Audit 307125

Condition: The CFO’s reporting of major program costs through the State of Arizona’s grant management system (eCivis) was not reviewed by a second individual. In addition, there was no independent review of the payroll registers selected during major program testing. Criteria: To better segregate duties, payroll and other costs charged to the major program should be reviewed and approved by a second individual. Cause and effect: The internal controls of the Foundation were not functioning as designed, resulting in an increased risk of fraud and error. There was an accumulated variance of $7,947 between costs reported through e-Civis and the accounting system. Recommendation: To better segregate duties, I recommend that governmental grant reports and the payroll registers be reviewed by the CEO or other key employee. Views of Responsible Officials: The Foundation will have the staffed CEO review and sign off on all reports and payroll registers in general with a specific focus on those tied to government grants.

Condition: There was an individual who had formerly worked for the Foundation in the previous fiscal year that was an employee of one of the Foundation’s partner agencies during the year under audit. This individual was compensated $20,000 through the Foundation’s payroll system during the year ended June 30, 2023, although she was no longer an employee of the Foundation. This payment was supported by an invoice from the former employee for hours worked between July and October of 2022 at her new employer related to this major program. There was no documented approval by the partner agency. This payment was charged as salaries to the major program. In addition, there was only one employee (program manager) who charged time to the major program, except as noted in the preceding paragraph. There was no authorized rate of pay on file for this employee. Criteria: In accordance with 2 CFR 200.430(i), payroll costs charged to federal awards must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. In accordance with Department of Labor regulations implementing the Fair Labor Standards Act (FLSA), charges for the salaries and wages of nonexempt employees must also be supported by records indicating the total number of hours worked each day. Cause and effect: Management believed the individual was undercompensated by her current employer, who is a subcontractor of the Foundation, for time spent on the major program. This additional payment was reported to the State of Arizona by management when paid. Recommendation: I recommend that an authorized rate of pay be included in all employees’ human resources files. Any independent contractors should be compensated as such, based on approved contracts, and charged to federal grants accordingly. Views of Responsible Officials: The Foundation confirms all employees have rate of pay documentation in their employee files. The Foundation is developing and will implement stronger policies around contractors engaged with the organization with oversight to contractors pay provided by the staffed CEO.

Condition: The CFO’s reporting of major program costs through the State of Arizona’s grant management system (eCivis) was not reviewed by a second individual. In addition, there was no independent review of the payroll registers selected during major program testing. Criteria: To better segregate duties, payroll and other costs charged to the major program should be reviewed and approved by a second individual. Cause and effect: The internal controls of the Foundation were not functioning as designed, resulting in an increased risk of fraud and error. There was an accumulated variance of $7,947 between costs reported through e-Civis and the accounting system. Recommendation: To better segregate duties, I recommend that governmental grant reports and the payroll registers be reviewed by the CEO or other key employee. Views of Responsible Officials: The Foundation will have the staffed CEO review and sign off on all reports and payroll registers in general with a specific focus on those tied to government grants.

Condition: There was an individual who had formerly worked for the Foundation in the previous fiscal year that was an employee of one of the Foundation’s partner agencies during the year under audit. This individual was compensated $20,000 through the Foundation’s payroll system during the year ended June 30, 2023, although she was no longer an employee of the Foundation. This payment was supported by an invoice from the former employee for hours worked between July and October of 2022 at her new employer related to this major program. There was no documented approval by the partner agency. This payment was charged as salaries to the major program. In addition, there was only one employee (program manager) who charged time to the major program, except as noted in the preceding paragraph. There was no authorized rate of pay on file for this employee. Criteria: In accordance with 2 CFR 200.430(i), payroll costs charged to federal awards must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. In accordance with Department of Labor regulations implementing the Fair Labor Standards Act (FLSA), charges for the salaries and wages of nonexempt employees must also be supported by records indicating the total number of hours worked each day. Cause and effect: Management believed the individual was undercompensated by her current employer, who is a subcontractor of the Foundation, for time spent on the major program. This additional payment was reported to the State of Arizona by management when paid. Recommendation: I recommend that an authorized rate of pay be included in all employees’ human resources files. Any independent contractors should be compensated as such, based on approved contracts, and charged to federal grants accordingly. Views of Responsible Officials: The Foundation confirms all employees have rate of pay documentation in their employee files. The Foundation is developing and will implement stronger policies around contractors engaged with the organization with oversight to contractors pay provided by the staffed CEO.