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  1. NASCSP Monitoring – Principles & Practices Training Example Title Screen # 1 Presented by: Denes L. Tobie, CPA May 10, 2006 Example Sub Title © 2005 Wipfli LLP

  2. Still We’re All in this Together! Where does this session fit into the four circles? © 2005 Wipfli LLP

  3. Agenda Topic One – OMB Circulars Then and Now Topic Two – Head Start Prism Fiscal Checklist Topic Three – Financial Analysis Topic Four – Understanding the Annual Topic Five – Other miscellaneous items to be aware of in your agency © 2005 Wipfli LLP

  4. Agenda Meet the trainer • Denes L. Tobie, CPA • Partner with Wipfli LLP, with the firm since 1997 • Nonprofit Auditor who works exclusively with Nonprofits • Currently oversees audits in Iowa, Idaho, New Jersey, Mississippi, Texas, Tennessee, Ohio, Illinois, Wisconsin, Michigan, Arkansas, Nevada, Missouri and Indiana • Trainer at GFP conference in Las Vegas for 6 years • Training for Board of Directors, State Agencies and Staff, both internal and external © 2005 Wipfli LLP

  5. Learning the Lingo • OMB = Office of Management and Budget • DHHS = Department of Health and Human Services • GAAP = Generally Accept Accounting Principles • SAS = Statement on Auditing Standards • AICPA = American Institute of Certified Public Accountants • CFR = Code of Federal Regulations • CFDA = Catalog of Federal Domestic Assistance • PRISM = Program Review Instrument for Systems Monitoring © 2005 Wipfli LLP

  6. Topic One – OMB Circulars – Then and Now • ADMINISTRATIVE REQUIREMENTS FOR NON-PROFIT ORGANIZATIONS (A-110) A. Original circular – July 1, 1976 B. Last major revision – November 29, 1993 C. Changes since November 1993 revision 1. October 13, 1994 – Increased small purchase threshold to $100,000 2. August 29, 1997 – Implemented Single Audit Act Amendments of 1996 3. November 6, 1999 – Freedom of Information Act request and research data revisions D. DHHS implemented as 45 CFR Part 74 © 2005 Wipfli LLP

  7. Topic One – OMB Circulars – Then and Now • COST PRINCIPLES FOR NONPROFIT ORGANIZATIONS (A-122) A. Original circular – June 27, 1980 B. Changes since June 27, 1980 1. 1983 and 1984 – Added lobbying costs to selected items of cost and clarified documentation required relating to lobbying 2. October 6, 1995 – Revised interest costs to allow interest 3. June 1, 1998 – Added additional unallowable costs and clarified other costs C. DHHS adopted by 45 CFR 74.27 D. Updated and revised, issued on May 10, 2004 – Mainly clarifications and more user friendly © 2005 Wipfli LLP

  8. Topic One – OMB Circulars – Then and Now • AUDIT OF STATES, LOCAL GOVERNMENTS, AND OTHER NONPROFIT ORGANIZATIONS (A-133) A. Original circular – March 16, 1990 B. Major revision – June 30, 1997 1. Merged in A-128 audit requirements for governments 2. Raised minimum audit threshold from $25,000 to $300,000 3. Changed due date to nine months 4. Created risk based approach for determining major programs 5. Created a data collection form 6. Revised definitions for audit findings and questioned costs 7. Added responsibilities for auditees 8. Provided audit submission process © 2005 Wipfli LLP

  9. Topic One – OMB Circulars – Then and Now • AUDIT OF STATES, LOCAL GOVERNMENTS, AND OTHER NONPROFIT ORGANIZATIONS (A-133) (continued) C. Annual revision to Compliance Supplement D. Revision to Single Audit Collection Form and instructions (effective for audit periods after 01/01/01) E. DHHS adopted by 45 CFR 74.26 and 92.26 F. 1/1/04 Minimum audit threshold raised to $500,000 © 2005 Wipfli LLP

  10. Topic Two – Head Start Prism Fiscal Checklist • See the attached Fiscal Checklist © 2005 Wipfli LLP

  11. Topic Two – Head Start Prism Fiscal Checklist • Broken down into 5 Areas: • Section I – Fiscal Risk Indicators, 12 questions • Section II – Internal Controls and Monitoring, 18 questions • Section III – Fiscal Accountability, 18 questions • Section IV – Reporting, 7 questions • Section V – Summary Standards, 2 questions Total 57 Questions of Fun!!! © 2005 Wipfli LLP

  12. Topic Three – Financial Analysis • Financial Analysis covers all aspects of your organization and can be incorporated into, and obtained from, many aspects of your organization, including: • Program reports • Program financial statements • Agency financial statements • Tax returns © 2005 Wipfli LLP

  13. Topic Three – Financial Analysis • You will learn how to look at your internal information differently than you ever have before and benefits will be gained • Provides you with executive level review of key financial data • Establishes additional internal control points within your own systems • Allows for more specific and efficient planning for the audit process © 2005 Wipfli LLP

  14. Topic Three – Financial Analysis • Required by regulations (OMB Circular A-110 Financial and Program Management) • Also implied by DHHS in Head Start and Community Services Block Grant programs • Improve the standards at which you operate your programs • Provides more information to the Board and Executive Director © 2005 Wipfli LLP

  15. Topic Three – Financial Analysis • Most important item to review is the agency-wide trial balance (How many currently review on an agency-wide basis? Why not?) (Do you know what to look for?) © 2005 Wipfli LLP

  16. Topic Three – Financial Analysis FOUR (4) KEY QUESTIONS YOU SHOULD ASK • What is it? • Where is it from? • What does it mean? • What do we do with it? © 2005 Wipfli LLP

  17. Topic Three – Financial Analysis • First thing to know about the trial balance is where do the numbers come from. • Must have a review system in place that requires balances to be reviewed, reconciled, and adjusted on a regular basis. © 2005 Wipfli LLP

  18. Topic Three – Financial Analysis • If the numbers aren’t supported by reliable information, the rest of analytical process is a waste of time. • Also, if numbers aren’t reliable the information reported to funding agencies, program directors and your board is incorrect. (And a waste of their time!) © 2005 Wipfli LLP

  19. Topic Three – Financial Analysis • What should you be looking for on the agency-wide balance sheet? • Does your balance sheet balance?! • Does the bank reconciliation agree to the general ledger? • Are there any credit balances in your asset accounts? © 2005 Wipfli LLP

  20. Topic Three – Financial Analysis • What should you be looking for… (continued) • Do subsidiary ledgers support the reported amounts on the balance sheet? • Did we buy any equipment this month with agency funds? Was it recorded properly? © 2005 Wipfli LLP

  21. Topic Three – Financial Analysis • What should you be looking for… (continued) • Are there any debit balances in the liability accounts? • Was any new debt incurred? If so, was it recorded properly? (Can be a very detrimental adjustment at year-end if not recorded properly) © 2005 Wipfli LLP

  22. Topic Three – Financial Analysis • Overall, does it look reasonable? Any odd looking accounts? If so, look into them now!!! Don’t wait for your auditors to find them. You won’t have reliable information and it will cost more during your audit!!! © 2005 Wipfli LLP

  23. Topic Three – Financial Analysis • If your balance sheet is correct, then your revenues and expenses are usually correct, but may be misclassified. © 2005 Wipfli LLP

  24. Topic Three – Financial Analysis • Next, analyze your individual program trial balances and results. • Any odd looking balances in the revenues? • Any odd looking balances in the expenses? © 2005 Wipfli LLP

  25. Topic Three – Financial Analysis • Next, analyze your individual program trial balances...(continued) • Have all revenues been recorded properly? • What is the bottom line? Are you over spent? • Have you recorded all of your invoices properly or receivables properly? © 2005 Wipfli LLP

  26. Topic Three – Financial Analysis • Next, analyze your individual program trial balances...(continued) • How is the program doing compared to budget? • Any significant over spent areas? • Do you need to get modification from your funding source? • Have you followed internal procedure to get executive director or board approvals for budget modifications? © 2005 Wipfli LLP

  27. Topic Three – Financial Analysis • Next, start to look at key numbers, what do you know about each program? • Are you on track to serve the number of participants you are required to serve? • What is your year-to-date in kind received, are you on track to get the amount required? © 2005 Wipfli LLP

  28. Topic Three – Financial Analysis • Finally, look at trends. Should be analyzing your programs based on individual cost. • What is your average cost per child that month? • How does that compare to last month? • What about your annual cost per child budget? • Is it over or under your projections? © 2005 Wipfli LLP

  29. Topic Three – Financial Analysis © 2005 Wipfli LLP

  30. Topic Three – Financial Analysis • When deciding on what trends to look at, keep in mind “Key Performance Indicators” • What is important to each program • Key performance indicators are separate from trends, but you need to monitor both aspects • Make sure they are meaningful © 2005 Wipfli LLP

  31. Topic Three – Financial Analysis Next, use the key numbers to analyze trends in your programs… • What is your transportation cost per child? • What are your average meal costs for the HS children? © 2005 Wipfli LLP

  32. Topic Three – Financial Analysis © 2005 Wipfli LLP

  33. Topic Three – Financial Analysis © 2005 Wipfli LLP

  34. Topic Three – Financial Analysis • Assign measurables to each aspect of your organization • If you think it is a waste of time, don’t do it, but we challenge you to tell us how you can manage your “business” without it!! © 2005 Wipfli LLP

  35. Topic Three – Financial Analysis Analysis of this type allows you to be proactive not reactive!! © 2005 Wipfli LLP

  36. Topic Three – Financial Analysis • You can look at any program or cost center to begin trend analysis. • Once established, they can be updated monthly to provide on going information to you and your program directors. © 2005 Wipfli LLP

  37. Topic Three – Financial Analysis • They can be early warning indicators of an impending problem. • Act on it and correct the problem, or do nothing and jeopardize the program? © 2005 Wipfli LLP

  38. Topic Three – Financial Analysis • Lastly, do a budget vs. actual analysis for the agency-wide information and the individual program information. • This is required in both the HS and CSBG programs. • HS governance regulations require it © 2005 Wipfli LLP

  39. Topic Three – Financial Analysis • To do this you need to be sure to budget correctly. This means, if your program does not operate for 12 months, be sure your budget doesn’t make that assumption, otherwise your budget will have odd fluctuating variances. (How many do agency-wide budgets?) © 2005 Wipfli LLP

  40. Topic Three – Financial Analysis • A true budget reflects anticipated activity during certain times of the year, not equally throughout the year © 2005 Wipfli LLP

  41. Topic Three – Financial Analysis © 2005 Wipfli LLP

  42. Topic Three – Financial Analysis © 2005 Wipfli LLP

  43. Topic Three – Financial Analysis • Report Format • Use technology to help prepare, don’t recreate the wheel, saves time and reduces the possibility of human error. • Use same format each month so everyone gets used to it and becomes familiar with the process and reports. © 2005 Wipfli LLP

  44. Topic Three – Financial Analysis • Present trend analysis • It can present a lot of information in a concise manner • Pictures are sometimes easier to follow than all of the numbers © 2005 Wipfli LLP

  45. Assets, Liabilities, and Net Assets1995-2004 © 2005 Wipfli LLP

  46. Revenues and Expenses 1995-2004 © 2005 Wipfli LLP

  47. Changes in Unrestricted Net Assets1995-2004 © 2005 Wipfli LLP

  48. Topic Three – Financial Analysis • Annually, someone should be analyzing the agency-wide trial balance, be sure that all accounts reconcile with supporting information © 2005 Wipfli LLP

  49. Topic Three – Financial Analysis • Be sure to save this supporting documentation for your auditor, it will save time later and make the audit process more efficient. • Consider creating an audit book (separate binder with tabs) to store this information and keep it by individual account. © 2005 Wipfli LLP

  50. Topic Three – Financial Analysis • Any questions you ask at year-end when reviewing your account analysis, chances are your auditor will (or should) ask the same questions. © 2005 Wipfli LLP