Department of Child
Support Services
OFFICE OF AUDITS AND
COMPLIANCE
Department of Child Support
Services
Office of Audits and Compliance
–
The Federal Government requires the state to perform
oversight of federal funds for the child support program to
ensure the counties remain in compliance with Federal
Regulations. This includes the following requirements:


OMB Circular A-87 /2 CFR Part 225
This circular establishes principles and standards for determining costs for
federal awards carried out through grants, cost reimbursement contracts,
and other agreements with state and local governments and federally
recognized Indian Tribal Governments. OMB A-87 WEBSITE
http://www.whitehouse.gov/omb/circulars/a087/a87_2004.html
OMB Circular A-133
This circular sets forth standards for obtaining consistency and uniformity
among federal agencies for the audit of states, local governments, and nonprofit organizations expending federal awards.
OMB A-133 WEBSITE
http://www.whitehouse.gov/omb/circulars/a133_compliance/08/08toc.html
What do we do?

The Office of Audits and Compliance has
oversight responsibility for the following
audits:
–
–
–
–
–
Trust Fund Close Out Audits
Fiscal Compliance Evaluations (CS 356 Reviews)
OIG Reviews
Internal Control Audits
Special Assignments
Authority and References
Financial Compliance Evaluations

45 CFR 302.10 and 302.14 Uniform Administrative Requirements

– Requires adequate accounting systems to support claims for federal
funds.
– Requires periodic evaluations of local operations
LCSA Letters
for Grants and Cooperative Agreements to State, Local and
Tribal Governments
–
05-09 Agreed Upon Procedures of Local Child Support Agency Administrative Costs.




Agreed Upon Procedures – February 15, 2005
CSS Letter 04-20 Clarification of Child Support Administrative Claiming and Financial
Policies
CSS Letter 05-05 Clarification of Non-Electronic Data Processing Automation
Requests and Cost Threshold for Equipment Inventories
45 CFR, Part 95
General Administration , Grant Programs
Authority and References
Financial Compliance Evaluations




Welfare and Institutions Code, Section 10084State funding for automation and Annual
Cooperation Agreement.
Family Code 17702-17714- Performance
incentive/excess funds.
CSS letter No. 00-12 – The LCSA must submit
their supplemental claims within nine months
after the end of the quarter in which the costs
were paid.
CSS Letter No. 04-02 – Clarification of Child
Support Administrative Claiming and Financial
Policies. (Clarification in CSS Letter No. 05-19)
Authority and References
Financial Compliance Evaluations



45 CFR, Part 304
Federal Financial Participation
45 CFR, Part 305
Program Performance Measures, Standards,
Financial Incentives, and Penalties
45 CFR, Part 307
Computerized Support Enforcement Systems
State Plan.
Authority and References
Financial Compliance Evaluations

Plan of Cooperation between LCSA and DCSS
states that:
– Have in place and maintain accounting standards and
systems consistent with uniform accounting procedures
prescribed by Federal and State requirements.
– Maintain accounting and fiscal record keeping systems
sufficient to ensure that claims for available funds are
submitted and retained in accordance with State and
Federal regulations.
– Have policies and procedures in place to ensure timely
tracking and monitoring of expenditures compared to
budgeted and allocated amounts.
Most Common Findings
for CS 356 Reviews

Health Incentive Funds
– Health incentive funds not reverted to the state
– Unexpended health insurance incentives
– Unallowed health expenditures claimed

Lack of Internal Controls
–
–
–
–
Fixed assets
CS 356 Preparation
Fiscal Controls/Accounting Procedures
Commingling of program expenditures and program
income
– Incomplete information of property ledger
– Inappropriate classifying of county DCSS charges
– Inadequate policies and procedures Surplus Fund Balance
Most Common Findings
for CS 356 Reviews

Expenditures
– Improper reporting of expenditures
– Expenditures not reviewed and inadequate supporting
documentation
– Double claiming of expenditures
– Unallowable operating expenditures-purchasing personal
use items, using administration funds to pay off bad debt
– Unnecessary expenditures- renting a postage meter
instead of requesting mail services from the county.

Fixed Assets
–
–
–
–
Improper reporting of fixed assets expenditure
Inaccurate property accounting
Improper property tagging
Overstated fixed assets
Most Common Findings
for CS 356 Reviews

Abatements
– Revenue not reported as abatement
– Understated interest abatements

Capital Expenditures
– No prior approval by the Department
– Not claiming expenditures in the period incurred

Personnel
– Time study and time certifications not prepared
– Inappropriate Personnel Expenditure

EDP
– Improper allocation of EDP
– Purchased with Non-EDP funding
CS 356 Review

The Office of Audits and Compliance (OAC)
will be taking over the responsibility for
auditing counties to verify compliance
regarding reporting of costs on the CS 356
form. The objectives of these reviews:
– Determine the accuracy of the expenditures and
abatements reported on the CS 356.
– Evaluate compliance with applicable laws and
regulations.
– Evaluate reporting controls.
The New Process

OAC will be taking a new approach to these
audits.
– The majority of these reviews will be desk
reviews with fewer trips into the field. Although,
we will be performing some field trips depending
on the adequacy of the response by the county.
If need be, we will have auditors sent to the site
to gather all pertinent information to complete
the audit.
356 Implementation
Strategy

The Department of Finance has performed
grant compliance reviews for OAC in the
past.
– OAC’s approach will be to perform these reviews
with a staff of three external auditors.
– We will be using a random sample to select the
counties that have not been audited by DOF.

Unless we have been given information that requires
we focus our direction on a specific county.
County Assistance

During this process change we will be
relying on counties to provide
documentation from all areas of review.
– We will try and limit the amount of
documentation to only areas that are needed to
be tested.
– The basic fundamental areas will be reviewed as
mandated by the Federal Government in working
in an oversight capacity.
The Basic Components

Reviews will be covering the basic areas of
the 356 to ensure compliance by counties:
–
–
–
–
–
–
–
–
–
Internal Controls,
Operating Expenses,
All Contracts,
EDP Staff and EDP Expenses,
Lab Expenses,
Personnel Services,
Incentives and Grant Programs,
Abatements,
Walk-In-Payments.
General Internal Controls





Review process and controls in place to ensure only
allowable and reasonable costs are claimed on the
356.
Inquire where county maintains their overhead or
indirect cost charges.
Determine if inventory counts are being performed.
Determine if the LCSA receives other funding
sources.
Review procedures and document overall
assessment of the internal controls in place for the
CS 356 revenues and expenses.
Areas of the CS 356
Reviews





As mentioned in one of the previous slides
the audit will be comprised of many pieces
of criteria. We will be reviewing Federal
Requirements but other areas of compliance
to be included are:
All LCSA and CSS letters pertinent to the
review,
Plan of Cooperation,
Family Code,
Welfare and Institutions Code.
Operating Expenses/Direct
Service Contracts

References for compliance
– CS 356.1
– OMB A-87
– 45 CFR Sections 304.20304.23,95.13,74.35 and 74.41-74.48
Space Costs
– Does the amount paid and reported on
the CS 356 agree with the monthly lease
and common area costs?
– Is the lease signed?
– Was the expense incurred during the
engagement period?
Documents Requested by auditors
– Lease agreement
Other Facility Operations




Were expenditures such as utilities, maintenance,
janitorial, repairs, alterations, etc. incurred by the
LCSA and paid during the period under review
Was the expense amount reported incurred by the
county?
Ensure that expenses incurred in this category are
not already covered in the lease agreement.
Types of documents requested by auditors.
– Lease agreement
– Documentation of expenditures spent in this area.
Payments to Other
County Agencies
Review of any agreement regarding payments to
other county agencies to ensure expenditures were
spent on child support related costs.
 Was the payment made during the period under
review?
Types of documents requested

– Detailed list of all LCSA contracts in effect during the
engagement period.
– Copy of inter-agency agreements in effect during the
engagement period.
– Copy of any MOU, other contract or arrangement
agreement with any public agencies during the
engagement period.
Other Contractor
Expenses Non- EDP






If DCSS negotiated contract for LCSAs, do all invoices go directly to DCSS?
Did the LCSA have a contract with public or private entities not included in
“payment to other county agencies” as required?
Was the expenditure incurred and paid during the period under review?
Trace the expenditures to the general ledgers and invoices.
Ensure adequate monitoring by the LCSA.
Types of documents requested:
–
–
–
–
List of LCSA personnel that were authorized to request and approve contracts
during the engagement period.
Detailed list of all the other contractor’s expenditures incurred and paid during the
engagement period.
List of other contracts and/or agreements that were negotiated and signed by the
LCSA during the engagement period.
Copies of all other contracts and/or agreements in effect during the engagement
period.
All Other Operating
Expenses



Determine the composition of the
expenditure.
Verify the claimed amount reflects the
amount paid.
Was the expenditure claimed during
the appropriate period and child
support related?
Direct Service Contracts
Verify amount paid by the LCSA was amount claimed.

Determine if the expenditure was made during the correct
period.

Determine if it was child support related.

Ensure there was adequate monitoring.
Documents to be Reviewed

–
–
–
Detailed list of all “Direct Service Contracts” that were in effect
during the engagement period.
Detailed list of all “Direct Service Contracts” expenditures that
were incurred and paid during the engagement period.
List of LCSA personnel that were authorized to request and
approve direct service contracts during the engagement period.
EDP Staff and EDP
Expenses

References
– 45 CFR Sections 304.22304.23,95.601,95.701,74.34,95.13,74.41
– OMB A-87
– All pertinent LCSA Letters
– Correspondence between DCSS and LCSA
EDP Staff and EDP
Expenses








Ensure that expenditures are authorized and recorded properly to EDP account numbers.
Verify if the expenditure was incurred and paid during the engagement period.
Verify that the actual EDP expenditure paid is the amount claimed in the 356.
Determine if the LCSA followed the DCSS EDP equipment procurement specifications.
Verify the LCSA followed DCSS instructions on the required contract language for MOU
with the county’s information technology department.
Ensure there was adequate monitoring of the contract.
Ensure breakout of expenditures are correct with dropdown account numbers.
Documents Requested
– Copy of listing of equipment for EDP purchases during the engagement period.
– List of LCSA personnel that were authorized to request and/or approve EDP
purchases during the engagement period.
– Copy of EDP physical inventory report that were generated during the engagement
period.
– Detailed list of EDP equipment allocated expenditures for administrative services
and EDP program during the engagement period .
– List of LCSA EDP staff for EDP operations during the engagement period.
Laboratory

References
– 45 CFR Sections 304.20-304.22374.4174.48
– OMB A-87
– All pertinent LCSA Letters
– Correspondence between DCSS and LCSA
Laboratory Expenses







Verify the LCSA had a contract with a vendor.
Trace and agree the amount reported on the 356 to
supporting documents.
Ensure contract was adequately monitored.
Determine if the expenditure was child support related.
Ensure the expenditure was incurred during the period of
review.
Ensure lab expenses recovered are documented and claimed.
Requested Documents
– Copy of contract for the Lab expenses pertinent during the
engagement period.
– Supporting documentation of amounts reported on the 356
during the period under review.
Personnel Services



References
OMB A-87, Attachment B, Section 11
All CSSIN and LCSA Letters pertinent
to the area.
Personnel Services







Ensure the LCSA completed time certification or time studies.
Verify costs charged on the 356 related only to wages, salaries and fringe benefits.
Trace employees who worked on the program to time sheets/time cards, duty statements
and to personnel documents to determine whether the employee worked on the child
support program for the amount of time charged on the CS 356.
Determine adequate controls are in place for determination of benefit payments.
Ensure the salary paid to employee is the amount claimed on the 356.
Determine the wages were paid prior to LCSA claiming expenditure on the 356 and in the
correct period.
Documents Requested
–
–
–
–
–
Separation of Duties matrixes.
Payroll Register from the LCSA.
Timesheets/Timecards used for Time Study or Time Certification signed by Employee’s and
Immediate Supervisors for the engagement period.
Copy of payroll authorization signature and approvers lists.
Duty Statements for all LCSA Management and staff.
Incentives

References
– Family Code Section 17714
– CSS Letters
Incentives




Determine the amounts of incentive
money received by the county.
Determine amount of incentive money
expended.
Verify the funds have been reconciled
and deposited into the correct
account.
Determine interest earned.
Other Fees or Program
Income




Determine if fees/other program income were
earned.
Determine if the County followed their procedures
regarding disposition.
Verify the LCSA reported the income on the CS 356
as abatement and document their analysis.
Documents Requested
– Itemized list of deposits, accumulation, and expenditures
of Fees or program income during the engagement period.
– Copy of any grant received by the state and the
disposition of those funds.
Abatements

Reference
– 45 CFR Section 74.24,
– Government Code Sections 29802, 50050, 50051 and 50055 –
Unclaimed Property,
– California DSS Policies and Procedures Manual, Section 12-430(k)
– Treatment of Undeliverable and Uncashed Warrants,
– LCSA Letter 03-10 – CS 34 and CS 356 Reporting Instructions for
Undistributable/Abandoned Collections,
– CSS Letter 04-22 – Undistributed Collections Instructions and
Disbursement Policies,
– 45 CFR Subtitle A, Section 74.22 – Payment,
– Family Code Section 17714,
– LCSA letter 02-36 – Interest Earned on Child Support Funds
– Disposition of Equipment,
– 45 CFR Section 74.34 – Equipment.
Abatements




Review the status of any undistributed/unreconciled funds.
Determine if the county has escheated and abated any
funds on the 356 during the period under review and
quantify.
Determine any interest earned on funds still not returned.
Documents Requested
–
–
–
Detailed list of undistributable or abandoned collections during
the engagement period.
Itemized list of fees or program income received during the
engagement period.
Detailed list of interest income received during the engagement
period.
Walk in Payments

Plan of Cooperation
– The LCSA shall adopt and enforce local, Federal and State procedures to
prevent persons who handle cash receipts of support payments from
participating in accounting functions that would allow the misuse of such
receipts.
– This responsibility encompasses the identification of applicable laws and
regulations and the establishment of internal controls designed to provide
reasonable assurance that the LCSA complies with established local,
Federal and State laws and regulations. The LCSA must also comply with
the State and county administration manual, Generally Accepted
Government Auditing Standards and GAAP.
– Ensure bonding requirements have been met to protect the county form
losses resulting from employee dishonesty for every person who has
receipt of and or disburses, handles, or otherwise has access to any IV-D
funds.
Walk in Payments





Ensure all cash walk-in payment records are
maintained, reviewed, and up to date.
Review proper segregation of duties.
Review bonding of all employees that
handle IV-D funds.
Verify amounts are recorded and reconciled
appropriately.
Documents requested
– Records documenting all cash payments.
– Past reconciliations performed.
Review Activities

The entrance conference is held via telephone conference or
onsite.
–
–
–
–
Introductions are made.
Scope of Evaluation is explained.
Designation of LCSA contact.
(If Onsite) Facility arrangements are discussed:




Office Space,
Access to phone,
Receipt of documentation,
Internet Access.
– Auditor Updates to County Management

During the course of the audit the audit staff will keep management
apprised of any findings or issues that may come up.
This is the first chance the county has to provide documentation to refute the
finding or criteria that resolves the finding.
Reporting Results of the
Audit or Evaluation

Walk away meeting is scheduled to present the findings to the
county staff which includes discussion of:



Control or compliance findings and discussion items.
Request for any documentation that may change current
issues discussed.
The county has a chance to respond to the findings by:
 Asking for an explanation of the criteria used.
 Provide documentation to refute the finding.
This is the second chance the county has to provide documentation
Exit Conference

This meeting is scheduled weeks after the walk
away. The following takes place during this
meeting;
–
–
–
–
–
Discussion again of the findings,
Discussion of further information needed,
Management Representation Letter requested,
Explanation of the report process,
Estimated date for draft report provided.
This is a the third chance for the county to provide supporting documentation to
dispute the finding.
Post Audit Process

Draft report provided to LCSA to respond to
the findings
– The LCSA response may:



Identify further information to refute findings,
Dispute findings,
Accept findings.
This is the last time for the county to dispute the findings.
Final Report Issuance

Final Report is Issued and the following occurs:
– The LCSA’s response is included in the draft report.
– The final is created from the draft and the responses
of the LCSA.
– Report is made final and distributed.
Copies are distributed to the following parties:




Director of the LCSA and any other parties the counties
requested be included,
Executive Office of the Department of Child Support Services
(Director, Chief Deputy Director, and Assistant Director),
DCSS, Office of Audits and Compliance,
DCSS, County Allocations.
TIPS FOR PREPARING
FOR AN AUDIT

Understand the auditor’s questions;
many times findings are problems with
semantics and misunderstandings.
– Explain processes clearly
– Help the auditors to resolve the issues

Keep your management in the loop
about what is going on during the
audit.
TIPS FOR PREPARING
FOR AN AUDIT






DOCUMENT, DOCUMENT, DOCUMENT!
Documentation for expenses,
Appropriate Approvals,
Audit Trails,
Knowledge of Policies and Regulations
Remember it is the responsibility of the
county to keep adequate documentation to
back up any questions auditors may have
during the performance of the audit.
Questions?