Rehabilitation Services Commission

Rehabilitation Services Commission Finance DivisionTop 10 Common Findings1Presenters

Scott Blake, External Auditor 3

Lisa Charlton, External Auditor 22

Todays ObjectivesTo provide assistance by communicating information that will ensure all costs invoiced to RSC are reimbursable.3Objectives (cont.)To help you develop efficient and effective financial management and accounting systems.

44Objectives (cont.)Build better relationships with our partners.

We are people helping people.5How may RSC better assist you?QuestionsRecommendationsComments6RSC wants to help you achieve:A clean audit! No findings are the best findings!Programmatic and financial objectives.Efficient reimbursement of costs.Empowerment! Knowledge is power.7Tips to a clean auditKnow your RSC contract (what does it require)Reference applicable Federal circulars (found in your agencys RSC contract) and RSC Contract Management HandbookA financial system that provides accurate, current & complete disclosure

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Accounting Basics9A Review of the BasicsAccrual Basis of Accounting v. Cash Basis of Accounting must choose one and apply consistently. For Federal contracts and grants, accrual basis must be used to ensure all costs are applied to the contract year.Accounting Procedures Manual processes should be defined, helps maintain continuity. Can someone new or outside your agency understand how your books are maintained?GAAP seek the advice and opinions of an accountant, preferably knowledgeable with Federal grants.10Basics, contdInternal Controls - a process designed to help the organization accomplish specific goals or objectives (ex. policies and procedures, workflows, purchase orders, etc.).Program Budget RSC requires budget proposals prior to start of grant period. Stay within cost category/line item budgets, or request a revised budget.Revenue/Expenses must be able to extract revenue and expenditure line items specific to each Federal funding source from agency general ledger.General Ledger should not have a positive or negative balance (zero-out).

11General LedgerBook of final entry summarizing all of companys financial transactions, through offsetting debit and credit accounts. (This is double-entry accounting.)

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Fiscal Regulations & Cost Allocation Plans

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Invoiced costs to RSC should be:

Allowable

Allocable

Reasonable14Allocable & Allowable does not mean ReimbursementCosts are Allowable if:Reasonable for the awards performanceAdequately documentedConsistentIn accordance with GAAPConform to cost limitations / exclusionsTime frame appropriate to contract

15AllocableProcess of assigning a cost, or group of costs, to one or more cost objectives, in realistic proportion to the benefit provided or other equitable relationship.

Is the RSC contract paying its fair share?16

Reasonable

Consider these when making judgments about reasonableness:Prevailing circumstancesOrdinary & necessaryLaws & contractsResponsible & prudent person test17Cost Allocation Plan (CAP)

OMB A-110, A-87, A-122(approved by cognizant agency)

Designed to provide that the Federal Government bear its fair share of the costs except where restricted or prohibited by law1818Used for costs benefiting two or more grants (ex. rent, utilities, copiers, and IT maintenance), ensures fair share is charged to each grantMethodology is in accordance with Federal cost accounting principles. Explainable and reasonable (ex. FTE ratio method, square footage basis)Consistently applied across all funding sources

19Cost Allocation Plan (CAP) Cost Allocation Plan (CAP) Cost Computation MethodologiesRatio of salariesRatio of FTEsRatio of program expensesRatio of program square footage20Internal Controls21Benefit of Internal ControlsCircular A-110Assure fiscal prudence:Safeguard assetsAssure fiscal compliance & viabilityCreate checks and balancesRequired by funding sources22Internal Controls (cont.)OMB Standards (federal circulars)Segregation of duties - Limits amount of fiscal activity controlled by any one person. Priority control for approving purchases, check signing, checks & balances.Conflict of interest awareness23Internal Controls PoliciesAuthorizing signatoriesSeparating accounts receivable from accounts payableBalance cash and checking accountsCredit cardsCellular phonesPurchasing schedule24Internal Control PoliciesInspecting payroll reportsRecording cash: journal & general ledgerPasswords whenever possiblePetty cash limitsUsing P.O.s (purchase orders)Regular computer backups - offsite25Accounting Procedures ManualExcellent Internal Control toolExplains how books are maintainedEffective training toolNeeds Board of Directors approvalUpdated annually (at least)Must be used!26Specific Cost Items

27PersonnelSalary or Rate of PayFringe Benefits

28PayrollWhich employees are paid salary vs. hourly, and are full-time vs. part-time?Policies and procedures should document differences.All split funded employees regardless of status must document actual time spent on each Federal funding source (i.e. personal activity reports, aka PARs).29Payroll (cont.)Costs invoiced to RSC must be actual, not budgeted, costs.RSC requires semi-annual certifications for fully funded staff. They should be after the fact, dated, and signed by employee and supervisor. Supporting documentation: timesheets, PARs, payroll journal, requests for leave, cancelled checks, bank statements, and general ledger, etc.

30Fringe BenefitsAs with payroll costs, fringe costs should be invoiced based on actual costs and be reflective of the general ledger.

Fringe benefits invoiced must have source documentation including calculations of costs.

31Fringe (cont.)Testing of fringe benefit costs will include a comparison of the costs paid to those outlined in your payroll policy.

All fringe benefits should be outlined in your payroll policies, if not it should be updated immediately.

32General OperatingCosts directly related to program:Telephone Staff travel (mileage and overnight travel)Office supplies ($300 or less)Equipment (more than $300)Staff DevelopmentOccupancy

33OccupancyOffice Rent (leased vs. owned)UtilitiesProperty Insurance Capital ImprovementsService MaintenanceMinor MaintenanceAllowance UseJanitorial Services

34Top 10 Common FindingsPayroll lack of Personal Activity Reports, expenses based on budgeted vs. actual costs

Lack of Supporting Documentation

Cost Allocation Plan (for shared costs) - no methodology, not uniformly applied

4. Unallowable Costs35Top 10 Findings (cont.)5. Budget expending grant funds for non- budget costs

6. Equipment and Inventory

7. Internal Control

8. Board of Directors lack of involvement and properly maintained minutes

36Top 10 Findings (cont.)9. Conflict of Interest board member or employee holds a personal financial interest

10. Independent Audits (A-133)

37Quiz time!1. Personal Activity Reports are NOT required for split-funded employees. True or False2. Photocopier paper was purchased with a credit card. Which of the following supporting documentation is required to support the expenditure?a. Credit card statementb. Receiptc. Cancelled checkd. A and Be. All of the above3. Bethany Griswold is a case worker who traveled all day (8:00 a.m. to 5:30 p.m.) providing services to consumers in her personal car. Which expenses can she be reimbursed for?a. Breakfastb. Mileage and parkingc. Lunchd. All of the above38Quiz cont.4. Per Circular A-110, which of the following is/are true about policies and procedures?a. Are an internal control b. Should be periodically reviewed and updatedc. Are oral d. Are required by A-110 e. All of the above

5. Dell Griffith deposits cash and checks, completes journal entries, writes checks, has access to an agency credit card, and reconciles the agencys bank statements. This is an example of: a. Sound fiscal managementb. Due diligencec. Lack of segregation of dutiesd. Fraud39Quiz cont.6. The Agency for Differently-Abled People has a Federal grant through the Ohio Dept. of Health, three Federal contracts through RSC, and a non-federal grant through the United Way. According to Circular A-110, how many extractable general ledgers are they required to have:a. Fourb. Onec. Threed. Five

7. A phone bill is received on November 15, 2012 for a service period of September 21, 2012 thru October 20, 2012, in the amount of $60.00. How much should be invoiced to the 2013 contract commenced on October 1, 2012?a. $20.00b. $30.00c. $60.00d. $40.0040Quiz cont.8. Which of the following expenditures are unallowable:a. Credit card interest b. Lobbying c. Alcohold. Meat tray for holiday party e. Late fee f. All of the above

9. Supplies and materials costing more than $300 is considered equipment?True or False

10. Cost allocation plans (CAPs) should be used for shared costs and:a. Be the same for all types of expenditures b. Have written methodologies c. A and Bd. None of the Above41Quiz cont.11. Please indicate which of the following are true or false:a. Purchases for non-budgeted items are allowable costs. T Fb. An inventory log for equipment costing more than $300 T F must be maintained.c. All single audits must be received by RSC no later than T F nine months after the auditee receives the report.d. Circular A-87 is applicable to non-profit organizations. T Fe. Yellow Pages advertising is an allowable cost. T Ff. A physical inventory must be performed every two years. T Fg. The Board of Directors is required to have a quorum and T F and document meeting minutes.h. Semi-annual certifications for employees funded 100% to T F the RSC contract must be after-the-fact determinations, dated, and signed by the employee and his/her supervisor.

42Quiz cont.12. MaryAnn Brandt is split-funded and budgeted 50% to a RSC contract and 50% elsewhere. For pay period 1/1/13 to 1/14/13, she was reimbursed $2,000.00 for 80 hours of work. Her personal activity report (PAR) indicated 32 hours (40%) worked on the RSC contract and 48 hours (60%) for elsewhere. Her agency invoiced RSC $1,000.00. Which of the following is/are true?a. A PAR was not requiredb. Her agency charged RSC the budgeted amountc. Invoicing based on budgeted costs is allowable as long as PARs track actual timed. Questioned costs are $200.00

43Wrap upPlease review your accounting systems to ensure the basics are being addressed. Extractable general ledgers, zero balances, segregation of duties, and reasonable cost allocation plans will go a long way to ensuring proper financial management of your RSC contract(s).If you avoid the Top 10 Common Findings, your agency is well on its way to a clean audit!Please contact your RSC Program for questions.The RSC Internet site has links to tools and resources! http://rsc.ohio.gov/ 44Internal Control QuestionnaireThe Internal Control Questionnaire (ICQ) is a tool RSC uses to assess your agencys control environment. You will find a link to ICQ on the RSC Internet site.Please submit to RSC according the schedule provided.

45Questions?46