Audit 323067

Finding 2023–002: Internal Controls over Allowable Activities and Costs Federal Department: U.S. Department of Treasury Pass-through Agencies: Cook County, Illinois and Women's Business Development Center COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, Federal Assistance Listing Number 21.027 Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards for Financial and Program Management Section 200.303, Internal controls states “The non-Federal” entity must: (1) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Section 200.430 (i) Standards for Documentation of Personnel Expenses states (1) Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities…; (v) Comply with the established accounting policies and practices of the non-federal entity…; (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-federal entity's written policies) are identified and entered into the records in a timely manner. Short-term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the federal award is accurate, allowable, and properly allocated. Per Exhibit A, Section D – Program Administration and Process Overview of the Subrecipient Agreement for the American Rescue Plan Act – State and Local Fiscal Recovery Funds dated July 20, 2022 with Cook County, Illinois, SDA was required to perform certain eligibility verification of program participant. The agreement notes that the subrecipient (SDA) has discretion on how to verify participants eligibility but should define and consistently apply an intake policy that includes maintaining documentation on each beneficiary that supports their eligibility, such as signed self-attestation forms from beneficiaries, financial documents that demonstrate economic hardship, geographic data showing that a program participant operates in a region that experienced disproportionate pandemic harm. SDA utilized an eligibility form (formerly panel review form) to document compliance with this requirement. Condition During the current audit period, SDA did not maintain adequate controls over allowable activities and costs related to its federally funded program. Cause SDA implemented the fiscal policy in 2023, which improved data retention and management for grant reporting of federal programs. Due to inconsistency in staffing during 2023, however, some historical gaps in data were found that were unable to be corrected prior to or during the 2023 audit. In addition, with the implementation of SDA’s customized Salesforce data management system, some data was deleted or lost during the transition, resulting in incomplete or missing records. Effect The failure to maintain adequate supporting documentation to ensure all expenditures, including personnel costs, are accurate, reasonable and allowable is a violation of federal regulations. Also, not maintaining support for actual time spent by employees on the program could result in unallowed payroll costs being charged to the federally funded program. Questioned Costs We noted total questioned costs of $36,170. Context During our review of 40 expenditures (from a 547 population) and related payroll activities (from a population of 58 totaling $231,798), we noted the following:  For 18 expenditures reviewed, we were not provided with the cost allocation schedule to support the actual charges to the federal program. Following our review of the total invoice amount, we did not note any costs that were deemed to be unallowed per the grantor(s) requirements and federal regulations.  During our review of 10 payroll expense items, we noted that payroll expenses charged to the program were based on estimates instead of the actual time and effort of reporting, which totaled $36,170.  We were provided with a listing of 244 clients served who were required to undergo an eligibility/intake review as specified in the grant agreement. We were not provided documentation, such as a completed eligibility form, to verify that the eligibility/intake review was performed for 21 of 25 clients served that were tested. It appears data was lost during the Salesforce (electronic system utilized to store eligibility data) system migration. Identification of Repeated Findings Repeated (Prior Finding No. 2022-002). Recommendation We recommend that SDA implement procedures to ensure all expenditures, including personnel costs, are properly reviewed and supporting documentation maintained in accordance with federal regulations. Views of Responsible Officials and Planned Corrective Action SDA agrees with the finding and recommendation. See SDA’s Corrective Action Plan on pages 40 – 44.

Finding 2023–003: Procurement Federal Department: U.S. Department of Treasury Pass-through Agencies: Cook County, Illinois and Women's Business Development Center COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, Federal Assistance Listing Number 21.027 Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards for Financial and Program Management Section 200.318, General procurement standards (a) states “the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in Section 200.317 through 200.327.” Section 200.318 (i) states “the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.” Also, Section 200.327 Contract provisions states that the non-Federal entity's contracts must contain the applicable provisions described in Appendix II to Part 200 – Contract Provisions for Non-Federal Entity Contracts Under Federal Award. SDA’s Fiscal Policies and Procedures Manual updated July 21, 2022 (“the Manual”) states “Procurement shall be made using one of the following methods: 1) Micro and Small Purchase Threshold; 2) Competitive Sealed Bids and Competitive Negotiations; and 3) Non-Competitive Negotiations. All methods of procurement, when funded by federal grants or contracts, must follow procurement requirements contained in the OMB, Uniform Administrative Requirements, Costs Principles, and Audit Requirements for federal awards. Any purchases over $10,000 must bid competitively if subject to a single federal audit.” In addition, the Manual states “purchases related to Federally funded grants over $10,000 will be bid through either a Request for Proposal (RFP) or Request for Qualifications (RFQ) process. In addition, Request for Information (RFI) process may be used to help inform the development of either RFP, RFQ or other forms of procurement. Awards will be awarded to responses that meet the outlined criteria and reflect the lowest responsible bid. Contractors will be excluded from conducting business with SDA if the contractor has been debarred and/or suspended from conducting business with the federal government. On a regular basis, SDA will check vendors for any debarment status change on the federal System for Award Management (SAM). All source documents supporting any given transaction (e.g., receipts, invoices, and RFP data) will be retained and filed with SDA contract files in a centralized location. At a minimum, source document data must be sufficient to establish the basis for selection, the basis for the cost (including the reasonableness of cost), the rationale for the method of procurement and selection of contract type, and the basis for payment.” Condition During the current audit period, SDA did not adequately ensure federally funded contracts issued to vendors/contractors followed federal regulations and its internal policy, which includes maintaining documents to support its procurement decisions. Cause Based on our discussions with management, SDA completed a formal RFQ process for all vendors selected but did not maintain adequate documentation of the decision-making process.   Effect The failure to maintain adequate documentation to support the procurement of federally funded contracts is a violation of federal regulations. Questioned Costs None. Context During our tests of procurement, we noted a total of four federally funded contracts were awarded by SDA during fiscal year 2023 (based on SDA’s procurement policy that required contracts with expenditures over the $10,000 threshold requiring competitive bid). We selected all four contracts for testing and noted the following:  For all four contracts, we noted no evidence that debarment/suspension verification checks were performed prior to awarding the contract.  For two contracts, we noted no evidence (justification memo) to support the basis for contractor selection (based on evaluation criteria and scoring outlined in the RFQs).  We noted that while the contract agreement includes language that the contractor shall comply with all appliable laws, ordinances, and codes of federal, state and local government. To avoid any confusion on the part of the contractors regarding federal compliance, a direct reference to 2 CFR Part 200 Appendix II should be included in the contract. Identification of Repeated Findings Repeated (Prior Finding No. 2022-003). Recommendation We recommend that SDA’s management adhere to its written policy and maintain documentation, including its justification memo to support all management decisions related to federally funded procurements to comply with federal regulations. Views of Responsible Officials and Planned Corrective Action SDA agrees with the finding and recommendation. See SDA’s Corrective Action Plan on pages 40 – 44.

Finding 2023–004: Reporting Federal Department: U.S. Department of Treasury Pass-through Agencies: Cook County, Illinois and Women's Business Development Center COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, Federal Assistance Listing Number 21.027 Criteria The Subrecipient Agreement for American Rescue Plan Act – State and Local Fiscal Recovery Funds between Cook County, Illinois (the County) and SDA, Exhibit A – Scope of Work states SDA shall provide performance and financial metrics and reports to the County on a monthly basis or as determined by the County and outlined in reporting and metrics sections of this agreement. Per the agreement, invoice (expense) submission is due at the end of each month and/or if funds are received in advance, the submission is due within one month of the expenditure. In addition, monthly performance (impact metrics) reporting of data will take place on the 15th day of each month following the reporting period in which it is applicable. The following program metrics will be collected and provided to the County in the following categories: 1) Client service metrics; 2) Develop annual survey to capture business growth metrics; 3) Develop annual survey to capture capital metrics; 4) Marketing and outreach metrics; and 5) Financial reporting. The 2022 Subaward and Fund Distribution Memorandum of Understanding (MOU) agreement between the Women’s Business Development Center (WBDC) and SDA states that financial reports, back-up documentation and invoices are to be submitted on a quarterly basis. Per SDA, the NT 110 report is due by the 15th day of each month. Condition During the current audit period, SDA did not comply with the reporting requirements outlined in its grant agreements. Cause This finding occurred in part due to a massive change in reporting systems by the County, which required manual reports submitted while GovGrants was corrected and fixed for submission. In addition, the County did bulk uploads of prior submitted data which did not save the original submission dates of SDA reports. Finally, SDA needs to be more consistent with following fiscal policies to the letter. Effect Failure to submit reports in a timely manner impairs the grantor agency’s ability to monitor program activities and could result in the loss of grant funding. Also, the failure to maintain adequate supporting documentation could result in inaccurate reporting and is a violation of grantor(s) reporting requirements.   Questioned Costs None. Context During our tests of monthly and quarterly reports submitted under the program, we reviewed a total of eight financial and nine performance reports (six monthly financial and performance reports from the two County (NT-106 and NT-108) grant agreements and two quarterly financial and three monthly performance reports from the WBDC (NT-110) grant agreement). We noted the following:  For all nine performance reports, we noted no evidence of review/approval of the reports prior to submission during 2023.  For one NT-106 and all three NT-110 monthly performance reports tested, we were not provided with any evidence of report submission. As such, we were unable to verify that the reports were submitted in a timely manner. Also, for one of these NT-106 reports, we were not provided with any supporting documentation to verify the performance metrics included in the report.  We noted two reports (one NT-108 monthly performance report and one NT-110 quarterly financial report) were submitted late, ranging from 13 to 70 days late. Identification of Repeated Findings Repeated (Prior Finding No. 2022-004). Recommendation We recommend that SDA implement procedures to ensure required reports are prepared, reviewed and submitted in a timely manner and in compliance with its grant agreements. Additionally, adequate documentation should be appropriately maintained to support all reports prepared and submitted under the grant agreements. Views of Responsible Officials and Planned Corrective Action SDA agrees with the finding and recommendation. See SDA’s Corrective Action Plan on pages 40 – 44.

Finding 2023–002: Internal Controls over Allowable Activities and Costs Federal Department: U.S. Department of Treasury Pass-through Agencies: Cook County, Illinois and Women's Business Development Center COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, Federal Assistance Listing Number 21.027 Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards for Financial and Program Management Section 200.303, Internal controls states “The non-Federal” entity must: (1) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Section 200.430 (i) Standards for Documentation of Personnel Expenses states (1) Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities…; (v) Comply with the established accounting policies and practices of the non-federal entity…; (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-federal entity's written policies) are identified and entered into the records in a timely manner. Short-term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the federal award is accurate, allowable, and properly allocated. Per Exhibit A, Section D – Program Administration and Process Overview of the Subrecipient Agreement for the American Rescue Plan Act – State and Local Fiscal Recovery Funds dated July 20, 2022 with Cook County, Illinois, SDA was required to perform certain eligibility verification of program participant. The agreement notes that the subrecipient (SDA) has discretion on how to verify participants eligibility but should define and consistently apply an intake policy that includes maintaining documentation on each beneficiary that supports their eligibility, such as signed self-attestation forms from beneficiaries, financial documents that demonstrate economic hardship, geographic data showing that a program participant operates in a region that experienced disproportionate pandemic harm. SDA utilized an eligibility form (formerly panel review form) to document compliance with this requirement. Condition During the current audit period, SDA did not maintain adequate controls over allowable activities and costs related to its federally funded program. Cause SDA implemented the fiscal policy in 2023, which improved data retention and management for grant reporting of federal programs. Due to inconsistency in staffing during 2023, however, some historical gaps in data were found that were unable to be corrected prior to or during the 2023 audit. In addition, with the implementation of SDA’s customized Salesforce data management system, some data was deleted or lost during the transition, resulting in incomplete or missing records. Effect The failure to maintain adequate supporting documentation to ensure all expenditures, including personnel costs, are accurate, reasonable and allowable is a violation of federal regulations. Also, not maintaining support for actual time spent by employees on the program could result in unallowed payroll costs being charged to the federally funded program. Questioned Costs We noted total questioned costs of $36,170. Context During our review of 40 expenditures (from a 547 population) and related payroll activities (from a population of 58 totaling $231,798), we noted the following:  For 18 expenditures reviewed, we were not provided with the cost allocation schedule to support the actual charges to the federal program. Following our review of the total invoice amount, we did not note any costs that were deemed to be unallowed per the grantor(s) requirements and federal regulations.  During our review of 10 payroll expense items, we noted that payroll expenses charged to the program were based on estimates instead of the actual time and effort of reporting, which totaled $36,170.  We were provided with a listing of 244 clients served who were required to undergo an eligibility/intake review as specified in the grant agreement. We were not provided documentation, such as a completed eligibility form, to verify that the eligibility/intake review was performed for 21 of 25 clients served that were tested. It appears data was lost during the Salesforce (electronic system utilized to store eligibility data) system migration. Identification of Repeated Findings Repeated (Prior Finding No. 2022-002). Recommendation We recommend that SDA implement procedures to ensure all expenditures, including personnel costs, are properly reviewed and supporting documentation maintained in accordance with federal regulations. Views of Responsible Officials and Planned Corrective Action SDA agrees with the finding and recommendation. See SDA’s Corrective Action Plan on pages 40 – 44.

Finding 2023–003: Procurement Federal Department: U.S. Department of Treasury Pass-through Agencies: Cook County, Illinois and Women's Business Development Center COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, Federal Assistance Listing Number 21.027 Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards for Financial and Program Management Section 200.318, General procurement standards (a) states “the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in Section 200.317 through 200.327.” Section 200.318 (i) states “the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.” Also, Section 200.327 Contract provisions states that the non-Federal entity's contracts must contain the applicable provisions described in Appendix II to Part 200 – Contract Provisions for Non-Federal Entity Contracts Under Federal Award. SDA’s Fiscal Policies and Procedures Manual updated July 21, 2022 (“the Manual”) states “Procurement shall be made using one of the following methods: 1) Micro and Small Purchase Threshold; 2) Competitive Sealed Bids and Competitive Negotiations; and 3) Non-Competitive Negotiations. All methods of procurement, when funded by federal grants or contracts, must follow procurement requirements contained in the OMB, Uniform Administrative Requirements, Costs Principles, and Audit Requirements for federal awards. Any purchases over $10,000 must bid competitively if subject to a single federal audit.” In addition, the Manual states “purchases related to Federally funded grants over $10,000 will be bid through either a Request for Proposal (RFP) or Request for Qualifications (RFQ) process. In addition, Request for Information (RFI) process may be used to help inform the development of either RFP, RFQ or other forms of procurement. Awards will be awarded to responses that meet the outlined criteria and reflect the lowest responsible bid. Contractors will be excluded from conducting business with SDA if the contractor has been debarred and/or suspended from conducting business with the federal government. On a regular basis, SDA will check vendors for any debarment status change on the federal System for Award Management (SAM). All source documents supporting any given transaction (e.g., receipts, invoices, and RFP data) will be retained and filed with SDA contract files in a centralized location. At a minimum, source document data must be sufficient to establish the basis for selection, the basis for the cost (including the reasonableness of cost), the rationale for the method of procurement and selection of contract type, and the basis for payment.” Condition During the current audit period, SDA did not adequately ensure federally funded contracts issued to vendors/contractors followed federal regulations and its internal policy, which includes maintaining documents to support its procurement decisions. Cause Based on our discussions with management, SDA completed a formal RFQ process for all vendors selected but did not maintain adequate documentation of the decision-making process.   Effect The failure to maintain adequate documentation to support the procurement of federally funded contracts is a violation of federal regulations. Questioned Costs None. Context During our tests of procurement, we noted a total of four federally funded contracts were awarded by SDA during fiscal year 2023 (based on SDA’s procurement policy that required contracts with expenditures over the $10,000 threshold requiring competitive bid). We selected all four contracts for testing and noted the following:  For all four contracts, we noted no evidence that debarment/suspension verification checks were performed prior to awarding the contract.  For two contracts, we noted no evidence (justification memo) to support the basis for contractor selection (based on evaluation criteria and scoring outlined in the RFQs).  We noted that while the contract agreement includes language that the contractor shall comply with all appliable laws, ordinances, and codes of federal, state and local government. To avoid any confusion on the part of the contractors regarding federal compliance, a direct reference to 2 CFR Part 200 Appendix II should be included in the contract. Identification of Repeated Findings Repeated (Prior Finding No. 2022-003). Recommendation We recommend that SDA’s management adhere to its written policy and maintain documentation, including its justification memo to support all management decisions related to federally funded procurements to comply with federal regulations. Views of Responsible Officials and Planned Corrective Action SDA agrees with the finding and recommendation. See SDA’s Corrective Action Plan on pages 40 – 44.

Finding 2023–004: Reporting Federal Department: U.S. Department of Treasury Pass-through Agencies: Cook County, Illinois and Women's Business Development Center COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, Federal Assistance Listing Number 21.027 Criteria The Subrecipient Agreement for American Rescue Plan Act – State and Local Fiscal Recovery Funds between Cook County, Illinois (the County) and SDA, Exhibit A – Scope of Work states SDA shall provide performance and financial metrics and reports to the County on a monthly basis or as determined by the County and outlined in reporting and metrics sections of this agreement. Per the agreement, invoice (expense) submission is due at the end of each month and/or if funds are received in advance, the submission is due within one month of the expenditure. In addition, monthly performance (impact metrics) reporting of data will take place on the 15th day of each month following the reporting period in which it is applicable. The following program metrics will be collected and provided to the County in the following categories: 1) Client service metrics; 2) Develop annual survey to capture business growth metrics; 3) Develop annual survey to capture capital metrics; 4) Marketing and outreach metrics; and 5) Financial reporting. The 2022 Subaward and Fund Distribution Memorandum of Understanding (MOU) agreement between the Women’s Business Development Center (WBDC) and SDA states that financial reports, back-up documentation and invoices are to be submitted on a quarterly basis. Per SDA, the NT 110 report is due by the 15th day of each month. Condition During the current audit period, SDA did not comply with the reporting requirements outlined in its grant agreements. Cause This finding occurred in part due to a massive change in reporting systems by the County, which required manual reports submitted while GovGrants was corrected and fixed for submission. In addition, the County did bulk uploads of prior submitted data which did not save the original submission dates of SDA reports. Finally, SDA needs to be more consistent with following fiscal policies to the letter. Effect Failure to submit reports in a timely manner impairs the grantor agency’s ability to monitor program activities and could result in the loss of grant funding. Also, the failure to maintain adequate supporting documentation could result in inaccurate reporting and is a violation of grantor(s) reporting requirements.   Questioned Costs None. Context During our tests of monthly and quarterly reports submitted under the program, we reviewed a total of eight financial and nine performance reports (six monthly financial and performance reports from the two County (NT-106 and NT-108) grant agreements and two quarterly financial and three monthly performance reports from the WBDC (NT-110) grant agreement). We noted the following:  For all nine performance reports, we noted no evidence of review/approval of the reports prior to submission during 2023.  For one NT-106 and all three NT-110 monthly performance reports tested, we were not provided with any evidence of report submission. As such, we were unable to verify that the reports were submitted in a timely manner. Also, for one of these NT-106 reports, we were not provided with any supporting documentation to verify the performance metrics included in the report.  We noted two reports (one NT-108 monthly performance report and one NT-110 quarterly financial report) were submitted late, ranging from 13 to 70 days late. Identification of Repeated Findings Repeated (Prior Finding No. 2022-004). Recommendation We recommend that SDA implement procedures to ensure required reports are prepared, reviewed and submitted in a timely manner and in compliance with its grant agreements. Additionally, adequate documentation should be appropriately maintained to support all reports prepared and submitted under the grant agreements. Views of Responsible Officials and Planned Corrective Action SDA agrees with the finding and recommendation. See SDA’s Corrective Action Plan on pages 40 – 44.

Finding 2023–002: Internal Controls over Allowable Activities and Costs Federal Department: U.S. Department of Treasury Pass-through Agencies: Cook County, Illinois and Women's Business Development Center COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, Federal Assistance Listing Number 21.027 Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards for Financial and Program Management Section 200.303, Internal controls states “The non-Federal” entity must: (1) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Section 200.430 (i) Standards for Documentation of Personnel Expenses states (1) Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities…; (v) Comply with the established accounting policies and practices of the non-federal entity…; (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-federal entity's written policies) are identified and entered into the records in a timely manner. Short-term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the federal award is accurate, allowable, and properly allocated. Per Exhibit A, Section D – Program Administration and Process Overview of the Subrecipient Agreement for the American Rescue Plan Act – State and Local Fiscal Recovery Funds dated July 20, 2022 with Cook County, Illinois, SDA was required to perform certain eligibility verification of program participant. The agreement notes that the subrecipient (SDA) has discretion on how to verify participants eligibility but should define and consistently apply an intake policy that includes maintaining documentation on each beneficiary that supports their eligibility, such as signed self-attestation forms from beneficiaries, financial documents that demonstrate economic hardship, geographic data showing that a program participant operates in a region that experienced disproportionate pandemic harm. SDA utilized an eligibility form (formerly panel review form) to document compliance with this requirement. Condition During the current audit period, SDA did not maintain adequate controls over allowable activities and costs related to its federally funded program. Cause SDA implemented the fiscal policy in 2023, which improved data retention and management for grant reporting of federal programs. Due to inconsistency in staffing during 2023, however, some historical gaps in data were found that were unable to be corrected prior to or during the 2023 audit. In addition, with the implementation of SDA’s customized Salesforce data management system, some data was deleted or lost during the transition, resulting in incomplete or missing records. Effect The failure to maintain adequate supporting documentation to ensure all expenditures, including personnel costs, are accurate, reasonable and allowable is a violation of federal regulations. Also, not maintaining support for actual time spent by employees on the program could result in unallowed payroll costs being charged to the federally funded program. Questioned Costs We noted total questioned costs of $36,170. Context During our review of 40 expenditures (from a 547 population) and related payroll activities (from a population of 58 totaling $231,798), we noted the following:  For 18 expenditures reviewed, we were not provided with the cost allocation schedule to support the actual charges to the federal program. Following our review of the total invoice amount, we did not note any costs that were deemed to be unallowed per the grantor(s) requirements and federal regulations.  During our review of 10 payroll expense items, we noted that payroll expenses charged to the program were based on estimates instead of the actual time and effort of reporting, which totaled $36,170.  We were provided with a listing of 244 clients served who were required to undergo an eligibility/intake review as specified in the grant agreement. We were not provided documentation, such as a completed eligibility form, to verify that the eligibility/intake review was performed for 21 of 25 clients served that were tested. It appears data was lost during the Salesforce (electronic system utilized to store eligibility data) system migration. Identification of Repeated Findings Repeated (Prior Finding No. 2022-002). Recommendation We recommend that SDA implement procedures to ensure all expenditures, including personnel costs, are properly reviewed and supporting documentation maintained in accordance with federal regulations. Views of Responsible Officials and Planned Corrective Action SDA agrees with the finding and recommendation. See SDA’s Corrective Action Plan on pages 40 – 44.

Finding 2023–003: Procurement Federal Department: U.S. Department of Treasury Pass-through Agencies: Cook County, Illinois and Women's Business Development Center COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, Federal Assistance Listing Number 21.027 Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards for Financial and Program Management Section 200.318, General procurement standards (a) states “the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in Section 200.317 through 200.327.” Section 200.318 (i) states “the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.” Also, Section 200.327 Contract provisions states that the non-Federal entity's contracts must contain the applicable provisions described in Appendix II to Part 200 – Contract Provisions for Non-Federal Entity Contracts Under Federal Award. SDA’s Fiscal Policies and Procedures Manual updated July 21, 2022 (“the Manual”) states “Procurement shall be made using one of the following methods: 1) Micro and Small Purchase Threshold; 2) Competitive Sealed Bids and Competitive Negotiations; and 3) Non-Competitive Negotiations. All methods of procurement, when funded by federal grants or contracts, must follow procurement requirements contained in the OMB, Uniform Administrative Requirements, Costs Principles, and Audit Requirements for federal awards. Any purchases over $10,000 must bid competitively if subject to a single federal audit.” In addition, the Manual states “purchases related to Federally funded grants over $10,000 will be bid through either a Request for Proposal (RFP) or Request for Qualifications (RFQ) process. In addition, Request for Information (RFI) process may be used to help inform the development of either RFP, RFQ or other forms of procurement. Awards will be awarded to responses that meet the outlined criteria and reflect the lowest responsible bid. Contractors will be excluded from conducting business with SDA if the contractor has been debarred and/or suspended from conducting business with the federal government. On a regular basis, SDA will check vendors for any debarment status change on the federal System for Award Management (SAM). All source documents supporting any given transaction (e.g., receipts, invoices, and RFP data) will be retained and filed with SDA contract files in a centralized location. At a minimum, source document data must be sufficient to establish the basis for selection, the basis for the cost (including the reasonableness of cost), the rationale for the method of procurement and selection of contract type, and the basis for payment.” Condition During the current audit period, SDA did not adequately ensure federally funded contracts issued to vendors/contractors followed federal regulations and its internal policy, which includes maintaining documents to support its procurement decisions. Cause Based on our discussions with management, SDA completed a formal RFQ process for all vendors selected but did not maintain adequate documentation of the decision-making process.   Effect The failure to maintain adequate documentation to support the procurement of federally funded contracts is a violation of federal regulations. Questioned Costs None. Context During our tests of procurement, we noted a total of four federally funded contracts were awarded by SDA during fiscal year 2023 (based on SDA’s procurement policy that required contracts with expenditures over the $10,000 threshold requiring competitive bid). We selected all four contracts for testing and noted the following:  For all four contracts, we noted no evidence that debarment/suspension verification checks were performed prior to awarding the contract.  For two contracts, we noted no evidence (justification memo) to support the basis for contractor selection (based on evaluation criteria and scoring outlined in the RFQs).  We noted that while the contract agreement includes language that the contractor shall comply with all appliable laws, ordinances, and codes of federal, state and local government. To avoid any confusion on the part of the contractors regarding federal compliance, a direct reference to 2 CFR Part 200 Appendix II should be included in the contract. Identification of Repeated Findings Repeated (Prior Finding No. 2022-003). Recommendation We recommend that SDA’s management adhere to its written policy and maintain documentation, including its justification memo to support all management decisions related to federally funded procurements to comply with federal regulations. Views of Responsible Officials and Planned Corrective Action SDA agrees with the finding and recommendation. See SDA’s Corrective Action Plan on pages 40 – 44.

Finding 2023–004: Reporting Federal Department: U.S. Department of Treasury Pass-through Agencies: Cook County, Illinois and Women's Business Development Center COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, Federal Assistance Listing Number 21.027 Criteria The Subrecipient Agreement for American Rescue Plan Act – State and Local Fiscal Recovery Funds between Cook County, Illinois (the County) and SDA, Exhibit A – Scope of Work states SDA shall provide performance and financial metrics and reports to the County on a monthly basis or as determined by the County and outlined in reporting and metrics sections of this agreement. Per the agreement, invoice (expense) submission is due at the end of each month and/or if funds are received in advance, the submission is due within one month of the expenditure. In addition, monthly performance (impact metrics) reporting of data will take place on the 15th day of each month following the reporting period in which it is applicable. The following program metrics will be collected and provided to the County in the following categories: 1) Client service metrics; 2) Develop annual survey to capture business growth metrics; 3) Develop annual survey to capture capital metrics; 4) Marketing and outreach metrics; and 5) Financial reporting. The 2022 Subaward and Fund Distribution Memorandum of Understanding (MOU) agreement between the Women’s Business Development Center (WBDC) and SDA states that financial reports, back-up documentation and invoices are to be submitted on a quarterly basis. Per SDA, the NT 110 report is due by the 15th day of each month. Condition During the current audit period, SDA did not comply with the reporting requirements outlined in its grant agreements. Cause This finding occurred in part due to a massive change in reporting systems by the County, which required manual reports submitted while GovGrants was corrected and fixed for submission. In addition, the County did bulk uploads of prior submitted data which did not save the original submission dates of SDA reports. Finally, SDA needs to be more consistent with following fiscal policies to the letter. Effect Failure to submit reports in a timely manner impairs the grantor agency’s ability to monitor program activities and could result in the loss of grant funding. Also, the failure to maintain adequate supporting documentation could result in inaccurate reporting and is a violation of grantor(s) reporting requirements.   Questioned Costs None. Context During our tests of monthly and quarterly reports submitted under the program, we reviewed a total of eight financial and nine performance reports (six monthly financial and performance reports from the two County (NT-106 and NT-108) grant agreements and two quarterly financial and three monthly performance reports from the WBDC (NT-110) grant agreement). We noted the following:  For all nine performance reports, we noted no evidence of review/approval of the reports prior to submission during 2023.  For one NT-106 and all three NT-110 monthly performance reports tested, we were not provided with any evidence of report submission. As such, we were unable to verify that the reports were submitted in a timely manner. Also, for one of these NT-106 reports, we were not provided with any supporting documentation to verify the performance metrics included in the report.  We noted two reports (one NT-108 monthly performance report and one NT-110 quarterly financial report) were submitted late, ranging from 13 to 70 days late. Identification of Repeated Findings Repeated (Prior Finding No. 2022-004). Recommendation We recommend that SDA implement procedures to ensure required reports are prepared, reviewed and submitted in a timely manner and in compliance with its grant agreements. Additionally, adequate documentation should be appropriately maintained to support all reports prepared and submitted under the grant agreements. Views of Responsible Officials and Planned Corrective Action SDA agrees with the finding and recommendation. See SDA’s Corrective Action Plan on pages 40 – 44.

Finding 2023–002: Internal Controls over Allowable Activities and Costs Federal Department: U.S. Department of Treasury Pass-through Agencies: Cook County, Illinois and Women's Business Development Center COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, Federal Assistance Listing Number 21.027 Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards for Financial and Program Management Section 200.303, Internal controls states “The non-Federal” entity must: (1) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and terms and conditions of the Federal award. Section 200.430 (i) Standards for Documentation of Personnel Expenses states (1) Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities…; (v) Comply with the established accounting policies and practices of the non-federal entity…; (viii) Budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to federal awards, but may be used for interim accounting purposes, provided that: (A) The system for establishing the estimates produces reasonable approximations of the activity actually performed; (B) Significant changes in the corresponding work activity (as defined by the non-federal entity's written policies) are identified and entered into the records in a timely manner. Short-term (such as one or two months) fluctuation between workload categories need not be considered as long as the distribution of salaries and wages is reasonable over the longer term; and (C) The non-federal entity's system of internal controls includes processes to review after-the-fact interim charges made to a federal award based on budget estimates. All necessary adjustments must be made such that the final amount charged to the federal award is accurate, allowable, and properly allocated. Per Exhibit A, Section D – Program Administration and Process Overview of the Subrecipient Agreement for the American Rescue Plan Act – State and Local Fiscal Recovery Funds dated July 20, 2022 with Cook County, Illinois, SDA was required to perform certain eligibility verification of program participant. The agreement notes that the subrecipient (SDA) has discretion on how to verify participants eligibility but should define and consistently apply an intake policy that includes maintaining documentation on each beneficiary that supports their eligibility, such as signed self-attestation forms from beneficiaries, financial documents that demonstrate economic hardship, geographic data showing that a program participant operates in a region that experienced disproportionate pandemic harm. SDA utilized an eligibility form (formerly panel review form) to document compliance with this requirement. Condition During the current audit period, SDA did not maintain adequate controls over allowable activities and costs related to its federally funded program. Cause SDA implemented the fiscal policy in 2023, which improved data retention and management for grant reporting of federal programs. Due to inconsistency in staffing during 2023, however, some historical gaps in data were found that were unable to be corrected prior to or during the 2023 audit. In addition, with the implementation of SDA’s customized Salesforce data management system, some data was deleted or lost during the transition, resulting in incomplete or missing records. Effect The failure to maintain adequate supporting documentation to ensure all expenditures, including personnel costs, are accurate, reasonable and allowable is a violation of federal regulations. Also, not maintaining support for actual time spent by employees on the program could result in unallowed payroll costs being charged to the federally funded program. Questioned Costs We noted total questioned costs of $36,170. Context During our review of 40 expenditures (from a 547 population) and related payroll activities (from a population of 58 totaling $231,798), we noted the following:  For 18 expenditures reviewed, we were not provided with the cost allocation schedule to support the actual charges to the federal program. Following our review of the total invoice amount, we did not note any costs that were deemed to be unallowed per the grantor(s) requirements and federal regulations.  During our review of 10 payroll expense items, we noted that payroll expenses charged to the program were based on estimates instead of the actual time and effort of reporting, which totaled $36,170.  We were provided with a listing of 244 clients served who were required to undergo an eligibility/intake review as specified in the grant agreement. We were not provided documentation, such as a completed eligibility form, to verify that the eligibility/intake review was performed for 21 of 25 clients served that were tested. It appears data was lost during the Salesforce (electronic system utilized to store eligibility data) system migration. Identification of Repeated Findings Repeated (Prior Finding No. 2022-002). Recommendation We recommend that SDA implement procedures to ensure all expenditures, including personnel costs, are properly reviewed and supporting documentation maintained in accordance with federal regulations. Views of Responsible Officials and Planned Corrective Action SDA agrees with the finding and recommendation. See SDA’s Corrective Action Plan on pages 40 – 44.

Finding 2023–003: Procurement Federal Department: U.S. Department of Treasury Pass-through Agencies: Cook County, Illinois and Women's Business Development Center COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, Federal Assistance Listing Number 21.027 Criteria 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Subpart D – Post-Federal Award Requirements Standards for Financial and Program Management Section 200.318, General procurement standards (a) states “the non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in Section 200.317 through 200.327.” Section 200.318 (i) states “the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price.” Also, Section 200.327 Contract provisions states that the non-Federal entity's contracts must contain the applicable provisions described in Appendix II to Part 200 – Contract Provisions for Non-Federal Entity Contracts Under Federal Award. SDA’s Fiscal Policies and Procedures Manual updated July 21, 2022 (“the Manual”) states “Procurement shall be made using one of the following methods: 1) Micro and Small Purchase Threshold; 2) Competitive Sealed Bids and Competitive Negotiations; and 3) Non-Competitive Negotiations. All methods of procurement, when funded by federal grants or contracts, must follow procurement requirements contained in the OMB, Uniform Administrative Requirements, Costs Principles, and Audit Requirements for federal awards. Any purchases over $10,000 must bid competitively if subject to a single federal audit.” In addition, the Manual states “purchases related to Federally funded grants over $10,000 will be bid through either a Request for Proposal (RFP) or Request for Qualifications (RFQ) process. In addition, Request for Information (RFI) process may be used to help inform the development of either RFP, RFQ or other forms of procurement. Awards will be awarded to responses that meet the outlined criteria and reflect the lowest responsible bid. Contractors will be excluded from conducting business with SDA if the contractor has been debarred and/or suspended from conducting business with the federal government. On a regular basis, SDA will check vendors for any debarment status change on the federal System for Award Management (SAM). All source documents supporting any given transaction (e.g., receipts, invoices, and RFP data) will be retained and filed with SDA contract files in a centralized location. At a minimum, source document data must be sufficient to establish the basis for selection, the basis for the cost (including the reasonableness of cost), the rationale for the method of procurement and selection of contract type, and the basis for payment.” Condition During the current audit period, SDA did not adequately ensure federally funded contracts issued to vendors/contractors followed federal regulations and its internal policy, which includes maintaining documents to support its procurement decisions. Cause Based on our discussions with management, SDA completed a formal RFQ process for all vendors selected but did not maintain adequate documentation of the decision-making process.   Effect The failure to maintain adequate documentation to support the procurement of federally funded contracts is a violation of federal regulations. Questioned Costs None. Context During our tests of procurement, we noted a total of four federally funded contracts were awarded by SDA during fiscal year 2023 (based on SDA’s procurement policy that required contracts with expenditures over the $10,000 threshold requiring competitive bid). We selected all four contracts for testing and noted the following:  For all four contracts, we noted no evidence that debarment/suspension verification checks were performed prior to awarding the contract.  For two contracts, we noted no evidence (justification memo) to support the basis for contractor selection (based on evaluation criteria and scoring outlined in the RFQs).  We noted that while the contract agreement includes language that the contractor shall comply with all appliable laws, ordinances, and codes of federal, state and local government. To avoid any confusion on the part of the contractors regarding federal compliance, a direct reference to 2 CFR Part 200 Appendix II should be included in the contract. Identification of Repeated Findings Repeated (Prior Finding No. 2022-003). Recommendation We recommend that SDA’s management adhere to its written policy and maintain documentation, including its justification memo to support all management decisions related to federally funded procurements to comply with federal regulations. Views of Responsible Officials and Planned Corrective Action SDA agrees with the finding and recommendation. See SDA’s Corrective Action Plan on pages 40 – 44.

Finding 2023–004: Reporting Federal Department: U.S. Department of Treasury Pass-through Agencies: Cook County, Illinois and Women's Business Development Center COVID-19 - Coronavirus State and Local Fiscal Recovery Funds, Federal Assistance Listing Number 21.027 Criteria The Subrecipient Agreement for American Rescue Plan Act – State and Local Fiscal Recovery Funds between Cook County, Illinois (the County) and SDA, Exhibit A – Scope of Work states SDA shall provide performance and financial metrics and reports to the County on a monthly basis or as determined by the County and outlined in reporting and metrics sections of this agreement. Per the agreement, invoice (expense) submission is due at the end of each month and/or if funds are received in advance, the submission is due within one month of the expenditure. In addition, monthly performance (impact metrics) reporting of data will take place on the 15th day of each month following the reporting period in which it is applicable. The following program metrics will be collected and provided to the County in the following categories: 1) Client service metrics; 2) Develop annual survey to capture business growth metrics; 3) Develop annual survey to capture capital metrics; 4) Marketing and outreach metrics; and 5) Financial reporting. The 2022 Subaward and Fund Distribution Memorandum of Understanding (MOU) agreement between the Women’s Business Development Center (WBDC) and SDA states that financial reports, back-up documentation and invoices are to be submitted on a quarterly basis. Per SDA, the NT 110 report is due by the 15th day of each month. Condition During the current audit period, SDA did not comply with the reporting requirements outlined in its grant agreements. Cause This finding occurred in part due to a massive change in reporting systems by the County, which required manual reports submitted while GovGrants was corrected and fixed for submission. In addition, the County did bulk uploads of prior submitted data which did not save the original submission dates of SDA reports. Finally, SDA needs to be more consistent with following fiscal policies to the letter. Effect Failure to submit reports in a timely manner impairs the grantor agency’s ability to monitor program activities and could result in the loss of grant funding. Also, the failure to maintain adequate supporting documentation could result in inaccurate reporting and is a violation of grantor(s) reporting requirements.   Questioned Costs None. Context During our tests of monthly and quarterly reports submitted under the program, we reviewed a total of eight financial and nine performance reports (six monthly financial and performance reports from the two County (NT-106 and NT-108) grant agreements and two quarterly financial and three monthly performance reports from the WBDC (NT-110) grant agreement). We noted the following:  For all nine performance reports, we noted no evidence of review/approval of the reports prior to submission during 2023.  For one NT-106 and all three NT-110 monthly performance reports tested, we were not provided with any evidence of report submission. As such, we were unable to verify that the reports were submitted in a timely manner. Also, for one of these NT-106 reports, we were not provided with any supporting documentation to verify the performance metrics included in the report.  We noted two reports (one NT-108 monthly performance report and one NT-110 quarterly financial report) were submitted late, ranging from 13 to 70 days late. Identification of Repeated Findings Repeated (Prior Finding No. 2022-004). Recommendation We recommend that SDA implement procedures to ensure required reports are prepared, reviewed and submitted in a timely manner and in compliance with its grant agreements. Additionally, adequate documentation should be appropriately maintained to support all reports prepared and submitted under the grant agreements. Views of Responsible Officials and Planned Corrective Action SDA agrees with the finding and recommendation. See SDA’s Corrective Action Plan on pages 40 – 44.