Office of Field Services Fiscal Review Process

1. Office of Field Services Fiscal Review Process Becky Pennington Susan Szymas February 7, 2013

2. Program Fiscal Reviews • The program fiscal review process complements the On Site Review process • Goal: Review all LEAs within a 5-year cycle • Program fiscal reviews have a different scope and do not replace Single Audits

3. Fiscal Review Process Selection • Risk-based criteria Notice • Date and required documentation On Site Visit • Audit fiscal records • Prepare report • Require compliance plan for findings

4. Risk Factors • Size of Title I Allocation • Late application or amendment submission when “Grant Funds Available” • Deviations found on Final Expenditure Reports (FERs) • LEAs reporting a deficit • Single Audit findings

5. Risk Factors • Low Graduation Rate • Not making proficiency targets for Reading or Mathematics • A school on the Persistently Low Achieving (PLA) List • And …

6. Risk Factors • The degree to which: • This LEA has excellent educational program and business office staff working cooperatively to manage grant programs • 2. This LEA produces excellent comprehensive needs assessments and school improvement plans likely to accelerate student achievement

7. Risk Factors • The degree to which: • This LEA respects all of the major laws, regulations, and guidance for OFS grant programs • All risk factors are considered in identifying highest priority for fiscal reviews

8. Documents RequestedPrior to Visit • Staff list for those funded by each Consolidated Application program • FTEs and their respective assignments • List should identify the staff and specific funding source(s) • General ledger expenditure summary (both payroll and non-payroll) including grant source cost centers for each grant for prior fiscal year • General ledger expenditure detail for • Title I, Part A

9. Documents RequestedPrior to Visit • Policies and Procedures for: • Cash Management, • Procurement, and • Payroll • Inventory list of all equipment purchased with Consolidated Application funds (list needs to identify which federal program the equipment was charged to) • General ledger account description

10. Documents Made Available During Visit • For selected employees, the following original documentation: • Payroll summaries for selected sample for a selected pay period • Personnel activity reports (PARs), semi-annual certifications • Teacher certifications • Professional licenses • Evidence of criminal background checks • Employee contracts, bargaining unit step information

11. Documents Made Available During Visit • General Ledger detail for payroll and benefit expenditures for Consolidated Application funded staff • Final Expenditure Reports (FERs) • For selected supplies and materials: • Invoices/Receipts • Purchase Orders/Requisitions • Duplicate checks • Travel Reimbursements forms (when applicable)

12. Documents Made Available During Visit • For selected contracted services: • Original Contracts • Bid documents • Invoices for selected services • Evidence of criminal background checks on contracted individuals • For selected equipment purchases: • Inventory Listing • Invoices, approvals • Physical inspection (location, use, tag identifications)

13. Scope of Program Fiscal Reviews • Staff • Provide evidence the employee is highly qualified • Provide evidence the employee has had criminal background screening • Teacher certificates or professional licenses

14. Scope of Program Fiscal Reviews • Policies and Procedures • Provide Board approved Policies and bylaws for Cash Management, Payroll, and Procurement; Business office Manuals/Procedures/Internal Controls • Narratives are not considered policies and procedures • Policies and procedures need to be on school letterhead • OFS will examine these documents and compare them to actual LEA operations

15. Scope of Program Fiscal Reviews • Cash Management System (CMS) • Copies of the LEAs cash draws from CMS and the supporting documentation from the general ledger for each cash draw during the grant period • Payroll Expenditures • Provide a payroll summary for each employee, indicating all the accounts the selected employee is charged to for the selected pay period • OFS may use this information to decide if an employee should have completed a PAR or a semi-annual certification

16. Scope of Program Fiscal Reviews • Payroll Expenditures (continued) • Time cards for hourly staff for the selected pay period; we compare hours worked to the hours charged to the grant • If a specified percentage of time is charged each pay period through the payroll accounting system, then we expect to see a quarterly reconciliation of the actual hours worked versus hours charged • If time cards do not clearly indicate the hours staff worked on a grant, then detailed logs will be used to define this information

17. Scope of Program Fiscal Reviews • Payroll Expenditures (continued) • PARs or semi-annual certifications for all selected employees; OFS will verify the hours/FTE to the time and effort documents for accuracy • Step, level and education criteria will be compared to the bargaining agreements • If paraprofessionals are not part of a bargaining agreement, then an LEA wage scale document will be used for the same purpose

18. Scope of Program Fiscal Reviews • Budget • Provide a general ledger summary, complete with budget information • OFS compares the LEA’s board approved budget to the budget in the Consolidated Application and to actual LEA expenditures • The scope of the budget comparison is by function code, object code • 10% rule applies to subtotal in approved function code • Budget changes need prior approval from OFS Consultant (EDGAR 80.30)

19. Scope of Program Fiscal Reviews • Budget (continued) • If two different projects for Title I, Part A have expenditures in a single fiscal year, (i.e. the grant for 2011/2012 and the grant for 2012/2013) then OFS expects to see two separate cost centers, one for each project • Expenditures should not be coded in the cost center, if they are not approved in the Consolidated Application • Some LEAs want to track all expenses related to Title I and record them in the grant cost center which may be considered commingling of federal and local funds

20. Scope of Program Fiscal Reviews • General Expenditures • Provide a detailed, non-payroll general ledger of Title I, Part A • OFS will compare actual expenditures with approved budget items in the Consolidated Application • Expenditures should be readily identified in the Consolidated Application and should be classified as they were approved in the Consolidated Application

21. Scope of Program Fiscal Reviews • Final Expenditure Reports (FERs) • Provide a general ledger summary for the prior grant year (i.e. July 1, 2011 through Sept. 30, 2012) • OFS will compare the FER to the general ledger summary • The general ledger summary should match the FER • Only record expenditures that have been approved in the Consolidated Application to grant cost centers

22. Scope of Program Fiscal Reviews • Contracted Services • If the LEA has expenditures for purchased services, these services will be part of the expenditure test sample • OFS will review the contract between the LEA and the contractor (even PESG or Will Sub) • OFS will verify that criminal background screening has been done on contractors who have contact with children or are regularly in the school building • If purchased services are for in-house professional development and/or Community Services for Parent Activities, then agendas and sign-in sheets must be kept by the LEA

23. Scope of Program Fiscal Reviews • Equipment/Inventory • An ongoing listing should be kept by the LEA for all equipment/inventory the LEA has purchased with Title I, Part A funds • For purposes of this list, all items $100.00 or greater and a life expectancy greater than one year should be included

24. Scope of Program Fiscal Reviews • Equipment/Inventory (continued) • The list should be in accordance with EDGAR (34 CFR 80 SS. 80.32) regulations, and should include: • A description of the item (each item listed separately) • The item’s serial number (if applicable) • The LEA assigned asset number (if applicable) • The cost of the item • The location of the item • The funding source of the item • Each item should be tagged with the funding source. • Acquisition Date of the property • Use and condition of property • Disposal date and sale price

25. Common Findings – 2011-12 • Semi-annual certifications and PARs: • Not completed • Not signed by employee and/or supervisor • Criminal background checks are missing from proof of certifications, salaries, and contracts • Expenditures are not specifically approved in the Consolidated Application • Questioned costs • Misclassified costs

26. Common Findings – 2011-12 • Lack of policies and procedures to ensure proper internal controls are in place, implemented, and properly monitored • Written procedures (and policies) are not detailed and specific to the LEA • LEA could not provide adequate documentation for cash draws • LEA’s budget approved by Board does not align with LEA’s Consolidated Application

27. Common Findings – 2011-12 • Inventory list of items purchased with Title I, Part A funds are not maintained • Equipment purchased with Title I, Part A funds are not tagged with the funding source

28. Common Issues with PARs and Semi-Annual Certifications • Historical LEA non-compliance of federal requirements • Staff performing one job all day long (one cost objective) are required to complete a semi-annual certification. • Staff performing multiple jobs (more than one cost objective) are required to complete a PAR.

29. Common Issues with PARs and Semi-Annual Certifications • Cost Objective • a function, organizational subdivision, contract, grant, or other activity for which cost data are needed and for which costs are incurred

30. Common Issues with PARs and Semi-Annual Certifications • PARs must be prepared at least monthly, be signed and dated by the employee, and account for the staff person’s total activity for all pay periods • Staff members hired for a fully federally funded Title I summer school are required to have a separate certification for that time period

31. Timekeeping: Decision Making Rubric

32. Timekeeping: Decision Making Graphic

33. Questions? Financial Unit Office of Field Services Michigan Department of Education OFSFinancial_Unit@michigan.gov 517-373-2519