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HomeMy WebLinkAboutResolutions - 1979.03.01 - 12400Miscellaneous Resolution 8865 March 1, 1979 BY IN RE PUBLIC SERVICES COMMITTEE - Henry William Hoot, Chairman Audit Policies for CETA h941MIS TO THE OAKLAND COUNTY BOARD OF COMMISSIONERS Mr. Chairperson, Ladies and Gentlement: WHEREAS the Oakland County Board of Commissioners by Miscellaneous Resoltuion No. 6546 applied for and was granted the designation as Prime Sponsor by the U. S. Department of Labor to administer the provisions of the Comprehensive EMployment and Training Act of 1973; and WHEREAS audit policies have been developed in response to the need for waiving questionable costs identified in audits; and WHEREAS there is no source of authority in audit guidelines or in the CETA Legislation for waiver of costs NOW THEREFORE BE IT RESOLVED that the Oakland County Board of Commissioners approve the attached policies for determination of questioned • costs from existing and future audits BE IT FURTHER RESOLVED that a quarterly written report for the review of waived questioned costs will be submitted to the Public Services Committee and the Oakland County Board of Commissioners BE IT FURTHER RESOLVED that the Chairperson of the Board of Cbmnissioners be and is hereby authorized to sign said waivers The Public Services Committee, by Henry William Hoot, Chairman, -moves the adoption of the foregoing resolution. PUBLIC SERVICES COMMITTEE Go 7-- Henry William Hoot, Chairman //. o L Mm 2/13/79 COUNTY OF OAKLAND DANIEL T. MURPHY. COUNTY EXECUTIVE MEMORANDUM TO : Oakland County Board of Commissioners FROM: Oakland County Employment and Training Administration RE : Audit Policy for Questionable Costs After four years of subcontracting CETA funds to local units of government in Oakland County, audits for the waiver of questionable costs have been established by the Employment and Training Division. There is no authority for this policy in either the audit guidelines or the CETA Legislation passed by Congress on October 27, 1978 (Public Law 95/524). The policies represent a standard of reasonableness which will maintain the fiscal integrity of our financial system and permit subcontractors to operate in the field without unreasonable delays and expanded uncertainty. The policies exist in three specific segments. (1) documentation, (2) recaptured funds, and (3) waivers due to the interpretation of regulations. The purpose of the review of these policies is to establish the authority by resolution through the Oakland County Board of Commissioners for waiver of questionable costs, which will subsequently be included in the Annual Manpower Plan for Fiscal Year 1979. Subpart A: Documentation All costs not substantiated during an audit are questioned. The documentation policy allows a subcontractor an opportunity to recoup these costs by providing specific documentation. Proper resolution of audit findings may be facilitated through documen- tation. Such documentation includes financial sources such as copies of payroll registers, bank statements, and reimbursement requests. Copies of participant PRIRs, contract modifications, written authorization of expenditures, reimbursement modifications, Regulation specifications, and/or any essential evidence verifying any or all costs questioned are also included in the documentation provided for scrutiny. Audit findings may identify broad system deficiencies without providing enough details of the questionable expenditures. Therefore, contractors in question are given the opportunity to dispute all findings reported through substantial documentation. Oakland County Employment & Training — 140 S. Saginaw Street, Suite 777 — Pontiac, Michigan 48058 — (313) 858-1033 In the case of expenditures charged to the wrong title, con- tractors must provide verification that the costs in question did not result in duplicate charges to the program. If the aforementioned is clearly defined, the contractor in question will not be penalized. As a result of audit findings, Classroom Training contractors will be permitted to resolve questionable costs by substantiating expenditures on a tuition per student basis. Contractors audited are permitted 30 days, from the date of conference between themselves and the Prime Sponsor, to substan- tiate any or all questionable expenditures. If this mandate is not observed within the period specified, the questionable expenditures will be disallowed and payment compulsory. Extensions are granted upon Prime Sponsor notification. COSTS QUESTIONED THROUGH AUDIT PROCEDURES FOR THE LACK OF DOCUMENTATION MAY BE WAIVED, IF THE APPROPRIATE VERIFICATION IS PROVIDED WITHIN A REASONABLE TIME PERIOD. Subpart B: Recaptured Funds Proper resolution of audit findings may be facilitated through payment of ineligible costs to Employment and Training Adminis- tration. This payment is a result of Federal Regulation violations and/or improper expenditures due to accounting and administrative inadequacies on the part of the agency in question. In each instance of ineligible costs payable, if the audit reviewed also indicated that there is a surplus of verified expenditures which have not been requested for reimbursements, the agency in question will be permitted to net their ineligible expenses against their surplus expenditures. If there are no surplus expenditures allow- able for reimbursement and ineligible costs are identified, then a request for payment of ineligible costs designated will be pro- cessed. In case of agency disagreement, an appeal of this process may be directed to the Audit Division of the fifth Region of the Department of Labor. However, this may be instituted only after the standard period for audit responses has elapsed, which is 30 days from the date the audit conference was held and the policy letter issued. AN AGENCY MAY SUBSTITUTE INELIGIBLE COSTS IDENTIFIED BY AUDIT, IF OTHER ELIGIBLE SURPLUS EXPENDITURES EXIST WITHIN THE BUDGET. SUBPART C: Interpretation of Regulations Resulting in Waiver of Questionable Costs Proper resolution of audit findings may be facilitated through waiver of questionable costs resulting from interpretation of regulations. Due to the Department of Labor's past endeavor to improve the operations of the Comprehensive Employment and Training Act by changing ambiguous or conflicting regulations which impede the accomplishment of program objectives, Region V ETA CETA Letters were instituted. However, because of the delay in the circulation of those letters, which in some instances were not received by the Prime Sponsor and/or the Auditing Division until weeks after the effective date established, complications developed in the field resulting in questionable costs. There were also difficulties in acquiring stable verbal interpretations of regulations due to the perpetual substitution of Federal • Representatives. Therefore, these situations necessitated this policy's existence in order to implement final written settle- ment on all pertinent questionable costs, which are itemized below. THE REASONABLE INTERPRETATION OF THE CETA LAW NOT AVAIL- ABLE IN WRITING AT THE TIME OF PROGRAM OPERATION, SHOULD NOT RESULT IN INELIGIBLE COSTS TO THE SUBCONTRACTOR BASED ON RETRO- ACTIVE POLICIES AND DECISIONS FROM THE DEPARTMENT OF LABOR. 1). According to Federal Regulations (96:348) dated June 4, 1974 (still in effect) which pertains to limitations on partici- pant's salary, it clearly specifies that compensation to any participant for PSE (Public Service Employment) is limited to a maximum full-time rate of $10,000 per year, plus the cost of fringe benefits to the extent they do not exceed earnings of $10,000 annually. This has been interpreted to imply that regardless of title by which earnings are incurred, as long as those earnings do not exceed the annual limitation of $10,000, they are allowable expenditures. Enrollees wages exceeding an annual rate of $10,000 should not be questioned unless the excess can be documented for a full year. Over- time or other wages which may exceed the annual rate fora week or month, but not for the entire year, should not be questioned. 2). During the period of Comprehensive Employment and Training Act's initiation through FY 76, many participating contractors were practicing inappropriate procedures for establishing enrollee eligibility. Many agencies experienced confusion as to which Participant Registration and Information Record dates were in compliance for conforming to regulatory speci- fications, which in turn, resulted in questionable costs. As a result, if it is clearly defined that the unemployment criteria of the participant in question has been met, and that the only issue outstanding is the application dates used to determine participant eligibility, the contractor in question will not be penalized. 3). During the period of FY 74 through the beginning of FY 75 many participating contractors received directives from the Prime Sponsor regarding revised Participant Registration and Information Records. This revision was made in order to comply with the Department of Labor requirements for estab- lishing eligibility. Contractors were requested to transfer participant information from the old forms to the new Regis- tration Record forms, with the appropriate signatures. How- ever due to confusion in the field, all directives were not enforced, resulting in questionable costs. Applicants signatures were not properly transmitted, and Participant Registration and Information Record dates transferred were not the original dates of application, but the dates the new forms were substituted. In some instances, application sig- natures were taped on. Since the original Participant Regis- tration and Information Records were disposed of, the missing information necessary at the time of audit could not be abstracted. If it is clearly defined that the basis of costs questioned is due to inadequate participant application as a result of the circumstances described above, the contractor will not be penalized. 4). For FY 75, development of an employability program was developed under the influence of regulations from the Department of Labor, other applicable laws and circulars from the Office of Management and Budget, and General Ser- vices Administration. This employability program was called Comprehensive Employment and Training Act On-The Job Training, which specifically monitors the progress of enrollee training on a monthly basis and permits monthly reimbursements contingent upon the number of hours trained. However, it could be construed that a confusion exists concerning the On-The-Job Training contracts from Phases 1 through 12, between 100% of the wage as a payroll item and 100% of the wage as a numerical item factor, involving the calculation of a cost formula. In every instance, the wage numerical value which was used was a cost formula that bore no relationship to the wage used in the context of payroll compensation. Subcontractors were instructed to use that same cost formula described above to prorate a payment schedule. At no time were enrollee wages compensated. The reimbursements to the employer represented the extraordinary costs of training. Therefore notwithstanding, if it is clearly defined that the basis of costs is due to the mis- interpretation of the reimbursement method described above, the subcontractor will not be penalized. 5). Questionable costs have resulted from the compensation of accrued Holidays to On-The-Job Training employers. These costs are recommended for disallowance due to the fact that our contract stipulates that only actual training costs are allowable for reimbursement. However, it will be advocated, due to the issue of equal fringe benefits under Sections 95:35 and 98:24 of the CETA Legislation, that compensation of Legal Holidays be paid to On-The-Job Training trainees as benefits available to all employees of an organization. Because this issue cuts across all OJT contracts, the following procedure will be implemented for resolution of questionable costs described above: 1). That the audit section indicate that it is their interpretation that fringe benefits sections are not being violated by denying paid Holidays to CETA trainees. 2). Forward the two interpretations to the Department of Labor for a final decision. Due to past experience, this process may take at least two to three months. During this interim, the disallowed costs in audit reports should refer directly to the correspondence submitted to the fifth Region. In the event that the decision is negative in terms of the fringe benefit clause, the specific Holidays for each OJT contract may then be listed in the same procedure that is currently used by Classroom Training. How- ever, this procedure is not preferrable because of the addi- tional administrative burden which already exists for private employers in OJT. 6). The Emergency Jobs Programs Extension Act of 1976 provides that unemployment insurance compensation for former CETA PSE participants shall be paid from SUA (Special Unemploy- ment Assistance) funds effective January 1, 1976. Prime Sponsors and subgrantees shall be credited or reimbursed for payments made for unemployment insurance attributable to PSE for the period from January 1, 1976 to September 30, 1976. Beginning October 1, 1976 prime sponsors are no longer liable for unemployment insurance coverage for PSE participants. These provisions apply to all PSE programs, regardless of the title under which the program is funded. In accordance with the administrative provisions of Federal Regulation 98.12 (D) (4), unemployment insurance benefits costs are allowable for administrative hire, and for partici- pants in other than public service employment. Unemployment insurance benefit costs for public service employment par- ticipants, including such participants who are also adminis- trative staff, who become eligible for unemployment insurance by reason of their participation in the program shall be paid not from funds under the Act, but from funds appropriated pursuant to Part B, Section 220 (a) of Pub. L. 94-444. NOTE: Part B, Section 220 (a) of Pub. L. 94-444 authorizes the employment service to pay unemployment insurance claims for CETA programs. (Administrative staff covered the same as participants). U. S. Department of Labor • • • Empioyment and Training Administration 233 South Dearborn Street Chicago, Illinois 60504 P 8 197G September 13, 1976 REGION V ETA CETA LETTER NO.160 Subject: Audits of Subgrantees and Contractors To: All CETA Prime Sponsors • 1. Purpose: To clarify questions regarding the responsibility of prime sponsors and the ETA on audits of CETA subgrantees and contractors and to identify the subgrants and contracts that are subject to audit. 2. Background: CETA prime sponsors are responsible for having audits conducted on each CETA subgrantee and contractor at least once every two years except as noted below in Section 3(B). The goal of these audits is to determine whether a subgrantee's or contractor's financial opera- tions are properly conducted, costs are allowable, its financial reports are presented fairly and if it has complied with applicable laws and reculations. 3. Subgrants and Contracts Subject to Audit: a. Independent audits are required for each subgrant Cr contract, as follows:/ X/ 1. Subgrants or Contracts of S100,000 or More - Prime sponsors are required to insure that all (100%) such subgrants or contracts are audited at least once every two years. 2. Subgrants or Contracts Less Than 5100,000 - Prire sponsors are required to insure that at least 25% of such subgrants are audited not less than once every two years. The 25% to be audited must be approved by the Office of Regional Audit after it reviews a listing of all of the prime sponsor's subgrants and contracts that are less than 5100,000, and concurs with the prime sponsor's Ttiectthn of those to be audited. The prime sponsor still has financial responsibility for the remaining 751:; of the subgrants and contracts that are under $100,000. b. No independent audits are required for fixed price contracts for non-program administrative types of procurement i.e., typewriter and copying machine maintenance agreements, office supplies, etc. 5TG #8865 March 1, 1979 Moved by Patterson supported by Fortino the resolution be adopted. AYES: Pernick, Peterson, Price, Wilcox, Aaron, DiGiovanni, Doyon, Fortino, Gabler, Gorsline, Hobart, Kasper, Kelly, Lewand, McConnell, McDonald, Moffitt, Montante, Moore, Murphy, Page, Patterson, Perinoff. (23) NAYS: None. (0) A sufficient majority having voted therefor, the resolution was adopted. STATE OF MICHIGAN) COUNTY OF OAKLAND) I, Lynn D. Allen, Clerk of the County of Oakland and having a seal, do hereby certify that I have compared the annexed copy of Miscellaneous Resolution #8865 adopted by the Oakland County Board of Commissioners at their meeting held on March 1, 1979 with the original record thereof now remaining in my office, and that it is a true and correct transcript therefrom, and of the whole thereof. In Testimony Whereof, I have hereunto set my hand and affixed the seal of said County at Pontiac, Michigan 1st March 79 this day of 19.... Lynn D. Allen Clerk By Depuly Clerk