HomeMy WebLinkAbout20110032.tiff STATE OF COLORADO
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Colorado Department of Human Services *4�a76//
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EMPLOYMENT AND REGULATORY AFFAIRS Bill Ritter,Jr.
Jenise May,Deputy Executive Director Governor
AUDIT DIVISION Karen L.Beye
4126 South Knox Court Executive Director
Denver,Colorado 80236
Phone 303-866-7333
TDD 303-866-7105
FAX 303-866-7332
wwwicdhs.state.co.us
Charissa M.Hammer,CPA,CFE
Director
To: Ms.Judy Griego,Director
Weld County Department of Social Services
From: Charissa Hammer,CPA,CFE
CDHS Audit Division Director
Date: December 27,2010
Subject: County TANF Contracts, Memorandums of Understanding, and Other Expenditures Related to
Achieving TANF Purposes in State Fiscal Year 2009 and/or 2010
Please review and, if necessary,respond to the(X)statements only.
1. ( X ) Attached is a copy of the letter to the Director of Weld County Department of Social Services' County TANF
Contract audit conducted by BIC),LLP,reflecting non-compliance issues with State rules and regulations.
2. (X) Submit factual corrections to the preliminary report to me by:January 19,2011
3. (X)If no factual corrections are due,please submit your Performance Improvement Plan to me by: February 9,2011
4. ( ) This is the request for the above mentioned Performance Improvement Plan,please submit to me by:
5. ( ) Your request for an extension of time has been granted, please submit your Performance Improvement Plan to me
by:
6. ( ) Your Performance Improvement Plan for the above mentioned review has been accepted by the Audit Division.
7. ( ) Your Performance Improvement Plan has not been accepted by the Audit Division,please respond to me by:
8. ( ) All non-compliance issues have been brought into compliance,bringing closure to this review.
If you have any questions regarding any of the above checked statements,please contact Charissa Hammer(303)866-7324 or
charissa.hammer@state.co.us
Thank you for your cooperation in all areas concerning this review.
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Our Mission is to Design and Deliver Quality Human Services that Improve the Safety and Independence of the People of Colorado
STATE OF COLORADO
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people who help people
EMPLOYMENT AND REGULATORY AFFAIRS Bill Ritter,Jr.
Jenise May,Deputy Executive Director Governor
AUDIT DIVISION Karen L.Beye
4126 South Knox Court Executive Director
Denver,Colorado 80236
Phone 303-866-7333
TDD 303-866-7105
FAX 303-866-7332
www.cdhs.state.co.us
Charissa M.Hammer,CPA,CFE
Director
December 27, 2010
Ms. Judy Griego, Director
Weld County Department of Social Services
P.O. Box A
Greeley, Colorado 80631
Dear Director Griego:
Thank you for your cooperation with the expanded portion of the County TANF Contract audit and for
providing additional documentation and information as requested. The audit was limited to the specific
areas covered by our request on July 26, 2010.
In 2008, the Colorado General Assembly passed Senate Bill 177 to comply with changes in Federal Law
governing the TANF program, as well as require that a county remit to the Colorado Long-Term Works
Reserve any unspent TANF reserves in excess of a specified percentage of the county's TANF block
grant for a given fiscal year, starting in State Fiscal Year (SFY) 2009. The Audit Division's
Department-wide Risk Assessment for SFY 2010, as well as a dramatic 39 percent increase in overall
TANF expenditures between 2008 and 2009,precipitated the decision to perform the original audit of 33
counties.
Based on the results of the TANF contract and expenditure audit conducted by the CDHS Audit
Division, the CDHS Executive Director made the decision to expand and extend the scope of
expenditures under review. CDHS contracted with BKD, LLP for an Agreed Upon Procedures
Engagement that impacted all counties. Those counties that did not receive a risk-based review by the
CDHS Audit Division had a minimum of 25 percent of TANF contract expenditures reviewed for both
SFYs 2009 and 2010. Those counties that already received a risk-based review of contracts for SFY
2009 had only a minimum of 25 percent of TANF contract expenditures reviewed for SFY 2010.
Auditing county expenditures is a routine way to comply with CDHS's Federally mandated sub-
recipient monitoring requirements. TANF expenditures, primarily those incurred through various types
of contracts, were the focus of this audit; basic cash assistance, cash diversions, some supportive
services, and personnel related costs were excluded from this audit.
Our Mission is to Design and Deliver Quality Human Services that Improve the Safety and Independence of the People of Colorado
Ms. Judy Griego
December 27, 2010
Page 2
BKD, LLP used a combination of data, interview material, and best practices to perform an evaluation
of TANF contracts, memorandums of understanding, and related expenditures greater than $5,000, in
order to determine whether the sampled expenditures were reasonable, allowable, and properly
documented. Overall, BKD, LLP visited 54 counties statewide for an in-depth review of contract
expenditures. The auditors interviewed management and related staff regarding the sampled
expenditures they made, reviewed the supporting documentation for the expenditures, and performed
site visits with the providers (i.e., contractors and subcontractors) to understand their programs and
business processes, as well as to inspect the purchases they made with TANF funds.
This letter contains information on three contracts to facilitate the Multidisciplinary Youth Assessment
Team (MYAT) program and one contract to provide vocational assessment and counseling services.
This letter contains various compliance issues and best practices that did not result in questioned costs,
but should be considered for future contracts and expenditures. Factual corrections to this letter, if any,
are due to the CDHS Audit Division by January 19, 2011, as stated in the attached memo. If there are
no factual corrections, your Performance Improvement Plan is due by February 9, 2011.
After examining the information you provided and interviewing various staff involved in the process,
the following compliance issues were noted:
I. State Fiscal Year 2009
A. North Range Behavioral Health ($64,915) for the period July 1, 2008 through June 30, 2009
The following compliance issue results in questioned costs:
1. One warrant totaling $7,187 was paid to North Range Behavioral Health on July 17, 2009. The
invoice was received on June 9, 2009 and was for services performed in May 2009; thus, the
expenditure was not paid for in the same fiscal year in which the expenditure was incurred.
According to Section 24-30-204, C.R.S., the fiscal year of the State government shall commence
on July 1 and end on June 30 of each year. This fiscal year shall be followed in making
appropriations and in financial reporting. As such, all expenses incurred in a given fiscal year
should be paid and entered into CFMS for reimbursement in that same fiscal year.
As a result, BKD, LLP would have calculated $7,187 in questioned costs for State Fiscal Year
2009 due to not reporting expenditures in the appropriate fiscal year. The Audit Division has
since sought clarification regarding the Federal and State Program rules and regulations.
According to 45 CFR Part 92.23 Period of Availability of Funds, the Federal code specifically
allows for expenditures from a prior period where carryover of unobligated balances is
permitted, in which case the carryover balances may be charged for costs resulting from
obligations in a subsequent funding period. In reviewing the question with other State and
Federal program staff, assurance was further attained that expenditures from a prior period would
be an allowable cost when paid in the current fiscal year.
Ms. Judy Griego
December 27, 2010
Page 3
B. Transitions Psychology Group, LLC ($120,000) for the period July 1, 2008 through June 30,
2009
The following compliance issue results in questioned costs:
2. One warrant totaling $4,125 was paid to Transitions Psychology Group, LLC on October 2,
2009. The invoice was received on June 2, 2009 and was for services performed in May 2009;
thus, the expenditure was not paid for in the same fiscal year in which the expenditure was
incurred. Another warrant totaling $4,250 was paid to Transitions Psychology Group, LLC on
July 28, 2009. The invoice was received on July 7, 2009 and was for services performed in June
2009; thus, the expenditure was not paid for in the same fiscal year in which the expenditure was
incurred and in which the contract was effective.
According to Section 24-30-204, C.R.S., the fiscal year of the State government shall commence
on July 1 and end on June 30 of each year. This fiscal year shall be followed in making
appropriations and in financial reporting. As such, all expenses incurred in a given fiscal year
should be paid and entered into CFMS for reimbursement in that same fiscal year.
As a result, BKD, LLP would have calculated $8,375 in questioned costs for State Fiscal Year
2009 due to not reporting expenditures in the appropriate fiscal year. However, as discussed in
compliance issue #1 above, prior year expenditures paid in a subsequent fiscal year will be an
allowable cost.
The following compliance issue does NOT result in questioned costs:
3. The contract between Transitions Psychology Group, LLC and Weld County Social Services was
not publicized for a competitive bid, so there is no assurance that the costs incurred during this
project are competitive with other vendors' prices.
According to Staff Manual Volume 5 — Finance and Accounting (Executive Director) Rules (11
CCR 2508-1) Section 5.351 Threshold for Utilizing a Bid System, a county department of social
services that purchases, at one time, supplies, equipment, construction material, personal or real
property, or personal services in excess of $25,000 must use a formal advertising and bidding
process to provide, to the maximum extent practicable, open and free competition. If a county
department is unable to use this process, written justification must be available at that county
department giving the facts related to the purchase and the inability to advertise and seek bids.
II. State Fiscal Year 2010
C. Weld County School District RE-8 ($30,526) for the period October 23, 2009 through June 30,
2010
The following compliance issue results in questioned costs:
4. One warrant totaling $6,784 was paid to Weld County School District RE-8 on July 23, 2010.
The invoice was received on June 22, 2010; thus, the expenditure was not paid for in the same
fiscal year in which the expenditure was incurred.
Ms. Judy Griego
December 27, 2010
Page 4
According to Section 24-30-204, C.R.S, the fiscal year of the State government shall commence
on July 1 and end on June 30 of each year. This fiscal year shall be followed in making
appropriations and in financial reporting. As such, all expenses incurred in a given fiscal year
should be paid and entered into CFMS for reimbursement in that same fiscal year.
As a result, BKD, LLP would have calculated $6,784 in questioned costs for State Fiscal Year
2010 due to not reporting expenditures in the appropriate fiscal year. However, as discussed in
compliance issue #1 above, prior year expenditures paid in a subsequent fiscal year will be an
allowable cost.
D. LifeBridge Christian Church ($50,753) for the period June 1, 2009 through June 30, 2010
The following compliance issue results in questioned costs:
5. Four warrants totaling $27,519 were paid to LifeBridge Christian Church for reimbursement of
quarterly expenditures for staff salaries and benefits. The invoices included three months of
expenditures and the invoices were sent prior to the completion of the quarter. Therefore,
portions of each invoice represented a prepayment, as all expenditures had not been incurred at
the time of request for reimbursement. In addition, the expenditures were based on budgetary
amounts, rather than actual costs.
According to Staff Manual Volume 5 — Finance and Accounting (Executive Director) Rules (11
CCR 2508-1) Section 5.561.5 Advance Payments/Retainers, contracts and other commitment
vouchers must not provide for advance payment for goods and/or services, unless it is an
established industry standard or the party to the contract can demonstrate a hardship and justify a
need. However, any advance payment made on a contract must have the written approval of the
chairman of the county social/human services board, or an authorized delegate. Specifically in
relation to an expenditure of funds from Colorado Works allocations, Agency Letter TCW 08-
06-I Fiscal/Contracting Issues Regarding the Colorado Works Program states that county
departments must follow responsible business practices and not pay costs upfront or all at once.
Examples of allowable payment methods include fee-for-service payments and vouchers. Best
practices from the State of Colorado Fiscal Rules also contain specific direction and restrictions
concerning the making of advance payments under State contracts, because there are inherent
risks associated with making advance payment to a contractor for yet to be performed services.
According to Staff Manual Volume 5 — Finance and Accounting (Executive Director) Rules (11
CCR 2508-1) Section 5.531.2 Expenditures Shall be Based on Actual Costs, reimbursable
expenditures must be an actual cost and not a cost based on an average, allocated, anticipated, or
budgeted cost. Section 5.541.4 Verification of Vendor's Invoice further states that the vendor's
invoice must be verified by checking for proper authorization, correct addition, and extensions.
Any discounts for prompt payment or volume purchase must be reported as a credit or reduction
of expenditures.
In addition, the Cash Management Improvement Act of 1990, and its prescribed regulations in the
Code of Federal Regulations, requires the timely disbursement of Federal funds and authorizes
charges and interest from any agency that does not comply with such requirement, in order to
ensure greater efficiency, effectiveness, and equity in the exchange of funds between the Federal
government and the states. According to the OMB Circular A-133 Compliance Supplement,
Ms. Judy Griego
December 27, 2010
Page 5
when entities are funded on a reimbursement basis, as is the Colorado Works Program, program
costs must be paid for by entity funds before reimbursement is requested from the Federal
government. When funds are advanced, recipients must follow procedures to minimize the time
elapsing between the transfer of funds from the U.S. Treasury and disbursement. The Colorado
Department of Human Services, as the pass-through entity for these Federal funds, is responsible
for establishing reasonable procedures to ensure receipt of reports on sub-recipients' cash
balances and cash disbursements in sufficient time to enable it to submit complete and accurate
cash transactions reports to the Federal government. Further, the Department is responsible for
monitoring cash drawdowns by its sub-recipients to ensure that they conform substantially to the
same standards of timing and amount as apply to the Department. Therefore, prepayments made
by the county departments can lead the Department to inadvertently violate Federal rules.
As a result, BKD, LLP calculated $27,519 in questioned costs for State Fiscal Year 2010 due to
prepayments not based on actual costs. However, since the prepayments later resulted in actual,
documented, and allowable expenditures during the same fiscal year in which the prepayment
occurred, the Audit Division will NOT make an audit adjustment, even though this remains a
questioned cost because it is not in agreement with Federal and State rules. In the future, though,
prepayment of expenditures may result in an audit adjustment for the full amount or a calculated
penalty amount.
The following compliance issue does NOT result in questioned costs:
6. The contract between LifeBridge Christian Church and Weld County Social Services was not
publicized for a competitive bid, as discussed in issue #3 above. A competitive bid process
would provide assurance that the costs incurred during this project are competitive with other
vendors' prices.
According to Staff Manual Volume 5 — Finance and Accounting (Executive Director) Rules (11
CCR 2508-1) Section 5.351 Threshold for Utilizing a Bid System, a county department of social
services that purchases, at one time, supplies, equipment, construction material, personal or real
property, or personal services in excess of $25,000 must use a formal advertising and bidding
process to provide, to the maximum extent practicable, open and free competition. If a county
department is unable to use this process, written justification must be available at that county
department giving the facts related to the purchase and the inability to advertise and seek bids.
The above compliance issues will not result in an audit adjustment. While the Department is not taking
back an adjustment, this letter will serve as a disclaimer that if the Federal or State governments audit
this area in the future and assess additional sanctions, these will be passed on to the county in question.
Further, while expenditures from prior periods will be an allowable cost, the Department would like to
emphasize that the funding allocation and close-out process rely on a complex methodology. In fairness
to other counties, it is important for each county to code expenditures to the appropriate fiscal year
whenever possible.
The Department will follow the procedures specified in Staff Manual Volume 5 — Finance and
Accounting (Executive Director) Rules (11 CCR 2508-1) Section 5.730 Audits by the Colorado
Department of Human Services and outlined in an attachment to this letter.
Ms. Judy Griego
December 27, 2010
Page 6
You may contact me at (303) 866-7324 if you have questions about our findings. Thank you for your
assistance throughout this audit.
Sincerely,
Charissa Hammer, CPA, CFE
CDHS Audit Division Director
Enclosures
cc: Bill Hanna, CDHS Deputy Executive Director Colorado Works
Jenise May, CDHS Deputy Executive Director Employment & Regulatory Affairs
Kevin Richards, CDHS Colorado Works Director
KC Robbie, CDHS Field Administration
Jerri Spear, CDHS Field Administration
Dick Taylor, CDHS Controller
Weld County Board of Commissioners
5.732 Corrective Action Process for Financial Compliance Reviews Performed by the Audit Division
5.732.1 Copy to County Director[Rev.eff.5/1/04]
The Colorado Department of Human Services, Audit Division,will mail one copy of the preliminary Financial Compliance Review report
to the County Director.
5.732.2 Deadline for Factual Corrections[Rev.eff. 5/1/04]
The county department of social/human services will have IS working days from the date of mailing to submit any factual corrections to
the Financial Compliance Review report to the Colorado Department of Human Services,Audit Division,4126 S.Knox Court,Denver,CO
80236. If no factual corrections are to be submitted,then the county department of sociaUhuman services shall have 30 working days from
the date of mailing to submit a corrective action plan to the Audit Division.
5.732.3 Corrective Action Plan[Rev.eff 5/1/04]
The corrective action plan submitted by the county department of social/human service shall include a:
A.Written Corrective Action Plan
Description,in writing,on how each non-compliance issue has been corrected;or
B.Information in the Corrective Action Plan
Plan,in writing,by which each non-compliance issue will be corrected. Such a plan must contain the following information for each non-
compliance issue:
I.Identify the non-compliance issue,
2.List the specific action(s)to be taken to correct the non-compliance,and
3.List the specific time frames for completion of each specific action.
5.732.4 Technical Assistance[Rev.eff.5/1/04]
The county department of social/human services may request technical assistance from the State in developing the corrective action plan.
This request must occur within the 30-day period.
5.732.5 Extension of Time[Rev.eff 5/1/04]
If the county department of social/human services needs additional time to develop a Corrective Action Plan, the county director must
submit a request in writing, to the Colorado Department of Human Services, Audit Division, 4126 S. Knox Court, Denver, CO 80236
specifying the new timeframe and providing an explanation for the extension request.
A.Review of Extension Request
The Colorado Department of Human Services, Audit Division, will review the request for time extension within five working days and
respond to the county director.
B.Accept or Reject the Corrective Action Plan
Within 20 working days of receipt of the Corrective Action Plan, from the county department of social/human services, the Colorado
Department of Human Services,Audit Division,will review and either accept or reject the corrective action plan.
5.732.6 Corrective Action Plan[Rev.eff 5/1/04]
A.Accepted Corrective Action Plan
If the plan is accepted,this decision will be indicated and the county department of social/human services will be notified via letter. At the
same time an e-mail notification will be sent to the Field Administration Division along with an electronic copy of the corrective action
plan.
B.Rejected Corrective Action Plan
If the plan is rejected by the Colorado Department of Human Services,Audit Division,the county department of social/human services will
be notified of the decision along with a new due date for an amended plan to be submitted.
C.Accepted Plan
Upon acceptance of new plan, the Colorado Department of Human Services, Audit Division will follow procedures outlined in Section
5.732.6.
D.Follow-Up
The Colorado Department of Human Services, Field Administration Division will verify that the county department of social/human
services has complied with the corrective action plan.
E.Closure
The Colorado Department of Human Services,Audit Division,will send a closure letter to the county director and any applicable financial
adjustments to the Colorado Department of Human Services,Accounting Division to be processed in the State financial reporting system.
5.733 Appeal Process for Financial Compliance Reviews Performed and Management Decisions Issued by the Audit Division
5.733.1 Appeal in Writing[Rev.eff 5/1/04]
The appeal must be in writing and addressed to the Executive Director of the Colorado Department of Human Services, 1575 Sherman St.,
Denver, CO 80203. The basis for the appeal shall be limited to a factual error in the report or an incorrect interpretation of law, rule or
regulations.
5.733.2 Decision[Rev.eff.5/1/04]
The decision of the Executive Director of the Colorado Department of Human Services shall be the end of the appeal process.
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