Audit 349343

Finding Number: 2024-001 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C, Nutrition Services, and No 93.053, Nutrition Services Incentive Program Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: CFR section 200.403, Factors Affecting Allowability of Costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may 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 and be adequately documented. 2 CFR section 200.405, Allowable Costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i), Standards for Documentation of Personnel Expenses, states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, 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 and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been updated to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2024-001, there is no disagreement with the audit finding. As this was a known finding at the beginning of the audit, management has drafted new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.

Finding Number: 2024-001 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C, Nutrition Services, and No 93.053, Nutrition Services Incentive Program Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: CFR section 200.403, Factors Affecting Allowability of Costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may 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 and be adequately documented. 2 CFR section 200.405, Allowable Costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i), Standards for Documentation of Personnel Expenses, states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, 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 and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been updated to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2024-001, there is no disagreement with the audit finding. As this was a known finding at the beginning of the audit, management has drafted new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.

Finding Number: 2024-001 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C, Nutrition Services, and No 93.053, Nutrition Services Incentive Program Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: CFR section 200.403, Factors Affecting Allowability of Costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may 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 and be adequately documented. 2 CFR section 200.405, Allowable Costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i), Standards for Documentation of Personnel Expenses, states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, 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 and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been updated to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2024-001, there is no disagreement with the audit finding. As this was a known finding at the beginning of the audit, management has drafted new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.

Finding Number: 2024-001 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C, Nutrition Services, and No 93.053, Nutrition Services Incentive Program Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: CFR section 200.403, Factors Affecting Allowability of Costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may 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 and be adequately documented. 2 CFR section 200.405, Allowable Costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i), Standards for Documentation of Personnel Expenses, states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, 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 and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been updated to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2024-001, there is no disagreement with the audit finding. As this was a known finding at the beginning of the audit, management has drafted new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.

Finding Number: 2024-001 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C, Nutrition Services, and No 93.053, Nutrition Services Incentive Program Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: CFR section 200.403, Factors Affecting Allowability of Costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may 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 and be adequately documented. 2 CFR section 200.405, Allowable Costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i), Standards for Documentation of Personnel Expenses, states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, 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 and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been updated to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2024-001, there is no disagreement with the audit finding. As this was a known finding at the beginning of the audit, management has drafted new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.

Finding Number: 2024-001 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C, Nutrition Services, and No 93.053, Nutrition Services Incentive Program Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: CFR section 200.403, Factors Affecting Allowability of Costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may 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 and be adequately documented. 2 CFR section 200.405, Allowable Costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i), Standards for Documentation of Personnel Expenses, states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, 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 and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been updated to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2024-001, there is no disagreement with the audit finding. As this was a known finding at the beginning of the audit, management has drafted new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.

Finding Number: 2024-002 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles, Matching, and Program Income Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: 2 CFR section 200.302, Financial Management, states that the recipient’s financial management system must provide for the following: Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, as well as expenditures and income. All records must be supported by source documentation. There must be written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. 2 CFR section 200.303, Internal Controls, states grant recipient must: 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. Cause: The organization does not have an effective reconciliation and review process required to track compliance requirements that adhere to Uniform Guidance and the grant terms. Match expenditures could not be reconciled to the Service Invoice Summaries. In addition, the methodology used to allocate program income, matching, and non-payroll expenditures was not consistently applied. Effect or Potential Effect: Potential for unallowable activities and unallowable costs, not meeting matching requirements per grant terms, and potential for program income to be understated or overstated. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization implement policies and procedures to ensure proper reconciliation and review of Service Invoice Summaries are effective and specific to grant View of Responsible Officials: In response to finding number 2024-002, there is no disagreement with the audit finding. Management is in the process of drafting new policies and procedures to ensure that the amount, source, and expenditure of Federal funds for all Federal awards is identified; and will track and verify expenditures and income. In addition, Management is developing a process and procedures to verify compliance with Federal statues, regulations, and the terms and conditions of each Federal award. Management will complete the Corrective Action Plan by February 28, 2025 and these procedures will be in full effect for the fiscal year 2025.

Finding Number: 2024-002 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles, Matching, and Program Income Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: 2 CFR section 200.302, Financial Management, states that the recipient’s financial management system must provide for the following: Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, as well as expenditures and income. All records must be supported by source documentation. There must be written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. 2 CFR section 200.303, Internal Controls, states grant recipient must: 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. Cause: The organization does not have an effective reconciliation and review process required to track compliance requirements that adhere to Uniform Guidance and the grant terms. Match expenditures could not be reconciled to the Service Invoice Summaries. In addition, the methodology used to allocate program income, matching, and non-payroll expenditures was not consistently applied. Effect or Potential Effect: Potential for unallowable activities and unallowable costs, not meeting matching requirements per grant terms, and potential for program income to be understated or overstated. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization implement policies and procedures to ensure proper reconciliation and review of Service Invoice Summaries are effective and specific to grant View of Responsible Officials: In response to finding number 2024-002, there is no disagreement with the audit finding. Management is in the process of drafting new policies and procedures to ensure that the amount, source, and expenditure of Federal funds for all Federal awards is identified; and will track and verify expenditures and income. In addition, Management is developing a process and procedures to verify compliance with Federal statues, regulations, and the terms and conditions of each Federal award. Management will complete the Corrective Action Plan by February 28, 2025 and these procedures will be in full effect for the fiscal year 2025.

Finding Number: 2024-002 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles, Matching, and Program Income Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: 2 CFR section 200.302, Financial Management, states that the recipient’s financial management system must provide for the following: Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, as well as expenditures and income. All records must be supported by source documentation. There must be written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. 2 CFR section 200.303, Internal Controls, states grant recipient must: 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. Cause: The organization does not have an effective reconciliation and review process required to track compliance requirements that adhere to Uniform Guidance and the grant terms. Match expenditures could not be reconciled to the Service Invoice Summaries. In addition, the methodology used to allocate program income, matching, and non-payroll expenditures was not consistently applied. Effect or Potential Effect: Potential for unallowable activities and unallowable costs, not meeting matching requirements per grant terms, and potential for program income to be understated or overstated. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization implement policies and procedures to ensure proper reconciliation and review of Service Invoice Summaries are effective and specific to grant View of Responsible Officials: In response to finding number 2024-002, there is no disagreement with the audit finding. Management is in the process of drafting new policies and procedures to ensure that the amount, source, and expenditure of Federal funds for all Federal awards is identified; and will track and verify expenditures and income. In addition, Management is developing a process and procedures to verify compliance with Federal statues, regulations, and the terms and conditions of each Federal award. Management will complete the Corrective Action Plan by February 28, 2025 and these procedures will be in full effect for the fiscal year 2025.

Finding Number: 2024-002 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles, Matching, and Program Income Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: 2 CFR section 200.302, Financial Management, states that the recipient’s financial management system must provide for the following: Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, as well as expenditures and income. All records must be supported by source documentation. There must be written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. 2 CFR section 200.303, Internal Controls, states grant recipient must: 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. Cause: The organization does not have an effective reconciliation and review process required to track compliance requirements that adhere to Uniform Guidance and the grant terms. Match expenditures could not be reconciled to the Service Invoice Summaries. In addition, the methodology used to allocate program income, matching, and non-payroll expenditures was not consistently applied. Effect or Potential Effect: Potential for unallowable activities and unallowable costs, not meeting matching requirements per grant terms, and potential for program income to be understated or overstated. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization implement policies and procedures to ensure proper reconciliation and review of Service Invoice Summaries are effective and specific to grant View of Responsible Officials: In response to finding number 2024-002, there is no disagreement with the audit finding. Management is in the process of drafting new policies and procedures to ensure that the amount, source, and expenditure of Federal funds for all Federal awards is identified; and will track and verify expenditures and income. In addition, Management is developing a process and procedures to verify compliance with Federal statues, regulations, and the terms and conditions of each Federal award. Management will complete the Corrective Action Plan by February 28, 2025 and these procedures will be in full effect for the fiscal year 2025.

Finding Number: 2024-002 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles, Matching, and Program Income Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: 2 CFR section 200.302, Financial Management, states that the recipient’s financial management system must provide for the following: Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, as well as expenditures and income. All records must be supported by source documentation. There must be written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. 2 CFR section 200.303, Internal Controls, states grant recipient must: 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. Cause: The organization does not have an effective reconciliation and review process required to track compliance requirements that adhere to Uniform Guidance and the grant terms. Match expenditures could not be reconciled to the Service Invoice Summaries. In addition, the methodology used to allocate program income, matching, and non-payroll expenditures was not consistently applied. Effect or Potential Effect: Potential for unallowable activities and unallowable costs, not meeting matching requirements per grant terms, and potential for program income to be understated or overstated. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization implement policies and procedures to ensure proper reconciliation and review of Service Invoice Summaries are effective and specific to grant View of Responsible Officials: In response to finding number 2024-002, there is no disagreement with the audit finding. Management is in the process of drafting new policies and procedures to ensure that the amount, source, and expenditure of Federal funds for all Federal awards is identified; and will track and verify expenditures and income. In addition, Management is developing a process and procedures to verify compliance with Federal statues, regulations, and the terms and conditions of each Federal award. Management will complete the Corrective Action Plan by February 28, 2025 and these procedures will be in full effect for the fiscal year 2025.

Finding Number: 2024-002 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles, Matching, and Program Income Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: 2 CFR section 200.302, Financial Management, states that the recipient’s financial management system must provide for the following: Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, as well as expenditures and income. All records must be supported by source documentation. There must be written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. 2 CFR section 200.303, Internal Controls, states grant recipient must: 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. Cause: The organization does not have an effective reconciliation and review process required to track compliance requirements that adhere to Uniform Guidance and the grant terms. Match expenditures could not be reconciled to the Service Invoice Summaries. In addition, the methodology used to allocate program income, matching, and non-payroll expenditures was not consistently applied. Effect or Potential Effect: Potential for unallowable activities and unallowable costs, not meeting matching requirements per grant terms, and potential for program income to be understated or overstated. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization implement policies and procedures to ensure proper reconciliation and review of Service Invoice Summaries are effective and specific to grant View of Responsible Officials: In response to finding number 2024-002, there is no disagreement with the audit finding. Management is in the process of drafting new policies and procedures to ensure that the amount, source, and expenditure of Federal funds for all Federal awards is identified; and will track and verify expenditures and income. In addition, Management is developing a process and procedures to verify compliance with Federal statues, regulations, and the terms and conditions of each Federal award. Management will complete the Corrective Action Plan by February 28, 2025 and these procedures will be in full effect for the fiscal year 2025.

Finding Number: 2024-001 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C, Nutrition Services, and No 93.053, Nutrition Services Incentive Program Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: CFR section 200.403, Factors Affecting Allowability of Costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may 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 and be adequately documented. 2 CFR section 200.405, Allowable Costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i), Standards for Documentation of Personnel Expenses, states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, 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 and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been updated to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2024-001, there is no disagreement with the audit finding. As this was a known finding at the beginning of the audit, management has drafted new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.

Finding Number: 2024-001 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C, Nutrition Services, and No 93.053, Nutrition Services Incentive Program Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: CFR section 200.403, Factors Affecting Allowability of Costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may 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 and be adequately documented. 2 CFR section 200.405, Allowable Costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i), Standards for Documentation of Personnel Expenses, states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, 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 and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been updated to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2024-001, there is no disagreement with the audit finding. As this was a known finding at the beginning of the audit, management has drafted new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.

Finding Number: 2024-001 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C, Nutrition Services, and No 93.053, Nutrition Services Incentive Program Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: CFR section 200.403, Factors Affecting Allowability of Costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may 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 and be adequately documented. 2 CFR section 200.405, Allowable Costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i), Standards for Documentation of Personnel Expenses, states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, 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 and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been updated to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2024-001, there is no disagreement with the audit finding. As this was a known finding at the beginning of the audit, management has drafted new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.

Finding Number: 2024-001 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C, Nutrition Services, and No 93.053, Nutrition Services Incentive Program Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: CFR section 200.403, Factors Affecting Allowability of Costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may 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 and be adequately documented. 2 CFR section 200.405, Allowable Costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i), Standards for Documentation of Personnel Expenses, states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, 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 and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been updated to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2024-001, there is no disagreement with the audit finding. As this was a known finding at the beginning of the audit, management has drafted new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.

Finding Number: 2024-001 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C, Nutrition Services, and No 93.053, Nutrition Services Incentive Program Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: CFR section 200.403, Factors Affecting Allowability of Costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may 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 and be adequately documented. 2 CFR section 200.405, Allowable Costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i), Standards for Documentation of Personnel Expenses, states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, 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 and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been updated to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2024-001, there is no disagreement with the audit finding. As this was a known finding at the beginning of the audit, management has drafted new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.

Finding Number: 2024-001 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C, Nutrition Services, and No 93.053, Nutrition Services Incentive Program Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: CFR section 200.403, Factors Affecting Allowability of Costs, states costs must: conform to limitations or exclusions, be accorded consistent treatment, a cost may 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 and be adequately documented. 2 CFR section 200.405, Allowable Costs, states this standard is met if the cost is incurred specifically for the Federal award and can be distributed in proportions that may be approximated using reasonable methods. Further, if costs benefit two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined, the costs must be allocated on any reasonable documented basis. 2 CFR section 200.430(i), Standards for Documentation of Personnel Expenses, states charges to Federal awards for salaries must be based on records that accurately reflect the work performed and these records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, 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 and non-Federal award and charges for the salaries and wages of nonexempt employees must be supported by records indicating the total number of hours worked each day. Condition: The Organization did not maintain an effective control environment to ensure costs incurred for expenditures charged to the program were in accordance with contract requirements and applicable cost principles. The method for allocation of non-payroll expenditures between federally funded programs and other programs was based on percentages that had not been updated to reflect current funding sources. Payroll expenditures were allocated based on budget estimates and not upon the actual work performed on various Federal awards and non-federal activities. Cause: The Organization received new funding subject to Uniform Guidance and did not have written internal control policies as required by Uniform Guidance. Processes and procedures were not updated to be in accordance with Uniform Guidance. Effect or Potential Effect: Potential for unallowable activities and unallowable costs. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization document all methods used to allocate expenditures and ensure adequate support is maintained to substantiate allocation calculations. Management should design and implement policies and procedures to ensure payroll expenditures are based on actual time spent on the federal funded programs. View of Responsible Officials: In response to finding number 2024-001, there is no disagreement with the audit finding. As this was a known finding at the beginning of the audit, management has drafted new policies and procedures to ensure payroll expenditures are based on actual time spent of the federal funded programs. Managers will allocate employees’ time based on tasks performed and the amount of time worked on federal award activities. The allocation of non-payroll expenses will be based on percentages of current funding sources. These new policies and procedures will be in full effect throughout fiscal year 2025 and beyond.

Finding Number: 2024-002 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles, Matching, and Program Income Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: 2 CFR section 200.302, Financial Management, states that the recipient’s financial management system must provide for the following: Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, as well as expenditures and income. All records must be supported by source documentation. There must be written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. 2 CFR section 200.303, Internal Controls, states grant recipient must: 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. Cause: The organization does not have an effective reconciliation and review process required to track compliance requirements that adhere to Uniform Guidance and the grant terms. Match expenditures could not be reconciled to the Service Invoice Summaries. In addition, the methodology used to allocate program income, matching, and non-payroll expenditures was not consistently applied. Effect or Potential Effect: Potential for unallowable activities and unallowable costs, not meeting matching requirements per grant terms, and potential for program income to be understated or overstated. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization implement policies and procedures to ensure proper reconciliation and review of Service Invoice Summaries are effective and specific to grant View of Responsible Officials: In response to finding number 2024-002, there is no disagreement with the audit finding. Management is in the process of drafting new policies and procedures to ensure that the amount, source, and expenditure of Federal funds for all Federal awards is identified; and will track and verify expenditures and income. In addition, Management is developing a process and procedures to verify compliance with Federal statues, regulations, and the terms and conditions of each Federal award. Management will complete the Corrective Action Plan by February 28, 2025 and these procedures will be in full effect for the fiscal year 2025.

Finding Number: 2024-002 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles, Matching, and Program Income Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: 2 CFR section 200.302, Financial Management, states that the recipient’s financial management system must provide for the following: Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, as well as expenditures and income. All records must be supported by source documentation. There must be written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. 2 CFR section 200.303, Internal Controls, states grant recipient must: 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. Cause: The organization does not have an effective reconciliation and review process required to track compliance requirements that adhere to Uniform Guidance and the grant terms. Match expenditures could not be reconciled to the Service Invoice Summaries. In addition, the methodology used to allocate program income, matching, and non-payroll expenditures was not consistently applied. Effect or Potential Effect: Potential for unallowable activities and unallowable costs, not meeting matching requirements per grant terms, and potential for program income to be understated or overstated. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization implement policies and procedures to ensure proper reconciliation and review of Service Invoice Summaries are effective and specific to grant View of Responsible Officials: In response to finding number 2024-002, there is no disagreement with the audit finding. Management is in the process of drafting new policies and procedures to ensure that the amount, source, and expenditure of Federal funds for all Federal awards is identified; and will track and verify expenditures and income. In addition, Management is developing a process and procedures to verify compliance with Federal statues, regulations, and the terms and conditions of each Federal award. Management will complete the Corrective Action Plan by February 28, 2025 and these procedures will be in full effect for the fiscal year 2025.

Finding Number: 2024-002 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles, Matching, and Program Income Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: 2 CFR section 200.302, Financial Management, states that the recipient’s financial management system must provide for the following: Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, as well as expenditures and income. All records must be supported by source documentation. There must be written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. 2 CFR section 200.303, Internal Controls, states grant recipient must: 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. Cause: The organization does not have an effective reconciliation and review process required to track compliance requirements that adhere to Uniform Guidance and the grant terms. Match expenditures could not be reconciled to the Service Invoice Summaries. In addition, the methodology used to allocate program income, matching, and non-payroll expenditures was not consistently applied. Effect or Potential Effect: Potential for unallowable activities and unallowable costs, not meeting matching requirements per grant terms, and potential for program income to be understated or overstated. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization implement policies and procedures to ensure proper reconciliation and review of Service Invoice Summaries are effective and specific to grant View of Responsible Officials: In response to finding number 2024-002, there is no disagreement with the audit finding. Management is in the process of drafting new policies and procedures to ensure that the amount, source, and expenditure of Federal funds for all Federal awards is identified; and will track and verify expenditures and income. In addition, Management is developing a process and procedures to verify compliance with Federal statues, regulations, and the terms and conditions of each Federal award. Management will complete the Corrective Action Plan by February 28, 2025 and these procedures will be in full effect for the fiscal year 2025.

Finding Number: 2024-002 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles, Matching, and Program Income Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: 2 CFR section 200.302, Financial Management, states that the recipient’s financial management system must provide for the following: Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, as well as expenditures and income. All records must be supported by source documentation. There must be written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. 2 CFR section 200.303, Internal Controls, states grant recipient must: 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. Cause: The organization does not have an effective reconciliation and review process required to track compliance requirements that adhere to Uniform Guidance and the grant terms. Match expenditures could not be reconciled to the Service Invoice Summaries. In addition, the methodology used to allocate program income, matching, and non-payroll expenditures was not consistently applied. Effect or Potential Effect: Potential for unallowable activities and unallowable costs, not meeting matching requirements per grant terms, and potential for program income to be understated or overstated. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization implement policies and procedures to ensure proper reconciliation and review of Service Invoice Summaries are effective and specific to grant View of Responsible Officials: In response to finding number 2024-002, there is no disagreement with the audit finding. Management is in the process of drafting new policies and procedures to ensure that the amount, source, and expenditure of Federal funds for all Federal awards is identified; and will track and verify expenditures and income. In addition, Management is developing a process and procedures to verify compliance with Federal statues, regulations, and the terms and conditions of each Federal award. Management will complete the Corrective Action Plan by February 28, 2025 and these procedures will be in full effect for the fiscal year 2025.

Finding Number: 2024-002 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles, Matching, and Program Income Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: 2 CFR section 200.302, Financial Management, states that the recipient’s financial management system must provide for the following: Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, as well as expenditures and income. All records must be supported by source documentation. There must be written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. 2 CFR section 200.303, Internal Controls, states grant recipient must: 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. Cause: The organization does not have an effective reconciliation and review process required to track compliance requirements that adhere to Uniform Guidance and the grant terms. Match expenditures could not be reconciled to the Service Invoice Summaries. In addition, the methodology used to allocate program income, matching, and non-payroll expenditures was not consistently applied. Effect or Potential Effect: Potential for unallowable activities and unallowable costs, not meeting matching requirements per grant terms, and potential for program income to be understated or overstated. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization implement policies and procedures to ensure proper reconciliation and review of Service Invoice Summaries are effective and specific to grant View of Responsible Officials: In response to finding number 2024-002, there is no disagreement with the audit finding. Management is in the process of drafting new policies and procedures to ensure that the amount, source, and expenditure of Federal funds for all Federal awards is identified; and will track and verify expenditures and income. In addition, Management is developing a process and procedures to verify compliance with Federal statues, regulations, and the terms and conditions of each Federal award. Management will complete the Corrective Action Plan by February 28, 2025 and these procedures will be in full effect for the fiscal year 2025.

Finding Number: 2024-002 Significant Deficiency – Internal Controls over Compliance and Compliance of: Activities Allowed or Unallowed and Allowable Costs/Cost Principles, Matching, and Program Income Federal Award: Aging Cluster, No. 93.045, Special Programs for the Aging, Title III, Part C Federal Agency: Department of Health and Human Services Pass-Through Entity: Monterey County Area Agency on Aging Criteria or Specific Requirement: 2 CFR section 200.302, Financial Management, states that the recipient’s financial management system must provide for the following: Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, as well as expenditures and income. All records must be supported by source documentation. There must be written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. 2 CFR section 200.303, Internal Controls, states grant recipient must: 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. Cause: The organization does not have an effective reconciliation and review process required to track compliance requirements that adhere to Uniform Guidance and the grant terms. Match expenditures could not be reconciled to the Service Invoice Summaries. In addition, the methodology used to allocate program income, matching, and non-payroll expenditures was not consistently applied. Effect or Potential Effect: Potential for unallowable activities and unallowable costs, not meeting matching requirements per grant terms, and potential for program income to be understated or overstated. Questioned Costs: Related questioned costs are unknown. Context: During the year under audit, the issues represent a systemic problem. Recommendation: We recommend the Organization implement policies and procedures to ensure proper reconciliation and review of Service Invoice Summaries are effective and specific to grant View of Responsible Officials: In response to finding number 2024-002, there is no disagreement with the audit finding. Management is in the process of drafting new policies and procedures to ensure that the amount, source, and expenditure of Federal funds for all Federal awards is identified; and will track and verify expenditures and income. In addition, Management is developing a process and procedures to verify compliance with Federal statues, regulations, and the terms and conditions of each Federal award. Management will complete the Corrective Action Plan by February 28, 2025 and these procedures will be in full effect for the fiscal year 2025.