KHC Program Compliance

1. KHCProgram Compliance

2. What is Compliance? Adherence to: • Funding agreements • Federal regulations • State regulations • Contracts • Binding agreements

3. Points to Consider • By accepting a federal grant or subgrant, the recipient agrees to comply with the applicable Federal requirements and to the prudent management of all expenditures and actions affecting the award. • Every document submitted (grant application, draw request, performance report, etc.) is a statement to a government official. • Every draw request is a certification that the awardee is complying with all material requirements and terms of the award.

4. What is a Compliance Review? • A review of financial records, draw requests, client files, policies and procedures, training records, etc. • Review any other pertinent documentation to ensure proper administration of program funds. • May include a physical inspection of property.

5. Why Do a Compliance Review? • Detect and correct violations. • Evaluate program progress and status. • Assist the agency in strengthening program administration. • Identify training and technical assistance needs. • Identify best practices. • Assess effectiveness of our internal processes.

6. References for Requirements • OMB Cir. A-110, Uniform Administrative Requirements for Grants and Agreements for Nonprofit Organizations • OMB Cir. A-122, Cost Principles for Nonprofit Organizations • OMB Cir. A-133, Audits of States, Local Governments, and Nonprofit Organizations • Statutes and Regulations that establish specific grant programs • Agency-specific funding agreements, contracts, Memorandum of Agreements

7. OMB Cir. A-110 Uniform Administrative Requirements for Grants and Agreements for Nonprofit Organizations Contains common administrative requirements for all federal awards • Reporting requirements • Project performance • Financial • Code of Conduct

8. OMB Cir. A-110 (continued) • Procurement standards: • Free and open competition. • Conflict of interest policy. • Cost and price reasonableness. • Contract administration and documentation. • Equal Employment Opportunity and other labor and employment standards.

9. OMB Cir. A-110 (continued) • Effective control over and accountability for all funds, property, and other assets. • Written procedures for determining the reasonableness, allocability, and allowability of costs. • Accounting for and use of program income. • Accounting records with supporting documentation.

10. OMB Cir. A-122 Cost Principles for Nonprofit Organizations • Compliance with Cost Principles is the primary area of focus in audits. • Grant application budgets and financial reports are scrutinized for compliance with cost principles. • Costs expended with grant funds must be: • Reasonable in amount. • Allocable to the purpose of the grant program. • Allowable under government cost principles.

11. OMB Cir. A-122 (continued) Areas of concern: • Indirect costs • Administrative costs • Facilities costs • Direct costs • Employee compensation • Professional services and subcontracts • Travel expenses • Eligible grant expenditures

12. OMB Cir. A-133 Audits of States, Local Governments, and Nonprofit Organizations • Currently, A-133 applies to any grant recipient or subrecipient that expends more than $500,000 in federal awards. • Changes proposed to OMB Cir. A-133 in 2013. • Proposed changes would consolidate all OMB Circulars into one.

13. Statutes and Regulations • A statute is the federal law that establishes the program and authorizes the use of federal dollars to fund it. • A regulation defines how the statute (law) will be carried out.

14. Funding Agreements and Contracts • Defines what your agency is agreeing to do. • Can impose further restrictions in addition to statutes and regulations. • Requires “pass through” language for subgrantees or subcontracts.

15. Common Compliance Issues • Lack of source documentation to support costs. • Ineligible costs charged to the grant. • Inadequate procedures to track, manage or account for expenses. • Serving ineligible clients. • Inadequate documentation of client eligibility. • Inadequate oversight of subrecipients. • Failure to maintain required program documentation.

16. Compliance Risk Areas • Adequate documentation • Source documentation for expenditures • Client eligibility • Labor charges (personnel activity records) • Direct vs. Indirect • Allocation over multiple projects • Consistency with approved grant budget

17. Compliance Risk Areas (continued) • Cost-sharing (match requirement) • Separation of funds for each award • Subgrantee monitoring • Conflict of interest

18. Documentation • Expenditures • Receipts • Bills • Lease documents for clients • Labor charges • Time and attendance records

19. Documentation(continued) • Match • Conflict of interest • Conflict of employees/board members regarding purchases or services. • Conflict of employees/board members and clients served.

20. SHR Monitoring 1. Review Preparation 2. Review Execution 3. Review Closure

21. Review Preparation The monitor reviews: • Funding Agreement • Project Application • Previous monitoring reviews • Responses to previous monitoring reviews • Other

22. Review Execution Items of Focus include: • Policies and Procedures • Universal Draw Requests • Required Match • Personnel Activity Reports • Client Files • Other

23. Review Execution Policies and Procedures • Program policies • Financial policies • Other federally-required policies

24. Review Execution Universal Draw Request • Draw selection • Reviewing a draw • Source documentation

25. Review Execution Reviewing the Draw • Authorized signature form • Reimbursement/Advancement of funds • Identification, determination, and confirmation of reimbursed funds

26. Review Execution Required Match • Review source • Review expenditure verification • Determine client/activity eligibility

27. Review Execution Personnel Activity Reports • Completion • Accuracy • Compliance

28. Review Execution Client Files • Eligibility documentation • Required verifications • Required forms

29. Review Execution Other Items for Review • Fair Housing • Evidence of adherence to policies • Other

30. Review Closure Closing a Review • Timeframes • Communication • Acceptable Methods of Corrective Action

31. Documenting Your Files • HUD Expectations • Eligibility • Case Notes • Other required elements

32. Documenting Financials • Source Documentation • Match • Personnel Activity Reports

33. Source Documentation • Who • What • When • Where • Why • How

34. Match Documentation • Who • What • When • Where • Why • How

35. Personnel Activity Reports • Who • What • When • Where • Why • How

36. Site Visit:What Happens Prior? • Compliance officer contacts the entity to coordinate the date(s) to conduct the review. • An official scheduling letter is issued to the agency detailing the date and time the monitor will arrive. • The agency is provided a list of documentation needed for the review. • The compliance officer prepares for the visit by reviewing funding agreements and documentation of prior reviews.

37. Site Visit: What To Expect • Initial meeting with the executive director, program director, and program staff to explain the purpose and schedule of the review. • Interview members of the organization's staff to gather information about activities and performance. • Review additional materials provided by the entity to obtain more detailed information about the program or project.

38. Site Visit: What To Expect (continued) • Examine a sampling of files to verify the existence of required documentation and the accuracy of reports and draw requests being submitted. • Visit a sampling of program sites (or the project itself) to confirm information contained in program files; this may also include interviewing residents. • Conduct an exit conference with appropriate senior staff to discuss the preliminary conclusions of the review and identify any follow-up actions necessary.

39. I’ve been monitored…now what? • A summary letter is issued to the agency. • Findings, concerns, observations • The letter will detail any follow-up action required. • A deadline for response will be included in the letter. • Compliance staff will assess the response and either close the review or request additional information.

40. Why should I respond? • Failure to adequately respond to a finding may result in the recapture of funds. • Unresolved findings will affect future funding requests from KHC.

41. How can I prepare? Ongoing: • Read and understand your funding agreement. • Ensure program staff is aware of program requirements. • Training for key managers and grant management personnel • Establish organizational policies and procedures. • Tailor them to the grant requirements

42. How can I prepare? (continued) • Subgrantees and subcontracts • Flow-down program requirements • Actively manage and monitor their performance • Obtain and maintain required documentation. • Regularly review and assess the items above.

43. How can I prepare? (continued) When a visit is scheduled: • Gather required documentation prior to the day of the review. • Provide adequate, quiet working space for the monitor. • Ensure appropriate staff is available during the review. • Be available for interviews, questions, and additional documentation requests.