Single Audit Update May 4, 2018 Jamie is a senior associate at - - PowerPoint PPT Presentation

Single Audit Update

May 4, 2018

Jamie is a senior associate at Plante Moran and has more than 13 years of public accounting experience providing audit and consulting services to K12 industry clients. FUN FACT: As a big fan of classical music and the theater, Jamie can always be found rocking

• ut while she works.

Jamie E e Essen enmacher er 1111 1111 Mi Michigan A Ave East L Lansing, MI MI 48823 48823 517 517-336 36-7552 552 jamie.essenm nmache her@plant ntemor

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Outline

• Overview of the Procurement Standards
• Five Methods of Procurement
• Written Policies & Procedures
• Action Items
• Other Grants Management Issues for 2018
• Effective Audit Tips

Procurement

Overview of Procurement Standards

Overview of Procurement Standards

Uniform Guidance procurement standards were delayed until July 1, 2018. For districts that waited, time is up! Reforms require the non-federal entity to use its own documented procurement which reflect applicable state and local laws and regulations, provided that the standards also confirm to applicable federal laws and standards. Must have written procurement procedures, conflict of interest policy, and written procedure for conducting technical evaluations of proposals and selecting participants (5 procurement methods).

Five Methods of Procurement

Five Methods of Procurement

1.

Micro-Purchases

• When should this method be used?
• Purchases less than micro purchase threshold of $3,500,

indexed annually (CFR 200.67)

• Note, because of the Defense Agency Appropriations Act the

threshold may be $10,000!

• Limit applies to aggregate purchase
• How are purchases solicited/awarded?
• Purchases are awarded based on District’s discretion
• No quotes or bids needed if price deemed reasonable
• District Credit Cards
• Attempt to rotate purchases between vendors, if practical

Five Methods of Procurement

2.

Small Purchase (Simplified Acquisition)

• When should this method be used?
• Purchases that do not exceed

−

Goods – The State of Michigan Bid Threshold (MCL 380.1274), indexed annually (FY 2018 threshold: $23,881)

−

Services – The Federal Simplified Acquisition Threshold, currently $150,000 (2 CFR 200.88)

−

School Policy – If the District has lower bidding thresholds, these apply instead. The District CANNOT increase the mandated thresholds

• How are purchases solicited/awarded?
• Price or rate quotations are obtained
• No cost or price analysis required
• District Credit Cards????
• Decision is documented

Five Methods of Procurement

3.

Sealed Bids

• When should this method be used?
• Purchases that exceed

−

Goods – The State of Michigan Bid Threshold (MCL 380.1274), indexed annually (FY 2018 threshold: $23,881)

−

Services – The Federal Simplified Acquisition Threshold, currently $150,000 (2 CFR 200.88)

−

School Policy – If lower than the mandated thresholds

• Fixed-price contract (lump sum or unit price)
• How are purchases solicited/awarded?
• Sealed bids solicited via formal advertising
• Suspended and Debarred requirements
• Awarded to lowest responsive and responsible bidder

(meeting all material terms and conditions of invitation for bids)

• Any or all bids may be rejected with sound documented

reason

Five Methods of Procurement

4.

Competitive Proposals

• When should this method be used?
• Purchases that exceed

−

Goods – The State of Michigan Bid Threshold (MCL 380.1274), indexed annually (FY 2018 threshold: $23,881)

−

Services – The Federal Simplified Acquisition Threshold, currently $150,000 (2 CFR 200.88)

−

School Policy – If lower than the mandated thresholds

• Fixed-price or cost-reimbursement based contracts
• Conditions not appropriate for use of sealed bids
• How are purchases solicited/awarded?
• Bids will be solicited
• Must have written method for conducting technical

evaluations of proposals received

• Suspended and Debarred requirements
• Awarded to the responsible firm whose proposal is most

advantageous to the program, with price and other factors considered

Five Methods of Procurement

5.

Non-Competitive Proposals (Sole Source)

• When should this method be used?
• Only when one or more of the following circumstances

apply:

−

Available only from a single source

−

How do you know?

−

Public emergency will not allow a delay

−

Authorized (in writing) by the awarding agency or pass through entity

−

No (or inadequate) competition (after soliciting sources)

• How are purchases solicited/awarded?
• Awarded to sole source if one or more of the above

conditions exist

• Specification limitations must be reasonable
• Documentation is KEY!

Written Policies and Procedures

Written Policies and Procedures

• Policy versus Procedure

−

Policy: Should address why you administer things a certain way and contain a goal or objective

−

Procedure: Should detail how you perform the functions necessary to confirm to the policy

−

Controls: While not specifically discussed, controls must exist to ensure procedures are completed correctly

• Procurement policy and procedures is required to reflect UG

changes

Written Policies and Procedures

• Conflict of Interest Policy (§200.318)

−

Written standards of conduct covering conflict of interest

• Employee conflict of interest (did not change)
• Organizational conflict of interest (new!)

−

Key Items to Include

• Define conflict of interest
• Soliciting or accepting gifts
• Disciplinary actions applied to violations
• Identify organizational conflicts
• Process to resolve the conflict
• Disclosure
• Exclude organization
• Abstain
• Resignation
• Nepotism

Written Policies and Procedures

• Written Procurement Procedures (§200.319)
• Written Procedure for Conducting Technical Evaluations of

Proposals and Selecting Participants (§200.320)

−

Written procedures for procurement transactions

• Identify the five allowable methods
• All procurement transactions must be conducted in a

manner providing full and open competition

• Must maintain oversight to ensure that contractors

perform in accordance with terms, conditions, and specifications of contract or PO

−

Key Items to Include

• Rationale for method of procurement
• Selection of the contract type
• Contractor selection or rejection
• Basis for the contract price
• Appendix II provides multiple provisions that must be

included in contracts

Written Policies and Procedures

• Suggestions

–

Review MDE guidance/expectations

–

Update policies and procedures already in place; no need to “re-create the wheel”

• Policy services providers likely have developed model

policies

• Model Procedures for Michigan Schools released 11.17

–

Tailor procedures for your specific processes

–

Tie in state law and local (district) policies – but make sure federal requirements are met

• If District policy is more restrictive, reference federal

requirements but note are above District thresholds

–

Consider referencing CFR/MCL sections instead of dollar values (for indexed thresholds)

Model Procedures for Michigan Schools

• Model Grants Management procedures issued November 2017
• Designed to conform with Uniform Guidance
• Key Content Areas

–

Financial Management Systems

–

Polices for Compliance with Michigan Department of Education Requirements

–

Policies for Compliance with the OMB Compliance Supplement

–

Other Policies and Procedures

Model Procedures for Michigan Schools

• Section highlights – Procurement

Pages

–

Purchasing and Procurement 3-6

–

Activities Allowed/un-allowed 30-31

–

Allowable Costs/Cost Principles 30-31

–

Procurement, Suspension and Debarment 37-38

–

Conflict of Interest 43

–

Supplies 46

–

Credit Card Purchases 48-49

–

Certification Regarding Suspension and Debarment 54

–

Conflict of Interest Disclosure Form 55-56

–

2 CFR 200, Subpart E: Cost Principles –

• Selected Items of Cost

58-60

Model Procedures for Michigan Schools

• Procurement - Key Observations

–

Purchasing and Procurement

• Sample procedures use dollar amounts, suggest using

indexing reference or FAR (Federal Acquisition Regulation) references

• Directs use of lower of federal and state threshold, but

best practice would be to acknowledge both and clarify which threshold you use.

Model Procedures for Michigan Schools

• Procurement - Key Observations

–

Activities Allowed/un-allowed and Allowable Costs/Cost Principles

• Provides framework for “reasonable cost”
• Provides framework for assessing grant allowability
• Procurement should consider allowability within the purchasing

process

–

Procurement, Suspension and Debarment

• Focus on documenting selection of method of procurement (not

everything must be bid and not everything is sole sourced!)

• Defines “covered transaction” which is when suspended and

debarred is applicable

• Identifies methods for complying with Suspended and Debarred
• Sample Certification Regarding Suspension and Debarment

Model Procedures for Michigan Schools

• Procurement - Key Observations

–

Conflict of Interest

• Sample Conflict of Interest disclosure form in appendix

–

Credit Card Purchases

• Sample prohibits gift cards, does your district use them?
• Allowable usage is specified, need to tailor to district
• Consider for micro purchases

Model Procedures for Michigan Schools

• Procurement - Key Questions

–

Is the item going to be charged to a federal grant?

–

Could the item or vendor be charged in the future?

–

Does the item require preapproval by the grantor?

–

Will use of a state or co-op bid list satisfy the procurement requirements?

–

Is it allowably under the grant terms/budget?

–

Does suspended and debarred apply? (Should it apply to all purchases?) How best to document compliance?

–

Are there sufficient controls for purchases where a check is not used? (electronic payments, credit card etc.)

–

How do staff know what to do when purchasing?

–

Will the policy and procedure be functioning 7.1.18?

Quick Access to UG Guidance

US ED Guidance https:\\www2.ed.gov\policy\fund\guid\uniform-guidance\index.html MDE/Grants/Uniform Guidance http://www.Michigan.gov\mde\0,4615,7-140-5236_76204---,00.html What’s NEW at MDE Compensation-Personal Service Memo – February 2, 2017 Tangible Personal Property Memo – February 2, 2017 MDE Uniform Guidance (UG) memo – May 26, 2016 MDE User Guide to Local Users – May 26, 2016 (Pages 7-10 focus on Procurement) MSBO http://www.msbo.org/msbo-online-library-school-finance Federal UG Guidance http:\\www.Michigan.gov\mde\0,4615,7-140-5236_76204-381290--,00.html

Action Items

Action Items

• Update internal procurement policies and procedures to reflect

changes described in Uniform Guidance

• Ensure organizational conflict of interest policy is written
• Review Appendix II to ensure contracts include required

specifications

• Review Model Manual - BUSINESS OFFICE PROCEDURES AND

FEDERAL AWARDS ADMINISTRATION

• Revisit where non-competitive bids may be likely to occur
• Determine approach to micro purchases
• Maintain suspended/debarred processes

−

Consider expanding to all purchases over $25,000

Other Grants Management Issues for 2018

Other Grants Management Issues

• 2018 “Skinny” Compliance Supplement
• Child Nutrition Cluster

–

Equipment preapproval

–

Bad debts

–

If district has excess fund balance and not reducing it, MDE can ask for funds back!

• Special Ed Cluster

–

Appears a method established for Excess Cost reporting by grantees

• Includes cost segregations between primary and secondary

education

–

Auditors may be required to test at some level

Effective Audit Tips

How to be ready?

Effective Audit Tips

Communication is the key!

Question: Have you met with your auditor? If you have not, it might be a good time to giver them a call.

Discussion Items:

• Significant changes for the year
• Interim, year-end, and board meeting dates
• Challenges or “hiccups” you experienced from the prior year
• If there were and adjustments or finding – how have you corrected them
• What can be done at interim (testing standpoint) to help make year-end

more efficient

• Any accounting/auditing standards that will impact the current or future

audit?

Effective Audit Tips

The calm before the storm…

• Providing a trial balance before the first day of fieldwork
• Understanding the source documents that are being

requested on the PBC list

• Provide workpapers from the PBC list in advance of fieldwork
• Reviewing FS footnotes and determining if there is additional

information you will need to provide not included on the PBC list

• Provide and sign any attorney/cash/investment confirmations

requested

• Are you still on target to be ready for your scheduled

time?

Effective Audit Tips

Fieldwork

• Checking in periodically (questions, open items)
• Any concerns or adjustments identified?
• Any changes to the single audit testing plan?
• Are they still on target to meet the scheduled

deadlines established?

• Reviewing draft financial statements or fund level

statements?

Effective Audit Tips

Post-fieldwork

• How is the wrap-up process coming

(review/changes/open items)?

• Ownership of the financial statements and

taking responsibility for the report information (i.e. final issuance of reports)

• If a board meeting presentation exist, is it ready

for review? Collaborative effort between the District and the auditor!

Thank You!

Steve Piesko, CPA

spiesko@manercpa.com 517.323.7500

GASB 84 – Fiduciary Activities:

• Effective for 6/ 30/ 20 school financial statements
• Provides clarity on what is considered a trust and agency account
• Key determination is control. Will impact:
• Student activities
• Scholarship funds
• Other
• If the District has determined that they have control (administrative

involvement), will be reported in the District financial statements as a special revenue fund.

• Each account will need to be analyzed individually, so start now.
• There has not been any specific guidance on this at any level so far,

1022 committee plans to address and provide statewide guidance after November meeting.

GASB 84 – Fiduciary Activities:

FLOW CHARTS FOR EVALUATI NG AND REPORTI NG POTENTI AL FI DUCI ARY ACTI VI TI ES

• The following flowcharts are intended to aid in the

application of the provisions of this Statement. The flowcharts are nonauthoritative and do not cover all aspects of this Statement. They should not be used in place of the Statement itself.

GASB 84 – Fiduciary Activities:

GASB 84 – Fiduciary Activities:

GASB 84 – Fiduciary Activities:

GASB 84 – Fiduciary Activities:

I LLUSTRATI ON

This appendix illustrates an example of the fiduciary fund financial statements for a hypothetical government. The statements are illustrative only and should not be considered authoritative. Management’s discussion and analysis, other statements that constitute basic financial statements, notes to financial statements, budgetary comparison schedules, and other required contents are not presented; thus, this set of statements does not meet the minimum requirements for basic financial statements and required supplementary information.

GASB 84 – Fiduciary Activities:

GASB 84 – Fiduciary Activities:

Michigan Public School Employees’ Retirement System (MPSERS) Appropriations

• Section 1 4 7 a ( 1 ) – Provides $ 1 0 0 .0 m illion to districts to offset a share of their MPSERS costs.

Distribution is based on a district’s proportionate share of MPSERS covered payroll.

• Section 1 4 7 a ( 2 ) – Provides $ 4 9 .0 m illion to reimburse MPSERS employers for the increased

normal costs associated with the reduction in the long-term investment rate of return assumptions from 8.0% to 7.5% . This is the first of a 2-year phase-in.

• Section 1 4 7 c ( 1 ) – Appropriates $ 9 6 0 .8 m illion to pay for the state share of unfunded accrued

liability (UAL) costs per PA 300 of 2012, which required the state to pay the UAL costs that exceed the capped employer contribution rate of 20.96% of MPSERS covered payroll.

• Section 1 4 7 c ( 2 ) – Appropriates $ 2 0 0 .0 m illion in a one-time added payment toward the cost
• f the 2010 early retirement incentive. The payment is expected to reduce the amortization period

by 2 years, making the final year FY 2019-20.

• Section 1 4 7 e – Provides $ 2 3 .1 m illion to reimburse MPSERS employers for the increased normal

costs associated with both the new Hybrid plan and the new Defined Contribution (DC or 401k plan) enacted under PA 92 of 2017.

147a2 – What is it?

• Additional resources to help pay for impact of rate of

return drop for the actuary calculation

• Rate changes the amount the District must contribute

to fund the liability

• Straight contribution, not related to pension/ OPEB

contribution rates

• Similar treatment of 147a

147c2 – One time MPSERS deposit

• Used to buy down years for the early retirement
• Not tied to contribution rates
• Since it is not built into the pension/ OPEB rate, cannot

allocate to federal grants

• Likely to have an impact on COE

147e – Reimbursement for Increased Costs Due to PA 92 of 2017

• Additional costs under new defined contribution plan

(4% contribution = 3% match)

• Additional costs of new Pension plus 2 hybrid option (3.1% )
• Districts will receive 100% through state aid in quarterly

payments based on actual amounts reported in these categories

• Final payment for June 30th quarter to be received in August
• Record similar to 147c1 and expense gross and record

revenue

Employer Contributions - UAAL

• Effective FY 2019, Current Operating Expenditures (COE)

comparisons will be used to determine the amount owed in UAAL.

• Base Benchmark-FY 2017 reported payroll will be adjusted by

the percent change in COE from 2017 to 2018 to establish the base COE Adjusted Payroll (Districts will know when they close at June 30th)

• Employer contributions will be flat rate of 20.96% multiplied

by COE base

• COE base will then be adjusted up or down in accordance

with change in COE

2019 Employer Contributions - UAAL

• After the close of FY2019, ORS will determine what you reported in

UAAL contributions on actual payroll and compare to COE adjusted payroll.

• If COE adjusted payroll is greater, the district will owe 20.96% of the

difference.

• If actual 2019 payroll is higher than adjusted COE payroll, the district

will receive a credit.

Stay Tuned for What Should be Included/ Excluded

• June 30, 2018 – no accounting impact
• June 30, 2019 and beyond
• Does the rate change? NO
• Does the contribution change? YES (the COE base will change

annually – up or down)

• Federal Program Implications – potentially
• ORS is working on a template to assist Districts to estimate

change in COE

• 2019 – Don’t forget to build into budget

Examples

• Scenario 1: Payroll decreases, COE mostly flat
• A. FY 2017 Reported Payroll: $4,487,738
• B. FY 17-18 COE % Change: 0.08%
• C. Base COE Adjusted Payroll – A x (1+ B): $4,491,329

Examples

Fiscal Year COE % Change COE Base Reported Payroll Difference Difference in Invoice* 2019 $4,491,329 $4,447,436 $43,892 $9,200 2020

• 1.61%

$4,419,018 $4,405,847 $13,171 $2,761 2021

• 0.93%

$4,377,921 $4,323,894 $54,027 $11,324 2022

• 0.96%

$4,335,893 $4,311,948 $23,945 $5,018 2023 0.32% $4,349,768 $4,278,013 $71,755 $15,039

*Difference in Invoice is 20.96% times the amount in the Difference column

Examples

• Scenario 2: Payroll increases, COE declines, then

increases

• A. FY 2017 Reported Payroll: $4,157,101
• B. FY 17-18 COE % Change: -0.60%
• C. Base COE Adjusted Payroll – A x (1+ B): $4,132,161

Examples

Fiscal Year COE % Change COE Base Reported Payroll Difference Difference in Invoice 2019 $4,132,161 $5,711,500 ($1,579,339) ($331,029) 2020

• 5.01%

$3,925,077 $5,629,400 ($1,704,323) ($357,226) 2021 1.29% $3,975,772 $5,772,500 ($1,796,727) ($376,594) 2022 4.58% $4,157,703 $5,871,700 ($1,713,997) ($359,253) 2023 3.48% $4,302,584 $5,970,200 ($1,667,616) ($349,532)

Reconciliation Calculation

• Contributions owed
• If UAAL contributions are owed, the contributions owed will

spread out over the rem aining pay periods in the fiscal year.

• Contributions to be refunded:
• If money is due to the reporting unit, it will receive a lum p

sum adjustment on its employer statement.

GASB Sta te me nt No . 75

Po ste mplo yme nt b e ne fits o the r tha n pe nsio ns



Willia m I. T uc ke r IV, CPA

GASB Sta te me nt No . 75

Po ste mplo yme nt b e ne fits o the r tha n pe nsio ns



Re q uire d to a do pt fo r June 30, 2018



Re q uire me nts mirro r GASB 68



L ia b ility a ppro xima te ly 1/ 3 the a mo unt o f NPL

GASB Sta te me nt No . 75

Po ste mplo yme nt b e ne fits o the r tha n pe nsio ns



Imple me nta tio n

 Co ntrib utio n da ta fo r Oc to b e r 1, 2016 thro ug h June 30, 2018

 De fe rre d o utflo ws o f re so urc e s fo r c o ntrib utio ns



Oc t 1, 2016 – June 30, 2017 (Re sta te me nt to b e g inning ne t po sitio n)



Oc t 1, 2017 – June 30, 2018 Curre nt ye a r DOOR

 Co mpe nsa tio n da ta fo r pe rio ds e nding Se pt 1, 2017 a nd June 30, 2018  E

mplo ye e pa rtic ipa nt da ta fo r pe rio d e nding Se pt 30, 2016

 Ac c o unts a dde d to Cha rt o f Ac c o unts to re c o rd GASB 75 a mo unts

GASB Sta te me nt No . 77



T a x Ab a te me nts

 Upda te a mo unts fo r June 30, 2017 with lo c a l munic ipa litie s