0. Audit, Financial Management and Expenditures
Resources to Help You Up Your Game
Barbara A. Loescher, CIA
Chief, Internal Audit Section/Assistant Inspector General
May 4, 2017

1. Today’s Topics DHS Audit Guide Financial Management Manual
Allowable Cost Policy Manual
Uniform Guidance issues
DHS review and resolution of county audits
Pending legislation

2. DHS Audit Guide Revision
Reasons for the revision:
To bring the Guide into conformance with the Uniform Guidance
To adopt a risk-based approach in the Guide in alignment with that of the AICPA
To eliminate excess, obsolete or unnecessary information
To combine all parts into one searchable, navigable document

3. Primary Changes
Testing of some fee-based services is no longer required.
Language related to information technology and separation of duties duplicated audit industry requirements and was removed.
Three required schedules were slightly altered.
The switch to risk-based auditing allows auditors to determine major programs and applicable compliance testing.

4. Where Can I Find It?
The Audit Guide is available on the Department of Administration’s website.
The revision was finalized and posted in January,
It was effective for any audits for periods ending December 31, 2016 and later.
There will be some minor revisions in late 2016.

5. Financial Management Manual
Why was a revision necessary?
Was last revised 1995
Not in compliance with Uniform Guidance
Doesn’t adequately address today’s issues, i.e., information technology, fraud, current accounting issues.
Needed to be more readable

6. Goals for the Revision
To facilitate better access and awareness to the Department’s requirements regarding financial management
To give providers useful information on best practices that can be applied to prevent audit findings
To incorporate new requirements from the Uniform Guidance

7. Primary Changes
Manual has been expanded to include non- profits, not just counties.
Chapters on allowable cost and the model contract have been removed and are now separate documents.
New section on fraud, waste and abuse
Expansion on information technology issues
Expansion on internal controls
New section on procurement

8. Allowable Cost Policy Manual
Why was this revision necessary?
Last revised in 1999
Is not in compliance with the Uniform Guidance
Needs to more clearly define what is allowable and what is not

9. Primary Changes
The manual will be expanded from the previous version to include:
How to set up your system to account for unallowable costs
A new section on expressly prohibited costs
A new section on documentation requirements
Department interpretation of what constitutes “reasonable and necessary”

10. Timeline for Distribution
Both manuals need to be reviewed internally by several entities before it can be published.
Both manuals will be provided to potential external users for comment.
Goal is to be ready to post online by July 1st on the Department’s web.

11. Uniform Guidance
Should be fully implemented with the exception of procurement requirements (July 1, 2017)
Department implementation is in progress
Still to come:
Sanctions policy
Audits of provider agencies

12. Resolution of County Audits
Common findings for counties:
Lack of separation of duties
Lack of expertise for preparing financial statements
Lack of reconciliations
As the cognizant agency, the Department is responsible for following up on cross-cutting findings
Has met with varying levels of warmth

13. Pending Legislation
Has been drafted that impacts both the audit threshold and allowable reserves earned by non- profit organizations
Is being promoted by Wisconsin Association of Foster Care Agencies
Changes will impact providers of
DHS, DCF and DOC
Counties

14. Proposed Changes - Threshold
The audit threshold will be increased from $25,000 to $100,000.

15. Impact of Threshold Increase
Fewer individual waivers requests
Eliminates the need for mandate relief waivers at the current thresholds
Saves staff time for processing waivers

16. Proposed Changes - Reserves
Non-profits would be able to retain up to 5% of revenue annually
Basis for calculation changes from allowable costs to revenue
No restriction on use of reserves

17. Proposed Changes - Limits
10% cap on reserve retention is eliminated
Levels the playing field between for-profit and non-profit providers
Providers may use funds for any purpose they want

18. Excess Reserves Provider is required to notify purchasers
Purchasers must request any excess within 6 months
If incorrect, recovery may extend beyond 6 months

19. Audits
Audits may be conducted by the Department or county up to six years after the end of a contract period.

20. For-Profit Agencies Are not addressed in the new legislation
Basis for calculation will be changed from costs to revenue to agree with legislation
10% limit still applies

21. Timeline Bill is being circulated at the Capitol
It takes effect on the January 1st after publication
DHS will update necessary guides and manuals

22. In Summary
New manuals and policies are in their final stages of being written.
We will let you know when they are published.
Training will be offered in Fall, 2017.

23. One Last Thing “Schatzi” Male cocker spaniel 6 years old 22 pounds
Chocolate merle
Great kisser

24. Questions
Contact Information Barbara Loescher, CIA (608) dhs.wisconsin.gov