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Financial Compliance

Financial Compliance

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Financial Compliance

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  1. Financial Compliance NC DPI Monitoring & Compliance Section October 21, 2013

  2. Objectives Attendees will gain an understanding of the following: • NC DPI’s Monitoring & Compliance Section • Roles • Contact information • Financial accountability and compliance requirements, especially as they apply to receipt of federal grants • Audited Financial Statements • Internal Controls • Financial Noncompliance

  3. Monitoring & Compliance Section What is the role of Monitoring & Compliance Section related to charter schools? Provide quality support to charter schools and their stakeholders through timely and accurate oversight and monitoring of charter school grants, programs and related initiatives. Under what authority does Monitoring and & Compliance operate? 34 CFR 80.40 - Grantees (DPI) must monitor grant and subgrant supported activities to assure compliance with applicable Federal requirements.

  4. Monitoring & Compliance Section Oversight activities include (but are not limited to) the following: • Fiscal monitoring • 21st Century Community Learning Center grants bond compliance • Administrative Cost Limitation compliance • Carryover Limitation compliance • Audit resolution • GS 143C-6-23 compliance • DUNS and SAM compliance • Technical Assistance • Charter School Financial Guide

  5. Monitoring & Compliance Section What is fiscal monitoring? What are some examples? On-site reviews Time and Effort Budget vs. Expenditure Equipment Contracted Services Written Policies and Procedures Desk reviews Review and analysis of the charter school’s activities to ensure Federal awards are used for authorized purposes in compliance with laws, regulations, and the provisions of contracts or grant agreements.

  6. Fiscal Expectations What is the expectation for fiscal responsibility for charter schools? • Charter schools are required to meet generally accepted standards of fiscal management. (NC Gen. Stat. 115C-238.29G(a)(2)). • Charter schools receiving federal funds must comply with applicable statutes, regulations, and approved applications; and must use Federal funds in accordance with those statutes, regulations, and applications.

  7. Legislation, Statutes& Guidance • Federal • No Child Left Behind Act of 2001 (NCLB) • Education Department of General Administrative Requirements (EDGAR) • General Education Provisions Act (GEPA) • OMB Circulars • A-133 • A-87 • North Carolina General Statute (GS115C-238.29A – GS115C-238.29K) • North Carolina State Board of Education (SBE) Policy

  8. Federal Grants Types of Grants Federal Funding Sources Child Nutrition IDEA Title VI-B (PRC 060) Title I (PRC 050) Federal Grants Available Through DPI • Formula • Allotted to all eligible applicants per a prescribed formula • Discretionary • Competitive grants

  9. Compliance Requirements • Allowable Costs • Budget • Due by June 30th • In format specified in grant application • DUNS number and SAM registration (Exhibit A) • Conflict of Interest Policy (Exhibit B) • Cash Management Improvement Act (CMIA) • Audited Financial Statements • Record Retention • Contracts • Inclusion of state language (GS115C-238.29H) • Administrative Cost Limitations • Carryover Limitations • Equipment Disposition • Documentation (Exhibit D) • Audit • Monitoring • Monitoring • Federal agencies • DPI Monitoring and Compliance Section fiscal monitoring • DPI Program monitors • Office of State Budget and Management (OSBM) • Office of the State Auditor (OSA)

  10. Financial Statements North Carolina Education Law requires an annual audit in accordance with: • GS 115C-238.29F(f)(1) The school is subject to the financial audits, the audit procedures, and audit requirements adopted by the State Board of Education for charter schools. These audit requirements may include the requirements of the School Budget and Fiscal Control Act. • Generally Accepted Auditing Standards (GAAS) • Generally Accepted Government Auditing Standards (GAGAS)

  11. Financial Statements Responsibilities: • Coordinate audit firm selection process • Contract with selected independent auditor according to standard procurement guidelines • Respond to audit findings and develop and implement corrective action plans to resolve identified issues • Ensure audits are submitted to the Local Government Commission (LGC) by October 31st • LGC will analyze financial data from audit reports, and submitted report approved will forward report to the pass through entity (DPI) • DPI Monitoring & Compliance staff: • Reviews all audits to identify and track findings and corrective action, • Follows up on all proposed responses and corrective action plans to verify implementation

  12. Financial Statements Financial Statement Red Flags: • Low or negative cash balance • Accounts receivable remain constant throughout year without decrease • Payroll tax liabilities constant or increase • Current & Long Term Debt excessively high • Fund Balance decline or negative • Operating expenses higher than budget • Student count decline

  13. Financial Statements Most Common Audit Findings • Absence of Conflict of Interest Policy • Absence of Required Language on Contracts • No indebtedness of any kind shall constitute an indebtedness of the State or its political subdivisions, and no indebtedness of the charter school shall involve or be secured by the faith, credit, or taxing power of the State or its political subdivisions. • Internal Control Deficiencies • Segregation of Duties* • Procurement - suspension and debarment • Review and signoff • Claims in excess of eligible cost • Costs claimed lacked supporting documentation

  14. Internal Controls What is Internal Control? A process effected by an entity’s board, management and personnel designed to provide reasonable assurance regarding the achievement of certain objectives. What are the objectives of internal controls? • Reliable financial reporting, • Effective and efficient operations, • Compliance with applicable laws and regulations, and • Safeguarding assets against theft and unauthorized use, acquisition, or disposal

  15. 5)Monitoring 4) Information & Communication Flow 4) Information & Communication Flow 1) Control Environment 2)Risk Assessment 3)Control Activities 4) Information & Communication Flow Internal Control Components 5 Key Components of Internal Control

  16. Internal Control Components 1. Control Environment Goal is to set the tone for the organization so management and employees have similar attitudes towards compliance • Competent management • Clearly defined organizational structure • Adequate supervision • Good relationship with oversight agencies (like DPI)

  17. Internal Control Components 2. Risk Assessment Goal is to be able to identify and assess the threat that an event, action, or non-action will adversely affect the school’s ability to achieve its business objectives and strategies.

  18. Internal Control Components 3. Control Activities Goal is to develop an internal control system that helps ensure management’s directives are carried out throughout the organization. • Documentation • Approvals/authorization • Transactions • Appropriate reporting • Segregation of Duties • Ensuring assets are safeguarded • Tracing

  19. Internal Control Components 4. Information and Communication: Goal is for management to determine the answers to the following: • What information is necessary? • At what point will it be collected? • What techniques will be used for collection? • Who is responsible for collection? • How will it be used?

  20. Internal Control Components 5. Monitoring Goal is for monitoring to be both internal and external, occur on a regular, consistent basis utilizing policies and procedures as the benchmark to evaluate the effectiveness of the internal controls system and to be able to identify and report deficiencies.

  21. Financial Noncompliance • G.S.115C-238.29G - Causes for nonrenewal or termination include “failure to meet generally accepted standards of fiscal management” • SBE Policy TCS-U-006 - further defines the “standards of fiscal management” under which a charter school is held accountable.

  22. Financial Noncompliance Financial Noncompliance: • Failure to respond to requests for data (UERS or other). • Showing signs of financial insolvency or weakness. • Having material audit findings which remain unresolved. • Receiving NSF notifications from the State Treasurer’s office. • Having a declining student count

  23. Financial Noncompliance What are three stages of noncompliance for charter schools? • LEVEL 1 = Cautionary Stage (60 days) Minimal level warning to encourage immediate compliance. • LEVEL 2 = Probationary Stage (60 days) State funds may be allotted on a monthly basis. • LEVEL 3 = Disciplinary Stage (10 days) 10 days to respond to noncompliance issues. Last step before recommendation revocation of charter.

  24. Monitoring & Compliance Section Contact Information • Leigh Ann Kerr, Assistant Director, School Business Services; ; (919)807-3553 • Curtis Terry, Fiscal Analyst; ; (919)807-3720 • Keisha Davis, Fiscal Monitor; ; (919)807-3682 • Karen Frazier, Fiscal Monitor; ; (919)807-3738 • Gene Bruton, Accountant (Single Audit, DUNS/SAM, Certification); ; (919)807-3726

  25. Resources • NC Department of Public Instruction Financial and Business Services • • US Department of Education Guidance • • Office of Budget and Management • OMB Circular A-87, Attachment B • OMB Circular A-133 • OMB Circulars/Cost Principles •