Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions;
and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following:
(1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received.
(2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance.
(3) Records that identify adequately the source and application of funds for federally-funded activities.
(4) Effective control over, and accountability for, all funds, property, and other assets.
Additionally, §200.303 Internal Controls states that a non-federal entity must (a) establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Condition: PSI has documented expenditure policies and procedures. However, as identified below, the review and approval process did not operate as designed.
PSI’s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording in the books and records. The following errors were identified during our testing of payroll and non-payroll expenditures:
For AL# 12.350 and AL# 98.001, BDO tested 120 payroll and non-payroll expenditures for each major program. BDO also separately tested 40 transactions from the indirect cost pool. Based on that testing, BDO identified instances in which the expenditures were reported within the incorrect period on an accrual basis. These expenditures were valid expenditures within the overall award period.
o For AL# 98.001 we identified the following errors: See Schedule of Findings and Questioned Costs for chart/table.
o For AL# 12.350 we identified the following error: See Schedule of Findings and Questioned Costs for chart/table.
o For indirect cost pool testing, one of the 40 transactions tested totaling $9 was recorded in error as it related to a prior period (2022).
Questioned Costs: As all of the costs noted were within the award period of performance, there are no questioned costs to report.
Context: This is a condition identified per review of PSI’s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method.
Cause: PSI has documented expenditure policies and procedures regarding the timely processing and approval of expenditures incurred. However, as identified above, the review and approval process for the samples identified above did not operate as designed.
Effect: The lack of adherence to established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of award agreements which could ultimately lead to disallowed costs for the major programs.
Repeat Finding: This is a repeat finding from the previous year. This was reported as finding 2022-002 in the 2022 schedule of findings and questioned costs.
Recommendation: BDO recommends PSI adhere to its documented policies and procedures regarding authorization and timely approval and recording of expenditures.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide additional training to staff members to ensure compliance with established policies and procedures. Refer to management’s corrective action plan for additional information.
2023-002 Internal Control over Compliance and Compliance with Procurement Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, §200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with §200.319 and must be performed using the appropriate procurement method as outlined in §200.320.
Condition: During the audit, we noted PSI management actively works with its country offices to address the importance of tracking transactions using a systematic approach that require procurement procedures to be completed. A purchase order tracking method exists; however, when BDO was provided a listing of procurements that was determined to be incomplete. Management ultimately was able to provide a complete listing after additional investigation and analysis. The direct and pass-through awards listed above were the impacted awards for both major programs.
Questioned Costs: There are no questioned costs.
Context: This is a condition identified based on our review of the internal control for generating a complete procurement population. The sampling of the compliance area would have been incomplete if BDO utilized the original listing provided by PSI.
Cause: PSI personnel did not adhere to PSI’s documented policies and procedures for tracking purchases and ensuring a complete population for testing.
Effect: Failure to generate a complete and accurate procurement listing could indicate an issue in which items do not follow the procurement process. Failure to perform procurement procedures in accordance with PSI’s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend management refine their procurement tracking method by clarifying established policies and procedures to create more consistency across PSI’s international office locations.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
Allegations of Fraud
See Schedule of Findings and Questioned Costs for chart/table.
Criteria: §200.516(a) Audit findings requires known or suspected fraud be reported by the auditor.
Condition: During 2023, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI.
• In the Republic of Tanzania, a driver exaggerated mileage to cover for fuel payments that could not be accounted for and submitted falsified accommodation payment receipts. The total financial loss to award 72062122CA00008 was $1,834.
• In the Republic of Kenya, allegations of potential misuse of program vehicles by a subrecipient were investigated to validate that the allegations of vehicle abuse and false travel expenses were made for award 7200AA18C00014. This investigation resulted in the disallowance of $2,371.
• In the Republic of Burundi, it was determined that there was falsification of procurement records including: manipulating the process of selection of vendors, selection of a hotel with less capacity than what was needed, and fictitious payments made. The costs incurred related to the falsified procurement activities totaled $82,052 for award 72069519CA00001.
• In the Republic of South Africa, programmatic records of client visits could not be sufficiently substantiated for 1,576 clients. The estimated financial loss to award NU2GGH002138 was $12,400.
• In the Republic of Zimbabwe, field services coordinators had signed off on intake forms on behalf of clients without conducting the first-level client verification activities. The attributable financial loss to award 72061318CA00009 is $3,524.
• In the Republic of Angola, an employee falsified expense records for advances provided resulting in a loss to award AID-OAA-1-15-00004 of $4,476.
PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency.
Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency.
Context: These conditions were identified through PSI’s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2023.
Cause: Individuals intentionally circumvented PSI’s established internal controls.
Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.
Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior year as findings 2022-005 in the December 31, 2022 schedule of findings and questioned costs.
Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management’s correction action plan for additional information.
Internal Control over Compliance and Compliance with Cash Management Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.305, Federal Payment, for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Specifically, §200.305(b)(1), Federal Payment, indicates: Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs.
Also in accordance with §200.305(b)(9), Federal Payment, interest earned on amounts up to $500 per year may be retained by the non-Federal entity for administrative purposes. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Payment Management System (PMS).
In accordance with the 2023 OMB Compliance Supplement, when the reimbursement payment method is used, program costs must be incurred before submitting a payment request to the federal awarding agency.
Condition: During our testing of compliance, we identified the following matters:
During our testing of advance payments received for major program AL# 98.001, for awards 7200AA20CA00007 and 72061220CA00003, management did not minimize the amount of time between the Federal advance payments and the actual disbursements for direct program expenditures and related indirect costs.
For AL# 98.001 award 7200AA20CA00007, PSI requested an advance payment in January 2023 of $594,800; however $3,631,387 remained available from a previous cash advance. Additionally, in February 2023, PSI requested an additional advance payment of $765,200 when an outstanding advance of $3,277,442 existed. As of December 31, 2023, PSI had $1,079,614 in cash available from advance payments for this award with no disbursements for direct expenditures.
For AL# 98.001 award 72061220CA00003, PSI requested an advance payment in September 2023 of $571,066; however $409,058 remained available from the prior cash advance. In October 2023, PSI returned funding of $140,764 but an outstanding advance of $701,690 still remained for this award. As of December 31, 2023, PSI had $136,124 in cash available from advance payments with no disbursements for direct expenditures.
Further, we noted PSI does maintain advance payments of Federal awards in interest-bearing accounts. However, PSI does not track the interest earned on those funds in order to remit interest earned in excess of $500 annually to the Department of Health and Human Services Payment Management System. As PSI earned approximately $5,040 of interest during the year ended December 31, 2023 on cash advances, PSI owed the United States Government $4,540 of interest.
During our cash management testing of awards under the cost reimbursement method, we identified instances where PSI requested reimbursement in excess of costs incurred:
• For AL# 12.350 award N00244-20-1-0007, in one instance of 13 samples tested, PSI requested reimbursement of $162,020 in April 2023 which exceed amount of expenses incurred by $77,369.
Questioned Costs: There are no questioned costs related to this finding.
Context: This is a condition based on testing of PSI’s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method.
Cause: For the advance payments for Award NU2GGH002005, PSI’s programmatic and finance team did not adequately monitor remaining budget and projected expenditures at the end of the period of performance of the award resulting in PSI requesting and receiving funds that were not able to be liquidated timely enough. Furthermore, the PSI management team did not have a sufficient review process to calculate the interest earned on cash advances to remit to the U.S. Government at the end of the year.
In relation to both the findings identified whereby expenses were paid after the invoice to the federal government was submitted for reimbursement, PSI personnel did not comply with the documented review and approval policies to ensure timely payment of local office expenditures incurred prior to drawdowns.
Effect: Failure to perform cash management procedures in accordance with PSI’s documented policies could result in obtaining funds from the U.S. Government in advance of actual expenditures incurred thus resulting in non-compliance with contractual agreements.
Repeat Finding: This is a repeat finding and was reported as finding 2022-004 in the 2022 schedule of findings and questioned costs.
Recommendation: We recommend management review all deferred revenue balances monthly for federal programs where advance funds are received in sufficient detail to determine whether expenses will be available in the immediate near term to spend down federal advances. We also recommend management ensure the compliance cash management policies that align to U.S. Government funding requirements.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will refine its method for calculating drawdowns on federal awards. Refer to management’s corrective action plan for additional information.
Internal Control over Compliance and Compliance with Cash Management Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.305, Federal Payment, for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Specifically, §200.305(b)(1), Federal Payment, indicates: Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs.
Also in accordance with §200.305(b)(9), Federal Payment, interest earned on amounts up to $500 per year may be retained by the non-Federal entity for administrative purposes. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Payment Management System (PMS).
In accordance with the 2023 OMB Compliance Supplement, when the reimbursement payment method is used, program costs must be incurred before submitting a payment request to the federal awarding agency.
Condition: During our testing of compliance, we identified the following matters:
During our testing of advance payments received for major program AL# 98.001, for awards 7200AA20CA00007 and 72061220CA00003, management did not minimize the amount of time between the Federal advance payments and the actual disbursements for direct program expenditures and related indirect costs.
For AL# 98.001 award 7200AA20CA00007, PSI requested an advance payment in January 2023 of $594,800; however $3,631,387 remained available from a previous cash advance. Additionally, in February 2023, PSI requested an additional advance payment of $765,200 when an outstanding advance of $3,277,442 existed. As of December 31, 2023, PSI had $1,079,614 in cash available from advance payments for this award with no disbursements for direct expenditures.
For AL# 98.001 award 72061220CA00003, PSI requested an advance payment in September 2023 of $571,066; however $409,058 remained available from the prior cash advance. In October 2023, PSI returned funding of $140,764 but an outstanding advance of $701,690 still remained for this award. As of December 31, 2023, PSI had $136,124 in cash available from advance payments with no disbursements for direct expenditures.
Further, we noted PSI does maintain advance payments of Federal awards in interest-bearing accounts. However, PSI does not track the interest earned on those funds in order to remit interest earned in excess of $500 annually to the Department of Health and Human Services Payment Management System. As PSI earned approximately $5,040 of interest during the year ended December 31, 2023 on cash advances, PSI owed the United States Government $4,540 of interest.
During our cash management testing of awards under the cost reimbursement method, we identified instances where PSI requested reimbursement in excess of costs incurred:
• For AL# 12.350 award N00244-20-1-0007, in one instance of 13 samples tested, PSI requested reimbursement of $162,020 in April 2023 which exceed amount of expenses incurred by $77,369.
Questioned Costs: There are no questioned costs related to this finding.
Context: This is a condition based on testing of PSI’s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method.
Cause: For the advance payments for Award NU2GGH002005, PSI’s programmatic and finance team did not adequately monitor remaining budget and projected expenditures at the end of the period of performance of the award resulting in PSI requesting and receiving funds that were not able to be liquidated timely enough. Furthermore, the PSI management team did not have a sufficient review process to calculate the interest earned on cash advances to remit to the U.S. Government at the end of the year.
In relation to both the findings identified whereby expenses were paid after the invoice to the federal government was submitted for reimbursement, PSI personnel did not comply with the documented review and approval policies to ensure timely payment of local office expenditures incurred prior to drawdowns.
Effect: Failure to perform cash management procedures in accordance with PSI’s documented policies could result in obtaining funds from the U.S. Government in advance of actual expenditures incurred thus resulting in non-compliance with contractual agreements.
Repeat Finding: This is a repeat finding and was reported as finding 2022-004 in the 2022 schedule of findings and questioned costs.
Recommendation: We recommend management review all deferred revenue balances monthly for federal programs where advance funds are received in sufficient detail to determine whether expenses will be available in the immediate near term to spend down federal advances. We also recommend management ensure the compliance cash management policies that align to U.S. Government funding requirements.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will refine its method for calculating drawdowns on federal awards. Refer to management’s corrective action plan for additional information.
2023-002 Internal Control over Compliance and Compliance with Procurement Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, §200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with §200.319 and must be performed using the appropriate procurement method as outlined in §200.320.
Condition: During the audit, we noted PSI management actively works with its country offices to address the importance of tracking transactions using a systematic approach that require procurement procedures to be completed. A purchase order tracking method exists; however, when BDO was provided a listing of procurements that was determined to be incomplete. Management ultimately was able to provide a complete listing after additional investigation and analysis. The direct and pass-through awards listed above were the impacted awards for both major programs.
Questioned Costs: There are no questioned costs.
Context: This is a condition identified based on our review of the internal control for generating a complete procurement population. The sampling of the compliance area would have been incomplete if BDO utilized the original listing provided by PSI.
Cause: PSI personnel did not adhere to PSI’s documented policies and procedures for tracking purchases and ensuring a complete population for testing.
Effect: Failure to generate a complete and accurate procurement listing could indicate an issue in which items do not follow the procurement process. Failure to perform procurement procedures in accordance with PSI’s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend management refine their procurement tracking method by clarifying established policies and procedures to create more consistency across PSI’s international office locations.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
Internal Control over Compliance and Compliance with Cash Management Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.305, Federal Payment, for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Specifically, §200.305(b)(1), Federal Payment, indicates: Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs.
Also in accordance with §200.305(b)(9), Federal Payment, interest earned on amounts up to $500 per year may be retained by the non-Federal entity for administrative purposes. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Payment Management System (PMS).
In accordance with the 2023 OMB Compliance Supplement, when the reimbursement payment method is used, program costs must be incurred before submitting a payment request to the federal awarding agency.
Condition: During our testing of compliance, we identified the following matters:
During our testing of advance payments received for major program AL# 98.001, for awards 7200AA20CA00007 and 72061220CA00003, management did not minimize the amount of time between the Federal advance payments and the actual disbursements for direct program expenditures and related indirect costs.
For AL# 98.001 award 7200AA20CA00007, PSI requested an advance payment in January 2023 of $594,800; however $3,631,387 remained available from a previous cash advance. Additionally, in February 2023, PSI requested an additional advance payment of $765,200 when an outstanding advance of $3,277,442 existed. As of December 31, 2023, PSI had $1,079,614 in cash available from advance payments for this award with no disbursements for direct expenditures.
For AL# 98.001 award 72061220CA00003, PSI requested an advance payment in September 2023 of $571,066; however $409,058 remained available from the prior cash advance. In October 2023, PSI returned funding of $140,764 but an outstanding advance of $701,690 still remained for this award. As of December 31, 2023, PSI had $136,124 in cash available from advance payments with no disbursements for direct expenditures.
Further, we noted PSI does maintain advance payments of Federal awards in interest-bearing accounts. However, PSI does not track the interest earned on those funds in order to remit interest earned in excess of $500 annually to the Department of Health and Human Services Payment Management System. As PSI earned approximately $5,040 of interest during the year ended December 31, 2023 on cash advances, PSI owed the United States Government $4,540 of interest.
During our cash management testing of awards under the cost reimbursement method, we identified instances where PSI requested reimbursement in excess of costs incurred:
• For AL# 12.350 award N00244-20-1-0007, in one instance of 13 samples tested, PSI requested reimbursement of $162,020 in April 2023 which exceed amount of expenses incurred by $77,369.
Questioned Costs: There are no questioned costs related to this finding.
Context: This is a condition based on testing of PSI’s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method.
Cause: For the advance payments for Award NU2GGH002005, PSI’s programmatic and finance team did not adequately monitor remaining budget and projected expenditures at the end of the period of performance of the award resulting in PSI requesting and receiving funds that were not able to be liquidated timely enough. Furthermore, the PSI management team did not have a sufficient review process to calculate the interest earned on cash advances to remit to the U.S. Government at the end of the year.
In relation to both the findings identified whereby expenses were paid after the invoice to the federal government was submitted for reimbursement, PSI personnel did not comply with the documented review and approval policies to ensure timely payment of local office expenditures incurred prior to drawdowns.
Effect: Failure to perform cash management procedures in accordance with PSI’s documented policies could result in obtaining funds from the U.S. Government in advance of actual expenditures incurred thus resulting in non-compliance with contractual agreements.
Repeat Finding: This is a repeat finding and was reported as finding 2022-004 in the 2022 schedule of findings and questioned costs.
Recommendation: We recommend management review all deferred revenue balances monthly for federal programs where advance funds are received in sufficient detail to determine whether expenses will be available in the immediate near term to spend down federal advances. We also recommend management ensure the compliance cash management policies that align to U.S. Government funding requirements.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will refine its method for calculating drawdowns on federal awards. Refer to management’s corrective action plan for additional information.
Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions;
and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following:
(1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received.
(2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance.
(3) Records that identify adequately the source and application of funds for federally-funded activities.
(4) Effective control over, and accountability for, all funds, property, and other assets.
Additionally, §200.303 Internal Controls states that a non-federal entity must (a) establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Condition: PSI has documented expenditure policies and procedures. However, as identified below, the review and approval process did not operate as designed.
PSI’s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording in the books and records. The following errors were identified during our testing of payroll and non-payroll expenditures:
For AL# 12.350 and AL# 98.001, BDO tested 120 payroll and non-payroll expenditures for each major program. BDO also separately tested 40 transactions from the indirect cost pool. Based on that testing, BDO identified instances in which the expenditures were reported within the incorrect period on an accrual basis. These expenditures were valid expenditures within the overall award period.
o For AL# 98.001 we identified the following errors: See Schedule of Findings and Questioned Costs for chart/table.
o For AL# 12.350 we identified the following error: See Schedule of Findings and Questioned Costs for chart/table.
o For indirect cost pool testing, one of the 40 transactions tested totaling $9 was recorded in error as it related to a prior period (2022).
Questioned Costs: As all of the costs noted were within the award period of performance, there are no questioned costs to report.
Context: This is a condition identified per review of PSI’s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method.
Cause: PSI has documented expenditure policies and procedures regarding the timely processing and approval of expenditures incurred. However, as identified above, the review and approval process for the samples identified above did not operate as designed.
Effect: The lack of adherence to established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of award agreements which could ultimately lead to disallowed costs for the major programs.
Repeat Finding: This is a repeat finding from the previous year. This was reported as finding 2022-002 in the 2022 schedule of findings and questioned costs.
Recommendation: BDO recommends PSI adhere to its documented policies and procedures regarding authorization and timely approval and recording of expenditures.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide additional training to staff members to ensure compliance with established policies and procedures. Refer to management’s corrective action plan for additional information.
2023-002 Internal Control over Compliance and Compliance with Procurement Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, §200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with §200.319 and must be performed using the appropriate procurement method as outlined in §200.320.
Condition: During the audit, we noted PSI management actively works with its country offices to address the importance of tracking transactions using a systematic approach that require procurement procedures to be completed. A purchase order tracking method exists; however, when BDO was provided a listing of procurements that was determined to be incomplete. Management ultimately was able to provide a complete listing after additional investigation and analysis. The direct and pass-through awards listed above were the impacted awards for both major programs.
Questioned Costs: There are no questioned costs.
Context: This is a condition identified based on our review of the internal control for generating a complete procurement population. The sampling of the compliance area would have been incomplete if BDO utilized the original listing provided by PSI.
Cause: PSI personnel did not adhere to PSI’s documented policies and procedures for tracking purchases and ensuring a complete population for testing.
Effect: Failure to generate a complete and accurate procurement listing could indicate an issue in which items do not follow the procurement process. Failure to perform procurement procedures in accordance with PSI’s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend management refine their procurement tracking method by clarifying established policies and procedures to create more consistency across PSI’s international office locations.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
Allegations of Fraud
See Schedule of Findings and Questioned Costs for chart/table.
Criteria: §200.516(a) Audit findings requires known or suspected fraud be reported by the auditor.
Condition: During 2023, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI.
• In the Republic of Tanzania, a driver exaggerated mileage to cover for fuel payments that could not be accounted for and submitted falsified accommodation payment receipts. The total financial loss to award 72062122CA00008 was $1,834.
• In the Republic of Kenya, allegations of potential misuse of program vehicles by a subrecipient were investigated to validate that the allegations of vehicle abuse and false travel expenses were made for award 7200AA18C00014. This investigation resulted in the disallowance of $2,371.
• In the Republic of Burundi, it was determined that there was falsification of procurement records including: manipulating the process of selection of vendors, selection of a hotel with less capacity than what was needed, and fictitious payments made. The costs incurred related to the falsified procurement activities totaled $82,052 for award 72069519CA00001.
• In the Republic of South Africa, programmatic records of client visits could not be sufficiently substantiated for 1,576 clients. The estimated financial loss to award NU2GGH002138 was $12,400.
• In the Republic of Zimbabwe, field services coordinators had signed off on intake forms on behalf of clients without conducting the first-level client verification activities. The attributable financial loss to award 72061318CA00009 is $3,524.
• In the Republic of Angola, an employee falsified expense records for advances provided resulting in a loss to award AID-OAA-1-15-00004 of $4,476.
PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency.
Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency.
Context: These conditions were identified through PSI’s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2023.
Cause: Individuals intentionally circumvented PSI’s established internal controls.
Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.
Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior year as findings 2022-005 in the December 31, 2022 schedule of findings and questioned costs.
Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management’s correction action plan for additional information.
Internal Controls over Compliance and Compliance with the Period of Performance Compliance Requirement
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Unless the Federal awarding agency or pass-through entity authorizes an extension, a non-Federal entity must liquidate all obligations incurred under the Federal award not later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award as required by §200.344(b). When used in connection with a non-Federal entity’s utilization of funds under a Federal award, “obligations” means orders placed for property, services, contracts, and subawards made, and similar transactions during a given period that require payment by the non-Federal entity during the same or a future period as described in §200.71.
Condition: We identified three instances out of 25 sample items selected, whereby expenses were incurred outside of the award period of performance. These expenses totaled $85 for award 72052020CA00002 and $2 for award AID-OAA-A-11-00012.
Questioned Costs: For Award 72052020CA00002, we identified $85 in known questioned costs as a result of our sampling and testing procedures related to the close-out period of the award.
Context: BDO’s testing of the period of performance compliance requirement was performed by examining whether the expenses selected as part of our testing of allowable costs and allowable activities were incurred within the proper period of performance of the award. Testing of 120 expenses for AL# 98.001 resulted in no exceptions to the period of performance requirements. BDO also performed specific period of performance procedures on those awards that began or ended during 2023. A total of 25 expenses for AL# 98.001 were selected across the awards that began or ended during 2023, and the two compliance matters identified above resulted from those specific 25 items tested for AL# 98.001.
Cause: PSI management has procedures in place to review expenditures to determine the appropriate period of performance; however, those procedures were not performed to a level of detail to identify expenses that were incurred outside the period of the award.
Effect: The lack of adherence to the established internal control procedures around the period of performance of the award resulted in noncompliance and questioned costs that need to be returned to the U.S. Agency for International Development. Continued noncompliance with federal statutes, regulations, and the provisions of the award agreements could ultimately result in additional disallowed costs for the major program.
Repeat Finding: This finding is a repeat finding and was reported as finding 2022-006 in the 2022 schedule of findings and questioned costs.
Recommendation: We recommend management revisit and consider revising their internal procedures around detecting expenditures incurred outside of the period of performance in order to prevent the charging of costs outside of the period of performance of the award. Furthermore, we believe an option would be to close the project within the accounting system, and create a separate project to accumulate any costs incurred after the end of the period of performance. The costs incurred subsequent to the end of the period of performance should go through the review and approval of individuals at PSI Headquarters.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide training to appropriate staff responsible for monitoring expenses on the program. Refer to management’s corrective action plan for additional information.
2023-002 Internal Control over Compliance and Compliance with Procurement Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, §200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with §200.319 and must be performed using the appropriate procurement method as outlined in §200.320.
Condition: During the audit, we noted PSI management actively works with its country offices to address the importance of tracking transactions using a systematic approach that require procurement procedures to be completed. A purchase order tracking method exists; however, when BDO was provided a listing of procurements that was determined to be incomplete. Management ultimately was able to provide a complete listing after additional investigation and analysis. The direct and pass-through awards listed above were the impacted awards for both major programs.
Questioned Costs: There are no questioned costs.
Context: This is a condition identified based on our review of the internal control for generating a complete procurement population. The sampling of the compliance area would have been incomplete if BDO utilized the original listing provided by PSI.
Cause: PSI personnel did not adhere to PSI’s documented policies and procedures for tracking purchases and ensuring a complete population for testing.
Effect: Failure to generate a complete and accurate procurement listing could indicate an issue in which items do not follow the procurement process. Failure to perform procurement procedures in accordance with PSI’s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend management refine their procurement tracking method by clarifying established policies and procedures to create more consistency across PSI’s international office locations.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
Allegations of Fraud
See Schedule of Findings and Questioned Costs for chart/table.
Criteria: §200.516(a) Audit findings requires known or suspected fraud be reported by the auditor.
Condition: During 2023, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI.
• In the Republic of Tanzania, a driver exaggerated mileage to cover for fuel payments that could not be accounted for and submitted falsified accommodation payment receipts. The total financial loss to award 72062122CA00008 was $1,834.
• In the Republic of Kenya, allegations of potential misuse of program vehicles by a subrecipient were investigated to validate that the allegations of vehicle abuse and false travel expenses were made for award 7200AA18C00014. This investigation resulted in the disallowance of $2,371.
• In the Republic of Burundi, it was determined that there was falsification of procurement records including: manipulating the process of selection of vendors, selection of a hotel with less capacity than what was needed, and fictitious payments made. The costs incurred related to the falsified procurement activities totaled $82,052 for award 72069519CA00001.
• In the Republic of South Africa, programmatic records of client visits could not be sufficiently substantiated for 1,576 clients. The estimated financial loss to award NU2GGH002138 was $12,400.
• In the Republic of Zimbabwe, field services coordinators had signed off on intake forms on behalf of clients without conducting the first-level client verification activities. The attributable financial loss to award 72061318CA00009 is $3,524.
• In the Republic of Angola, an employee falsified expense records for advances provided resulting in a loss to award AID-OAA-1-15-00004 of $4,476.
PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency.
Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency.
Context: These conditions were identified through PSI’s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2023.
Cause: Individuals intentionally circumvented PSI’s established internal controls.
Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.
Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior year as findings 2022-005 in the December 31, 2022 schedule of findings and questioned costs.
Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management’s correction action plan for additional information.
Internal Controls over Compliance and Compliance with the Period of Performance Compliance Requirement
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Unless the Federal awarding agency or pass-through entity authorizes an extension, a non-Federal entity must liquidate all obligations incurred under the Federal award not later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award as required by §200.344(b). When used in connection with a non-Federal entity’s utilization of funds under a Federal award, “obligations” means orders placed for property, services, contracts, and subawards made, and similar transactions during a given period that require payment by the non-Federal entity during the same or a future period as described in §200.71.
Condition: We identified three instances out of 25 sample items selected, whereby expenses were incurred outside of the award period of performance. These expenses totaled $85 for award 72052020CA00002 and $2 for award AID-OAA-A-11-00012.
Questioned Costs: For Award 72052020CA00002, we identified $85 in known questioned costs as a result of our sampling and testing procedures related to the close-out period of the award.
Context: BDO’s testing of the period of performance compliance requirement was performed by examining whether the expenses selected as part of our testing of allowable costs and allowable activities were incurred within the proper period of performance of the award. Testing of 120 expenses for AL# 98.001 resulted in no exceptions to the period of performance requirements. BDO also performed specific period of performance procedures on those awards that began or ended during 2023. A total of 25 expenses for AL# 98.001 were selected across the awards that began or ended during 2023, and the two compliance matters identified above resulted from those specific 25 items tested for AL# 98.001.
Cause: PSI management has procedures in place to review expenditures to determine the appropriate period of performance; however, those procedures were not performed to a level of detail to identify expenses that were incurred outside the period of the award.
Effect: The lack of adherence to the established internal control procedures around the period of performance of the award resulted in noncompliance and questioned costs that need to be returned to the U.S. Agency for International Development. Continued noncompliance with federal statutes, regulations, and the provisions of the award agreements could ultimately result in additional disallowed costs for the major program.
Repeat Finding: This finding is a repeat finding and was reported as finding 2022-006 in the 2022 schedule of findings and questioned costs.
Recommendation: We recommend management revisit and consider revising their internal procedures around detecting expenditures incurred outside of the period of performance in order to prevent the charging of costs outside of the period of performance of the award. Furthermore, we believe an option would be to close the project within the accounting system, and create a separate project to accumulate any costs incurred after the end of the period of performance. The costs incurred subsequent to the end of the period of performance should go through the review and approval of individuals at PSI Headquarters.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide training to appropriate staff responsible for monitoring expenses on the program. Refer to management’s corrective action plan for additional information.
2023-002 Internal Control over Compliance and Compliance with Procurement Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, §200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with §200.319 and must be performed using the appropriate procurement method as outlined in §200.320.
Condition: During the audit, we noted PSI management actively works with its country offices to address the importance of tracking transactions using a systematic approach that require procurement procedures to be completed. A purchase order tracking method exists; however, when BDO was provided a listing of procurements that was determined to be incomplete. Management ultimately was able to provide a complete listing after additional investigation and analysis. The direct and pass-through awards listed above were the impacted awards for both major programs.
Questioned Costs: There are no questioned costs.
Context: This is a condition identified based on our review of the internal control for generating a complete procurement population. The sampling of the compliance area would have been incomplete if BDO utilized the original listing provided by PSI.
Cause: PSI personnel did not adhere to PSI’s documented policies and procedures for tracking purchases and ensuring a complete population for testing.
Effect: Failure to generate a complete and accurate procurement listing could indicate an issue in which items do not follow the procurement process. Failure to perform procurement procedures in accordance with PSI’s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend management refine their procurement tracking method by clarifying established policies and procedures to create more consistency across PSI’s international office locations.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
Allegations of Fraud
See Schedule of Findings and Questioned Costs for chart/table.
Criteria: §200.516(a) Audit findings requires known or suspected fraud be reported by the auditor.
Condition: During 2023, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI.
• In the Republic of Tanzania, a driver exaggerated mileage to cover for fuel payments that could not be accounted for and submitted falsified accommodation payment receipts. The total financial loss to award 72062122CA00008 was $1,834.
• In the Republic of Kenya, allegations of potential misuse of program vehicles by a subrecipient were investigated to validate that the allegations of vehicle abuse and false travel expenses were made for award 7200AA18C00014. This investigation resulted in the disallowance of $2,371.
• In the Republic of Burundi, it was determined that there was falsification of procurement records including: manipulating the process of selection of vendors, selection of a hotel with less capacity than what was needed, and fictitious payments made. The costs incurred related to the falsified procurement activities totaled $82,052 for award 72069519CA00001.
• In the Republic of South Africa, programmatic records of client visits could not be sufficiently substantiated for 1,576 clients. The estimated financial loss to award NU2GGH002138 was $12,400.
• In the Republic of Zimbabwe, field services coordinators had signed off on intake forms on behalf of clients without conducting the first-level client verification activities. The attributable financial loss to award 72061318CA00009 is $3,524.
• In the Republic of Angola, an employee falsified expense records for advances provided resulting in a loss to award AID-OAA-1-15-00004 of $4,476.
PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency.
Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency.
Context: These conditions were identified through PSI’s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2023.
Cause: Individuals intentionally circumvented PSI’s established internal controls.
Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.
Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior year as findings 2022-005 in the December 31, 2022 schedule of findings and questioned costs.
Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management’s correction action plan for additional information.
Allegations of Fraud
See Schedule of Findings and Questioned Costs for chart/table.
Criteria: §200.516(a) Audit findings requires known or suspected fraud be reported by the auditor.
Condition: During 2023, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI.
• In the Republic of Tanzania, a driver exaggerated mileage to cover for fuel payments that could not be accounted for and submitted falsified accommodation payment receipts. The total financial loss to award 72062122CA00008 was $1,834.
• In the Republic of Kenya, allegations of potential misuse of program vehicles by a subrecipient were investigated to validate that the allegations of vehicle abuse and false travel expenses were made for award 7200AA18C00014. This investigation resulted in the disallowance of $2,371.
• In the Republic of Burundi, it was determined that there was falsification of procurement records including: manipulating the process of selection of vendors, selection of a hotel with less capacity than what was needed, and fictitious payments made. The costs incurred related to the falsified procurement activities totaled $82,052 for award 72069519CA00001.
• In the Republic of South Africa, programmatic records of client visits could not be sufficiently substantiated for 1,576 clients. The estimated financial loss to award NU2GGH002138 was $12,400.
• In the Republic of Zimbabwe, field services coordinators had signed off on intake forms on behalf of clients without conducting the first-level client verification activities. The attributable financial loss to award 72061318CA00009 is $3,524.
• In the Republic of Angola, an employee falsified expense records for advances provided resulting in a loss to award AID-OAA-1-15-00004 of $4,476.
PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency.
Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency.
Context: These conditions were identified through PSI’s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2023.
Cause: Individuals intentionally circumvented PSI’s established internal controls.
Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.
Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior year as findings 2022-005 in the December 31, 2022 schedule of findings and questioned costs.
Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management’s correction action plan for additional information.
Allegations of Fraud
See Schedule of Findings and Questioned Costs for chart/table.
Criteria: §200.516(a) Audit findings requires known or suspected fraud be reported by the auditor.
Condition: During 2023, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI.
• In the Republic of Tanzania, a driver exaggerated mileage to cover for fuel payments that could not be accounted for and submitted falsified accommodation payment receipts. The total financial loss to award 72062122CA00008 was $1,834.
• In the Republic of Kenya, allegations of potential misuse of program vehicles by a subrecipient were investigated to validate that the allegations of vehicle abuse and false travel expenses were made for award 7200AA18C00014. This investigation resulted in the disallowance of $2,371.
• In the Republic of Burundi, it was determined that there was falsification of procurement records including: manipulating the process of selection of vendors, selection of a hotel with less capacity than what was needed, and fictitious payments made. The costs incurred related to the falsified procurement activities totaled $82,052 for award 72069519CA00001.
• In the Republic of South Africa, programmatic records of client visits could not be sufficiently substantiated for 1,576 clients. The estimated financial loss to award NU2GGH002138 was $12,400.
• In the Republic of Zimbabwe, field services coordinators had signed off on intake forms on behalf of clients without conducting the first-level client verification activities. The attributable financial loss to award 72061318CA00009 is $3,524.
• In the Republic of Angola, an employee falsified expense records for advances provided resulting in a loss to award AID-OAA-1-15-00004 of $4,476.
PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency.
Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency.
Context: These conditions were identified through PSI’s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2023.
Cause: Individuals intentionally circumvented PSI’s established internal controls.
Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.
Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior year as findings 2022-005 in the December 31, 2022 schedule of findings and questioned costs.
Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management’s correction action plan for additional information.
Internal Control over Compliance and Compliance with Cash Management Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.305, Federal Payment, for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Specifically, §200.305(b)(1), Federal Payment, indicates: Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs.
Also in accordance with §200.305(b)(9), Federal Payment, interest earned on amounts up to $500 per year may be retained by the non-Federal entity for administrative purposes. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Payment Management System (PMS).
In accordance with the 2023 OMB Compliance Supplement, when the reimbursement payment method is used, program costs must be incurred before submitting a payment request to the federal awarding agency.
Condition: During our testing of compliance, we identified the following matters:
During our testing of advance payments received for major program AL# 98.001, for awards 7200AA20CA00007 and 72061220CA00003, management did not minimize the amount of time between the Federal advance payments and the actual disbursements for direct program expenditures and related indirect costs.
For AL# 98.001 award 7200AA20CA00007, PSI requested an advance payment in January 2023 of $594,800; however $3,631,387 remained available from a previous cash advance. Additionally, in February 2023, PSI requested an additional advance payment of $765,200 when an outstanding advance of $3,277,442 existed. As of December 31, 2023, PSI had $1,079,614 in cash available from advance payments for this award with no disbursements for direct expenditures.
For AL# 98.001 award 72061220CA00003, PSI requested an advance payment in September 2023 of $571,066; however $409,058 remained available from the prior cash advance. In October 2023, PSI returned funding of $140,764 but an outstanding advance of $701,690 still remained for this award. As of December 31, 2023, PSI had $136,124 in cash available from advance payments with no disbursements for direct expenditures.
Further, we noted PSI does maintain advance payments of Federal awards in interest-bearing accounts. However, PSI does not track the interest earned on those funds in order to remit interest earned in excess of $500 annually to the Department of Health and Human Services Payment Management System. As PSI earned approximately $5,040 of interest during the year ended December 31, 2023 on cash advances, PSI owed the United States Government $4,540 of interest.
During our cash management testing of awards under the cost reimbursement method, we identified instances where PSI requested reimbursement in excess of costs incurred:
• For AL# 12.350 award N00244-20-1-0007, in one instance of 13 samples tested, PSI requested reimbursement of $162,020 in April 2023 which exceed amount of expenses incurred by $77,369.
Questioned Costs: There are no questioned costs related to this finding.
Context: This is a condition based on testing of PSI’s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method.
Cause: For the advance payments for Award NU2GGH002005, PSI’s programmatic and finance team did not adequately monitor remaining budget and projected expenditures at the end of the period of performance of the award resulting in PSI requesting and receiving funds that were not able to be liquidated timely enough. Furthermore, the PSI management team did not have a sufficient review process to calculate the interest earned on cash advances to remit to the U.S. Government at the end of the year.
In relation to both the findings identified whereby expenses were paid after the invoice to the federal government was submitted for reimbursement, PSI personnel did not comply with the documented review and approval policies to ensure timely payment of local office expenditures incurred prior to drawdowns.
Effect: Failure to perform cash management procedures in accordance with PSI’s documented policies could result in obtaining funds from the U.S. Government in advance of actual expenditures incurred thus resulting in non-compliance with contractual agreements.
Repeat Finding: This is a repeat finding and was reported as finding 2022-004 in the 2022 schedule of findings and questioned costs.
Recommendation: We recommend management review all deferred revenue balances monthly for federal programs where advance funds are received in sufficient detail to determine whether expenses will be available in the immediate near term to spend down federal advances. We also recommend management ensure the compliance cash management policies that align to U.S. Government funding requirements.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will refine its method for calculating drawdowns on federal awards. Refer to management’s corrective action plan for additional information.
Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions;
and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following:
(1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received.
(2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance.
(3) Records that identify adequately the source and application of funds for federally-funded activities.
(4) Effective control over, and accountability for, all funds, property, and other assets.
Additionally, §200.303 Internal Controls states that a non-federal entity must (a) establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Condition: PSI has documented expenditure policies and procedures. However, as identified below, the review and approval process did not operate as designed.
PSI’s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording in the books and records. The following errors were identified during our testing of payroll and non-payroll expenditures:
For AL# 12.350 and AL# 98.001, BDO tested 120 payroll and non-payroll expenditures for each major program. BDO also separately tested 40 transactions from the indirect cost pool. Based on that testing, BDO identified instances in which the expenditures were reported within the incorrect period on an accrual basis. These expenditures were valid expenditures within the overall award period.
o For AL# 98.001 we identified the following errors: See Schedule of Findings and Questioned Costs for chart/table.
o For AL# 12.350 we identified the following error: See Schedule of Findings and Questioned Costs for chart/table.
o For indirect cost pool testing, one of the 40 transactions tested totaling $9 was recorded in error as it related to a prior period (2022).
Questioned Costs: As all of the costs noted were within the award period of performance, there are no questioned costs to report.
Context: This is a condition identified per review of PSI’s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method.
Cause: PSI has documented expenditure policies and procedures regarding the timely processing and approval of expenditures incurred. However, as identified above, the review and approval process for the samples identified above did not operate as designed.
Effect: The lack of adherence to established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of award agreements which could ultimately lead to disallowed costs for the major programs.
Repeat Finding: This is a repeat finding from the previous year. This was reported as finding 2022-002 in the 2022 schedule of findings and questioned costs.
Recommendation: BDO recommends PSI adhere to its documented policies and procedures regarding authorization and timely approval and recording of expenditures.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide additional training to staff members to ensure compliance with established policies and procedures. Refer to management’s corrective action plan for additional information.
Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions;
and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following:
(1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received.
(2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance.
(3) Records that identify adequately the source and application of funds for federally-funded activities.
(4) Effective control over, and accountability for, all funds, property, and other assets.
Additionally, §200.303 Internal Controls states that a non-federal entity must (a) establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Condition: PSI has documented expenditure policies and procedures. However, as identified below, the review and approval process did not operate as designed.
PSI’s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording in the books and records. The following errors were identified during our testing of payroll and non-payroll expenditures:
For AL# 12.350 and AL# 98.001, BDO tested 120 payroll and non-payroll expenditures for each major program. BDO also separately tested 40 transactions from the indirect cost pool. Based on that testing, BDO identified instances in which the expenditures were reported within the incorrect period on an accrual basis. These expenditures were valid expenditures within the overall award period.
o For AL# 98.001 we identified the following errors: See Schedule of Findings and Questioned Costs for chart/table.
o For AL# 12.350 we identified the following error: See Schedule of Findings and Questioned Costs for chart/table.
o For indirect cost pool testing, one of the 40 transactions tested totaling $9 was recorded in error as it related to a prior period (2022).
Questioned Costs: As all of the costs noted were within the award period of performance, there are no questioned costs to report.
Context: This is a condition identified per review of PSI’s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method.
Cause: PSI has documented expenditure policies and procedures regarding the timely processing and approval of expenditures incurred. However, as identified above, the review and approval process for the samples identified above did not operate as designed.
Effect: The lack of adherence to established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of award agreements which could ultimately lead to disallowed costs for the major programs.
Repeat Finding: This is a repeat finding from the previous year. This was reported as finding 2022-002 in the 2022 schedule of findings and questioned costs.
Recommendation: BDO recommends PSI adhere to its documented policies and procedures regarding authorization and timely approval and recording of expenditures.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide additional training to staff members to ensure compliance with established policies and procedures. Refer to management’s corrective action plan for additional information.
Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions;
and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following:
(1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received.
(2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance.
(3) Records that identify adequately the source and application of funds for federally-funded activities.
(4) Effective control over, and accountability for, all funds, property, and other assets.
Additionally, §200.303 Internal Controls states that a non-federal entity must (a) establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Condition: PSI has documented expenditure policies and procedures. However, as identified below, the review and approval process did not operate as designed.
PSI’s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording in the books and records. The following errors were identified during our testing of payroll and non-payroll expenditures:
For AL# 12.350 and AL# 98.001, BDO tested 120 payroll and non-payroll expenditures for each major program. BDO also separately tested 40 transactions from the indirect cost pool. Based on that testing, BDO identified instances in which the expenditures were reported within the incorrect period on an accrual basis. These expenditures were valid expenditures within the overall award period.
o For AL# 98.001 we identified the following errors: See Schedule of Findings and Questioned Costs for chart/table.
o For AL# 12.350 we identified the following error: See Schedule of Findings and Questioned Costs for chart/table.
o For indirect cost pool testing, one of the 40 transactions tested totaling $9 was recorded in error as it related to a prior period (2022).
Questioned Costs: As all of the costs noted were within the award period of performance, there are no questioned costs to report.
Context: This is a condition identified per review of PSI’s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method.
Cause: PSI has documented expenditure policies and procedures regarding the timely processing and approval of expenditures incurred. However, as identified above, the review and approval process for the samples identified above did not operate as designed.
Effect: The lack of adherence to established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of award agreements which could ultimately lead to disallowed costs for the major programs.
Repeat Finding: This is a repeat finding from the previous year. This was reported as finding 2022-002 in the 2022 schedule of findings and questioned costs.
Recommendation: BDO recommends PSI adhere to its documented policies and procedures regarding authorization and timely approval and recording of expenditures.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide additional training to staff members to ensure compliance with established policies and procedures. Refer to management’s corrective action plan for additional information.
2023-002 Internal Control over Compliance and Compliance with Procurement Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, §200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with §200.319 and must be performed using the appropriate procurement method as outlined in §200.320.
Condition: During the audit, we noted PSI management actively works with its country offices to address the importance of tracking transactions using a systematic approach that require procurement procedures to be completed. A purchase order tracking method exists; however, when BDO was provided a listing of procurements that was determined to be incomplete. Management ultimately was able to provide a complete listing after additional investigation and analysis. The direct and pass-through awards listed above were the impacted awards for both major programs.
Questioned Costs: There are no questioned costs.
Context: This is a condition identified based on our review of the internal control for generating a complete procurement population. The sampling of the compliance area would have been incomplete if BDO utilized the original listing provided by PSI.
Cause: PSI personnel did not adhere to PSI’s documented policies and procedures for tracking purchases and ensuring a complete population for testing.
Effect: Failure to generate a complete and accurate procurement listing could indicate an issue in which items do not follow the procurement process. Failure to perform procurement procedures in accordance with PSI’s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend management refine their procurement tracking method by clarifying established policies and procedures to create more consistency across PSI’s international office locations.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
Allegations of Fraud
See Schedule of Findings and Questioned Costs for chart/table.
Criteria: §200.516(a) Audit findings requires known or suspected fraud be reported by the auditor.
Condition: During 2023, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI.
• In the Republic of Tanzania, a driver exaggerated mileage to cover for fuel payments that could not be accounted for and submitted falsified accommodation payment receipts. The total financial loss to award 72062122CA00008 was $1,834.
• In the Republic of Kenya, allegations of potential misuse of program vehicles by a subrecipient were investigated to validate that the allegations of vehicle abuse and false travel expenses were made for award 7200AA18C00014. This investigation resulted in the disallowance of $2,371.
• In the Republic of Burundi, it was determined that there was falsification of procurement records including: manipulating the process of selection of vendors, selection of a hotel with less capacity than what was needed, and fictitious payments made. The costs incurred related to the falsified procurement activities totaled $82,052 for award 72069519CA00001.
• In the Republic of South Africa, programmatic records of client visits could not be sufficiently substantiated for 1,576 clients. The estimated financial loss to award NU2GGH002138 was $12,400.
• In the Republic of Zimbabwe, field services coordinators had signed off on intake forms on behalf of clients without conducting the first-level client verification activities. The attributable financial loss to award 72061318CA00009 is $3,524.
• In the Republic of Angola, an employee falsified expense records for advances provided resulting in a loss to award AID-OAA-1-15-00004 of $4,476.
PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency.
Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency.
Context: These conditions were identified through PSI’s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2023.
Cause: Individuals intentionally circumvented PSI’s established internal controls.
Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.
Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior year as findings 2022-005 in the December 31, 2022 schedule of findings and questioned costs.
Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management’s correction action plan for additional information.
Internal Control over Compliance and Compliance with Cash Management Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.305, Federal Payment, for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Specifically, §200.305(b)(1), Federal Payment, indicates: Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs.
Also in accordance with §200.305(b)(9), Federal Payment, interest earned on amounts up to $500 per year may be retained by the non-Federal entity for administrative purposes. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Payment Management System (PMS).
In accordance with the 2023 OMB Compliance Supplement, when the reimbursement payment method is used, program costs must be incurred before submitting a payment request to the federal awarding agency.
Condition: During our testing of compliance, we identified the following matters:
During our testing of advance payments received for major program AL# 98.001, for awards 7200AA20CA00007 and 72061220CA00003, management did not minimize the amount of time between the Federal advance payments and the actual disbursements for direct program expenditures and related indirect costs.
For AL# 98.001 award 7200AA20CA00007, PSI requested an advance payment in January 2023 of $594,800; however $3,631,387 remained available from a previous cash advance. Additionally, in February 2023, PSI requested an additional advance payment of $765,200 when an outstanding advance of $3,277,442 existed. As of December 31, 2023, PSI had $1,079,614 in cash available from advance payments for this award with no disbursements for direct expenditures.
For AL# 98.001 award 72061220CA00003, PSI requested an advance payment in September 2023 of $571,066; however $409,058 remained available from the prior cash advance. In October 2023, PSI returned funding of $140,764 but an outstanding advance of $701,690 still remained for this award. As of December 31, 2023, PSI had $136,124 in cash available from advance payments with no disbursements for direct expenditures.
Further, we noted PSI does maintain advance payments of Federal awards in interest-bearing accounts. However, PSI does not track the interest earned on those funds in order to remit interest earned in excess of $500 annually to the Department of Health and Human Services Payment Management System. As PSI earned approximately $5,040 of interest during the year ended December 31, 2023 on cash advances, PSI owed the United States Government $4,540 of interest.
During our cash management testing of awards under the cost reimbursement method, we identified instances where PSI requested reimbursement in excess of costs incurred:
• For AL# 12.350 award N00244-20-1-0007, in one instance of 13 samples tested, PSI requested reimbursement of $162,020 in April 2023 which exceed amount of expenses incurred by $77,369.
Questioned Costs: There are no questioned costs related to this finding.
Context: This is a condition based on testing of PSI’s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method.
Cause: For the advance payments for Award NU2GGH002005, PSI’s programmatic and finance team did not adequately monitor remaining budget and projected expenditures at the end of the period of performance of the award resulting in PSI requesting and receiving funds that were not able to be liquidated timely enough. Furthermore, the PSI management team did not have a sufficient review process to calculate the interest earned on cash advances to remit to the U.S. Government at the end of the year.
In relation to both the findings identified whereby expenses were paid after the invoice to the federal government was submitted for reimbursement, PSI personnel did not comply with the documented review and approval policies to ensure timely payment of local office expenditures incurred prior to drawdowns.
Effect: Failure to perform cash management procedures in accordance with PSI’s documented policies could result in obtaining funds from the U.S. Government in advance of actual expenditures incurred thus resulting in non-compliance with contractual agreements.
Repeat Finding: This is a repeat finding and was reported as finding 2022-004 in the 2022 schedule of findings and questioned costs.
Recommendation: We recommend management review all deferred revenue balances monthly for federal programs where advance funds are received in sufficient detail to determine whether expenses will be available in the immediate near term to spend down federal advances. We also recommend management ensure the compliance cash management policies that align to U.S. Government funding requirements.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will refine its method for calculating drawdowns on federal awards. Refer to management’s corrective action plan for additional information.
Internal Control over Compliance and Compliance with Cash Management Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.305, Federal Payment, for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Specifically, §200.305(b)(1), Federal Payment, indicates: Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs.
Also in accordance with §200.305(b)(9), Federal Payment, interest earned on amounts up to $500 per year may be retained by the non-Federal entity for administrative purposes. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Payment Management System (PMS).
In accordance with the 2023 OMB Compliance Supplement, when the reimbursement payment method is used, program costs must be incurred before submitting a payment request to the federal awarding agency.
Condition: During our testing of compliance, we identified the following matters:
During our testing of advance payments received for major program AL# 98.001, for awards 7200AA20CA00007 and 72061220CA00003, management did not minimize the amount of time between the Federal advance payments and the actual disbursements for direct program expenditures and related indirect costs.
For AL# 98.001 award 7200AA20CA00007, PSI requested an advance payment in January 2023 of $594,800; however $3,631,387 remained available from a previous cash advance. Additionally, in February 2023, PSI requested an additional advance payment of $765,200 when an outstanding advance of $3,277,442 existed. As of December 31, 2023, PSI had $1,079,614 in cash available from advance payments for this award with no disbursements for direct expenditures.
For AL# 98.001 award 72061220CA00003, PSI requested an advance payment in September 2023 of $571,066; however $409,058 remained available from the prior cash advance. In October 2023, PSI returned funding of $140,764 but an outstanding advance of $701,690 still remained for this award. As of December 31, 2023, PSI had $136,124 in cash available from advance payments with no disbursements for direct expenditures.
Further, we noted PSI does maintain advance payments of Federal awards in interest-bearing accounts. However, PSI does not track the interest earned on those funds in order to remit interest earned in excess of $500 annually to the Department of Health and Human Services Payment Management System. As PSI earned approximately $5,040 of interest during the year ended December 31, 2023 on cash advances, PSI owed the United States Government $4,540 of interest.
During our cash management testing of awards under the cost reimbursement method, we identified instances where PSI requested reimbursement in excess of costs incurred:
• For AL# 12.350 award N00244-20-1-0007, in one instance of 13 samples tested, PSI requested reimbursement of $162,020 in April 2023 which exceed amount of expenses incurred by $77,369.
Questioned Costs: There are no questioned costs related to this finding.
Context: This is a condition based on testing of PSI’s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method.
Cause: For the advance payments for Award NU2GGH002005, PSI’s programmatic and finance team did not adequately monitor remaining budget and projected expenditures at the end of the period of performance of the award resulting in PSI requesting and receiving funds that were not able to be liquidated timely enough. Furthermore, the PSI management team did not have a sufficient review process to calculate the interest earned on cash advances to remit to the U.S. Government at the end of the year.
In relation to both the findings identified whereby expenses were paid after the invoice to the federal government was submitted for reimbursement, PSI personnel did not comply with the documented review and approval policies to ensure timely payment of local office expenditures incurred prior to drawdowns.
Effect: Failure to perform cash management procedures in accordance with PSI’s documented policies could result in obtaining funds from the U.S. Government in advance of actual expenditures incurred thus resulting in non-compliance with contractual agreements.
Repeat Finding: This is a repeat finding and was reported as finding 2022-004 in the 2022 schedule of findings and questioned costs.
Recommendation: We recommend management review all deferred revenue balances monthly for federal programs where advance funds are received in sufficient detail to determine whether expenses will be available in the immediate near term to spend down federal advances. We also recommend management ensure the compliance cash management policies that align to U.S. Government funding requirements.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will refine its method for calculating drawdowns on federal awards. Refer to management’s corrective action plan for additional information.
2023-002 Internal Control over Compliance and Compliance with Procurement Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, §200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with §200.319 and must be performed using the appropriate procurement method as outlined in §200.320.
Condition: During the audit, we noted PSI management actively works with its country offices to address the importance of tracking transactions using a systematic approach that require procurement procedures to be completed. A purchase order tracking method exists; however, when BDO was provided a listing of procurements that was determined to be incomplete. Management ultimately was able to provide a complete listing after additional investigation and analysis. The direct and pass-through awards listed above were the impacted awards for both major programs.
Questioned Costs: There are no questioned costs.
Context: This is a condition identified based on our review of the internal control for generating a complete procurement population. The sampling of the compliance area would have been incomplete if BDO utilized the original listing provided by PSI.
Cause: PSI personnel did not adhere to PSI’s documented policies and procedures for tracking purchases and ensuring a complete population for testing.
Effect: Failure to generate a complete and accurate procurement listing could indicate an issue in which items do not follow the procurement process. Failure to perform procurement procedures in accordance with PSI’s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend management refine their procurement tracking method by clarifying established policies and procedures to create more consistency across PSI’s international office locations.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
Internal Control over Compliance and Compliance with Cash Management Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.305, Federal Payment, for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Specifically, §200.305(b)(1), Federal Payment, indicates: Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs.
Also in accordance with §200.305(b)(9), Federal Payment, interest earned on amounts up to $500 per year may be retained by the non-Federal entity for administrative purposes. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Payment Management System (PMS).
In accordance with the 2023 OMB Compliance Supplement, when the reimbursement payment method is used, program costs must be incurred before submitting a payment request to the federal awarding agency.
Condition: During our testing of compliance, we identified the following matters:
During our testing of advance payments received for major program AL# 98.001, for awards 7200AA20CA00007 and 72061220CA00003, management did not minimize the amount of time between the Federal advance payments and the actual disbursements for direct program expenditures and related indirect costs.
For AL# 98.001 award 7200AA20CA00007, PSI requested an advance payment in January 2023 of $594,800; however $3,631,387 remained available from a previous cash advance. Additionally, in February 2023, PSI requested an additional advance payment of $765,200 when an outstanding advance of $3,277,442 existed. As of December 31, 2023, PSI had $1,079,614 in cash available from advance payments for this award with no disbursements for direct expenditures.
For AL# 98.001 award 72061220CA00003, PSI requested an advance payment in September 2023 of $571,066; however $409,058 remained available from the prior cash advance. In October 2023, PSI returned funding of $140,764 but an outstanding advance of $701,690 still remained for this award. As of December 31, 2023, PSI had $136,124 in cash available from advance payments with no disbursements for direct expenditures.
Further, we noted PSI does maintain advance payments of Federal awards in interest-bearing accounts. However, PSI does not track the interest earned on those funds in order to remit interest earned in excess of $500 annually to the Department of Health and Human Services Payment Management System. As PSI earned approximately $5,040 of interest during the year ended December 31, 2023 on cash advances, PSI owed the United States Government $4,540 of interest.
During our cash management testing of awards under the cost reimbursement method, we identified instances where PSI requested reimbursement in excess of costs incurred:
• For AL# 12.350 award N00244-20-1-0007, in one instance of 13 samples tested, PSI requested reimbursement of $162,020 in April 2023 which exceed amount of expenses incurred by $77,369.
Questioned Costs: There are no questioned costs related to this finding.
Context: This is a condition based on testing of PSI’s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method.
Cause: For the advance payments for Award NU2GGH002005, PSI’s programmatic and finance team did not adequately monitor remaining budget and projected expenditures at the end of the period of performance of the award resulting in PSI requesting and receiving funds that were not able to be liquidated timely enough. Furthermore, the PSI management team did not have a sufficient review process to calculate the interest earned on cash advances to remit to the U.S. Government at the end of the year.
In relation to both the findings identified whereby expenses were paid after the invoice to the federal government was submitted for reimbursement, PSI personnel did not comply with the documented review and approval policies to ensure timely payment of local office expenditures incurred prior to drawdowns.
Effect: Failure to perform cash management procedures in accordance with PSI’s documented policies could result in obtaining funds from the U.S. Government in advance of actual expenditures incurred thus resulting in non-compliance with contractual agreements.
Repeat Finding: This is a repeat finding and was reported as finding 2022-004 in the 2022 schedule of findings and questioned costs.
Recommendation: We recommend management review all deferred revenue balances monthly for federal programs where advance funds are received in sufficient detail to determine whether expenses will be available in the immediate near term to spend down federal advances. We also recommend management ensure the compliance cash management policies that align to U.S. Government funding requirements.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will refine its method for calculating drawdowns on federal awards. Refer to management’s corrective action plan for additional information.
Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions;
and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following:
(1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received.
(2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance.
(3) Records that identify adequately the source and application of funds for federally-funded activities.
(4) Effective control over, and accountability for, all funds, property, and other assets.
Additionally, §200.303 Internal Controls states that a non-federal entity must (a) establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Condition: PSI has documented expenditure policies and procedures. However, as identified below, the review and approval process did not operate as designed.
PSI’s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording in the books and records. The following errors were identified during our testing of payroll and non-payroll expenditures:
For AL# 12.350 and AL# 98.001, BDO tested 120 payroll and non-payroll expenditures for each major program. BDO also separately tested 40 transactions from the indirect cost pool. Based on that testing, BDO identified instances in which the expenditures were reported within the incorrect period on an accrual basis. These expenditures were valid expenditures within the overall award period.
o For AL# 98.001 we identified the following errors: See Schedule of Findings and Questioned Costs for chart/table.
o For AL# 12.350 we identified the following error: See Schedule of Findings and Questioned Costs for chart/table.
o For indirect cost pool testing, one of the 40 transactions tested totaling $9 was recorded in error as it related to a prior period (2022).
Questioned Costs: As all of the costs noted were within the award period of performance, there are no questioned costs to report.
Context: This is a condition identified per review of PSI’s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method.
Cause: PSI has documented expenditure policies and procedures regarding the timely processing and approval of expenditures incurred. However, as identified above, the review and approval process for the samples identified above did not operate as designed.
Effect: The lack of adherence to established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of award agreements which could ultimately lead to disallowed costs for the major programs.
Repeat Finding: This is a repeat finding from the previous year. This was reported as finding 2022-002 in the 2022 schedule of findings and questioned costs.
Recommendation: BDO recommends PSI adhere to its documented policies and procedures regarding authorization and timely approval and recording of expenditures.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide additional training to staff members to ensure compliance with established policies and procedures. Refer to management’s corrective action plan for additional information.
2023-002 Internal Control over Compliance and Compliance with Procurement Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, §200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with §200.319 and must be performed using the appropriate procurement method as outlined in §200.320.
Condition: During the audit, we noted PSI management actively works with its country offices to address the importance of tracking transactions using a systematic approach that require procurement procedures to be completed. A purchase order tracking method exists; however, when BDO was provided a listing of procurements that was determined to be incomplete. Management ultimately was able to provide a complete listing after additional investigation and analysis. The direct and pass-through awards listed above were the impacted awards for both major programs.
Questioned Costs: There are no questioned costs.
Context: This is a condition identified based on our review of the internal control for generating a complete procurement population. The sampling of the compliance area would have been incomplete if BDO utilized the original listing provided by PSI.
Cause: PSI personnel did not adhere to PSI’s documented policies and procedures for tracking purchases and ensuring a complete population for testing.
Effect: Failure to generate a complete and accurate procurement listing could indicate an issue in which items do not follow the procurement process. Failure to perform procurement procedures in accordance with PSI’s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend management refine their procurement tracking method by clarifying established policies and procedures to create more consistency across PSI’s international office locations.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
Allegations of Fraud
See Schedule of Findings and Questioned Costs for chart/table.
Criteria: §200.516(a) Audit findings requires known or suspected fraud be reported by the auditor.
Condition: During 2023, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI.
• In the Republic of Tanzania, a driver exaggerated mileage to cover for fuel payments that could not be accounted for and submitted falsified accommodation payment receipts. The total financial loss to award 72062122CA00008 was $1,834.
• In the Republic of Kenya, allegations of potential misuse of program vehicles by a subrecipient were investigated to validate that the allegations of vehicle abuse and false travel expenses were made for award 7200AA18C00014. This investigation resulted in the disallowance of $2,371.
• In the Republic of Burundi, it was determined that there was falsification of procurement records including: manipulating the process of selection of vendors, selection of a hotel with less capacity than what was needed, and fictitious payments made. The costs incurred related to the falsified procurement activities totaled $82,052 for award 72069519CA00001.
• In the Republic of South Africa, programmatic records of client visits could not be sufficiently substantiated for 1,576 clients. The estimated financial loss to award NU2GGH002138 was $12,400.
• In the Republic of Zimbabwe, field services coordinators had signed off on intake forms on behalf of clients without conducting the first-level client verification activities. The attributable financial loss to award 72061318CA00009 is $3,524.
• In the Republic of Angola, an employee falsified expense records for advances provided resulting in a loss to award AID-OAA-1-15-00004 of $4,476.
PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency.
Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency.
Context: These conditions were identified through PSI’s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2023.
Cause: Individuals intentionally circumvented PSI’s established internal controls.
Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.
Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior year as findings 2022-005 in the December 31, 2022 schedule of findings and questioned costs.
Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management’s correction action plan for additional information.
Internal Controls over Compliance and Compliance with the Period of Performance Compliance Requirement
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Unless the Federal awarding agency or pass-through entity authorizes an extension, a non-Federal entity must liquidate all obligations incurred under the Federal award not later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award as required by §200.344(b). When used in connection with a non-Federal entity’s utilization of funds under a Federal award, “obligations” means orders placed for property, services, contracts, and subawards made, and similar transactions during a given period that require payment by the non-Federal entity during the same or a future period as described in §200.71.
Condition: We identified three instances out of 25 sample items selected, whereby expenses were incurred outside of the award period of performance. These expenses totaled $85 for award 72052020CA00002 and $2 for award AID-OAA-A-11-00012.
Questioned Costs: For Award 72052020CA00002, we identified $85 in known questioned costs as a result of our sampling and testing procedures related to the close-out period of the award.
Context: BDO’s testing of the period of performance compliance requirement was performed by examining whether the expenses selected as part of our testing of allowable costs and allowable activities were incurred within the proper period of performance of the award. Testing of 120 expenses for AL# 98.001 resulted in no exceptions to the period of performance requirements. BDO also performed specific period of performance procedures on those awards that began or ended during 2023. A total of 25 expenses for AL# 98.001 were selected across the awards that began or ended during 2023, and the two compliance matters identified above resulted from those specific 25 items tested for AL# 98.001.
Cause: PSI management has procedures in place to review expenditures to determine the appropriate period of performance; however, those procedures were not performed to a level of detail to identify expenses that were incurred outside the period of the award.
Effect: The lack of adherence to the established internal control procedures around the period of performance of the award resulted in noncompliance and questioned costs that need to be returned to the U.S. Agency for International Development. Continued noncompliance with federal statutes, regulations, and the provisions of the award agreements could ultimately result in additional disallowed costs for the major program.
Repeat Finding: This finding is a repeat finding and was reported as finding 2022-006 in the 2022 schedule of findings and questioned costs.
Recommendation: We recommend management revisit and consider revising their internal procedures around detecting expenditures incurred outside of the period of performance in order to prevent the charging of costs outside of the period of performance of the award. Furthermore, we believe an option would be to close the project within the accounting system, and create a separate project to accumulate any costs incurred after the end of the period of performance. The costs incurred subsequent to the end of the period of performance should go through the review and approval of individuals at PSI Headquarters.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide training to appropriate staff responsible for monitoring expenses on the program. Refer to management’s corrective action plan for additional information.
2023-002 Internal Control over Compliance and Compliance with Procurement Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, §200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with §200.319 and must be performed using the appropriate procurement method as outlined in §200.320.
Condition: During the audit, we noted PSI management actively works with its country offices to address the importance of tracking transactions using a systematic approach that require procurement procedures to be completed. A purchase order tracking method exists; however, when BDO was provided a listing of procurements that was determined to be incomplete. Management ultimately was able to provide a complete listing after additional investigation and analysis. The direct and pass-through awards listed above were the impacted awards for both major programs.
Questioned Costs: There are no questioned costs.
Context: This is a condition identified based on our review of the internal control for generating a complete procurement population. The sampling of the compliance area would have been incomplete if BDO utilized the original listing provided by PSI.
Cause: PSI personnel did not adhere to PSI’s documented policies and procedures for tracking purchases and ensuring a complete population for testing.
Effect: Failure to generate a complete and accurate procurement listing could indicate an issue in which items do not follow the procurement process. Failure to perform procurement procedures in accordance with PSI’s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend management refine their procurement tracking method by clarifying established policies and procedures to create more consistency across PSI’s international office locations.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
Allegations of Fraud
See Schedule of Findings and Questioned Costs for chart/table.
Criteria: §200.516(a) Audit findings requires known or suspected fraud be reported by the auditor.
Condition: During 2023, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI.
• In the Republic of Tanzania, a driver exaggerated mileage to cover for fuel payments that could not be accounted for and submitted falsified accommodation payment receipts. The total financial loss to award 72062122CA00008 was $1,834.
• In the Republic of Kenya, allegations of potential misuse of program vehicles by a subrecipient were investigated to validate that the allegations of vehicle abuse and false travel expenses were made for award 7200AA18C00014. This investigation resulted in the disallowance of $2,371.
• In the Republic of Burundi, it was determined that there was falsification of procurement records including: manipulating the process of selection of vendors, selection of a hotel with less capacity than what was needed, and fictitious payments made. The costs incurred related to the falsified procurement activities totaled $82,052 for award 72069519CA00001.
• In the Republic of South Africa, programmatic records of client visits could not be sufficiently substantiated for 1,576 clients. The estimated financial loss to award NU2GGH002138 was $12,400.
• In the Republic of Zimbabwe, field services coordinators had signed off on intake forms on behalf of clients without conducting the first-level client verification activities. The attributable financial loss to award 72061318CA00009 is $3,524.
• In the Republic of Angola, an employee falsified expense records for advances provided resulting in a loss to award AID-OAA-1-15-00004 of $4,476.
PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency.
Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency.
Context: These conditions were identified through PSI’s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2023.
Cause: Individuals intentionally circumvented PSI’s established internal controls.
Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.
Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior year as findings 2022-005 in the December 31, 2022 schedule of findings and questioned costs.
Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management’s correction action plan for additional information.
Internal Controls over Compliance and Compliance with the Period of Performance Compliance Requirement
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.309, a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance and any costs incurred before the Federal awarding agency or pass-through entity made the Federal award that were authorized by the Federal awarding agency or pass-through entity. Unless the Federal awarding agency or pass-through entity authorizes an extension, a non-Federal entity must liquidate all obligations incurred under the Federal award not later than 120 calendar days after the end date of the period of performance as specified in the terms and conditions of the Federal award as required by §200.344(b). When used in connection with a non-Federal entity’s utilization of funds under a Federal award, “obligations” means orders placed for property, services, contracts, and subawards made, and similar transactions during a given period that require payment by the non-Federal entity during the same or a future period as described in §200.71.
Condition: We identified three instances out of 25 sample items selected, whereby expenses were incurred outside of the award period of performance. These expenses totaled $85 for award 72052020CA00002 and $2 for award AID-OAA-A-11-00012.
Questioned Costs: For Award 72052020CA00002, we identified $85 in known questioned costs as a result of our sampling and testing procedures related to the close-out period of the award.
Context: BDO’s testing of the period of performance compliance requirement was performed by examining whether the expenses selected as part of our testing of allowable costs and allowable activities were incurred within the proper period of performance of the award. Testing of 120 expenses for AL# 98.001 resulted in no exceptions to the period of performance requirements. BDO also performed specific period of performance procedures on those awards that began or ended during 2023. A total of 25 expenses for AL# 98.001 were selected across the awards that began or ended during 2023, and the two compliance matters identified above resulted from those specific 25 items tested for AL# 98.001.
Cause: PSI management has procedures in place to review expenditures to determine the appropriate period of performance; however, those procedures were not performed to a level of detail to identify expenses that were incurred outside the period of the award.
Effect: The lack of adherence to the established internal control procedures around the period of performance of the award resulted in noncompliance and questioned costs that need to be returned to the U.S. Agency for International Development. Continued noncompliance with federal statutes, regulations, and the provisions of the award agreements could ultimately result in additional disallowed costs for the major program.
Repeat Finding: This finding is a repeat finding and was reported as finding 2022-006 in the 2022 schedule of findings and questioned costs.
Recommendation: We recommend management revisit and consider revising their internal procedures around detecting expenditures incurred outside of the period of performance in order to prevent the charging of costs outside of the period of performance of the award. Furthermore, we believe an option would be to close the project within the accounting system, and create a separate project to accumulate any costs incurred after the end of the period of performance. The costs incurred subsequent to the end of the period of performance should go through the review and approval of individuals at PSI Headquarters.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide training to appropriate staff responsible for monitoring expenses on the program. Refer to management’s corrective action plan for additional information.
2023-002 Internal Control over Compliance and Compliance with Procurement Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.318(a), General Procurement Standards, the non-federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations, provided the procurements conform to applicable federal law and the standards identified in General Procurement Standards. Additionally, §200.318(i) states that the non-federal entity must maintain records sufficient to detail the history of the procurement. These records are required to include, but are not necessarily limited to the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. All procurement transactions must be conducted in a manner providing full and open competition consistent in accordance with §200.319 and must be performed using the appropriate procurement method as outlined in §200.320.
Condition: During the audit, we noted PSI management actively works with its country offices to address the importance of tracking transactions using a systematic approach that require procurement procedures to be completed. A purchase order tracking method exists; however, when BDO was provided a listing of procurements that was determined to be incomplete. Management ultimately was able to provide a complete listing after additional investigation and analysis. The direct and pass-through awards listed above were the impacted awards for both major programs.
Questioned Costs: There are no questioned costs.
Context: This is a condition identified based on our review of the internal control for generating a complete procurement population. The sampling of the compliance area would have been incomplete if BDO utilized the original listing provided by PSI.
Cause: PSI personnel did not adhere to PSI’s documented policies and procedures for tracking purchases and ensuring a complete population for testing.
Effect: Failure to generate a complete and accurate procurement listing could indicate an issue in which items do not follow the procurement process. Failure to perform procurement procedures in accordance with PSI’s documented policies and Procurement Procedures as outlined in the Uniform Administrative Requirements could result in the procurement being disallowed.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend management refine their procurement tracking method by clarifying established policies and procedures to create more consistency across PSI’s international office locations.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and has developed a corrective action plan to address the instances of noncompliance identified and lapses in prescribed internal controls.
Allegations of Fraud
See Schedule of Findings and Questioned Costs for chart/table.
Criteria: §200.516(a) Audit findings requires known or suspected fraud be reported by the auditor.
Condition: During 2023, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI.
• In the Republic of Tanzania, a driver exaggerated mileage to cover for fuel payments that could not be accounted for and submitted falsified accommodation payment receipts. The total financial loss to award 72062122CA00008 was $1,834.
• In the Republic of Kenya, allegations of potential misuse of program vehicles by a subrecipient were investigated to validate that the allegations of vehicle abuse and false travel expenses were made for award 7200AA18C00014. This investigation resulted in the disallowance of $2,371.
• In the Republic of Burundi, it was determined that there was falsification of procurement records including: manipulating the process of selection of vendors, selection of a hotel with less capacity than what was needed, and fictitious payments made. The costs incurred related to the falsified procurement activities totaled $82,052 for award 72069519CA00001.
• In the Republic of South Africa, programmatic records of client visits could not be sufficiently substantiated for 1,576 clients. The estimated financial loss to award NU2GGH002138 was $12,400.
• In the Republic of Zimbabwe, field services coordinators had signed off on intake forms on behalf of clients without conducting the first-level client verification activities. The attributable financial loss to award 72061318CA00009 is $3,524.
• In the Republic of Angola, an employee falsified expense records for advances provided resulting in a loss to award AID-OAA-1-15-00004 of $4,476.
PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency.
Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency.
Context: These conditions were identified through PSI’s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2023.
Cause: Individuals intentionally circumvented PSI’s established internal controls.
Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.
Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior year as findings 2022-005 in the December 31, 2022 schedule of findings and questioned costs.
Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management’s correction action plan for additional information.
Allegations of Fraud
See Schedule of Findings and Questioned Costs for chart/table.
Criteria: §200.516(a) Audit findings requires known or suspected fraud be reported by the auditor.
Condition: During 2023, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI.
• In the Republic of Tanzania, a driver exaggerated mileage to cover for fuel payments that could not be accounted for and submitted falsified accommodation payment receipts. The total financial loss to award 72062122CA00008 was $1,834.
• In the Republic of Kenya, allegations of potential misuse of program vehicles by a subrecipient were investigated to validate that the allegations of vehicle abuse and false travel expenses were made for award 7200AA18C00014. This investigation resulted in the disallowance of $2,371.
• In the Republic of Burundi, it was determined that there was falsification of procurement records including: manipulating the process of selection of vendors, selection of a hotel with less capacity than what was needed, and fictitious payments made. The costs incurred related to the falsified procurement activities totaled $82,052 for award 72069519CA00001.
• In the Republic of South Africa, programmatic records of client visits could not be sufficiently substantiated for 1,576 clients. The estimated financial loss to award NU2GGH002138 was $12,400.
• In the Republic of Zimbabwe, field services coordinators had signed off on intake forms on behalf of clients without conducting the first-level client verification activities. The attributable financial loss to award 72061318CA00009 is $3,524.
• In the Republic of Angola, an employee falsified expense records for advances provided resulting in a loss to award AID-OAA-1-15-00004 of $4,476.
PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency.
Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency.
Context: These conditions were identified through PSI’s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2023.
Cause: Individuals intentionally circumvented PSI’s established internal controls.
Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.
Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior year as findings 2022-005 in the December 31, 2022 schedule of findings and questioned costs.
Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management’s correction action plan for additional information.
Allegations of Fraud
See Schedule of Findings and Questioned Costs for chart/table.
Criteria: §200.516(a) Audit findings requires known or suspected fraud be reported by the auditor.
Condition: During 2023, PSI identified multiple fraud incidents through its internal reporting mechanisms that impacted its federally funded programs. These fraud incidents have been reported to the appropriate U.S. Office of the Inspector General by PSI.
• In the Republic of Tanzania, a driver exaggerated mileage to cover for fuel payments that could not be accounted for and submitted falsified accommodation payment receipts. The total financial loss to award 72062122CA00008 was $1,834.
• In the Republic of Kenya, allegations of potential misuse of program vehicles by a subrecipient were investigated to validate that the allegations of vehicle abuse and false travel expenses were made for award 7200AA18C00014. This investigation resulted in the disallowance of $2,371.
• In the Republic of Burundi, it was determined that there was falsification of procurement records including: manipulating the process of selection of vendors, selection of a hotel with less capacity than what was needed, and fictitious payments made. The costs incurred related to the falsified procurement activities totaled $82,052 for award 72069519CA00001.
• In the Republic of South Africa, programmatic records of client visits could not be sufficiently substantiated for 1,576 clients. The estimated financial loss to award NU2GGH002138 was $12,400.
• In the Republic of Zimbabwe, field services coordinators had signed off on intake forms on behalf of clients without conducting the first-level client verification activities. The attributable financial loss to award 72061318CA00009 is $3,524.
• In the Republic of Angola, an employee falsified expense records for advances provided resulting in a loss to award AID-OAA-1-15-00004 of $4,476.
PSI has ongoing investigations involving U.S. Federal funding pending in multiple countries for which the facts and circumstances and full effect of the fraud investigations have not been determined. Where investigations are still pending and conclusions of the matters identified through whistleblower or other communications have not been reached, PSI has reported such matters to the appropriate U.S. agency.
Questioned Costs: There are no questioned costs as the questioned amounts have been, or are in the process of, being reimbursed to the respective Federal agency.
Context: These conditions were identified through PSI’s internal review and audit processes and were reported to us during our internal control assessment for the year ended December 31, 2023.
Cause: Individuals intentionally circumvented PSI’s established internal controls.
Effect: These conditions could result in unallowable expenses being charged to U.S. Government awards if controls in place had not identified the conditions.
Repeat Finding: The specific items identified above were not reported in the prior year; however, findings related to fraud were included for the prior year as findings 2022-005 in the December 31, 2022 schedule of findings and questioned costs.
Recommendation: Because of the international environment in which PSI operates, the potential for fraud is heightened. Given this, we recommend management continue to utilize its global internal audit team and fraud reporting hotline, as well as other policies and procedures around fraud identification to mitigate the fraud risk.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will proactively report and investigate allegations of fraud and to raise awareness of the actions to be taken when there is a suspicion of fraud. Refer to management’s correction action plan for additional information.
Internal Control over Compliance and Compliance with Cash Management Requirements
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.305, Federal Payment, for non-Federal entities other than states, payment methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. Specifically, §200.305(b)(1), Federal Payment, indicates: Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs.
Also in accordance with §200.305(b)(9), Federal Payment, interest earned on amounts up to $500 per year may be retained by the non-Federal entity for administrative purposes. Any additional interest earned on Federal advance payments deposited in interest-bearing accounts must be remitted annually to the Department of Health and Human Services Payment Management System (PMS).
In accordance with the 2023 OMB Compliance Supplement, when the reimbursement payment method is used, program costs must be incurred before submitting a payment request to the federal awarding agency.
Condition: During our testing of compliance, we identified the following matters:
During our testing of advance payments received for major program AL# 98.001, for awards 7200AA20CA00007 and 72061220CA00003, management did not minimize the amount of time between the Federal advance payments and the actual disbursements for direct program expenditures and related indirect costs.
For AL# 98.001 award 7200AA20CA00007, PSI requested an advance payment in January 2023 of $594,800; however $3,631,387 remained available from a previous cash advance. Additionally, in February 2023, PSI requested an additional advance payment of $765,200 when an outstanding advance of $3,277,442 existed. As of December 31, 2023, PSI had $1,079,614 in cash available from advance payments for this award with no disbursements for direct expenditures.
For AL# 98.001 award 72061220CA00003, PSI requested an advance payment in September 2023 of $571,066; however $409,058 remained available from the prior cash advance. In October 2023, PSI returned funding of $140,764 but an outstanding advance of $701,690 still remained for this award. As of December 31, 2023, PSI had $136,124 in cash available from advance payments with no disbursements for direct expenditures.
Further, we noted PSI does maintain advance payments of Federal awards in interest-bearing accounts. However, PSI does not track the interest earned on those funds in order to remit interest earned in excess of $500 annually to the Department of Health and Human Services Payment Management System. As PSI earned approximately $5,040 of interest during the year ended December 31, 2023 on cash advances, PSI owed the United States Government $4,540 of interest.
During our cash management testing of awards under the cost reimbursement method, we identified instances where PSI requested reimbursement in excess of costs incurred:
• For AL# 12.350 award N00244-20-1-0007, in one instance of 13 samples tested, PSI requested reimbursement of $162,020 in April 2023 which exceed amount of expenses incurred by $77,369.
Questioned Costs: There are no questioned costs related to this finding.
Context: This is a condition based on testing of PSI’s compliance with specified requirements. The prevalence of these findings is detailed in the condition section above. The samples were selected using a non-statistical method.
Cause: For the advance payments for Award NU2GGH002005, PSI’s programmatic and finance team did not adequately monitor remaining budget and projected expenditures at the end of the period of performance of the award resulting in PSI requesting and receiving funds that were not able to be liquidated timely enough. Furthermore, the PSI management team did not have a sufficient review process to calculate the interest earned on cash advances to remit to the U.S. Government at the end of the year.
In relation to both the findings identified whereby expenses were paid after the invoice to the federal government was submitted for reimbursement, PSI personnel did not comply with the documented review and approval policies to ensure timely payment of local office expenditures incurred prior to drawdowns.
Effect: Failure to perform cash management procedures in accordance with PSI’s documented policies could result in obtaining funds from the U.S. Government in advance of actual expenditures incurred thus resulting in non-compliance with contractual agreements.
Repeat Finding: This is a repeat finding and was reported as finding 2022-004 in the 2022 schedule of findings and questioned costs.
Recommendation: We recommend management review all deferred revenue balances monthly for federal programs where advance funds are received in sufficient detail to determine whether expenses will be available in the immediate near term to spend down federal advances. We also recommend management ensure the compliance cash management policies that align to U.S. Government funding requirements.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will refine its method for calculating drawdowns on federal awards. Refer to management’s corrective action plan for additional information.
Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions;
and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following:
(1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received.
(2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance.
(3) Records that identify adequately the source and application of funds for federally-funded activities.
(4) Effective control over, and accountability for, all funds, property, and other assets.
Additionally, §200.303 Internal Controls states that a non-federal entity must (a) establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Condition: PSI has documented expenditure policies and procedures. However, as identified below, the review and approval process did not operate as designed.
PSI’s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording in the books and records. The following errors were identified during our testing of payroll and non-payroll expenditures:
For AL# 12.350 and AL# 98.001, BDO tested 120 payroll and non-payroll expenditures for each major program. BDO also separately tested 40 transactions from the indirect cost pool. Based on that testing, BDO identified instances in which the expenditures were reported within the incorrect period on an accrual basis. These expenditures were valid expenditures within the overall award period.
o For AL# 98.001 we identified the following errors: See Schedule of Findings and Questioned Costs for chart/table.
o For AL# 12.350 we identified the following error: See Schedule of Findings and Questioned Costs for chart/table.
o For indirect cost pool testing, one of the 40 transactions tested totaling $9 was recorded in error as it related to a prior period (2022).
Questioned Costs: As all of the costs noted were within the award period of performance, there are no questioned costs to report.
Context: This is a condition identified per review of PSI’s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method.
Cause: PSI has documented expenditure policies and procedures regarding the timely processing and approval of expenditures incurred. However, as identified above, the review and approval process for the samples identified above did not operate as designed.
Effect: The lack of adherence to established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of award agreements which could ultimately lead to disallowed costs for the major programs.
Repeat Finding: This is a repeat finding from the previous year. This was reported as finding 2022-002 in the 2022 schedule of findings and questioned costs.
Recommendation: BDO recommends PSI adhere to its documented policies and procedures regarding authorization and timely approval and recording of expenditures.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide additional training to staff members to ensure compliance with established policies and procedures. Refer to management’s corrective action plan for additional information.
Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles
See Schedule of Findings and Questioned Costs for chart/table.
Criteria or Specific Requirement: In accordance with §200.302 Financial Management, a non-federal entity's financial management systems, including records documenting compliance with federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions;
and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the federal statutes, regulations, and the terms and conditions of the federal award. The financial management system of each non-federal entity must provide for the following:
(1) Identification, in its accounts, of all federal awards received and expended and the federal programs under which they were received.
(2) Accurate, current, and complete disclosure of the financial results of each federal award or program in accordance with the reporting requirements set forth in §200.327 Financial Reporting and §200.328 Monitoring and Reporting Program Performance.
(3) Records that identify adequately the source and application of funds for federally-funded activities.
(4) Effective control over, and accountability for, all funds, property, and other assets.
Additionally, §200.303 Internal Controls states that a non-federal entity must (a) establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award.
Condition: PSI has documented expenditure policies and procedures. However, as identified below, the review and approval process did not operate as designed.
PSI’s policies are designed to ensure expenses are reviewed and approved timely to ensure proper recording in the books and records. The following errors were identified during our testing of payroll and non-payroll expenditures:
For AL# 12.350 and AL# 98.001, BDO tested 120 payroll and non-payroll expenditures for each major program. BDO also separately tested 40 transactions from the indirect cost pool. Based on that testing, BDO identified instances in which the expenditures were reported within the incorrect period on an accrual basis. These expenditures were valid expenditures within the overall award period.
o For AL# 98.001 we identified the following errors: See Schedule of Findings and Questioned Costs for chart/table.
o For AL# 12.350 we identified the following error: See Schedule of Findings and Questioned Costs for chart/table.
o For indirect cost pool testing, one of the 40 transactions tested totaling $9 was recorded in error as it related to a prior period (2022).
Questioned Costs: As all of the costs noted were within the award period of performance, there are no questioned costs to report.
Context: This is a condition identified per review of PSI’s compliance with allocability and allowability provisions of the Uniform Guidance. The prevalence of these findings is detailed in the condition section above. Samples were selected using a non-statistical method.
Cause: PSI has documented expenditure policies and procedures regarding the timely processing and approval of expenditures incurred. However, as identified above, the review and approval process for the samples identified above did not operate as designed.
Effect: The lack of adherence to established internal control policies and procedures can lead to noncompliance with federal statutes, regulations, and the provisions of award agreements which could ultimately lead to disallowed costs for the major programs.
Repeat Finding: This is a repeat finding from the previous year. This was reported as finding 2022-002 in the 2022 schedule of findings and questioned costs.
Recommendation: BDO recommends PSI adhere to its documented policies and procedures regarding authorization and timely approval and recording of expenditures.
Views of Responsible Officials: PSI management agrees with the finding and recommendations set forth within and will provide additional training to staff members to ensure compliance with established policies and procedures. Refer to management’s corrective action plan for additional information.