FAC Explorer

Audit 308478

FY End
2023-12-31
Total Expended
$10.29M
Findings
6
Programs
23
Organization: Lutheran Social Services of Wisconsin and Upper Michigan, Inc. (WI)
Year: 2023 Accepted: 2024-06-10
Auditor: Baker Tilly US LLP

Organization Exclusion Status:

Findings

ID Ref Severity Repeat Requirement
400455 2023-001 Material Weakness - M
400456 2023-001 Material Weakness - M
400457 2023-001 Material Weakness - M
976897 2023-001 Material Weakness - M
976898 2023-001 Material Weakness - M
976899 2023-001 Material Weakness - M

Programs

ALN Program Spent Major Findings
21.027 Coronavirus State and Local Fiscal Recovery Funds $3.22M Yes 1
64.024 Va Homeless Providers Grant and Per Diem Program $2.18M - 0
19.510 U.s. Refugee Admissions Program $944,566 - 0
93.566 Refugee and Entrant Assistance_state Administered Programs $679,711 - 0
93.576 Refugee and Entrant Assistance_discretionary Grants $655,713 - 0
93.567 Refugee and Entrant Assistance_voluntary Agency Programs $381,241 - 0
93.959 Block Grants for Prevention and Treatment of Substance Abuse - Urban Rural Woman's Treatment $336,706 - 0
14.239 Home Investment Partnerships Program $251,454 - 0
93.959 Block Grants for Prevention and Treatment of Substance Abuse - Treatment Alternative $179,103 - 0
14.231 Emergency Solutions Grant Program $141,560 - 0
93.912 Rural Health Care Services Outreach, Rural Health Network Development and Small Health Care Provider Quality Improvement $103,935 - 0
20.509 Formula Grants for Rural Areas and Tribal Transit Program $88,373 - 0
20.513 Enhanced Mobility of Seniors and Individuals with Disabilities $84,839 - 0
14.896 Family Self-Sufficiency Program $76,696 - 0
10.555 National School Lunch Program $40,800 - 0
14.267 Continuum of Care Program $25,731 - 0
93.558 Temporary Assistance for Needy Families $21,979 - 0
10.553 School Breakfast Program $21,716 - 0
93.667 Social Services Block Grant $13,464 - 0
97.024 Emergency Food and Shelter National Board Program $8,204 - 0
84.425 Education Stabilization Fund $6,749 - 0
14.218 Community Development Block Grants/entitlement Grants $6,400 - 0
10.550 Commodity Supplemental Food Program $3,290 - 0

Contacts

Name Title Type
P8A4N1A17JD3 Randall Oleszak Auditee
4142462353 Krista Pankop, CPA Auditor
No contacts on file

Notes to SEFA

Title: Audits Accounting Policies: The accompanying Schedule of Expenditures of Federal and State Awards (the “Schedule”) includes the federal and state of Wisconsin award activity of Lutheran Social Services of Wisconsin and Upper Michigan, Inc. (“LSS”) under programs of the federal and state government for the year ended December 31, 2023 and is presented on the accrual basis of accounting. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements of Federal Awards (“Uniform Guidance”) and the State Single Audit Guidelines. Because the schedule presents only a selected portion of the operations of LSS, it is not intended to and does not represent the financial position, changes in net assets or cash flows of LSS. Expenditures are recognized following, as applicable, either the cost principles in OMB Circular A-122, Cost Principles for Non-profit Organizations, or the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through entity identification numbers are presented where available. LSS receives funding from the Wisconsin Departments of Children and Families, Health Services, Corrections, Public Instruction, Administration, Veterans Affairs, Transportation, and Justice. The amounts received as grants have been subjected to the auditing provisions prescribed in the State of Wisconsin State Single Audit Guidelines (“SSAG”). LSS also received $36,546,753, related to over 150 contracts with state, county and local governmental units under various contractor relationships which passed through the Wisconsin Departments of Health Services, Corrections, and Children and Families. These contracts are not included on the Schedule and are reported separately in accordance with the guidance received from the various departments. Expenditures for the following consolidated subsidiaries of LSS are not included to meet the requirements of the Uniform Guidance, because they have separate audits under the Uniform Guidance or do not require an audit under the Uniform Guidance: LSS Aspen Center, LLC, LSS Housing, Printery Row-Pulaski, LLC, LSS Croft Place, LLC, LSS Housing, Quentin Apartments-Palatine, LLC, LSS Haymarket Lofts, LLC, LSS Housing, South Willow, Inc., LSS Housing, 26th Street, Inc., LSS Housing, Tennyson Ridge, LLC, LSS Housing, 38Ten Parmenter-Middleton, LLC, LSS Housing, The Klassik-Verona, LLC, LSS Housing, Bay City Lofts-Green Bay, LLC, LSS Housing, Thirteen31-Milwaukee, LLC, LSS Housing, Candise Street Lofts Jefferson, LLC, LSS Housing-ThriveOn-Milwaukee, LLC, LSS Housing, CC Lane-Oregon, LLC, LSS Housing, Union Corners-Madison, LLC, LSS Housing, Center Street, Inc., LSS Housing, University Park Commons-LSS Housing, Eau Claire, Inc., Madison, LLC, LSS Housing, Edison School-Milwaukee, LLC, LSS Housing, Uno's-Madison, LLC, LSS Housing, Germantown, Inc., LSS Housing, Uptown Lofts-Kenosha, LLC, LSS Housing-Gold Medal Lofts Racine, LLC, LSS Housing-Valor Madison, LLC, LSS Housing, Granville, Inc., LSS Housing, Waukesha Hickory Flats, Inc., LSS Housing, Hampton, Inc., LSS Housing, Willow Wood, Inc., LSS Housing, Home Sweet Home, Inc., LSS Housing, Woodside, Inc., LSS Housing, Horlick-Racine, LLC, LSS Housing, Woodview, Inc., LSS Housing, Houghton, Inc., LSS Jackson Square, LLC, LSS Housing, Inc., LSS Manor, Inc. - Calumet, LSS Housing, Landmark-Wausau, LLC, LSS Manor, Inc. - Chocolay, LSS Housing, Mill Road, Inc., LSS Manor, Inc. - Lake Geneva, LSS Housing, North Willow, Inc., LSS Manor, Inc. - Marquette, LSS Housing, Phillis Wheatley-Milwaukee, LLC, LSS Manor, Inc. - New Berlin, LSS Housing, Prairieview, Inc., LSS Pebble Ridge, LLC (a) The Uniform Guidance and the SSAG establish certain criteria for the identification of major programs. Under the Uniform Guidance, tests of compliance with certain types of compliance requirements are required for each major program. The major programs included in the schedule have been determined in accordance with the Uniform Guidance or the SSAG. Major programs are as follows: - 21.027 COVID-19, Coronavirus State and Local Fiscal Recovery Funds (federal major program only) - 64.024 VA Homeless Providers Grant and Per Diem Program (state major program only) The Wisconsin Departments of Health Services, Corrections, and Children and Families also require the contractor relationships to be audited in accordance with their requirements. (b) Expenditures consist of direct and indirect costs. Direct costs are those that can be easily identified with an individual award. The salary of a program coordinator of a federal or state award program and the materials consumed by the program are examples of direct costs. (c) Indirect costs cannot be easily identified with an individual award program. Indirect costs are the costs of services and resources that benefit many award programs, as well as other LSS activities. Indirect costs consist of expenses incurred for administration, building maintenance, and building and equipment depreciation. De Minimis Rate Used: N Rate Explanation: LSS has elected not to use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance. All federal and state awards are subject to review and audit by the grantor agencies. Such audits could lead to requests for reimbursement by the grantor agencies for costs disallowed under the terms of the awards.
Title: Capital Advance Accounting Policies: The accompanying Schedule of Expenditures of Federal and State Awards (the “Schedule”) includes the federal and state of Wisconsin award activity of Lutheran Social Services of Wisconsin and Upper Michigan, Inc. (“LSS”) under programs of the federal and state government for the year ended December 31, 2023 and is presented on the accrual basis of accounting. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements of Federal Awards (“Uniform Guidance”) and the State Single Audit Guidelines. Because the schedule presents only a selected portion of the operations of LSS, it is not intended to and does not represent the financial position, changes in net assets or cash flows of LSS. Expenditures are recognized following, as applicable, either the cost principles in OMB Circular A-122, Cost Principles for Non-profit Organizations, or the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through entity identification numbers are presented where available. LSS receives funding from the Wisconsin Departments of Children and Families, Health Services, Corrections, Public Instruction, Administration, Veterans Affairs, Transportation, and Justice. The amounts received as grants have been subjected to the auditing provisions prescribed in the State of Wisconsin State Single Audit Guidelines (“SSAG”). LSS also received $36,546,753, related to over 150 contracts with state, county and local governmental units under various contractor relationships which passed through the Wisconsin Departments of Health Services, Corrections, and Children and Families. These contracts are not included on the Schedule and are reported separately in accordance with the guidance received from the various departments. Expenditures for the following consolidated subsidiaries of LSS are not included to meet the requirements of the Uniform Guidance, because they have separate audits under the Uniform Guidance or do not require an audit under the Uniform Guidance: LSS Aspen Center, LLC, LSS Housing, Printery Row-Pulaski, LLC, LSS Croft Place, LLC, LSS Housing, Quentin Apartments-Palatine, LLC, LSS Haymarket Lofts, LLC, LSS Housing, South Willow, Inc., LSS Housing, 26th Street, Inc., LSS Housing, Tennyson Ridge, LLC, LSS Housing, 38Ten Parmenter-Middleton, LLC, LSS Housing, The Klassik-Verona, LLC, LSS Housing, Bay City Lofts-Green Bay, LLC, LSS Housing, Thirteen31-Milwaukee, LLC, LSS Housing, Candise Street Lofts Jefferson, LLC, LSS Housing-ThriveOn-Milwaukee, LLC, LSS Housing, CC Lane-Oregon, LLC, LSS Housing, Union Corners-Madison, LLC, LSS Housing, Center Street, Inc., LSS Housing, University Park Commons-LSS Housing, Eau Claire, Inc., Madison, LLC, LSS Housing, Edison School-Milwaukee, LLC, LSS Housing, Uno's-Madison, LLC, LSS Housing, Germantown, Inc., LSS Housing, Uptown Lofts-Kenosha, LLC, LSS Housing-Gold Medal Lofts Racine, LLC, LSS Housing-Valor Madison, LLC, LSS Housing, Granville, Inc., LSS Housing, Waukesha Hickory Flats, Inc., LSS Housing, Hampton, Inc., LSS Housing, Willow Wood, Inc., LSS Housing, Home Sweet Home, Inc., LSS Housing, Woodside, Inc., LSS Housing, Horlick-Racine, LLC, LSS Housing, Woodview, Inc., LSS Housing, Houghton, Inc., LSS Jackson Square, LLC, LSS Housing, Inc., LSS Manor, Inc. - Calumet, LSS Housing, Landmark-Wausau, LLC, LSS Manor, Inc. - Chocolay, LSS Housing, Mill Road, Inc., LSS Manor, Inc. - Lake Geneva, LSS Housing, North Willow, Inc., LSS Manor, Inc. - Marquette, LSS Housing, Phillis Wheatley-Milwaukee, LLC, LSS Manor, Inc. - New Berlin, LSS Housing, Prairieview, Inc., LSS Pebble Ridge, LLC (a) The Uniform Guidance and the SSAG establish certain criteria for the identification of major programs. Under the Uniform Guidance, tests of compliance with certain types of compliance requirements are required for each major program. The major programs included in the schedule have been determined in accordance with the Uniform Guidance or the SSAG. Major programs are as follows: - 21.027 COVID-19, Coronavirus State and Local Fiscal Recovery Funds (federal major program only) - 64.024 VA Homeless Providers Grant and Per Diem Program (state major program only) The Wisconsin Departments of Health Services, Corrections, and Children and Families also require the contractor relationships to be audited in accordance with their requirements. (b) Expenditures consist of direct and indirect costs. Direct costs are those that can be easily identified with an individual award. The salary of a program coordinator of a federal or state award program and the materials consumed by the program are examples of direct costs. (c) Indirect costs cannot be easily identified with an individual award program. Indirect costs are the costs of services and resources that benefit many award programs, as well as other LSS activities. Indirect costs consist of expenses incurred for administration, building maintenance, and building and equipment depreciation. De Minimis Rate Used: N Rate Explanation: LSS has elected not to use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance. The capital advance balance at the beginning of the year is included in the federal expenditures presented in the Schedule related to the Home Investment Partnership Program. This is also the balance at December 31, 2023.
Title: Loan Balance Accounting Policies: The accompanying Schedule of Expenditures of Federal and State Awards (the “Schedule”) includes the federal and state of Wisconsin award activity of Lutheran Social Services of Wisconsin and Upper Michigan, Inc. (“LSS”) under programs of the federal and state government for the year ended December 31, 2023 and is presented on the accrual basis of accounting. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements of Federal Awards (“Uniform Guidance”) and the State Single Audit Guidelines. Because the schedule presents only a selected portion of the operations of LSS, it is not intended to and does not represent the financial position, changes in net assets or cash flows of LSS. Expenditures are recognized following, as applicable, either the cost principles in OMB Circular A-122, Cost Principles for Non-profit Organizations, or the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through entity identification numbers are presented where available. LSS receives funding from the Wisconsin Departments of Children and Families, Health Services, Corrections, Public Instruction, Administration, Veterans Affairs, Transportation, and Justice. The amounts received as grants have been subjected to the auditing provisions prescribed in the State of Wisconsin State Single Audit Guidelines (“SSAG”). LSS also received $36,546,753, related to over 150 contracts with state, county and local governmental units under various contractor relationships which passed through the Wisconsin Departments of Health Services, Corrections, and Children and Families. These contracts are not included on the Schedule and are reported separately in accordance with the guidance received from the various departments. Expenditures for the following consolidated subsidiaries of LSS are not included to meet the requirements of the Uniform Guidance, because they have separate audits under the Uniform Guidance or do not require an audit under the Uniform Guidance: LSS Aspen Center, LLC, LSS Housing, Printery Row-Pulaski, LLC, LSS Croft Place, LLC, LSS Housing, Quentin Apartments-Palatine, LLC, LSS Haymarket Lofts, LLC, LSS Housing, South Willow, Inc., LSS Housing, 26th Street, Inc., LSS Housing, Tennyson Ridge, LLC, LSS Housing, 38Ten Parmenter-Middleton, LLC, LSS Housing, The Klassik-Verona, LLC, LSS Housing, Bay City Lofts-Green Bay, LLC, LSS Housing, Thirteen31-Milwaukee, LLC, LSS Housing, Candise Street Lofts Jefferson, LLC, LSS Housing-ThriveOn-Milwaukee, LLC, LSS Housing, CC Lane-Oregon, LLC, LSS Housing, Union Corners-Madison, LLC, LSS Housing, Center Street, Inc., LSS Housing, University Park Commons-LSS Housing, Eau Claire, Inc., Madison, LLC, LSS Housing, Edison School-Milwaukee, LLC, LSS Housing, Uno's-Madison, LLC, LSS Housing, Germantown, Inc., LSS Housing, Uptown Lofts-Kenosha, LLC, LSS Housing-Gold Medal Lofts Racine, LLC, LSS Housing-Valor Madison, LLC, LSS Housing, Granville, Inc., LSS Housing, Waukesha Hickory Flats, Inc., LSS Housing, Hampton, Inc., LSS Housing, Willow Wood, Inc., LSS Housing, Home Sweet Home, Inc., LSS Housing, Woodside, Inc., LSS Housing, Horlick-Racine, LLC, LSS Housing, Woodview, Inc., LSS Housing, Houghton, Inc., LSS Jackson Square, LLC, LSS Housing, Inc., LSS Manor, Inc. - Calumet, LSS Housing, Landmark-Wausau, LLC, LSS Manor, Inc. - Chocolay, LSS Housing, Mill Road, Inc., LSS Manor, Inc. - Lake Geneva, LSS Housing, North Willow, Inc., LSS Manor, Inc. - Marquette, LSS Housing, Phillis Wheatley-Milwaukee, LLC, LSS Manor, Inc. - New Berlin, LSS Housing, Prairieview, Inc., LSS Pebble Ridge, LLC (a) The Uniform Guidance and the SSAG establish certain criteria for the identification of major programs. Under the Uniform Guidance, tests of compliance with certain types of compliance requirements are required for each major program. The major programs included in the schedule have been determined in accordance with the Uniform Guidance or the SSAG. Major programs are as follows: - 21.027 COVID-19, Coronavirus State and Local Fiscal Recovery Funds (federal major program only) - 64.024 VA Homeless Providers Grant and Per Diem Program (state major program only) The Wisconsin Departments of Health Services, Corrections, and Children and Families also require the contractor relationships to be audited in accordance with their requirements. (b) Expenditures consist of direct and indirect costs. Direct costs are those that can be easily identified with an individual award. The salary of a program coordinator of a federal or state award program and the materials consumed by the program are examples of direct costs. (c) Indirect costs cannot be easily identified with an individual award program. Indirect costs are the costs of services and resources that benefit many award programs, as well as other LSS activities. Indirect costs consist of expenses incurred for administration, building maintenance, and building and equipment depreciation. De Minimis Rate Used: N Rate Explanation: LSS has elected not to use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance. Loan disbursements during the year are included in the federal expenditures presented in the Schedule. The loan balance at December 31, 2023 was $3,215,617 related to the COVID-19 Coronavirus State and Local Fiscal Recovery Funds program loan.

Finding Details

Finding 2023-001
2023-001 Material Weakness – Subrecipient Monitoring – Material Noncompliance Agency: U.S. Department of Treasury Federal Assistance Listing Number: 21.027 COVID-19 - Coronavirus State and Local Recovery Funds Criteria: 2 CFR 200.332(b) requires a pass-through entity to evaluate each subrecipient's risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. 2 CFR 200.332(d) requires the passthrough entity to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Statement of Condition: Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not document their evaluation of the subrecipients risk of noncompliance and perform monitoring of the subrecipient, as required. Questioned Costs: The amount of questioned costs could not be determined. Context: Lutheran Social Services of Wisconsin and Upper Michigan, Inc.’s subrecipient was required by their contract to provide all requests for disbursement from the grantor to Lutheran Social Services of Wisconsin and Upper Michigan, Inc. for review and approval, prior to requesting the funds from the grantor. Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not receive nor did they review the three (3) draw requests during the period. Additionally, no other processes or controls were in place over the subrecipient monitoring requirement. Effect: Failure to adequately monitor the activity of a subrecipient may result in unallowable costs being charged to the federal program. Cause: Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not have proper controls in place to monitor their subrecipient. Management was unaware the subrecipient was expending passthrough funds and receiving disbursements from the federal grantor. Recommendation: We recommend management review their processes and controls surrounding subrecipients to ensure appropriate oversight is maintained and compliance with all program and contract requirements occurs. Management Response: LSS received a grant from Illinois Housing Development Authority (IHDA) which was ‘passed through’ to a tax credit project entity (the subrecipient of the grant). The agreements governing the grant to Lutheran Social Services of Wisconsin and Upper Michigan, Inc. (LSS) and loan to the subrecipient specifically called for multiple layers of review and approval by the subrecipient, IHDA, other project lenders, a title company, and at IHDA’s request, LSS. The lead developer, a member of the tax credit project entity, is responsible for managing the construction project and for preparation of all draw requests. The agreements specifically called for the tax credit project entity (as subrecipient) to certify to LSS that the draw package met the grant agreement requirements and specifications, on which certification LSS would then rely to make a corresponding certification to IHDA that the draw package met the grant agreement requirements and specifications. In this instance, the lead developer properly prepared certain draw requests (as the subrecipient), made the required certifications, and submitted them directly to IHDA without informing LSS of such draw request. Rather than requiring strict compliance with the grant agreements and rejecting the subrecipient’s draw request for the lack of LSS’s certification, IHDA elected to accept a direct certification from the subrecipient and effectively waive the LSS certification requirement. We agree that LSS did not have a monitoring system in place to ensure that the subrecipient informed LSS of draw requests and ensure that LSS’s intervening certification to IHDA be made, however there are other factors impacting the program: 1. IHDA did not notify the subrecipient or LSS under the terms of the grant documents that the intervening LSS certification was missing, and instead elected to disburse proceeds directly to the subrecipient based on the subrecipient’s direct certification which served as a waiver of the requirement of the intervening LSS certification. 2. All draw requests were approved by the contractor, the architect, the construction lender, and the title company, which multiple additional layers of review put into place by LSS and IHDA as part of grant document negotiation ensured that grant funds were properly utilized for qualifying project expenses. 3. All parties have been made aware of this issue and it has not resulted in any financial, operational or reputation implications. We have put in place a process to ensure all draw requests come to LSS for review and documented sign-off approval before submission to IHDA.
Finding 2023-001
2023-001 Material Weakness – Subrecipient Monitoring – Material Noncompliance Agency: U.S. Department of Treasury Federal Assistance Listing Number: 21.027 COVID-19 - Coronavirus State and Local Recovery Funds Criteria: 2 CFR 200.332(b) requires a pass-through entity to evaluate each subrecipient's risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. 2 CFR 200.332(d) requires the passthrough entity to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Statement of Condition: Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not document their evaluation of the subrecipients risk of noncompliance and perform monitoring of the subrecipient, as required. Questioned Costs: The amount of questioned costs could not be determined. Context: Lutheran Social Services of Wisconsin and Upper Michigan, Inc.’s subrecipient was required by their contract to provide all requests for disbursement from the grantor to Lutheran Social Services of Wisconsin and Upper Michigan, Inc. for review and approval, prior to requesting the funds from the grantor. Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not receive nor did they review the three (3) draw requests during the period. Additionally, no other processes or controls were in place over the subrecipient monitoring requirement. Effect: Failure to adequately monitor the activity of a subrecipient may result in unallowable costs being charged to the federal program. Cause: Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not have proper controls in place to monitor their subrecipient. Management was unaware the subrecipient was expending passthrough funds and receiving disbursements from the federal grantor. Recommendation: We recommend management review their processes and controls surrounding subrecipients to ensure appropriate oversight is maintained and compliance with all program and contract requirements occurs. Management Response: LSS received a grant from Illinois Housing Development Authority (IHDA) which was ‘passed through’ to a tax credit project entity (the subrecipient of the grant). The agreements governing the grant to Lutheran Social Services of Wisconsin and Upper Michigan, Inc. (LSS) and loan to the subrecipient specifically called for multiple layers of review and approval by the subrecipient, IHDA, other project lenders, a title company, and at IHDA’s request, LSS. The lead developer, a member of the tax credit project entity, is responsible for managing the construction project and for preparation of all draw requests. The agreements specifically called for the tax credit project entity (as subrecipient) to certify to LSS that the draw package met the grant agreement requirements and specifications, on which certification LSS would then rely to make a corresponding certification to IHDA that the draw package met the grant agreement requirements and specifications. In this instance, the lead developer properly prepared certain draw requests (as the subrecipient), made the required certifications, and submitted them directly to IHDA without informing LSS of such draw request. Rather than requiring strict compliance with the grant agreements and rejecting the subrecipient’s draw request for the lack of LSS’s certification, IHDA elected to accept a direct certification from the subrecipient and effectively waive the LSS certification requirement. We agree that LSS did not have a monitoring system in place to ensure that the subrecipient informed LSS of draw requests and ensure that LSS’s intervening certification to IHDA be made, however there are other factors impacting the program: 1. IHDA did not notify the subrecipient or LSS under the terms of the grant documents that the intervening LSS certification was missing, and instead elected to disburse proceeds directly to the subrecipient based on the subrecipient’s direct certification which served as a waiver of the requirement of the intervening LSS certification. 2. All draw requests were approved by the contractor, the architect, the construction lender, and the title company, which multiple additional layers of review put into place by LSS and IHDA as part of grant document negotiation ensured that grant funds were properly utilized for qualifying project expenses. 3. All parties have been made aware of this issue and it has not resulted in any financial, operational or reputation implications. We have put in place a process to ensure all draw requests come to LSS for review and documented sign-off approval before submission to IHDA.
Finding 2023-001
2023-001 Material Weakness – Subrecipient Monitoring – Material Noncompliance Agency: U.S. Department of Treasury Federal Assistance Listing Number: 21.027 COVID-19 - Coronavirus State and Local Recovery Funds Criteria: 2 CFR 200.332(b) requires a pass-through entity to evaluate each subrecipient's risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. 2 CFR 200.332(d) requires the passthrough entity to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Statement of Condition: Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not document their evaluation of the subrecipients risk of noncompliance and perform monitoring of the subrecipient, as required. Questioned Costs: The amount of questioned costs could not be determined. Context: Lutheran Social Services of Wisconsin and Upper Michigan, Inc.’s subrecipient was required by their contract to provide all requests for disbursement from the grantor to Lutheran Social Services of Wisconsin and Upper Michigan, Inc. for review and approval, prior to requesting the funds from the grantor. Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not receive nor did they review the three (3) draw requests during the period. Additionally, no other processes or controls were in place over the subrecipient monitoring requirement. Effect: Failure to adequately monitor the activity of a subrecipient may result in unallowable costs being charged to the federal program. Cause: Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not have proper controls in place to monitor their subrecipient. Management was unaware the subrecipient was expending passthrough funds and receiving disbursements from the federal grantor. Recommendation: We recommend management review their processes and controls surrounding subrecipients to ensure appropriate oversight is maintained and compliance with all program and contract requirements occurs. Management Response: LSS received a grant from Illinois Housing Development Authority (IHDA) which was ‘passed through’ to a tax credit project entity (the subrecipient of the grant). The agreements governing the grant to Lutheran Social Services of Wisconsin and Upper Michigan, Inc. (LSS) and loan to the subrecipient specifically called for multiple layers of review and approval by the subrecipient, IHDA, other project lenders, a title company, and at IHDA’s request, LSS. The lead developer, a member of the tax credit project entity, is responsible for managing the construction project and for preparation of all draw requests. The agreements specifically called for the tax credit project entity (as subrecipient) to certify to LSS that the draw package met the grant agreement requirements and specifications, on which certification LSS would then rely to make a corresponding certification to IHDA that the draw package met the grant agreement requirements and specifications. In this instance, the lead developer properly prepared certain draw requests (as the subrecipient), made the required certifications, and submitted them directly to IHDA without informing LSS of such draw request. Rather than requiring strict compliance with the grant agreements and rejecting the subrecipient’s draw request for the lack of LSS’s certification, IHDA elected to accept a direct certification from the subrecipient and effectively waive the LSS certification requirement. We agree that LSS did not have a monitoring system in place to ensure that the subrecipient informed LSS of draw requests and ensure that LSS’s intervening certification to IHDA be made, however there are other factors impacting the program: 1. IHDA did not notify the subrecipient or LSS under the terms of the grant documents that the intervening LSS certification was missing, and instead elected to disburse proceeds directly to the subrecipient based on the subrecipient’s direct certification which served as a waiver of the requirement of the intervening LSS certification. 2. All draw requests were approved by the contractor, the architect, the construction lender, and the title company, which multiple additional layers of review put into place by LSS and IHDA as part of grant document negotiation ensured that grant funds were properly utilized for qualifying project expenses. 3. All parties have been made aware of this issue and it has not resulted in any financial, operational or reputation implications. We have put in place a process to ensure all draw requests come to LSS for review and documented sign-off approval before submission to IHDA.
Finding 2023-001
2023-001 Material Weakness – Subrecipient Monitoring – Material Noncompliance Agency: U.S. Department of Treasury Federal Assistance Listing Number: 21.027 COVID-19 - Coronavirus State and Local Recovery Funds Criteria: 2 CFR 200.332(b) requires a pass-through entity to evaluate each subrecipient's risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. 2 CFR 200.332(d) requires the passthrough entity to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Statement of Condition: Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not document their evaluation of the subrecipients risk of noncompliance and perform monitoring of the subrecipient, as required. Questioned Costs: The amount of questioned costs could not be determined. Context: Lutheran Social Services of Wisconsin and Upper Michigan, Inc.’s subrecipient was required by their contract to provide all requests for disbursement from the grantor to Lutheran Social Services of Wisconsin and Upper Michigan, Inc. for review and approval, prior to requesting the funds from the grantor. Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not receive nor did they review the three (3) draw requests during the period. Additionally, no other processes or controls were in place over the subrecipient monitoring requirement. Effect: Failure to adequately monitor the activity of a subrecipient may result in unallowable costs being charged to the federal program. Cause: Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not have proper controls in place to monitor their subrecipient. Management was unaware the subrecipient was expending passthrough funds and receiving disbursements from the federal grantor. Recommendation: We recommend management review their processes and controls surrounding subrecipients to ensure appropriate oversight is maintained and compliance with all program and contract requirements occurs. Management Response: LSS received a grant from Illinois Housing Development Authority (IHDA) which was ‘passed through’ to a tax credit project entity (the subrecipient of the grant). The agreements governing the grant to Lutheran Social Services of Wisconsin and Upper Michigan, Inc. (LSS) and loan to the subrecipient specifically called for multiple layers of review and approval by the subrecipient, IHDA, other project lenders, a title company, and at IHDA’s request, LSS. The lead developer, a member of the tax credit project entity, is responsible for managing the construction project and for preparation of all draw requests. The agreements specifically called for the tax credit project entity (as subrecipient) to certify to LSS that the draw package met the grant agreement requirements and specifications, on which certification LSS would then rely to make a corresponding certification to IHDA that the draw package met the grant agreement requirements and specifications. In this instance, the lead developer properly prepared certain draw requests (as the subrecipient), made the required certifications, and submitted them directly to IHDA without informing LSS of such draw request. Rather than requiring strict compliance with the grant agreements and rejecting the subrecipient’s draw request for the lack of LSS’s certification, IHDA elected to accept a direct certification from the subrecipient and effectively waive the LSS certification requirement. We agree that LSS did not have a monitoring system in place to ensure that the subrecipient informed LSS of draw requests and ensure that LSS’s intervening certification to IHDA be made, however there are other factors impacting the program: 1. IHDA did not notify the subrecipient or LSS under the terms of the grant documents that the intervening LSS certification was missing, and instead elected to disburse proceeds directly to the subrecipient based on the subrecipient’s direct certification which served as a waiver of the requirement of the intervening LSS certification. 2. All draw requests were approved by the contractor, the architect, the construction lender, and the title company, which multiple additional layers of review put into place by LSS and IHDA as part of grant document negotiation ensured that grant funds were properly utilized for qualifying project expenses. 3. All parties have been made aware of this issue and it has not resulted in any financial, operational or reputation implications. We have put in place a process to ensure all draw requests come to LSS for review and documented sign-off approval before submission to IHDA.
Finding 2023-001
2023-001 Material Weakness – Subrecipient Monitoring – Material Noncompliance Agency: U.S. Department of Treasury Federal Assistance Listing Number: 21.027 COVID-19 - Coronavirus State and Local Recovery Funds Criteria: 2 CFR 200.332(b) requires a pass-through entity to evaluate each subrecipient's risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. 2 CFR 200.332(d) requires the passthrough entity to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Statement of Condition: Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not document their evaluation of the subrecipients risk of noncompliance and perform monitoring of the subrecipient, as required. Questioned Costs: The amount of questioned costs could not be determined. Context: Lutheran Social Services of Wisconsin and Upper Michigan, Inc.’s subrecipient was required by their contract to provide all requests for disbursement from the grantor to Lutheran Social Services of Wisconsin and Upper Michigan, Inc. for review and approval, prior to requesting the funds from the grantor. Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not receive nor did they review the three (3) draw requests during the period. Additionally, no other processes or controls were in place over the subrecipient monitoring requirement. Effect: Failure to adequately monitor the activity of a subrecipient may result in unallowable costs being charged to the federal program. Cause: Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not have proper controls in place to monitor their subrecipient. Management was unaware the subrecipient was expending passthrough funds and receiving disbursements from the federal grantor. Recommendation: We recommend management review their processes and controls surrounding subrecipients to ensure appropriate oversight is maintained and compliance with all program and contract requirements occurs. Management Response: LSS received a grant from Illinois Housing Development Authority (IHDA) which was ‘passed through’ to a tax credit project entity (the subrecipient of the grant). The agreements governing the grant to Lutheran Social Services of Wisconsin and Upper Michigan, Inc. (LSS) and loan to the subrecipient specifically called for multiple layers of review and approval by the subrecipient, IHDA, other project lenders, a title company, and at IHDA’s request, LSS. The lead developer, a member of the tax credit project entity, is responsible for managing the construction project and for preparation of all draw requests. The agreements specifically called for the tax credit project entity (as subrecipient) to certify to LSS that the draw package met the grant agreement requirements and specifications, on which certification LSS would then rely to make a corresponding certification to IHDA that the draw package met the grant agreement requirements and specifications. In this instance, the lead developer properly prepared certain draw requests (as the subrecipient), made the required certifications, and submitted them directly to IHDA without informing LSS of such draw request. Rather than requiring strict compliance with the grant agreements and rejecting the subrecipient’s draw request for the lack of LSS’s certification, IHDA elected to accept a direct certification from the subrecipient and effectively waive the LSS certification requirement. We agree that LSS did not have a monitoring system in place to ensure that the subrecipient informed LSS of draw requests and ensure that LSS’s intervening certification to IHDA be made, however there are other factors impacting the program: 1. IHDA did not notify the subrecipient or LSS under the terms of the grant documents that the intervening LSS certification was missing, and instead elected to disburse proceeds directly to the subrecipient based on the subrecipient’s direct certification which served as a waiver of the requirement of the intervening LSS certification. 2. All draw requests were approved by the contractor, the architect, the construction lender, and the title company, which multiple additional layers of review put into place by LSS and IHDA as part of grant document negotiation ensured that grant funds were properly utilized for qualifying project expenses. 3. All parties have been made aware of this issue and it has not resulted in any financial, operational or reputation implications. We have put in place a process to ensure all draw requests come to LSS for review and documented sign-off approval before submission to IHDA.
Finding 2023-001
2023-001 Material Weakness – Subrecipient Monitoring – Material Noncompliance Agency: U.S. Department of Treasury Federal Assistance Listing Number: 21.027 COVID-19 - Coronavirus State and Local Recovery Funds Criteria: 2 CFR 200.332(b) requires a pass-through entity to evaluate each subrecipient's risk of noncompliance with federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring. 2 CFR 200.332(d) requires the passthrough entity to monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved. Statement of Condition: Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not document their evaluation of the subrecipients risk of noncompliance and perform monitoring of the subrecipient, as required. Questioned Costs: The amount of questioned costs could not be determined. Context: Lutheran Social Services of Wisconsin and Upper Michigan, Inc.’s subrecipient was required by their contract to provide all requests for disbursement from the grantor to Lutheran Social Services of Wisconsin and Upper Michigan, Inc. for review and approval, prior to requesting the funds from the grantor. Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not receive nor did they review the three (3) draw requests during the period. Additionally, no other processes or controls were in place over the subrecipient monitoring requirement. Effect: Failure to adequately monitor the activity of a subrecipient may result in unallowable costs being charged to the federal program. Cause: Lutheran Social Services of Wisconsin and Upper Michigan, Inc. did not have proper controls in place to monitor their subrecipient. Management was unaware the subrecipient was expending passthrough funds and receiving disbursements from the federal grantor. Recommendation: We recommend management review their processes and controls surrounding subrecipients to ensure appropriate oversight is maintained and compliance with all program and contract requirements occurs. Management Response: LSS received a grant from Illinois Housing Development Authority (IHDA) which was ‘passed through’ to a tax credit project entity (the subrecipient of the grant). The agreements governing the grant to Lutheran Social Services of Wisconsin and Upper Michigan, Inc. (LSS) and loan to the subrecipient specifically called for multiple layers of review and approval by the subrecipient, IHDA, other project lenders, a title company, and at IHDA’s request, LSS. The lead developer, a member of the tax credit project entity, is responsible for managing the construction project and for preparation of all draw requests. The agreements specifically called for the tax credit project entity (as subrecipient) to certify to LSS that the draw package met the grant agreement requirements and specifications, on which certification LSS would then rely to make a corresponding certification to IHDA that the draw package met the grant agreement requirements and specifications. In this instance, the lead developer properly prepared certain draw requests (as the subrecipient), made the required certifications, and submitted them directly to IHDA without informing LSS of such draw request. Rather than requiring strict compliance with the grant agreements and rejecting the subrecipient’s draw request for the lack of LSS’s certification, IHDA elected to accept a direct certification from the subrecipient and effectively waive the LSS certification requirement. We agree that LSS did not have a monitoring system in place to ensure that the subrecipient informed LSS of draw requests and ensure that LSS’s intervening certification to IHDA be made, however there are other factors impacting the program: 1. IHDA did not notify the subrecipient or LSS under the terms of the grant documents that the intervening LSS certification was missing, and instead elected to disburse proceeds directly to the subrecipient based on the subrecipient’s direct certification which served as a waiver of the requirement of the intervening LSS certification. 2. All draw requests were approved by the contractor, the architect, the construction lender, and the title company, which multiple additional layers of review put into place by LSS and IHDA as part of grant document negotiation ensured that grant funds were properly utilized for qualifying project expenses. 3. All parties have been made aware of this issue and it has not resulted in any financial, operational or reputation implications. We have put in place a process to ensure all draw requests come to LSS for review and documented sign-off approval before submission to IHDA.