Volume 1 November 20, 2014 For ERSEA, note the following correction and clarification: Grantees must meet specific conditions to use the 100-to-130% of poverty eligibility category. However, you do not need to verify that the grantee has met those conditions. You should accept the 100-to-130% of poverty status if it is a status the program uses. If the program does not use this status, you should consider Percent of Poverty values of 100% or higher as over income. Volume 3 December 12, 2014 Fiscal 6.1. Be sure to read the EAS carefully, if the grantee has changed facilities costs to the award, do not select the last EAS under fiscal 6.1. Read the first EAS selection carefully and you will likely end up choosing the top EAS, if in fact there have been no concerns. ERSEA A reminder on the requirements for documentation of income eligibility: From Program Instruction 10-02: Currently programs are not required to maintain copies of the documents reviewed to determine income eligibility; however, OHS encourages programs to maintain copies of the eligibility documents with the eligibility verification form in the child's official record. If the grantee does not retain documentation, the FIS/ERSEA reviewer only needs to review the grantee s income verification form. Volume 4 December 22, 2014 Monetary findings should be supported by proper documentation tracing the cost to a Final SF-425 Federal Financial Report. For example, if a grantee purchased a bus without prior approval, the reviewer should trace from the purchase order, to an invoice, to the general ledger and finally into the Final SF-425. By performing this activity (and collecting the related documents for the evidence binder), the reviewer ensures that the cost was actually charged to the Head Start award. Financial Reports/Accounting Records: If the grantee cannot produce standard accounting records such as a complete general ledger, the reviewer should verify the financial management system meets the standards outlined in the regulations. The grantee s financial system must provide for accurate, current and complete disclosure of the financial results of the Head Start program. The grantee must produce monthly financial reports for the Board and Policy Council. If the grantee s general ledger is not operable, the reviewer should question how these requirements are being met. FIFO & Audit: The reviewer should ensure that all comments in the FIFO are entered into the document in the protocol. Non-Personnel Cost & Procurement Transactions: As a general rule, reviewers should not re-use the same transactions across multiple transaction guides. But when pressed for time, the reviewer may opt to use the same transactions for the procurement and non-personnel guides. Otherwise, transactions should not be recycled. For example, we would not expect to see leased facility transactions also appearing as nonpersonnel transactions. 1
Leased Facilities Transactions: Long-term leases should be evaluated to determine whether these are actually capital leases (in plain terms, a lease-buy arrangement) which require prior approval under Part 1309. If the lease provides for transfer of ownership at the end of the lease term (or a bargain purchase at the end of the lease), then it is likely a capital lease. The duration or cost of the lease are also factors. A lease extending over 75% or more of the life of a facility is likely a capital lease. A lease whose payments are 90% or more of the facility s value at the beginning of the lease term is likely a capital lease. Procurement Transactions: The protocol instructions ask reviewers to determine if there are any procurements in excess of $25,000 this is the threshold for completion of a guide. When evaluating a procurement, reviewers should focus on the total amount of the procurement, not on an individual payment. For example, a $12,000 payment for services may appear to be below the $25,000 threshold. But the reviewer should go back to the grantee s procurement instrument and determine the total amount of invoices charged against a single procurement. One way to do this is to ask the grantee to provide a report on all payments to the vendor, and then ask to see the procurement instruments supporting each payment. The reviewer may find that the $12,000 payment was only a partial payment against a much larger procurement. Non-Federal Share Transactions: We ve found several instances of very low dollar amount ($1.51, $7.50, etc.) non-federal share transactions selected for testing. Even if you find a problem with a single low-dollar value transaction, we may be unable to develop a finding because the transaction is individually insignificant. One suggestion is to test a group of low dollar value transactions. By testing a group of transactions, you will get a better sense of the scope and impact of a potential finding. At the end of the onsite review, check the Completeness report found on the main page of the standalone. Confirm that the Completeness report shows complete for all guides, meaning that all TQs have been answered. ERSEA The Fiscal RFL does not need to assign the child file instructions page to a Reviewer in order to complete Child File guides. To create a Child File guide, select Child Files and then Add new child file. If a child is categorically eligible, the reviewer should not use the poverty calculator. The calculator should not be used in cases where the family has no income. Here is a Link to ERSEA Policy Clarifications - https://eclkc.ohs.acf.hhs.gov/hslc/standards/pc/i_pc_actual.htm. This site provides answers to some commonly asked question surrounding ERSEA. Volume 6 January 16, 2015 Below are FAQs gathered from questions raised by Reviewers during the first quarter or submitted to headstartreviews@danya.com. Question: Do I need to have the Fiscal RFL assign the Child File Instructions page to me? 2
Answer: The RFL does not need to assign the Child File Instructions page to the Reviewer. Simply click on Child Files then Add New Child File. Question: Do I need to use the Poverty Calculator for all files when I am doing redeterminations? Answer: You should not use the poverty calculator when re-determining eligibility of a child file that is categorically eligible or when there is no income. Question: What do I do if a child has been dropped from the program or was included in the sample in error? Answer: If the file is not available for you to review, check no to the question Are you able to review this file? Then select the appropriate drop down from the indicating the justification. Lastly, you should describe in detail why the child file was not accessible. You should then close out that child file and begin your review of the next child file. Question: What do I need to do when the grantee categorizes children as 100 to 130 percent of poverty? Answer: Grantees must meet specific conditions to use the 100-to-130 percent category. However, you do not need to verify that the grantee has met those conditions. You should accept the 100-to-130 percent of poverty status if it is a status the program uses. If the program does not use this status, you are to consider Percent of Poverty values of 100 percent or higher as over income. Question: When reviewing reports during the ERSEA Coordinator interview, what information should I record? Answer: When recording information from reports provided during interviews, please be as detailed as possible in recording grantee information. For disabilities, please capture in your notes the number of children who are identified with a disability and the total enrollment. For enrollment, record in the protocol the past 12 months of actual and funded enrollment. In instances where the grantee is under-enrolled, be sure to record the grantee s response regarding their communication of enrollment status with their Regional Office. For attendance, record previous 6 months of attendance percentage. If under 85% for any month, record the grantee s response regarding the efforts they make to analyze the causes of absenteeism. For those who wish to learn even more about ERSEA, please follow this link to ECLKC for a series of Policy Clarifications - https://eclkc.ohs.acf.hhs.gov/hslc/standards/pc/i_pc_actual.htm Volume 7 January 23, 2015 Guidance on the period of Review The FIS/ERSEA review event has two distinct focuses: 3
Assessment of controls as of the date of the review event The reviewer is expected to verify that the grantee is currently implementing specific controls. Examples of these controls and systems include: Bank reconciliations Monthly financial reporting to governing body and Policy Council Insurance coverage Payment of taxes, worker compensation, and other amounts owed The reviewer should make these assessments as of the date of the FIS/ERSEA review event, and if issues are identified, include the scope of the problem. For example, the bank reconciliations were not completed for the last 18 consecutive months or insurance coverage expired 3 years ago on January 31, 2011. To be a completed bank reconciliation, the adjusted bank balance must equal the adjusted general ledger balance. If there is a variance, the variance must be resolved. Testing of transactions executed before the review event In this portion of the review, the reviewer is looking at how the grantee has implemented Federal requirements by evaluating transactions executed before the review event. The focus should be on transactions included on a Final SF-425 report. In FY15, reviewers will find that some grantees are operating new Head Start awards, under new award numbers. Before selecting transactions, reviewers should determine which scenario (below) best describes the grantee s most recent Final SF-425. Review the Notice of Award to determine the number of months included in the grantee s last Project Year. The Final SF-425 can cover a: Full Year Final SF-425 (Project Year covered 12 months) under New Award Number: In this scenario, reviewers should select transactions from the period covered by the most recent Final SF-425. Partial Year Final SF-425 under New Award Number (Project Year covered 8 months or more): In this scenario, reviewers would select transactions from the period covered by the most recent Final SF-425. Partial Year Final SF-425 under New Award Number (Project Year covered 7 months or less): In this scenario, reviewers would select transactions from the period covered by the most recent Final SF-425 (under the new award number) as well as transactions from the previous Final SF-425 (under the old award number). If issues are found in the transactions selected from the old award, those issues should be fully developed; the reviewer should also determine through additional transaction testing whether the issue persists into the new award. The reviewer should also determine whether the grantee corrected procedures to avoid recurrence. If no Final SF-425: Under New Award Number, reviewers would select transactions from the period covered by the last FinalSF- 425 under the old award number. If the transaction testing from the old award yields issues, those issues should be fully developed; the reviewer should also determine through additional transaction testing 4
whether the issue persists into the new award. The reviewer should also determine whether the grantee corrected procedures to avoid recurrence. Under any Head Start award: This scenario may apply to the first year review of new grantees. In this case, reviewers should select transactions from the inception of the current award to the date of the review event. Webinar: New uniform administrative requirements, cost principles, audit requirements, and implementing regulations from the Department of Health and Human Services (HHS) went into effect Dec. 26, 2014. A webinar will be held on Tuesday, Feb. 10, 2015; 2 4 p.m. EST. The presenters will provide updates and address fiscal and grants management questions about the new regulations and requirements. Should you wish to participate, select this link to register: https://attendee.gotowebinar.com/register/83363136457064194 Volume 9 February 6, 2015 Photo Op - Introducing the Fiscal Review Field Leads (RFLs)! Volume 11 February 20, 2015 Fiscal Integrity On Feb. 10, 2015, the Office of Head Start (OHS) held a webinar to discuss the new uniform administrative requirements, cost principles, and audit requirements for federal awards. These requirements went into effect Dec. 26, 2014. Webinar materials are now available on ECLKC. When completing the Transaction Guide for Bank Reconciliations, please provide the adjusted bank balance and the adjusted general ledger cash balance in your notes. Be sure to note if the bank statements reconcile with the general ledger and if not, whether the grantee has determined the cause of the variance. Reminders: 1. Assign narrative evidence (findings) to the RFL at the end of the Review 2. At the end of the week, check in with the RFL before you leave the worksite 3. Never tell the grantee that an issue will become a finding 4. Review the last closed grant year for transaction testing. Conduct current year transaction testing to further document/develop an issue found in the closed year. Look at the current grant year for internal control measures such as bank reconciliation, separation of duties, etc. ERSEA When conducting re-determinations, you should review the documentation the grantee has retained and make a decision as to whether or not you agree with the category in which the child was enrolled. The grantee must be able to support their decision based on their documentation. If you disagree with documents or methods (e.g. the multipliers they use to annualize income) used in their determination, please be sure to discuss your concerns with the grantee and include notes at the end of the Child File Guide as to why you disagree. 5
Many of you may have seen the email about issuance of the Final Rule on Head Start Eligibility. Although the Rule has an effective date of March 12, 2015, more guidance will be provided in the upcoming weeks by the Office of Head Start and how we will monitor the Final Rule and we will pass it on to you as it soon as we receive it. Volume 13 March 6, 2015 FIFO When responding to comments on the FIFO, first review any available documents that can be used to respond to the comments (e.g., audit reports). Also, please begin FIFO review as early in the week as possible, particularly for items you expect might be time consuming. Please remind the grantee staff you work with during the week to keep the information available in case you have the need to access it as the week goes on. Never print sensitive documents while at grantee facilities. When you identify a lease that is less-than-arms-length (LTAL) and you identify no concerns with the relationship, please provide narrative as to why the LTAL is not of concern. If a grantee has loans, you must provide transaction guides for up to three of those loans whether or not the funds support HS/EHS activities. The transaction review is to determine if HS/EHS assets were used as collateral. Include in the selections loans refinanced since the previous triennial and any new loans since last triennial. Check in daily with the RFLs as required so that everyone is informed on the current status of the review event. Volume 15 March 20, 2015 All child file samples are uploaded to the OHSMS evidence binder by COB Thursday of every week for the following week s reviews. If you have any questions regarding the sample, please contact your assigned RFL. Please remember to de-select any citations that are not applicable to the issue you are writing the summary for. Also, please remember to assign any findings to your RFL before you leave the review. When selecting journal entries for testing, please do not include any entries related to the grantee recording non-federal Share (NFS). All NFS transactions should be listed in the NFS guide. On February 10, 2015, the Office of Head Start (OHS) held a webinar to discuss the new uniform administrative requirements, cost principles, and audit requirements for federal awards. The webinar and related questions and answers (Q&A) are now available on the Early Childhood Learning and Knowledge Center (ECLKC). 6
Select this link to view the webinar: http://eclkc.ohs.acf.hhs.gov/hslc/tta-system/operations/mang-sys/fiscal-mang/webinars/uniform-cost-au dit.html Explore Q&A from the webinar: http://eclkc.ohs.acf.hhs.gov/hslc/tta-system/operations/mang-sys/fiscal-mang/webinars/uniform-require ments-faq.html For ERSEA3.1, please be sure to capture actual enrollment as opposed to funded enrollment during your ERSEA Coordinator interview. Also, for this same CM, be sure to ask whether the grantee has a current waiver. 7