How to Lead, Support and Enhance Title IV & Grant Management Compliance

1. How to Lead, Support and Enhance Title IV & Grant Management Compliance Presented by: Michelle Spriggs Patricia Gallagher Susan Jenks Beard

2. Presenters • Michelle Spriggs, CPA, MBA • Director, CBIZ Tofias & Mayer Hoffman McCann P.C. • Patricia Gallagher, CPA • Associate VP for Financial Affairs, Franklin W. Olin College of Engineering • Susan Jenks Beard • Director of Financial Aid, Wheaton College 1

3. Agenda • Federal spending • The regulatory environment • Key risks with grants management and Title IV compliance • Common A-133 findings • Preparing for a successful A-133 audit • Selecting an A-133 auditor • Best practices for detection and remediation 2

4. Prime Award FederalSpending FY 2012 Federal Spending (in billions) Source: USAspending.gov 3

5. Federal Awards by State(in billions) Source: USAspending.gov 4

6. Changing Regulatory Environment “Transparency Promotes Accountability.” H. Glenn Walker, Executive Director of the Recovery Accountability and Transparency Board, to the AICPA National Governmental Accounting and Auditing Update Conference – August 2010 5

7. Changing Regulatory Environment (Cont.) • Congressional interest • 2008 audit quality hearings • Focus on for-profit institutions is trickling down to not-for-profit institutions • Senator Grassley initiating audits for specific situations that he feels warrant attention 6

8. Changing Regulatory Environment (Cont.) • Presidential interest • 2009 Executive Order • 2011 Memorandum • Reduce payment errors • Eliminate fraud, abuse, waste • Improve effectiveness of single audits towards identifying improper payments • Identify opportunities to reform grant policies and streamline or eliminate single audit requirements where minimal value 7

9. Changing Regulatory Environment (Cont.) • GAO evaluated the single audit concept • Congress should designate a federal entity to evaluate and comprehensively monitor the single audit process • Assess the efficiency and effectiveness of how agencies carry out their single audit responsibilities • Consider simplified alternatives to small entities • Achieve a balance between risk and cost effective accountability 8

10. Changing Regulatory Environment (Cont.) • More government oversight coming our way • OMB considering a Grants Governance Board • Each federal agency to appoint a Chief Financial Assistance Officer and Single Audit Coordinator • OMB to establish a senior position to coordinate federal agency efforts • OMB is considering comments for potential changes to cost circulars 9

11. Changing Regulatory Environment (Cont.) • DOE announcement letter 1/17/12 • Bolstering enforcement of due date regulations for financial and compliance audits • Late reporting is deemed indicative of a lack of financial responsibility and administrative capacity and may indicate mismanagement of Title IV funds 10

12. Changing Regulatory Environment (Cont.) • DOE announcement letter 1/17/12 (Cont.) • Institution may be sited for a past performance violation • Will cause failure of financial responsibility requirements • Continued participation in the Title IV program will require: • Provisional certification • Posting of LOC at 10% of Title IV funds received • Use of heightened cash payment method 11

13. Changing Regulatory Environment (Cont.) • Revised incentive compensation rules in effect July 1, 2011 prohibiting incentive compensation to individuals or entities involved in recruiting students or making awards of student aid • compliance with these rules needs to be monitored on a consistent basis • OMB issued a Q&A on Federal Funding Accountability and Transparency Act (FFATA) compliance testing 12

14. Changing Regulatory Environment (Cont.) • US Court of Appeals for the District of Columbia upheld a lower court ruling that struck down part of the state authorization requirement in the Department of Education’s program integrity rules • US District Court of Columbia recently vacated most of the gainful employment rules 13

15. Changing Regulatory Environment (Cont.) • Other areas of focus • Third party servicers • NSLDS reporting • Perkins loans administration • Title IV refunds • Incorrect calculations • Late returns • Travel and expense reporting • Documentation deficiencies – policies and procedures not documented or up-to-date 14

16. Changing Regulatory Environment (Cont.) • Future changes to the Single Audit regulations • Increase the audit threshold to $1 million • Create a new category of audit requirement for expenditures between $1 million and $3 million • No significant changes for expenditures over $3 million • 9 month due date of A-133 audit likely to become 6 months 15

17. What Keeps You Up at Night 16

18. What Keeps You Up at Night 17

19. What Keeps You Up at Night 18

20. What Keeps You Up at Night 19

21. What Grants ComplianceManagement IS • Collaborative effort among all departments within the institution that has an impact on grant compliance • Don’t forget SFA department and their role 20

22. What Grants Compliance Management IS NOT • An effort placed solely on the shoulders of one individual or department • Grant compliance officer • Grants accountant • Program director • SFA department • An “enigma” the institution perceives as having no relation to securing new funds • Someone else’s responsibility 21

23. Obstacles to Compliance • Inadequate resources • Staff training, professional development • Poorly defined roles and responsibilities • Nonexistent or outdated policies and procedures related to federal grants management • Poor information systems • Poor conception of the importance of compliance and internal controls 22

24. Systems Management 23

25. Goals of the A-133Audit Process • Remain in good standing with federal government and pass-through entities • Minimize impact on your institution • Avoid repercussions from a bad audit • Minimize audit costs • Identify problematic areas • Keep good reputation in the community 24

26. A-133 Findings Summary Summary of findings reported on Data Collection Forms during 2007-2010 *Information obtained from the Federal Audit Clearinghouse 25

27. Top 5 A-133 Findings Summary of findings reported on Data Collection Forms during 2007-2010 *Summarized using information obtained from the Federal Audit Clearinghouse 26

28. Common A-133 Findings • Time and effort reporting • Salaries are charged based on actual time incurred and not budgeted time • Documentation exists based on level of effort performed • Can be timesheet or other documentation directly from the individual on a periodic basis verifying actual time spent and charged 27

29. Common A-133 Findings (Cont.) • Time and effort reporting (Cont.) • HHS and NSF OIGs expressed concern and being aggressive in areas of noncompliance • Several high-profile universities fined • Auditor work being reviewed 28

30. Common A-133 Findings (Cont.) • Subrecipient monitoring • Area of federal focus (i.e. FFATA reporting) • Comprehensive written policy needed • Consideration of for-profit and foreign subs • Procedures when A-133 reports are not required by subs • Annual risk assessment – at a minimum • Quality of the A-133 audit review process • Quality of follow-up actions 29

31. Common A-133 Findings (Cont.) • Procurement • Documentation of bid or sole source decision • Material and services • Subrecipient selection • Name of a vendor or subrecipient in an award application or proposal is not indicative of federal approval of such • Review of debarment of vendors or subrecipients 30

32. Preparing for a Successful A-133 Audit • Proper scheduling of fieldwork • Coordination with multiple departments • Timeline for deliverables for all • Explicit PBC listing • Ask questions to know what your auditor is looking for 31

33. Preparing for a Successful A-133 Audit (Cont.) • Actively manage the workflow • Assign a point person • Manage the process • Have regular progress meetings • Discuss emerging concerns • No surprises! • Push back when appropriate • Use everything learned for improvements for next year 32

34. Preparing for a Successful A-133 Audit (Cont.) • Responding to findings • Campus “tone at the top” – commitment to get things right • Identify the real problem • Fix the disease not the symptom • Obtain buy-in from all involved • Create training opportunities • Start action plans ASAP 33

35. Preparing for a Successful A-133 Audit (Cont.) • Complete and accurate Schedule of Expenditures of Federal Awards (SEFA) • Pass through entities and identifying numbers • ARRA funds • Clusters • Programs/clusters > $300k may be audited • Programs/clusters with ARRA $ may be audited 34

36. Preparing for a Successful A-133 Audit (Cont.) • Identification of research and development programs • National Science Foundation • Check data collection forms for how CFDA numbers reported by other institutions http://harvester.census.gov/sac/ 35

37. Preparing for a Successful A-133 Audit (Cont.) • Understanding and identifying applicable compliance requirements • Read and understand the grant agreements • Obtain and review the latest version of A-133 Compliance Supplement http://www.whitehouse.gov/omb/circulars/a133_compliance_supplement_2012 36

38. Preparing for a Successful A-133 Audit (Cont.) • Be familiar with applicable cost circulars • A-21 Cost Principles for Educational Institutions http://www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a021/a21_2004.pdf • A-122 Cost Principles for NFP Organizations http://www.whitehouse.gov/sites/default/files/omb/assets/omb/circulars/a122/a122_2004.pdf 37

39. Preparing for a Successful A-133 Audit (Cont.) • Organized files • Supporting documentation for expenses, eligibility, procurement, subrecipient monitoring • Appropriate approvals If it’s not documented…….it didn’t happen! 38

40. Selecting an A-133 Auditor • Demonstration of qualifications • Number of A-133 clients • Both the firm and the individuals assigned • Types of programs and agencies auditing • Are A-133 auditors local • How often is the partner/senior manager in the field • Participation in improvement programs like GAQC • Look up some of their audits (Mass AG and DCF sites) 39

41. Selecting an A-133 Auditor (Cont.) • Talk to references • How practical are they to work with • How knowledgeable is the team • Review results of external peer review • Members of SFA and Grants Management departments involved in the interview process 40

42. Best Practices for Detection and Remediation • Create a grants and/or Title IV administration program that incorporates the A-133 compliance requirements and internal controls framework • Ensure all expenditures approved by program manager • Documentation sufficient to determine nature of expenditure and allowability kept 41

43. Best Practices for Detection and Remediation (Cont.) • Expect personnel responsible for these areas to manage awards considering A-133 compliance requirements • Ensure responsible personnel are keeping abreast of changes in policies or requirements • Attending key conferences and seminars • Members of relevant associations and list serves 42

44. Best Practices for Detection and Remediation (Cont.) • Collaborating among departments • Regular budget to actual reviews and discussions of variances • Promote an environment of open communication so decisions are not made without considering impact on other areas • Establish a system of budget control and monitoring 43

45. Best Practices for Detection and Remediation (Cont.) • Use a strong accounting and performance reporting system • Each grant has its own accounting record/cost center • Accounting record/cost center tracks expenditures to approved budget • Consider an internal audit process 44

46. Education of Governance 45

47. Questions? 46