1. FISCAL MONITORING Gary Payne, CPA, CIA, CISA Unit Manager, Fiscal Monitoring Contract Oversight & Support Section

2. WHY? WHAT IS IT? WHY SHOULD I CARE? FISCAL MONITORING October 13, 2009

3. WHY FISCAL MONITORING? It’s required by OMB Circular A-133 [Federal Funds] & Uniform Grant Management Standards (UGMS) [State Funds] to: Ensure Accountability of Taxpayer Funds Disbursed.

4. ‘NUFF SAID!

5. WHAT IS FISCAL MONITORING? Single Audits Review, Monitoring, & Follow-up on Single Audit Findings by HHSC OIG & DSHS Performing On-site & Desk Reviews of Subrecipient Contractors by DSHS Personnel Adequacy of monitoring sub-contracts executed by DSHS contractors by the DSHS contractor (i.e. You have to monitor your sub-contractor’s performance/compliance).

6. There is overlap. A Single Audit’s scope is on the entity’s total Federal or State Awards. A DSHS Fiscal Review’s scope is more focused. It is targeted on ascertaining contractual compliance with DSHS contract requirements. WHAT’S THE BIG DIFFERENCE BETWEEN SINGLE AUDITS & FISCAL MONITORING? THEY SEEM REDUNDANT!

7. “OK, drill down to what DSHS tests & evaluates?” It can include any contract requirements included in a DSHS contract.

8. Governance (re: The Enron & “Bernie” Slide) Allowability of Expenditures Period of Availability Cost Allocation Plans Matching & Program Income Other “Uhm, this covers a lot of ground. DSHS contracts are pretty voluminous.” “Could you give me the Cliff Notes version?”

9. GOVERNANCE Defined by OMB Circulars, UGMS & Federal Agency Common Rule Defined by DSHS Contract Requirements Defined by Texas Administrative Code (Community Centers)

10. ALLOWABILITY OF EXPENDITURES Defined by applicable OMB Circulars & UGMS Defined by grant specific terms (i.e. review the DSHS contract for specific requirements, some grants have specific prohibitions for certain expenditures that would be allowable under most other grants).

11. PERIOD OF AVAILABILITY Defined by OMB Circulars, UGMS & Federal Agency Common Rule It means that transactions must occur within the contract term. This applies to revenue, expenditures, program income, and matching costs.

12. COST ALLOCATION PLANS (CAPS) Defined by OMB Circulars, UGMS & Federal Agency Common Rule It means that transactions must occur within the contract term. This applies to revenue, expenditures, program income, and matching costs. Discussion of CAPS in detail, is beyond the time limits of this presentation, but can be categorized into the two following aspects: Has a compliant CAP been submitted? Did the entity follow the CAP?

13. MATCHING Matching requirements are defined in DSHS contracts. Common exceptions include: Inadequately documented match (particularly in- kind) Counting other grant expenditures as match for DSHS grants Match claimed occurred outside contract terms.

14. PROGRAM INCOME Inadequately documented program income Incorrect allocation of program income Program Income is defined in OMB Circulars, UGMS & Federal Agency Common Rule. Review the DSHS Contract for specific requirements. Common exceptions include:

15. OTHER Waste, Fraud, & Abuse = Referral to HHSC Office of Inspector General for Investigation

16. “Hey, That’s Scary Stuff! We Don’t Want to Go There!” But it’s the law. The best means of preventing entering this arena, is to ensure: Board Governance is providing appropriate oversight of management. Management operates with appropriate checks & balances (i.e. internal controls).

17. “Yeah, but how? We’re small and mainly staffed by lay people and volunteers - not attorneys & CPAs!” Contract with professional staff (attorneys, CPAs, etc.) for appropriate expertise, DSHS contracts generally allow administrative costs to cover such needs.

18. For assistance you should contact: Robert Vitek, Manager Financial Technical Assistance Unit Contract Oversight & Support 888.963.7111 x2326 (toll free) 512.458.7111 x2326 (direct) robert.vitek@dshs.state.tx.us TECHNICAL ASSISTANCE SECTION DSHS has a Technical Assistance Section to advise and help DSHS contractors.

19. ABOUT DSHS TECHNICAL ASSISTANCE The DSHS Technical Assistance Unit is designed to assist DSHS contractors with current questions or problems in a prospective manner. DSHS contractors should be aware that DSHS Technical Assistance cannot resolve single audit findings or DSHS Program or Fiscal review findings. This function represents an “ounce of prevention, not a pound of cure.”

20. “My board is great but the guy sitting next to me could use some help in this area!” “Okay, How about Board Governance?”

21. Members of Board have specific legal responsibilities pursuant to State laws and DSHS contract requirements. Management & Board legal counsel should: BOARD RESPONSIBILITIES Brief Board members of these requirements prior to executing DSHS contracts Review websites referenced on the following slide

22. WEBSITES FOR NON-PROFIT BOARD GOVERNANCE - BEST PRACTICES www.wcnwebsite.org/practices/board.htm www.navref.org/bestpractices/gov_bod_intro.htm www.aicpa.org/download/training-bod.pdf www.directorsforum.org/resources/cg_documents/cgnews_bestpractices.php www.npgoodpractice.org/Glossary/Default.aspx?index=B

23. QUESTIONS AND ANSWERS