1. AUDIT DOCUMENTS AND AUDIT PROCESS Presented by Dion Andres – Sacramento LGA Adele Realista – Santa Cruz LGA

2. WHAT IS AN AUDIT? An Audit is a methodical examination of utilization of resources. It concludes with a written report of its findings. An audit is a test of management’s accounting system to determine the extent to which internal accounting controls are both available and being used. Audits may be classified as Internal or Independent depending upon whether they are performed by internal or external auditors. External auditors must be independent both in fact and in appearance. Audits are performed in accordance to generally accepted auditing standards or GAAS.

3. TYPES OF AUDITS FINANCIAL AND COMPLIANCE AUDITS PROGRAM COMPLIANCE AUDITS SINGLE AUDITS PERFORMANCE AUDITS

4. GOVERNMENT ACCOUNTABILITY The Government Accountability Office or GAO developed standards that are set forth in standards for Audits of Governmental Organizations, Programs, Activities and Functions. These standards provide guidance to auditors performing financial and compliance, program compliance, performance audits. Audit is not limited to GAO Standards

5. GENERAL STANDARDS Full scope of an audit – examination of financial records, reports, accounts, including an evaluation of compliance with applicable laws and regulations. Auditors must collectively possess adequate professional proficiency for the tasks required. Must maintain independent attitude Professional care is to be used in conducting audit

6. AUDIT PROCESS Engagement Letter Entrance Meeting During Audit After Audit Exit Meeting Recommendation Management Response Acceptance Letter

7. STATE CONTRACT- EXHIBIT E Audit This provision supersedes Provision #4, entitled “Audit” in General Terms & Conditions (GTC 307). View Exhibit C at the following Internet site: http://www.ols.dgs.ca.gov/Standard+Language. http://www.ols.dgs.ca.gov Contractor agrees that the awarding department, the Department of General Services, the Bureau of State Audits, or their designated representative, and employees of the California Department of Justice, and the United States Centers for Medicare and Medicaid Services, shall have the right to review, access, examine, monitor, audit, and to copy any records and supporting documentation pertaining to the performance of this agreement. Contractor agrees to allow interviews of any employees, or staff of any subcontractor, who might reasonably have information related to such records by either state and/or federal authorities. Contractor agrees to retain all necessary records for a minimum period of three (3) years after the end of the quarter in which the expenditures were incurred for MAA and, if an audit is in progress, all records relevant to the audit shall be retained until the completion of the audit or the final resolution of all audit exceptions, deferrals, and/or disallowances, whichever is later, and if litigation has been initiated, all necessary records shall be retained until the final resolution of the litigation. The records shall fully disclose the type and extent of administrative activities performed by the appropriate staff. The Contractor shall furnish such documentation and any other information regarding the performance of and payment for MAA, upon request, to the state or federal government.

8. ENGAGEMENT LETTER The relationship between the independent auditor and the audited government entity should properly be handled on a legally binding contractual basis. Formal written contract for independent audit examinations are commonly called engagement letter. This is also referred as Entrance Letter

9. Documents that the Auditor would ask to review Audit file should include but not limited to the following: Original Time Survey – signed in blue ink, reviewed and dated at the end of a period. Completed SPMP Questionnaire & Licenses Certified time for direct charged staff Copies of Time sheets Organizational Chart including current names of persons in each position Chart of Accounts

10. Continued… Accounting Policies and Procedures General Ledger or Trial Balance Salaries and benefits payroll report Paid Invoices that support expenses claimed, purchase orders and receiving reports Lease contracts List of Fixed assets Employee contracts and leave schedules Overhead allocation Cost Allocation plan and/or Indirect Cost Rate Plan

11. Continued… Contracts with LGA/CBO/Vendors Outreach Materials for CMAA Training Materials and Attendance Sheets Encounter Log for TCM Client Case files for TCM CAFR – Comprehensive Annual Financial Report or Prior year audit report Copies of formally adopted annual operating budget and any amendment Revenue contracts used as CPE Proof of receipt of CPE funds

12. Entrance Meeting In person meeting with auditors and staff that will be involved during the audit. Introductions Auditors summarize their scope of work Ask questions for clarification Meet the staff who will provide materials Accessibility to facilities

13. WHAT HAPPENS DURING AUDIT Auditors should be given a room to conduct their audit Staff should make themselves available in case of questions or additional information During the audit, there is an opportunity to correct any findings Prior to audit, all documents requested on the engagement letter should have been gathered and given to the auditors at the entrance meeting Usually the auditors will notify if they will finish on time or will need to extend their time

14. AFTER THE AUDIT AND EXIT MEETING The auditors will ask if you need to have an exit meeting During the exit meeting, the auditors will summarize their findings and answer questions Arrangements can be made to provide corrections or additional documentations The auditors will provide time lines on when they will send the summary of findings

15. SUMMARY OF FINDINGS AND RECOMMENDATIONS This is a formal letter that summarizes the auditors’ findings with their recommendations The recommendations are expected to be corrected effective immediately If not corrected, it will automatically be another finding in the following year and the program will be noted or flagged as audit risk

16. MANAGEMENT RESPONSE An authorized personnel will respond to the Summary of findings and recommendation letter The response will either be a concurrence to the findings with a corrective action plan or an explanation to a disagreement to the findings

17. ACCEPTANCE Auditor will issue an acceptance letter to the Management response with the corrective action plan and closes the audit. Auditor will issue an audit report The following year, if audited, the Auditors will revisit the corrective action plan to ensure that it was properly in place.

18. AUDIT REPORT Unqualified Opinion – Financial statements do present fairly financial position and results of operation is in conformity with GAAP. Qualified Opinion – Financial statements are presented fairly except for certain audit exceptions Adverse Opinion – Financial statements do not present fairly financial position and results of operation do not conform with GAAP.

19. Site Review for CMAA Date and time of the site review Address where site review will take place Fiscal year being reviewed Claiming units selected for review CMAA site visit Documentation checklist–Appendix Q CMAA Unit Site Visit Tool Worksheet – Appendix R CMAA Time Survey Participant Interview questionnaire – Appendix S Participating Staff Interview schedule – Appendix T

20. SITE REVIEW FOR TCM This process is pretty much consistent with CMAA 30 day notice prior to sending the Entrance letter Date and time of site visit Address where site review takes place Fiscal year being reviewed Budget unit selected to be reviewed Case Manager interview questionnaire and schedule LGA Coordinator interview questionnaire and schedule List of Encounter and client case files to review Original Time Survey forms

21. APPEAL PROCESS Right to appeal Informal Hearing - with a hearing officer Formal Hearing – with a judge For TCM instructions to appeal is included in the Blue Cover Audit Report For SMAA refer to PPL 14-006 For CMAA refer to implementation manual

22. QUESTIONS Your questions can also be answered by visiting the consortium lounge during the conference.