Success Stories Revealed - CAROI Implementation in PR

Conversation About Cooperative Audit Resolution(CAROI)and its successful implementation in Puerto RicoIleana Fas PachecoPhil Maestri1AgendaBackgroundActions takenWhat is CAROIAccomplishmentsRelevance of CAROI todayQuestionsWhat happened

Culmination of many years of unresolved auditsHundreds of findingsMillions $$$ questioned costsPotential fraud and abuseProblems bigger than PRDEHigh risk designation the only answer3PRDE es declarado "High Risk Grantee"May-200250% fondos del 2002-03 son congeladosMay-2002PRDE entra en el proceso CAROISep-2003Agreed Upon ProcedureFeb-2004Comienzo Planes de TrabajoMar-2004100% de los fondos 2004-05 otorgados a tiempoAug-2004Implementacin de mdulos Grant y Project de PRIFASAug-2004Recuperacin de fondos disponibles del 1998-99 + 1999-00Sep-2004Acuerdo de CumplimientoOct-2004Eliminacin de la designacin de "High Risk Grantee"Oct-2004Cronologia de Eventos

Sealamientos del 1994 al 2003Single Audit + OIG5Costos Cuestionados del 1994 al 2003$151,258,732PRDE es declarado "High Risk Grantee"May-200250% fondos del 2002-03 son congeladosMay-2002PRDE entra en el proceso CAROISep-2003Agreed Upon ProcedureFeb-2004Comienzo Planes de TrabajoMar-2004100% de los fondos 2004-05 otorgados a tiempoAug-2004Implementacin de mdulos Grant y Project de PRIFASAug-2004Recuperacin de fondos disponibles del 1998-99 + 1999-00Sep-2004Acuerdo de CumplimientoOct-2004Eliminacin de la designacin de "High Risk Grantee"Oct-2004Cronologia de Eventosen los viejos tiemposAudit resolution was battle. Findings Led to disagreements Then appeals , distrust, secrecy, Everyone had to take sides

8Audit ProcessCostly to produceQuestions spending of Federal fundsExpensive to defend9Same findings next yearSteve McNamara 9We were talking single audits but any audit could fit the patternAlways a disagreement over the spending of fundsPractice was to never admit there was a problem deny and defendLawyers and litigation very frequentBecause we were focused on the specific findings the basic problem was never fixed

And thenCesar Rey was instrumental in changeWilling to admit there were problemsHad the courage to trust USDE to not use what PRDE revealed against themWas an advocate for infrastructure reformBecame an excellent partnerBrought with him Ileana Fas and many competent team members

10CAROI Proverb11usted no necesita un martillo para quitar una mosca de la cabeza de otroAncient ProverbSteve McNamara 11usted no necesita un martillo para quitar una mosca de la cabeza de otroThat was our approach everything needed a sledgehammerIn reality, 80% could be resolved with minimal effort everybody agreed on findings

Five Part Formula for Success12+Right Players+Open Dialogue+Shared Purpose/Objectives+Sense of Urgency+Seeing Things Differently=Successful resolution

Steve McNamara 12If you had anything to do with the process/audit/resolution you need to be at the tableSolutions were much easier to find when it was a discussion rather than a letter writing campaignAmazing we were all in the same business and it had nothing to do with finance or Feeling a need to resolve this so we can all get back to the REAL work.Recognizing there is more than one right answer and the Feds frequently dont have that answer

Audits become a useful management toolBurden of resolving audits and correcting problems is reducedCommunication and understanding increasesWhy does it work?How do we know when were there?Audits are no longer looked at as a problem to be dealt with but rather a help to identify areas to improveThe process of resolving gets easierEverybody is talking for the right reasonsAdvantages of CAROIBroad ApplicabilityCost SavingsFlexibilityImpartialityEfficiencyAccountabilityWeve used this lots of places. Not just a one time projectStarted in PA. Several states Maryland used with BaltimoreUSDE incorporates CAROI principles into all audit resolutionThere is hope for you 14CAROI PrinciplesCommunicationUnderstanding TrustSharing CollaborationResolution/performance

15Steve McNamara 15Talking WITH each other not just AT each otherSeeing other perspectives as validBehave as though you are trusted and that youre worthy of that trustWorking together is best: Rod Paige None of us individually are as smart as ALL of us together!Get to the solution that improves the program delivery

Every CAROI project should end withPerformance goal/objectiveSolution to root causes systemic changeProject plan to achieve goalsIdentifies StakeholdersAccountabilities and responsibilitiesResources An agreement signed by all partiesIdentified what it is that were trying to accomplishHow do we do that?Who will do it?Who is responsible for success/failure?What do we need to get it done?Everybody agrees AND commits16PRDE es declarado "High Risk Grantee"May-200250% fondos del 2002-03 son congeladosMay-2002PRDE entra en el proceso CAROISep-2003Agreed Upon ProcedureFeb-2004Comienzo Planes de TrabajoMar-2004100% de los fondos 2004-05 otorgados a tiempoAug-2004Implementacin de mdulos Grant y Project de PRIFASAug-2004Recuperacin de fondos disponibles del 1998-99 + 1999-00Sep-2004Acuerdo de CumplimientoOct-2004Eliminacin de la designacin de "High Risk Grantee"Oct-2004Cronologia de EventosSigned Compliance Agreement

Results Lapsed FundsResultados "Single Audits" del 1994 al 20042 CFR 200Strengthens oversight of Federal grantsCommon standards for financial and program managementEncourages the use of CAROIOmni-crcularSo, why do we care about the Omni-circular in a CAROI discussion?Because CAROI is now in the new regulations government wide regulations.22Relevance of CAROI TodayNew OMB omni-circular ( 200.513 (3)(iii) and 200.25 Cooperative Audit Resolution);Broad Applicability;Local experience developed within PR;Provides a framework for problem solving;Can be applied in local multi-agency issues;Addresses root causes of problems.

Still lots left to be doneHave come a long way since we startedWithout the improvements implemented through CAROI would not be ready to make other improvementsProgram first but with broken infrastructure cant focus on program delivery

23CAROI Guideshttp://www2.ed.gov/policy/gen/guid/caroi/index.htmlhttp://www.agacgfm.org/AGA/ToolsResources/documents/CAROI.pdf

Two guides for implementing CAROI1st ED original handbook2nd AGA toolkit

Google CAROI24Thank YouPreguntas?Grafica Sealamientos 94 al 041392610014012712251514234

Number of findingsAosSealamientosResultados "Single Audits" del 1994 al 2004

Grafica de Estatus305253033288

Sealamientos de Auditora 1994 al 2003

Sheet1Fiscal YearNumber of findings1993-1994131994-199591995-1996261996-19971001997-19981401998-19991271999-20001222000-2001512001-2002512002-2003422003-200434Not Seeking Recovery305Seeking Recovery25May Seek Recovery30Closed33Status of Limitation288681

AnalisisBase Recurrente 2001Single Audit YearSealamientos RecurrentesNuevos SealamientosRecurrente delCostos CuestionadosCostos% costo de NuevosBase2002Nuevos SealamientosCuestionadosSealamientos20022823$2,223,039.00$17,658,204.0012.59%2003151611$6,432,858.00$18,406,605.0034.95%Total433911$8,655,897.00$36,064,809.0024.00%Single Audit YearNuevos SealamientosCorregidosParcialmente CorregidoCAROI20022317422003161123Total392865Porciento71.79%15.38%12.82%El trmino Base Recurrente 2001incluye todos aquellos sealaminentos que vienen repitindose desde el ao 2001 hacia atrs.Single Audits Results for the years ended June 30, 1999 through 2003Fiscal YearNumber of findingsAmount of Questioned CostsOIG$142,602,835.001994-1998288$9,918,8661998-1999127$30,382,8721999-2000122$52,646,0822000-200151$22,246,1032001-200251$17,658,2042002-200342$18,406,6052003-200434$4,471,000$115,193,9231994 @ 2001715$151,258,732$110,956,9941999 @ 2003

2002June 30, 2002Recurrent-prior to 2001Status on the Summary Schedule of Prior Year AuditCompletion dateFinding NumberNon-recurrentQuestioned Costs02-01X02-02X02-03X02-04X02-09X02-13X02-14X02-16X02-18X02-19X02-20X02-21X02-24X02-27X02-28X02-29X02-38X02-50X02-51X02-05X02-06X02-07X02-11X02-12X02-26X02-40X02-46X02-49X02-08X192,903.00Corrected30-Jun-0302-10X1,306,627.00Corrected30-Jun-0302-15X52,000.00Not Corrected02-17X9,119.00Not Corrected02-22X336,000.00Corrected30-Jun-0302-23X71,430.00Corrected30-Jun-0302-25X254,960.00Corrected30-Jun-0302-30X0.0Partially Corrected02-31X0.0Corrected30-Jun-0302-32XUndeterminedPartially Corrected02-33XUndeterminedCorrected30-Jun-0302-34XUndeterminedCorrected30-Jun-0302-35XUndeterminedCorrected30-Jun-0302-36XUndeterminedCorrected30-Jun-0302-37XUndeterminedCorrected30-Jun-0302-39XUndeterminedPartially Corrected02-41XUndeterminedCorrected30-Jun-0302-42XUndeterminedPartially Corrected02-43XUndeterminedCorrected30-Jun-0302-44XUndeterminedCorrected30-Jun-0302-45XUndeterminedCorrected30-Jun-0302-47XUndeterminedCorrected30-Jun-0302-48XUndeterminedCorrected30-Jun-0328232,223,039.00

2003June 30, 2003Recurrent-prior to 2001Recurrent-since 2002Status on the Management Response/ Corrective Action PlanCompletion dateFinding NumberNon-recurrentQuestioned Costs03-02X03-04X03-06X03-08X03-13X03-14X03-15X03-16X03-17X03-20X03-21X03-07X03-19X03-39X03-40X03-05X198,919.00Not corrected03-09X208,251.00Partially Completed03-11X206,644.00Corrected30-Jun-0303-18X19,786.00Not corrected03-30X0.0Partially Completed03-31XUndeterminedPartially Completed03-32XUndeterminedPartially Completed03-33XUndeterminedCorrected30-Jun-0303-34XUndeterminedCorrected30-Jun-0303-41X0.0Partially Completed03-42XUndeterminedPartially Completed03-01X0.0Corrected30-Jun-0303-03X213,652.00Not corrected03-10X5,836,802.00Corrected30-Jun-0303-12X368,075.00Not corrected03-22X14,329.00Partially Completed03-23XUndeterminedPartially Completed03-24X0.0Corrected30-Jun-0303-25X0.0Corrected30-Jun-0303-26XUndeterminedNot corrected03-27X0.0Corrected30-Jun-0303-28X0.0Corrected30-Jun-0303-29XUndeterminedCorrected30-Jun-0303-35XUndeterminedCorrected30-Jun-0303-36XUndeterminedCorrected30-Jun-0303-37XUndeterminedCorrected30-Jun-0303-38XUndeterminedCorrected30-Jun-031511166,432,858.00

Selamientos

Sealamientos del 1994 al 2003

Costos Cuestionados1426028358655897

Questioned CostCostos Cuestionados del 1994 al 2003$151,258,732$8,655,897$142,602,835

Graphs DataFindingsSealamiento del 1994-2003676Nuevos Sealamientos de 2002 to 200339715Questioned CostCosto de sealamientos del 1994-2003$142,602,835142602835Costo de Nuevos sealamientos 2002 al 2003$8,655,897Total Questioned Cost$151,258,732151258732

CAROI Action Plans FlowchartGrant TeamProcurement TeamPayroll TeamAudit TeamII. Application / Evaluation / Approval ProcessVII. Reporting ProcessIV. Budget ProcessIdentified Need as per Approved Budget (Personnel per program/project)Identified Need as per Approved Budget (Purchases and Contracts)I. Pre-Award Planning ProcessVI. Interagency Process (Hacienda / BGF / OGP)IV. Interagency Process (Hacienda / BGF / OGP)V. Program / Project ImplementationVI. Technical AssistanceVI. Monitoring ProcessPayroll CertificationII. Time Distribution ProcessFIFO ImplementationInternal Audit OfficeAudit Oversight CommitteeIV. Property Management ProcessI. Vendor Selection ProcessII. Contracting ProcessIII. Contract Execution Management ProcessV. Payment ProcessVII. Funds Draw Down ProcessWritten Payroll ProceduresIII. Interagency Process (Hacienda / BGF / OGP)I. Hire / Transfer Process III. Semimonthly Payroll ProcessV. Funds Draw Down Process Quarterly Aggregate ReportQuarterly Payroll Reconciliation ReportInputUSDE posts estimated program levels for following fiscal yearVIII. Private Schools and Equitable ServicesIX. Schoolwide ProgramsX. Implementation of Re-organization plan XII. Community SchoolsXI.Implementation of PRIFAS grants management and project modules