Audit 338528

Finding 2023-001 Criteria or specific requirement – The Organization is subject to 45 CFR sections 75.403-405 which require all expenses charged to a federal award to be allowable, reasonable and allocable. Condition – The Organization made bonus payments to staff totaling $38,750 during July and August 2023 without appropriate policies, controls and processes in place. Context – The external auditor reconciled salaries expense recorded on the general ledger to salaries reported on payroll tax returns noting the total amount reported on the payroll tax returns exceeded the total amount recorded on the general ledger. The difference was due to bonus amounts paid to staff during July and August 2023 being recorded in a separate account on the general ledger. These bonuses represent all of the bonus payments recorded during the year. The bonuses were not determined to be excessive or improper; however, due to the lack of formal policies and documentation the bonuses are being reported as questioned costs. Effect – The cost of the bonus payments may be determined not to be reasonable or justified and may be disallowed. Cause – The Organization did not have formalized policies in place to provide guidance on assessing staff performance and delivery of bonus payments. In addition, the Organization did not maintain appropriate documentation of the criteria used to evaluate staff performance or documentation of how the bonus amounts were determined. Recommendation – The Organization should adopt and implement formalized policies to provide guidance on assessing staff performance and delivery of bonus payments. Also, the Organization should maintain sufficient documentation of the methodology followed in determining the amount of any bonus payments and the approval of such payments. Views of responsible officials and planned corrective actions – The Organization agrees with the finding and is in the process of adopting updated policies and having them approved by ACL. These updated policies will provide clear guidance on the staff performance review process and the methodology for determining any bonus amounts to be paid. Questioned costs - $38,750

Finding 2023-002 Criteria or specific requirement – The Organization is subject to 2 CFR section 200.303 and 45 CFR section 75.303. Both require 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 – The Organization has not completely met the requirements and expectations of the sections cited above as several significant deficiencies exist in the Organization’s internal control over compliance. Context – In August 2023, a review team from the Administration for Community Living (ACL) conducted a compliance review of the Organization. In January 2024, ACL issued a draft of their report addressing the results of the compliance review. In that report, ACL identified numerous significant deficiencies in the Organization’s internal control over compliance and concerns of potential noncompliance. ACL has continued working closely with the Organization in providing technical assistance resources to support the Organization in designing, implementing and maintaining effective internal control over compliance. Effect – If the Organization does not correct the significant deficiencies detailed in the ACL compliance review report, then unallowable activities and unallowable costs may be improperly charged to the program. Cause – The ACL review team identified the following significant deficiencies in the Organization’s internal control over compliance. • Insufficient financial management policies and procedures • Ineffective internal controls in expense review and payment processes • Commingling of cost centers and inadequate accounting system to track Part C award data • Minimal oversight in budget reconciliation activities • Inadequate internal controls and oversight of timekeeping processes • Inadequate contracting and procurement processes and insufficient documentation of contracting and procurement actions • Current management and staffing model is inadequate to ensure internal controls • Inadequate controls to verify costs allowability Recommendation – The Organization should continue working with the assistance of ACL to correct the significant deficiencies noted by the ACL review team in order to improve internal control over compliance and meet the requirements and expectations of 2 CFR section 200.303 and 45 CFR section 75.303. Views of responsible officials and planned corrective actions – The Organization agrees with the finding and has made substantial progress in addressing the significant deficiencies identified in their internal control over compliance. The Organization is committed to continuing to work diligently and in full cooperation with ACL to implement the corrective actions included in their compliance review report.

Finding 2023-001 Criteria or specific requirement – The Organization is subject to 45 CFR sections 75.403-405 which require all expenses charged to a federal award to be allowable, reasonable and allocable. Condition – The Organization made bonus payments to staff totaling $38,750 during July and August 2023 without appropriate policies, controls and processes in place. Context – The external auditor reconciled salaries expense recorded on the general ledger to salaries reported on payroll tax returns noting the total amount reported on the payroll tax returns exceeded the total amount recorded on the general ledger. The difference was due to bonus amounts paid to staff during July and August 2023 being recorded in a separate account on the general ledger. These bonuses represent all of the bonus payments recorded during the year. The bonuses were not determined to be excessive or improper; however, due to the lack of formal policies and documentation the bonuses are being reported as questioned costs. Effect – The cost of the bonus payments may be determined not to be reasonable or justified and may be disallowed. Cause – The Organization did not have formalized policies in place to provide guidance on assessing staff performance and delivery of bonus payments. In addition, the Organization did not maintain appropriate documentation of the criteria used to evaluate staff performance or documentation of how the bonus amounts were determined. Recommendation – The Organization should adopt and implement formalized policies to provide guidance on assessing staff performance and delivery of bonus payments. Also, the Organization should maintain sufficient documentation of the methodology followed in determining the amount of any bonus payments and the approval of such payments. Views of responsible officials and planned corrective actions – The Organization agrees with the finding and is in the process of adopting updated policies and having them approved by ACL. These updated policies will provide clear guidance on the staff performance review process and the methodology for determining any bonus amounts to be paid. Questioned costs - $38,750

Finding 2023-002 Criteria or specific requirement – The Organization is subject to 2 CFR section 200.303 and 45 CFR section 75.303. Both require 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 – The Organization has not completely met the requirements and expectations of the sections cited above as several significant deficiencies exist in the Organization’s internal control over compliance. Context – In August 2023, a review team from the Administration for Community Living (ACL) conducted a compliance review of the Organization. In January 2024, ACL issued a draft of their report addressing the results of the compliance review. In that report, ACL identified numerous significant deficiencies in the Organization’s internal control over compliance and concerns of potential noncompliance. ACL has continued working closely with the Organization in providing technical assistance resources to support the Organization in designing, implementing and maintaining effective internal control over compliance. Effect – If the Organization does not correct the significant deficiencies detailed in the ACL compliance review report, then unallowable activities and unallowable costs may be improperly charged to the program. Cause – The ACL review team identified the following significant deficiencies in the Organization’s internal control over compliance. • Insufficient financial management policies and procedures • Ineffective internal controls in expense review and payment processes • Commingling of cost centers and inadequate accounting system to track Part C award data • Minimal oversight in budget reconciliation activities • Inadequate internal controls and oversight of timekeeping processes • Inadequate contracting and procurement processes and insufficient documentation of contracting and procurement actions • Current management and staffing model is inadequate to ensure internal controls • Inadequate controls to verify costs allowability Recommendation – The Organization should continue working with the assistance of ACL to correct the significant deficiencies noted by the ACL review team in order to improve internal control over compliance and meet the requirements and expectations of 2 CFR section 200.303 and 45 CFR section 75.303. Views of responsible officials and planned corrective actions – The Organization agrees with the finding and has made substantial progress in addressing the significant deficiencies identified in their internal control over compliance. The Organization is committed to continuing to work diligently and in full cooperation with ACL to implement the corrective actions included in their compliance review report.