2023-001 Finding – Federal Award
Type:
Subrecipient Monitoring – Non-Compliance and Significant Deficiency in Internal Control Over Compliance. (Partial repeat of finding 2022-02)
Identification of Federal Program:
Research and Development Cluster:
AL Number: 81.086 Conservation Research and Development Program
Criteria / Requirement:
2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards.
In accordance with 2 CFR section 200.332, a pass-through entity must clearly identify to the subrecipient the award as a subaward by providing the required federal information related to the award, all requirements imposed by the pass-through entity on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the provisions of contracts and grants agreements. The pass-through entity must evaluate risk of non-compliance of each subrecipient, monitoring the subrecipient and ensuring accountability of for-profit subrecipients.
Condition / Context:
Forth passed through $1,026,831 in funding to subrecipients under Assistance Listing 81.086. During our audit, we noted that Forth did not have documented written procedures or controls in place to ensure compliance with the U.S. Office of Management and Budget’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) subrecipient monitoring requirements. Improvements were made to subrecipient monitoring in 2023, and a policy was established in 2024. It was noted that within subaward contracts, required federal contract information was provided. Further, subrecipients are being evaluated for risk of non-compliance, prior to engaging in a subcontract.
While monitoring has improved, as Forth is having regular meetings to ensure tasks are being completed timely and providing technical assistance when needed, it was noted that in the sample of four subrecipients one subrecipient was subject to 2 CFR Subpart F and the audit for this entity was not obtained. Per 2 CFR 200.332(d)(2) & (3), an entity must ensure that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, highlighting the status of action planned or taken to address Single Audit Finding related to the subaward. Further, they must issue a management decision for applicable audit findings.
Cause:
Procedures were not in place to ensure that Forth is maintaining proper subrecipient monitoring for each federal subrecipient.
Effect:
Failure to maintain sufficient subrecipient monitoring may result in the wrongful use of federal funds and non‐compliance with the provisions of applicable requirements of the federal award. Questioned Costs:
None.
Recommendation:
The Organization should establish written policies and procedures regarding the contracting and monitoring of subrecipients that are in line with Uniform Guidance requirements, as well as establish organizational controls to ensure that such policies and procedures are being followed.
Management’s response:
We agree with the auditor’s comments and will implement the following action steps to improve the situation. We will create and document a procedure which ensures we obtain audits on an annual basis from our subrecipients. This procedure will be implemented by October 31, 2024
2023-002 Finding – Federal Award
Type:
Cash Management (Invoices) – Material Weakness in Internal Control over Compliance. (Repeat 2022-003)
Identification of Federal Program:
Research and Development Cluster:
AL Number: 81.086 Conservation Research and Development Program
Criteria / Requirement:
2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards.
Condition / Context:
It was noted during the audit that there were insufficient internal controls over invoices submitted for cost reimbursement related to federal grants as invoices were created and approved by one individual. While the internal controls were insufficient, our sample of invoices did not contain errors or undocumented amounts.
Cause:
Procedures were not in place to ensure that Forth is maintaining adequate internal controls over compliance in regards to cash management requirements. Key duties and functions are not segregated among organization personnel and internal control policies and procedures are inadequate to properly define the roles and responsibilities of accounting personnel performing key functions.
Effect:
Failure to maintain sufficient internal controls over invoices submitted for cost reimbursement related to federal grants may result in the wrongful use of federal funds and/or non‐compliance with the provisions of applicable requirements. Questioned Costs:
None.
Recommendation:
The Organization should establish written policies and procedures regarding invoicing for cost-reimbursement related to federal grants which include proper segregation of duties.
Management’s response:
We agree with the auditor’s comments, and the following actions have been or will be taken to improve the situation. We hired a Grants Accountant in 2024 to take over the responsibility of preparing invoices for cost-reimbursement. This allows for the additional control of the Senior Finance Manager reviewing the invoices. This review is now being documented in writing. Additionally, there are procedures in place to ensure if the Senior Finance Manager prepares the invoice, the Director of Finance & Operations reviews and documents approval of the invoice. We will establish written policies and procedures to document this process by October 31, 2024.
2023-003 Finding – Federal Award
Type:
Reporting (Special Reporting – FFATA / FSRS) – Material Non-Compliance and Material Weakness in Internal Control over Compliance. (Repeat 2022-003)
Identification of Federal Program:
Research and Development Cluster:
AL Number: 81.086 Conservation Research and Development Program
Criteria / Requirement:
2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards.
Under the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282), as amended by Section 6202 of Pub. L. No. 110-252, that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). The subawards meeting the above definition are to be reported no later than the last day of the month following the month in which the subaward/subaward amendment obligation was made or the subcontract award/subcontract modification was made.
Condition / Context:
During 2023, Forth entered into 18 first-tier subawards greater than $30,000. KT tested 4 of these subawards, noting that these were reported under the Federal Funding Accountability and Transparency Act to the Federal Subaward Reporting System. However, the reports submitted were not made within the required timeframe. Cause:
Procedures were not in place to ensure that Forth is maintaining adequate internal controls over compliance in regards to federal special reporting. Procedures are not in place to track and report first-tier subawards.
Effect:
Failure to maintain sufficient internal controls and proper procedures, including tracking over reporting first-tier subawards may result in wrongful use of federal funds and non-compliance with federal awards.
Questioned Costs:
None.
Recommendation:
The Organization should establish written policies and procedures regarding first-tier subawards including tracking and proper internal control procedures.
Management’s response:
We agree with the auditor’s comments and the following actions have been taken to improve the situation. We hired a Contracts & Compliance Manager in 2024 who is now responsible for reporting first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) by the reporting due date. Additionally, we established written policies and procedures regarding first-tier subawards including tracking and proper internal control procedures.
2023-004 Finding – Federal Award
Type:
Allowable Costs – Non-Compliance and Material Weakness in Internal Control over Compliance.
Identification of Federal Program:
Research and Development Cluster:
AL Number: 81.086 Conservation Research and Development Program
Criteria / Requirement:
2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards.
Condition / Context:
It was noted during the audit that there were insufficient internal controls over expenses recorded through allocations related to federal grants, as allocation journal entries were created and posted by one individual. Of 25 expenditures sampled, 12 were allocation journal entries. The payroll allocation journal entries are a manual process in which time is tracked per timesheets but then is input into a workbook to allocate expenses to funders based on percentage of time dedicated to certain programs. Of the 10 allocated payroll expenditures, there were 2 instances where the payrate used to calculate the allocation did not match the approved current payrate with the associated employee. Cause:
Procedures were not in place to ensure that Forth is maintaining adequate internal controls over compliance in regards to allocated expenditures. Additionally, the manual process in which these allocations are calculated leaves open the possibility of misallocating amounts among funders.
Effect:
Failure to maintain sufficient internal controls and proper procedures may result in over-allocation or under-allocation of expenditures related federal awards and non-compliance with federal awards.
Questioned Costs:
None.
Recommendation:
The Organization should establish written policies and procedures regarding allocation processes, including ensuring internal controls are in place. It would also be beneficial to eliminate or reduce the amount of manual inputs into the allocation process.
Management’s response:
We agree with the auditor’s comments, and the following action will be taken to improve the situation. We will establish written policies and procedures regarding allocation processes, including ensuring internal controls are in place by November 30, 2024. Simultaneously, we will also consider options to eliminate or reduce the amount of manual inputs into the allocation process.
2023-005 Finding – Federal Award
Type:
Procurement – Material Non-Compliance and Material Weakness in Internal Control over Compliance.
Identification of Federal Program:
Research and Development Cluster:
AL Number: 81.086 Conservation Research and Development Program
Criteria / Requirement:
Per 2 CFR sections 200.318 through 200.326 an entity receiving federal funds must follow their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200.
Condition / Context:
During the audit it was noted that Forth had established a Procurement Policy which incorporated procurement requirements identified in 2 CFF Part 200. However, of the 3 items selected for testing did not follow the Procurement Policy. Cause:
While the Procurement Policy is documented, the procedures and policies were not being followed.
Effect:
Failure to maintain sufficient internal controls and proper procedures may result in wrongful use of federal funds and non-compliance with federal awards.
Questioned Costs:
None.
Recommendation:
The Organization should follow establish written policies and procedures regarding procurement and properly document the process for each procurement made.
Management’s response:
We agree with the auditor’s comments and the following actions have been taken to improve the situation. We hired a Contracts & Compliance Manager in 2024 who is now responsible for ensuring the procurement process is properly documented for each procurement made.
2023-001 Finding – Federal Award
Type:
Subrecipient Monitoring – Non-Compliance and Significant Deficiency in Internal Control Over Compliance. (Partial repeat of finding 2022-02)
Identification of Federal Program:
Research and Development Cluster:
AL Number: 81.086 Conservation Research and Development Program
Criteria / Requirement:
2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards.
In accordance with 2 CFR section 200.332, a pass-through entity must clearly identify to the subrecipient the award as a subaward by providing the required federal information related to the award, all requirements imposed by the pass-through entity on the subrecipient so that the federal award is used in accordance with federal statutes, regulations, and the provisions of contracts and grants agreements. The pass-through entity must evaluate risk of non-compliance of each subrecipient, monitoring the subrecipient and ensuring accountability of for-profit subrecipients.
Condition / Context:
Forth passed through $1,026,831 in funding to subrecipients under Assistance Listing 81.086. During our audit, we noted that Forth did not have documented written procedures or controls in place to ensure compliance with the U.S. Office of Management and Budget’s Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) subrecipient monitoring requirements. Improvements were made to subrecipient monitoring in 2023, and a policy was established in 2024. It was noted that within subaward contracts, required federal contract information was provided. Further, subrecipients are being evaluated for risk of non-compliance, prior to engaging in a subcontract.
While monitoring has improved, as Forth is having regular meetings to ensure tasks are being completed timely and providing technical assistance when needed, it was noted that in the sample of four subrecipients one subrecipient was subject to 2 CFR Subpart F and the audit for this entity was not obtained. Per 2 CFR 200.332(d)(2) & (3), an entity must ensure that the subrecipient takes timely and appropriate action on all deficiencies pertaining to the Federal award provided to the subrecipient from the pass-through entity detected through audits, highlighting the status of action planned or taken to address Single Audit Finding related to the subaward. Further, they must issue a management decision for applicable audit findings.
Cause:
Procedures were not in place to ensure that Forth is maintaining proper subrecipient monitoring for each federal subrecipient.
Effect:
Failure to maintain sufficient subrecipient monitoring may result in the wrongful use of federal funds and non‐compliance with the provisions of applicable requirements of the federal award. Questioned Costs:
None.
Recommendation:
The Organization should establish written policies and procedures regarding the contracting and monitoring of subrecipients that are in line with Uniform Guidance requirements, as well as establish organizational controls to ensure that such policies and procedures are being followed.
Management’s response:
We agree with the auditor’s comments and will implement the following action steps to improve the situation. We will create and document a procedure which ensures we obtain audits on an annual basis from our subrecipients. This procedure will be implemented by October 31, 2024
2023-002 Finding – Federal Award
Type:
Cash Management (Invoices) – Material Weakness in Internal Control over Compliance. (Repeat 2022-003)
Identification of Federal Program:
Research and Development Cluster:
AL Number: 81.086 Conservation Research and Development Program
Criteria / Requirement:
2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards.
Condition / Context:
It was noted during the audit that there were insufficient internal controls over invoices submitted for cost reimbursement related to federal grants as invoices were created and approved by one individual. While the internal controls were insufficient, our sample of invoices did not contain errors or undocumented amounts.
Cause:
Procedures were not in place to ensure that Forth is maintaining adequate internal controls over compliance in regards to cash management requirements. Key duties and functions are not segregated among organization personnel and internal control policies and procedures are inadequate to properly define the roles and responsibilities of accounting personnel performing key functions.
Effect:
Failure to maintain sufficient internal controls over invoices submitted for cost reimbursement related to federal grants may result in the wrongful use of federal funds and/or non‐compliance with the provisions of applicable requirements. Questioned Costs:
None.
Recommendation:
The Organization should establish written policies and procedures regarding invoicing for cost-reimbursement related to federal grants which include proper segregation of duties.
Management’s response:
We agree with the auditor’s comments, and the following actions have been or will be taken to improve the situation. We hired a Grants Accountant in 2024 to take over the responsibility of preparing invoices for cost-reimbursement. This allows for the additional control of the Senior Finance Manager reviewing the invoices. This review is now being documented in writing. Additionally, there are procedures in place to ensure if the Senior Finance Manager prepares the invoice, the Director of Finance & Operations reviews and documents approval of the invoice. We will establish written policies and procedures to document this process by October 31, 2024.
2023-003 Finding – Federal Award
Type:
Reporting (Special Reporting – FFATA / FSRS) – Material Non-Compliance and Material Weakness in Internal Control over Compliance. (Repeat 2022-003)
Identification of Federal Program:
Research and Development Cluster:
AL Number: 81.086 Conservation Research and Development Program
Criteria / Requirement:
2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards.
Under the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282), as amended by Section 6202 of Pub. L. No. 110-252, that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). The subawards meeting the above definition are to be reported no later than the last day of the month following the month in which the subaward/subaward amendment obligation was made or the subcontract award/subcontract modification was made.
Condition / Context:
During 2023, Forth entered into 18 first-tier subawards greater than $30,000. KT tested 4 of these subawards, noting that these were reported under the Federal Funding Accountability and Transparency Act to the Federal Subaward Reporting System. However, the reports submitted were not made within the required timeframe. Cause:
Procedures were not in place to ensure that Forth is maintaining adequate internal controls over compliance in regards to federal special reporting. Procedures are not in place to track and report first-tier subawards.
Effect:
Failure to maintain sufficient internal controls and proper procedures, including tracking over reporting first-tier subawards may result in wrongful use of federal funds and non-compliance with federal awards.
Questioned Costs:
None.
Recommendation:
The Organization should establish written policies and procedures regarding first-tier subawards including tracking and proper internal control procedures.
Management’s response:
We agree with the auditor’s comments and the following actions have been taken to improve the situation. We hired a Contracts & Compliance Manager in 2024 who is now responsible for reporting first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) by the reporting due date. Additionally, we established written policies and procedures regarding first-tier subawards including tracking and proper internal control procedures.
2023-004 Finding – Federal Award
Type:
Allowable Costs – Non-Compliance and Material Weakness in Internal Control over Compliance.
Identification of Federal Program:
Research and Development Cluster:
AL Number: 81.086 Conservation Research and Development Program
Criteria / Requirement:
2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards.
Condition / Context:
It was noted during the audit that there were insufficient internal controls over expenses recorded through allocations related to federal grants, as allocation journal entries were created and posted by one individual. Of 25 expenditures sampled, 12 were allocation journal entries. The payroll allocation journal entries are a manual process in which time is tracked per timesheets but then is input into a workbook to allocate expenses to funders based on percentage of time dedicated to certain programs. Of the 10 allocated payroll expenditures, there were 2 instances where the payrate used to calculate the allocation did not match the approved current payrate with the associated employee. Cause:
Procedures were not in place to ensure that Forth is maintaining adequate internal controls over compliance in regards to allocated expenditures. Additionally, the manual process in which these allocations are calculated leaves open the possibility of misallocating amounts among funders.
Effect:
Failure to maintain sufficient internal controls and proper procedures may result in over-allocation or under-allocation of expenditures related federal awards and non-compliance with federal awards.
Questioned Costs:
None.
Recommendation:
The Organization should establish written policies and procedures regarding allocation processes, including ensuring internal controls are in place. It would also be beneficial to eliminate or reduce the amount of manual inputs into the allocation process.
Management’s response:
We agree with the auditor’s comments, and the following action will be taken to improve the situation. We will establish written policies and procedures regarding allocation processes, including ensuring internal controls are in place by November 30, 2024. Simultaneously, we will also consider options to eliminate or reduce the amount of manual inputs into the allocation process.
2023-005 Finding – Federal Award
Type:
Procurement – Material Non-Compliance and Material Weakness in Internal Control over Compliance.
Identification of Federal Program:
Research and Development Cluster:
AL Number: 81.086 Conservation Research and Development Program
Criteria / Requirement:
Per 2 CFR sections 200.318 through 200.326 an entity receiving federal funds must follow their own documented procurement procedures, which reflect applicable state and local laws and regulations, provided that the procurements conform to applicable federal statutes and the procurement requirements identified in 2 CFR Part 200.
Condition / Context:
During the audit it was noted that Forth had established a Procurement Policy which incorporated procurement requirements identified in 2 CFF Part 200. However, of the 3 items selected for testing did not follow the Procurement Policy. Cause:
While the Procurement Policy is documented, the procedures and policies were not being followed.
Effect:
Failure to maintain sufficient internal controls and proper procedures may result in wrongful use of federal funds and non-compliance with federal awards.
Questioned Costs:
None.
Recommendation:
The Organization should follow establish written policies and procedures regarding procurement and properly document the process for each procurement made.
Management’s response:
We agree with the auditor’s comments and the following actions have been taken to improve the situation. We hired a Contracts & Compliance Manager in 2024 who is now responsible for ensuring the procurement process is properly documented for each procurement made.