SECTION 2 ? FINANCIAL STATEMENT FINDINGS Finding 2022-001 Internal Control over Bank Reconciliation and Vendor Invoice Approval Condition: Bank statements and bank reconciliations were prepared and reviewed by two individuals, but the approval was not documented in writing (or electronic means). Invoices were not defaced prior to payment, review by supervisory personnel not documented and program to be changed for the expenditure was not noted on the invoice, and therefore not approved. Cause: The Organization has developed an internal control documentation but has not a prior audit. They were unaware, even in a small office, that documented procedures by initial and dating (manually or electronically) is required as evidence of segregation of approval duties. Criteria: Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Effect: The supervisory personnel approval of the bank statement, bank reconciliation, vendor invoices and charge to program(s) was not documented. Recommendation: Bank statements and bank reconciliations: Bank reconciliations should be prepared within 30 days of the receipt of the statement. Banks may not correct any errors (or fraud) that is not detected and reported within that time frame. The bank statement and bank reconciliation should be reviewed by a person other than the preparer and that person should initial and date (or electronic procedure of comparable nature) as reviewed and approved. The bank reconciliation balance should agree with the general ledger balance(s). Upon approval of vendor invoices, the invoice should be defaced, and the vendor, amount and program charged should be initialed and dated (or electronic procedure of comparable nature), on the face of the invoice, by supervisory personnel. Management?s response: Management agrees with this recommendation and have taken steps to implement proper review and documentation for bank reconciliations and vendor invoice approvals. Person Responsible: President/CEO, Finance Officer, and Program Managers
SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding 2022-002 Debarred and Suspended Vendors Condition: The Organization?s did not develop and perform procedures to ensuring staff verified the suspension and debarment status of two contractors paid $25,000 or more, all or in part with federal funds. Cause: Suspension and Debarment Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the Organization enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The Organization may accomplish this verification by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration?s System for Award Management at SAM.gov. The Organization must perform this verification before entering into the contract or, in this specific case, prior to charging the costs to a federal award, and it must keep documentation demonstrating compliance with this federal requirement. The Organization did not have adequate controls and did not verify that the two contractors were not suspended or debarred before charging the costs to the program. Criteria: Title 2 CFR Part 180, OMB, Guidelines to Agencies on Governmentwide Debarment and Suspension (No procurement), establishes non-procurement debarment and suspension regulations, implementing Executive Orders 12549 and 12689. Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 13. The Contractor certified that it is in compliance with and must note be, and shall not contract with individuals or organizations which are debarred, suspended, or otherwise excluded from or ineligible from participation in the Feder Assistance Programs under Executive Order 12549, and ?Debarment and Suspension?, codified at 29 VFR part 98. Contractor must provide a signed statement, attached to this Agreement, that it is complying with the requirements of this section. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not obtain a written certification, insert a clause into the contract, or check SAM.gov to verify the contractor was not suspended or debarred. Without this verification, the City increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any payments the City made to an ineligible party would be unallowable, and the federal grantor could potentially recover them. We verified the contractor was not suspended or debarred. Therefore, we are not questioning the related costs. Recommendation: Develop internal control policies to ensure contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them or charging their costs to the program and documenting the verification. This can be added to service contracts with a written certification. Management?s response: Management agrees with this recommendation and have taken steps to develop and implement proper internal controls. Person Responsible: Finance Officer and Program Managers
SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Finding 2022-003 Monitoring Subcontractors Performance Condition: The Organization did not develop and perform procedures to verify the subcontractor?s adherence to contract terms (provide contract services), condition and contract specifications. The Organization relied on what they considered to be pre-approval Pacific Mountain Development Councils? website as meeting the criteria. The PacMnt contracts do not reference the website, or that placement on the website waives oversite by the grantee. Cause: The Organization?s internal controls were inadequate to perform and document the performance monitoring of the subcontractors. The Pacific Mountain Workforce Development Council provided an on-line ?Eligible Training Provider List? which the Organization accepted and relied upon as a pre-approval that the contracted services required no further monitoring. Criteria: Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 31.6 Oversite Grantee must maintain oversight over all contracts. This includes, but is not limited to, monitoring contractor performance regarding contract terms, conditions, and specifications. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not monitor the contactors for adherence to contract terms, condition and specifications. Recommendation: To ensure compliance with governmental grant programs, additional training and education should be obtained by associated staff. Management?s response: Management agrees with the recommendation and have scheduled training for key personnel. Person Responsible: Program Managers
Finding 2022-004 Written Approval of Subcontractors Condition: The Organization did not develop and perform procedures to obtain required written approval of the subcontractors they contracted with. Cause: The Organization did not develop and perform procedures to document written approval of subcontractors from the grantor. The Pacific Mountain Workforce Development Council provided an on-line ?Eligible Training Provider List? which the Organization accepted as an authorization that the contracted services would be provided without further written approval. Criteria: Criteria: Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 36. Subcontracting The Contractor shall not subcontract work or services contemplated under the Contract and/or use an outside consultant except as provided for in the Scope of Work without obtaining the prior written approval of PACMTN for the authority to enter into subcontracts. Contractor acknowledgers that such approve for any subcontract does not relieve the Contractor of its obligations to perform hereunder. PACMTN retains the author to review and approve or disapprove all subcontracts. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not obtain written authorization to subcontract work as they relied upon the PACMTN on-line ?Eligible Training Provider List? to be such approval. Recommendation: To ensure compliance with governmental grant programs, additional training and education should be obtained by associated staff. Management?s response: Management agrees with this recommendation and have scheduled training for key personnel. Person Responsible: President/CEO and Program Managers
Finding 2022-005 Indirect Cost Allocation ? Questioned Costs Condition: Grant 102-TCC-BS-PY21, PY Business Services & Solutions, grant document did not contain a specific allowable indirect cost amount. The budget contained a line for ?Subcontractors and Other? of $66,077. The Organization charged an indirect allocation to this grant of $47,070, an overcharge of $19,007. Grant 102-TCC-CT-BS-PY21, Thurston Chamber ? Sector Training, had an indirect budget line item of $17,274. The Organization charged $24,736, an over change of $7,462. Grant 102-TCCC-PEC-PY21, Thurston Chamber Pathway to Employment Cohort, had no budget line item for indirect costs. The Organization charged indirect costs under ?Career Services? for $73,535, an overcharge of $73,535. These overcharges total questioned costs of $100,004. The Organization lacked a methodology of pooling all indirect costs and allocating the costs uniformly across all revenue sources. Cause: The Organization did not obtain adequate training and understanding of the calculation and allocation of indirect costs in government funded programs. Criteria: Uniform Guidance 2 CFR ? 200.405 Allocable costs. (a) A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. (b) All activities which benefit from the non-Federal entity's indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. (c) Any cost allocable to a particular Federal award under the principles provided for in this part may not be charged to other Federal awards to overcome fund deficiencies, to avoid SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Finding 2022-005 Indirect Cost Allocation ? Questioned Costs restrictions imposed by Federal statutes, regulations, or terms and conditions of the Federal awards, or for other reasons. However, this prohibition would not preclude the non-Federal entity from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal awards. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization charged federal programs for unallowed indirect costs. Recommendation: To ensure compliance with indirect cost calculation and allocation procedures, the Organization should obtain additional grant training. Management?s response: Management agrees with the need for additional grant training, especially as it applies to calculating and allocating indirect costs. However, we do have issues with the classification of expenses within the original contract and hope we can reconcile those prior to the finalization of the grant award. Person Responsible: President/CEO Finance Officer
SECTION 2 ? FINANCIAL STATEMENT FINDINGS Finding 2022-001 Internal Control over Bank Reconciliation and Vendor Invoice Approval Condition: Bank statements and bank reconciliations were prepared and reviewed by two individuals, but the approval was not documented in writing (or electronic means). Invoices were not defaced prior to payment, review by supervisory personnel not documented and program to be changed for the expenditure was not noted on the invoice, and therefore not approved. Cause: The Organization has developed an internal control documentation but has not a prior audit. They were unaware, even in a small office, that documented procedures by initial and dating (manually or electronically) is required as evidence of segregation of approval duties. Criteria: Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Effect: The supervisory personnel approval of the bank statement, bank reconciliation, vendor invoices and charge to program(s) was not documented. Recommendation: Bank statements and bank reconciliations: Bank reconciliations should be prepared within 30 days of the receipt of the statement. Banks may not correct any errors (or fraud) that is not detected and reported within that time frame. The bank statement and bank reconciliation should be reviewed by a person other than the preparer and that person should initial and date (or electronic procedure of comparable nature) as reviewed and approved. The bank reconciliation balance should agree with the general ledger balance(s). Upon approval of vendor invoices, the invoice should be defaced, and the vendor, amount and program charged should be initialed and dated (or electronic procedure of comparable nature), on the face of the invoice, by supervisory personnel. Management?s response: Management agrees with this recommendation and have taken steps to implement proper review and documentation for bank reconciliations and vendor invoice approvals. Person Responsible: President/CEO, Finance Officer, and Program Managers
SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding 2022-002 Debarred and Suspended Vendors Condition: The Organization?s did not develop and perform procedures to ensuring staff verified the suspension and debarment status of two contractors paid $25,000 or more, all or in part with federal funds. Cause: Suspension and Debarment Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the Organization enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The Organization may accomplish this verification by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration?s System for Award Management at SAM.gov. The Organization must perform this verification before entering into the contract or, in this specific case, prior to charging the costs to a federal award, and it must keep documentation demonstrating compliance with this federal requirement. The Organization did not have adequate controls and did not verify that the two contractors were not suspended or debarred before charging the costs to the program. Criteria: Title 2 CFR Part 180, OMB, Guidelines to Agencies on Governmentwide Debarment and Suspension (No procurement), establishes non-procurement debarment and suspension regulations, implementing Executive Orders 12549 and 12689. Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 13. The Contractor certified that it is in compliance with and must note be, and shall not contract with individuals or organizations which are debarred, suspended, or otherwise excluded from or ineligible from participation in the Feder Assistance Programs under Executive Order 12549, and ?Debarment and Suspension?, codified at 29 VFR part 98. Contractor must provide a signed statement, attached to this Agreement, that it is complying with the requirements of this section. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not obtain a written certification, insert a clause into the contract, or check SAM.gov to verify the contractor was not suspended or debarred. Without this verification, the City increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any payments the City made to an ineligible party would be unallowable, and the federal grantor could potentially recover them. We verified the contractor was not suspended or debarred. Therefore, we are not questioning the related costs. Recommendation: Develop internal control policies to ensure contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them or charging their costs to the program and documenting the verification. This can be added to service contracts with a written certification. Management?s response: Management agrees with this recommendation and have taken steps to develop and implement proper internal controls. Person Responsible: Finance Officer and Program Managers
SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Finding 2022-003 Monitoring Subcontractors Performance Condition: The Organization did not develop and perform procedures to verify the subcontractor?s adherence to contract terms (provide contract services), condition and contract specifications. The Organization relied on what they considered to be pre-approval Pacific Mountain Development Councils? website as meeting the criteria. The PacMnt contracts do not reference the website, or that placement on the website waives oversite by the grantee. Cause: The Organization?s internal controls were inadequate to perform and document the performance monitoring of the subcontractors. The Pacific Mountain Workforce Development Council provided an on-line ?Eligible Training Provider List? which the Organization accepted and relied upon as a pre-approval that the contracted services required no further monitoring. Criteria: Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 31.6 Oversite Grantee must maintain oversight over all contracts. This includes, but is not limited to, monitoring contractor performance regarding contract terms, conditions, and specifications. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not monitor the contactors for adherence to contract terms, condition and specifications. Recommendation: To ensure compliance with governmental grant programs, additional training and education should be obtained by associated staff. Management?s response: Management agrees with the recommendation and have scheduled training for key personnel. Person Responsible: Program Managers
Finding 2022-004 Written Approval of Subcontractors Condition: The Organization did not develop and perform procedures to obtain required written approval of the subcontractors they contracted with. Cause: The Organization did not develop and perform procedures to document written approval of subcontractors from the grantor. The Pacific Mountain Workforce Development Council provided an on-line ?Eligible Training Provider List? which the Organization accepted as an authorization that the contracted services would be provided without further written approval. Criteria: Criteria: Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 36. Subcontracting The Contractor shall not subcontract work or services contemplated under the Contract and/or use an outside consultant except as provided for in the Scope of Work without obtaining the prior written approval of PACMTN for the authority to enter into subcontracts. Contractor acknowledgers that such approve for any subcontract does not relieve the Contractor of its obligations to perform hereunder. PACMTN retains the author to review and approve or disapprove all subcontracts. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not obtain written authorization to subcontract work as they relied upon the PACMTN on-line ?Eligible Training Provider List? to be such approval. Recommendation: To ensure compliance with governmental grant programs, additional training and education should be obtained by associated staff. Management?s response: Management agrees with this recommendation and have scheduled training for key personnel. Person Responsible: President/CEO and Program Managers
Finding 2022-005 Indirect Cost Allocation ? Questioned Costs Condition: Grant 102-TCC-BS-PY21, PY Business Services & Solutions, grant document did not contain a specific allowable indirect cost amount. The budget contained a line for ?Subcontractors and Other? of $66,077. The Organization charged an indirect allocation to this grant of $47,070, an overcharge of $19,007. Grant 102-TCC-CT-BS-PY21, Thurston Chamber ? Sector Training, had an indirect budget line item of $17,274. The Organization charged $24,736, an over change of $7,462. Grant 102-TCCC-PEC-PY21, Thurston Chamber Pathway to Employment Cohort, had no budget line item for indirect costs. The Organization charged indirect costs under ?Career Services? for $73,535, an overcharge of $73,535. These overcharges total questioned costs of $100,004. The Organization lacked a methodology of pooling all indirect costs and allocating the costs uniformly across all revenue sources. Cause: The Organization did not obtain adequate training and understanding of the calculation and allocation of indirect costs in government funded programs. Criteria: Uniform Guidance 2 CFR ? 200.405 Allocable costs. (a) A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. (b) All activities which benefit from the non-Federal entity's indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. (c) Any cost allocable to a particular Federal award under the principles provided for in this part may not be charged to other Federal awards to overcome fund deficiencies, to avoid SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Finding 2022-005 Indirect Cost Allocation ? Questioned Costs restrictions imposed by Federal statutes, regulations, or terms and conditions of the Federal awards, or for other reasons. However, this prohibition would not preclude the non-Federal entity from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal awards. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization charged federal programs for unallowed indirect costs. Recommendation: To ensure compliance with indirect cost calculation and allocation procedures, the Organization should obtain additional grant training. Management?s response: Management agrees with the need for additional grant training, especially as it applies to calculating and allocating indirect costs. However, we do have issues with the classification of expenses within the original contract and hope we can reconcile those prior to the finalization of the grant award. Person Responsible: President/CEO Finance Officer
SECTION 2 ? FINANCIAL STATEMENT FINDINGS Finding 2022-001 Internal Control over Bank Reconciliation and Vendor Invoice Approval Condition: Bank statements and bank reconciliations were prepared and reviewed by two individuals, but the approval was not documented in writing (or electronic means). Invoices were not defaced prior to payment, review by supervisory personnel not documented and program to be changed for the expenditure was not noted on the invoice, and therefore not approved. Cause: The Organization has developed an internal control documentation but has not a prior audit. They were unaware, even in a small office, that documented procedures by initial and dating (manually or electronically) is required as evidence of segregation of approval duties. Criteria: Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Effect: The supervisory personnel approval of the bank statement, bank reconciliation, vendor invoices and charge to program(s) was not documented. Recommendation: Bank statements and bank reconciliations: Bank reconciliations should be prepared within 30 days of the receipt of the statement. Banks may not correct any errors (or fraud) that is not detected and reported within that time frame. The bank statement and bank reconciliation should be reviewed by a person other than the preparer and that person should initial and date (or electronic procedure of comparable nature) as reviewed and approved. The bank reconciliation balance should agree with the general ledger balance(s). Upon approval of vendor invoices, the invoice should be defaced, and the vendor, amount and program charged should be initialed and dated (or electronic procedure of comparable nature), on the face of the invoice, by supervisory personnel. Management?s response: Management agrees with this recommendation and have taken steps to implement proper review and documentation for bank reconciliations and vendor invoice approvals. Person Responsible: President/CEO, Finance Officer, and Program Managers
SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding 2022-002 Debarred and Suspended Vendors Condition: The Organization?s did not develop and perform procedures to ensuring staff verified the suspension and debarment status of two contractors paid $25,000 or more, all or in part with federal funds. Cause: Suspension and Debarment Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the Organization enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The Organization may accomplish this verification by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration?s System for Award Management at SAM.gov. The Organization must perform this verification before entering into the contract or, in this specific case, prior to charging the costs to a federal award, and it must keep documentation demonstrating compliance with this federal requirement. The Organization did not have adequate controls and did not verify that the two contractors were not suspended or debarred before charging the costs to the program. Criteria: Title 2 CFR Part 180, OMB, Guidelines to Agencies on Governmentwide Debarment and Suspension (No procurement), establishes non-procurement debarment and suspension regulations, implementing Executive Orders 12549 and 12689. Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 13. The Contractor certified that it is in compliance with and must note be, and shall not contract with individuals or organizations which are debarred, suspended, or otherwise excluded from or ineligible from participation in the Feder Assistance Programs under Executive Order 12549, and ?Debarment and Suspension?, codified at 29 VFR part 98. Contractor must provide a signed statement, attached to this Agreement, that it is complying with the requirements of this section. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not obtain a written certification, insert a clause into the contract, or check SAM.gov to verify the contractor was not suspended or debarred. Without this verification, the City increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any payments the City made to an ineligible party would be unallowable, and the federal grantor could potentially recover them. We verified the contractor was not suspended or debarred. Therefore, we are not questioning the related costs. Recommendation: Develop internal control policies to ensure contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them or charging their costs to the program and documenting the verification. This can be added to service contracts with a written certification. Management?s response: Management agrees with this recommendation and have taken steps to develop and implement proper internal controls. Person Responsible: Finance Officer and Program Managers
SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Finding 2022-003 Monitoring Subcontractors Performance Condition: The Organization did not develop and perform procedures to verify the subcontractor?s adherence to contract terms (provide contract services), condition and contract specifications. The Organization relied on what they considered to be pre-approval Pacific Mountain Development Councils? website as meeting the criteria. The PacMnt contracts do not reference the website, or that placement on the website waives oversite by the grantee. Cause: The Organization?s internal controls were inadequate to perform and document the performance monitoring of the subcontractors. The Pacific Mountain Workforce Development Council provided an on-line ?Eligible Training Provider List? which the Organization accepted and relied upon as a pre-approval that the contracted services required no further monitoring. Criteria: Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 31.6 Oversite Grantee must maintain oversight over all contracts. This includes, but is not limited to, monitoring contractor performance regarding contract terms, conditions, and specifications. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not monitor the contactors for adherence to contract terms, condition and specifications. Recommendation: To ensure compliance with governmental grant programs, additional training and education should be obtained by associated staff. Management?s response: Management agrees with the recommendation and have scheduled training for key personnel. Person Responsible: Program Managers
Finding 2022-004 Written Approval of Subcontractors Condition: The Organization did not develop and perform procedures to obtain required written approval of the subcontractors they contracted with. Cause: The Organization did not develop and perform procedures to document written approval of subcontractors from the grantor. The Pacific Mountain Workforce Development Council provided an on-line ?Eligible Training Provider List? which the Organization accepted as an authorization that the contracted services would be provided without further written approval. Criteria: Criteria: Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 36. Subcontracting The Contractor shall not subcontract work or services contemplated under the Contract and/or use an outside consultant except as provided for in the Scope of Work without obtaining the prior written approval of PACMTN for the authority to enter into subcontracts. Contractor acknowledgers that such approve for any subcontract does not relieve the Contractor of its obligations to perform hereunder. PACMTN retains the author to review and approve or disapprove all subcontracts. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not obtain written authorization to subcontract work as they relied upon the PACMTN on-line ?Eligible Training Provider List? to be such approval. Recommendation: To ensure compliance with governmental grant programs, additional training and education should be obtained by associated staff. Management?s response: Management agrees with this recommendation and have scheduled training for key personnel. Person Responsible: President/CEO and Program Managers
Finding 2022-005 Indirect Cost Allocation ? Questioned Costs Condition: Grant 102-TCC-BS-PY21, PY Business Services & Solutions, grant document did not contain a specific allowable indirect cost amount. The budget contained a line for ?Subcontractors and Other? of $66,077. The Organization charged an indirect allocation to this grant of $47,070, an overcharge of $19,007. Grant 102-TCC-CT-BS-PY21, Thurston Chamber ? Sector Training, had an indirect budget line item of $17,274. The Organization charged $24,736, an over change of $7,462. Grant 102-TCCC-PEC-PY21, Thurston Chamber Pathway to Employment Cohort, had no budget line item for indirect costs. The Organization charged indirect costs under ?Career Services? for $73,535, an overcharge of $73,535. These overcharges total questioned costs of $100,004. The Organization lacked a methodology of pooling all indirect costs and allocating the costs uniformly across all revenue sources. Cause: The Organization did not obtain adequate training and understanding of the calculation and allocation of indirect costs in government funded programs. Criteria: Uniform Guidance 2 CFR ? 200.405 Allocable costs. (a) A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. (b) All activities which benefit from the non-Federal entity's indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. (c) Any cost allocable to a particular Federal award under the principles provided for in this part may not be charged to other Federal awards to overcome fund deficiencies, to avoid SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Finding 2022-005 Indirect Cost Allocation ? Questioned Costs restrictions imposed by Federal statutes, regulations, or terms and conditions of the Federal awards, or for other reasons. However, this prohibition would not preclude the non-Federal entity from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal awards. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization charged federal programs for unallowed indirect costs. Recommendation: To ensure compliance with indirect cost calculation and allocation procedures, the Organization should obtain additional grant training. Management?s response: Management agrees with the need for additional grant training, especially as it applies to calculating and allocating indirect costs. However, we do have issues with the classification of expenses within the original contract and hope we can reconcile those prior to the finalization of the grant award. Person Responsible: President/CEO Finance Officer
SECTION 2 ? FINANCIAL STATEMENT FINDINGS Finding 2022-001 Internal Control over Bank Reconciliation and Vendor Invoice Approval Condition: Bank statements and bank reconciliations were prepared and reviewed by two individuals, but the approval was not documented in writing (or electronic means). Invoices were not defaced prior to payment, review by supervisory personnel not documented and program to be changed for the expenditure was not noted on the invoice, and therefore not approved. Cause: The Organization has developed an internal control documentation but has not a prior audit. They were unaware, even in a small office, that documented procedures by initial and dating (manually or electronically) is required as evidence of segregation of approval duties. Criteria: Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Effect: The supervisory personnel approval of the bank statement, bank reconciliation, vendor invoices and charge to program(s) was not documented. Recommendation: Bank statements and bank reconciliations: Bank reconciliations should be prepared within 30 days of the receipt of the statement. Banks may not correct any errors (or fraud) that is not detected and reported within that time frame. The bank statement and bank reconciliation should be reviewed by a person other than the preparer and that person should initial and date (or electronic procedure of comparable nature) as reviewed and approved. The bank reconciliation balance should agree with the general ledger balance(s). Upon approval of vendor invoices, the invoice should be defaced, and the vendor, amount and program charged should be initialed and dated (or electronic procedure of comparable nature), on the face of the invoice, by supervisory personnel. Management?s response: Management agrees with this recommendation and have taken steps to implement proper review and documentation for bank reconciliations and vendor invoice approvals. Person Responsible: President/CEO, Finance Officer, and Program Managers
SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding 2022-002 Debarred and Suspended Vendors Condition: The Organization?s did not develop and perform procedures to ensuring staff verified the suspension and debarment status of two contractors paid $25,000 or more, all or in part with federal funds. Cause: Suspension and Debarment Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the Organization enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The Organization may accomplish this verification by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration?s System for Award Management at SAM.gov. The Organization must perform this verification before entering into the contract or, in this specific case, prior to charging the costs to a federal award, and it must keep documentation demonstrating compliance with this federal requirement. The Organization did not have adequate controls and did not verify that the two contractors were not suspended or debarred before charging the costs to the program. Criteria: Title 2 CFR Part 180, OMB, Guidelines to Agencies on Governmentwide Debarment and Suspension (No procurement), establishes non-procurement debarment and suspension regulations, implementing Executive Orders 12549 and 12689. Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 13. The Contractor certified that it is in compliance with and must note be, and shall not contract with individuals or organizations which are debarred, suspended, or otherwise excluded from or ineligible from participation in the Feder Assistance Programs under Executive Order 12549, and ?Debarment and Suspension?, codified at 29 VFR part 98. Contractor must provide a signed statement, attached to this Agreement, that it is complying with the requirements of this section. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not obtain a written certification, insert a clause into the contract, or check SAM.gov to verify the contractor was not suspended or debarred. Without this verification, the City increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any payments the City made to an ineligible party would be unallowable, and the federal grantor could potentially recover them. We verified the contractor was not suspended or debarred. Therefore, we are not questioning the related costs. Recommendation: Develop internal control policies to ensure contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them or charging their costs to the program and documenting the verification. This can be added to service contracts with a written certification. Management?s response: Management agrees with this recommendation and have taken steps to develop and implement proper internal controls. Person Responsible: Finance Officer and Program Managers
SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Finding 2022-003 Monitoring Subcontractors Performance Condition: The Organization did not develop and perform procedures to verify the subcontractor?s adherence to contract terms (provide contract services), condition and contract specifications. The Organization relied on what they considered to be pre-approval Pacific Mountain Development Councils? website as meeting the criteria. The PacMnt contracts do not reference the website, or that placement on the website waives oversite by the grantee. Cause: The Organization?s internal controls were inadequate to perform and document the performance monitoring of the subcontractors. The Pacific Mountain Workforce Development Council provided an on-line ?Eligible Training Provider List? which the Organization accepted and relied upon as a pre-approval that the contracted services required no further monitoring. Criteria: Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 31.6 Oversite Grantee must maintain oversight over all contracts. This includes, but is not limited to, monitoring contractor performance regarding contract terms, conditions, and specifications. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not monitor the contactors for adherence to contract terms, condition and specifications. Recommendation: To ensure compliance with governmental grant programs, additional training and education should be obtained by associated staff. Management?s response: Management agrees with the recommendation and have scheduled training for key personnel. Person Responsible: Program Managers
Finding 2022-004 Written Approval of Subcontractors Condition: The Organization did not develop and perform procedures to obtain required written approval of the subcontractors they contracted with. Cause: The Organization did not develop and perform procedures to document written approval of subcontractors from the grantor. The Pacific Mountain Workforce Development Council provided an on-line ?Eligible Training Provider List? which the Organization accepted as an authorization that the contracted services would be provided without further written approval. Criteria: Criteria: Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 36. Subcontracting The Contractor shall not subcontract work or services contemplated under the Contract and/or use an outside consultant except as provided for in the Scope of Work without obtaining the prior written approval of PACMTN for the authority to enter into subcontracts. Contractor acknowledgers that such approve for any subcontract does not relieve the Contractor of its obligations to perform hereunder. PACMTN retains the author to review and approve or disapprove all subcontracts. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not obtain written authorization to subcontract work as they relied upon the PACMTN on-line ?Eligible Training Provider List? to be such approval. Recommendation: To ensure compliance with governmental grant programs, additional training and education should be obtained by associated staff. Management?s response: Management agrees with this recommendation and have scheduled training for key personnel. Person Responsible: President/CEO and Program Managers
Finding 2022-005 Indirect Cost Allocation ? Questioned Costs Condition: Grant 102-TCC-BS-PY21, PY Business Services & Solutions, grant document did not contain a specific allowable indirect cost amount. The budget contained a line for ?Subcontractors and Other? of $66,077. The Organization charged an indirect allocation to this grant of $47,070, an overcharge of $19,007. Grant 102-TCC-CT-BS-PY21, Thurston Chamber ? Sector Training, had an indirect budget line item of $17,274. The Organization charged $24,736, an over change of $7,462. Grant 102-TCCC-PEC-PY21, Thurston Chamber Pathway to Employment Cohort, had no budget line item for indirect costs. The Organization charged indirect costs under ?Career Services? for $73,535, an overcharge of $73,535. These overcharges total questioned costs of $100,004. The Organization lacked a methodology of pooling all indirect costs and allocating the costs uniformly across all revenue sources. Cause: The Organization did not obtain adequate training and understanding of the calculation and allocation of indirect costs in government funded programs. Criteria: Uniform Guidance 2 CFR ? 200.405 Allocable costs. (a) A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. (b) All activities which benefit from the non-Federal entity's indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. (c) Any cost allocable to a particular Federal award under the principles provided for in this part may not be charged to other Federal awards to overcome fund deficiencies, to avoid SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Finding 2022-005 Indirect Cost Allocation ? Questioned Costs restrictions imposed by Federal statutes, regulations, or terms and conditions of the Federal awards, or for other reasons. However, this prohibition would not preclude the non-Federal entity from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal awards. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization charged federal programs for unallowed indirect costs. Recommendation: To ensure compliance with indirect cost calculation and allocation procedures, the Organization should obtain additional grant training. Management?s response: Management agrees with the need for additional grant training, especially as it applies to calculating and allocating indirect costs. However, we do have issues with the classification of expenses within the original contract and hope we can reconcile those prior to the finalization of the grant award. Person Responsible: President/CEO Finance Officer
SECTION 2 ? FINANCIAL STATEMENT FINDINGS Finding 2022-001 Internal Control over Bank Reconciliation and Vendor Invoice Approval Condition: Bank statements and bank reconciliations were prepared and reviewed by two individuals, but the approval was not documented in writing (or electronic means). Invoices were not defaced prior to payment, review by supervisory personnel not documented and program to be changed for the expenditure was not noted on the invoice, and therefore not approved. Cause: The Organization has developed an internal control documentation but has not a prior audit. They were unaware, even in a small office, that documented procedures by initial and dating (manually or electronically) is required as evidence of segregation of approval duties. Criteria: Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Effect: The supervisory personnel approval of the bank statement, bank reconciliation, vendor invoices and charge to program(s) was not documented. Recommendation: Bank statements and bank reconciliations: Bank reconciliations should be prepared within 30 days of the receipt of the statement. Banks may not correct any errors (or fraud) that is not detected and reported within that time frame. The bank statement and bank reconciliation should be reviewed by a person other than the preparer and that person should initial and date (or electronic procedure of comparable nature) as reviewed and approved. The bank reconciliation balance should agree with the general ledger balance(s). Upon approval of vendor invoices, the invoice should be defaced, and the vendor, amount and program charged should be initialed and dated (or electronic procedure of comparable nature), on the face of the invoice, by supervisory personnel. Management?s response: Management agrees with this recommendation and have taken steps to implement proper review and documentation for bank reconciliations and vendor invoice approvals. Person Responsible: President/CEO, Finance Officer, and Program Managers
SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding 2022-002 Debarred and Suspended Vendors Condition: The Organization?s did not develop and perform procedures to ensuring staff verified the suspension and debarment status of two contractors paid $25,000 or more, all or in part with federal funds. Cause: Suspension and Debarment Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the Organization enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The Organization may accomplish this verification by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration?s System for Award Management at SAM.gov. The Organization must perform this verification before entering into the contract or, in this specific case, prior to charging the costs to a federal award, and it must keep documentation demonstrating compliance with this federal requirement. The Organization did not have adequate controls and did not verify that the two contractors were not suspended or debarred before charging the costs to the program. Criteria: Title 2 CFR Part 180, OMB, Guidelines to Agencies on Governmentwide Debarment and Suspension (No procurement), establishes non-procurement debarment and suspension regulations, implementing Executive Orders 12549 and 12689. Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 13. The Contractor certified that it is in compliance with and must note be, and shall not contract with individuals or organizations which are debarred, suspended, or otherwise excluded from or ineligible from participation in the Feder Assistance Programs under Executive Order 12549, and ?Debarment and Suspension?, codified at 29 VFR part 98. Contractor must provide a signed statement, attached to this Agreement, that it is complying with the requirements of this section. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not obtain a written certification, insert a clause into the contract, or check SAM.gov to verify the contractor was not suspended or debarred. Without this verification, the City increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any payments the City made to an ineligible party would be unallowable, and the federal grantor could potentially recover them. We verified the contractor was not suspended or debarred. Therefore, we are not questioning the related costs. Recommendation: Develop internal control policies to ensure contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them or charging their costs to the program and documenting the verification. This can be added to service contracts with a written certification. Management?s response: Management agrees with this recommendation and have taken steps to develop and implement proper internal controls. Person Responsible: Finance Officer and Program Managers
SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Finding 2022-003 Monitoring Subcontractors Performance Condition: The Organization did not develop and perform procedures to verify the subcontractor?s adherence to contract terms (provide contract services), condition and contract specifications. The Organization relied on what they considered to be pre-approval Pacific Mountain Development Councils? website as meeting the criteria. The PacMnt contracts do not reference the website, or that placement on the website waives oversite by the grantee. Cause: The Organization?s internal controls were inadequate to perform and document the performance monitoring of the subcontractors. The Pacific Mountain Workforce Development Council provided an on-line ?Eligible Training Provider List? which the Organization accepted and relied upon as a pre-approval that the contracted services required no further monitoring. Criteria: Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 31.6 Oversite Grantee must maintain oversight over all contracts. This includes, but is not limited to, monitoring contractor performance regarding contract terms, conditions, and specifications. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not monitor the contactors for adherence to contract terms, condition and specifications. Recommendation: To ensure compliance with governmental grant programs, additional training and education should be obtained by associated staff. Management?s response: Management agrees with the recommendation and have scheduled training for key personnel. Person Responsible: Program Managers
Finding 2022-004 Written Approval of Subcontractors Condition: The Organization did not develop and perform procedures to obtain required written approval of the subcontractors they contracted with. Cause: The Organization did not develop and perform procedures to document written approval of subcontractors from the grantor. The Pacific Mountain Workforce Development Council provided an on-line ?Eligible Training Provider List? which the Organization accepted as an authorization that the contracted services would be provided without further written approval. Criteria: Criteria: Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 36. Subcontracting The Contractor shall not subcontract work or services contemplated under the Contract and/or use an outside consultant except as provided for in the Scope of Work without obtaining the prior written approval of PACMTN for the authority to enter into subcontracts. Contractor acknowledgers that such approve for any subcontract does not relieve the Contractor of its obligations to perform hereunder. PACMTN retains the author to review and approve or disapprove all subcontracts. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not obtain written authorization to subcontract work as they relied upon the PACMTN on-line ?Eligible Training Provider List? to be such approval. Recommendation: To ensure compliance with governmental grant programs, additional training and education should be obtained by associated staff. Management?s response: Management agrees with this recommendation and have scheduled training for key personnel. Person Responsible: President/CEO and Program Managers
Finding 2022-005 Indirect Cost Allocation ? Questioned Costs Condition: Grant 102-TCC-BS-PY21, PY Business Services & Solutions, grant document did not contain a specific allowable indirect cost amount. The budget contained a line for ?Subcontractors and Other? of $66,077. The Organization charged an indirect allocation to this grant of $47,070, an overcharge of $19,007. Grant 102-TCC-CT-BS-PY21, Thurston Chamber ? Sector Training, had an indirect budget line item of $17,274. The Organization charged $24,736, an over change of $7,462. Grant 102-TCCC-PEC-PY21, Thurston Chamber Pathway to Employment Cohort, had no budget line item for indirect costs. The Organization charged indirect costs under ?Career Services? for $73,535, an overcharge of $73,535. These overcharges total questioned costs of $100,004. The Organization lacked a methodology of pooling all indirect costs and allocating the costs uniformly across all revenue sources. Cause: The Organization did not obtain adequate training and understanding of the calculation and allocation of indirect costs in government funded programs. Criteria: Uniform Guidance 2 CFR ? 200.405 Allocable costs. (a) A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. (b) All activities which benefit from the non-Federal entity's indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. (c) Any cost allocable to a particular Federal award under the principles provided for in this part may not be charged to other Federal awards to overcome fund deficiencies, to avoid SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Finding 2022-005 Indirect Cost Allocation ? Questioned Costs restrictions imposed by Federal statutes, regulations, or terms and conditions of the Federal awards, or for other reasons. However, this prohibition would not preclude the non-Federal entity from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal awards. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization charged federal programs for unallowed indirect costs. Recommendation: To ensure compliance with indirect cost calculation and allocation procedures, the Organization should obtain additional grant training. Management?s response: Management agrees with the need for additional grant training, especially as it applies to calculating and allocating indirect costs. However, we do have issues with the classification of expenses within the original contract and hope we can reconcile those prior to the finalization of the grant award. Person Responsible: President/CEO Finance Officer
SECTION 2 ? FINANCIAL STATEMENT FINDINGS Finding 2022-001 Internal Control over Bank Reconciliation and Vendor Invoice Approval Condition: Bank statements and bank reconciliations were prepared and reviewed by two individuals, but the approval was not documented in writing (or electronic means). Invoices were not defaced prior to payment, review by supervisory personnel not documented and program to be changed for the expenditure was not noted on the invoice, and therefore not approved. Cause: The Organization has developed an internal control documentation but has not a prior audit. They were unaware, even in a small office, that documented procedures by initial and dating (manually or electronically) is required as evidence of segregation of approval duties. Criteria: Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11. Effect: The supervisory personnel approval of the bank statement, bank reconciliation, vendor invoices and charge to program(s) was not documented. Recommendation: Bank statements and bank reconciliations: Bank reconciliations should be prepared within 30 days of the receipt of the statement. Banks may not correct any errors (or fraud) that is not detected and reported within that time frame. The bank statement and bank reconciliation should be reviewed by a person other than the preparer and that person should initial and date (or electronic procedure of comparable nature) as reviewed and approved. The bank reconciliation balance should agree with the general ledger balance(s). Upon approval of vendor invoices, the invoice should be defaced, and the vendor, amount and program charged should be initialed and dated (or electronic procedure of comparable nature), on the face of the invoice, by supervisory personnel. Management?s response: Management agrees with this recommendation and have taken steps to implement proper review and documentation for bank reconciliations and vendor invoice approvals. Person Responsible: President/CEO, Finance Officer, and Program Managers
SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Finding 2022-002 Debarred and Suspended Vendors Condition: The Organization?s did not develop and perform procedures to ensuring staff verified the suspension and debarment status of two contractors paid $25,000 or more, all or in part with federal funds. Cause: Suspension and Debarment Federal requirements prohibit recipients from contracting with or purchasing from parties suspended or debarred from doing business with the federal government. Whenever the Organization enters into contracts or purchases goods or services that it expects to equal or exceed $25,000, paid all or in part with federal funds, it must verify the contractors have not been suspended, debarred or otherwise excluded. The Organization may accomplish this verification by collecting a written certification from the contractor, adding a clause or condition into the contract that states the contractor is not suspended or debarred, or checking for exclusion records in the U.S. General Services Administration?s System for Award Management at SAM.gov. The Organization must perform this verification before entering into the contract or, in this specific case, prior to charging the costs to a federal award, and it must keep documentation demonstrating compliance with this federal requirement. The Organization did not have adequate controls and did not verify that the two contractors were not suspended or debarred before charging the costs to the program. Criteria: Title 2 CFR Part 180, OMB, Guidelines to Agencies on Governmentwide Debarment and Suspension (No procurement), establishes non-procurement debarment and suspension regulations, implementing Executive Orders 12549 and 12689. Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 13. The Contractor certified that it is in compliance with and must note be, and shall not contract with individuals or organizations which are debarred, suspended, or otherwise excluded from or ineligible from participation in the Feder Assistance Programs under Executive Order 12549, and ?Debarment and Suspension?, codified at 29 VFR part 98. Contractor must provide a signed statement, attached to this Agreement, that it is complying with the requirements of this section. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not obtain a written certification, insert a clause into the contract, or check SAM.gov to verify the contractor was not suspended or debarred. Without this verification, the City increases its risk of providing federal funds to contractors that are excluded from participating in federal programs. Any payments the City made to an ineligible party would be unallowable, and the federal grantor could potentially recover them. We verified the contractor was not suspended or debarred. Therefore, we are not questioning the related costs. Recommendation: Develop internal control policies to ensure contractors paid $25,000 or more, all or in part with federal funds, are not suspended or debarred before entering into contracts with them or charging their costs to the program and documenting the verification. This can be added to service contracts with a written certification. Management?s response: Management agrees with this recommendation and have taken steps to develop and implement proper internal controls. Person Responsible: Finance Officer and Program Managers
SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Finding 2022-003 Monitoring Subcontractors Performance Condition: The Organization did not develop and perform procedures to verify the subcontractor?s adherence to contract terms (provide contract services), condition and contract specifications. The Organization relied on what they considered to be pre-approval Pacific Mountain Development Councils? website as meeting the criteria. The PacMnt contracts do not reference the website, or that placement on the website waives oversite by the grantee. Cause: The Organization?s internal controls were inadequate to perform and document the performance monitoring of the subcontractors. The Pacific Mountain Workforce Development Council provided an on-line ?Eligible Training Provider List? which the Organization accepted and relied upon as a pre-approval that the contracted services required no further monitoring. Criteria: Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 31.6 Oversite Grantee must maintain oversight over all contracts. This includes, but is not limited to, monitoring contractor performance regarding contract terms, conditions, and specifications. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not monitor the contactors for adherence to contract terms, condition and specifications. Recommendation: To ensure compliance with governmental grant programs, additional training and education should be obtained by associated staff. Management?s response: Management agrees with the recommendation and have scheduled training for key personnel. Person Responsible: Program Managers
Finding 2022-004 Written Approval of Subcontractors Condition: The Organization did not develop and perform procedures to obtain required written approval of the subcontractors they contracted with. Cause: The Organization did not develop and perform procedures to document written approval of subcontractors from the grantor. The Pacific Mountain Workforce Development Council provided an on-line ?Eligible Training Provider List? which the Organization accepted as an authorization that the contracted services would be provided without further written approval. Criteria: Criteria: Pacific Mountain Workforce Development Council, Contracts 102-TCC-BS-PY21, 102-TC-PEC-PY21, 102-TCC-CY-BS-PY21: 36. Subcontracting The Contractor shall not subcontract work or services contemplated under the Contract and/or use an outside consultant except as provided for in the Scope of Work without obtaining the prior written approval of PACMTN for the authority to enter into subcontracts. Contractor acknowledgers that such approve for any subcontract does not relieve the Contractor of its obligations to perform hereunder. PACMTN retains the author to review and approve or disapprove all subcontracts. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization did not obtain written authorization to subcontract work as they relied upon the PACMTN on-line ?Eligible Training Provider List? to be such approval. Recommendation: To ensure compliance with governmental grant programs, additional training and education should be obtained by associated staff. Management?s response: Management agrees with this recommendation and have scheduled training for key personnel. Person Responsible: President/CEO and Program Managers
Finding 2022-005 Indirect Cost Allocation ? Questioned Costs Condition: Grant 102-TCC-BS-PY21, PY Business Services & Solutions, grant document did not contain a specific allowable indirect cost amount. The budget contained a line for ?Subcontractors and Other? of $66,077. The Organization charged an indirect allocation to this grant of $47,070, an overcharge of $19,007. Grant 102-TCC-CT-BS-PY21, Thurston Chamber ? Sector Training, had an indirect budget line item of $17,274. The Organization charged $24,736, an over change of $7,462. Grant 102-TCCC-PEC-PY21, Thurston Chamber Pathway to Employment Cohort, had no budget line item for indirect costs. The Organization charged indirect costs under ?Career Services? for $73,535, an overcharge of $73,535. These overcharges total questioned costs of $100,004. The Organization lacked a methodology of pooling all indirect costs and allocating the costs uniformly across all revenue sources. Cause: The Organization did not obtain adequate training and understanding of the calculation and allocation of indirect costs in government funded programs. Criteria: Uniform Guidance 2 CFR ? 200.405 Allocable costs. (a) A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart. (b) All activities which benefit from the non-Federal entity's indirect (F&A) cost, including unallowable activities and donated services by the non-Federal entity or third parties, will receive an appropriate allocation of indirect costs. (c) Any cost allocable to a particular Federal award under the principles provided for in this part may not be charged to other Federal awards to overcome fund deficiencies, to avoid SECTION 3 ? FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Finding 2022-005 Indirect Cost Allocation ? Questioned Costs restrictions imposed by Federal statutes, regulations, or terms and conditions of the Federal awards, or for other reasons. However, this prohibition would not preclude the non-Federal entity from shifting costs that are allowable under two or more Federal awards in accordance with existing Federal statutes, regulations, or the terms and conditions of the Federal awards. Title 2 CFR Part 200, Uniform Guidance, section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Effect: The Organization charged federal programs for unallowed indirect costs. Recommendation: To ensure compliance with indirect cost calculation and allocation procedures, the Organization should obtain additional grant training. Management?s response: Management agrees with the need for additional grant training, especially as it applies to calculating and allocating indirect costs. However, we do have issues with the classification of expenses within the original contract and hope we can reconcile those prior to the finalization of the grant award. Person Responsible: President/CEO Finance Officer