NCJA’s National Forum on Financial Management Training Office of the chief financial officer

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Importance of Internal Controls

Internal Controls

Internal Controls Defined broadly, internal controls involves everything that controls risks in an organization. It is how resources are directed, monitored, and measured. Strong internal controls can ensure effective and efficient operations, reliable financial reporting, and compliance with applicable laws and regulations.

Internal Controls Internal controls can only be expected to provide reasonable assurance, not absolute. Internal controls are important for detecting and preventing fraud. Proper segregation of duties is a critical element of adequate internal control. Requirements for internal controls are issued by GAO and COSO.

Administrative Funds Sub-recipient Contractor Contractor Sub-recipient

Administrative Funds Allows pass-through entities to utilize a specified percentage of an award to administer the program. Funds must be tracked separately and reported on the SF-425. Administrative funds may be billed either directly or indirectly. Recipients are prohibited from commingling funds on a program-by-program or project-by-project basis.

Federal Grants Update

Applicable Laws and Regulations Affecting Federal Grant Funds

2 CFR Part 200 Uniform Requirements There were (5) five updates published in CY-15. Updates consisted of technical corrections (add and/or delete language). Electronic version (e-CFR) frequently updated.

2015 DOJ Grants Financial Guide Each DOJ grant-making component now using the same Financial Guide. Pre-award Risk Assessment - (Federal agencies). Procurement Guide Non-Federal entities may request an extension of a current negotiated rate for a period of up to (4) years.

2015 DOJ Grants Financial Guide A non-federal entity that has never received a negotiated indirect cost rate, may elect to charge a de minimis rate of up to 10%. Budget modifications greater than 10% of the total award requires prior approval – (new threshold $150K). Threshold $750K or more expended during the FY – Single Audit required.

Top Ten Monitoring Findings 14

TEN TOP MONITORING FINDINGS (FY 2015) 1. Procedures not documented or need improvement. 2. FFATA Reporting requirements not met. 3. Unauthorized Costs. 4. FFRs did not reconcile to grantee’s accounting records. 5. Indirect costs charged improperly. 15 15 15

TEN TOP MONITORING FINDINGS (FY 2015) 6. Budget category expenditures not properly tracked. 7. Unallowable Costs 8. Unsupported Costs. 9. Indirect costs not reported on the FFR. 10. Special conditions not met by grantees. 16 16 16

TOP TEN AUDIT FINDINGS (FY2015) 1. Procedures not documented or need improvement. 2. Accounting system inadequate or not effectively utilized to account for grant funds. 3. Special conditions not met by grantee – unsupported/unauthorized expenditures/drawdowns. 4. Financial and Program reports not submitted timely or accurately prepared. 5. Excess cash-on-hand identified. 17 17 17

TOP TEN AUDIT FINDINGS (FY2015) 6. Suspension and Debarment - verification not performed or not properly documented. 7. Subrecipient monitoring not being conducted. 8. Supplanting indicators identified. 9. Matching funds not accurately reported on FFRs. 10. Program/interest income and related expenditures not recorded in accounting system. 18 18 18

Questions & Answers (Q&A)