Does the APM include a specific administrative procedure that describes the information required to be maintained in property records? Education Service Center, Region 20 May 2018 63 Property and Equipment: Does the APM include a specific administrative procedure describing the frequency of inventory taken by your organization? Education Service Center, Region 20 May 2018 64 32

Property and Equipment: Does the APM include a specific administrative procedure describing your organization s requirements for disposing of personal or real property purchased with federal funds, including the filing of written correspondence with TEA? Education Service Center, Region 20 May 2018 65 Records Retention: Does the APM include a specific administrative procedure that requires your organization to retain grant records for a period of at least five years? Education Service Center, Region 20 May 2018 66 33

Records Retention: Does the APM include a specific administrative procedure that describes your organization s methods for collection, transmission, and storage of information? Education Service Center, Region 20 May 2018 67 Employee Records and Job Descriptions: Does the APM include a specific administrative procedure that requires your organization to prepare an internal accounting record (such as a payroll authorization form or personnel action form) for each position? Education Service Center, Region 20 May 2018 68 34

Employee Records and Job Descriptions: Does the APM include a specific administrative procedure that requires your organization to maintain a job description for each grant funded position? Education Service Center, Region 20 May 2018 69 Personnel Expenses: Does the APM include specific procedures describing your organization s standards for documenting charges to federal awards for salaries and wages based on records that accurately reflect the work performed? Education Service Center, Region 20 May 2018 70 35

Personnel Expenses: Does the APM include specific procedures that require that your organization s records of personnel expenses be supported by a system of internal controls that provide reasonable assurance that charges are accurate, allowable, and properly allocated? Education Service Center, Region 20 May 2018 71 Personnel Expenses: Does the APM include specific procedures that require that records of personnel expense be incorporated into your organization s official records? Education Service Center, Region 20 May 2018 72 36

Personnel Expenses: Does the APM include specific procedures that require that records of personnel expenses reasonably reflect the total activity for which the employee is compensated by your organization, not exceeding 100 percent of compensated activities? Education Service Center, Region 20 May 2018 73 Personnel Expenses: Does the APM include specific procedures that require that records of personnel expenses encompass both federally assisted and all other activities compensated by your organization on an integrated basis, but may include the use of subsidiary records as defined in your organization s written policy? Education Service Center, Region 20 May 2018 74 37

Personnel Expenses: Does the APM include specific procedures that require records of personnel expenses comply with your organization s established accounting policies and practices? Education Service Center, Region 20 May 2018 75 Personnel Expenses: Does the APM include specific procedures that require records of personnel expenses to support the distribution of the employee s salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non federal award; an indirect cost activity and a direct cost activity; two or more indirect activities that are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity? Education Service Center, Region 20 May 2018 76 38

ATTRIBUTES TESTED Education Service Center, Region 20 May 2018 77 Payroll Attributes Tested Position was approved in the budget Approved by TEA in the grant application Job description was signed, dated, described activities that were allowable under the grant program, and was updated to reflect current job duties Position was supported by laws, rules, regulations, and the grant application Program/activity/strategy being funded is described in the district/campus improvement plan Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 78 39

Payroll Attributes Tested, continued Payroll costs were incurred within the allowable grant period Payroll records matched approved source(s) of funding Payroll authorization form, Salary authorization, Personnel action form, or Other record that identifies all of the sources of funding from which the employee was authorized to be paid Employee was properly certified as a teacher or paraprofessional, as applicable Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 79 Payroll Attributes Tested, continued Extra duty pay was supported by signed and dated timesheets Extra duty pay was supported by a signed and dated supplemental contract or agreement that stipulated the allowable federal program work activities Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 80 40

Payroll Attributes Tested, continued Time and Effort Documentation: Maintained based on single and multiple cost objectives Periodic certification Single Cost Objective A signed and dated job description with source of funding listed was provided in lieu of a periodic certification, per Ed Flex waiver, for applicable programs Personnel Activity Report Multiple Cost Objectives Accounts for the total activity for which the employee was compensated Signed and dated by the employee or supervisor having first hand knowledge of work performed Signed after the work was performed Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 81 Payroll Attributes Tested, continued Time and Effort Documentation: Reflects an after the fact distribution of actual activity Time allocation matched the payroll cost allocation Maintained according to LEA s policies and procedures Time and effort documentation maintained for stipends, if applicable Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 82 41

Payroll Attributes Tested, continued For organizations that used the substitute time and effort system: A management certification form was on file at TEA A predetermined schedule was maintained by the organization and supported activities reported on the certification A periodic (semi annual) certification form was signed and dated by both the employee and supervisor Time allocation matched the payroll cost allocation Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 83 Non Payroll Attributes Tested The expenditure was reasonable and necessary to further the statutory purpose of the grant or pertained to a required or authorized grant activity The costs of the goods or services were chargeable or assignable to the grant in accordance with the relative benefits received The funded program/activity/strategy (goods or services charged to the grant) were supported by the campus/district improvement plan, if applicable Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 84 42

Non Payroll Attributes Tested, continued The expenditure was supplemental to other non federal programs Expenditure met supplement, not supplant requirements of the federal program The item or service purchased was approved in the program budget, as amended The cost was incurred and the goods and services were received after the start, and before the end, of the grant period The purchase order was issued prior to the invoice date Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 85 Non Payroll Attributes Tested, continued The accounting record included an original and complete internal accounting document, such as Executed contract, Purchase order, Payment authorization form, Expense reimbursement form, or Travel reimbursement form The accounting record included an original and complete thirdparty document, such as Utility billing statement, Itemized receipt, or Itemized invoice Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 86 43

Non Payroll Attributes Tested, continued The accounting record indicated that the transaction was approved by an authorized individual Appropriate accounting codes were used to record transactions Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 87 Non Payroll Attributes Tested, continued Procurement method adhered to applicable procurement standards Purchasing method was supported by adequate documentation Purchase adhered to applicable state and/or federal competitive bidding requirements, as applicable The purchase adhered to noncompetitive procurement requirements, if applicable The organization properly identified and maintained adequate documentation of its determination Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 88 44

Non Payroll Attributes Tested, continued If the purchase was made using micropurchase procedures, it was a one time purchase below $3,500 If the purchase was made using small purchase procedures, at least three price or rate quotations were obtained from qualified sources Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 89 Non Payroll Attributes Tested, continued Suspension and Debarment: The organization verified the vendor was not suspended or debarred at the time of procurement Checking www.sam.gov or Collecting a certification from the vendor Suspension and debarment documentation was maintained Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 90 45

Non Payroll Attributes Tested, continued For purchases made through a purchasing cooperative: A valid cooperative agreement was in place for purchases made through a cooperative The purchasing cooperative complied with EDGAR procurement requirements The organization maintains documentation to support the cooperative s compliance with EDGAR Preliminary Report of Observations and Findings issued by TEA; Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 91 Grant Expenditures Tested Grant funds were obligated, expended, and used in accordance with: The approved grant application The purpose authorized by statute for those funds The federal cost principles, including maintaining time and effort records in accordance with the applicable federal requirements The period of performance (encumbrances, obligations, and receipt of goods and services occurred during the grant period and in time to substantially benefit the grant period) The applicable fiscal, programmatic, and other requirements, including cash management requirements Monitoring Review issued by TEA Education Service Center, Region 20 May 2018 92 46

Grant Expenditures Tested, continued Grant expenditures are properly supported by your organization s source documentation and that costs are allocable to the grant program Expenditures reported in TEA s automated expenditure reporting (ER) system correspond to expenditures recorded in your organization s general ledger and payroll journal and to the budget in the approved grant application Monitoring Review issued by TEA Education Service Center, Region 20 May 2018 93 Grant Expenditures Tested, continued Your organization complied with the following requirements, as applicable: The mandatory account code structure and accounting requirements given in Module 1, Financial Accounting and Reporting [FAR Guide] of TEA s Financial Accountability System Resource Guide (FASRG) Generally accepted accounting principles (GAAP) Fund accounting in accordance with 2 CFR 200.302 Monitoring Review issued by TEA Education Service Center, Region 20 May 2018 94 47

COMMON AUDIT FINDINGS Education Service Center, Region 20 May 2018 95 Examples of Payroll Findings Lack of appropriate time and effort reporting documentation Cost not allocated per time and effort records Funds obligated outside of the grant period Positions not approved in the application Lack of job descriptions describing the duties/activities allowed under the program Lack of Salary Authorization to spend grant funds Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 96 48

Examples of Non Payroll Findings Lack of an original and complete third party document No itemized receipt, itemized invoice, etc., to support the purchase Lack of complete internal document authorizing purchases No purchase order or approval of purchase by authorized personnel Obligating grant funds prior to start of grant period signing contracts prior to grant period Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 97 Examples of Non Payroll Findings Purchase did not adhere to appropriate procurement standards Lack of executed agreement of contract with the vendor Cost not necessary or reasonable for the benefit of recipients Purchases made from purchasing cooperative without an agreement Did not demonstrate compliance with suspension and debarment Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 98 49

ACTUAL OBSERVATIONS & FINDINGS, INCLUDING RECOMMENDATIONS BY TEA Education Service Center, Region 20 May 2018 99 Flexibility Since TEA performs monitoring reviews and grant reviews during the current grant year, most findings or questioned costs may be resolved by: Submitting adequate supporting documentation Amending budgets Reclassifying unallowable costs to other funding sources Replacing questioned costs with other expenditures that are allowable Federal Fiscal Monitoring Updates presented by Roger Hingorani; ACET 4/19/2018 Education Service Center, Region 20 May 2018 100 50

Payroll Costs Observation: Job Descriptions Job descriptions were not signed and dated by the employees to acknowledge their current roles and responsibilities related to the position paid for with grant funds The organization could not demonstrate that the employee worked on activities supported by applicable laws, rules, and regulations Recommendation: Ensure job descriptions are current, signed and dated, and describe roles and responsibilities applicable to the grant Review existing policies and procedures and update to ensure compliance Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 101 Payroll Costs Finding: Stipends The organization used federal funds to pay stipends to employees, but did not provide supporting documentation demonstrating why grant funds were used for these stipends Additionally, the organization did not provide payroll authorization records identifying the funding sources and pay rates approved for the employees who received stipends Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 102 51

Recommendation: Payroll Costs Finding: Stipends Provide documentation supporting the use of grants funds to pay stipends to the employees in question Provide payroll authorization records identifying each employee s funding sources and pay rates, including the approved stipend amounts Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 103 Payroll Costs Finding: Stipends Recommendation, continued: If unable to provide the requested documentation, reclassify the questioned costs to another appropriate funding source and charge other allowable expenditures to the grant in the amount of the questioned costs Submit updated general ledger with journal entries to support the reclassification and the adjustment of the questioned costs Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 104 52

Payroll Costs Finding: Stipends Recommendation, continued: If the organization does not have additional expenditures to replace the unallowed costs, reduce the next drawdown of grant funds for the amount claimed for unallowed expenditures If questioned costs are not reclassified, the organization may be required to return the questioned costs to TEA Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 105 Payroll Costs Observation: Certification Grant funds were used for payroll costs to an employee who did not possess the certification required for their position Recommendation: Reclassify unallowable payroll costs to another funding source Reduce future reimbursements from this grant to comply with federal cash management requirements Monitoring Review issued by TEA Education Service Center, Region 20 May 2018 106 53

Payroll Costs Observation: Time and Effort The organization did not maintain adequate time and effort documentation to demonstrate compliance with 2 CFR 200.430(i) Periodic certification reports did not identify the ending dates for the periods being certified by the employees Recommendation: Update records to identify the specific period certified by employees Monitoring Review issued by TEA Education Service Center, Region 20 May 2018 107 Payroll Costs Observation: Time and Effort The organization did not maintain adequate time and effort documentation to demonstrate compliance with 2 CFR 200.430(i) Time and effort certification reports were signed and dated by employees prior to the end of the certification period Recommendation: Update records to comply with the time and effort requirement Monitoring Review issued by TEA Education Service Center, Region 20 May 2018 108 54

Payroll Costs Observation: Time and Effort The organization did not maintain adequate time and effort documentation to demonstrate compliance with 2 CFR 200.430(i) Employees participating in the Substitute Time and Effort System do not meet the eligibility requirements to do so Monitoring Review issued by TEA Education Service Center, Region 20 May 2018 109 Payroll Costs Observation: Time and Effort The organization did not maintain adequate time and effort documentation to demonstrate compliance with 2 CFR 200.430(i) Documentation for employees participating in the Substitute Time and Effort System: Employee schedule for one employee was not provided Two Certification forms were missing either a date or signature Monitoring Review issued by TEA Education Service Center, Region 20 May 2018 110 55

Expenditure Observation: Coding The organization did not properly record an expenditure in the detailed general ledger in accordance with TEA s Financial Accountability System Resource Guide (FASRG) The organization used an incorrect class object code when it recorded an expense in the general ledger Recommendation: Reclassify the expense and provide TEA an updated general ledger that includes the adjusting entries Monitoring Review issued by TEA Education Service Center, Region 20 May 2018 111 Expenditure Observation: Lack of Budgetary Control The organization did not demonstrate it maintained effective budgetary control of grant expenditures 51% variance between the budget in the general ledger and the budget as amended and approved in the grant application Variance was due to carryover of previous year s unused grant funds not budgeted in the general ledger Recommendation: Ensure the general ledger accurately reflects grant funds as budgeted in the grant application, including any carryover funds Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 112 56

Set Asides Observation The organization did not spend grant funds for the specific activities described in the applicable schedule of the grant application The organization did not identify in the general ledger the appropriation/expenditures of grant funds reserved to carry out specific activities Recommendation: The organization should ensure that set asides are identified separately in the general ledger or spent for the specific activities described in the application Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 113 Expenditure Finding: Purchase Orders The organization issued a purchase order after the invoice date Recommendation: Reclassify the questioned costs to another appropriate funding source and charge other allowable expenditures to the grant in the amount of the questioned costs Submit an updated general ledger with journal entries to support the reclassification and the adjustment of the questioned costs If the organization does not have additional expenditures to replace the unallowed costs, reduce the next drawdown of grant funds for the amount claimed for unallowed expenditures If questioned costs are not reclassified, the organization may be required to return the questioned costs to TEA Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 114 57

Procurement Observation: Contracted Services Grant funds were used for contracted services that were not specifically approved in the grant budget Recommendation: Submit a budget amendment to allow the costs Monitoring Review issued by TEA Education Service Center, Region 20 May 2018 115 Procurement Observation: Contracted Services The organization did not provide contracts to support payments made for contracted services Recommendation: Provide a corrective action plan to address the finding, including any additional supporting documentation to address the questioned costs If unable to do so, reclassify the questioned costs to another appropriate funding source and charge other allowable expenditures to the grant in the amount of the questioned costs Submit an updated general ledger with journal entries to support the reclassification and the adjustment of the questioned costs If the organization does not have additional expenditures to replace the unallowed costs, reduce the next drawdown of grant funds for the amount claimed for unallowed expenditures If questioned costs are not reclassified, the organization may be required to return the questioned costs to TEA Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 116 58

Procurement Observation: Policies and Procedures The organization s purchasing policies and procedures did not adequately comply with new procurement standards as stated in 2 CFR 200.318 326 Recommendation: Create and implement policies and procedures to give reasonable assurance the organization is managing federal awards appropriately and is complying with laws, regulations, and the provisions of grant agreements Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 117 EDGAR Procurement Standards 200.318 General procurement standards 200.319 Competition 200.320 Methods of procurement to be followed 200.321 Contracting with small and minority businesses, women s business enterprises, and labor surplus area firms 200.322 Procurement of recovered materials 200.323 Contract cost and price 200.324 Federal awarding agency or pass through entity review 200.325 Bonding requirements 200.326 Contract provisions Education Service Center, Region 20 May 2018 118 59

Procurement Finding: Small Purchase Procedures The organization did not comply with the federal procurement standards as stipulated in 2 CFR 200.320 The organization did not maintain adequate documentation to demonstrate that it adhered to the small purchase procedures requirements for the procurement of goods and services as required by federal rules Monitoring Review issued by TEA Education Service Center, Region 20 May 2018 119 Standard: Procurement by Small Purchase Procedures Small purchase procedures are those relatively simple and informal procurement methods for securing services, supplies, or other property that do not cost more than the Simplified Acquisition Threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources 2 CFR 200.320(b) Education Service Center, Region 20 May 2018 120 60

Procurement Finding: Small Purchase Procedures The organization did not obtain price or rate quotations from an adequate number of qualified sources for procurement of goods and services by small purchase methods Recommendation: Provide a corrective action plan to address the finding Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 121 Procurement Finding: Noncompetitive The organization did not demonstrate that it adequately complied with procurement standards as identified in 2 CFR 200.320 The organization claimed procurement by noncompetitive proposal or sole source, but did not meet the standards Recommendation: Request approval from TEA for the noncompetitive procurement Review existing policies and procedures and update to ensure compliance Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 122 61

Standard: Procurement by Noncompetitive Proposals Procurement through solicitation of a proposal from only one source May be used only when one or more of the following circumstances apply: 1) The item is available only from a single source; 2) The public exigency or emergency for the requirement will not permit a delay resulting from competitive solicitation; 3) The Federal awarding agency or pass through entity [TEA] expressly authorizes noncompetitive proposals in response to a written request from the non Federal entity [LEA]; or 4) After solicitation of a number of sources, competition is determined inadequate 2 CFR 200.320(f) Education Service Center, Region 20 May 2018 123 Procurement Observation: Debarment and Suspension The organization did not provide assurance it complied with 2 CFR 200.213, which restricts contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities Preliminary Report of Observations and Findings issued by TEA Education Service Center, Region 20 May 2018 124 62

Standard: Suspension and Debarment Non federal entities (LEAs) are subject to the nonprocurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR Part 180 These regulations restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities 2 CFR 200.213 Education Service Center, Region 20 May 2018 125 ACTION STEPS Education Service Center, Region 20 May 2018 126 63

Action Steps Review common audit findings and examples of actual observations and findings Analyze your LEA s processes in comparison to these Adjust processes to ensure compliance Education Service Center, Region 20 May 2018 127 Action Steps Review required elements for your administrative procedures manual Ensure your written policies and procedures include all the elements Implement procedures Train staff Ensure staff understand why certain processes are required Education Service Center, Region 20 May 2018 128 64

Reminders Ensure general ledger and payroll journals align Job descriptions reflect current roles and responsibilities, identify funding sources, and are signed and dated Use local option codes to track set asides, reservations Education Service Center, Region 20 May 2018 129 Reminders Time and effort documentation must adequately ensure proper allocation to the grant(s) Documentation must be signed after the fact Reconcile actual to budget and make needed adjustments Education Service Center, Region 20 May 2018 130 65

Reminders Check www.sam.gov to ensure vendors are not suspended or debarred Print screen print and attach to purchase order Obtain 3 quotes for small purchases and justify why the particular vendor was selected Noncompetitive procurements must meet one of the required circumstances outlined in 2 CFR 200.320(f) Education Service Center, Region 20 May 2018 131 RESOURCES Education Service Center, Region 20 May 2018 132 66