Fiscal Monitoring OCFS Bureau of Compliance 6152021 1
Fiscal Monitoring OCFS Bureau of Compliance 6/15/2021 1
What is fiscal monitoring? • Fiscal Monitoring is a limited scope review of an organization’s transactions, accounts and records made for the purpose of rendering a judgment whether the limited sample of transactions reviewed are consistent with contract terms, and representative of actual cost as supported by books and records of the organization • It is a risk assessment function that can help determine whether a fiscal audit is necessary. 6/15/2021 2
What is a contract audit? • Contract audit is a comprehensive and independent examination of an organization’s transactions, accounts, records, made for the purpose of obtaining reasonable assurances that all material expenditures claimed for reimbursement were consistent with contract terms and representative of actual cost, as supported by the books and records of the organization 6/15/2021 3
Why fiscal monitoring is important? • Monitoring has a significant deterrent effect. If contractors know that their fiscal records and transactions will be reviewed exercise more care in the preparation of their claims, they will be less likely to commit fraud or other improper activities. • Fiscal monitoring can actually improve programmatic aspects of the contract because it helps ensure that funds are used effectively, and only for programmatic purposes. 6/15/2021 4
• Helps identify contractors at risk so assistance can be provided before they fail. • There is a significant risk of fraud, which can result in loss of funds, which in turn can negatively impact the organization and result in bad publicity for OCFS. • Failure to properly monitor programs can result in audit disallowance. • Failure to properly monitor programs could result in an audit finding by the Office of the State Comptroller. 6/15/2021 5
What are the two types of fiscal monitoring • On-site Fiscal monitoring: this involves a visit to the agency’s administrative offices/program operations to conduct interviews and review records. • Administrative Monitoring (Desk Audit): this involves the agency to submit copies of supporting documentation (e. g. payroll payouts, cancelled checks etc. ) to substantiate all of the expenses claimed on vouchers. 6/15/2021 6
Advantages • Advantages of on-site monitoring include: üAvailability of original source documentation üThe ability to observe program operations. üRead availability of staff to answer questions and provide additional documentation that might be necessary. 6/15/2021 7
Advantages • Advantages of a desk audit include: üThis type of monitoring does not present the time pressures that often accompany on-site monitoring visits. 6/15/2021 8
On-Site Monitoring Procedures • Personal Services – Salaries: Generally, monitoring efforts should always include a review of personal services (salaries) expenditures. 6/15/2021 9
On-Site Monitoring Procedures • Payroll Taxes – Reimbursement paid to programs is based on gross salaries paid by the program to its employees. If the agency failed to remit federal and state taxes withheld from employees’ salaries to the appropriate tax authorities there should be a disallowance in the amount of taxes withheld from the salaries of OCFS funded employees, but not remitted. 6/15/2021 10
On-Site Monitoring Procedures • Fringe Benefits – If fringe benefits are claimed based on actual expenses, verify the accuracy of the claimed amount by reviewing cancelled checks and invoices. 6/15/2021 11
Potential Findings • • • No-Show Employees “Double Dipping” No Time sheets or inaccurate timesheets Improper allocation Payroll taxes not paid 6/15/2021 12
Contractual Expenditures • Contractual expenses should be verified through examination of source documentation such as cancelled checks and invoices. 6/15/2021 13
Potential Findings • Issuing a check payable to cash, to a employees personal business or to a shell company or themselves. • Legitimate invoices that have already been paid, are paid again. • Invoices without phone numbers. • Frequent use of PO Boxes, suite addresses, of residential addresses. 6/15/2021 14
Potential Findings (continued) • Sequentially-numbers invoices. • Invoices not on company letterhead. 6/15/2021 15
Contractual / Consultants • The contractual / consultants category is highly susceptible to abuse. Contracts are sometimes awarded based on personal relationships rather than to consultants who are the most qualified and / or the most price competitive. 6/15/2021 16
Potential Findings • Contracts awarded based on personal relationships • Consultant / contractor not qualified. • Excessive pricing. • Kickbacks. • Little or no work preformed. • Consultants perform work that should be performed by employees. • Improper classification of employees as consultants. 6/15/2021 17
Travel Expenses • Travel expenses should be traced back to receipts and cancelled checks to confirm their legitimacy. Exercise caution in accepting credit card statements as proof of expenses given the lack of detail provided by these documents. Where possible limit travel reimbursement to state rates. The use of perdiems is recommended. 6/15/2021 18
Potential Findings • Travel expenses claimed based on advance rather than actual expenditures. • Unnecessary Travel • Personal travel expense charged to program. • Travel expenses exceed approved rates • Misuse of petty cash account to reimburse insufficiently-documented staff travel. 6/15/2021 19
Equipment • Equipment purchased with OCFS funds for programmatic purposes, are sometimes used for administrative purposes, sometimes by people who are not assigned to work on the funded program. It is important that the program account for the equipment and the manner in which it is being used. 6/15/2021 20
Supplies Expenditures • Supplies expense should be reasonable given the size and nature of the program. This expense area is susceptible to many of the same fraud and irregularities found in other categories. If supply cost are allocated the monitor should review the allocation method to judge its appropriateness. 6/15/2021 21
Rent, Utilities and Other Expenditures • When rent and utility cost are allocated the monitor should evaluate the appropriateness of the allocation methodology. Rent and utilities are typically allocated based on square footage used. If reimbursing on a lease, review the lease to determine that the cost are reasonable. Expenses claimed should be traced back to invoices and cancelled checks (as with other expenditures) 6/15/2021 22
Other Tidbits • Time Records – Program should maintain accurate time records for all OCFS funded employees. These records must included: üPeriod covered üFull signature of employee üFull signature of supervisor 6/15/2021 23
Other Tidbits (continued) • Consultant / Contractual Services – If consultant services are being reimbursed with OCFS funds there must be a written agreement on file for each consultant. The agreement must included: üOutline of work to be performed üRate of pay üDuration of service 6/15/2021 24
Other Tidbits (continued) • Bank Statement Reconciliation – Bank account statements must be reconciled monthly by someone other that the fiscal officer or persons who sign the checks. Reconciled statements should be signed and dated to document that they were reconciled. 6/15/2021 25
Other Tidbits (continued) • Cash receipt / disbursement journals – Agencies receiving OCFS funds must maintain an accounting system which permits separate identification of receipt and expenditure of these funds. This should include a cash receipts journal listing all funds received, including source and amount and a cash disbursements journal listing all funds disbursed, including payee and amount. 6/15/2021 26
Other Tidbits (continued) • Shared Cost – State Finance Law and GAAP require that any expenses incurred over more that one funding source or program must be charged proportionately and the method of allocation must be documented. • Someone other than the fiscal officer should verify receipt of goods (sign for delivery) 6/15/2021 27
Other Tidbits (continued) • Petty Cash - Invoices or receipts with a brief description of expenditures should be maintained to document petty cash expenditures. Petty cash disbursement documentation should include: üDate üPayee üPurpose üApproved by üReceived by 6/15/2021 28
Other Tidbits (continued) • Shared Cost – State Finance Law and GAAP require that any expenses incurred over more that one funding source or program must be charged proportionately and the method of allocation must be documented. 6/15/2021 29
Other Tidbits (continued) • Agency Board of Directors must operate in accordance with it’s corporate by-laws • Reports should be made to the Board regarding program activities and accomplishments. • OCFS should be identified as a funding source in any and all promotional material 6/15/2021 30
Other Tidbits (continued) • Agency checks should be signed by two people and should be different from those who have direct responsibility to maintain the checking account, books and records. • Agency should maintain records so as to keep each grant year’s expenditures accounted for separately. 6/15/2021 31
Other Tidbits (continued) • Exterior of the program site should be maintained and in good repair and free from any danger to safety and health. • Interior of the program site ( furnishings, floor coverings, stairways, handrails) should be maintained and in good repair and free from any danger to health and safety. 6/15/2021 32
Other Tidbits (continued) • Program site should have at least two unobstructed and easily accessible means of egress to the exterior of the building. • The means of egress should be identified with illuminated exit signs (visible in the dark). • Program site should have emergency exit route posted on diagrams which are located in areas conducive to easy viewing. 6/15/2021 33
Other Tidbits (continued) • Exterior of the program site should be maintained and in good repair and free from any danger to safety and health. • Interior of the program site ( furnishings, floor coverings, stairways, handrails) should be maintained and in good repair and free from any danger to health and safety. 6/15/2021 34
Other Tidbits (continued) • Program site should have fire extinguishers available which are: üOperable as verified by an inspection tag signed and dated by a certified inspector within previous 12 months. • Program should have a first aid kit and a spill kit. 6/15/2021 35
Other Tidbits (continued) • Program should have fire, heat and/or smoke and CO 2 detectors. • Flammable or highly combustible materials (ex. Gasoline, spray paint, solvents, varnish, wood stain, turpentine) at the program site should be stored in fire restrictive storage units. 6/15/2021 36
Other Tidbits (continued) • Agency should maintain documentation that the program site has received a fire inspection within the previous 12 months, and that any violations have been corrected. Programs located in areas of public access such as court houses, libraries, and schools are exempt from this requirement. 6/15/2021 37
Other Tidbits (continued) • When monitoring visits are conducted the results of the visit should always be detailed in a written report. • Program strengths identified through monitoring can be brought to the attention of other agencies as they might be able to use those practices to enhance their programs. 6/15/2021 38
It’s Up To You • Through experience, you will learn what’s important, what questions need to be asked, and what questions can be answered. 6/15/2021 39
- Slides: 39