Audit 329195

Noncompliance and material weakness in internal control over compliance with allowable costs/cost principles requirements. Federal Agency: United States Department of Treasury Assistance Listing Number: 21.027 Assistance Listing Name: Coronavirus State and Local Fiscal Recovery Award Number: DA-202212-01096 Award Year: January 1, 2023 through December 31, 2023 Name of Pass-Through Entity: King County Regional Homelessness Authority Criteria Nonfederal entities must follow the standards for documentation of personnel expenses set out at 2 CFR section 200.430(i). Under those standards, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Additionally, those standards require that the records a) reasonably reflect the total activity for which the employee is compensated by the nonfederal entity, not exceeding 100% of compensated activities; b) support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and nonfederal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity; and c) budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards. Condition During our testing of the payroll costs charged to the major program, we noted that ACLT is allocating payroll costs for individual employees using budget estimates of time and effort on different activities. ACLT does not maintain after-the-fact documentation of time spent for each employee to support the allocations. Additionally, during our testing of wage rates we noted that ACLT did not maintain adequate documentation of approved wage rates for each employee charged to the Federal program in that the wage rates were not supported by the personnel/employee status change form as required by ACLT’s system of internal control. Cause ACLT’s system of internal control is not designed appropriately as it does not include capturing and documenting an after-the-fact determination of time and effort for each employee on different activities. A ACLT’s system of internal control was not operating effectively as ACLT did not retain a fully completed and approved personnel/employee status change form to support the current wage rate for each employee. Effect The effect is that ACLT is not in compliance with the requirements of 2 CFR section 200.430(i). Payroll costs charged to the major program are not supported by documentation evidencing that those costs reasonably reflect the work performed on the activity. Questioned Costs The total expenditures of $2,200,000 charged to the major program in 2023 are for payroll costs and related fringe benefits. Context ACLT maintains a timekeeping and payroll system for charges to federal awards that documents approved wage and salary rates, hours, and actual amounts paid to employees. However, the system does not include the documentation required in 2 CFR section 200.430(i) specifically related to documenting actual time and effort performed on different activities. The payroll charged to the major program includes a mix of employees that work 100% of their time on the major program activity and other employees that allocate their total hours to the major program activity and other activities. Of the $1,833,304 of gross payroll cost charged to the major program in 2023, 75.8% of that cost relates to employees that work 100% of their time on the major program activity; the remaining 24.2% of the cost relates to employees that allocate their total hours to the major program activity and other activities. Additionally, ACLT’s system of internal control is designed to have a personnel/employee status change form completed and approved to evidence the current wage rate for each employee. During our audit we noted that this form was not consistently completed for each employee with wages charged to the Federal program. Repeat Finding This is not a repeat finding. Recommendation We recommend management update its payroll system to add procedures to capture and document an after-thefact determination of work effort for each employee to support the percentage of payroll cost allocated to federal programs. Examples of such documentation that management consider include: a) monthly time sheets signed by the employee and employee’s supervisor documenting actual time and effort spent on different activities, or b) the procedures outlined in 2 CFR section 200.430(i)(1)(viii) to support the use of budgeted estimates. Additionally, we recommend management review its procedures to ensure that the personnel/employee status change form is completed and approved for each employee upon hire as well as when each employee’s salary or wage rate is adjusted. Views of Responsible Officials and Corrective Action Plan Management agrees with the finding and has provided the accompanying corrective action plan.

Finding 2023-003 Significant deficiency in internal control over compliance with reporting requirements Federal Agency: United States Department of Treasury Assistance Listing Number: 21.027 Assistance Listing Name: Coronavirus State and Local Fiscal Recovery Award Number: DA-202212-01096 Award Year: January 1, 2023 through December 31, 2023 Name of Pass-Through Entity: King County Regional Homelessness Authority Criteria The grant agreement requires ACLT to submit quarterly narrative (performance) reports and [quarterly/mid-year] and annual expenditure reports. These reports have specified due dates that ACLT is required to meet. Condition and Context We selected two of the four quarterly narrative (performance) reports for testing, the first quarter report due on April 10, 2023 and the fourth quarter report due on January 15, 2024. We noted that one of the two reports, the first quarter report, was submitted after the due date. The late report was due on April 10, 2023 and was submitted on May 5, 2023. Cause ACLT’s system of internal control did not operate effectively to ensure all required reports were submitted by the required due dates. Effect The effect of the condition is that some of the required reports were submitted late. Questioned Costs Not applicable. Repeat Finding Element of this finding are a repeat of finding 2022-007. Recommendation We recommend management review its controls and related procedures, and provide additional training as needed to applicable staff, to ensure all required reports are submitted by the required due dates. Views of Responsible Officials and Corrective Action Plan Management agrees with the finding and has provided the accompanying corrective action plan.

Noncompliance and material weakness in internal control over compliance with allowable costs/cost principles requirements. Federal Agency: United States Department of Treasury Assistance Listing Number: 21.027 Assistance Listing Name: Coronavirus State and Local Fiscal Recovery Award Number: DA-202212-01096 Award Year: January 1, 2023 through December 31, 2023 Name of Pass-Through Entity: King County Regional Homelessness Authority Criteria Nonfederal entities must follow the standards for documentation of personnel expenses set out at 2 CFR section 200.430(i). Under those standards, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Additionally, those standards require that the records a) reasonably reflect the total activity for which the employee is compensated by the nonfederal entity, not exceeding 100% of compensated activities; b) support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and nonfederal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity; and c) budget estimates (i.e., estimates determined before the services are performed) alone do not qualify as support for charges to Federal awards. Condition During our testing of the payroll costs charged to the major program, we noted that ACLT is allocating payroll costs for individual employees using budget estimates of time and effort on different activities. ACLT does not maintain after-the-fact documentation of time spent for each employee to support the allocations. Additionally, during our testing of wage rates we noted that ACLT did not maintain adequate documentation of approved wage rates for each employee charged to the Federal program in that the wage rates were not supported by the personnel/employee status change form as required by ACLT’s system of internal control. Cause ACLT’s system of internal control is not designed appropriately as it does not include capturing and documenting an after-the-fact determination of time and effort for each employee on different activities. A ACLT’s system of internal control was not operating effectively as ACLT did not retain a fully completed and approved personnel/employee status change form to support the current wage rate for each employee. Effect The effect is that ACLT is not in compliance with the requirements of 2 CFR section 200.430(i). Payroll costs charged to the major program are not supported by documentation evidencing that those costs reasonably reflect the work performed on the activity. Questioned Costs The total expenditures of $2,200,000 charged to the major program in 2023 are for payroll costs and related fringe benefits. Context ACLT maintains a timekeeping and payroll system for charges to federal awards that documents approved wage and salary rates, hours, and actual amounts paid to employees. However, the system does not include the documentation required in 2 CFR section 200.430(i) specifically related to documenting actual time and effort performed on different activities. The payroll charged to the major program includes a mix of employees that work 100% of their time on the major program activity and other employees that allocate their total hours to the major program activity and other activities. Of the $1,833,304 of gross payroll cost charged to the major program in 2023, 75.8% of that cost relates to employees that work 100% of their time on the major program activity; the remaining 24.2% of the cost relates to employees that allocate their total hours to the major program activity and other activities. Additionally, ACLT’s system of internal control is designed to have a personnel/employee status change form completed and approved to evidence the current wage rate for each employee. During our audit we noted that this form was not consistently completed for each employee with wages charged to the Federal program. Repeat Finding This is not a repeat finding. Recommendation We recommend management update its payroll system to add procedures to capture and document an after-thefact determination of work effort for each employee to support the percentage of payroll cost allocated to federal programs. Examples of such documentation that management consider include: a) monthly time sheets signed by the employee and employee’s supervisor documenting actual time and effort spent on different activities, or b) the procedures outlined in 2 CFR section 200.430(i)(1)(viii) to support the use of budgeted estimates. Additionally, we recommend management review its procedures to ensure that the personnel/employee status change form is completed and approved for each employee upon hire as well as when each employee’s salary or wage rate is adjusted. Views of Responsible Officials and Corrective Action Plan Management agrees with the finding and has provided the accompanying corrective action plan.

Finding 2023-003 Significant deficiency in internal control over compliance with reporting requirements Federal Agency: United States Department of Treasury Assistance Listing Number: 21.027 Assistance Listing Name: Coronavirus State and Local Fiscal Recovery Award Number: DA-202212-01096 Award Year: January 1, 2023 through December 31, 2023 Name of Pass-Through Entity: King County Regional Homelessness Authority Criteria The grant agreement requires ACLT to submit quarterly narrative (performance) reports and [quarterly/mid-year] and annual expenditure reports. These reports have specified due dates that ACLT is required to meet. Condition and Context We selected two of the four quarterly narrative (performance) reports for testing, the first quarter report due on April 10, 2023 and the fourth quarter report due on January 15, 2024. We noted that one of the two reports, the first quarter report, was submitted after the due date. The late report was due on April 10, 2023 and was submitted on May 5, 2023. Cause ACLT’s system of internal control did not operate effectively to ensure all required reports were submitted by the required due dates. Effect The effect of the condition is that some of the required reports were submitted late. Questioned Costs Not applicable. Repeat Finding Element of this finding are a repeat of finding 2022-007. Recommendation We recommend management review its controls and related procedures, and provide additional training as needed to applicable staff, to ensure all required reports are submitted by the required due dates. Views of Responsible Officials and Corrective Action Plan Management agrees with the finding and has provided the accompanying corrective action plan.