Arkansas Association of Federal Coordinators September 23, 2011

Arkansas Association Arkansas Association of Federal of Federal

CoordinatorsCoordinators

September 23, September 23, 20112011

Common Audit Common Audit Findings - Federal Findings - Federal

ComplianceCompliance

Overview (FY 2010)

• 214 school district and educational cooperative federal audits

• 83 entities with findings

• Allowable Costs/Allowable Activities (19)

• Davis-Bacon Act (28)

• Eligibility (1)

Overview (FY 2010) (cont.)

• Equipment and Real Property Management (6)

• Procurement and Suspension and Debarment (29)

• Program Income (9)• Reporting (43)• Special Tests and Provisions (7)

14 Compliance Requirements

• Activities Allowed or Unallowed

• Allowable Costs/Cost Principles

• Cash Management• Davis-Bacon Act• Eligibility

14 Compliance Requirements (cont.)

• Equipment and Real Property Management

• Matching, Level of Effort, and Earmarking

• Period of Availability of Federal Funds

14 Compliance Requirements (cont.)

• Procurement and Suspension and Debarment

• Program Income• Real Property Acquisition and Relocation Assistance

• Reporting

14 Compliance Requirements (cont.)

• Subrecipient Monitoring• Special Tests and Provisions

Common Major Programs

• Title I, Part A Cluster• Special Education Cluster• State Fiscal Stabilization Fund

Cluster• Child Nutrition Cluster• Education Jobs Fund (FY 11)

Activities Allowed or Unallowed

• Unique to each federal program

• Derived from the provisions of laws, regulations, or the provisions of contract or grant agreements

Allowable Costs/Cost Principles

• Applicable Cost Circular - OMB Circular A-87, Cost Principles for State, Local, and Indian Tribal Governments

• Costs must be allowable, reasonable, and documented.

Allowable Costs/Cost Principles (cont.)

• Circular addresses documentation of employee time and effort (semi-annual certifications or monthly personnel activity reports).

• Circular addresses certain allowable and unallowable costs.

Allowable Costs/Cost Principles (cont.)

FY 10 findings primarily pertained to employee time and effort documentation, incorrect amounts prorated to federal program, costs coded in error to federal program, costs not included in ARRA plan, and excess indirect costs.

Cash Management

School districts and educational cooperatives are primarily subrecipients; program funds received on a reimbursement basis based on specific APSCN procedures

Davis-Bacon Act• Applicable to certain contracts in excess

of $2,000, for construction, modernization, renovation, and repair activities

• Required prevailing wage rate clauses must be included in applicable contract.

• Certified payrolls from the contractor or subcontractor must be submitted weekly.

• FY 10 findings addressed failure to include wage rate clauses or obtain certified payrolls.

Eligibility

• Depending on the federal program, eligibility requirements generally apply to the student (e.g., free and reduced price meal application and verification process) or entity (e.g., attendance area).

• FY 10 findings pertained to failure to maintain supporting documentation pertaining to verification process.

Equipment and Real Property Management

• State of Arkansas capitalization threshold is lower than Federal government.

• Accounting for capital assets purchased from federal programs must be captured in APSCN at the source of funds (SOF) level.

Equipment and Real Property Management (cont.)

• Federal disposition requirements (per unit fair market value of $5,000 or more at time of disposition)

• Physical inventory must be taken periodically and reconciled to the equipment records.

Equipment and Real Property Management (cont.)

FY 10 findings pertained to failure to record capital asset purchases, failure to update equipment records for deleted items, items could not be located, or items were capitalized to wrong program or fund.

Matching, Level of Effort, and Earmarking

• Matching includes requirements to provide contributions of a specified amount or percentage to match Federal awards.

• Level of effort includes maintenance of effort and supplement not supplant.

• Earmarking includes requirements that specify an amount or percentage that must be used for specified activities.

Period of Availability of Federal Funds

Federal awards may specify a time period during which the Federal funds may be utilized. ARRA funds are a good example.

Procurement and Suspension and Debarment

• Subrecipients shall use the same State policies and procedures used for procurements from non-Federal funds.

• Buy-American clause

• Excluded Parties List System (EPLS) website addressed in Commissioner’s Memo FIN-10-047

Procurement and Suspension and Debarment (cont.)

FY 10 findings pertained to lack of Buy-American clause in contracts, failure to follow State law regarding bidding and performance bonds, and lack of internal control regarding the checking for suspended or debarred parties.

Program Income

• Income received that is directly generated by the federally funded project during the grant period

• FY 10 findings pertained to insufficient amounts billed to operating fund by food services program for Provision 2 school districts.

Real Property Acquisition and Relocation Assistance

Rarely applicable to school districts

Reporting

• Annual financial reports required for certain federal programs

• Such reports are compared to applicable budgets to determine variances in excess of 10%.

Reporting (cont.)

• ACSIP budget (each line item in total (function) and each column in total (object)

• Other federal reports compared to budget for each function/object cell.

Reporting (cont.)

FY 10 findings primarily pertained to reported amounts exceeding budgeted amounts by more than allowable variance, inaccurate counting of meals, and inaccurate reporting of expenditures in the general ledger.

Reporting (cont.)

• Commissioner’s Memo LS-11-098 dated March 15, 2011 addressed deadline for budget amendments and program adjustments for ACSIP programs.

• New reporting for FY 11 (Federal Funding Accountability and Transparency Act (FFATA)

Reporting (cont.)

FFATA reporting is applicable to direct recipients of grants or cooperative agreements (non-ARRA funds) who make first-tier subawards.

Subrecipient Monitoring

Rarely applicable to school districts and educational cooperatives; such entities rarely make subawards to other entities

Special Tests and Provisions

• Comparability reports• Private school participation• Schoolwide programs• Highly qualified teachers and

paraprofessionals• Separate accounting for ARRA

funds

Special Tests and Provisions (cont.)

FY 10 findings primarily pertained to accounting errors for ARRA funds, lack of documentation to demonstrate contact with private school officials, lack of documentation for highly qualified personnel, and lack of documentation to support that teachers participated in the needs assessment process.

Audit Findings

• Opinion on compliance for each major program• Instances of noncompliance• Material instances of noncompliance

Audit Findings (cont.)

• Internal control over compliance• Significant deficiency• Material weakness

Timeline

Most ARRA funds will remain available for obligation until September 30, 2011 and must be spent by December 2011.

Arkansas Association Arkansas Association of Federal of Federal

CoordinatorsCoordinators

September 23, September 23, 20112011