American Recovery & Reinvestment Act of 2009: Review and UpDATE

1. American Recovery & Reinvestment Act of 2009:Review and UpDATE Presented by Sam Atkinson Robbie Smith Performance Audit Division Office of the State Auditor February 10, 2010

2. Federal Overview:Key Accountability Objectives • Program/economic outcomes achieved • Competitive opportunities maximized • Waste, fraud & abuse identified and minimized • Funds obligated/expended timely • Improper payments minimized • Data reporting timely and accurate • Increased accountability and transparency • Hold States responsible

3. Federal Overview:Who’s Watching • The Government Accountability Office (GAO) • The Offices of the Inspector General (OIGs) • The Recovery, Accountability and Transparency Board (RATb) • Citizens, Media, Whistleblowers • State Auditor, Governor, State Fiscal Officer

4. Federal Overview:What Are They Looking For? • Fraud, Waste, and Abuse • Video Message From Earl Devaney • Fraud, Waste, and Abuse • Examples of Red Flags: • Non compliance with 1512 Reporting (letter) • Non-competitive contracts/Sole source vendors • Splitting contracts • Weak internal controls (handout)

5. Federal Overview:What Are They Looking For? • Examples of IG findings: • Inadequate or No documentation • Non-allowed salaries and expenses • Supplanting instead of supplementing • Failure to report properly/timely • Inadequate or No policies and procedures; • Not understanding the regulations and guidance; • Policies and procedures in place but not followed • Misuse of procurement cards • Improper inventory control

6. OSA Oversight • OSA Contract with BKD CPA firm • Oversight, Monitoring • Certifications and reporting • Internal controls, such as segregated accounting procedures • Real Time Auditing/Sampling • Feedback & coordination with OSA • Work closely with • GAO, OIG, FBI • Other Task Forces and Oversight Entities • Coordinated efforts to keep oversight entities and others “in-the-loop”

7. Federal Guidelines:Steps to Reporting • After registrations and certifications are filed, gather all reportable information (checklists) • At the end of this quarter, complete State mandated MS Excel federal spreadsheet • Double-check for accuracy • Send it to www.federalreporting.gov and by e-mail to stimulusreports@governor.state.ms.us • Review your posted information • ALWAYS Review OMB and Agency guidance: http://www.whitehouse.gov/omb/assets/memoranda_2010/m10-08.pdf

8. Federal Guidelines • OMB circular A-102 (common rule) require recipients to maintain records that identify the source and application of ARRA funds • Guidance in part 176—Responsibilities to track, account, and report transactions and to prepare audit documentation and reports in accordance with OMB Circular A-133 • Section 15269(c)(14) of ARRA & US DOL encourage States to require the use of the State job bank for job postings

9. Federal Guidelines • Section 902 requires that each contract awarded using ARRA funds must include a provision that provides the U.S. Comptroller General and his representatives with the authority to: • (1) Examine any records of the contractor or any of its subcontractors, or any State or local agency administering such contract, that directly pertain to, and involve transactions relating to, the contract or subcontract; and • (2) Interview any officer or employee of the contractor or any of its subcontractors, or of any State or local government agency administering the contract, regarding such transactions.

10. Federal Guidelines • Section 1515(a) of the ARRA provides authority for any representatives of the United States Inspector General to examine any records or interview any employee or officers working on this contract.  • The contractor is advised that representatives of the Inspector General have the authority to examine any record and interview any employee or officer of the contractor, its subcontractors or other firms working on this contract.  • Section 1515(b) further provides that nothing in this section shall be interpreted to limit or restrict in any way any existing authority of an Inspector General.

11. Federal Guidelines • Section 1512 (h) requires registration in the Central Contractor Registration (CCR) Database at www.ccr.gov • Whistleblower Posters: http://www.recovery.gov/Contact/ReportFraud/Pages/WhistleBlowerInformation.aspx • Section 1605 requires Buy American provision for construction, renovation, remodeling (even painting), etc. • Section 1606 requires Davis-Bacon Act provisions

12. Federal Reporting Basics • ARRA quarterly reports are DIFFERENT from typical required federal reporting • Training webinars have been posted here: https://www.federalreporting.gov/federalreporting/downloads.do#webinars • ARRA quarterly reports are not a substitute/replacement for regular federal agency reports; they are in addition • Mississippi requires ALL recipients to use the Microsoft Excel option for the first two reporting periods

13. Federal Reporting Basics • 1512 reportable programs www.whitehouse.gov/omb/assets/memoranda_fy2009/m09-21-supp1.pdf • In addition to regular reporting on a federal program, ARRA requires additional and different reports • In addition to standard rules and regulations, additional rules and regulations apply to ARRA funds • Non-compliance could be treated as a violation of the award agreement

14. Contracts • Submit Mississippi ARRA Stimulus Projects to bids@mississippi.org for posting to http://www.mscpc.com/MississippiARRAStimulusProjects/tabid/79/Default.aspx • Post notice with DFA of any contract awards https://merlin.state.ms.us/Stimulus/ContractUploads.nsf/Home?OpenPage • MDA and DFA must maintain this information on the public website for the duration of the ARRA funding or until the project is completed, whichever is longer

15. Contracts • Contracts that use any ARRA funds must include the required addendum of federally mandated terms and conditions found in DFA memo #12, 05-05-09 at a minimum. • Contracts must also contain any required terms from both State and Federal entities • Contract Review Board guidelines, ARRA requirements, federal agency specific requirements, etc.

16. Contracts • E-verification • Whistleblower protection • Reporting requirements • Contract provision to implement ARRA Section 902 • Authority of the Inspector General provision • Buy America provision • Wage rate provision • Availability and use of funds provision • Federal, State and Local Tax Obligations • Anti-discrimination and equal opportunity

17. Internal Controls • Internal control is an important part of an organization’s management plan that provides reasonable assurance of the accomplishment of goals and objectives, efficiency of operations, reliability of information, and legal compliance— Internal control is management’s responsibility. • What are the internal control objectives?  • Reliability of financial reporting • Effectiveness and efficiency of operations • Compliance with applicable laws and regulations • Reduce risk that errors would not be detected in a timely period

18. Internal Controls • What are some inherent limitations of the internal control objectives?  • Human error • Deliberate circumvention • Collusion • Management override • Cost/benefit considerations • The five elements of internal control include • Control Environment • Risk Assessment • Control Activities • Information and Communications • Monitoring

19. Internal Controls Elements • Control Activities: • Physical controls • Segregation of duties • Independent checks on performance • Information and Communication • Policy guidance • Reporting requirements • Reporting process defined by Agency • Monitoring • Adequate resources needed to monitor • Mechanisms to report fraud, waste, and abuse • Accountability of sub recipients

20. Internal Controls Components • Risk Assessment • Adequate number of knowledgeable staff • Previous audit findings on internal controls • Tools to determine vulnerabilities • Control Environment • Sets tone of organization • Provides discipline and structure • Generated by management • Management is responsible for performing risk assessment procedures and for establishing and maintaining a system of internal controls based on the risk assessment.

21. Accounting & Compliance • All federal grant recipients are required to comply with federal internal control standards. ARRA is no different. • ARRA specifically requires non-federal entities receiving federal awards to establish and maintain internal controls designed to reasonably ensure compliance with federal laws, regulations, and program compliance requirements.

22. Accounting & Compliance • ALL entities • must separately account for ARRA funds—direct or indirect • Must track how funds are spent • Must disclose to sub recipients any portion of funding related to ARRA • Contract provisions and requirements will be checked • Compliance Assistance • OMB guidance and webinars • Federal Agency specific guidance • GAO and OIG reports • State Auditors and other independent Public Accountants

23. At The End of The Day… No matter who gets the money, We want to know We did our best, We did our job, and We Protected the taxpayers’ interest