Are Your Internal Controls in Order?

Are your Internal Controls in Order? Updating financial management policies to ensure

compliance with the new UGG

NGMA Monthly Training LuncheonOctober 21, 2015

RBW STRATEGY ALL RIGHTS RESERVED © 2015

Rachel Werner is CEO and Owner, RBW Strategy, LLC. Based in Washington, DC metro area. Over 12 years of grant lifecycle support and project

management experience with government, nonprofit and corporate entities.

Grants Management Certificate, Certified Grants Professional, and Project Management Professional.

About the Presenter

10/21/15 RBW STRATEGY ALL RIGHTS RESERVED © 2015 2

1. Identify the differences between previous OMB guidance and the UGG regarding financial management practices, including internal controls and time and effort reporting, and identify risks for non-compliance.

2. Learn how these new updates impact the activities of those who seek and manage federal funds.

3. Gather information on the components of robust internal control policies.

Session Objectives


Why does this impact me?


Funding Research or

Planning

Application or FOA

Development

NoGA and Project Start-up

Award Management

and Monitoring

Project Closeout

UGG impacts the entire grants lifecycle

Internal controls fuel effective grants management and this impacts the entire grants lifecycle. OMB has increased focus on performance

measurement and transparency. Financial management = operations, and this often

becomes the forgotten stepchild of post-award management.

Why These Objectives?


Grant Seekers – Ensure effective stewardship of public funding in adherence to federal regulations, policies and guidelines.

Grant Makers – Ensure that organizations are able to serve as effective public stewards of federal funds.

UGG Internal Control Goals


Are you implementing UGG?

How do you REALLY feel about adapting and changing your work due to UGG?


Get Back to UGG’s Mission Focus on streamlining and efficiency. Focus on how financials equate to program

outcomes, which helps show greater social impact.

Increased transparency – don’t let GAO write a report about your department!


What are relevant updates in UGG?


Previous OMB Guidance

• Internal Controls – Standalone process that was less focused on transparency, performance or safeguarding pertinent information

• Time and Effort Reporting –Required written documentation to show how personnel time was spent on grant projects (and this ties to % allocation of federal funding)

Uniform Guidance

• Internal Controls – Required component of project management process. Internal controls are a necessity to safeguard information and measures are taken to reduce risk and ensure compliance with federal regulations

• Time and Effort Reporting –no documentation required, folded into internal control policies and processes



Internal Controls (Section 200.303)The non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliancewith Federal statutes, regulations, and the terms and conditions of the Federal award.



Internal Controls (Section 200.303)These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the TreadwayCommission (COSO).



Internal Controls (Section 200.61)Internal controls is a process, implemented by a non-Federal entity, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: Effectiveness and efficiency of operations; Reliability of reporting for internal and external use;

and Compliance with applicable laws and regulations.


Internal Controls (Section 200.62) Transactions are executed in compliance with:

o Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program.

o Any other Federal statutes and regulations that are identified in the Compliance Supplement.

Funds, property, and other assets are safeguardedagainst loss from unauthorized use or disposition.



Internal Controls (Section 200.62)Transactions are properly recorded and accounted for, in order to: Permit the preparation of reliable financial

statements and Federal reports; Maintain accountability over assets; and Demonstrate compliance with Federal statutes,

regulations, and the terms and conditions of the Federal award.



Time and Effort Reporting (Section 200.430)

The non-Federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a Federal awards based on budget estimates. All necessary adjustment must be made such that the final amount charged to the Federal award is accurate, allowable, and properly allocated.

Comply with the established accounting policies and practices of the non-Federal entity.



Time and Effort Reporting (Section 200.430) Encompass both federally assisted and all other

activities compensated by the non-Federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-Federal entity's written policy.

Support the distribution of the employee's salary or wages among specific activities or cost objectives.


How does this impact grant makers?


Internal Controls• What are you doing to ensure

grantee compliance with applicable regulations and statutes?

• What systems and processes do you have in place to review internal control processes?

• Are there best practices you can share with grantees?

• How are you supporting grantees with financial reporting?

Time and Effort• How do you intend to ensure that

grantees are capturing time correctly through accounting and financial management systems?

• How do you reiterate that management of time must conform to internal control policies?

• How do you intend to ensure accuracy with after the fact reporting (which does not align with budget estimates)?

• How do you measure time spent on grants projects without required documentation?


Internal Controls• What are you doing to ensure

compliance with applicable regulations and statutes?

• What internal control systems and processes do you have in place? Do these require updates?

• Are you able to complete required federal reports and ensure transparency?

• What safeguards do you have in place to protect information?

Time and Effort• How will time and effort reporting

conform to your internal control policies?

• How will you capture time spent on federal projects using existing financial management and accounting systems? Will you need to acquire a new system?

• How do you intend to ensure accuracy with after the fact reporting (which does not align with budget estimates)?

• Have you reviewed these updates with your team members charged on federal projects?

How does this impact grant seekers?

What are the internal control policy updates?


Grant Makers

• Operations Objectives - Update technical assistance provided to grantees and applicants prior to award.

• Reporting Objectives - Determine how relevant financial and report information can determine effective internal controls.

• Compliance Objectives - Outline plan for assessing internal controls, especially for high risk grantees.

Grant Seekers

• Operations Objectives – Determine effectiveness and efficiency of operations (i.e. financial performance goals and safeguarding assets).

• Reporting Objectives – Ensure internal and external financial and non-financial reporting. Includes reliability, timeliness, transparency, etc.

• Compliance Objectives – Ensure adherence or laws and regulations.

© Thompson Information Services, 2015

Best Practices: Internal Control Policies


Well designed internal controls protect the organization through risk avoidance strategies.

Test these processes and procedures (created from policies) in action, and make any changes required.

Ensure that management has information that is comprehensive for accounting, reporting, planning and monitoring purposes.

Train your team!

Well-written policies that that reflect current systems and organizational structure (and capacity)A commitment to integrity and ethical values Independent oversight over development and

performance of internal controlsA commitment to attract, develop and retain

competent individualsAddress employee responsibilities, limits to

authority, performance standards, hiring practices,whistleblower policies, conflict of interests, etc

Internal Controls: Risk Avoidance



Maintain accountability for individuals with clear job descriptions

Organizational chart and structure with clear lines ofauthority and responsibilityAdequate training programs

and performance evaluations





Preventive Controls: Prevents the occurrence of a negative event in a proactive manner (i.e. security and surveillance, purchases over $5,000)

Detective Controls: Identify undesirable "occurrences" after the fact (i.e. supervisor review & approval, report run showing user activity, physical inventory count)

Automated Controls: Built into network infrastructure and software applications (i.e. passwords, data entry validation checks)

Manual Controls: Require action to be taken by employees (i.e. obtain supervisor’s approval for overtime, reconcile bank accounts) © Thompson Information Services, 2015



According to Part 200.303, federal grantees will be expected to answer questions similar to the ones below (taken from the American Institute of CPAs, or AICPA) during their Single Audits:

Does the organization have a comprehensive code of conduct or other policies addressing acceptable business practice, conflicts of interest, and expected standards of ethical and moral behavior?

Are the level of competence and the requisite knowledge and skills defined for each job in the accounting and internal audit departments?

© eCivis blog post 2015

Internal Controls: Checklist for Audits


Is the selection of accounting practices made in the long-term best interest of the organization?

Do senior managers get involved as needed to provide direction, address issues, correct problems, and implement improvements?

Do employees understand that sub-standard performance will result in remedial action?

Does the organization consider risks from external sources such as creditor demands, economic conditions, regulation, or labor relations?

Are milestones to achieve financial reporting objectives monitored to ensure that timing deadlines are met?

© eCivis blog post 2015

Internal Controls: Checklist for Audits

Resource capacity (personnel, funding, materials, knowledge, etc.).

Strategic planning and alignment with organization’s priorities.

Leadership changes. Lack of best practices on UGG implementation Maintenance of continuous quality

improvement/evaluation measurement. Meeting operational goals while changing the way

business is conducted.

Likely Pitfalls and Challenges


Rachel WernerOwner and CEORBW Strategy, LLCPh: (301) 325-8552Email: [email protected]: www.linkedin.com/in/rabwernerTwitter: @rbwstrategywww.rbwstrategy.com


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Government & Nonprofit

Are Your Internal Controls in Order?