#2023-004 – Major Federal Award Finding – Period of Performance
Nature of Finding: Compliance Finding – Period of Performance and Material Weakness in Internal Controls over Compliance
This is a repeat of prior year finding #2022-004.
Criteria/Condition: A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance. The Organization did not have controls in place to verify that costs were being charged to the award in the correct period of performance.
Questioned Costs: Approximately $19,400
Identification of How Questioned Costs Were Computed: A sample of 40 non-payroll expenditures totaling approximately $110,000 was selected from a population of approximately $175,000 of non-payroll expenditures charged to the major program during the year ending December 31, 2023.
• Of the invoices selected for testing, 4 expenditures were billed during the month of September 2023. All 4 of these expenditures were inappropriately charged to the incorrect grant period. As a result, the questioned costs include all non-payroll expenditures billed in September 2023, which was approximately $15,700.
• Of the 36 remaining invoices selected for testing, 6 other invoices were partially or entirely billed to the incorrect grant period, totaling an additional $2,582 identified error. Questioned costs are estimated by projecting this error identified in the sample tested to the population of non-payroll expenditures billed during the remaining 11 months of the year (excluding September 2023).
Cause/Context: There are not proper controls in place to review invoices and assign them to the appropriate grant period. Seven expenditures out of forty non-payroll related expenditures tested for the grant were for contracted annual services or other costs that partially or entirely related to a separate performance period but was billed in its entirety to the current fiscal year.
Effect: An overstatement of expenditures for the grant was reported in the current year. Reimbursement was sought for expenditures outside of the grant’s period of performance.
Recommendation: We recommend procedures be established for the independent review of the grant period of performance when recording transactions and preparing grant reimbursement requests. Evidence of this review should be documented and maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to establish formal written policy documenting significant accounting procedures including but not limited to the independent review of the grant period of performance when recording transactions and preparing grant reimbursement requests. Evidence of the review to be documented and maintained according to the procedures to be implemented.
#2023-005 – Major Federal Award Finding – Allocation of Costs
Nature of Finding: Compliance Finding – Allowable Costs and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-006.
Criteria/Condition: Federal regulations 2 CFR 200.405 provide that costs benefiting two or more projects in proportions that can be easily determined must be allocated to the projects based on the proportional benefit. If proportions cannot be easily determined, the costs may be allocated to the benefitted projects on a reasonable and documented basis.
Questioned Costs: Not able to be determined.
Identification of How Questioned Costs Were Computed: Of the major program expenditures selected for testing, certain costs charged to the major program appear to be under-allocated, while others appear to be over-allocated to the major program. These matters are not isolated or contained to any particular type of expenditure. There was no meaningful methodology identified to quantify or extend the errors to the population.
Cause/Context: Controls were not in place to evaluate the allocation of costs to grants based on proportional benefit provided to each grant. For payroll costs and 1 of the 40 expenditures selected for testing, costs were divided arbitrarily when charged to grants. No documented support for the allocation methodology was present.
Effect: Expenditures that involve an allocation of costs between grants are not supported. The lack of controls results in questioned costs as a disproportionate amount of expenditures may be charged to the federal program.
Recommendation: We recommend management establish procedures and controls to allocate costs between grants based upon actual costs attributed to the grant and the particular expenditure allowed by the grant. Any such allocations should be supported by activity-level substantiation and be reviewed. Documentation of the allocation methodology, review and approval should be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to recommend to management the establishment of procedures and controls to allocate costs between grants based on actual costs attributed to grant and the particular expenditure allowed by the grant. All such allocations will be supported by activity-level substantiation and be reviewed. Documentation of the allocation methodology, review and approval will be maintained in writing.
#2023-006 – Major Federal Award Finding – Allowable Costs – Payroll
Nature of Finding: Compliance Finding – Allowable Costs and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-007.
Criteria/Condition: A non-federal entity may only charge allowable costs to federal programs. The Organization did not have controls in place to verify that costs were being charged to the award were based upon actual costs incurred and consistent with those provided in the grant budget.
Questioned Costs: Approximately $40,400
Identification of How Questioned Costs Were Computed: Payroll expenditures charged to the grant during the year were traced in total to the year-to-date payroll reports. Questioned costs represent the error identified in the testing of the population of payroll expenditures of the major program.
Cause/Context: There are not proper controls in place to review payroll costs monthly to ensure costs were charge to the grant appropriately. This resulted in three instances of noncompliance:
• Amounts were billed to the grant using estimated monthly wages rather than actual wages incurred.
• The employee portion of payroll taxes were billed to the grant twice – once as part of gross wages and again as fringe benefits and added to employer payroll tax costs.
• Costs were charged to the grant for one employee who was not listed in the grant budget as an allowable cost.
Effect: An overstatement of expenditures for the grant was reported and submitted for reimbursement.
Recommendation: We recommend that a full-range of controls over payroll and payroll related costs be implemented. The Organization should devote the resources necessary to ensure that such costs are of direct benefit to the program, are reviewed, approved, documented, and that the accounting and reporting process is accurate. Further, controls over grant billings should be established to ensure expenditures represent actual costs incurred. All control activities, including independent review should be documented and evidence of review and approval be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a full-range of control over costs charged to federal programs. MARR’s primary decision-making authority regarding such controls shall be placed with the MARR’s president. MARR’s protocol shall ensure that such costs are the direct benefit to the program, are reviewed, approved, documented and ensure the accounting and reporting process be accurate. Further, controls over grant billings will be established to ensure expenditures represent actual costs incurred. All control activities, including independent review, should be documented and evidence of review and approval will be maintained.
#2023-007 – Major Federal Award Finding – Allowable Costs – Non-Payroll
Nature of Finding: Compliance Finding – Allowable Costs and Material Weakness in Internal Controls Over Compliance
This is a partial repeat of prior year finding #2022-008.
Criteria/Condition: A non-federal entity may only charge allowable costs incurred by the entity that are necessary and reasonable for the administration of the program and are of a nature in line with the categories allowed in the grant budget. The Organization did not have controls in place to verify that costs were being charged to the award in the correct amount or for necessary and reasonable expenditures.
Questioned Costs: Approximately $41,300
Identification of How Questioned Costs Were Computed: A sample of 40 non-payroll expenditures totaling approximately $110,000 was selected from a population of approximately $175,000 of non-payroll expenditures charged to the major program during the year ending December 31, 2023. Of the invoices selected for testing, the following are identified as questioned costs:
• 2 expenditures, totaling $5,708, were erroneously billed to the grant twice. Questioned costs are estimated to be approximately $9,000 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
• 2 invoices were billed to the grant at amounts higher than the supporting invoice, totaling $426 overbilled to the grant. Questioned costs are estimated to be approximately $700 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
• 5 expenditures totaling $5,868 were charged to the grant for costs relating to marketing purchases, including branded merchandise, branded apparel, etc. The Organization indicated these items were purchased with the primary intent to distribute during the National Alliance of Recovery Residences (NARR) annual conference. Though certain costs related to this conference were allowed under the grant budget, marketing costs were not included, and therefore appear to be unallowable. Questioned costs are estimated to be approximately $9,400 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
• Questioned costs were identified for costs relating to the lease of a second space. Costs totaling up to $12,000 were allocated in part to the major program as office lease expenditures but were instead described to be an employee fringe benefit. These costs were determined to be outside of those necessary and reasonable for the administration of the program.
• 3 expenditures were charged to the grant for costs that were at least partially not necessary and reasonable or otherwise appear to be unallowable. Questioned costs are estimated to be approximately $10,200 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
Cause/Context: There are not proper controls in place to review invoices and ensure grant billings are in line with allowable costs incurred. Further, a portion of lease costs appear to be classified inconsistent with the underlying nature of the space.
Effect: An overstatement of expenditures for the grant was reported and submitted for reimbursement.
Recommendation: We recommend that a full-range of controls over costs charged to federal programs be implemented. The Organization should devote the resources necessary to ensure that such costs are allowable, of direct benefit to the program, are reviewed, approved, documented, and that the accounting and reporting process is accurate. Further, controls over grant billings should be established to ensure expenditures represent actual costs incurred. All control activities, including independent review should be documented and evidence of review and approval be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a full range of controls over costs charged to federal programs. MARR’s protocol shall ensure that such costs are the direct benefit to the program, are reviewed, approved, documented and ensure the accounting and reporting process be accurate. Further, controls over grant billings will be established to ensure expenditures represent actual costs incurred. All control activities, including independent review, should be documented and evidence of review and approval will be maintained.
#2023-008 – Major Federal Award Finding – Reporting
Nature of Finding: Material Weakness in Internal Controls Over Compliance
This is a partial repeat of prior year finding #2022-009.
Criteria/Condition: Federal regulations 2 CFR 200.328 - 200.329 provide that required reporting under the federal program must be completed timely and accurately. The federal award agreement includes specific report filing due dates. Segregation of duties is also a key element of internal controls, including controls over compliance, and involves processes whereby the activities of one employee are reviewed or checked by the activities of another individual, and avoids one employee having the ability to perform a transaction or process from beginning to end. We noted during testing that no review procedures are in place surrounding these reports.
Cause/Context: Controls were not in place to ensure accurate reporting. Only one individual was involved in the reporting process.
Effect: Controls in place do not sufficiently ensure complete, accurate, and timely reporting compliance.
Recommendation: We recommend that a full-range of controls related to reporting, including federal program reporting be implemented. The Organization should devote the resources necessary to ensure that reports are timely and accurately prepared, reviewed, and approved prior to filing. All controls, including review and approval should be documented and that documentation be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a full – range of controls relating to reporting, including federal program reporting. MARR will take such steps as necessary to ensure that reports are timely and accurately prepared, reviewed, and approved prior to filing. All controls, including review and approval will be documented in such documentation to be maintained.
#2023-009 – Major Federal Award Finding – Required Policies
Nature of Finding: Compliance Finding – Uniform Guidance Administrative Requirements and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-010.
Criteria/Condition: The Uniform Guidance requires written policies and procedures that pertain to key matters important to the administration of federal grants.
Cause/Context: The Organization has not established the administrative policies required by Uniform Guidance.
Effect: The Organization is not in compliance with the administrative requirements of Uniform Guidance.
Recommendation: The Organization should adopt formal written policies related to grants management required by Uniform Guidance.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement and adopt formal written policies relating to grants management ordered by Uniform Guidance.
#2023-010 – Major Federal Award Finding – Document Retention
Nature of Finding: Compliance Finding – Uniform Guidance Administrative Requirements and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-011.
Criteria/Condition: Federal regulations 2 CFR 200.334 provides that a non-federal entity must retain all records pertinent to a federal award for a minimum period of three years from the date of submission of the annual financial report. We noted during testing that records were not consistently being maintained.
Cause/Context: For 4 of the 40 expenditures selected for testing, the Organization was unable to provide appropriate invoice documentation supporting the amount charged to the grant.
Effect: Federal expenditures could be charged to the grant at incorrect amounts or for unallowable costs.
Recommendation: We recommend the Organization implement a document retention policy that is consistent with the federal document retention requirements.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a document retention policy that is consistent with federal document retention requirements.
#2023-004 – Major Federal Award Finding – Period of Performance
Nature of Finding: Compliance Finding – Period of Performance and Material Weakness in Internal Controls over Compliance
This is a repeat of prior year finding #2022-004.
Criteria/Condition: A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance. The Organization did not have controls in place to verify that costs were being charged to the award in the correct period of performance.
Questioned Costs: Approximately $19,400
Identification of How Questioned Costs Were Computed: A sample of 40 non-payroll expenditures totaling approximately $110,000 was selected from a population of approximately $175,000 of non-payroll expenditures charged to the major program during the year ending December 31, 2023.
• Of the invoices selected for testing, 4 expenditures were billed during the month of September 2023. All 4 of these expenditures were inappropriately charged to the incorrect grant period. As a result, the questioned costs include all non-payroll expenditures billed in September 2023, which was approximately $15,700.
• Of the 36 remaining invoices selected for testing, 6 other invoices were partially or entirely billed to the incorrect grant period, totaling an additional $2,582 identified error. Questioned costs are estimated by projecting this error identified in the sample tested to the population of non-payroll expenditures billed during the remaining 11 months of the year (excluding September 2023).
Cause/Context: There are not proper controls in place to review invoices and assign them to the appropriate grant period. Seven expenditures out of forty non-payroll related expenditures tested for the grant were for contracted annual services or other costs that partially or entirely related to a separate performance period but was billed in its entirety to the current fiscal year.
Effect: An overstatement of expenditures for the grant was reported in the current year. Reimbursement was sought for expenditures outside of the grant’s period of performance.
Recommendation: We recommend procedures be established for the independent review of the grant period of performance when recording transactions and preparing grant reimbursement requests. Evidence of this review should be documented and maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to establish formal written policy documenting significant accounting procedures including but not limited to the independent review of the grant period of performance when recording transactions and preparing grant reimbursement requests. Evidence of the review to be documented and maintained according to the procedures to be implemented.
#2023-005 – Major Federal Award Finding – Allocation of Costs
Nature of Finding: Compliance Finding – Allowable Costs and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-006.
Criteria/Condition: Federal regulations 2 CFR 200.405 provide that costs benefiting two or more projects in proportions that can be easily determined must be allocated to the projects based on the proportional benefit. If proportions cannot be easily determined, the costs may be allocated to the benefitted projects on a reasonable and documented basis.
Questioned Costs: Not able to be determined.
Identification of How Questioned Costs Were Computed: Of the major program expenditures selected for testing, certain costs charged to the major program appear to be under-allocated, while others appear to be over-allocated to the major program. These matters are not isolated or contained to any particular type of expenditure. There was no meaningful methodology identified to quantify or extend the errors to the population.
Cause/Context: Controls were not in place to evaluate the allocation of costs to grants based on proportional benefit provided to each grant. For payroll costs and 1 of the 40 expenditures selected for testing, costs were divided arbitrarily when charged to grants. No documented support for the allocation methodology was present.
Effect: Expenditures that involve an allocation of costs between grants are not supported. The lack of controls results in questioned costs as a disproportionate amount of expenditures may be charged to the federal program.
Recommendation: We recommend management establish procedures and controls to allocate costs between grants based upon actual costs attributed to the grant and the particular expenditure allowed by the grant. Any such allocations should be supported by activity-level substantiation and be reviewed. Documentation of the allocation methodology, review and approval should be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to recommend to management the establishment of procedures and controls to allocate costs between grants based on actual costs attributed to grant and the particular expenditure allowed by the grant. All such allocations will be supported by activity-level substantiation and be reviewed. Documentation of the allocation methodology, review and approval will be maintained in writing.
#2023-006 – Major Federal Award Finding – Allowable Costs – Payroll
Nature of Finding: Compliance Finding – Allowable Costs and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-007.
Criteria/Condition: A non-federal entity may only charge allowable costs to federal programs. The Organization did not have controls in place to verify that costs were being charged to the award were based upon actual costs incurred and consistent with those provided in the grant budget.
Questioned Costs: Approximately $40,400
Identification of How Questioned Costs Were Computed: Payroll expenditures charged to the grant during the year were traced in total to the year-to-date payroll reports. Questioned costs represent the error identified in the testing of the population of payroll expenditures of the major program.
Cause/Context: There are not proper controls in place to review payroll costs monthly to ensure costs were charge to the grant appropriately. This resulted in three instances of noncompliance:
• Amounts were billed to the grant using estimated monthly wages rather than actual wages incurred.
• The employee portion of payroll taxes were billed to the grant twice – once as part of gross wages and again as fringe benefits and added to employer payroll tax costs.
• Costs were charged to the grant for one employee who was not listed in the grant budget as an allowable cost.
Effect: An overstatement of expenditures for the grant was reported and submitted for reimbursement.
Recommendation: We recommend that a full-range of controls over payroll and payroll related costs be implemented. The Organization should devote the resources necessary to ensure that such costs are of direct benefit to the program, are reviewed, approved, documented, and that the accounting and reporting process is accurate. Further, controls over grant billings should be established to ensure expenditures represent actual costs incurred. All control activities, including independent review should be documented and evidence of review and approval be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a full-range of control over costs charged to federal programs. MARR’s primary decision-making authority regarding such controls shall be placed with the MARR’s president. MARR’s protocol shall ensure that such costs are the direct benefit to the program, are reviewed, approved, documented and ensure the accounting and reporting process be accurate. Further, controls over grant billings will be established to ensure expenditures represent actual costs incurred. All control activities, including independent review, should be documented and evidence of review and approval will be maintained.
#2023-007 – Major Federal Award Finding – Allowable Costs – Non-Payroll
Nature of Finding: Compliance Finding – Allowable Costs and Material Weakness in Internal Controls Over Compliance
This is a partial repeat of prior year finding #2022-008.
Criteria/Condition: A non-federal entity may only charge allowable costs incurred by the entity that are necessary and reasonable for the administration of the program and are of a nature in line with the categories allowed in the grant budget. The Organization did not have controls in place to verify that costs were being charged to the award in the correct amount or for necessary and reasonable expenditures.
Questioned Costs: Approximately $41,300
Identification of How Questioned Costs Were Computed: A sample of 40 non-payroll expenditures totaling approximately $110,000 was selected from a population of approximately $175,000 of non-payroll expenditures charged to the major program during the year ending December 31, 2023. Of the invoices selected for testing, the following are identified as questioned costs:
• 2 expenditures, totaling $5,708, were erroneously billed to the grant twice. Questioned costs are estimated to be approximately $9,000 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
• 2 invoices were billed to the grant at amounts higher than the supporting invoice, totaling $426 overbilled to the grant. Questioned costs are estimated to be approximately $700 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
• 5 expenditures totaling $5,868 were charged to the grant for costs relating to marketing purchases, including branded merchandise, branded apparel, etc. The Organization indicated these items were purchased with the primary intent to distribute during the National Alliance of Recovery Residences (NARR) annual conference. Though certain costs related to this conference were allowed under the grant budget, marketing costs were not included, and therefore appear to be unallowable. Questioned costs are estimated to be approximately $9,400 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
• Questioned costs were identified for costs relating to the lease of a second space. Costs totaling up to $12,000 were allocated in part to the major program as office lease expenditures but were instead described to be an employee fringe benefit. These costs were determined to be outside of those necessary and reasonable for the administration of the program.
• 3 expenditures were charged to the grant for costs that were at least partially not necessary and reasonable or otherwise appear to be unallowable. Questioned costs are estimated to be approximately $10,200 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
Cause/Context: There are not proper controls in place to review invoices and ensure grant billings are in line with allowable costs incurred. Further, a portion of lease costs appear to be classified inconsistent with the underlying nature of the space.
Effect: An overstatement of expenditures for the grant was reported and submitted for reimbursement.
Recommendation: We recommend that a full-range of controls over costs charged to federal programs be implemented. The Organization should devote the resources necessary to ensure that such costs are allowable, of direct benefit to the program, are reviewed, approved, documented, and that the accounting and reporting process is accurate. Further, controls over grant billings should be established to ensure expenditures represent actual costs incurred. All control activities, including independent review should be documented and evidence of review and approval be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a full range of controls over costs charged to federal programs. MARR’s protocol shall ensure that such costs are the direct benefit to the program, are reviewed, approved, documented and ensure the accounting and reporting process be accurate. Further, controls over grant billings will be established to ensure expenditures represent actual costs incurred. All control activities, including independent review, should be documented and evidence of review and approval will be maintained.
#2023-008 – Major Federal Award Finding – Reporting
Nature of Finding: Material Weakness in Internal Controls Over Compliance
This is a partial repeat of prior year finding #2022-009.
Criteria/Condition: Federal regulations 2 CFR 200.328 - 200.329 provide that required reporting under the federal program must be completed timely and accurately. The federal award agreement includes specific report filing due dates. Segregation of duties is also a key element of internal controls, including controls over compliance, and involves processes whereby the activities of one employee are reviewed or checked by the activities of another individual, and avoids one employee having the ability to perform a transaction or process from beginning to end. We noted during testing that no review procedures are in place surrounding these reports.
Cause/Context: Controls were not in place to ensure accurate reporting. Only one individual was involved in the reporting process.
Effect: Controls in place do not sufficiently ensure complete, accurate, and timely reporting compliance.
Recommendation: We recommend that a full-range of controls related to reporting, including federal program reporting be implemented. The Organization should devote the resources necessary to ensure that reports are timely and accurately prepared, reviewed, and approved prior to filing. All controls, including review and approval should be documented and that documentation be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a full – range of controls relating to reporting, including federal program reporting. MARR will take such steps as necessary to ensure that reports are timely and accurately prepared, reviewed, and approved prior to filing. All controls, including review and approval will be documented in such documentation to be maintained.
#2023-009 – Major Federal Award Finding – Required Policies
Nature of Finding: Compliance Finding – Uniform Guidance Administrative Requirements and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-010.
Criteria/Condition: The Uniform Guidance requires written policies and procedures that pertain to key matters important to the administration of federal grants.
Cause/Context: The Organization has not established the administrative policies required by Uniform Guidance.
Effect: The Organization is not in compliance with the administrative requirements of Uniform Guidance.
Recommendation: The Organization should adopt formal written policies related to grants management required by Uniform Guidance.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement and adopt formal written policies relating to grants management ordered by Uniform Guidance.
#2023-010 – Major Federal Award Finding – Document Retention
Nature of Finding: Compliance Finding – Uniform Guidance Administrative Requirements and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-011.
Criteria/Condition: Federal regulations 2 CFR 200.334 provides that a non-federal entity must retain all records pertinent to a federal award for a minimum period of three years from the date of submission of the annual financial report. We noted during testing that records were not consistently being maintained.
Cause/Context: For 4 of the 40 expenditures selected for testing, the Organization was unable to provide appropriate invoice documentation supporting the amount charged to the grant.
Effect: Federal expenditures could be charged to the grant at incorrect amounts or for unallowable costs.
Recommendation: We recommend the Organization implement a document retention policy that is consistent with the federal document retention requirements.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a document retention policy that is consistent with federal document retention requirements.
#2023-004 – Major Federal Award Finding – Period of Performance
Nature of Finding: Compliance Finding – Period of Performance and Material Weakness in Internal Controls over Compliance
This is a repeat of prior year finding #2022-004.
Criteria/Condition: A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance. The Organization did not have controls in place to verify that costs were being charged to the award in the correct period of performance.
Questioned Costs: Approximately $19,400
Identification of How Questioned Costs Were Computed: A sample of 40 non-payroll expenditures totaling approximately $110,000 was selected from a population of approximately $175,000 of non-payroll expenditures charged to the major program during the year ending December 31, 2023.
• Of the invoices selected for testing, 4 expenditures were billed during the month of September 2023. All 4 of these expenditures were inappropriately charged to the incorrect grant period. As a result, the questioned costs include all non-payroll expenditures billed in September 2023, which was approximately $15,700.
• Of the 36 remaining invoices selected for testing, 6 other invoices were partially or entirely billed to the incorrect grant period, totaling an additional $2,582 identified error. Questioned costs are estimated by projecting this error identified in the sample tested to the population of non-payroll expenditures billed during the remaining 11 months of the year (excluding September 2023).
Cause/Context: There are not proper controls in place to review invoices and assign them to the appropriate grant period. Seven expenditures out of forty non-payroll related expenditures tested for the grant were for contracted annual services or other costs that partially or entirely related to a separate performance period but was billed in its entirety to the current fiscal year.
Effect: An overstatement of expenditures for the grant was reported in the current year. Reimbursement was sought for expenditures outside of the grant’s period of performance.
Recommendation: We recommend procedures be established for the independent review of the grant period of performance when recording transactions and preparing grant reimbursement requests. Evidence of this review should be documented and maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to establish formal written policy documenting significant accounting procedures including but not limited to the independent review of the grant period of performance when recording transactions and preparing grant reimbursement requests. Evidence of the review to be documented and maintained according to the procedures to be implemented.
#2023-005 – Major Federal Award Finding – Allocation of Costs
Nature of Finding: Compliance Finding – Allowable Costs and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-006.
Criteria/Condition: Federal regulations 2 CFR 200.405 provide that costs benefiting two or more projects in proportions that can be easily determined must be allocated to the projects based on the proportional benefit. If proportions cannot be easily determined, the costs may be allocated to the benefitted projects on a reasonable and documented basis.
Questioned Costs: Not able to be determined.
Identification of How Questioned Costs Were Computed: Of the major program expenditures selected for testing, certain costs charged to the major program appear to be under-allocated, while others appear to be over-allocated to the major program. These matters are not isolated or contained to any particular type of expenditure. There was no meaningful methodology identified to quantify or extend the errors to the population.
Cause/Context: Controls were not in place to evaluate the allocation of costs to grants based on proportional benefit provided to each grant. For payroll costs and 1 of the 40 expenditures selected for testing, costs were divided arbitrarily when charged to grants. No documented support for the allocation methodology was present.
Effect: Expenditures that involve an allocation of costs between grants are not supported. The lack of controls results in questioned costs as a disproportionate amount of expenditures may be charged to the federal program.
Recommendation: We recommend management establish procedures and controls to allocate costs between grants based upon actual costs attributed to the grant and the particular expenditure allowed by the grant. Any such allocations should be supported by activity-level substantiation and be reviewed. Documentation of the allocation methodology, review and approval should be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to recommend to management the establishment of procedures and controls to allocate costs between grants based on actual costs attributed to grant and the particular expenditure allowed by the grant. All such allocations will be supported by activity-level substantiation and be reviewed. Documentation of the allocation methodology, review and approval will be maintained in writing.
#2023-006 – Major Federal Award Finding – Allowable Costs – Payroll
Nature of Finding: Compliance Finding – Allowable Costs and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-007.
Criteria/Condition: A non-federal entity may only charge allowable costs to federal programs. The Organization did not have controls in place to verify that costs were being charged to the award were based upon actual costs incurred and consistent with those provided in the grant budget.
Questioned Costs: Approximately $40,400
Identification of How Questioned Costs Were Computed: Payroll expenditures charged to the grant during the year were traced in total to the year-to-date payroll reports. Questioned costs represent the error identified in the testing of the population of payroll expenditures of the major program.
Cause/Context: There are not proper controls in place to review payroll costs monthly to ensure costs were charge to the grant appropriately. This resulted in three instances of noncompliance:
• Amounts were billed to the grant using estimated monthly wages rather than actual wages incurred.
• The employee portion of payroll taxes were billed to the grant twice – once as part of gross wages and again as fringe benefits and added to employer payroll tax costs.
• Costs were charged to the grant for one employee who was not listed in the grant budget as an allowable cost.
Effect: An overstatement of expenditures for the grant was reported and submitted for reimbursement.
Recommendation: We recommend that a full-range of controls over payroll and payroll related costs be implemented. The Organization should devote the resources necessary to ensure that such costs are of direct benefit to the program, are reviewed, approved, documented, and that the accounting and reporting process is accurate. Further, controls over grant billings should be established to ensure expenditures represent actual costs incurred. All control activities, including independent review should be documented and evidence of review and approval be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a full-range of control over costs charged to federal programs. MARR’s primary decision-making authority regarding such controls shall be placed with the MARR’s president. MARR’s protocol shall ensure that such costs are the direct benefit to the program, are reviewed, approved, documented and ensure the accounting and reporting process be accurate. Further, controls over grant billings will be established to ensure expenditures represent actual costs incurred. All control activities, including independent review, should be documented and evidence of review and approval will be maintained.
#2023-007 – Major Federal Award Finding – Allowable Costs – Non-Payroll
Nature of Finding: Compliance Finding – Allowable Costs and Material Weakness in Internal Controls Over Compliance
This is a partial repeat of prior year finding #2022-008.
Criteria/Condition: A non-federal entity may only charge allowable costs incurred by the entity that are necessary and reasonable for the administration of the program and are of a nature in line with the categories allowed in the grant budget. The Organization did not have controls in place to verify that costs were being charged to the award in the correct amount or for necessary and reasonable expenditures.
Questioned Costs: Approximately $41,300
Identification of How Questioned Costs Were Computed: A sample of 40 non-payroll expenditures totaling approximately $110,000 was selected from a population of approximately $175,000 of non-payroll expenditures charged to the major program during the year ending December 31, 2023. Of the invoices selected for testing, the following are identified as questioned costs:
• 2 expenditures, totaling $5,708, were erroneously billed to the grant twice. Questioned costs are estimated to be approximately $9,000 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
• 2 invoices were billed to the grant at amounts higher than the supporting invoice, totaling $426 overbilled to the grant. Questioned costs are estimated to be approximately $700 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
• 5 expenditures totaling $5,868 were charged to the grant for costs relating to marketing purchases, including branded merchandise, branded apparel, etc. The Organization indicated these items were purchased with the primary intent to distribute during the National Alliance of Recovery Residences (NARR) annual conference. Though certain costs related to this conference were allowed under the grant budget, marketing costs were not included, and therefore appear to be unallowable. Questioned costs are estimated to be approximately $9,400 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
• Questioned costs were identified for costs relating to the lease of a second space. Costs totaling up to $12,000 were allocated in part to the major program as office lease expenditures but were instead described to be an employee fringe benefit. These costs were determined to be outside of those necessary and reasonable for the administration of the program.
• 3 expenditures were charged to the grant for costs that were at least partially not necessary and reasonable or otherwise appear to be unallowable. Questioned costs are estimated to be approximately $10,200 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
Cause/Context: There are not proper controls in place to review invoices and ensure grant billings are in line with allowable costs incurred. Further, a portion of lease costs appear to be classified inconsistent with the underlying nature of the space.
Effect: An overstatement of expenditures for the grant was reported and submitted for reimbursement.
Recommendation: We recommend that a full-range of controls over costs charged to federal programs be implemented. The Organization should devote the resources necessary to ensure that such costs are allowable, of direct benefit to the program, are reviewed, approved, documented, and that the accounting and reporting process is accurate. Further, controls over grant billings should be established to ensure expenditures represent actual costs incurred. All control activities, including independent review should be documented and evidence of review and approval be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a full range of controls over costs charged to federal programs. MARR’s protocol shall ensure that such costs are the direct benefit to the program, are reviewed, approved, documented and ensure the accounting and reporting process be accurate. Further, controls over grant billings will be established to ensure expenditures represent actual costs incurred. All control activities, including independent review, should be documented and evidence of review and approval will be maintained.
#2023-008 – Major Federal Award Finding – Reporting
Nature of Finding: Material Weakness in Internal Controls Over Compliance
This is a partial repeat of prior year finding #2022-009.
Criteria/Condition: Federal regulations 2 CFR 200.328 - 200.329 provide that required reporting under the federal program must be completed timely and accurately. The federal award agreement includes specific report filing due dates. Segregation of duties is also a key element of internal controls, including controls over compliance, and involves processes whereby the activities of one employee are reviewed or checked by the activities of another individual, and avoids one employee having the ability to perform a transaction or process from beginning to end. We noted during testing that no review procedures are in place surrounding these reports.
Cause/Context: Controls were not in place to ensure accurate reporting. Only one individual was involved in the reporting process.
Effect: Controls in place do not sufficiently ensure complete, accurate, and timely reporting compliance.
Recommendation: We recommend that a full-range of controls related to reporting, including federal program reporting be implemented. The Organization should devote the resources necessary to ensure that reports are timely and accurately prepared, reviewed, and approved prior to filing. All controls, including review and approval should be documented and that documentation be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a full – range of controls relating to reporting, including federal program reporting. MARR will take such steps as necessary to ensure that reports are timely and accurately prepared, reviewed, and approved prior to filing. All controls, including review and approval will be documented in such documentation to be maintained.
#2023-009 – Major Federal Award Finding – Required Policies
Nature of Finding: Compliance Finding – Uniform Guidance Administrative Requirements and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-010.
Criteria/Condition: The Uniform Guidance requires written policies and procedures that pertain to key matters important to the administration of federal grants.
Cause/Context: The Organization has not established the administrative policies required by Uniform Guidance.
Effect: The Organization is not in compliance with the administrative requirements of Uniform Guidance.
Recommendation: The Organization should adopt formal written policies related to grants management required by Uniform Guidance.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement and adopt formal written policies relating to grants management ordered by Uniform Guidance.
#2023-010 – Major Federal Award Finding – Document Retention
Nature of Finding: Compliance Finding – Uniform Guidance Administrative Requirements and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-011.
Criteria/Condition: Federal regulations 2 CFR 200.334 provides that a non-federal entity must retain all records pertinent to a federal award for a minimum period of three years from the date of submission of the annual financial report. We noted during testing that records were not consistently being maintained.
Cause/Context: For 4 of the 40 expenditures selected for testing, the Organization was unable to provide appropriate invoice documentation supporting the amount charged to the grant.
Effect: Federal expenditures could be charged to the grant at incorrect amounts or for unallowable costs.
Recommendation: We recommend the Organization implement a document retention policy that is consistent with the federal document retention requirements.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a document retention policy that is consistent with federal document retention requirements.
#2023-004 – Major Federal Award Finding – Period of Performance
Nature of Finding: Compliance Finding – Period of Performance and Material Weakness in Internal Controls over Compliance
This is a repeat of prior year finding #2022-004.
Criteria/Condition: A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance. The Organization did not have controls in place to verify that costs were being charged to the award in the correct period of performance.
Questioned Costs: Approximately $19,400
Identification of How Questioned Costs Were Computed: A sample of 40 non-payroll expenditures totaling approximately $110,000 was selected from a population of approximately $175,000 of non-payroll expenditures charged to the major program during the year ending December 31, 2023.
• Of the invoices selected for testing, 4 expenditures were billed during the month of September 2023. All 4 of these expenditures were inappropriately charged to the incorrect grant period. As a result, the questioned costs include all non-payroll expenditures billed in September 2023, which was approximately $15,700.
• Of the 36 remaining invoices selected for testing, 6 other invoices were partially or entirely billed to the incorrect grant period, totaling an additional $2,582 identified error. Questioned costs are estimated by projecting this error identified in the sample tested to the population of non-payroll expenditures billed during the remaining 11 months of the year (excluding September 2023).
Cause/Context: There are not proper controls in place to review invoices and assign them to the appropriate grant period. Seven expenditures out of forty non-payroll related expenditures tested for the grant were for contracted annual services or other costs that partially or entirely related to a separate performance period but was billed in its entirety to the current fiscal year.
Effect: An overstatement of expenditures for the grant was reported in the current year. Reimbursement was sought for expenditures outside of the grant’s period of performance.
Recommendation: We recommend procedures be established for the independent review of the grant period of performance when recording transactions and preparing grant reimbursement requests. Evidence of this review should be documented and maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to establish formal written policy documenting significant accounting procedures including but not limited to the independent review of the grant period of performance when recording transactions and preparing grant reimbursement requests. Evidence of the review to be documented and maintained according to the procedures to be implemented.
#2023-005 – Major Federal Award Finding – Allocation of Costs
Nature of Finding: Compliance Finding – Allowable Costs and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-006.
Criteria/Condition: Federal regulations 2 CFR 200.405 provide that costs benefiting two or more projects in proportions that can be easily determined must be allocated to the projects based on the proportional benefit. If proportions cannot be easily determined, the costs may be allocated to the benefitted projects on a reasonable and documented basis.
Questioned Costs: Not able to be determined.
Identification of How Questioned Costs Were Computed: Of the major program expenditures selected for testing, certain costs charged to the major program appear to be under-allocated, while others appear to be over-allocated to the major program. These matters are not isolated or contained to any particular type of expenditure. There was no meaningful methodology identified to quantify or extend the errors to the population.
Cause/Context: Controls were not in place to evaluate the allocation of costs to grants based on proportional benefit provided to each grant. For payroll costs and 1 of the 40 expenditures selected for testing, costs were divided arbitrarily when charged to grants. No documented support for the allocation methodology was present.
Effect: Expenditures that involve an allocation of costs between grants are not supported. The lack of controls results in questioned costs as a disproportionate amount of expenditures may be charged to the federal program.
Recommendation: We recommend management establish procedures and controls to allocate costs between grants based upon actual costs attributed to the grant and the particular expenditure allowed by the grant. Any such allocations should be supported by activity-level substantiation and be reviewed. Documentation of the allocation methodology, review and approval should be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to recommend to management the establishment of procedures and controls to allocate costs between grants based on actual costs attributed to grant and the particular expenditure allowed by the grant. All such allocations will be supported by activity-level substantiation and be reviewed. Documentation of the allocation methodology, review and approval will be maintained in writing.
#2023-006 – Major Federal Award Finding – Allowable Costs – Payroll
Nature of Finding: Compliance Finding – Allowable Costs and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-007.
Criteria/Condition: A non-federal entity may only charge allowable costs to federal programs. The Organization did not have controls in place to verify that costs were being charged to the award were based upon actual costs incurred and consistent with those provided in the grant budget.
Questioned Costs: Approximately $40,400
Identification of How Questioned Costs Were Computed: Payroll expenditures charged to the grant during the year were traced in total to the year-to-date payroll reports. Questioned costs represent the error identified in the testing of the population of payroll expenditures of the major program.
Cause/Context: There are not proper controls in place to review payroll costs monthly to ensure costs were charge to the grant appropriately. This resulted in three instances of noncompliance:
• Amounts were billed to the grant using estimated monthly wages rather than actual wages incurred.
• The employee portion of payroll taxes were billed to the grant twice – once as part of gross wages and again as fringe benefits and added to employer payroll tax costs.
• Costs were charged to the grant for one employee who was not listed in the grant budget as an allowable cost.
Effect: An overstatement of expenditures for the grant was reported and submitted for reimbursement.
Recommendation: We recommend that a full-range of controls over payroll and payroll related costs be implemented. The Organization should devote the resources necessary to ensure that such costs are of direct benefit to the program, are reviewed, approved, documented, and that the accounting and reporting process is accurate. Further, controls over grant billings should be established to ensure expenditures represent actual costs incurred. All control activities, including independent review should be documented and evidence of review and approval be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a full-range of control over costs charged to federal programs. MARR’s primary decision-making authority regarding such controls shall be placed with the MARR’s president. MARR’s protocol shall ensure that such costs are the direct benefit to the program, are reviewed, approved, documented and ensure the accounting and reporting process be accurate. Further, controls over grant billings will be established to ensure expenditures represent actual costs incurred. All control activities, including independent review, should be documented and evidence of review and approval will be maintained.
#2023-007 – Major Federal Award Finding – Allowable Costs – Non-Payroll
Nature of Finding: Compliance Finding – Allowable Costs and Material Weakness in Internal Controls Over Compliance
This is a partial repeat of prior year finding #2022-008.
Criteria/Condition: A non-federal entity may only charge allowable costs incurred by the entity that are necessary and reasonable for the administration of the program and are of a nature in line with the categories allowed in the grant budget. The Organization did not have controls in place to verify that costs were being charged to the award in the correct amount or for necessary and reasonable expenditures.
Questioned Costs: Approximately $41,300
Identification of How Questioned Costs Were Computed: A sample of 40 non-payroll expenditures totaling approximately $110,000 was selected from a population of approximately $175,000 of non-payroll expenditures charged to the major program during the year ending December 31, 2023. Of the invoices selected for testing, the following are identified as questioned costs:
• 2 expenditures, totaling $5,708, were erroneously billed to the grant twice. Questioned costs are estimated to be approximately $9,000 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
• 2 invoices were billed to the grant at amounts higher than the supporting invoice, totaling $426 overbilled to the grant. Questioned costs are estimated to be approximately $700 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
• 5 expenditures totaling $5,868 were charged to the grant for costs relating to marketing purchases, including branded merchandise, branded apparel, etc. The Organization indicated these items were purchased with the primary intent to distribute during the National Alliance of Recovery Residences (NARR) annual conference. Though certain costs related to this conference were allowed under the grant budget, marketing costs were not included, and therefore appear to be unallowable. Questioned costs are estimated to be approximately $9,400 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
• Questioned costs were identified for costs relating to the lease of a second space. Costs totaling up to $12,000 were allocated in part to the major program as office lease expenditures but were instead described to be an employee fringe benefit. These costs were determined to be outside of those necessary and reasonable for the administration of the program.
• 3 expenditures were charged to the grant for costs that were at least partially not necessary and reasonable or otherwise appear to be unallowable. Questioned costs are estimated to be approximately $10,200 by projecting this error identified in the sample tested to the population of non-payroll expenditures of the major program.
Cause/Context: There are not proper controls in place to review invoices and ensure grant billings are in line with allowable costs incurred. Further, a portion of lease costs appear to be classified inconsistent with the underlying nature of the space.
Effect: An overstatement of expenditures for the grant was reported and submitted for reimbursement.
Recommendation: We recommend that a full-range of controls over costs charged to federal programs be implemented. The Organization should devote the resources necessary to ensure that such costs are allowable, of direct benefit to the program, are reviewed, approved, documented, and that the accounting and reporting process is accurate. Further, controls over grant billings should be established to ensure expenditures represent actual costs incurred. All control activities, including independent review should be documented and evidence of review and approval be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a full range of controls over costs charged to federal programs. MARR’s protocol shall ensure that such costs are the direct benefit to the program, are reviewed, approved, documented and ensure the accounting and reporting process be accurate. Further, controls over grant billings will be established to ensure expenditures represent actual costs incurred. All control activities, including independent review, should be documented and evidence of review and approval will be maintained.
#2023-008 – Major Federal Award Finding – Reporting
Nature of Finding: Material Weakness in Internal Controls Over Compliance
This is a partial repeat of prior year finding #2022-009.
Criteria/Condition: Federal regulations 2 CFR 200.328 - 200.329 provide that required reporting under the federal program must be completed timely and accurately. The federal award agreement includes specific report filing due dates. Segregation of duties is also a key element of internal controls, including controls over compliance, and involves processes whereby the activities of one employee are reviewed or checked by the activities of another individual, and avoids one employee having the ability to perform a transaction or process from beginning to end. We noted during testing that no review procedures are in place surrounding these reports.
Cause/Context: Controls were not in place to ensure accurate reporting. Only one individual was involved in the reporting process.
Effect: Controls in place do not sufficiently ensure complete, accurate, and timely reporting compliance.
Recommendation: We recommend that a full-range of controls related to reporting, including federal program reporting be implemented. The Organization should devote the resources necessary to ensure that reports are timely and accurately prepared, reviewed, and approved prior to filing. All controls, including review and approval should be documented and that documentation be maintained.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a full – range of controls relating to reporting, including federal program reporting. MARR will take such steps as necessary to ensure that reports are timely and accurately prepared, reviewed, and approved prior to filing. All controls, including review and approval will be documented in such documentation to be maintained.
#2023-009 – Major Federal Award Finding – Required Policies
Nature of Finding: Compliance Finding – Uniform Guidance Administrative Requirements and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-010.
Criteria/Condition: The Uniform Guidance requires written policies and procedures that pertain to key matters important to the administration of federal grants.
Cause/Context: The Organization has not established the administrative policies required by Uniform Guidance.
Effect: The Organization is not in compliance with the administrative requirements of Uniform Guidance.
Recommendation: The Organization should adopt formal written policies related to grants management required by Uniform Guidance.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement and adopt formal written policies relating to grants management ordered by Uniform Guidance.
#2023-010 – Major Federal Award Finding – Document Retention
Nature of Finding: Compliance Finding – Uniform Guidance Administrative Requirements and Material Weakness in Internal Controls Over Compliance
This is a repeat of prior year finding #2022-011.
Criteria/Condition: Federal regulations 2 CFR 200.334 provides that a non-federal entity must retain all records pertinent to a federal award for a minimum period of three years from the date of submission of the annual financial report. We noted during testing that records were not consistently being maintained.
Cause/Context: For 4 of the 40 expenditures selected for testing, the Organization was unable to provide appropriate invoice documentation supporting the amount charged to the grant.
Effect: Federal expenditures could be charged to the grant at incorrect amounts or for unallowable costs.
Recommendation: We recommend the Organization implement a document retention policy that is consistent with the federal document retention requirements.
Views of Responsible Officials and Planned Corrective Actions: MARR will retain a CPA consultant to implement a document retention policy that is consistent with federal document retention requirements.