4.2 Standards for Financial Management System

4.2.1 Standards for Financial Management System

Effective Date: March 1, 2022

Background

This policy specifies the minimum requirements that must be maintained by subrecipients of WIOA Title I funds for their financial management system.

Financial systems must allow for effective fiscal and internal controls and accountability for funds, property, and other assets to ensure they are used solely for the authorized purposes. All subrecipients must maintain all data elements used in required federal reports in accordance with established program definitions contained in the Act, regulations, and state policies.¹

Financial Management System Reqirements

1. Financial Management System
   Financial Management System must meet and follow the current Generally Accepted Accounting Principles (GAAP) and demonstrate compliance with legal and contractual requirements.
   Financial Management System shall provide accurate, current, and complete disclosures of all expenditures including but not limited to those from grants, contracts, or agreements. The costs must be traceable to a level of detail that establishes compliance with WIOA applicable laws and regulations.²
   Financial Management System shall follow consistent rules for aggregation of detailed data to summary level:
   • Accounting Systems will compare budgeted amounts to actual expenditures including proper charging and classification.³
   • Information pertaining to subgrant and contract awards, obligations, unobligated balances, assets, liabilities, expenditures, income, program income, matching and stand-in costs.⁴
   • Allow for the tracking of funds to a level of expenditure adequate to establish that funds have not been used in violation of the WIOA.⁵
2. Records
   Records should identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation.⁶
3. Internal Controls
   Effective control over, and accountability for, all funds, property, and other assets. The non-Federal entity must adequately safeguard all assets and assure that they are used solely for authorized purposes.⁷
4. Cash Management
   Procedures for minimizing the time elapsing between the receipt of funds from DWD and disbursement of those funds must be followed very strictly. Cash drawdowns must be made as close as possible to the time of making disbursements, and Subrecipients must monitor cash drawdowns by their subrecipients to minimize cash on hand and ensure they conform to the same standards of timing and amount as that of Subrecipients.⁸ Also see policy 4.4 Cash Management and Invoicing Standards.
5. Allowable Cost
   Written procedures for determining the allowability of costs in accordance with UG Cost Principals and the terms and conditions of the Federal award. Costs must be necessary and reasonable for proper and efficient administration of grant funds. Applicable OMB cost principles, agency program regulations, and the terms and conditions of grant and subgrant agreements must be adhered to in determining the reasonableness, allowability, and allocability of costs.⁹
6. Financial Reporting
   All costs reported against grant funds must be traceable to the accounting records and be allowable costs according to GAAP and the financial reporting requirements of the grant or subgrant.
7. Reports
   Accurate, current and complete disclosure of the financial results of each grant in accordance with the reporting requirements set forth in Policy 4.3 Reporting Requirements. DET requires reporting on an accrual basis. The grantee is not required to establish an accrual accounting system but shall develop such accrual data for its reports on the basis of an analysis of available documentation.¹⁰

Subgrantee Systems

Each grantee must ensure that the financial management systems of their subgrantees meet the above listed standards.

Failure to Meet Standards

If the grantee's financial management system fails to meet the standards set forth in this section, DET will require corrective action by a specific date. Grantees who fail to take corrective action in the time given are subject to having costs withheld or disallowed.

• ¹ 2 CFR § 200.302 (a)
• ² 2 CFR § 200.302 (a)
• ³ 2 CFR § 200.302 (b)(5)
• ⁴ 2 CFR § 200.302 (b)(3)
• ⁵ 2 CFR § 200.302 (a)
• ⁶ 2 CFR § 200.302 (b)(3)
• ⁷ 2 CFR § 200.302 (b)(4)
• ⁸ 2 CFR § 200.302(b)(6) & 200.305(b)
• ⁹ 2 CFR § 200.302 (b)(7) & 2 CFR § 200.403(a)
• ¹⁰ 2 CFR § 200.302 (b)(2)