Reference Number: 2023-001 – Inadequate Controls over Grant Revenue
Type of Finding: Significant Deficiency in Internal Control over Financial Reporting
Criteria
Management is responsible for the preparation and fair presentation, as well as the accuracy of its financial statements in accordance with accounting principles generally accepted in the United States of America. This includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error or fraud. Accounting principles promulgated over the years for not-for-profit organizations require substantial interpretation and judgment relating to the proper classification of net assets as well as the difficult question regarding the determination of whether grant funds are to be recorded as a contribution or an exchange transaction.
Condition
During the audit, we found that the Organization has no formal processes in place for the reconciliation and analysis of its grants and for making these classification decisions. Audit adjustments were required to properly record grant revenue with and without donor restrictions and net assets with and without donor restrictions. In addition, the Organization required assistance in reconciling grant programs to the Schedule of Expenditures of Federal Awards (SEFA) and identifying that all federal grant programs were included in the SEFA.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
Due to turnover of key personnel, internal controls were either lacking or not designed properly and mitigating controls were not sufficient to effectively identity misstatements in grant revenue. Audit adjustments were required to properly record grant revenue with and without donor restrictions and net assets with and without donor restrictions.
Recommendation
We suggest that, in order to ensure understanding of and compliance with specific grant terms as well as consistency of reporting for all such grant agreements, the appropriate personnel review grant agreements on a timely basis and establish documented and consistent procedures pertaining to the appropriate accounting for all grants. We believe that this process will make accounting for and classifying of grants an easier and more routine task. Thus, this should also achieve more consistent accounting and financial statement presentation.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: In the year being audited (July 1, 2022-June 30, 2023), we have removed our Fiscal Audit Consultant and replaced that with a Director of Finance employee that has the skill, knowledge, and education for this matter to be resolved for subsequent audits. Also, moving forward each new grant contract will be discussed with our CPA firm for guidance on the proper application of the grant/contract as it relates to the proper classification of restricted and unrestricted funds. Moreover, since this was our first requirement for a single audit the SEFA form was a new introduction into our internal controls presented by our auditor during the audit and we believe assistance with this form in any subsequent audits will be limited, if needed at all.
Anticipated Implementation Date: June 30, 2024
Reference Number: 2023-002 – Delays in Financial Reporting
Type of Finding: Material Weakness in Internal Control over Financial Reporting; Instance of Noncompliance
Criteria
In accordance with Title 45 U.S. Code of Federal Regulations (CFR) Part 75 Subpart F, recipients that spend a total of $750,000 or more in federal funds during their fiscal year are subject to Single Audit requirements and the audit must be completed and the Data Collection Form and reporting package submitted to the Federal Audit Clearinghouse within the earlier of 30 calendar days after receipt of the auditor’s report(s), or nine months after the end of the audit period.
Condition
The Organization has experienced significant delays in the preparation and issuance of the 2023 financial statements and its Single Audit under Uniform Guidance.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
Delays in processing year-end closing procedures caused the financial statement issuance to be delayed. In addition, the Organization is neither in compliance with Uniform Guidance nor any grant agreements that require annual audited financial statements.
Recommendation
We recommend that the Organization develop and document processes to systematically identify and track all federal funds to ensure timely provision of a Single Audit. Key actions to be included in this plan should encompass enhanced training and awareness initiatives, the establishment of internal review procedures, and the implementation of ongoing monitoring and oversight mechanisms.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: The Organization had a significant turnover in both Fiscal Manager Consultant and Executive Director during the year being audited. The Fiscal Manager Consultant was replaced by the Director of Finance in the later part of the fiscal year 2022-2023. This required the new Director of Finance to create and implement as many internal controls that were needed, that were not implemented, and/or recommended by our current CPA firm who had been previously auditing prior years. Additionally, our Director of Finance has engaged the Board of Directors in taking a more active role in the financial statement overview that was not previously recommended to them by our CPA firm.
Anticipated Implementation Date: June 30, 2024
Reference Number: 2023-003 – Review of Participant Applications
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Program
Federal Award Number and Year: AA211079, AA311059, 170305366
Category of Finding: Eligibility
Type of Finding: Significant Deficiency in Internal Control over Compliance
Criteria
Title 2 Code of Federal Regulations (2 CFR) §200.303 states that the 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Condition
During our review of participant intake forms for the WIOA programs, we noted that forty (40) forms did not contain documentation of review and approval by the Executive Director and there was no documented process for case management participant eligibility determinations.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
No documented review processes for participant intake forms or participant eligibility determinations are deficiencies in internal control and could result in ineligible participants being noted as eligible and included in the program.
Questioned Costs
Questioned costs were not identified.
Context
For the forty (40) participate intake forms selected for testing, all forty were missing evidence of review.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document review processes to ensure all participant intake forms are reviewed by a second person in addition to the case manager and that all participant eligibility determinations are reviewed.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: During the period being audited internal controls for program participants documents were not reviewed by the former Executive Director. The new Executive Director has implemented a check and balance procedure that requires the Case Manager, Program Manager, and Executive Director to review and sign off on participant application forms and to be documented on the participants application before the participant can move forward in the program.
Anticipated Implementation Date: June 30, 2024
Reference Number: 2023-004 – Grant Expenditure Coding Changes
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Program
Federal Award Number and Year: AA211079, AA311059, 170305366
Category of Finding: Allowable Costs and Cost Principles
Type of Finding: Significant Deficiency in Internal Control over Compliance
Criteria
Title 2 Code of Federal Regulations (2 CFR) §200.303 states that the 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Condition
During our review of check requisitions for selected nonpayroll costs, we noted one (1) requisition where the approved account coding had been changed in QuickBooks after approval with no evidence of approval for that change.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
No documented review processes for changes in grant expenditure general ledger accounts and classes is a deficiency in internal control and could result in unallowable costs.
Questioned Costs
Questioned costs were not identified.
Context
For the sixty (60) non-payroll costs selected for testing, one was coded to a different general ledger account than listed on the approved check requisition.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes for changing of grant expenditure general ledger accounts and classes to ensure all changes are approved with evidence of that approval.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: The approved account coding that was changed in the "condition" section mentioned above was done by the former Fiscal Consultant that was replaced by the current Director of Finance. Knowledge of that change with no documentation was not noticed until it was a selection picked during the audit. The current Director of Finance was not the manager of the Fiscal Consultant, the Executive Director was, and the current Director of Finance was not given any authority over the Fiscal Consultant. Currently the internal control implemented requires that no changes to grant coding are allowed to be done unless the Director of Finance deploys an accounting department team member to make the change by written request, it is then signed by the staff members in the accounting department making the change. If the Director of Finance makes the reclassification it is documented on the original invoice and signed off by the Director of Finance.
Anticipated Implementation Date: June 30, 2024
Reference Number: 2023-005 – Ineligible Participants
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Program
Federal Award Number and Year: AA211079, 170305366
Category of Finding: Eligibility
Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Noncompliance
Criteria
In accordance with Section 3 WIOA, 128 Stat. 1431 and grant agreements, participants must meet the WIOA definition of adult, dislocated worker, or dislocated homemaker and must not have previously participated in any WIOA program to be eligible to participate.
Condition
During our review of participant eligibility, we noted five (5) participants were ineligible for the as follows:
(1) One (1) participant was ineligible due to previously participating in a WIOA program with the Organization.
(2) Four (4) participants were ineligible due to being fully employed and did not meet the definition of either dislocated worker per Section 3(15), WIOA, 128 Stat. 1431 or dislocated homemaker per Section 3(16), WIOA, 128 Stat. 1432.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
The Organization has no documented policies and procedures for determining eligibility and for reviewing eligibility.
Questioned Costs
We identified costs of $8,774 that could be considered questionable. We are unable to estimate total likely questioned costs.
Context
For the forty (40) participants selected for testing, five (5) were found to be ineligible.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes for determining participant eligibility and for reviewing case manager determination of participant eligibility. We also recommend the Organization develop a recurring training program for staff involved with grant processes and procedures and compliance requirements.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: During the period being audited internal controls for program participants documents were not reviewed by the former Executive Director. The new Executive Director has implemented a check and balance procedure that requires the Case Manager, Program Manager, and Executive Director to review and sign off on participant application forms and to be documented on the participants application before the participant can move forward in the program.
Anticipated Implementation Date: June 30, 2024
Reference Number: 2023-006 – Salary Allocation
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Program
Federal Award Number and Year: AA211079, 170305366
Category of Finding: Allowable Costs and Cost Principles
Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Noncompliance
Criteria
Title 2 Code of Federal Regulations (2 CFR) §200.405 states a cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.
This standard is met if the cost:
(1) Is incurred specifically for the federal award;
(2) Benefits both the federal award and other work of the non-federal entity and can be distributed in proportions that may be approximated using reasonable methods; and
(3) Is necessary to the overall operation of the non-federal entity and is assignable in part to the federal award in accordance with the principles in this subpart.
Condition
During our review of payroll costs, we noted seven (7) employees with payroll allocation that did not agree to payroll allocable to the grant per the time study.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
The Organization allocated more direct payroll costs than were specifically incurred for the award.
Questioned Costs
We identified questioned costs of $655. We are unable to estimate total likely questioned costs.
Context
For the forty (40) participants selected for testing, seven (7) employees had payroll costs that were not allocated to the grant correctly.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes for reviewing payroll entries posted to QuickBooks against the monthly time survey and entry to ensure allocations posted to the general ledger agree to approved allocations. We also recommend the Organization develop a recurring training program for staff involved with grant processes and procedures and compliance requirements.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: Internal controls for proper vetting and approval of spreadsheets are being implemented to safeguard the accuracy of payroll report totals that tie back to labor percentages allocated to individual employee labor totals, billed to the grant.
Anticipated Implementation Date: December 31, 2024
Reference Number: 2023-001 – Inadequate Controls over Grant Revenue
Type of Finding: Significant Deficiency in Internal Control over Financial Reporting
Criteria
Management is responsible for the preparation and fair presentation, as well as the accuracy of its financial statements in accordance with accounting principles generally accepted in the United States of America. This includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error or fraud. Accounting principles promulgated over the years for not-for-profit organizations require substantial interpretation and judgment relating to the proper classification of net assets as well as the difficult question regarding the determination of whether grant funds are to be recorded as a contribution or an exchange transaction.
Condition
During the audit, we found that the Organization has no formal processes in place for the reconciliation and analysis of its grants and for making these classification decisions. Audit adjustments were required to properly record grant revenue with and without donor restrictions and net assets with and without donor restrictions. In addition, the Organization required assistance in reconciling grant programs to the Schedule of Expenditures of Federal Awards (SEFA) and identifying that all federal grant programs were included in the SEFA.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
Due to turnover of key personnel, internal controls were either lacking or not designed properly and mitigating controls were not sufficient to effectively identity misstatements in grant revenue. Audit adjustments were required to properly record grant revenue with and without donor restrictions and net assets with and without donor restrictions.
Recommendation
We suggest that, in order to ensure understanding of and compliance with specific grant terms as well as consistency of reporting for all such grant agreements, the appropriate personnel review grant agreements on a timely basis and establish documented and consistent procedures pertaining to the appropriate accounting for all grants. We believe that this process will make accounting for and classifying of grants an easier and more routine task. Thus, this should also achieve more consistent accounting and financial statement presentation.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: In the year being audited (July 1, 2022-June 30, 2023), we have removed our Fiscal Audit Consultant and replaced that with a Director of Finance employee that has the skill, knowledge, and education for this matter to be resolved for subsequent audits. Also, moving forward each new grant contract will be discussed with our CPA firm for guidance on the proper application of the grant/contract as it relates to the proper classification of restricted and unrestricted funds. Moreover, since this was our first requirement for a single audit the SEFA form was a new introduction into our internal controls presented by our auditor during the audit and we believe assistance with this form in any subsequent audits will be limited, if needed at all.
Anticipated Implementation Date: June 30, 2024
Reference Number: 2023-002 – Delays in Financial Reporting
Type of Finding: Material Weakness in Internal Control over Financial Reporting; Instance of Noncompliance
Criteria
In accordance with Title 45 U.S. Code of Federal Regulations (CFR) Part 75 Subpart F, recipients that spend a total of $750,000 or more in federal funds during their fiscal year are subject to Single Audit requirements and the audit must be completed and the Data Collection Form and reporting package submitted to the Federal Audit Clearinghouse within the earlier of 30 calendar days after receipt of the auditor’s report(s), or nine months after the end of the audit period.
Condition
The Organization has experienced significant delays in the preparation and issuance of the 2023 financial statements and its Single Audit under Uniform Guidance.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
Delays in processing year-end closing procedures caused the financial statement issuance to be delayed. In addition, the Organization is neither in compliance with Uniform Guidance nor any grant agreements that require annual audited financial statements.
Recommendation
We recommend that the Organization develop and document processes to systematically identify and track all federal funds to ensure timely provision of a Single Audit. Key actions to be included in this plan should encompass enhanced training and awareness initiatives, the establishment of internal review procedures, and the implementation of ongoing monitoring and oversight mechanisms.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: The Organization had a significant turnover in both Fiscal Manager Consultant and Executive Director during the year being audited. The Fiscal Manager Consultant was replaced by the Director of Finance in the later part of the fiscal year 2022-2023. This required the new Director of Finance to create and implement as many internal controls that were needed, that were not implemented, and/or recommended by our current CPA firm who had been previously auditing prior years. Additionally, our Director of Finance has engaged the Board of Directors in taking a more active role in the financial statement overview that was not previously recommended to them by our CPA firm.
Anticipated Implementation Date: June 30, 2024
Reference Number: 2023-003 – Review of Participant Applications
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Program
Federal Award Number and Year: AA211079, AA311059, 170305366
Category of Finding: Eligibility
Type of Finding: Significant Deficiency in Internal Control over Compliance
Criteria
Title 2 Code of Federal Regulations (2 CFR) §200.303 states that the 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Condition
During our review of participant intake forms for the WIOA programs, we noted that forty (40) forms did not contain documentation of review and approval by the Executive Director and there was no documented process for case management participant eligibility determinations.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
No documented review processes for participant intake forms or participant eligibility determinations are deficiencies in internal control and could result in ineligible participants being noted as eligible and included in the program.
Questioned Costs
Questioned costs were not identified.
Context
For the forty (40) participate intake forms selected for testing, all forty were missing evidence of review.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document review processes to ensure all participant intake forms are reviewed by a second person in addition to the case manager and that all participant eligibility determinations are reviewed.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: During the period being audited internal controls for program participants documents were not reviewed by the former Executive Director. The new Executive Director has implemented a check and balance procedure that requires the Case Manager, Program Manager, and Executive Director to review and sign off on participant application forms and to be documented on the participants application before the participant can move forward in the program.
Anticipated Implementation Date: June 30, 2024
Reference Number: 2023-004 – Grant Expenditure Coding Changes
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Program
Federal Award Number and Year: AA211079, AA311059, 170305366
Category of Finding: Allowable Costs and Cost Principles
Type of Finding: Significant Deficiency in Internal Control over Compliance
Criteria
Title 2 Code of Federal Regulations (2 CFR) §200.303 states that the 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. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Condition
During our review of check requisitions for selected nonpayroll costs, we noted one (1) requisition where the approved account coding had been changed in QuickBooks after approval with no evidence of approval for that change.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
No documented review processes for changes in grant expenditure general ledger accounts and classes is a deficiency in internal control and could result in unallowable costs.
Questioned Costs
Questioned costs were not identified.
Context
For the sixty (60) non-payroll costs selected for testing, one was coded to a different general ledger account than listed on the approved check requisition.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes for changing of grant expenditure general ledger accounts and classes to ensure all changes are approved with evidence of that approval.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: The approved account coding that was changed in the "condition" section mentioned above was done by the former Fiscal Consultant that was replaced by the current Director of Finance. Knowledge of that change with no documentation was not noticed until it was a selection picked during the audit. The current Director of Finance was not the manager of the Fiscal Consultant, the Executive Director was, and the current Director of Finance was not given any authority over the Fiscal Consultant. Currently the internal control implemented requires that no changes to grant coding are allowed to be done unless the Director of Finance deploys an accounting department team member to make the change by written request, it is then signed by the staff members in the accounting department making the change. If the Director of Finance makes the reclassification it is documented on the original invoice and signed off by the Director of Finance.
Anticipated Implementation Date: June 30, 2024
Reference Number: 2023-005 – Ineligible Participants
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Program
Federal Award Number and Year: AA211079, 170305366
Category of Finding: Eligibility
Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Noncompliance
Criteria
In accordance with Section 3 WIOA, 128 Stat. 1431 and grant agreements, participants must meet the WIOA definition of adult, dislocated worker, or dislocated homemaker and must not have previously participated in any WIOA program to be eligible to participate.
Condition
During our review of participant eligibility, we noted five (5) participants were ineligible for the as follows:
(1) One (1) participant was ineligible due to previously participating in a WIOA program with the Organization.
(2) Four (4) participants were ineligible due to being fully employed and did not meet the definition of either dislocated worker per Section 3(15), WIOA, 128 Stat. 1431 or dislocated homemaker per Section 3(16), WIOA, 128 Stat. 1432.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
The Organization has no documented policies and procedures for determining eligibility and for reviewing eligibility.
Questioned Costs
We identified costs of $8,774 that could be considered questionable. We are unable to estimate total likely questioned costs.
Context
For the forty (40) participants selected for testing, five (5) were found to be ineligible.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes for determining participant eligibility and for reviewing case manager determination of participant eligibility. We also recommend the Organization develop a recurring training program for staff involved with grant processes and procedures and compliance requirements.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: During the period being audited internal controls for program participants documents were not reviewed by the former Executive Director. The new Executive Director has implemented a check and balance procedure that requires the Case Manager, Program Manager, and Executive Director to review and sign off on participant application forms and to be documented on the participants application before the participant can move forward in the program.
Anticipated Implementation Date: June 30, 2024
Reference Number: 2023-006 – Salary Allocation
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Program
Federal Award Number and Year: AA211079, 170305366
Category of Finding: Allowable Costs and Cost Principles
Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Noncompliance
Criteria
Title 2 Code of Federal Regulations (2 CFR) §200.405 states a cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received.
This standard is met if the cost:
(1) Is incurred specifically for the federal award;
(2) Benefits both the federal award and other work of the non-federal entity and can be distributed in proportions that may be approximated using reasonable methods; and
(3) Is necessary to the overall operation of the non-federal entity and is assignable in part to the federal award in accordance with the principles in this subpart.
Condition
During our review of payroll costs, we noted seven (7) employees with payroll allocation that did not agree to payroll allocable to the grant per the time study.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
The Organization allocated more direct payroll costs than were specifically incurred for the award.
Questioned Costs
We identified questioned costs of $655. We are unable to estimate total likely questioned costs.
Context
For the forty (40) participants selected for testing, seven (7) employees had payroll costs that were not allocated to the grant correctly.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes for reviewing payroll entries posted to QuickBooks against the monthly time survey and entry to ensure allocations posted to the general ledger agree to approved allocations. We also recommend the Organization develop a recurring training program for staff involved with grant processes and procedures and compliance requirements.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: Internal controls for proper vetting and approval of spreadsheets are being implemented to safeguard the accuracy of payroll report totals that tie back to labor percentages allocated to individual employee labor totals, billed to the grant.
Anticipated Implementation Date: December 31, 2024