Getting in Shape for a Financial Management ReviewMarion Montez, Financial Integrity AnalystFinancial Management Review Team (FMRT)Division of Financial Integrity (DFI)Office of Federal Assistance Management (OFAM)

Getting in Shape for aFinancial Management Review

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Agenda

• Background• What is a Financial Management Review and Why Is It

Performed?• Guidance and Standards• Scope of the Review and Review Process• Review Process• Internal Controls• Financial Management Policies and Procedures• Financial Management Requirements Guide• Document List• Top Five Areas for Strengthening• Tips for Success

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BackgroundFinancial Management Reviews

Reason for Financial Management Reviews (FMR)• Rise in the federal expenditure threshold for single

audits to $750,000 or more for recipients with FYs beginning on or after 1/1/15.

- Uniform Administrative Requirements, Cost Principles and Audit Requirements for HHS Awards, 45 CFR 75.

• Recipients under the threshold are exempt from complying with single audit requirements.

• Recipients with known financial management control weaknesses.

• Recipients with a HRSA grant program that is not covered under a single audit as a major program.

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What is a Financial Management Review?Financial Management Reviews

In the absence of single audits• FMRs are a preventive measure to help recipients ensure their

financial systems are capable of adequately administering federal awards

• DFI began the process in FY 17

Review recipients’ compliance with HHS financial management standards

• Determine if written policies and procedures conform to standards prescribed under Subpart D, 45 CFR 75

• If recipients are financially stable per review of recent financial data

• If control weaknesses do exist, the FMR process can identify them and request revised policies & procedures

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Why are They Performed?Financial Management Reviews

FMRs help ensure • HRSA funds are used in accordance with

laws, regulations and award terms & conditions;

• HRSA funds are properly accounted for and reported; and

• Recipients may avoid audit findings and potential disallowed costs (grant reviews, audits or investigations).

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Guidance and StandardsFinancial Management Reviews

• 45 CFR 75 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for HHS Awards, December 19, 2014

• HHS Grants Policy Statement, January 1, 2007• Grants Policy Bulletin Number 2018-04 Legislative Mandates

in Grants Management• HRSA Federal Financial Assistance Conflict of Interest Policy,

November 16, 2017• GAO-14-704G – Standards for Internal Control in the Federal

Government, September 2014• HRSA Financial Management Requirements Guide for Award

Recipients

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Scope of the ReviewFinancial Management Reviews

• Most recent audited financial statements or IRS Form 990

• Accounting and personnel policies & procedures

• Chart of accounts

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Review ProcessFinancial Management Reviews

• Desk reviews• Every 2 years per entity under the threshold (if no

single audits)• Not a review of grant expenditures• FMRs, as with other DFI functions, do not impact

the ability to drawdown funds or project activities• For FMRs that identify internal control weaknesses

• Work with recipient to strengthen policies and procedures

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Internal ControlsFinancial Management Reviews

• The financial management system of each non-Federal entity must provide for the following (45 CFR 75.303)

• Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award…

• Comply with Federal statutes, regulations, and the terms and conditions of the Federal awards (Notice of Award, Terms and Conditions: Grant Specific Terms, Standard Terms, Mandatory Disclosures)

• Evaluate and monitor the non-Federal entity’s compliance with statutes, regulations and the terms and conditions of Federal awards

• Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings

• Take reasonable measures to safeguard protected personally identifiable information and other information the HHS awarding agency or pass-through entity designates as sensitive…

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Financial Management Policies and ProceduresFinancial Management Reviews

• What do we mean by Policies and Procedures?• Policy – a statement of intent and is implemented as

a procedure to guide and determine present and future decisions; what we do

• Procedure – a particular way of accomplishing something or of acting; How we do it

• What’s the Point of Policies and Procedures?• Written documents that should be regularly updated• Compliance with federal regulations and grant

requirements• Document internal controls• Used to train staff

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Financial Management Requirements GuideFinancial Management Reviews

Cash Management Credit Cards

Annual Audits Timekeeping

Accounting System Travel

Bank Statements Property Control

Disbursements/Procurement Conflict of Interest

Matching or Cost Sharing Mandatory Disclosures

Consultants and Contractors Limitation on Use of HRSA Funds

Expenditure Analysis Allowability of Costs

Indirect Costs Program Income

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Document ListFinancial Management Reviews

• Audited financial statements or IRS Form 990 (if applicable) submission for FY 2017 or later

• Chart of Accounts• Accounting and personnel policies and procedures,

updated to incorporate the financial management requirements prescribed in 45 CFR 75

• Management control areas outlined in the Financial Management Requirements Guide (see Handout).

• Cross-reference the controls in the Guide to the relevant location in the policies and procedures to facilitate the FMR process; include the annotated Guide in your submission to HRSA.

• Copying and pasting the management control areas from the Guide to your organization’s policies and procedures will not be accepted.

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Top Five Areas for StrengtheningFinancial Management Reviews

FY 17 Overall Areas• Bank statements• Conflict of Interest• Indirect Costs• Property Control• Disbursement/Procurement

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Bank StatementsFinancial Management Reviews

The P&Ps must:a. Prohibit the individual reconciling the bank statements from

opening them;b. Require bank statements be opened and reviewed by a

recipient official that is not authorized to sign checks (i.e. –treasurer, president, etc.), but who is familiar with its financial activities;

c. Require bank statements be reconciled in a timely manner by someone not authorized to sign checks;

d. Require the reconciliation be approved by a recipient official outside the payment process but familiar with the financial activities; and

e. Define timely (i.e. – within 14 days, etc.).

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Conflict of InterestFinancial Management Reviews

Establish P&Ps to prevent employees, consultants, members of governing bodies, and other involved in grant supported activities from using their positions for purposes that are, or give appearance of being, motivated by a desire for private financial gain for themselves, or others, such as those with whom they have family, business, or other ties.

a. Address conditions under which outside activities, relationships, or financial interests are proper or improper;

b. Provide for advance notification of outside activities, relationships, or financial interests to a responsible organizational official;

c. Include a process for notification and review by the responsible official of potential or actual violations of the standards;

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Conflict of Interest (Continued)Financial Management Reviews

d. Specify the nature of penalties that may be imposed for violations;

e. If a recipient conducts activities supported by grant funding through subrecipients (including subawards under 45 CFR §75.351), the recipient must take reasonable steps to ensure that these organizations or individuals also comply with this conflict of interest policy; and

f. Address disclosure in writing of any potential conflict of interest to the respective federal awarding agency or pass-through entity.

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Indirect CostsFinancial Management Reviews

If applicable, the P&Ps must describe:a. Existing or planned indirect cost rates and the type of

rate used as well as both the content of pooled expenses and the type of allocation base used;

b. If all costs are direct, the method used to allocate costs benefiting multiple cost objectives to each cost objective;

c. How and when the rate proposal is prepared, submitted and personnel responsible; and

d. The approval process of indirect cost rate reimbursement, matching or cost sharing.

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Property ControlFinancial Management Reviews

The P&Ps must require:a. Property records be maintained that include a

description, cost, purchase date, source of funding, location, and condition of each property item;

b. Periodic physical inventories be taken and reconciled to the property records no less frequently than every other year;

c. Property purchased with Government funds be tagged; d. d. Property be safeguarded to prevent loss or theft and

describe how; ande. Disposition requirements for property obtained with

federal funds.

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Disbursements/ProcurementFinancial Management Reviews

The P&Ps must require:a. Documentation be maintained to support all disbursements and

describe how;

b. Disbursements be pre-approved and indicate by whom for both small and large dollar purchases;

c. Expenditures be reasonable and explain how this should be accomplished (bids, quotes, etc.);

d. Blank checks be safeguarded and define how;

e. Segregation of duties over creation of vendor accounts/making payments via Electronic Fund Transfer methods and define how; and

f. The dollar threshold for determining signatures on checks and designated organization officials authorized to sign checks.

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Tips for SuccessFinancial Management Reviews

• Regularly review and update policies and procedures.

• Stay current on Legislative mandates and incorporate them into policies and procedures.

• Tailor policies and procedures to your own organization, not a cut and paste of financial management requirements.

• Financial management reviewers are here to help.

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Questions?

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Contact Information

Marion MontezFinancial Management Review TeamEmail: MMontez@hrsa.govPhone: (415) 629-2906

Web: hrsa.gov/about/organization/bureausTwitter: twitter.com/HRSAgovFacebook: facebook.com/HRSAgov

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