EXTERNAL AUDITS LPA Roundtable Event November 2015 Presented by: Gregory Stephens, Manager
Overview 1. Background Information 2. Different types of services and reviews provided o Reasons completed 3. Selection Criteria/Risk Based Criteria 4. Follow-up – Streamlining 2
Oversight Operations required of ODOT Background Information • ODOT must monitor activities under Federal awards. – to assure compliance with applicable Federal requirements – to assure performance expectations are being achieved. • We are also held accountable to the Auditor of State’s Office. 3
Education and Training
Different types of services/reviews performed by the Office of External Audits Education and Training 5
Education and Training • Benefits recognized: – All participants are more informed. – Training events provide an opportunity to build relationships. – Better understanding of responsibilities. – Fewer findings during audits. 6
Requirement Review Form (RRF)
Different types of services/reviews performed by the Office of External Audits RRF Advisory Role Education and Training 8
Requirement Review Form (RRF) Advisory Role • Proposal of the RRF • Review of the RRF • Provides more assurance for the LPA’s processes and project documentation. 9
Limited Scope Review (LSR)
Different types of services/reviews performed by the Office of External Audits Limited Scope Review RRF Advisory Role Education and Training 11
Limited Scope Review (LSR) - Background • The LSR is not an audit. • The LSR is a review of only a subset of audit requirements. • No Formal Report is provided for an LSR. • Information is shared with District personnel, Local Programs and the LPA. • Focus of LSR may change as audit risks are identified. 12
Limited Scope Review (LSR) - Background • Current LSR focus is LPA Labor support. • These Limited Scope Reviews focus specifically on time- tracking and support of labor costs. 13
LSR - Payroll Cost Support • LPAs and ODOT need to follow Federal standards for documentation of personnel expenses. – Even though full support of time-tracking must be maintained, ODOT Districts often may not require full-support of time with invoices. • LPAs need to charge the actual hourly wage of the LPA staff working on the project (at the time the hours were worked.) 14
LSR Time Tracking - LPA Involvement • If the ODOT voucher does not include detail – we request the support from the District and/or the LPA. • We provide feedback to the LPAs on any deficiencies in its process so that it could make improvements to be eligible for reimbursement in the future. 15
LSR – What does ODOT currently review? Time Tracking Payroll Register Timesheet support for all paid hours in payroll period Payroll support for Employee Base/OT rate Timesheet documents hours worked on each project Employees' time tracked to payroll records Timesheet tracks time daily (work, leave, holiday, sick, etc) Support of Employee status Employee approval of timesheet Date of Employee approval Overhead Elgibility Supervisor approval of timesheet Employee is full-time, with benefits Date of Supervisor approval Overhead method approved for use Supervisor approval, no less than monthly Overhead rates calculated correctly Overtime allocated to all projects Corrections (made in ink and initialed) 16
Review and Approval of Fringe and Overhead Rates
Different types of services/reviews performed by the Office of External Audits Fringe and Overhead Rate Review Limited Scope Review RRF Advisory Role Education and Training 18
Review and Approval of Fringe and Overhead Rates Background • Safe Harbor – Needed no support of costs for the LPA to apply this rate. – Of 300 LPAs receiving Federal funding in 2014, only a few LPAs requested the use of their own approved rate. • Fringe and Overhead Rates – Are now necessary for each LPA to recover fringe or overhead costs. – Need to be documented and supported with actual incurred costs from the LPA’s accounting system data. 19
Review and Approval of Fringe and Overhead Rates - LPA Involvement • The LPA is very involved in the process of documenting costs when considering the costs of the: – Entire Agency – Engineer’s Office – Specific subset of the Engineer’s Office • Role of LPA’s Finance/Auditor’s Office ODOT LPA External Auditor can help work with the finance staff to explain what documentation is needed and why it’s needed. 20
Review of Fringe and Overhead Rates – What does ODOT review? When reviewing the rate documentation, per Federal requirements, we ensure: • The costs included in the form match to the financial system reports. • Any allocated costs are allocated to benefitted agencies on some reasonable basis . • The LPA has not exceeded Federal reserve limitations for Self Insurance funds – Most often includes Health Insurance and/or Workers ’ Compensation • That only labor costs and only fringe costs related to the personnel identified are included. • That all labor costs and all fringe costs related to the personnel identified are included. 21
Review of LPA Auditor of State Audits
Different types of services/reviews performed by the Office of External Audits AOS Audit Review Fringe and Overhead Rate Review Limited Scope Review RRF Advisory Role Education and Training 23
Review of LPA AOS Audits - Background • LPAs are required by Federal law to have an audit completed each year or every other year. – Dependent on the amount of Federal funding expended during the LPA’s fiscal year. • ODOT is required, as the pass-through entity, to review the LPA’s audit results. – $500,000* over – annually – this audit is referred to as a Single Audit. – Less than $500,000* - Regular audit – may be completed annually or every other year. *Threshold changed to $750,000 in 2015 with implementation of 2 CFR 200 24
LPA AOS Audits - What Does ODOT Review? • Did the LPA report all Federal expenditures for the ODOT Highway Funded Program? • Did the LPA have a Single Audit or Regular Audit? • Did the AOS identify : – “ Findings” or “Noncompliance” with the ODOT Highway Funded Program? • Material noncompliance or deficiencies in the program – Management Letter “Findings” or Recommendations? 25
Desk Inspection – LPA Involvement • We contact the LPA only if: – Expenditure reporting is not correct. • We contact the LPA Auditor/finance contact listed on the Federal Audit Clearinghouse form. – There are issues identified that may relate to the Highway Program. • We will have to request a corrective action plan. It is possible to have a good audit with the AOS, and yet have project specific issues identified in an ODOT Project review. – AOS review is very high-level as it is reviewing all the LPA departments; ODOT is reviewing one specific project. 26
Why do we review the LPA AOS audits? • Pass-through Entity Responsibilities: – Monitor financial reports – Request a formal corrective action plan from the LPA – Evaluate Risk • Oversight of ODOT: – FHWA – AOS 27
Limited Scope Audit
Different types of services/reviews performed by the Office of External Audits Audit AOS Audit Review Fringe and Overhead Rate Review Limited Scope Review RRF Advisory Role Education and Training 29
Limited Scope Audit - Background • Limited Scope Audits have been performed for many years. • The Limited Scope Audit Program was streamlined in 2014. – Some of the items no longer reviewed during the Project LSR: • DBE • Prevailing Wage • Specific Item Quantities (3-way match: daily diary to item delivery tickets to invoiced costs) 30
Limited Scope Audit Streamlined • The External Auditor now spends less than one day on-site at each LPA. • A project review form is emailed to LPA. • External Auditor begins review at ODOT office and follows up on-site with LPA to clarify any outstanding items. 31
Limited Scope Audit – Selection Criteria For those entities selected for audit, the audit file introductory page provides selection criteria: As the Requirement Review form was implemented in 2015, the results from it and the LSR will also become part of the risk criteria in the future. 32
Limited Scope Audit – LPA Involvement • LPA will be responsible for pulling documentation and emailing to ODOT. • LPA works with ODOT during on-site review. • LPA will be required to provide a response to the audit report. • LPA may be required to provide a corrective action plan. 33
Limited Scope Audit – What does ODOT review? • Pre-Award – Person in Responsible Charge, Legislation to enter into project, Bid Documents include FHWA 1273, EPLS • Post-Award – Bid tab, Bid policy, Bid award, 30 percent tracking • Daily Diaries – Includes detail for work completed, equipment used, personnel labor, bid quantities • Change Orders – Change order policy followed, significant change orders identified • Consultant and Contractors – Agreements include FHWA 1273, Correct indirect rate applied to Consultant invoices, Support for Consultant labor 34
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