Finding 2024-001:
Internal control deficiency and noncompliance over Activities Allowed or Unallowed and Allowable Costs/Cost Principles related to payroll expenditures.
Identification of the federal program:
Assistance Listing Number 11.028
• Connecting Minority Communities Pilot Program
• U.S. Department of Commerce
• Federal award identification number: 06-09-C13050
• Federal award year: January 15, 2023 through January 14, 2025
Criteria or specific requirement (including statutory, regulatory or other citation):
Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 – Internal controls. The recipient and subrecipient must: (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Title 2, Subtitle A, Chapter II, Part 200, Subpart E, 200.400 – Policy guide. The application of these cost principles is based on the fundamental premises that:
(b) The recipient and subrecipient are responsible for administering Federal funds in a manner consistent with Federal statutes, regulations, and the terms and conditions of the Federal award.
Title 2, Subtitle A, Chapter II, Part 200, Subpart E, 200.403 – Factors affecting allowability of costs. Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards:
(d) Be accorded consistent treatment. For example, a cost must not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
(e) Be adequately documented.
Condition:
During our testing over the Activities Allowed or Unallowed and Allowable Costs/Cost Principles compliance requirement, we observed management did not have effective internal controls in place to ensure salaries, fringe benefits, and indirect costs were correctly allocated to the Federal award.
Cause:
Management did not have effective internal controls in place over the compliance requirement as stated in the criteria or specific requirement section above.
Effect or potential effect:
Management overstated the salaries, fringe benefits, and indirect costs that was charged and reimbursed from the grantor. Without effective internal controls, other overstatements of salaries, fringe benefits, and indirect costs could occur in the future.
Questioned costs:
$23,159:
• Assistance Listing Number 11.028
• Federal Award Identification Number – 06-09-C13050
Questioned costs were computed by taking the difference between the salaries, fringe benefits, and indirect costs charged and reimbursed by the grantor in the amount of $150,695 and the calculated salaries, fringe benefits, and indirect costs for each employee taking the employee’s hourly rate multiplied by the hours worked and time and effort percentage and fringe benefit percentage and indirect cost percentage in the amount of $127,536.
Context:
During our testing over Activities Allowed or Unallowed and Allowable Costs/Cost Principles, we obtained a listing of 31 salaries and fringe benefits expenditures and selected a sample of 5. The total value of the 5 salaries and fringe benefits expenditures was $107,639 with the associated indirect costs expenditures was $43,056 out of the total population of $539,696. The hourly rate used to calculate salaries for each employee included the fringe benefit percentage which was also applied to the calculated salaries which resulted in an overstatement of salaries, fringe benefits, and indirect costs.
Identification as a repeat finding, if applicable:
No.
Recommendation:
We recommend management refund the questioned costs to the grantor and develop and implement effective internal controls to ensure salaries, fringe benefits, and indirect costs were correctly allocated to the Federal award.
Views of responsible officials:
Management has adjusted for the incorrect allocation with the grantor (i.e., refunded the questioned costs) and will implement an additional review control of the allocation and final calculation of salaries, fringe benefits, and indirect costs.
Finding 2024-002:
Internal control deficiency and noncompliance over Reporting related to performance reports.
Identification of the federal program:
Assistance Listing Number 11.028
• Connecting Minority Communities Pilot Program
• U.S. Department of Commerce
• Federal award identification number: 06-09-C13050
• Federal award year: January 15, 2023 through January 14, 2025
Criteria or specific requirement (including statutory, regulatory or other citation):
Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 – Internal controls. The recipient and subrecipient must: (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
The terms and conditions of the Federal award requires the following:
Pursuant to 47 C.F.R. 302.9(b)(1), each award recipient will be required to submit a technical progress report on a semi-annual and annual basis for the periods ending March 31 and September 30 of each year. Semi-annual performance reports will be due within 30 days after the end of the reporting period. Technical progress reports shall contain information as prescribed in 2 C.F.R. § 200.329 and Department of Commerce Financial Assistance Standard Terms and Conditions dated November 12, 2020, Section A.01.
Condition:
During our testing over the Reporting compliance requirement, we observed management did not have effective internal controls in place to ensure performance reports were submitted by the deadline and completed correctly.
Cause:
Management did not have effective internal controls in place over the compliance requirement as stated in the criteria or specific requirement section above.
Effect or potential effect:
Management did not submit the required performance reports by the deadline and certain key line items were not completed correctly. Without effective internal controls, other reports could be submitted after the deadline and/or completed incorrectly in the future.
Questioned costs:
None.
Context:
During our testing over Reporting, we obtained a listing of two performance reports and tested both performance reports. We observed the following:
• Management did not submit the required performance reports by the deadline. The entity is required to submit a semi-annual performance report with deadlines of April 30 and October 30 of each year. We observed all reports were submitted after the deadline.
• The April 30, 2024 performance report key line items related to the budgeted amounts were from the original financial assistance award signed on January 11, 2023 versus the amendment to the financial assistance award signed on June 29, 2023.
• The April 30, 2024 performance report key line items related to the personnel and fringe benefits costs were calculated entirely based on the latest fringe benefit rate of 44% versus using the prior year rate of 35% for the time period in effect which resulted in a misclassification between personnel and fringe benefits costs of $6,054.
Identification as a repeat finding, if applicable:
No.
Recommendation:
We recommend that management develop and implement effective internal controls to ensure performance reports were submitted by the deadline and completed correctly.
Views of responsible officials:
Management will meet with the Principal Investigator and provide additional training emphasizing the importance of timely submission and accuracy of grant documentation and reports. In addition, management will monitor submission deadlines and follow-up with the Principal Investigator to ensure timely filing.
Finding 2024-001:
Internal control deficiency and noncompliance over Activities Allowed or Unallowed and Allowable Costs/Cost Principles related to payroll expenditures.
Identification of the federal program:
Assistance Listing Number 11.028
• Connecting Minority Communities Pilot Program
• U.S. Department of Commerce
• Federal award identification number: 06-09-C13050
• Federal award year: January 15, 2023 through January 14, 2025
Criteria or specific requirement (including statutory, regulatory or other citation):
Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 – Internal controls. The recipient and subrecipient must: (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
Title 2, Subtitle A, Chapter II, Part 200, Subpart E, 200.400 – Policy guide. The application of these cost principles is based on the fundamental premises that:
(b) The recipient and subrecipient are responsible for administering Federal funds in a manner consistent with Federal statutes, regulations, and the terms and conditions of the Federal award.
Title 2, Subtitle A, Chapter II, Part 200, Subpart E, 200.403 – Factors affecting allowability of costs. Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards:
(d) Be accorded consistent treatment. For example, a cost must not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost.
(e) Be adequately documented.
Condition:
During our testing over the Activities Allowed or Unallowed and Allowable Costs/Cost Principles compliance requirement, we observed management did not have effective internal controls in place to ensure salaries, fringe benefits, and indirect costs were correctly allocated to the Federal award.
Cause:
Management did not have effective internal controls in place over the compliance requirement as stated in the criteria or specific requirement section above.
Effect or potential effect:
Management overstated the salaries, fringe benefits, and indirect costs that was charged and reimbursed from the grantor. Without effective internal controls, other overstatements of salaries, fringe benefits, and indirect costs could occur in the future.
Questioned costs:
$23,159:
• Assistance Listing Number 11.028
• Federal Award Identification Number – 06-09-C13050
Questioned costs were computed by taking the difference between the salaries, fringe benefits, and indirect costs charged and reimbursed by the grantor in the amount of $150,695 and the calculated salaries, fringe benefits, and indirect costs for each employee taking the employee’s hourly rate multiplied by the hours worked and time and effort percentage and fringe benefit percentage and indirect cost percentage in the amount of $127,536.
Context:
During our testing over Activities Allowed or Unallowed and Allowable Costs/Cost Principles, we obtained a listing of 31 salaries and fringe benefits expenditures and selected a sample of 5. The total value of the 5 salaries and fringe benefits expenditures was $107,639 with the associated indirect costs expenditures was $43,056 out of the total population of $539,696. The hourly rate used to calculate salaries for each employee included the fringe benefit percentage which was also applied to the calculated salaries which resulted in an overstatement of salaries, fringe benefits, and indirect costs.
Identification as a repeat finding, if applicable:
No.
Recommendation:
We recommend management refund the questioned costs to the grantor and develop and implement effective internal controls to ensure salaries, fringe benefits, and indirect costs were correctly allocated to the Federal award.
Views of responsible officials:
Management has adjusted for the incorrect allocation with the grantor (i.e., refunded the questioned costs) and will implement an additional review control of the allocation and final calculation of salaries, fringe benefits, and indirect costs.
Finding 2024-002:
Internal control deficiency and noncompliance over Reporting related to performance reports.
Identification of the federal program:
Assistance Listing Number 11.028
• Connecting Minority Communities Pilot Program
• U.S. Department of Commerce
• Federal award identification number: 06-09-C13050
• Federal award year: January 15, 2023 through January 14, 2025
Criteria or specific requirement (including statutory, regulatory or other citation):
Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 – Internal controls. The recipient and subrecipient must: (a) Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).
The terms and conditions of the Federal award requires the following:
Pursuant to 47 C.F.R. 302.9(b)(1), each award recipient will be required to submit a technical progress report on a semi-annual and annual basis for the periods ending March 31 and September 30 of each year. Semi-annual performance reports will be due within 30 days after the end of the reporting period. Technical progress reports shall contain information as prescribed in 2 C.F.R. § 200.329 and Department of Commerce Financial Assistance Standard Terms and Conditions dated November 12, 2020, Section A.01.
Condition:
During our testing over the Reporting compliance requirement, we observed management did not have effective internal controls in place to ensure performance reports were submitted by the deadline and completed correctly.
Cause:
Management did not have effective internal controls in place over the compliance requirement as stated in the criteria or specific requirement section above.
Effect or potential effect:
Management did not submit the required performance reports by the deadline and certain key line items were not completed correctly. Without effective internal controls, other reports could be submitted after the deadline and/or completed incorrectly in the future.
Questioned costs:
None.
Context:
During our testing over Reporting, we obtained a listing of two performance reports and tested both performance reports. We observed the following:
• Management did not submit the required performance reports by the deadline. The entity is required to submit a semi-annual performance report with deadlines of April 30 and October 30 of each year. We observed all reports were submitted after the deadline.
• The April 30, 2024 performance report key line items related to the budgeted amounts were from the original financial assistance award signed on January 11, 2023 versus the amendment to the financial assistance award signed on June 29, 2023.
• The April 30, 2024 performance report key line items related to the personnel and fringe benefits costs were calculated entirely based on the latest fringe benefit rate of 44% versus using the prior year rate of 35% for the time period in effect which resulted in a misclassification between personnel and fringe benefits costs of $6,054.
Identification as a repeat finding, if applicable:
No.
Recommendation:
We recommend that management develop and implement effective internal controls to ensure performance reports were submitted by the deadline and completed correctly.
Views of responsible officials:
Management will meet with the Principal Investigator and provide additional training emphasizing the importance of timely submission and accuracy of grant documentation and reports. In addition, management will monitor submission deadlines and follow-up with the Principal Investigator to ensure timely filing.