Guidance: Monitoring & Audits

Every federal agency is responsible for ensuring all federal resources are appropriately managed, which includes conducting monitoring visits to award recipients (e.g. grantees, cooperative agreement recipients, sponsors). The AmeriCorps Agency has developed risk assessment criteria to help prioritize monitoring activities.

Within the AmeriCorps Agency there is the Office of Inspector General (OIG), established in 1993 under the National Community Service Trust Act as an independent and objective entity. The OIG conducts and supervises audits and investigations relating to Corporation programs and operations. The OIG also provides leadership to “promote economy, efficiency and effectiveness in the administration of Corporation programs and operations.” More about the OIG can be found within, “Your Guide to The Office of Inspector General, AmeriCorps,” found at http://www.cncsoig.gov/
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The Corps Network as a “Pass-Through” Entity

The Corps Network (TCN) is a recipient of federal grant funds from the Federal Government, among other sources, and projects/programs funded through TCN are Subgrantees. Upon receiving the sub-award, the Subgrantee becomes a part of a reporting network that adheres to the same regulations for grant administration as TCN.

Subgrantees are required to maintain grant records, submit progress reports, and request reimbursement in much the same way as TCN reports to the respective federal agency. As the grantor, TCN must ensure that all Subgrantees are in compliance with both state and federal grant guidelines and is responsible to monitor both program and financial aspects of the sub-awards.

Specifically, the following federal regulation governs TCN, the “pass-through entity”, and relationship with any Subgrantee. According to OMB Circular No. A-133, paragraph 400(d), pass-through entity responsibilities:

Have written policies and procedures for monitoring Subgrantees;
Identify the Federal award and funding source and provide the Subgrantee with the CFDA number that corresponds to the award;
Advise Subgrantees of all requirements imposed on them;
Monitor the activities of Subgrantees as necessary to ensure that Federal awards are used for authorized purposes in compliance with laws, regulations, and the provisions of contracts or grant agreements and that performance goals are achieved;
Document monitoring activities;
Ensure Subgrantees have A-133 audits when required;
Issue decisions and ensure follow-up on audit findings in a timely manner;
Where necessary, adjust its own records and financial statements based on audits; and
Require Subgrantees to permit access by the pass-through entity and auditors to records and financial statements, as necessary, for the pass-through entity to comply with A-133

TCN Monitoring Objectives – Promoting Partnerships and Results

TCN is committed to making each project a top quality investment by identifying best practices to share for replication.
TCN will work with Subgrantees to correct or improve areas of concern. With this in mind, Subgrantees should understand that TCN expects them to reciprocate in an appropriate manner and work with TCN staff to correct issue areas.
Monitoring activities should be used to identify targeted areas of technical assistance including providing training and disseminating information related to continuous improvement.
Monitoring activities should also include space to gather information to evaluate TCN’s performance as a pass-through entity.

Monitoring Throughout the Program Year – Techniques & Approaches

There are a variety of ways that TCN Staff monitor Subgrantees throughout the program year. Monitoring is not limited to the on-site visits. The Corps Network’s monitoring system includes ongoing processes and procedures. All are used to ensure that program administration is done in a cost-effective, allowable and efficient manner.

Surveys and Interviews
TCN may distribute Corpsmember questionnaires, exit surveys, staff questionnaires, community surveys, and surveys to recipients of service to gather additional data on projects and impressions of important constituencies that are affected by Subgrantee operations. Questionnaires can provide different perspectives or highlight important information that may not be provided by other monitoring tools. TCN may distribute surveys and questionnaires directly to the target groups and ask them to complete and return them, or TCN may conduct one-on-one interviews of representatives of the target groups during site visits or over the phone. In all instances, TCN will inform the project director when verbal or written surveys are being conducted.

Review of Reimbursements: Financial Compliance
Each Subgrantee is required to submit reimbursement invoices for billing purposes. TCN Staff review these invoices and monitor appropriate, allowed, consistent cost allocation and spending throughout the year. There are the basic financial management standards. See OMB Circular referenced below for complete information in greater detail.

OMB Circular A-110 Subpart C §_.20 Standards for financial management systems.

Financial Reporting. Accurate, current, and complete disclosure of the financial results of financially assisted activities must be made in accordance with the financial reporting requirements of the grant or subgrant.
Accounting Records. Records must adequately identify the source of the application of funds provided for financially assisted activities. These records must contain information pertaining to grant or subgrant awards and authorizations, obligations, unobligated balances, assets, liabilities, outlays or expenditures, and income.
Internal Control. Effective control and accountability must be maintained.
Budget Control. Actual expenditures or outlays must be compared with budgeted amounts for each grant or subgrant. Financial information must be related to performance or productivity data, including the development of unit cost information whenever appropriate or specifically required
Funds Transfer. Written procedures should be used to minimize the time elapsing between the transferof funds to the recipient from the U.S. Treasury.
Allowable Cost. Applicable OMB cost principles, agency program regulations, and the terms of the grant or subgrant agreements will be followed in determining reasonableness, allowability, and allocability of costs.
Source Documentation. Accounting records must be supported by such source documentation as cancelled checks, paid bills, payrolls, time and attendance records, contract and subgrant award documents, etc.

Progress Reports
Every federal grantee and its Subgrantees are required to submit progress reports on their progress toward achieving annual performance measures. These reports are TCN’s and the federal awarding agency’s main source of data, both qualitative and quantitative, for assessing the quality and performance of its grantees. The reports are part of the Subgrantee contract file at TCN and are public information under state and federal sunshine laws.

Each Subgrantee must complete the Progress Report by the close of business according to the schedule provided. These reports are reviewed by TCN staff. When completing progress reports, Subgrantee information should be concise. It is important to report accurate and specific figures, and information that supports real progress toward achieving the goal of the performance measures. The Subgrantee report information is compiled and included in TCN’s aggregate progress report and submitted to the federal awarding agency.

Conference Calls and Webinars

The Corps Network often hosts conference calls and/or webinars for our programs and projects because of the geographical nature of our Subgrantees. These activities need to be documented (scheduled of activities, agenda and minutes) as program monitoring activities. They represent valuable communication and training time where important information is disseminated and discussed. Topics such as:

Administrative requirements
Program activities, successful implementation and opportunities for improvement
Evaluation data and procedures
Best Practice Sharing

Conferences and Training

The Corps Network’s annual National Conference is a key piece of program monitoring. Agendas and attendance records are kept to identify who received what information and training. This is also a valuable opportunity to showcase effective programs and projects and provide peer-learning interactions to share best practices that will improve the quality of other programs and projects.

Desk Reviews

Desk reviews are basically remote site visits. They typically involve a high-level review of documents on file (member files and Corps Policies) as well as those submitted by the Subgrantee upon request. The purpose of a desk review is to determine whether the Subgrantee is adhering to AmeriCorps and TCN program regulations and requirements.

Site Visits Formal site visits are scheduled during the project period. Other visits may be used to follow up on items that were identified as areas of concern during previous site visits or progress reports or to conduct surveys of community residents, partners, members or project staff.

The Corps Network’s Monitoring Instrument (see full form in Manual)
Section 1: Subgrantee, Grant and Monitoring Information
Section 2: General Grant Review
Section 3: Project Overview
Section 4: Data Collection and Reporting
Section 5: Time and Attendance Record Keeping
Section 6: Fiscal Overview and Oversight
Section 7: Project Monitoring Summary

TCN staff will complete certain portions of the Monitoring Tool before sending it to the Subgrantee. The Subgrantee will complete the rest of the form and return it to TCN prior the Site Visit. TCN staff will review and then discuss the information during the site visit. Upon return from the visit, TCN staff will summarize findings, concerns, observations, expectations and recommendations. After the written report is finalized, a copy of the entire document is forwarded to the contract signatory and the AmeriCorps Program Director.

Chart of Accounts and Cost Allocation Plans

The chart of accounts is just the numeric or alphabetic listing of how the information is coded in the accounting system. Some agencies might provide an entire copy of their chart of accounts if they do not have many funding sources, others might only provide a copy of listing of accounts associated with this grant. Someone from the fiscal office should be able to print this out. The importance of this is that it demonstrates that your agency has the capacity to separately track the funds for this grant within your accounting system. You should see either a list of numbers or words that have the expense categories that are listed in the budget.

Cost Allocation Plan is an item obtained from the finance office and unfortunately there is no standardized format. This item is important to ensure that the agency has a pre-determined plan to allocate shared coststo various programs they operate in an equitable manner. Items that should/might be addressed include fringe benefits, space, office supplies, administrative costs either as a group or individually (audit, fiscal staff, accounting, liability insurance, board insurance, office supplies). This may be in the form of a spreadsheet with budget information about the various programs with expense and/or income figures, or you might have a document with paragraphs explaining how various shared costs are handled. The document should reflect the basis upon which costs are allocated (number of staff, square footage, etc.) and should be updated each year to ensure the basis remains accurate.

Policy and Procedures Review

Subgrantees must have established infrastructure and financial standards. Subgrantee staff must be aware of the policies and procedures in place.

Audit or Financial Statement Review Subgrantees are required to provide a copy of the most recent audit performed. Many smaller nonprofit agencies (receiving less than $750,000 annually in federal funds) cannot afford an audit but rely on their yearly financial reports. However, if any audit has been performed, including audit per A-133, TCN must receive a copy at the beginning of each program year.

Audit Report Reviews

What was the opinion issued regarding the audit (unqualified, qualified, adverse or disclaimer)?
Were there any issues identified in the audit that could impact on the AmeriCorps project (e.g. time reporting overlap or lack of individual accounting funds for tracking, etc.)?
For projects with multiple grants, are all grants listed in the audit?

If there are findings reported from the audit, and they could impact the project, TCN staff will follow-up for further information regarding what the entity is doing to resolve the findings. TCN is required to do goodfaith monitoring to ensure our partners use standard accounting principles to in-turn ensure sub-granted funds are expended correctly and tracked properly.

Monitoring “Red Flags

A red flag is an activity or occurrence or a series of activities and occurrences, which may lead to questioning the validity of the activity.
Top Five Red Flags (according to, “Financial Literacy for Executives and Non-financial Staff,” AmeriCorps Training)
1) Late Reporting
2) Lack of documentation and audit trail to support claimed expenses
3) Incomplete, non-existent or outdated policies and procedures
4) Continual staff turnover
5) Finance staff does not share accounting information, never takes vacation, or does not provide reports from the accounting system in a timely basis

What types of issues might an auditor consider a “red flag”?
There are numerous things that an auditor might consider a red flag. An occasional lapse of controls might lead to an audit exception with recommendations for improvement. However, when several of these red flags occur together within a unit, a process, or are applied to an individual, the auditor may look further. The decision to go further may be based upon objective criteria (definite lack of compliance with prescribed policies and procedures) or be subjective (gut feeling). Red flags that could trigger additional inquiry and/or testing by an auditor include:

Lack of appropriate supervisory oversight. Either the supervisor doesn’t know what their staff is doing or doesn’t care. Any number of things can cause these problems. However, inadequate funding/staffing of a work unit and negative supervisory attitude are among the most common. Also at fault may be an organization’s lack of emphasis on controlling financial resources. Good financial accountability is a basic, fundamental responsibility for all managers.
Work area in disarray. Although auditors don’t score on “neatness” of work areas, disorganization can be a red flag that there is no process in place to handle work activities. This is especially critical in units where cash is received or expended.
Excessive turnover in staffing. This problem combined with lack of supervisory oversight can prove to be a “disaster”.
Individuals “hoarding” their work. No one touches it in his or her absence. Everyone needs to have a back-up for their job duties. This is especially critical in financial areas.
Supervisor’s inability to understand employee’s work or processes they follow. There is or should be very little within your agency that an employee cannot communicate clearly as to their work duties. This includes areas where “accounting” takes place. Accounting and related functions really are or should be designed to be logical and straightforward processes. As a supervisor or manager, if you can’t understand the process, there could be a serious problem with it.
Excessive involvement from employees or management in inappropriate and/or conflicting tasks. Rarely, if ever, would an employee be responsible for authorizing the purchase of something like equipment, picking up of the warrant to pay for the equipment and also picking up the equipment.

Subgrantee Risk Assessment Criteria Overview

Organizational Effectiveness

Self-Assessment results
How large is the organization? How long has the organization been in existence?
How much experience does the organization have with various funding streams?
Has the organization undergone any major, recent changes?
Are the program staff properly experienced and trained for the project?
Has the organization had any previous audit issues? If so, what was the response and were they resolved? What is the plan to address any concerns that are still unresolved?
Is the organization’s management (Leadership / Board of Directors) informed and engaged?
Does the project fit within the organization’s overall mission and vision?

Fiscal Management

What has been the history of timeliness, accuracy and complete reporting?
Has there been a history of unallocated, unreasonable or unallowable expenditures?
Is there a history of large unexpended balances or over expended budgets?
Are there concerns with meeting match requirements?
What is the quality of internal controls (policies and procedures, staff training and separation of duties)?
Does the organization have new or substantially changed financial management or accounting systems?
What is the size of the award?
Does the organization sub-grant a large portion of its award?

Corpsmember Management

What has been the organization’s track record for Corpsmember enrollment?
What have been the organization’s Corpsmember retention rates?
If applicable, what has been the organization’s track record for Education Award attainment?
If applicable, is the organization timely with Corpsmember enrollment and exit?
Is time and effort reporting in compliance?
Is there adequate training and support provided for Corpsmembers success?

History of Meeting Requirements/Program Compliance

Have program staff attended all required meetings and training?
Are program staff responsive to The Corps Network’s requests?
What is the organization’s history regarding reporting: incomplete, inaccurate or late reports?
Have there been any major project design or scope changes in the past?
What is the quality of proposed performance measures?
What is the history of progress towards target goals? Have they been met?

Grant Project Risk Assessment

Are program outputs and outcomes clear and measureable?
In what ways is the program susceptible to abuse?
What potential hindrances might prevent the program from fulfilling its purpose?
What is the size and complexity of the awards?
What is the percentage of pass-through awards?
Are the program regulations complex?
Are there current audit findings associated with this program?
What is Congress’ interest in the program? What is the public interest in the program?
Is this a multi-year award?

Common Audit Issues to Avoid

Corpsmember eligibility to serve
Funded staff eligibility to work on project
National Service Criminal History Check Compliance
Inadequate time and activity records
Inadequate or missing documentation for match costs
Financial reports do not reconcile with the accounts
Inadequate internal controls or financial systems
Lack of written policies and procedures

Common Investigations

Displacement
Improper Use of Members
Timesheet fraud
Misuse of Grant Funds
Embezzlement

Displacement

Members assigned to staff positions
Staff laid off and replaced by members
Employee on leave; member assigned the work
Employee resigns; member assigned the work

Improper Use of Members

Members used as personal assistant.
Members not performing service.
Members serving outside the scope of the grant.
Members used to generate business for non-profit.
Members used to perform clerical/receptionist duties.

Timesheet Fraud

Recording hours not actually served
Service hours are not properly documented
Member hours are not reasonable or allowable
Member hours or service not verified
Timesheets pre-dated or completed in advance
Members serving from home
Staff time inaccurately allocated

Misuse of Grant Funds

Grant funds are fully expended early
Unauthorized costs are charged to the grant
Funds are borrowed temporarily to pay for unauthorized activities
Funds are drawn down on unfilled member slots
Funds are drawn down on terminated members
Employee claimed under the grant but not working on the grant

Embezzlement

Members, volunteers, and staff are not being paid.
Payments are made to member not serving.
Documents altered.
Documents are missing, copies used instead of originals, fabricated receipts.

Finding
Budget Allocations
Grantees charge costs in one grant that are actually carried out in a succeeding budget period in a new grant. For example, a grantee issues a contract late in the budget year for activities the contractor will complete in the succeeding year under a new grant. Contractor payments span both grants. Auditors question the costs as unallocable to the grant and CNCS typically would disallow them during audit resolution.
Account Reconciliation
Grantees/subgrantees are not reconciling expenditures in their accounting
systems/general ledger to amounts claimed on Federal Financial Reports (FFR). The amount claimed on the FFR does not match the accounting records. Auditors question the difference between what the account system demonstrates as expended and what the FFR reports. CNCS must disallow the costs if the grantee cannot reconcile the difference.
Staff Time-keeping
Staff allocating time to more than one grant are not keeping timesheets that show actual time spent on each grant. The project director’s timesheet does not allocate time between two different grants. The timesheet only records work hours vs. vacation, sick, and other leave.

Auditors question total salary costs because they can’t determine how much time was actually spent on the different grants. The staff person and supervisor spend significant time during audit resolution reconstructing
calendars and checking activities over the year to substantiate time allocated to the grants
Time and Attendance
Grantees/subgrantees charge salaries to a grant based on budgeted amounts instead of actual after-the-fact time reported on timesheets. For example, the grantee budgets for 20% of a staff member, claims 20% of the staff time, but timesheets support only 18%. The auditors question the entire claimed salary
for all staff. During audit resolution, the grantee has to go back and recalculate time spent for all staff based on the timesheets. Some disallowances will occur if the claimed costs are not supported by the timesheets.
Subgrantee Monitoring
Grantees do not have good fiscal monitoring policies and procedures in place to ensure subrecipient financial systems are set up to manage Federal funds. For example, the grantee fiscal monitoring tool does not include a process to check amounts recorded in the accounting system to amounts claimed on expense reports.
Participant Evaluations/Appraisals
Grantees/subgrantees are not conducting evaluations as required or not maintaining records of evaluations.

For AmeriCorps, auditors question the living allowance and education awards for members serving a second term without appropriate evaluations supporting successful completion of the first term.
Criminal History Checks
Grantees/subgrantees are not conducting background checks of all participants or staff who receive a stipend, education award, salary or other remuneration All costs for unchecked participants or staff will be questioned and likely disallowed.
AmeriCorps Member Timekeeping
Member timesheets are not signed by both the member and supervisor. Member timesheets do not add up to the term of service claimed. Auditors question the portion of unearned living allowance and the entire education award earned by those members because they did not meet the requirements.
AmeriCorps Enrollment
Grantees allow members to begin service before members sign contracts. The auditors deduct hours served before the member signed the contract and question the education award earned if the decrease in hours results in less hours served than required to earn the education award. CNCS may have had to rule that the education award is not valid because the grant provisions
stipulate the conditions for enrollment. Grant Provision change (08/09).
Match
Grantees/subgrantees claim match that is not sufficiently supported. For example, grantees/ subgrantees claim match for an activity that doesn’t appear in the approved budget or for which there is no supporting documentation, such as time and attendance records for donated staff. Auditors will question the unsupported match. If supporting documentation cannot be provided, some disallowance of Federal funds may result because the match is not met. Audit resolution requires significant time and effort to confirm all match.
Match
Grantees/subgrantees claim match that is excessive or substitute match for activities not in the approved budget. For example, grantees/subgrantees claim a significant overmatch for donated Public Service Announcements or provide support during the budget. audit for match to a training activity not included in the approved budget. Auditors may decide to audit the entire match or question the entire match based on inability to confirm whether the match is reasonable or allocable under the approved budget. When off-budget match appears, auditors may question the necessity of the cost. Audit resolution requires significant time and effort to confirm all match.

Corrective Action
Budget Allocations
Review budget to actual expenditures on a monthly basis. Ensure you charge the costs to the correct grant or budget period. Ensure you seek approval from CNCS to use funds from a previous budget period in the succeeding new grant budget period or through a no-cost extension. Do not assume CNCS will approve the request. In many cases, it may not be approved.
Account Reconciliation
Create and implement procedures to conduct a regular reconciliation between the new FFR (replacing the FSR and FCTR) and the accounting system and document the process in written procedures. If different offices or individuals prepare the reports, ensure they communicate with one another and reconcile
differences.
Staff Timekeeping
Ensure timesheets record hours by activity or cost center to track the actual time spent on each grant and clearly follow the requirements of the Cost Principles.
Time and Attendance
Ensure accounting staff are reporting payroll expenditures based on actual hours by grant or activity and not using budgeted time entered into the accounting system at the beginning of the year as the allocation method when completing expenditure reports. Develop a system to compare actual time against budgeted time and document the process in writing (governments only can charge budgeted time, non-profits are not allowed).
Subgrantee Monitoring
Review and strengthen fiscal monitoring policies and procedures of subgrantee
financial systems. Develop a written tool, and set-up regular on-site or desk monitoring visits.
Participant Evaluations/Appraisals
Include regular review of member/volunteer files to ensure all of the documentation is available. Develop and implement written policies and procedures for conducting and retaining member evaluations which vary by type of participant: Full and Half-time members require mid and end-of-term evaluations. All others only at end-of-term.
AmeriCorps Background Checks
Going Forward: Make sure all programs/operating sites understand the requirements of CNCS’s regulations and any state specific laws that may also apply: Customize participant contracts and maintain documentation that a background check was done on all participants and funded staff. Make sure you include review of background checks in your subgrantee monitoring plans if you have subgrantees.
AmeriCorps Member Timekeeping
Review timesheets and perform periodic reconciliations of completed timesheets with My AmeriCorps Portal certifications of hours completed. Make this a part of your monitoring plan if you have subgrantees.
AmeriCorps Enrollment
Going Forward: Establish and implement written policies that address members’
signing contracts before commencement of service so they are fully aware of their rights and responsibilities.
Match
Record all claimed match in accounting journals as both revenue and expenditure. Make sure claimed match is included in the budget and you maintain appropriate supporting documentation. Do not record match until supporting documentation is received and in hand.
Match
Make sure claimed match is reasonable and included in the budget. Per your grant provisions or regulations, request budget amendments as necessary to include new sources of match not included in the original budget.

Definitions
Internal Controls
Internal controls come in many different shapes and sizes. There is no ‘one size fits all.’ There are, however, certain common controls that do need to be in place. Internal controls exist to ensure entity resources are adequately protected. Good internal control processes protect staff as well as money and equipment. They can be ‘hard’ controls that are generally very specific and procedural in nature or ‘soft’ controls that are less specific and more intangible.

Common types of internal controls include: processes for ensuring an entity hires qualified staff, provides staff with training and adequate oversight, “hard” controls such as:

Well-written policies and procedures
Clear delineation and assignment of duties
Management monitoring and oversight of activities
Centralized decision making
Background checks on new hires
Clear separation of duties
Authorization signatures for transactions

And “Soft” controls such as:

Strong leadership
Ethical environment
High expectations
Good communication practices
Competent personnel

Reasonable Costs
A cost is reasonable if it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the costs.

Questioned Costs
Identified by auditors as potentially being out of compliance with federal laws, regulations, grant agreements, etc.

Disallowed Costs
Expenditures identified by the grantor (usually as a result of an audit or monitoring visit) as out of compliance. These must be repaid to the grantor. Disallowed federal funds must be repaid from nonfederal funding sources.

Finding
A violation of the Act, Federal/State Regulation or Policy. These violations create a significant risk to the program, the services or its resources. For example:

FINDING 1: There was no proof of citizenship on file for Sallie Service.

FINDING 2: Project staff has not submitted Corpsmember enrollment paperwork in a timely manner as instructed in the Enrollment Instructions.

Concern
Not a violation of the Act, Federal/State Regulation or Policy, but a situation or circumstance that Staff feels presents a risk to the program, services or resources. A concern could also be a violation of the Act, Federal/State Regulation or Policy, but not create a significant risk (i.e. there is not the frequency or volume of error present to create a large risk, but there is risk present). For example, one timesheet is found with white out of 50 reviewed. For example:

CONCERN 1: The project did not participate in the 2010 state Launch in Seattle.

CONCERN 2: The project staff does not appear to have regular and consistent communication with fiscal staff regarding budget spending and reimbursement processing.

Observation
Not a violation of policy or guidance, or a situation that merits high risk. An observation may be something that Staff notices or wonders about and seeks clarification or further input from the project concerning. It could be a minor process improvement suggestion or a note about forms, practices, language, etc. that the project uses within its operation.

Performance Audit
Determines whether the program is producing up to measurable expectations or in the most cost effective manner.

Compliance Audit
Determines whether the program activities are in compliance with laws and regulations.

Unqualified Audit Opinion
Financial statements present fairly the entity’s financial position. This is generally the best opinion available. However, the financial statements may show the organization is deeply in debt*. As long as the figures in the financial statements are correct they meet requirements for an unqualified opinion.

*Going concern: if an auditor indicates in their report that there is going concern issue with an entity it is an indication of a problem. The auditor is expressing their concern that the entity may not be able to pay their debts as they come due and the entity may go out of business.

Qualified Audit Opinion
Financial statements are presented fairly “except for” certain issues that the auditor will identify in the qualifications to the statements.

Adverse Audit Opinion
Financial statements do not present fairly the entity’s financial activities.

Disclaimer Audit Opinion
The auditor cannot form an opinion on the fairness of presentation. This is usually due to missing or inadequate records.