Finding 2022-002 Internal Control Over Activities Allowed or Unallowable (ALN# 59.008 COVID-19 Disaster Assistance Loans) Type of Finding: Material Weakness in Internal Control Over Compliance Condition and Context: During the year ended December 31, 2022, the Executive Director was paid a one-time payment in the amount of $60,000 and another $50,000 was paid to an LLC that is owned by the Executive Director?s daughter. There were no services provided to support these payments. SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2022 Section III Federal Award Findings (Continued) Finding 2022-002 Internal Control Over Activities Allowed or Unallowable (ALN# 59.008 COVID-19 Disaster Assistance Loans) (Continued) Criteria: Program funds are only allowed to be spent on actives that are allowed per the Uniform Guidance. In addition, nonprofit organizations are not allowed to spend funds on activities that do not further the advancement of the Organization. Cause: Management and those charged with governance were not aware of how the funds could be spent. Effect: The Organization is not in compliance with its federal awards and they may have caused a private inurement. Question Costs: Known questioned costs of $110,000 were identified. Recommendation: The Executive Director should repay the $60,000 and have the LLC repay the $50,000. We also recommend management and the board of directors should obtain training in what are and are not allowable expenses for a nonprofit organization. Views of Responsible Officials: As part of the investment strategy of the SBA Disaster Loan, Little Buns, Inc. invested $50,000 in a startup company, MAW LLC. MAW LLC is a healthcare start-up led by nurse practitioners-partnering with community organizations to ensure that health and wellness guidelines are followed according to the latest practice guidelines. MAW provides a mechanism of healthcare support for businesses who operate in relationship to overall health outcomes, but do not employ clinical staff. An investment was made in MAW LLC as a revenue stream for Little Buns Inc. These funds provided material support for startup costs such as technology expenditures, software, research and development, market share analysis, networking, professional development and overall business development. In return, MAW will provide repayment plus interest of startup funds and also provide a set number of consult hours per month and per diem. This exchange will provide Little Buns Inc with access to MAW services as well as development of nutrition and child health focused content from licensed healthcare professionals. The pandemic created a unique set of circumstances for Little Buns Inc as operational costs continued, while CACFP administrative funds were greatly reduced. Little Buns Inc needed to quickly pivot into a new model of employee and client engagement and the decision was made to create work at home stations for existing employees. Off-site offices were set up for multiple employees to be able to continue to operate the business of Little Buns, Inc. without personally interfacing with other staff members and childcare providers. As funds were not available through USDA CACFP grant, the executive director covered the cost for employee workstations as no additional source of funding could be determined. The $60,000 one-time payment provided to the Executive Director as a repayment of the costs incurred for the transition to work from home stations for employees.
Finding 2022-001 Financial Close Process Type of Finding: Material Weakness in Internal Control over Financial Reporting Condition and Context: The financial statements provided by management did not include all of the activity of the Organization. There was another bank account and loan that was not recorded on the financial statements that were provided to the auditor. Criteria: Management is responsible for establishing internal controls to properly record, track, and approve the financial statements. Cause: Management did not provide the outside bookkeeper with all of the bank statements and information for the Organization. Effect: The financial statements were materially misstated until the bank account and its activity were included in the financial statements. Recommendation: Management should ensure all activity and accounts of the Organization are provided to the outside bookkeeper on a monthly basis. Views of Responsible Officials: Little Buns, Inc. was awarded a SBA Disaster Loan that was intended for investment purposes to generate income to provide additional resources for expenses not available through USDA CACFP Grant funding. I was not aware that these funds were audited in the Federal Audit for USDA CACFP Grant funding as they were not co-mingled in the grant funding
Finding 2022-002 Internal Control Over Activities Allowed or Unallowable (ALN# 59.008 COVID-19 Disaster Assistance Loans) Type of Finding: Material Weakness in Internal Control Over Compliance Condition and Context: During the year ended December 31, 2022, the Executive Director was paid a one-time payment in the amount of $60,000 and another $50,000 was paid to an LLC that is owned by the Executive Director?s daughter. There were no services provided to support these payments. SCHEDULE OF FINDINGS AND QUESTIONED COSTS (CONTINUED) FOR THE YEAR ENDED DECEMBER 31, 2022 Section III Federal Award Findings (Continued) Finding 2022-002 Internal Control Over Activities Allowed or Unallowable (ALN# 59.008 COVID-19 Disaster Assistance Loans) (Continued) Criteria: Program funds are only allowed to be spent on actives that are allowed per the Uniform Guidance. In addition, nonprofit organizations are not allowed to spend funds on activities that do not further the advancement of the Organization. Cause: Management and those charged with governance were not aware of how the funds could be spent. Effect: The Organization is not in compliance with its federal awards and they may have caused a private inurement. Question Costs: Known questioned costs of $110,000 were identified. Recommendation: The Executive Director should repay the $60,000 and have the LLC repay the $50,000. We also recommend management and the board of directors should obtain training in what are and are not allowable expenses for a nonprofit organization. Views of Responsible Officials: As part of the investment strategy of the SBA Disaster Loan, Little Buns, Inc. invested $50,000 in a startup company, MAW LLC. MAW LLC is a healthcare start-up led by nurse practitioners-partnering with community organizations to ensure that health and wellness guidelines are followed according to the latest practice guidelines. MAW provides a mechanism of healthcare support for businesses who operate in relationship to overall health outcomes, but do not employ clinical staff. An investment was made in MAW LLC as a revenue stream for Little Buns Inc. These funds provided material support for startup costs such as technology expenditures, software, research and development, market share analysis, networking, professional development and overall business development. In return, MAW will provide repayment plus interest of startup funds and also provide a set number of consult hours per month and per diem. This exchange will provide Little Buns Inc with access to MAW services as well as development of nutrition and child health focused content from licensed healthcare professionals. The pandemic created a unique set of circumstances for Little Buns Inc as operational costs continued, while CACFP administrative funds were greatly reduced. Little Buns Inc needed to quickly pivot into a new model of employee and client engagement and the decision was made to create work at home stations for existing employees. Off-site offices were set up for multiple employees to be able to continue to operate the business of Little Buns, Inc. without personally interfacing with other staff members and childcare providers. As funds were not available through USDA CACFP grant, the executive director covered the cost for employee workstations as no additional source of funding could be determined. The $60,000 one-time payment provided to the Executive Director as a repayment of the costs incurred for the transition to work from home stations for employees.
Finding 2022-001 Financial Close Process Type of Finding: Material Weakness in Internal Control over Financial Reporting Condition and Context: The financial statements provided by management did not include all of the activity of the Organization. There was another bank account and loan that was not recorded on the financial statements that were provided to the auditor. Criteria: Management is responsible for establishing internal controls to properly record, track, and approve the financial statements. Cause: Management did not provide the outside bookkeeper with all of the bank statements and information for the Organization. Effect: The financial statements were materially misstated until the bank account and its activity were included in the financial statements. Recommendation: Management should ensure all activity and accounts of the Organization are provided to the outside bookkeeper on a monthly basis. Views of Responsible Officials: Little Buns, Inc. was awarded a SBA Disaster Loan that was intended for investment purposes to generate income to provide additional resources for expenses not available through USDA CACFP Grant funding. I was not aware that these funds were audited in the Federal Audit for USDA CACFP Grant funding as they were not co-mingled in the grant funding