Riverside Community College District Grants Office AuditReadiness Workshop

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Riverside Community College DistrictGrants
OfficeAudit-Readiness Workshop
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Role of the fiscal agent

• Ensures all commitments made in the application
  are fulfilled
• Ensures that all expenditures are allowable and
  that match contribution is met
• Submits all required reports
• Ensures that all sub-awardees perform and adhere
  to all audit requirements
• Ensures that sub-awardees are not disbarred by
  checking http//www.epls.gov - exact name and
  tax identification number is needed

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Auditors..what do they look for?

• Evidence that the institution's financial
  management system has adequate internal controls
  (ensures that no one person has complete control
  over all aspects of a financial transaction)
• Evidence that you are doing what you said you
  were going to do in your approved application and
  revisions (achieving the outcomes, goals and
  objectives)
• That expenditures made are allowable

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Auditors..what do they look for?

• That your performance report data is accurate and
  reliable
• Evidence that statutory and regulatory
  requirements have been met (for example, the
  matching funds requirement)
• Evidence of compliance with Office of Management
  and Budget (OMB) circulars
• A-21, A-110 and A-133

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What if I am audited? What should I have on
hand?

• A copy of the grant award notification (GAN) and
  approved application
• Request for Applications (RFA) and corresponding
  specifications
• Approvals in writing for requested revisions
• Terms and conditions articles
• Organizational chart showing positions of the
  project within the structure of the institution

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What if I am audited?What should I have on hand?

• List of all project staff and a position
  description for each
• The most recent edition of EDGAR and the
  applicable OMB circulars
• Written policies and procedures for
• The drawdown and disbursement of federal funds
  that avoid excess cash balances and assure
  adequate controls (checks and balances)
• Personnel

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What if I am audited?What should I have on hand?

• List of equipment purchased and location
• Copies of all materials produced by the project
• List of participants served by grant year or
  cohort, whichever corresponds to the program
  design
• All performance reports submitted to the funding
  agency
• Documentation of participants progress, delivery
  of program services or outcomes achieved

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What if I am audited?What should I have on hand?

• Most recent A-133 (non-federal) audit
• Copies of
• Education Department General Administrative
  Regulations (EDGAR)
• OMB circular A-21, Cost Principles for
  Educational Institutions
• OMB circular A-110, Uniform Administrative
  Requirements for Grants and Other Agreements with
  Institutions of Higher Education, et al

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What if I am audited?What should I have on hand?

• OMB circular A-133, Audits of States, Local
  Governments, and Non-Profit Organizations
• Program statutes and regulations
• Program/college policies and procedures manuals
• Annual personnel statements original signatures
  in blue ink completed after-the-fact

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(No Transcript)
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Single Audit Act of 1984 and Amendments of 1996

• Non-Federal entities that expend 500,000 or more
  in a year in federal awards shall have a single
  or program-specific audit conducted for that year
  in accordance with the provisions of this part.

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Costs How do I know if theyre allowable?

• Allowable they must conform to any limitations
  or exclusions set forth in these cost principles
  or in the sponsored agreement as to types or
  amounts of cost items
• Allocable the process of assigning a cost, or a
  group of costs, to one or more cost objective, in
  reasonable and realistic proportion to the
  benefit provided
• Reasonable a cost that would be incurred by a
  prudent person

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Costs How do I know if theyre allowable?

• They must be given consistent treatment through
  application of those generally accepted
  accounting principles appropriate to the
  circumstances
• Check grant award and grant terms and conditions
  for possible exceptions
• When in doubt, contact program officer

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Audit-Readiness Resources

• Education Department General Administrative
  Regulations (EDGAR) can be found on-line at
  http//www.ed.gov/policy/fund/reg/edgarReg/edgar.h
  tml
• Office of Management and Budget circulars
• A-21 Cost Principles for Educational
  Institutions
• A-110 Uniform Administrative Requirements for
  Grants and Other Agreements
  with Institutions of Higher Education, Hospitals
  and Other Non-Profit Organizations

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Audit-Readiness Resources

• A-133 Audits of States, Local Governments, and
  Non-Profit Organizations
• All OMB circulars can be found on-line at
  http//www.whitehouse.gov/omb/circulars/index.html

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What are the Expanded Authorities?

• Legislation providing greater autonomy to
  grantees, based on Title 34 Code of Federal
  Regulations (CFR), Part 74, Sub-part C, Section
  74.25 - applies to most federal grants
• Pre-award costs
• Time extensions
• Budget transfers
• Carryover

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Pre-award Costs

• No prior approval is required for pre-award costs
  incurred up to 90 days before the budget period
  begins
• Includes both new and non-competing continuation
  awards
• Applicant should have some reasonable expectation
  that it will receive a grant
• Expenditures are incurred at the applicants own
  risk
• Funds are not available for drawdown until the
  budget period begins
• Cannot be used to pay for cost over-runs from the
  previous year
• Prior approval is required for pre-award costs
  incurred more than 90 days before start of the
  budget period

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Time extensions

• One-time extension of the project period for up
  to one year without prior approval
• Grantee sends written notification of planned
  extension to assigned program officer no later
  than 10 days before end of project period.
  Notice includes
• Supporting reasons for extension
• Revised expiration date
• Cannot be merely for the purpose of exhausting
  unexpended funds
• Cannot require the need for additional federal
  funds
• Cannot change the scope or objectives of the
  project

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Budget Transfers

• Provisions in 34 CFR 74.25 regarding budget
  transfers apply to all types of grantees
• No prior approval is required for many budget
  transfers
• Check applicable OMB Cost Principle Circulars for
  specific expenditures requiring prior approval
• Changes in EDGAR still requiring prior approval
• Changes in project scope or objectives
• Changes in a key person specified in the award
  document

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Budget Transfers

• The absence for more than 3 months or a 25
  reduction in time of the approved project
  director
• The need for additional federal funds
• The transfer of amounts budgeted for indirect
  costs to absorb increases in direct costs, or
  vice versa, if approval is required by the
  Secretary
• The transfer of funds allotted for training
  allowances (direct payment to trainees) to other
  categories of expense

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Budget Transfers

• Unless described in the application and funded in
  the approved award, the sub-award, transfer or
  contracting out of any work under an award. This
  provision does not apply to the purchase of
  supplies, material, equipment, or general support
  services.
• No other prior approval requirements for specific
  items are imposed unless a deviation has been
  approved by OMB

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Carryover

• Unexpended funds are carried over from one budget
  period to the next without prior approval
• Program Officer may require a written statement
  describing how unexpended funds will be used
• When At the time of funding decision
• New funds may be reduced under certain
  circumstances
• Unexpended funds may be used for any allowable
  cost that falls within the approved project scope
• Not just for finishing uncompleted activities
  from the previous budget period

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General Provisions for Selected Items of
CostOMB A-21 Cost Principles for Educational
Institutions, Part J

• Advertising and public relations costs
  allowable with restrictions
• Advisory councils - allowable as a direct cost
  where authorized by the federal awarding agency
• Alcoholic beverages unallowable
• Alumni activities unallowable
• Audit costs - the costs of audits required by,
  and performed in accordance with, the Single
  Audit Act - allowable

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General Provisions for Selected Items of Cost

• Bad debts unallowable
• Bonding costs allowable with restrictions
• Commencement and convocation costs unallowable
• Communication costs (including telephone and
  postage) allowable
• Compensation for personal services
• Employees of the organization - allowable to the
  extent that the total compensation to individual
  employees conforms to the established policies of
  the institution and provided that the charges
  correspond with work performed directly on the
  sponsored agreement

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General Provisions for Selected Items of Cost

• Severance pay allowable with restrictions
• Defense and prosecution of criminal and civil
  proceedings and claims allowable with strict
  restrictions
• Depreciation and use allowances allowable where
  needed, used and properly allocable to sponsored
  agreements
• Donations and contributions unallowable/not
  reimbursable, but may be used toward cost sharing
  (match) by recipient

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General Provisions for Selected Items of Cost

• Entertainment costs unallowable
• Equipment and other capital expenditures
  allowable when approved in advance by the federal
  agency
• Fines and penalties unallowable except when
  incurred as a result of complying with
  requirements of the funding agency
• Fundraising costs - unallowable

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General Provisions for Selected Items of Cost

• Goods or services for personal use unallowable
• Insurance and indemnification - costs of
  insurance required or approved, and maintained,
  pursuant to the sponsored agreement - allowable
• Labor relations costs allowable
• Lobbying - unallowable

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General Provisions for Selected Items of Cost

• Materials and supplies necessary to carry out a
  sponsored agreement - allowable
• Meetings and conferences, the primary purpose of
  which is the dissemination of technical
  information - allowable
• Memberships, subscriptions and professional
  activity costs - costs of the institutions
  membership in business, technical, and
  professional organizations are allowable costs
  of the institutions subscriptions to business,
  professional, and technical periodicals are also
  allowable

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General Provisions for Selected Items of Cost

• Professional service costs - costs of
  professional and consultant services rendered by
  persons who are members of a particular
  profession or possess a special skill, and who
  are not officers or employees of the institution,
  are allowable when reasonable in relation to the
  services rendered and when not contingent upon
  recovery of the costs from the Federal Government
  (i.e. grant writing fees)

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General Provisions for Selected Items of Cost

• Allowable when allocable to the sponsored
  agreement and approved in advance by the federal
  agency
• Scholarships and student aid costs are allowable
  only when the purpose of the sponsored agreement
  is to provide training to selected participants
  and the charge is approved by the sponsoring
  agency

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General Provisions for Selected Items of Cost

• Student activity costs - unallowable, unless
  specifically provided for in the sponsored
  agreement
• Training costs - the cost of training provided
  for employee development is allowable
• Travel costs allowable with restrictions

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Direct Cost Allocation Principle

• If a cost benefits two or more projects or
  activities in proportions that can be determined
  without undue effort or cost, the cost should be
  allocated to the projects based on the
  proportional benefit
• If proportions cannot be determined without undue
  effort or cost, then the costs may be allocated
  or transferred to benefited projects on any
  reasonable basis

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Indirect Costs

• May be restricted by funding agency
• Cost allocation study required
• Approved indirect cost rate agreement from
  cognizant agency, the U.S. Department of Health
  and Human Services
• On-campus rate is 36.5 through 6/30/09
• Off-campus rate is 20.5 through 6/30/09
• Unrecovered indirect may qualify as match

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Principles for Matching Costs

• Verifiable from the recipient's records
• Are not included as contributions for any other
  federally-assisted project or program
• Necessary and reasonable for proper and efficient
  accomplishment of project or program objectives
• Are allowable under the applicable cost principles

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Principles for Matching Costs

• Are not paid by the Federal Government under
  another award, except where authorized by federal
  statute to be used for cost sharing or matching
• Are provided for in the approved budget when
  required by the federal awarding agency

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Principles for Matching Costs

• Unrecovered indirect costs may be included as
  part of cost sharing or matching only with the
  prior approval of the Federal awarding agency
• Values of matching contributions determined
  according to principles in A-21

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Program Income

• Program income earned by projects financed in
  whole or in part with federal funds during the
  project period shall be retained by the recipient
  and used in one or more of the ways listed in the
  following 
• Added to funds committed to the project by the
  federal awarding agency and recipient and used to
  further eligible project or program objectives
• Used to finance the non-federal share of the
  project or program

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Program Income

• Deducted from the total project or program
  allowable cost in determining the net allowable
  costs on which the federal share of costs is
  based
• In the event that the Federal awarding agency
  does not specify in its regulations or the terms
  and conditions of the award how program income is
  to be used, paragraph (b)(3) shall apply
  automatically to all projects or programs except
  research

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Common Audit Exceptions

• Missing A-133 audits
• Improper travel no documentation of purpose or
  person traveling
• No or inadequate internal controls
• No or inadequate financial recordkeeping funds
  unaccounted for
• No or inadequate documentation of client
  eligibility, services provided, or progress
  achieved

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Common Audit Exceptions

• Missing personnel statements
• Poor record-keeping
• Lack of documentation
• Incorrect indirect cost rates
• Unallowable expenses

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Be Prepared!

• Be pro-active
• Read and know your grant and all applicable
  regulations
• Educate your staff and sub-awardees about grant
  responsibilities and the regulations they must
  follow
• Develop a timeline that allows for the
  achievement of all outcomes and objectives within
  the required timeframe
• Develop an evaluation plan or strategy so
  critical data can be collected from the beginning

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Be Prepared!

• Record keeping
• Personnel statement at least annually
• All items required in an audit (see what should
  I have on hand? above)
• All reports submitted
• Detailed information on expenditures
• Written approvals for revisions

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Close-out

• Process all remaining obligations for goods and
  services obtained within the grant period
• Submit all required reports
• Account for any real property acquired with
  federal funds
• Formal closeout request may be required
• Storage of grant records for five years

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Disposition of Equipment at Closeout

• Regulations found in OMB circular A-110, Subpart
  C Post Award Requirements, Property Standards,
  Part 34, Equipment
• Title to equipment acquired by a recipient with
  federal funds shall vest in the recipient,
  subject to the following conditions
• The recipient shall use the equipment in the
  project or program for which it was acquired as
  long as needed, whether or not the project or
  program continues to be supported by federal funds

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Disposition of Equipment at Closeout

• When no longer needed for the original project or
  program, the recipient shall use the equipment in
  connection with its other federally-sponsored
  activities, in the following order of priority
• (i) Activities sponsored by the federal
  awarding agency which funded the original
  project, then
• (ii) activities sponsored by other federal
  awarding agencies

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Disposition of Equipment at Closeout

• When acquiring replacement equipment, the
  recipient may use the equipment to be replaced as
  trade-in or sell the equipment and use the
  proceeds to offset the costs of the replacement
  equipment subject to the approval of the Federal
  awarding agency
• When the recipient no longer needs the equipment,
  if the current per unit fair market value is
  5,000 or more, the recipient may retain the
  equipment for other uses provided that
  compensation is made to the original federal
  awarding agency or its successor

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Supplies and Other Expendable Property at Closeout

• Regulations found in OMB circular A-110, Subpart
  C Post Award Requirements, Property Standards,
  Part 35
• Title to supplies and other expendable property
  shall vest in the recipient upon acquisition. If
  there is a residual inventory of unused supplies
  exceeding 5,000 in total aggregate value upon
  termination or completion of the project or
  program and the supplies are not needed for any
  other federally-sponsored project or program, the
  recipient shall retain the supplies for use on
  non-federal sponsored activities or sell them,
  but shall, in either case, compensate the Federal
  Government for its share

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Questions?