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Audit Secrets Revealed

Audit Secrets Revealed. By Belen Briones, CPA Gibson, Ruddock, Patterson LLC May 9, 2013 ACET Spring Conference. Helpful resources to ensure compliance . Contract/Grant Award OMB A-87 Cost Principles for State, Local and Indian Tribal Governments

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Audit Secrets Revealed

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  1. Audit Secrets Revealed By Belen Briones, CPA Gibson, Ruddock, Patterson LLC May 9, 2013 ACET Spring Conference

  2. Helpful resources to ensure compliance • Contract/Grant Award • OMB A-87 Cost Principles for State, Local and Indian Tribal Governments • OMB A-133 Audits of State, Local Governments and Non-Profit Organizations • OMB Compliance Supplement • 2013 edition to be released soon • http://www.whitehouse.gov/omb/circulars_default

  3. Compliance Supplement • Is revised annually • 2013 Compliance Supplement due out this Spring • Broken up into 7 parts • Part 3 gives the general compliance requirements • Part 4 is divided by Department • Provides detailed compliance requirements for specific programs

  4. Title I, Part A – The Basics

  5. Title I, Part A – what’s the big deal? • To improve the teaching and learning for low-income children who are at risk of not meeting state academic standards • Funding is based on a statutory formula • One of the largest program for many school districts • Many compliance requirements

  6. Schoolwide vs. Targeted Assistance • Schoolwide - Schools above 40% poverty may use its funds, along with other Federal, State and local, to upgrade the entire educational program of the school and to raise academic achievement for all students • Targeted Assistance – School identifies students who are failing, or most at risk of failing, to meet the State’s challenging student academic achievement standards and who have the greatest need for assistance. • The campus has the designation not the District (i.e. no such thing as Districtwide)

  7. To Pool or Not to Pool • Consolidated Schoolwide Pool • Decision made by school district • Not required to maintain separate records by program • Lose their specific program identity but must support activities that address the intent and purpose of each program • Must use funds to address specific needs of the school identified by the needs assessment and articulated in the schoolwide plan • Must allocate the total expenditures to the different programs pooled for financial reporting purposes

  8. To Pool or Not to Pool (cont) • Schoolwide program – non-consolidated • Must keep separate records by program • Must comply with all the program regulatory requirements for each program • Semi-annual certifications for employees that work 100% of time on the same cost objective • Personnel activity reports for split funded employees • Decision should be documented in the schoolwide plan

  9. Schoolwide Plan • Comprehensive needs assessment • Schoolwide reform strategies • Instruction by highly qualified professional staff • Professional development • Strategies to attract high-quality teachers • Parental involvement • Transition from early childhood programs • Include teachers in decision making • Provide effective, timely additional assistance • Coordination and integration

  10. Allowable Activities & Cost Principles • Must meet the intent and purpose of the program • Must be instructionally related • Improve TAKS/STAR scores • Increase academic performance through activities such as parental involvement • Must be documented in the schoolwide plan • Must be reasonable and necessary • OMB A-87

  11. Eligibility • Allocate to eligible schools based on the number of children from low-income families residing within the attendance area • Must use the same poverty measure consistently to rank all its school attendance areas • Must serve eligible schools or attendance areas in rank order according to their percentage of poverty • Must serve areas or schools above 75% poverty level • District with less than 1,000 students or with only one school per grade span is not required to rank its school attendance areas

  12. Allocation of Funds • Allocate funds in rank order based on the total number of children from low-income families in area • Must consider low-income private school children in calculation • Can serve attendance area with less than 35% poverty rate, but additional calculation (125% rule) is necessary

  13. Maintenance of Effort • Fiscal effort per student or the aggregate expenditures of the District from State and local fund for free public education for the preceding year was not less than 90% of the combined fiscal effort or aggregate expenditures for the second preceding year • Example 1: • 2010 State and Local Expenditures = 152,000,000 • 2009 State and Local Expenditures = 175,000,00 175,000,000 * 90% = 157,500,000 FAILS MOE in 2011 • Example 2: • 2010 State and Local Expenditures = 158,000,000 • 2009 State and Local Expenditures = 175,000,00 175,000,000 * 90% = 157,500,000 PASSES MOE in 2011 • Excludes community services, capital outlay, debt service, funds provided by federal government, and supplementary expenses as a result of a declared disaster,

  14. Supplement Not Supplant • Schoolwide program may be used to supplement total amount of funds • District’s responsibility that supplement not supplant requirement is met • School does not need to demonstrate that activities are supplemental • Examples of Supplanting • Federal funds used to provide services that the District was required to make available under other Federal, State or local law • Federal funds used to provide services that the District provided with non-federal funds in prior year

  15. Comparability • Annual requirement • Does not apply to Districts that have only one school for each grade span • Most common way to determine comparability • Average number of students per instruction staff • Average staff salary per student

  16. Reporting • Annual Report Card • Effective for the 2010-2011 school year • Report graduation rate data • Documentation must be maintained to support the removal of students from the cohort

  17. Private Schools • Must provide equitable service to eligible private school children • Allocation should be based on total number of low-income children • Communication is crucial in assuring that low-income children that attend private school are served

  18. IDEA B – The Basics

  19. Allowable Activities & Cost Principles • Must meet the intent and purpose of the program • Specially designed instruction • At no cost to parent • Includes related services such as transportation • Must be excess costs • Must be reasonable and necessary • OMB A-87

  20. Maintenance of Effort and Earmarking • Maintenance of Effort • Must spend an amount of local funds, or a combination of state and local funds that is at least equal, on either an aggregate or per capita basis in current year as in prior fiscal year • Allowances/exceptions can be made • Departure of special ed personnel • Decrease in enrollment • Earmarking • Limited to 15% for Early Intervening Services

  21. Time and Effort for Federal Programs

  22. Time and Effort • Single Federal award or cost objective (100%) • Semi-annual certification (Option 1) • Must be signed by employee • Or supervisor having first hand knowledge of work performed • Signed after work has been performed • Job Description (Option 2) • Must clearly state employee is assigned to program 100% • Only for Ed Flex Waiver Covered Programs

  23. Time and Effort • Multiple activities or cost objectives (split-funded) • Personnel activity reports (option 1) • Must reflect actual activity, not budget • Budget estimates must be revised at least quarterly to reflect actual • Must account for total activity for which employee is compensated • Must be prepared at least monthly • Must be signed by the employee

  24. Time and Effort • Multiple activities or cost objectives (split-funded) • New Substitute System (Option 2) • Must receive approval from TEA • Submit semi-annual certifications instead of personnel activity report • Must be signed by employee • Or supervisor having first hand knowledge of work performed • Signed after work has been performed • Submit a work schedule • Samples of certification and schedule available on TEA website http://www.tea.state.tx.us/index2.aspx?id=2147510385

  25. New Substitute System • Must submit management certification to TEA for approval • Must submit management certification to TEA on an annual basis • In effect beginning 2012-2013 • Employees must work on specific activities or cost objectives based on predetermined, consistent schedules • Applicable to LEAs and open-enrollment charter schools

  26. What do auditors look for?

  27. The Audit of Expenditures

  28. What auditors look for • Are there internal controls in place to prevent noncompliance • Has it been properly approved? • Is the cost reasonable? • Is the cost necessary? • Does it meet the intent and purpose of the program? • Is it supplemental (Title I)?

  29. The Big Picture – A Practical Approach • Payroll Compliance • Is the position allowable? • Has the position been approved in the grant application? • Compare prior year coding to current year coding • If using funds for class size reduction, is there a class size reduction plan/analysis

  30. The Big Picture – A Practical Approach • Non-Payroll Compliance • Compare current year expenditures to application by major expenditure object code category • Compare current year expenditures to prior year by major expenditure object code category • Compare current year expenditures to budget documents • Consider reviewing the general ledger to see if there is any unallowable activity • Example: Six Flags Over Texas, Sea World

  31. What are the common findings and how do you avoid them?

  32. Common Findings & Solutions • Unallowable costs and cost principles • Read the Compliance Supplement each year • Provide annual training to personnel • Review the general ledger and look for unallowable expenditures • Check your local policy for travel and update if necessary

  33. Common Findings & Solutions • Failure to maintain adequate time and effort • Semi Annuals • Consider obtaining before breaks • Consider having the supervisor sign • Consider making them electronic • Make a checklist to track semi-annuals • Personnel Activity Reports • Provide an example of what you expect • Perform spot checks of PARs for compliance

  34. Common Findings & Solutions • No written policies and procedures • Look at the Compliance Supplement for requirements • Ask for help! • Remember…sharing is caring! • Lack of proper internal controls • Segregate duties • Ensure it goes through proper approval process • Purchasing Department • Federal Awards Department • Communication!!

  35. Common Findings & Solutions • Inadequate documentation • Maintain all invoices • Quotes are not considered adequate support • Document your rationale for unique situations • Attach conference agendas to expense reports • Under IRS rules, expense reports are required • Improper coding of transactions • Provide annual training to personnel • FASRG • Monitor budgets and do amendments, if necessary

  36. Common Findings & Solutions • Supplementing vs. Supplanting • Verify PY coding when preparing budgets • Look at the big picture • Failure to maintain effort • Don’t be surprised! Monitor maintenance of effort calculation

  37. Questions?? Belen Briones, CPAGibson, Ruddock, Pattersonbelen@grp-cpa.com(915) 356-3700

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