1. Lessons Learned from Financial Management Reviews May 15, 2008 Bruce Robinson FTA Office of Research, Demonstration and Innovation

2. 2 Overview In 2007 FTA conducted Financial Management Oversight (FMO) Reviews of 5 Research recipients FMOs are a more in-depth review of financial management systems, focused on FTAs grants program Testing of compliance with specific rules of FTA and 49 CFR Part 18 or 19, also know as the Common Rule

3. 3 Principle Areas Examined Financial reporting Fixed assets Payroll Accounts payable Grants management Procurement Overhead Cash management

4. 4 Interviews with General Manager/ CFO Controller/Director of Finance/Accounting Manager Grants Administrator Fixed Asset Accounting Manager Procurements/Purchasing Manager Treasurer Human Resources Manager

5. 5 Findings/Recommendations

6. 6 Lack of policies or procedures: Develop formal records retention policy – Fixed Asset records and procedures Develop comprehensive accounting policies and procedures manual (electronic). Payroll procedures

7. 7 Inadequate Segregation of Duties: Segregate responsibilities of: creating and maintaining human resource records; payroll records; and employee time information. Authorizing and preparing cash transactions; recording and reconciling cash transactions in general ledger Person counting spare parts; maintaining inventory record of spare parts Institute layers of review, such as: Executive Director review of monthly bank reconciliation, project manager review of invoices

8. 8 Cost Allocation: Submit Cost Allocation Plan to FTA or cognizant agency for approval. Overhead cost pool included unallowable costs Update procedures for establishing and periodically reviewing Cost Allocation Plan

9. 9 Procurements: Approval of procurements not documented Update Procurement Manual to comply with 49 CFR Part 19 and FTA Circular 4220.1E Requirements to document and justify all sole source procurements Procedures to ensure compliance with Federal procurement requirements Documented cost analysis before purchase Ensure all required Federal clauses are included

10. 10 Payroll: Ensure timesheets are reviewed and approved by authorized supervisor

11. 11 Assets: Record assets (equipments assigned to the project) in general ledger and fixed asset management system at proper acquisition costs and accumulated depreciation. Determine who owns each vehicle and whether they are properly titled –get concurrence from FTA. Policies and procedures should be developed regarding maintenance, insurance, and monitoring of usage.

12. 12 Reconciliations: Ensure independent review and approval of all reconciliations on a timely basis (normally within 30 days after end of reporting month). Bank balance and general ledger balances should be for same cutoff date Need proper sign-offs on the reconciliations

13. 13 Reporting: Inadequate financial reporting Reporting not timely Allow for timely review and approval of financial reports by the Executive Director

14. 14 Invoices Invoices must be based on actual costs incurred Implement formal process where costs applied to awards are reviewed for reasonable, allowable, and allocable Ensure that paid invoices are retained and properly filed in an organized and secure manner to allow for their retrieval and review. Maintain grant billing files that contain copies of all supporting documentation for amounts charged – including in-kind contributions. Ensure that invoices are reviewed and approved by appropriate officials Record all credit card transactions in the General Ledger

15. 15 Other: Ensure all grant modifications are in writing Close-out grants in a timely manner Negotiate with bank to seek a protection plan for funds exceeding $100K

16. 16 Lessons Learned: Many of our recipients are unfamiliar with Federal requirements Small size of some grantees makes segregation of duties more difficult (need cross training of employees)