10 Program, Fiscal Monitoring, and Audit, 2605(b)(10) - Assurance 10

10.1. How do you ensure good fiscal accounting and tracking of funds? CSD maintains fiscal controls and accounting practices in accordance with the California Uniform Accounting System. Our financial management system maintains financial data and accounting records supported by source documentation for all federal funds administered. CSD’s internal control structure conforms to state and federal procedures. See below for additional information. 10.1a Provide your definitions of the following: Obligation The California Department of Finance defines “obligations” as amounts that a governmental unit may legally be required to pay out of its resources. Budgetary authority must be available before obligations can be created. For budgetary purposes, obligations include payables for goods or services received, but not yet paid for, and outstanding encumbrances (i.e., commitments for goods and services not yet received nor paid for). The term “encumbrance” corresponds, to some degree, to the Federal definition of obligation, and is defined as follows: The commitment of all or part of an appropriation. Encumbrances represent valid obligations related to unfilled purchase orders or unfulfilled contracts. Outstanding encumbrances are recognized as budgetary expenditures in the individual department’s budget documents and their individual annual financial reports. In California practice, the obligation of state operations funds is created by an act of the Legislature, typically through the annual budget act, which creates the authority to, and the perimeters for, the expenditure of such funds, independent of program appropriations. The built-in flexibility of this approach enables the expenditure of state operations funding on an “as needed” basis, thereby rationalizing the use the funds in the most effective and optimal manner. Expenditures The term “expenditure” as used in California practice is defined as follows: Expenditures reported on a department’s year-end financial statements and “past year” budget documents consist of amounts paid and accruals (including outstanding encumbrances and payables) for obligations created for the last fiscal year. “Current year” and “budget year” expenditures in budget documents are estimates for the respective fiscal year. (See “Encumbrance,” also referred to as “budgetary expenditures.”) The expenditure of California state funds is an adaptive process, enabling state agencies to address changing needs without being hamstrung by rigid restrictions. For example, the primary statutory provision concerning the time period for expenditure of state funds is found in the Government Code at §16304, which provides in part as follows: An appropriation shall be available for encumbrance during the period specified therein, or, if not otherwise limited by law, for three years after the date upon which it first became available for encumbrance. An appropriation containing the term “without regard to fiscal years” shall be available for encumbrance from year to year until expended... This means an appropriation of state funds may be expended in any of the following time frames, depending on the approach taken by the Legislature: 1) In the period of time specified in the appropriation; 2) Indefinitely, i.e. until fully expended; or 3) If neither option 1) or 2) is specified, then in three years after becoming available. It is important to note that option 3) is, in practice, used as the default option because the Legislature always has the ability to extend the period of expenditure, if the need arises. Expenditure timeframe The State of California can use up to three years to expend funds it receives via LIHEAP grants. This is based on the State’s standard General Fund appropriations which allows for 1 year to encumber and 2 years to liquidate an encumbrance after the year it was made. However, CSD emphasizes to our Local Service Providers the goal to expending the funds within two years or less as represented in our original contract terms with our local service providers and the project period on the grant award itself. On a few occasions CSD will amend a contract’s end date to assist agencies who have had unanticipated issues arise and need additional time up to the end of the third year. This is the standard timeframe as applied to most state-funded programs. Administrative costs Actual costs for auxiliary functions such as salaries, wages, workers compensation, and fringe benefits for administrative staff, facilities, utilities, office and computer equipment, telephone, travel, accounting, auditing, monitoring assistance, office supplies, and like services necessary to sustain the direct effort involved in administering a grant program or an activity providing services to the grant program. Includes incurred costs associated with participation and attendance to policy advisory committee meetings and workgroups. Audit Process 10.2. Is your LIHEAP program audited annually under the Single Audit Act and OMB Circular A - 133? Yes No 10.2a - if yes, describe your auditor selection process. The auditor is selected at the state level by the Bureau of State Audits of the California Department of Finance. 10.3. Describe any audit findings of the grant recipient (i.e. State/Tribe/Territory) rising to the level of material weakness or reportable condition cited in the single audits, inspector general reviews, or other government agency reviews from the most recently audited fiscal year. No Findings Finding Type Brief Summary Resolved? Action Taken 1 10.4. Audits of Local Administering Agencies What types of annual audit requirements do you have in place for local administering agencies/district offices? Select all that apply. Local agencies/district offices are required to have an annual audit in compliance with Single Audit Act and OMB Circular A-133 Local agencies/district offices are required to have an annual audit (other than A-133) Local agencies/district offices' A-133 or other independent audits are reviewed by Grant recipient as part of compliance process. Grant recipient conducts fiscal and program monitoring of local agencies/district offices Local agencies and district offices are required to have an annual audit in compliance with Single Audit Act and OMB Circular A-133 Compliance Monitoring 10.5. Describe your monitoring process for compliance at each level below. Check all that apply. Grant recipients have a policy in place for appropriate separation of duties and internal controls. Internal program review Departmental oversight Secondary review of invoices and payments Other program review mechanisms are in place. Describe: Local Administering Agencies/District Offices: On - site evaluation Annual program review Monitoring through central database Desk reviews Client File Testing/Sampling Other program review mechanisms are in place. Describe: 10.6 Explain, or attach a copy of your local agency monitoring schedule and protocol. CSD Field Operations Unit will conduct a combination of in-house and on-site compliance monitoring. In general, CSD’s monitoring schedule runs from March 1 to October 31. Please refer to the CSD’s Monitoring Scope and Overview for details on the monitoring protocols that will be implemented in the Federal Fiscal Year 2026. 10.7. Describe how you select local agencies for monitoring reviews. Attach a risk assessment if subrecipients are utilized. Site Visits: All LIHEAP agencies have on-site monitoring reviews at least every three years. After conducting an annual risk assessment, the agencies are selected for onsite visits based on the areas of concern identified during the annual risk review, or through whistle blower complaints. Agencies are monitored first with a subsequent follow up monitoring focusing on the issues identified to ensure full resolution. Desk Reviews: CSD will conduct an in-house compliance monitoring of all agencies that do not receive an on-site monitoring visit. 10.8. How often is each local agency monitored? Please attach a monitoring schedule if one has been developed. Triannually 10.9. How many local agencies are currently on corrective action plans? 1 If any of the above questions require further explanation or clarification that could not be made in the fields provided, attach a document with said explanation here.