Subrecipient Annual Risk Assessment and Monitoring Review Process

1. Subrecipient Annual Risk Assessment and Monitoring Review Process March 2006

2. We will discuss… • Who…is a subrecipient? • What…is a risk assessment? • What…is monitoring? • Why…is monitoring important? • What…is the role of the monitor? • Who…performs monitoring? • When…do you monitor? • Where…do you look for guidance?

3. Subrecipient / Vendor Determination • All characteristics need not be present • Judgment should be used in the determination process

4. Subrecipient Characteristics • Provider determines eligibility. • Provider has performance measured against federal program objectives. • Provider responsible for programmatic decisions. • Provider responsible for federal program compliance requirements. • Provider uses federal funds to carry out its own program.

5. Vendor Characteristics • Organization provides the goods and services within normal business operations. • Organization provides similar goods or services to many different purchasers. • Organization operates in a competitive environment. • Organization provides goods or services that are ancillary to the operation of the federal program. • Organization is not subject to compliance requirements of the federal program.

6. Refer to examples.

7. Subaward Agreements • Agreements shall outline: • Scope of Work • Budget • Performance Requirements • Program Authorizing Legislation • Program Regulations

8. Subaward Agreements • Key provisions must include minimum administrative requirements: • Financial Management • Procurement • Financial Reports • Program Reports • Records Retention • Cost Allocation • Payment • Matching

9. Subaward Agreements • Administrative Requirements • (cont’d) • Period of Availability • Program Income • Real Property • Equipment • Supplies • Monitoring • Audits • Other

10. Subaward Agreements • Must also include: • CFDA Title and Number (www.CFDA.gov) • Award Name • Name of Federal Agency • Applicable Compliance Requirements • Notification of Annual Risk Assessment

11. What is a risk assessment? • Risk assessment is completed annually. • Risk assessment measures two quantities: • Magnitude of the potential loss • Probability that the loss will occur • What is the overall risk assessment for the subrecipient? • Determines frequency of monitoring • Determines depth of monitoring

12. Risk assessment may include… • Size of the award • Percentage of award vs. total federal awards received by the agency • Complexity of award requirements • Single or multi-year award • Subrecipient experience • Prior monitoring / audit results

13. Additional items to consider… • Provider History • Policies and Procedures • Financial Stability • Management Systems

14. What is a monitor?

15. What is monitoring? • A process that evaluates how a grantee is administering a grant according to the requirements of the grant: • Eligibility Determination • Allowability of Services • Allowable Costs • Internal Management Systems • Procurement Policy • Other

16. Why is monitoring important? • Ensure compliance with federal rules and regulations • Ensure services are provided in accordance with subaward agreement

17. Who performs monitoring? • States monitor local agencies. • Local agencies monitor subrecipients. • Subrecipients monitor sub-subrecipients.

18. What is the role of a monitor? • Notification of review • Request necessary policies and documents • Provide technical assistance as needed

19. When do you monitor? • As deemed necessary based on annual risk assessment

20. Monitoring Process

21. Eligibility Determination • Verify that eligibility was properly determined.

22. Eligibility Determination • Suggested activities: • Review program forms to ensure they capture accurate eligibility requirements. • Review case files, completed applications, and other program records and forms to determine that the subrecipient is appropriately assessing eligibility criteria.

23. Allowability of Services • Verify that services provided were allowable under grant rules and were provided as billed.

24. Allowability of Services • Suggested activities: • Review program records as well as brochures and any other materials disseminated to the public. • Review program forms to ensure they capture accurate program services. • Review program records to ensure documentation of service delivery.

25. Allowable Costs • Verify that the cost of goods, services, and property are allowable, in accordance with federal regulations, and expenditures appear to be within the submitted budget.

26. Allowable Costs • Suggested activities: • Review purchasing records. • Review monthly expenditure reports. • Review invoices and budgets.

27. Internal Management Systems • Verify that sufficient internal management systems are in place to ensure subrecipient has effective control over and accountability for all funds, property, and other assets.

28. Internal Management Systems • Suggested activities: • Review subrecipient’s procedure manual and or operating policies. • Review subrecipient’s inventory report/listing. • Review prior audits and corrective action plans.

29. Procurement Policy • Verify that the subrecipient’s procurement policy represents an acceptable level of internal control and is in accordance with federal procurement requirements.

30. Procurement Policy • Suggested activities: • Review any codes of conduct. • Review transactions.

31. Cost Allocation • Verify financial records to assure accounting records identify the source of funds and provide for accurate division of charges and cost as related to the subaward agreement.

32. Cost Allocation • Suggested activities: • Review cost allocation methodology. • Observe use of acquired assets to verify they are being used as charged.

33. Reports • Verify financial and other reports are supported by underlying accounting or performance records and are submitted in accordance with the provisions of the subaward agreement.

34. Reports • Suggested activity: • Review records to ensure: • Timeliness • Accuracy • Completeness

35. Cash Management • Verify cash management system provides reasonable assurance that federal funds are drawn down only for immediate needs. (Not applicable for reimbursement basis agreements.)

36. Cash Management • Suggested activities: • Review start up funds. • Review funding requests vs. expenditures.

37. Program Income • Verify that program income practice provides reasonable assurance income is correctly earned, recorded and used in accordance with the program requirements.

38. Program Income • Suggested activity: • Review records to ensure that program income was: • Recorded as earned. • Deposited as collected.

39. Monitoring Results • Upon conclusion of monitoring: • Findings will be completed by the reviewer and signed by the director of the agency or designee. • A copy will be mailed to the subrecipient identifying any deficiencies.

40. Monitoring Results • Upon conclusion of monitoring: • Immediate action should be taken to correct issues involving ineligible uses of federal funds. • A corrective action plan should be developed by the subrecipient within 60 days from the issuance of the review findings to address deficiencies or noncompliance issues.

41. Monitoring Follow-Up • Why is follow-up important? • Identify recurring problems to a program • Example: Incorrect eligibility determinations could result in unallowable charges to federal program. • Identify recurring problems with a subrecipient • Example: Subrecipient that fails to correct monitoring findings is at risk of incurring additional unallowable costs or audit findings.

42. Monitoring Follow-Up • Consequences: • Pass-through entity may withhold program funds until corrective action is taken. • Could result in reportable condition in subrecipient’s audit.

43. Where do you look for guidance? • OAC 5101:9-1-88 • OMB Circular A-133 • 45 CFR 92.40 • Techniques for Monitoring Federal Subawards (Thompson Publishing Group) • ODJFS Fiscal Supervisor