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Pennsylvania Association of Community Health Centers Time & Effort Reporting. Presented by David Fields, CPA, Senior Manager October 9, 2013. Headline Issue – time & effort reporting. Significant buzz surrounding cost principles & allowable cost rules & time & effort reporting - PowerPoint PPT Presentation
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Presented byDavid Fields, CPA, Senior ManagerOctober 9, 2013
1 // experience perspective
Pennsylvania Association of Community Health CentersTime & Effort Reporting
HEADLINE ISSUE – TIME & EFFORT REPORTING Significant buzz surrounding cost principles &
allowable cost rules & time & effort reporting What have you heard? What are your thoughts regarding issues? Is room for improvement & if so what are
most significant areas?
2
HEADLINE ISSUE – TIME & EFFORT REPORTING OIG audits of CHCs New era of accountability – phrase spoken with ARRA
bill Seeing fruits of change Accountability, not new rules
HRSA scrutinized by OIG OIG audits of CHCs Significant questioned costs
3
WHY ARE AUDITORS CONCERNED? The risk that
An “unallowable” cost is paid for with federal grant dollars Costs charged to the grant are not properly supported Unreasonable costs are incurred A CHC expense is charged to wrong federal grant or wrong
amount is allocated
4
OIG AUDIT TIME & EFFORT REPORTING FINDING
Pursuant to 2 CFR pt. 230, Appendix B, §§ (8)(m)(1) & (8)(m)(2)(a), the distribution of salaries and wages to awards must be supported by personnel activity reports. The reports must reflect an after-the-fact determination of the actual activity of each employee. Budget estimates (i.e., estimates determined before the services are performed) do not qualify as support for charges to awards
5
OIG AUDIT TIME & EFFORT REPORTING FINDING Continued - Contrary to these Federal requirements,
CHC calculated NAP & IDS payroll costs on basis of budget estimates & not on basis of actual time employees worked on grant-approved activities
Specifically, in lieu of tracking actual time employees worked on grant-approved activities, CHC multiplied each employee’s salary & benefit cost by pre-determined grant FTE allocation. Use of budget estimates rather than actual costs could result in improper allocation of Recovery Act grant funding
6
OIG FINDINGS 2012 – TIME & EFFORT Most common & frequent Some six & seven-figure questioned costs Examples
Did not work outside of normal hours – IDS Salaries not supported by personnel activity reports &
improperly allocated $87,000, $700,000, $785,000, $1.6m, $3m (part of $3m on
next page), $5.2m No time & attendance approval – $120,000
7
OIG FINDINGS 2012 Documentation of expenditures
No separate system to track expenditures Multiple instance exceeding $3m, $2m, $2m & $350,000
More than half of the 18 reports in 2012 had some finding
Expected new PIN draft to remind, clarify & address documentation of & cost principles for CHCs It did not address time & effort reporting Why not?
8
BLAME GAME – CHC EXCUSES “No one told me”
Auditor, HRSA site visit, HRSA grant or project officer
“No one else is doing it either…”
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BLAME GAME – CHC EXCUSES “We take care of indigent population in our
community” Bad Debt & Sliding Fee more than grant Grant funds were used for grant purposes
Response from OIG
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WHAT ARE WE GOING TO DO?
Take it seriously Knowledge is power – understand regulations Review policies Reconsider processes Accept this as a cost of doing business, but adjust as
efficiently & painlessly as possible
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8. COMPENSATION FOR PERSONAL SERVICES Definition – includes all compensation paid currently
or accrued by organization for services of employees rendered during the period of award Fringe, overtime, retirement, bonus, etc.
It must be reasonable, conform with established policies & be applied consistently
12
8. COMPENSATION FOR PERSONAL SERVICES
Costs unallowable under other paragraphs of this appendix shall not be allowable under this paragraph just because it is personal compensation (e) Nonallowable costs addressed in other areas of appendix B
are not allowable just because you call them compensation
13
8. COMPENSATION FOR PERSONAL SERVICES Overtime, shift premiums, etc., are only allowable with
awarding agency approval unless (f) Necessary due to emergencies Indirect functions – admin., maint., & accounting Continuous nature of job & cannot be reasonably
interrupted or otherwise completed When lower federal costs to federal government will result
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8. COMPENSATION FOR PERSONAL SERVICES Fringe benefits are permitted as long as allocated
proportionately to relative amount of time or effort actually devoted to each cost objective (g) Pension costs (i) as long as they meet the reasonable, fair &
consistent rules Personal use automobiles are unallowable fringe
benefit cost, direct or indirect (h)
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8. COMPENSATION FOR PERSONAL SERVICES Incentive compensation is permissible under criteria
mentioned (j) Severance pay is only allowable if it is required by law,
employer/employee agreement, established policy creating an implied agreement or circumstances of particular employment (k) Two categories – see terms
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8. SUPPORT OF SALARIES & WAGES (M) Time & effort reporting
Maintained for all staff members whose compensation is charged in whole or in part directly to awards or if needed to facilitate determination of indirect cost rate (2)
Includes hourly & salary Uses term “personnel activity report” See required elements on PAR slide
17
8. SUPPORT OF SALARIES & WAGES (M) How is overtime handled?
Charges for salaries & wages of nonexempt employees, in addition to other supporting documentation, must also be supported by records indicating total number of hours worked each day (3)
• e.g., Hours worked by hourly employees must be captured & allocated
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Know the rules...
Documentation is key!
NO TIME AND EFFORT REPORTING GUIDANCE
Anticipated PIN would address Lack of explanation implies there will be no relief Response to PIN has requested guidance on applying
time and effort reporting in a CHC The OIG has been very critical of the lack of adequate
time and effort reporting in the industry Hope? – OMB is working on “Super Circular”
20 // experience perspective
PERSONNEL ACTIVITY REPORTS (PARS) After the fact Actual Not budget Total activity Signed as accurate
Employee or Supervisor with firsthand knowledge
Prepared monthly Coincide with at least one pay period
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MyTown Community Health CenterPersonnel Activity Report
Employee Name: Dr. John SmithDate Adult Med HIV IDS Admin Total
Monday 5/2 6 2 8Tuesday 5/3 6 2 8Wednesday 5/4 6 2 8Thursday 5/5 8 8Friday 5/6 4 4 8Saturday 5/7 0Monday 5/9 6 2 8Tuesday 5/10 6 2 8Wednesday 5/11 4 4Thursday 5/12 8 8Friday 5/13 4 4 8Saturday 5/14 4 4
Total 34 24 14 8 80
PRACTICAL THOUGHTS The rules are the same, but the approach will vary
based on facts & circumstances What is your risk profile? Variables to consider:
Out of scope servicesIndirect cost rateHow many federal grantsSize of federal grants relative to budgetOthers
23 // experience perspective
FINAL THOUGHTS
What are my risks?
Do I have policies in place?
Are existing systems/accounts adequate?
Establish an action plan & execute soon
THANK YOU
FOR MORE INFORMATION // For a complete list of our offices and subsidiaries, visit bkd.com or contact:
Please feel free to contactDavid Fields [email protected]
26
The information in BKD seminars is presented by BKD professionals, but applying specific information to your situation requires careful consideration of facts & circumstances. Consult your BKD advisor before acting on any matters covered in these seminars.