internal controls for federal grants. steve weinberger financial manager division of internal audits...

Internal Controls for Federal Internal Controls for Federal GrantsGrants

Internal Controls for Federal Internal Controls for Federal GrantsGrants

Steve WeinbergerSteve Weinberger

Financial Manager Financial Manager

Division of internal AuditsDivision of internal Audits

Department of AdministrationDepartment of Administration

dintaud.state.nv.usdintaud.state.nv.us

Office of Management and BudgetOffice of Management and Budget

Federal Federal Grant Grant

GuidelinesGuidelinesUniversitiesUniversities

States, States, Local, Indian Local, Indian

Tribal Tribal GovernmentsGovernments

Non-ProfitsNon-Profits HospitalsHospitals

AdministrativAdministrative e RequirementsRequirements

§ 45 CFR 2543§ 45 CFR 2543§ § 2 CFR 215 2 CFR 215

(formerly A-110)(formerly A-110)

§ 45 CFR 2541§ 45 CFR 2541 OMB A-102OMB A-102

§ 45 CFR 2543§ 45 CFR 2543§ § 2 CFR 215 2 CFR 215

(formerly A-110)(formerly A-110)

§ 45 CFR § 45 CFR 25432543

§ 2 CFR 215 § 2 CFR 215 (formerly A-(formerly A-

110)110)

Cost Cost PrinciplesPrinciples

§ 2 CFR 220 § 2 CFR 220 (formerly A-21)(formerly A-21)



§ 45 CFR 74 § 45 CFR 74 (HHS (HHS

regulations)regulations)

Audit Audit Requirements Requirements

**OMB A-133OMB A-133 OMB A-133OMB A-133 OMB A-133OMB A-133 OMB A-133OMB A-133

Notes:CFR = Code of Federal Regulations* = Organization is subject to A-133 if it expends more than $500,000 in Federal funds in its fiscal year

Circulars and Codes

OMB A-133OMB A-133

• OMB Circular A-133 (Audits of States OMB Circular A-133 (Audits of States and Educational Institutions)and Educational Institutions)Entities receiving Entities receiving federal awardsfederal awards must have must have

internal controls designed to provide internal controls designed to provide reasonable assurance that:reasonable assurance that:Transactions are properly recordedTransactions are properly recorded

Assets are safeguarded against lossAssets are safeguarded against loss

Reports are complete and accurateReports are complete and accurate

Federal and grant requirements are complied withFederal and grant requirements are complied with

Federal AwardsFederal Awards

• Federal Award (defined)Federal Award (defined) Federal financial assistance and federal cost-Federal financial assistance and federal cost-

reimbursement contracts that non-federal entities reimbursement contracts that non-federal entities receive directly from federal awarding agencies or receive directly from federal awarding agencies or indirectly from pass-through entities.indirectly from pass-through entities.

OMB A-133OMB A-133

• OMB Circular A-133 OMB Circular A-133 Audits of States, Local Governments, and Non-Profit Audits of States, Local Governments, and Non-Profit

Organizations Organizations

• Compliance SupplementCompliance Supplement Compliance requirements to be considered as part the Single Compliance requirements to be considered as part the Single

Audit Act and OMB Circular A-133Audit Act and OMB Circular A-133

• Part 6 Internal ControlsPart 6 Internal Controls

OMB A-133 Compliance OMB A-133 Compliance SupplementSupplement

• Part 6 Internal Control Part 6 Internal Control Part 6 is intended to assist non-Federal Part 6 is intended to assist non-Federal entities and their auditors in complying entities and their auditors in complying with the with the A-133 compliance A-133 compliance requirements.requirements.

General Compliance General Compliance RequirementsRequirements

Compliance RequirementsCompliance Requirements

Activities Allowed or Unallowed (A)Activities Allowed or Unallowed (A)Allowable Costs/Cost Principles (B)Allowable Costs/Cost Principles (B)Cash Management (C)Cash Management (C)Davis Bacon Act (D)Davis Bacon Act (D)Eligibility (E)Eligibility (E)Equipment and Real Property Management Equipment and Real Property Management

(F)(F)

General Compliance General Compliance RequirementsRequirements

Compliance Requirements (Cont’d)Compliance Requirements (Cont’d)

Matching, Level of Effort, Earmarking (G)Matching, Level of Effort, Earmarking (G)Period of Availability of Federal Funds (H)Period of Availability of Federal Funds (H)Procurement and Suspension and Procurement and Suspension and

Debarment (I)Debarment (I)Program Income (J)Program Income (J)Real Property Acquisition and Relocation Real Property Acquisition and Relocation

Assistance (K)Assistance (K)Reporting (L)Reporting (L)Subrecipient Monitoring (M)Subrecipient Monitoring (M)

Internal ControlsInternal Controls

General notes about Internal Controls:General notes about Internal Controls:

• Provide Provide reasonable assurance reasonable assurance that objectives are metthat objectives are met

• Procedures must be documentedProcedures must be documented ManualsManuals Written ProceduresWritten Procedures

• Management is responsible for Management is responsible for DevelopingDeveloping DocumentingDocumenting ImplementingImplementing MonitoringMonitoring

Activities Allowed &Activities Allowed & Allowable Costs and Cost Allowable Costs and Cost

Principles (A & B)Principles (A & B)GeneralGeneral

• Circular A-87 (relocated to 2 CFR, Part 225Circular A-87 (relocated to 2 CFR, Part 225**) defines allowable ) defines allowable cost principles, cost principles,

• Costs must be:Costs must be: NecessaryNecessary ReasonableReasonable AllocableAllocable Legal under state & local lawLegal under state & local law Conform with Federal law & grant termsConform with Federal law & grant terms Consistently treatedConsistently treated Comply with Generally Accepted Accounting Procedures (GAAP)Comply with Generally Accepted Accounting Procedures (GAAP) Not included as matchNot included as match Net of creditsNet of credits Adequately documentedAdequately documented

**Code of Federal Regulations (2 CFR), Subtitle A, Chapter II, part 225

Allowable Costs and Cost Allowable Costs and Cost Principles (A & B)Principles (A & B)

Necessary & ReasonableNecessary & Reasonable• Necessary for the performance or administration of the Necessary for the performance or administration of the

grantgrant• Reasonable purchase at fair market priceReasonable purchase at fair market price

Necessary – Do we really need it?Necessary – Do we really need it?Will this be surplus property?Will this be surplus property?Do we already have existing resources?Do we already have existing resources?Is this the minimum amount I need to spend to meet my needIs this the minimum amount I need to spend to meet my need

Reasonable – Is the expense amount valid?Reasonable – Is the expense amount valid?Did we pay a fair price? Can we prove it?Did we pay a fair price? Can we prove it?Would we be comfortable defending this purchase?Would we be comfortable defending this purchase?


AllocableAllocable• Benefits the program somehowBenefits the program somehow

• Can only charge in proportion to value received by the Can only charge in proportion to value received by the programprogram– If a computer is used 50% of the time for a program, you can charge If a computer is used 50% of the time for a program, you can charge

half the costhalf the cost

Legal under state & local lawLegal under state & local law• If it’s illegal you can’t buy it with Federal fundsIf it’s illegal you can’t buy it with Federal funds

Conform with Federal law & grant Conform with Federal law & grant termsterms


Consistently TreatedConsistently Treated• Policies apply equally to Federal and non-Federal activitiesPolicies apply equally to Federal and non-Federal activities

• Cannot assign as direct cost if indirect under state Cannot assign as direct cost if indirect under state programsprograms

Complies with GAAPComplies with GAAP• Generally Accepted Accounting PrinciplesGenerally Accepted Accounting Principles

Not included as a MatchNot included as a Match• Not part of a match from another programNot part of a match from another program


Net of Applicable CreditsNet of Applicable Credits• Purchase discounts, rebates or allowancesPurchase discounts, rebates or allowances

• Insurance refundsInsurance refunds

Adequately DocumentedAdequately Documented• Amount of funds used for costAmount of funds used for cost

• How funds are usedHow funds are used

• Share of costs provided by other sourcesShare of costs provided by other sources


2 CFR, Part 225 provides specific 2 CFR, Part 225 provides specific guidance on allowable costs (See guidance on allowable costs (See handouts)handouts)

Specifically disallows:Specifically disallows: Alcoholic beveragesAlcoholic beverages Bad debtsBad debts Donations and contributionsDonations and contributions LobbyingLobbying Selling and marketingSelling and marketing EntertainmentEntertainment


• Direct CostsDirect Costs(Readily identified with program)(Readily identified with program)

Salaries/wages of employees for time devoted to performance Salaries/wages of employees for time devoted to performance of awardof awardKeep payroll recordsKeep payroll recordsEstimates time worked on programEstimates time worked on programSemi-annual certifications if 100% on single programSemi-annual certifications if 100% on single program

Materials, supplies used specifically for purpose of the awardMaterials, supplies used specifically for purpose of the award Equipment/capital expenditures approved by the specific Equipment/capital expenditures approved by the specific

programprogram Travel expenses to carry out awardTravel expenses to carry out award


• Indirect CostsIndirect Costs(Not readily identified with program)(Not readily identified with program)

Accounting, information technology, human resources, Accounting, information technology, human resources, general program management and oversight. general program management and oversight. Use SWCAP (Approved by Federal DHHS)Use SWCAP (Approved by Federal DHHS)Use an approved Indirect Cost RateUse an approved Indirect Cost Rate

Made up of allowable indirect costsMade up of allowable indirect costs


• Indirect Cost Rate P/B=RIndirect Cost Rate P/B=RIndirect Cost Pool (P)Indirect Cost Pool (P)Direct Cost Base (B)Direct Cost Base (B)Rate (R)Rate (R)


P: Indirect Cost PoolSalaries $90,000Fringe 30,000Rent 10,000Consultants 6,000Travel 5,000Supplies 3,000Communications 2,000Miscellaneous 4,000Total Pool $150,000


B: Direct Cost BaseB: Direct Cost Base

Salaries & Benefits:Trainers 200,000Three Counselors 100,000Total Direct Sales & Benefits 300,000 300,000

Other Direct Costs:Occupancy 90,000Travel 40,000Participant Stipends 20,000Participant Support Services 30,000Supplies 10,000Miscellaneous 10,000

Total Other Direct 200,000 200,000

Total Direct Costs 500,000


Indirect Cost Rate (PBR)Indirect Cost Rate (PBR)

PP: Pool of Indirect Costs : Pool of Indirect Costs 150,000150,000

BB: Base of Direct Costs: Base of Direct Costs

Salaries & WagesSalaries & Wages 300,000300,000

Other Direct CostsOther Direct Costs 200,000200,000

Total Direct CostTotal Direct Cost 500,000500,000

RR: Indirect Cost Rate: Indirect Cost Rate150,000150,000

500,000 = 500,000 = 30%30%


AllocationAllocation

Direct CostsDirect Costs 100,000100,000

Indirect Cost RateIndirect Cost Rate 30%30%

Indirect CostsIndirect Costs 30,00030,000

Rates must be:Rates must be:Approved annually by cognizant agencyApproved annually by cognizant agency

Fed agency that contributes most moneyFed agency that contributes most money


Internal ControlsInternal ControlsControl ObjectiveControl Objective• Federal awards are expended only for allowable activities Federal awards are expended only for allowable activities

and costs of goodsand costs of goods

• Services charged to Federal awards are allowableServices charged to Federal awards are allowable


Control ProceduresControl Procedures Costs for federal and non-Federal activities are separately Costs for federal and non-Federal activities are separately

accounted foraccounted for Supporting documentation is maintained for all Supporting documentation is maintained for all

expenditures expenditures Direct charges are for allowable costsDirect charges are for allowable costs Charges used for Indirect Cost Rates are for allowable costsCharges used for Indirect Cost Rates are for allowable costs Indirect Cost Rates are approved Indirect Cost Rates are approved Supervisor periodically reviews expenditures and Supervisor periodically reviews expenditures and

computations computations (document the review)(document the review) Review should be done by someone other than person Review should be done by someone other than person

authorizing expendituresauthorizing expenditures


Control Procedures (Cont’d)Control Procedures (Cont’d) Exceptions are corrected and addressed to ensure they Exceptions are corrected and addressed to ensure they

don’t happen againdon’t happen again Management reviews budget to actual reports ( or other Management reviews budget to actual reports ( or other

performance reports) timelyperformance reports) timely Grant agreements should be available to all personnel Grant agreements should be available to all personnel

preparing reviewing and authorizing expenditures.preparing reviewing and authorizing expenditures.

Cash Management ©Cash Management ©

GeneralGeneralCash Management Improvement Act of Cash Management Improvement Act of 19901990• Ensure greater efficiency, effectiveness, and equity Ensure greater efficiency, effectiveness, and equity in in exchange of funds between Federal exchange of funds between Federal government and states.government and states.

• State of Nevada has a Treasury-State Agreement State of Nevada has a Treasury-State Agreement (TSA) with the Federal government.(TSA) with the Federal government.

States reimburse interest to Federal governmentStates reimburse interest to Federal government



Control ObjectiveControl Objective Draw down of Federal for immediate needs only, comply Draw down of Federal for immediate needs only, comply w/TSA and limit payments to subrecipients to immediate w/TSA and limit payments to subrecipients to immediate needsneeds


Control ProceduresControl Procedures• Limit amount of time between drawing and expending Limit amount of time between drawing and expending

fundsfunds Disburse funds received before requesting new fundsDisburse funds received before requesting new funds Disburse program income, refunds, rebates before Disburse program income, refunds, rebates before

requesting new fundsrequesting new funds Limit cash advances to subrecipientsLimit cash advances to subrecipients

• Send Send Incoming Funds NotificationIncoming Funds Notification to Treasurer’s Office to Treasurer’s Office If ARRA, state on NotificationIf ARRA, state on Notification

• Forecast cash requirements for each programForecast cash requirements for each program


Control Activities (Cont’d)Control Activities (Cont’d)• Compare forecast to actual expenditures, investigate Compare forecast to actual expenditures, investigate

variancesvariances Done by someone other than person authorized to do Done by someone other than person authorized to do

expendituresexpenditures

• Draw downs based on actual cash outlaysDraw downs based on actual cash outlays

• Track draw downs against award amountTrack draw downs against award amount

• Try to segregate:Try to segregate: Forecasting cash requirementForecasting cash requirement Preparing request for draw downPreparing request for draw down Reviewing the request for draw downReviewing the request for draw down

Davis – Bacon Act (D)Davis – Bacon Act (D)

GeneralGeneralMust pay prevailing wages on Must pay prevailing wages on

public works projectspublic works projects

• Federally paid or assistedFederally paid or assisted

• Rates can be found at:Rates can be found at: http://www.access.gpo.gov//davisbacon/ http://www.laborcommissioner.com/

http://www.access.gpo.gov//davisbacon/

http://www.laborcommissioner.com/

Davis – Bacon Act (D)Davis – Bacon Act (D)NRS 338.1382NRS 338.1382

• Public work contract requires prevailing wagePublic work contract requires prevailing wage

• Public work Public work – New construction, repair or reconstruction of– New construction, repair or reconstruction of Public buildingsPublic buildings Jails and prisonsJails and prisons Public roadsPublic roads Public highwaysPublic highways Public streets and alleysPublic streets and alleys Public utilitiesPublic utilities Publicly owned water mains and sewersPublicly owned water mains and sewers Public parks and playgroundsPublic parks and playgrounds Public convention facilitiesPublic convention facilities All other publicly owned works and propertiesAll other publicly owned works and properties

Davis – Bacon Act (D)Davis – Bacon Act (D)


Control ObjectiveControl Objective• Contractors and subs are notified of DB Act requirementsContractors and subs are notified of DB Act requirements• Certified payrolls are submitted to state agencyCertified payrolls are submitted to state agency• Prevailing wages paid Prevailing wages paid

Control ActivitiesControl Activities• Inform contractors of prevailing wage requirementsInform contractors of prevailing wage requirements• Compare wages paid by contractors and sub-contractors to Compare wages paid by contractors and sub-contractors to

prevailing wageprevailing wage Obtain contractors and subcontractors payroll reportsObtain contractors and subcontractors payroll reports

• Management periodically verifies that above 2 procedures being Management periodically verifies that above 2 procedures being donedone

Eligibility (E)Eligibility (E)

GeneralGeneral• Determining who is eligible to receive Federal funding, and Determining who is eligible to receive Federal funding, and

how much they are eligible forhow much they are eligible for

Internal ControlsInternal ControlsControl ObjectiveControl Objective • Only eligible individuals and organizations receive Only eligible individuals and organizations receive

assistanceassistance• Subrecipients are eligible Subrecipients are eligible • Amounts provided to or on behalf of eligible parties are Amounts provided to or on behalf of eligible parties are

properly calculatedproperly calculated


Control ActivitiesControl Activities• Conflict of Interest statements maintained for people determining Conflict of Interest statements maintained for people determining

eligibilityeligibility

• Policies which provide direction for eligibility determinations are Policies which provide direction for eligibility determinations are documented.documented.

• Procedures to calculate eligibility requirements consistent with Procedures to calculate eligibility requirements consistent with program requirementsprogram requirements

• Use a checklist or automated process when determining eligibilityUse a checklist or automated process when determining eligibility

• Eligibility determinations should be reviewed and approved by a Eligibility determinations should be reviewed and approved by a supervisor before assistance payments beginsupervisor before assistance payments begin

• Verification of information obtained from client verified with an Verification of information obtained from client verified with an independent third party if possibleindependent third party if possible


Control Activities (Cont’d)Control Activities (Cont’d)• Segregate preparing application or eligibility intake form Segregate preparing application or eligibility intake form

from:from: Verifying information on the formVerifying information on the form Approving the formApproving the form

If outside party determines eligibility, ensure they are If outside party determines eligibility, ensure they are complying with program. complying with program.

• Management or Independent personnel periodically review:Management or Independent personnel periodically review: Eligibility determination process and formulas are consistent Eligibility determination process and formulas are consistent

w/programw/program Data used to determine eligibility is accurate and completeData used to determine eligibility is accurate and complete

• Periodically review clients to determine continued eligibilityPeriodically review clients to determine continued eligibility

Equipment and Real Property Equipment and Real Property Management (F)Management (F)

Internal ControlsInternal ControlsControl ObjectiveControl Objective• Ensure proper records are maintained for equipment Ensure proper records are maintained for equipment

acquired with Federal awards, acquired with Federal awards,

• Equipment is adequately safeguarded, Equipment is adequately safeguarded,

• Disposition or encumbrance of any equipment or real Disposition or encumbrance of any equipment or real property complies with Federal requirements and property complies with Federal requirements and

• Federal awarding agency is appropriately compensated for Federal awarding agency is appropriately compensated for its share of any property soldits share of any property sold

Equipment and Real Property Equipment and Real Property Management (F)Management (F)

Control ProceduresControl Procedures• Equipment (Over 5K)Equipment (Over 5K)

Must be used in the program for which it was acquiredMust be used in the program for which it was acquired Records maintained that identifyRecords maintained that identify

Description of equipmentDescription of equipmentSerial numberSerial numberAcquisition date and costAcquisition date and cost

Property tags on equipmentProperty tags on equipment Annual physical inventory and reconciliation to recordsAnnual physical inventory and reconciliation to records Management review of inventory and reconciliationManagement review of inventory and reconciliation Adequately maintained and safeguarded Adequately maintained and safeguarded Sale of equipment must include competition to extent possibleSale of equipment must include competition to extent possible

Equipment and Real Property Equipment and Real Property ManagementManagement (F) (F)

Control ProceduresControl Procedures• Real PropertyReal Property

Records maintained that identifyRecords maintained that identifyTitle holderTitle holderAcquisition date and costAcquisition date and cost% of Federal participation of the cost% of Federal participation of the cost Location, condition, and disposition dataLocation, condition, and disposition data

Used for originally authorized purposeUsed for originally authorized purpose Approval may be obtained to use for other Federal projects or Approval may be obtained to use for other Federal projects or

programsprograms Consent of awarding agency required to dispose or encumber Consent of awarding agency required to dispose or encumber

the title to propertythe title to property Sale of property must include competition to extent possibleSale of property must include competition to extent possible Federal awarding agency gets their share of sales proceedsFederal awarding agency gets their share of sales proceeds

Matching, Level of Effort, Matching, Level of Effort, Earmarking (G)Earmarking (G)

GeneralGeneralMatchingMatching• Provide contributions of a specified amount or percentage Provide contributions of a specified amount or percentage

to match Federal awardsto match Federal awards

• Requirements are unique to each Federal programRequirements are unique to each Federal program

• Found in grant agreement, contract, laws and regulationsFound in grant agreement, contract, laws and regulations


Acceptable Matching CostsAcceptable Matching Costs• Verifiable from agency’s recordsVerifiable from agency’s records

• Not included in matching for any other Federal programsNot included in matching for any other Federal programs

• Allowable under applicable costs principlesAllowable under applicable costs principles

• Necessary and reasonableNecessary and reasonable

• Not paid by the Federal Government under a different Not paid by the Federal Government under a different awardaward

• Provided for in an approved budgetProvided for in an approved budget

• Comply with grant or contract agreementComply with grant or contract agreement

• In KindIn Kind contributions are valued on an acceptable basis contributions are valued on an acceptable basis and the basis and valuation are documentedand the basis and valuation are documented


Level of EffortLevel of Effort• A specified level of service to be provided for precise periodA specified level of service to be provided for precise period

• A specified level of expenditures from non-Federal or A specified level of expenditures from non-Federal or Federal sources for specific activities to be maintained for a Federal sources for specific activities to be maintained for a precise periodprecise period Federal funds should supplement and not replace non-Federal Federal funds should supplement and not replace non-Federal

funding of services funding of services


EarmarkingEarmarking• Specify the minimum and/or maximum amount or Specify the minimum and/or maximum amount or

percentage of the program’s funding that must be used for percentage of the program’s funding that must be used for specified activities and/or subrecipientsspecified activities and/or subrecipients


Internal ControlsInternal ControlsControl ObjectiveControl Objective• Assure that matching, level of effort, or earmarking Assure that matching, level of effort, or earmarking

requirements are met using only allowable funds or costs requirements are met using only allowable funds or costs which are properly calculatedwhich are properly calculated


Control ProceduresControl Procedures• Matching or level of effort requirements are included in the Matching or level of effort requirements are included in the

agency’s budgetagency’s budget

• Matching, level of effort and earmarking data is tracked Matching, level of effort and earmarking data is tracked separately from other fiscal dataseparately from other fiscal data

• Evidence is maintained showing whether contributions:Evidence is maintained showing whether contributions: Are from non-Federal sourcesAre from non-Federal sources Involve Federal funding, directly or indirectlyInvolve Federal funding, directly or indirectly Were used for another Federal programWere used for another Federal program

Matching, Level of Effort, Earmarking (G)

Control Procedures (Cont’d)Control Procedures (Cont’d)• Document the value of Document the value of in-kindin-kind contributions including contributions including

Local labor market rates for volunteeringLocal labor market rates for volunteering Payroll records from other organizations for their employeesPayroll records from other organizations for their employees Quotes, published prices or independent appraisals for Quotes, published prices or independent appraisals for

equipment, land, etc.equipment, land, etc.

• Supervisory review of sources used for matching or level of Supervisory review of sources used for matching or level of efforteffort

• Supervisory review of budget vs. actualSupervisory review of budget vs. actual

Period of Availability (H)

Internal ControlsInternal ControlsControl ObjectiveControl Objective• Ensure that Federal funds are used only during the Ensure that Federal funds are used only during the

authorized period of availabilityauthorized period of availability

Period of Availability (H)Period of Availability (H)

Control ProceduresControl Procedures• Staff and management should be aware of grant cut-off Staff and management should be aware of grant cut-off

datesdates

• The accounting system should prevent obligation or The accounting system should prevent obligation or expenditure of Federal funds outside of the availability expenditure of Federal funds outside of the availability period.period.

• Supervisors should review expenditures before and after Supervisors should review expenditures before and after the cut-off date to ensure compliance with availability the cut-off date to ensure compliance with availability requirementsrequirements

• Unliquidated commitments should be cancelled at the end Unliquidated commitments should be cancelled at the end of the periodof the period

• Supervisory review of budget vs. actualSupervisory review of budget vs. actual

Procurement, Suspension and Procurement, Suspension and Debarment (I)Debarment (I)

GeneralGeneral

• Codes of ConductCodes of Conduct Conflicts of InterestConflicts of Interest

Cannot participate in selection, award or Cannot participate in selection, award or administration of contract if employee, immediate administration of contract if employee, immediate family member, partner has a financial interest in the family member, partner has a financial interest in the firm selected for awardfirm selected for award


• CompetitionCompetition Procurement transaction must not restrict Procurement transaction must not restrict

competition such ascompetition such asUnreasonable requirements in order to qualifyUnreasonable requirements in order to qualifyUnnecessary experience or excessive bondingUnnecessary experience or excessive bondingNon-competitive pricing practices between firms or Non-competitive pricing practices between firms or

affiliated companiesaffiliated companiesSpecifying a brand name instead of allowing an equal Specifying a brand name instead of allowing an equal

productproduct

Procurement, Suspension and Procurement, Suspension and Debarment (I) Debarment (I)

• Solicitations for goods and services provide:Solicitations for goods and services provide:

Description of the technical requirements for the material product or Description of the technical requirements for the material product or service to be procured. Description cannot contain features which service to be procured. Description cannot contain features which unduly restrict competition. unduly restrict competition.

Requirements which the bidder/offeror must fulfillRequirements which the bidder/offeror must fulfill

Description of functions to be performedDescription of functions to be performed

Specific Features of “brand name or equal” descriptions that bidders Specific Features of “brand name or equal” descriptions that bidders are required to meet.are required to meet.

Preference for products and services that conserve natural resources Preference for products and services that conserve natural resources and protect the environment. (To the extent economically feasible)and protect the environment. (To the extent economically feasible)

Procurement, Suspension and Debarment (I)(I)

• Contract cost and priceContract cost and priceCost Analysis used for sole source, based on Cost Analysis used for sole source, based on

offeror’s cost to determine reasonable amountofferor’s cost to determine reasonable amountPrice analysis done for multi-bid, based on Price analysis done for multi-bid, based on

comparison of price quotations submitted, comparison of price quotations submitted, market prices, etcmarket prices, etc

Cost plus a percentage of cost and percentage Cost plus a percentage of cost and percentage of construction cost methods are prohibited.of construction cost methods are prohibited.


• Procurement RecordsProcurement RecordsBasis for contractor selectionBasis for contractor selectionIf sole source, explain whyIf sole source, explain whyBasis for award cost or priceBasis for award cost or price

• Contract AdministrationContract AdministrationMonitor contractor to ensure compliance with Monitor contractor to ensure compliance with

contract terms, specs, etc. contract terms, specs, etc. Document monitoring procedures and resultsDocument monitoring procedures and results


Suspension and DebarmentSuspension and Debarment• No awards to any parties that are debarred or No awards to any parties that are debarred or

suspended form participation in Federal suspended form participation in Federal assistance programs or activitiesassistance programs or activities

• If If >>25k, verify with Excluded Parties List System 25k, verify with Excluded Parties List System (EPLS)(EPLS)

• EPLS maintained by General Services EPLS maintained by General Services AdministrationAdministration

• Only award to responsible contractorsOnly award to responsible contractors

• Consider integrity or past performance issuesConsider integrity or past performance issues


Internal ControlsInternal ControlsControl ObjectiveControl Objective• Ensure that procurement of goods and services comply with Ensure that procurement of goods and services comply with

federal guidelines and transactions are not made with a federal guidelines and transactions are not made with a debarred or suspended partydebarred or suspended party


Control ProceduresControl Procedures• Conflict of Interest statements maintained for people Conflict of Interest statements maintained for people

responsible for procurement of goods and servicesresponsible for procurement of goods and services

• Supervisor approval for high dollar, lengthy, or sensitive Supervisor approval for high dollar, lengthy, or sensitive procurement contractsprocurement contracts

• Solicitations written correctlySolicitations written correctly

• Follow same procedures as for contracts procured with Follow same procedures as for contracts procured with state $$$state $$$ Contract ManagerContract Manager Contract Monitor Contract Monitor Segregate approving contract, monitoring contract, and paying Segregate approving contract, monitoring contract, and paying

contractcontract


Control Procedures (Cont’d)Control Procedures (Cont’d)• Document contract monitor proceduresDocument contract monitor procedures

Verify performance with terms, conditions and specs of Verify performance with terms, conditions and specs of contractcontract

Quality of goods, warranties, and delivery schedulesQuality of goods, warranties, and delivery schedules

• Written Policy prohibiting business with suspended or Written Policy prohibiting business with suspended or debarred partiesdebarred parties If equal or greater than 25K, specify how you determined If equal or greater than 25K, specify how you determined

aboveabove Excluded Parties Listing System Excluded Parties Listing System – maintained by General – maintained by General

Services AdministrationServices Administration


Control Procedures (Cont’d)Control Procedures (Cont’d)• Perform a cost or price analysisPerform a cost or price analysis

• Maintain records for:Maintain records for: Basis for contractor selectionBasis for contractor selection Justification of sole sourceJustification of sole source Basis of award cost or priceBasis of award cost or price


Control Procedures (Cont’d)Control Procedures (Cont’d)• Management reviews for:Management reviews for:

Conflicts of interest, bribes, kickbacks, etcConflicts of interest, bribes, kickbacks, etc Restrictions on competitionRestrictions on competition Using small businesses and firms owned by women and Using small businesses and firms owned by women and

minoritiesminorities Sole source justificationSole source justification

Program Income (J)Program Income (J)

GeneralGeneral

• Program IncomeProgram Income earned asearned asFees for services performedFees for services performedRental of property acquired with grant fundsRental of property acquired with grant fundsSale of commodities or items fabricated under Sale of commodities or items fabricated under

a granta grantPayments of principal and interest on loans Payments of principal and interest on loans

made with grant fundsmade with grant funds


• Program income must beProgram income must beDeducted from outlays Deducted from outlays Added to the project budgetAdded to the project budgetUsed for matching requirementsUsed for matching requirements

• Use of income may be specified in awardUse of income may be specified in award

• If not specified, must be deducted from If not specified, must be deducted from outlaysoutlays


Internal ControlsInternal ControlsControl ObjectiveControl Objective• Ensure program income is correctly earned, Ensure program income is correctly earned,

recorded and used in accordance with program recorded and used in accordance with program requirementsrequirements


Control ProceduresControl Procedures• Income collection procedures are same as those for state Income collection procedures are same as those for state

funded funded

• Deposit procedures same as state fundedDeposit procedures same as state funded

• Program income is properly identified (not commingled with Program income is properly identified (not commingled with state income)state income)

• Supervisory review done to ensure program income used Supervisory review done to ensure program income used properlyproperly

• Management compares budget to actual and investigates Management compares budget to actual and investigates variancesvariances

Real Property Acquisition and Real Property Acquisition and Relocation Assistance (K)Relocation Assistance (K)

GeneralGeneral• Comply with Comply with Uniform Relocation Assistance Uniform Relocation Assistance

and Real Property Acquisition Policies Act of and Real Property Acquisition Policies Act of 1970 (URA)1970 (URA)


URAURA• Real Property AcquisitionReal Property Acquisition

Appraise before negotiationAppraise before negotiationInvite property owner to appraisalInvite property owner to appraisalProvide property owner with written offer of just Provide property owner with written offer of just

compensation summarycompensation summaryPay for property before possessionPay for property before possessionReimburse property owner for recording fees, Reimburse property owner for recording fees,

prepaid real estate taxes, or other such prepaid real estate taxes, or other such expensesexpenses


• Residential ReplacementResidential Replacement Provide relocation advisory servicesProvide relocation advisory services Minimum 90 days written notice to vacateMinimum 90 days written notice to vacate Reimburse moving expensesReimburse moving expenses Pay for added costs of renting or purchasing comparable Pay for added costs of renting or purchasing comparable

replacement propertyreplacement property

• Non-residential ReplacementNon-residential Replacement Provide relocation advisory servicesProvide relocation advisory services 90 days notice90 days notice Reimburse for moving and reestablishment expensesReimburse for moving and reestablishment expenses


Internal ControlsInternal ControlsControl ObjectiveControl Objective• Ensure compliance with real property acquisition, Ensure compliance with real property acquisition,

appraisal, negotiation and relocation appraisal, negotiation and relocation requirementsrequirements


Control ProceduresControl Procedures• Maintain written policies of relocation assistance and real Maintain written policies of relocation assistance and real

property acquisition that comply with Federal regulationproperty acquisition that comply with Federal regulation

• Have copies of regulations available for personnel Have copies of regulations available for personnel administering programsadministering programs

• Use a checklist to ensure compliance with URAUse a checklist to ensure compliance with URA

• Send pamphlets to persons being relocated informing them Send pamphlets to persons being relocated informing them of their rights and the prescribed proceduresof their rights and the prescribed procedures

• Request written acknowledgement of persons being Request written acknowledgement of persons being relocated and that their rights and prescribed procedures relocated and that their rights and prescribed procedures have been made available to themhave been made available to them


Control Procedures (Cont’d)Control Procedures (Cont’d)• Be aware of homeowners trying to take advantage of Be aware of homeowners trying to take advantage of

relocation assistancerelocation assistance Financial means for house being acquiredFinancial means for house being acquired

• Assign a supervisor to monitor forAssign a supervisor to monitor for Compliance with URACompliance with URA Appraisals are reasonable compared with prior appraisalsAppraisals are reasonable compared with prior appraisals

• Price and negotiation settlements are reviewed by an Price and negotiation settlements are reviewed by an appropriately designated officialappropriately designated official

• Records are maintained for all acquisitions and Records are maintained for all acquisitions and displacementsdisplacements

Reporting (L)Reporting (L)

GeneralGeneralThree types of reportsThree types of reports• Monitoring and PerformanceMonitoring and Performance

Compare actual accomplishments to goals or objectivesCompare actual accomplishments to goals or objectives

• FinancialFinancial Provide financial status of fundsProvide financial status of funds

• Special ReportingSpecial Reporting


Internal ControlsInternal ControlsControl ObjectiveControl Objective• Ensure Federal reports are submitted timely, Ensure Federal reports are submitted timely,

include all activity in the reporting period, are include all activity in the reporting period, are supported by appropriate records and are fairly supported by appropriate records and are fairly presented in accordance with program presented in accordance with program requirementsrequirements


Control ProceduresControl Procedures• Have a tracking system which reminds staff when reports Have a tracking system which reminds staff when reports

are dueare due

• Use general ledger or other reliable records as basis of Use general ledger or other reliable records as basis of reportsreports

• Written procedures showing how to prepare reports and Written procedures showing how to prepare reports and sources to usesources to use

• Use reconciliations when possibleUse reconciliations when possible


Control Procedures (Cont’d)Control Procedures (Cont’d)• Supervisory review of reports forSupervisory review of reports for

AccuracyAccuracy Completeness of dataCompleteness of data Proper information contained in reportProper information contained in report Correct accounting method used (cash or accrual)Correct accounting method used (cash or accrual)

Subrecipient Monitoring (M)Subrecipient Monitoring (M)

GeneralGeneralSubrecipient vs. Vendor (See Handout)Subrecipient vs. Vendor (See Handout)• SubrecipientSubrecipient

Determines eligibilityDetermines eligibility Uses performance measuresUses performance measures Programmatic decision makingProgrammatic decision making Comply with program requirementsComply with program requirements Carries out the program (as opposed to providing Carries out the program (as opposed to providing

services)services)


Subrecipient vs. Vendor (Cont’d)Subrecipient vs. Vendor (Cont’d)• VendorVendor

Provides goods and services normal business activitiesProvides goods and services normal business activities Provides similar goods to different entitiesProvides similar goods to different entities Operates in a competitive environmentOperates in a competitive environment Provides goods or services that are ancillary to programProvides goods or services that are ancillary to program Not subject to compliance requirementsNot subject to compliance requirements


Internal ControlsInternal ControlsControl ObjectiveControl Objective• Federal award information and compliance requirements Federal award information and compliance requirements

are identified to subrecipientsare identified to subrecipients

• Subrecipient activities are monitoredSubrecipient activities are monitored

• Subrecipient audit findings are resolvedSubrecipient audit findings are resolved

• Ensure Subrecipient obtains required auditsEnsure Subrecipient obtains required audits


Control ProceduresControl Procedures• Maintain a current list of all subrecipientsMaintain a current list of all subrecipients

• Award document should contain:Award document should contain: Description and program number as stated in CFDADescription and program number as stated in CFDA A listing of Federal requirements. Items can be in award or A listing of Federal requirements. Items can be in award or

attachmentattachment A statement signed by an official of the subrecipient A statement signed by an official of the subrecipient

acknowledging that the subrecipient was of informed of, acknowledging that the subrecipient was of informed of, understands, and agrees to comply with the applicable understands, and agrees to comply with the applicable requirementsrequirements


Control Procedures (Cont’d)Control Procedures (Cont’d)• MonitoringMonitoring

Perform on-site visits to review financial and program records Perform on-site visits to review financial and program records and observe operations. Document procedures performedand observe operations. Document procedures performed

Document and follow-up on any deficiencies notedDocument and follow-up on any deficiencies noted Review subrecipient reports and follow-up on any concernsReview subrecipient reports and follow-up on any concerns Monitor subrecipient budgetsMonitor subrecipient budgets Use time tracking to ensure timely monitoring, report Use time tracking to ensure timely monitoring, report

submission and follow-up of noted deficienciessubmission and follow-up of noted deficiencies


Control Procedures (Cont’d)Control Procedures (Cont’d)• Monitoring (cont’d)Monitoring (cont’d)

Follow-up on prior audit or on-site review findingsFollow-up on prior audit or on-site review findings Consider risk factors such as:Consider risk factors such as:

Size of grantSize of grantSize of subrecipientSize of subrecipientEconomic and political conditions, regulatory changesEconomic and political conditions, regulatory changesSubrecipient financial problems, loss of personnel, new activitiesSubrecipient financial problems, loss of personnel, new activities

Monitors should be objective and independent of subrecipientMonitors should be objective and independent of subrecipient Supervisors should review monitoring work papers and Supervisors should review monitoring work papers and

procedures to ensure they are timely and completeprocedures to ensure they are timely and complete


Control Procedures (Cont’d)Control Procedures (Cont’d)• Single AuditSingle Audit

Determine by inquiry if subrecipient should be auditedDetermine by inquiry if subrecipient should be audited If required, ensure that subrecipient submits required reportsIf required, ensure that subrecipient submits required reports If subrecipient fails to submit reports, withhold further fundingIf subrecipient fails to submit reports, withhold further funding

Internal Controls for GrantsInternal Controls for Grants

That’s It - FinallyThat’s It - Finally

Thank YouThank You

internal controls for federal grants. steve weinberger financial manager division of internal audits...

Documents

federal grants slide

grant requirements

code of federal regulations

federal awarding agencies

federal funds h procurement

audits of states

office of management

nonfederal entities