ROUNDTABLE FOLLOW-UP Created by the Office of External Audits - - PowerPoint PPT Presentation

ROUNDTABLE FOLLOW-UP

Created by the Office of External Audits Division of Finance

OH OHIO O DEP EPAR ARTMENT TMENT OF OF TRANSPO ANSPORTATION TION

TOP TAKEAWAYS

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Local Programs will work with External Audits to create and distribute facts sheet

■ The FEMA Manual reference Mr. Cade provided was from 2007. – Many requirements have changed since 2007. ■ Created a definition guide using 2 CFR 200 definitions and acronyms, along with FHWA definitions. ■ Definition guide is complete and will be posted to the External Audits LPA webpage in the next few days.

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Officially understand if accounting data has to be system generated

■ Per 2 CFR 200, Appendix VII Part 2, indirect cost or fringe rate proposals must be supported by the LPA’s official financial data. – The Office of External Audits has created visual depictions of this requirement. – The Office of External Audits has updated the input form to create a more definitive process. ■ The LPA’s supporting documentation has to be generated from its accounting

• system. As many LPAs are using an individual Division, Office or cost center

(Engineer), the LPA is not required to reconcile all cost information back to the Auditor of State financial statements. ■ However, some LPAs will have self-funded costs - Reconciliation is required for self- funded accounts or allocated costs per Federal requirements. Limitations for self- funded reserves are set by the Federal government, and are not set by ODOT Division of Finance.

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“System Generated” Support

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Self-Funded Account Example

Each Office at the LPA is required to contribute to the Workers’ Compensation Costs. Each Office is allocated a portion of this cost. The allocation method must be equitable to each office.

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Self-Funded Account Example

• The LPA determines that each office will be allocated its share of this cost based upon its percent of total

annual labor costs.

• The LPA allocated each office’s percent of total labor to the Workers’ Compensation cost.

This type of allocation ensures that each office has its own equitable share in the cost of Workers’ Compensation.

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Offic ice Annual al Labo bor Percen ent of Total tal Labor Labor Workers’ Compen ensation sation Cost st Allocat located ed Offic ice Workers’ Comp Cost

1 100,000 14.29% 100,000 14,286 2 150,000 21.43% 21,429 3 200,000 28.57% 28,571 4 250,000 35.71% 35,714 Total $700,000 $100,000

Be clear about where payroll details are kept/What is the District’s LPA responsibility

■ The Office of Local Programs will provide clarification in its policy and will ensure the requirements of LPAs are consistent across all districts. – The Office of External Audits has provided guidance that the Districts should be reviewing the time-tracking in detail at the beginning of the project to ensure requirements will be met. – Any issues should be identified early in the project. – The Office of External Audits does not require Districts to review every payroll submittal.

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Be clear about where payroll details are kept/What is the District’s LPA responsibility (continued)

■ The Local-Let Participation Review Form is intended to be the “control” as required by 2 CFR 200. – The form is a tool to help ensure the LPAs receive maximum reimbursement of internal costs. – Advisory feedback is provided before a project begins; the District should use this information to gauge risk and ensure changes needed, as reflected by the feedback, are made.

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Does time tracking differ with different cost recovery methods?

■ We received guidance from FHWA, in interpreting 2 CFR 200 requirements; this guidance allowed us to provide some flexibility for time tracking. ■ The notification of the changes was sent to all District LPA Managers July 5, 2016. – Requirements remain the same for those LPAs requesting reimbursement of direct labor and fringe or direct labor and overhead (and de minimis).

■ There are no changes in the detailed required for tracking all time to direct and indirect activities. – However, all indirect activities may be tracked to one or more general activities based on the LPA’s normal time-tracking procedures.

– Requirements for those LPAs requesting reimbursement for only direct labor or direct labor plus only de minimis (10 percent) are no longer required to track indirect activities in detail.

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Finalize answers on credit bridge

■ Completed – Credit Bridge recommendations were approved by the Senior Leadership Team on January 6, 2016. ■ Formal guidance was issued on February 9, 2016. ■ In order to be permitted to include the fringe and overhead costs in the credit bridge request, the LPAs have to meet two criteria: – The LPA must be able to demonstrate that it has a Federally-compliant time- tracking system in place – The LPA has to have an approved fringe or overhead rate calculated by the Division of Finance for the year(s) which it is requesting to receive credit.

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Improve timeframe for approving rates

■ ODOT’s timeframe for approving rates, upon receiving complete cost support, has been an average of 3 Days. ■ The delay for LPAs providing necessary support and certification of costs has greatly extended the review/approval process. – The LPAs timeframe for sending in a complete fringe form and supporting documentation is 97 days. – Many LPAs did not attend the LPA fringe rate/2 CFR 200 training that was provided in the fall. – With the initial submission, many LPAs are not providing all supporting documentation that is required for rate approval. ■ The more complete and accurate the initial submission, the more timely the approval will be.

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Detail for rates – Cost Allocation Plan

Wages ges

■ Direct Labor ■ Indirect Labor

Fringe nge Benef nefits ts

■ Holiday Pay ■ Sick Leave ■ Vacation Leave ■ Retirement ■ Workers’ Compensation ■ Unemployment ■ Health Insurance ■ Life Insurance ■ Medicare

Overhea head d Costs ts

■ Office Supplies ■ Miscellaneous Supplies ■ Ground-keeping Supplies, Maintenance ■ Building Supplies ■ Utilities (Electric, Gas, Phone, Water) ■ Rental Equipment ■ Rental Buildings ■ Data Processing ■ Postage ■ Travel

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Example of actual 2016 overhead costs submitted by LPA. Full Cost Allocation Plan includes a review of salary, fringe, and overhead (indirect) costs:

Detail for rates - Cost Allocation Plan (continued)

■ Postage ■ Transportation and Travel ■ LPA Copier Charges ■ LPA Garage ■ LPA Printing ■ LPA Parking Validations ■ Computer Software ■ Lab Testing ■ Other Expenses ■ Publications ■ Equipment – Maintenance. & Repair ■ Other Expenses ■ Professional Dues & Subscriptions ■ Communication/Advertising/Maps

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Additional overhead costs to be supported:

Detail for Rates – Fringe Cost Rate

■ Fringe Rates include review of salary and fringe only: – Labor – Leave to include holiday, sick, vacation, comp, etc. – Retirement – Health insurance – Unemployment compensation – Workers’ compensation – Medicare – Life insurance

Example of actual 2016 Fringe costs submitted by LPA.

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Actual Example-LPA Fringe Rate Submittal

■ Out of the LPA’s $4,375,081 in Water Operating Fund costs, only $1,139,347 was reviewed by ODOT, with $834,506 of that amount being salaries, leaving only $237,701 as fringe cost (non-salary costs) reviewed. ■ This $237,701 represents a 5.4% review of the LPA’s total costs.

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Improve timeframe for approving rates - (continued)

■ To help the LPAs with its support gathering process, the Office of External Audits has: – Provided training and will continue to do so. – Analyzed reasons why LPA completion of rate requests are delayed. – Determined how we can help with this process.

■ Created a letter that can be provided to LPA Finance or Auditing staff to identify and explain the need for cost information. ■ Created visual depictions of the system generated support requirements. ■ Updated fringe form and deleted the de minimis form. ■ Updated the fringe and deminimis invoice forms. ■ Instituted a process to be on-site to approve all overhead rates and to also offer to meet with LPAs at their locations to approve the fringe rates. ■ Created a step-by-step visual for use by those LPAs working to provide an initial rate request.

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Improve timeframe for approving rates - future

■ ODOT’s Office of External Audits is committed to ensuring timely approval of fringe and overhead rates. – Will continue to offer educational sessions. – Will continue to analyze risk factors to determine area of focus.

■ We will be implementing a customer feedback survey to help identify areas of focus.

– We will accept an approved cognizant agency review rate.

■ The current Cognizant Agency approval documentation will need to be provided to ODOT. ■ Upon assurance of the current, approved rate, ODOT will then notify the District and the LPA of the approval for use of the rate.

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Timetable to update LPA MOP

■ The Office of Local Programs is working with FHWA and other internal and external parties to update the Manual of Operating Procedures. ■ This is a long-term goal to be completed in its entirety by June 30, 2017.

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Work with FHWA to benchmark other states

■ Rich Winning would like FHWA to coordinate.

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Local Programs Office is coordinating “Audit” visits to local sites

■ The Office of Local Programs and FHWA shared their planned visits for CY 2016. ■ The Office of External Audits completed its risk assessment for CY 2016. ■ The Office of External Audits finalized its monthly audit schedule for CY 2016. – LPAs were selected for review based upon risk. – Scheduled LPA Limited Scope Audits have been completed. ■ The Office of External Audits will continue to evaluate and update plan as necessary.

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As a department, become more customer service focused and serving the LPAs as customers

■ The goal is for the Office of Local Programs and the Office of External Audits to provide a team approach throughout the LPA Project Audit process. ■ As such, we had implemented “audit/finance” items for the Local-Let Participation Review Form based upon feedback from audits completed. – The goal was to have the items, that were continuously a finding at audit*, reviewed before a new project was started under the 2 CFR 200 requirements. – By reviewing the requirements and communication concerns at the beginning

• f the project; our goal is to avoid future issues that would lead to audit

findings.

*Shown on following slides.

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Daily Diaries

Reviews daily diary detail as required by the LTAP Manual.

CY 2015 Audit Results CY 2014 Audit Results

23 5 50% 5 50%

Daily Diaries

Audit with Findings Audit with No Findings Not Tested 14 100% 0%

Daily Diaries

Audit with Findings Audit with No Findings Not Tested

(One Test = 14 results) (One Test = 10 results)

Change Orders

Did the LPA have support to document ODOT concurrence with the Change Order Review Process? Did the LPA have support to document ODOT review and concurrence for all "Significant" change

• rders?

CY 2015 Audit Results CY 2014 Audit Results

24 8 40% 7 35% 5 25%

Change Order Documentation/Approvals

Audit with Findings Audit with No Findings None for Review

(Two Tests - 20 Results)

8 29% 6 21% 14 50%

Change Order Documentation/Approvals

Audit with Findings Audit with No Findings None for Review

(Two Tests - 28 Results)

Post Award - Project Award

Did the LPA have all bid receipts? Did the LPA award the project within 60 days of the bid

• pening? Did the LPA award the project to the lowest responsible bidder?

CY 2015 Audit Results CY 2014 Audit Results

25 5 12% 33 83% 2 5%

Post-Award Project Award

Audit with Findings Audit with No Findings Not Tested (Four tests = 40 Results)

4 7% 43 77% 9 16%

Post-Award Project Award

Audit with Findings Audit with No Findings Not Tested (Four tests = 56 results)

Post Award Documentation/Process

Did the LPA have a documented policy for awards/bids? Did the LPA follow its documented policy for this award? Did the LA provide evidence to document that the Prime Contractor retained 30 percent of the original project costs?

CY 2015 Audit Results CY 2014 Audit Results

26 19 47% 21 53%

Post-Award Documented Processes and Project Record Retention

Audit with Findings Audit with No Findings Not Tested

Four Tests = 40 Results

26 46% 30 54%

Post-Award Documented Processes and Project Record Retention

Audit with Findings Audit with No Findings Not Tested (Four Tests = 56 results)

Time-tracking Results

15 15 56% 56% 12 12 44%

Supervisor visor Approved ed Timeshee sheet Timely

No Yes

11 11 41% 16 16 59% 59%

Tra racks ks All Projects cts/Tim Time

No Yes

3 27% 8 73% 73%

Correct ect Alloca cati tion n of OT

No Yes

(Sixteen of the Agencies did not have OT)

8 30% 30% 19 19 70% 70%

Timeshe esheet t Approved ed by Emp mployee ee

No Yes 27

Continue conversation with FHWA

■ ODOT and FHWA have worked together in the past, and will continue to do so in the future.

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Seek consistency among District LPA Coordinators

■ The Office of Local Programs is working with FHWA and other internal and external parties to update the Manual of Operating Procedures. ■ This is a long-term goal to be completed in its entirety by June 2017.

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Thank you for attending today.

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