Source: http://www.twc.state.tx.us/financial-manual-grants-contracts-appendix-i-internal-control-matrix
Timestamp: 2017-12-12 13:54:41
Document Index: 741099162

Matched Legal Cases: ['art 6', 'art 3', 'art 6', 'art 6', 'art 6', 'art 6', 'art 6', 'art 6']

Financial Manual for Grants & Contracts Appendix I: Internal Control Matrix — TWC
Financial Manual for Grants & Contracts Appendix I: Internal Control Matrix
Activities Allowed or Unallowed & Allowable Costs
Equipment & Real Property Management
Procurement, Suspension & Debarment
Real Property Acquisition & Relocation Assistance
The OMB Circular A-133 Compliance Supplement, Part 6, provides auditees and auditors with guidance to obtain an understanding of and evaluate the adequacy of internal control. These characteristics are described for 13 of the 14 types of compliance requirements identified in Part 3 of the Compliance Supplement (See Chapter 2 for additional detail). In using the following characteristics Part 6 of the Supplement provides:
"This Part 6 is intended to assist non-federal entities and their auditors in complying with these [testing requirements of OMB Circular A-133] by describing, for each type of compliance requirement, the objectives of internal control, and certain characteristics of internal controls that, when present and operating effectively, may ensure compliance with program requirements. However, the categorizations reflected in this Part 6 may not necessarily reflect how an entity considers and implements internal control [i.e., depending on the organization’s structure, functions, etc.]. Also, this part is not a checklist of required internal control characteristics. Non-federal entities could have adequate internal control even though some or all of the characteristics included in Part 6 are not present. Further, non-federal entities could have other appropriate internal controls operating effectively that have not been included in this Part 6. Non-federal entities and their auditors will need to exercise judgment in determining the most cost effective internal control in a given environment or circumstance to provide reasonable assurance for compliance with federal [or state] program requirements."
The characteristics in Part 6 of the OMB Circular A-133 Compliance Supplement are carried into the Financial Manual for Grants and Contracts in this Appendix for the purpose of providing Contractors and monitors with guidelines for evaluating internal control. This Appendix organizes the 13 types of compliance requirements for which characteristics of internal control are discussed as shown below, retaining the same format as used in the Compliance Supplement.
Control Objectives – To provide reasonable assurance that federal awards are expended only for allowable activities and that the costs of goods and services charged to federal awards are allowable and in accordance with the applicable cost principles.
Management sets reasonable budgets for federal and non-federal programs so that no incentive exists to miscode expenditures
Management enforces appropriate penalties for misappropriation or misuse of funds
Organization-wide cognizance of need for separate identification of allowable federal costs
Management provides personnel approving and pre-auditing expenditures with a list of allowable and unallowable expenditures
Process for assessing risks resulting from changes to cost accounting systems
Key manager has a sufficient understanding of staff, processes, and controls to identify where unallowable activities or costs could be charged to a federal program and not be detected
Accountability provided for charges and costs between federal and non-federal activities
Process in place for timely updating of procedures for changes in activities allowed and cost principles
Computations checked for accuracy
Supporting documentation compared to list of allowable and unallowable expenditures
Adjustments to unallowable costs made where appropriate and follow-up action taken to determine the cause
Adequate segregation of duties in review and authorization of costs
Accountability for authorization is fixed in an individual who is knowledgeable of the requirements for determining activities allowed and allowable costs
Reports, such as a comparison of budget to actual provided to appropriate management for review on a timely basis
Establishment of internal and external communication channels on activities and costs allowed
Training programs, both formal and informal, provide knowledge and skills necessary to determine activities and costs allowed
Interaction between management and staff regarding questionable costs
Grant agreements (including referenced program laws, regulations, handbooks, etc.) and cost principles circulars available to staff responsible for determining activities allowed and allowable costs under federal awards
Management reviews supporting documentation of allowable cost information
Flow of information from federal agency to appropriate management personnel
Comparisons made with budget and expectations of allowable costs
Analytic reviews (e.g., comparison of budget to actual or prior year to current year) and audits performed
Control Objectives – To provide reasonable assurance that the draw down of federal cash is only for immediate needs and recipients limit payments to subrecipients to immediate cash needs.
Appropriate assignment of responsibility for approval of cash drawdowns and payments to subrecipients
Budgets for drawdowns are consistent with realistic cash needs
Mechanisms exist to anticipate, identify, and react to routine events that affect cash needs
Routine assessment of adequacy of subrecipient cash needs
Management has identified programs that receive cash advances and is aware of cash management requirements
Cash flow statements by program are prepared to determine essential cash flow needs
Accounting system is capable of scheduling payments for accounts payable and requests for funds from Treasury to avoid time lapse between draw down of funds and actual disbursements of funds
Appropriate level of supervisory review of cash management activities
Procedures for requesting cash advances as close as is administratively possible to actual cash outlays
Monitoring of cash management activities
Repayment of excess interest earnings where required
Variance reporting of expected versus actual cash disbursements of federal awards and drawdowns of federal funds
Established channel of communication between pass-through entity and subrecipients regarding cash needs
Periodic independent evaluation (e.g. by internal audit, top management) of entity cash management, budget and actual results, repayment of excess interest earnings, and federal draw down activities
Subrecipients’ requests for federal funds are evaluated
Review of compliance with Treasury-State agreements
Control Objectives – To provide reasonable assurance that contractors and subcontractors were properly notified of the Davis-Bacon Act requirements and the required certified payrolls were submitted to the non-federal entity.
Management understands and communicates to staff, contractors, and subcontractors the requirements to pay wages in accordance with the Davis-Bacon Act
Management understands its responsibility for monitoring compliance
Mechanisms in place to identify contractors and subcontractors most at risk of non-compliance
Management identified how compliance will be monitored and the related risks of failure to monitor for compliance with Davis-Bacon Act
Contractors informed in the procurement documents of the requirements for prevailing wage rates
Contractors and subcontractors are required by contract to submit certifications and copies of payrolls
Contractors’ and subcontractors’ payrolls monitored to ensure certified payrolls are submitted
Prevailing wage rates requirements are appropriately communicated
Reports provide sufficient information to determine if requirements are being met
Channels are established for staff to report non-compliance
Management reviews to ensure that contractors and subcontractors are properly notified of the Davis-Bacon Act requirements
Management reviews to ensure that certified payrolls are properly received
Control Objectives – To provide reasonable assurance that only eligible individuals and organizations receive assistance under federal award programs, that subawards are made only to eligible subrecipients, and that amounts provided to or on behalf of eligibles were calculated in accordance with program requirements.
Staff size and competence provides for proper making of eligibility determinations
Realistic caseload/performance targets established for eligibility determinations
Lines of authority clear for determining eligibility
Identification of risk that eligibility information prepared internally or received from external sources could be incorrect
Conflict-of-interest statements are maintained for individuals who determine eligibility
Process for assessing risks resulting from changes to eligibility determination systems
Written policies provide direction for making and documenting eligibility determinations
Procedures to calculate eligibility amounts consistent with program requirements
Eligibility objectives and procedures clearly communicated to employees
Authorized signatures (manual or electronic) on eligibility documents periodically reviewed
Access to eligibility records limited to appropriate persons
Manual criteria checklists or automated process used in making eligibility determinations
Process for periodic eligibility re-determinations in accordance with program requirements
Verification of accuracy of information used in eligibility determinations
Procedures to ensure the accuracy and completeness of data used to determine eligibility requirements
Information system meets needs of eligibility decision-makers and program management
Processing of eligibility information subject to edit checks and balancing procedures
Training programs inform employees of eligibility requirements
Channels of communication exist for people to report suspected eligibility improprieties
Management receptive to suggestions to strengthen eligibility determination process
Documentation of eligibility determinations in accordance with program requirements
Periodic analytical reviews of eligibility determinations performed by management
Program quality control procedures performed
Periodic audits of detailed transactions
Control Objectives – To provide reasonable assurance that proper records are maintained for equipment acquired with federal awards, equipment is adequately safeguarded and maintained, disposition or encumbrance of any equipment or real property is in accordance with federal requirements, and the federal awarding agency is appropriately compensated for its share of any property sold or converted to non-federal use.
Management committed to providing proper stewardship for property acquired with federal awards
No incentives exist to under-value assets at time of disposition
Sufficient accountability exists to discourage temptation of misuse of federal assets
Procedures to identify risk of misappropriation or improper disposition of property acquired with federal awards
Management understands requirements and operations sufficiently to identify potential areas of noncompliance (e.g., decentralized locations, departments with budget constraints, transfers of assets between departments)
Accurate records maintained on all acquisitions and dispositions of property acquired with federal awards
Property tags are placed on equipment
A physical inventory of equipment is periodically taken and compared to property records
Property records contain description (including serial number or other identification number), source, who holds title, acquisition date and cost, percentage of federal participation in the cost, location, condition, and disposition data
Procedures established to ensure that the federal awarding agency is appropriately reimbursed for dispositions of property acquired with federal awards
Policies and procedures in place for responsibilities of recordkeeping and authorities for disposition
Accounting system provides for separate identification of property acquired wholly or partly with federal funds and with non-federal funds
A channel of communication exists for people to report suspected improprieties in the use or disposition of equipment
Program managers are provided with applicable requirements and guidelines
Management reviews the results of periodic inventories and follows up on inventory discrepancies
Management reviews dispositions of property to ensure appropriate valuation and reimbursement to federal awarding agencies
Control Objectives – To provide reasonable assurance that matching, level of effort, or earmarking requirements are met using only allowable funds or costs which are properly calculated and valued.
Commitment from management to meet matching, level of effort, and earmarking requirements (e.g., adequate budget resources to meet a specified matching requirement or maintain a required level of effort)
Budgeting process addresses/provides adequate resources to meet matching, level of effort, or earmarking goals
Responsibilities for determining required amounts or limits for matching, level of effort, or earmarking
Methods of valuing matching requirements, e.g., “in-kind” contributions of property and services, calculations of levels of effort
Allowable costs that may be claimed for matching, level of effort, or earmarking
Methods of accounting for and documenting amounts used to calculate amounts claimed for matching, level of effort, or earmarking
Identification of areas where estimated values will be used for matching, level of effort, or earmarking
Management has sufficient understanding of the accounting system to identify potential recording problems
Are from non-federal sources
Involve federal funding, directly or indirectly
Were used for another federally-assisted program
Note: Generally, matching contributions must be from a non-federal source and may not involve federal funding or be used for another federally assisted program
Adequate review of monthly cost reports and adjusting entries
Separately accounting for data used to support matching, level of effort, or earmarking amounts or limits or calculations
Ensuring that expenditures or expenses, refunds, and cash receipts or revenues are properly classified and recorded only once as to their effect on matching, level of effort, or earmarking
Documenting the value of “in-kind” contributions of property or services, including:
Basis for local labor market rates for valuing volunteer services
Payroll records or confirmation from other organizations for services provided by their employees
Quotes, published prices, or independent appraisals used as the basis for donated equipment, supplies, land, buildings, or use of space
Supervisory review of matching, level of effort, or earmarking activities performed to assess the accuracy and allowability of transactions and determinations, e.g., at the time reports on federal awards are prepared
Control Objectives – To provide reasonable assurance that federal funds are used only during the authorized period of availability.
Management understands and is committed to complying with period of availability requirements
Entity’s operations are such that it is unlikely there will be federal funds remaining at the end of the period of availability
The budgetary process considers period of availability of federal funds as to both obligation and disbursement
Identification and communication of period of availability cut-off requirements as to both obligation and disbursement
Accounting system prevents obligation or expenditure of federal funds outside of the period of availability
Review of disbursements by person knowledgeable of period of availability of funds
End of grant period cut-offs are met by such mechanisms as advising program managers of impending cut-off dates and review of expenditures just before and after cut-off date
Cancellation of unliquidated commitments at the end of the period of availability
Timely communication of period of availability requirements and expenditure deadlines to individuals responsible for program expenditure, including automated notifications of pending deadlines
Periodic reporting of unliquidated balances to appropriate levels of management and follow up
Periodic review of expenditures before and after cut-off date to ensure compliance with period of availability requirements
Review by management of reports showing budget and actual for period
Control Objectives – To provide reasonable assurance that procurement of goods and services are made in compliance with the provisions of the A-102 Common Rule or OMB Circular A-110, as applicable, and that covered transactions (as defined in the suspension and debarment common rule) are not made with a debarred or suspended party.
Existence and implementation of codes of conduct and other policies regarding acceptable practice, conflicts-of-interest, or expected standards of ethical and moral behavior for making procurements
Procurement manual that incorporated federal requirements
Absence of pressure to meet unrealistic procurement performance targets
Management’s prohibition against intervention or overriding established procurement controls
Board or governing body oversight required for high dollar, lengthy, or other sensitive procurement contracts
Adequate knowledge and experience of key procurement managers in light of responsibilities for procurements for federal awards
Clear assignment of authority for issuing purchasing orders and contracting for goods and services
Procedures to identify risks arising from vendor inadequacy, e.g., quality of goods and services, delivery schedules, warranty assurances, user support
Procedures established to identify risks arising from conflicts-of-interest, e.g., kickbacks, related party transactions, bribery
Management understands the requirements for procurement and suspension and debarment, and, given the organization’s staff, departments, and processes, has identified where noncompliance could likely occur
Conflict-of-interest statements are maintained for individuals with responsibility for procurement of goods or services
Job descriptions or other means of defining tasks that comprise particular procurement jobs
Contractor’s performance with the terms, conditions, and specifications of the contract is monitored and documented
Establish segregation of duties between employees responsible for contracting and accounts payable and cash disbursing
Procurement actions appropriately documented in the procurement files
Supervisors review procurement and contracting decisions for compliance with federal procurement policies
Procedures established to verify that vendors providing goods and services under the award have not been suspended or debarred by the federal government
Contract files that document significant procurement history
Methods of procurement, authorized including selection of contract type, contractor selection or rejection, and the basis of contract price
Verification that procurements provide full and open competition
Requirements for cost or price analysis, including for contract modifications
Obtaining and reacting to suspension and debarment certifications
Other applicable requirements for procurements under federal awards are followed
Official written policy for suspension and debarment that:
Contains or references the federal requirements
Prohibits the award of a subaward, covered contract, or any other covered agreement for program administration, goods, services, or any other program purpose with any suspended or debarred party
Before November 26, 2003, requires staff to obtain certifications from entities receiving subawards of any value and procurement contracts equal to or exceeding $100,000, certifying that the organization and its principals are not suspended or debarred. As of November 26, 2003, requires staff to determine that entities receiving subawards of any value and procurement contracts equal to or exceeding $25,000 and their principals are not suspended or debarred, and specifies the means that will be used to make that determination, i.e., checking the Excluded Parties Listing System (EPLS), which is maintained by the General Services Administration; obtaining a certification; or inserting a clause in the agreement.
Employees’ procurement duties and control responsibilities are effectively communicated
Procurement staff are provided a current hard-copy EPLS or have on-line access
Channels of communication are provided for people to report suspected procurement and contracting improprieties
Management periodically conducts independent reviews of procurements and contracting activities to determine whether policies and procedures are being followed as intended
Control Objectives – To provide reasonable assurance that program income is correctly earned, recorded, and used in accordance with the program requirements.
Management recognizes its responsibilities for program income
Management’s prohibition against intervention or overriding controls over program income
Realistic performance targets for the generation of program income
Mechanisms in place to identify the risk of unrecorded or miscoded program income
Variances between expected and actual income analyzed
Pricing and collection policies procedures clearly communicated to personnel responsible for program income
Mechanism in place to ensure that program income is properly recorded as earned and deposited in the bank as collected
Policies and procedures provide for correct use of program income in accordance with federal program requirements
Information systems identify program income collections and usage
A channel of communication for people to report suspected improprieties in the collection or use of program income
Internal audit of program income
Management compares program income to budget and investigates significant differences
Control Objectives – To provide reasonable assurance of compliance with the real property acquisition, appraisal, negotiation, and relocation requirements.
Management committed to ensuring compliance with the Uniform Relocation Assistance and Real Property Acquisition Policies Act of 1970, as amended (URA)
Written policies exist for handling relocation assistance and real property acquisition
Identification of risk that relocation will not be conducted in accordance with the URA, e.g., improper payments will be made to individuals or businesses that relocate
Employees handling relocation assistance and real property acquisition have been trained in the requirements of the URA
Review of expenditures pertaining to real property acquisition and relocation assistance by employees knowledgeable in the URA
A system is in place to adequately document relocation assistance and real property acquisition
Management monitors relocation assistance and real property acquisition for compliance with the URA
Control Objectives – To provide reasonable assurance that reports of federal awards submitted to the federal awarding agency or pass-through entity include all activity of the reporting period, are supported by underlying accounting or performance records, and are fairly presented in accordance with program requirements.
Persons preparing, reviewing, and approving the reports possess the required knowledge, skills, and abilities
Management’s attitude toward reporting promotes accurate and fair presentation
Appropriate assignment of responsibility and delegation of authority for reporting decisions
Mechanisms exist to identify risks of faulty reporting caused by such items as lack of current knowledge of, inconsistent application of, or carelessness or disregard for standards and reporting requirements of federal awards
Identification of underlying source data or analysis for performance or special reporting that may not be reliable
Written policy exists that establishes responsibility and provides the procedures for periodic monitoring, verification, and reporting of program progress and accomplishments
Tracking system which reminds staff when reports are due
The general ledger or other reliable records are the basis for the reports
Supervisory review of reports performed to assure accuracy and completeness of data and information included in the reports
The required accounting method is used (e.g., cash or accrual)
An accounting or information system that provides for the reliable processing of financial and performance information for federal awards
Communications from external parties corroborate information included in the reports for federal awards
Periodic comparison of reports to supporting records
Control Objectives – To provide reasonable assurance that federal award information and compliance requirements are identified to subrecipients, subrecipient activities are monitored, subrecipient audit findings are resolved, and the impact of any subrecipient noncompliance on the pass-through entity is evaluated. Also, the pass-through entity should perform procedures to provide reasonable assurance that the subrecipient obtained required audits and takes appropriate corrective action on audit findings.
Establishment of “tone at the top” of management’s commitment to monitoring subrecipients
Management’s intolerance of overriding established procedures to monitor subrecipients
Entity’s organizational structure and its ability to provide the necessary information flow to monitor subrecipients are adequate
Sufficient resources dedicated to subrecipient monitoring
Knowledge, skills, and abilities needed to accomplish subrecipient monitoring tasks defined
Individuals performing subrecipient monitoring possess knowledge, skills, and abilities required
They are willing and able to comply with the requirements of the award
They have accounting systems, including the use of applicable cost principles, and internal control systems adequate to administer the award
Appropriate sanctions taken for subrecipient noncompliance
Key managers understand the subrecipient’s environment, systems, and controls sufficient to identify the level and methods of monitoring required
Financial problems that could lead to diversion of grant funds
Loss of license or accreditation to operate program
New activities, products, or services
Identify to subrecipients the federal award information (e.g., CFDA title and number, award name, name of federal agency, amount of award) and applicable compliance requirements
Include in agreements with subrecipients the requirement to comply with the compliance requirements applicable to the federal program, including the audit requirements of OMB Circular A-133
Subrecipients’ compliance with audit requirements monitored using techniques such as the following:
Determining by inquiry and discussions whether subrecipient met thresholds requiring an audit under OMB Circular A-133
If an audit is required, assuring that the subrecipient submits the report, report package or the documents required by OMB circulars and/or recipient’s requirements
If a subrecipient was required to obtain an audit in accordance with OMB Circular A-133 but did not do so, following up with the subrecipient until the audit is completed. Taking appropriate actions such as withholding further funding until the subrecipient meets the audit requirements.
Subrecipient’s compliance with federal program requirements monitored using such techniques as the following:
Issuing timely management decisions for audit and monitoring findings to inform the subrecipient whether the corrective action planned is acceptable
Maintain a system to track and following-up on reported deficiencies related to programs funded by the recipient and ensure that timely corrective action is taken
Regular contacts with subrecipients and appropriate inquiries concerning the federal program
Reviewing subrecipient reports and following-up on areas of concern
Monitoring subrecipient budgets
Performing site visits to subrecipient to review financial and programmatic records and observe operations
Offering subrecipients technical assistance where needed
Communication of federal award requirements to subrecipients
Responsibilities for monitoring subrecipients
Process and procedures for monitoring
Methodology for resolving findings of subrecipient noncompliance or weaknesses in internal control
Requirements for and processing of subrecipient audits, including appropriate adjustment of pass-through entity’s accounts
A listing of federal requirements that the subrecipient must follow. Items can be specifically listed in the award document, attached as an exhibit to the document, or incorporated by reference to specific criteria.
The description and program number for each program as stated in the CFDA. If the program funds include pass-through funds from another recipient, the pass-through program information should also be identified.
A recordkeeping system is in place to assure that documentation is retained for the time period required by the recipient
Procedures are in place to provide channels for subrecipients to communicate concerns to the pass-through entity
Establish a tracking system to assure timely submission of required reporting, such as: financial reports, performance reports, audit reports, onsite monitoring reviews of subrecipients, and timely resolution of audit findings
Supervisory reviews performed to determine the adequacy of subrecipient monitoring