Reference Number: 2024-001 – Inadequate Controls over Grant Revenue
Type of Finding: Significant Deficiency in Internal Control over Financial Reporting
Criteria
Management is responsible for the preparation and fair presentation, as well as the accuracy of its financial statements in accordance with accounting principles generally accepted in the United States of America. This includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error or fraud. Accounting principles promulgated over the years for not-for-profit organizations require substantial interpretation and judgment relating to the proper classification of net assets as well as the difficult question regarding the determination of whether grant funds are to be recorded as a contribution or an exchange transaction.
Condition
During the audit, we found that the Organization has no formal processes in place for the reconciliation and analysis of its grants and for making these classification decisions. Audit adjustments were required to properly record grant revenue with and without donor restrictions and net assets with and without donor restrictions. In addition, the Organization required assistance in reconciling grant programs to the Schedule of Expenditures of Federal Awards (SEFA) and identifying that all federal grant programs were included in the SEFA.
This is a repeat finding of 2023-001.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
Due to turnover of key personnel, internal controls were either lacking or not designed properly and mitigating controls were not sufficient to effectively identity misstatements in grant revenue. Audit adjustments were required to properly record grant revenue with and without donor restrictions and net assets with and without donor restrictions.
Recommendation
We suggest that, in order to ensure understanding of and compliance with specific grant terms as well as consistency of reporting for all such grant agreements, the appropriate personnel review grant agreements on a timely basis and establish documented and consistent procedures pertaining to the appropriate accounting for all grants. We believe that this process will make accounting for and classifying of grants an easier and more routine task. Thus, this should also achieve more consistent accounting and financial statement presentation.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: In the year being audited (July 1, 2023-June 30, 2024), we have removed our Fiscal Audit Consultant and replaced that with a Director of Finance employee that has the skill, knowledge, and education for this matter to be resolved for subsequent audits. Also, moving forward each new grant contract will be discussed with our CPA firm for guidance on the proper application of the grant/contract as it relates to the proper classification of restricted and unrestricted funds.
Anticipated Implementation Date: July 1, 2024
Reference Number: 2024-002 – Inadequate Documentation for Participant Stipends
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Department
Federal Award Number and Year: AA211079 Fiscal Year 2023-2024
Category of Finding: Activities Allowed or Unallowed; Allowable Costs/Cost Principles
Type of Finding: Material Weakness in Internal Control over Compliance, Instance of Noncompliance
Criteria
Title 2 Code of Federal Regulations (2 CFR) §200.343(g) states that for costs to be allowable under federal awards, costs be adequately documented.
2 CFR §200.303 states that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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).
Condition
During our audit of compliance with activities allowed or unallowed and allowable costs/cost principles, we noted that the Organization was unable to provide adequate supporting documentation (attendance sheets and/or sign in sheets with signatures) for thirty-nine (39) direct non payroll costs.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
Not providing sufficient documentation to auditors to demonstrate compliance with federal compliance results in an audit scope limitation. Failure to adequately document and maintain support for expenditures results in non-compliance with 2 CFR) §200.343(g) and there is a risk that federal funds may be used for unallowable activities and/or costs.
Questioned Costs
Questioned costs were not determinable.
Context
For thirty-nine (39) out of sixty (60) direct nonpayroll costs selected for testing, the Company did not provide adequate supporting documentation (attendance sheets and/or sign in sheets with signatures).
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes and procedures for participant attendance tracking and participant stipends paid.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: The organization will strengthen and document a formal process for documenting attendance. This process will include provide training to employees responsible for tracking attendance, implementing a signature sheet to be submitted and reviewed by program managers after each class, and incorporate review of attendance sheets into the payment processes for participant stipend payments ensuring only participants who correctly documented attendance are able to receive the stipend funds.
Anticipated Implementation Date: July 1, 2025
Criteria
Title 2 Code of Federal Regulations (2 CFR) §200.303 states that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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).
Condition
During our review of participant intake forms for the WIOA programs, we noted that thirty-nine (39) forms did not contain documentation of review and approval by the Executive Director and there was no documented process for case management participant eligibility determinations.
This is a repeat finding of 2023-003.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
No documented review processes for participant intake forms or participant eligibility determinations are deficiencies in internal control and could result in ineligible participants being noted as eligible and included in the program.
Questioned Costs
Questioned costs were not identified.
Context
For the thirty-nine (39) participate intake forms selected for testing, all thirty-nine were missing evidence of review.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document review processes to ensure all participant intake forms are reviewed by a second person in addition to the case manager and that all participant eligibility determinations are reviewed.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: During the period being audited internal controls for program participants documents were not reviewed by the former Executive Director. The new Executive Director has implemented a check and balance procedure that requires the Case Manager, Program Manager, and Executive Director to review and sign off on participant application forms and to be documented on the participants application before the participant can move forward in the program.
Anticipated Implementation Date: July 1, 2024
Reference Number: 2024-004 – Ineligible Participants
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Department
Federal Award Number and Year: AA211079 Fiscal Year 2023-2024
Category of Finding: Eligibility
Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Noncompliance
Criteria
In accordance with Section 3 WIOA, 128 Stat. 1431 and grant agreements, participants must meet the WIOA definition of adult, dislocated worker, or dislocated homemaker.
Condition
During our review of participant eligibility, we noted eleven (11) participants were ineligible due to being fully employed and did not meet the definition of either dislocated worker per Section 3(15), WIOA, 128 Stat. 1431 or dislocated homemaker per Section 3(16), WIOA, 128 Stat. 1432.
This is a repeat finding of 2023-005.
Cause
Due to significant turnover in key personnel in the Organization’s finance department and management in past years, the Organization has no documented policies and procedures for determining eligibility and for reviewing eligibility.
Effect
Failure to adequately document and maintain support for eligibility determinations may result in non-compliance with WIOA regulations and there is risk that federal funds may be used on ineligible participants.
Questioned Costs
We identified costs of $13,245 that could be considered questionable. We are unable to estimate total likely questioned costs.
Context
For the thirty-nine (39) participants selected for testing, eleven (11) were found to be ineligible.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes for determining participant eligibility and for reviewing case manager determination of participant eligibility. We also recommend the Organization develop a recurring training program for staff involved with grant processes and procedures and compliance requirements.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: During the period being audited internal controls for program participants documents were not reviewed by the former Executive Director. The new Executive Director has implemented a check and balance procedure that requires the Case Manager, Program Manager, and Executive Director to review and sign off on participant application forms and to be documented on the participants application before the participant can move forward in the program.
Anticipated Implementation Date: July 1, 2024
Reference Number: 2024-005 – Missing Selective Service Registration
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Department
Federal Award Number and Year: AA211079 Fiscal Year 2023-2024
Category of Finding: Eligibility
Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Noncompliance
Criteria
In accordance with Section 188(h) WIOA, 128 Stat. 1599 and Title 50 United States Code “Military Selective Service Act,” Appendix 453, males who are who are subject to the registration requirements of the Military Selective Service Act must have complied with these requirements to be eligible for participation in WIOA-funded programs and services.
Condition
During our review of participant eligibility, we noted the Organization was unable to provide adequate supporting documentation for selective service registration for three (3) participants.
Cause
Due to significant turnover in key personnel in the Organization’s finance department and management in past years, the Organization has no documented policies and procedures for determining eligibility and for reviewing eligibility.
Effect
Failure to adequately document and maintain support for eligibility determinations may result in non-compliance with WIOA regulations and there is risk that federal funds may be used on ineligible participants.
Questioned Costs
Questioned costs were not determinable.
Context
For the thirty-nine (39) participants selected for testing, nineteen (19) were required to comply with the selective service registration requirements. From these nineteen (19), the Organization was unable to provide adequate supporting documentation for selective service registration for three (3) participants.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes for determining participant eligibility and for reviewing case manager determination of participant eligibility. We also recommend the Organization develop a recurring training program for staff involved with grant processes and procedures and compliance requirements.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: During the period being audited internal controls for program participants documents were not reviewed by the former Executive Director. The new Executive Director has implemented a check and balance procedure that requires the Case Manager, Program Manager, and Executive Director to review and sign off on participant application forms and to be documented on the participants application before the participant can move forward in the program.
Anticipated Implementation Date: July 1, 2025
Reference Number: 2024-006 – Subrecipient Monitoring
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258 BWC
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Department
Federal Award Number and Year: AA211079 Fiscal Year 2023-2024
Category of Finding: Subrecipient Monitoring
Type of Finding: Material Weakness in Internal Control over Compliance, Instance of Noncompliance
Criteria
In accordance with Title 2 U.S. Code of Federal Regulations (CFR) § 200.332, all pass-through entities (PTE) must:
(a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes:
(1) Federal award identification:
i. Subrecipient name (which must match the name associated with its unique entity identifier);
ii. Subrecipient's unique entity identifier;
iii. Federal Award Identification Number (FAIN);
iv. Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency;
v. Subaward Period of Performance Start and End Date;
vi. Subaward Budget Period Start and End Date;
vii. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient;
viii. Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation;
ix. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity;
x. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA);
xi. Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity;
xii. Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;
xiii. Identification of whether the award is R&D; and
xiv. Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414.
(b) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section.
(c) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.
(d) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501.
Condition
During our audit of compliance with subrecipient monitoring, we noted that for one (1) subrecipient agreement, the agreement did not include one or more of the required elements defined in 2 CFR § 200.332 (a)(1) in the subrecipient’s agreement. For the same one (1) subrecipient, the Organization did not perform the risk assessment procedures defined in 2 CFR § 200.332 (b) or verify that the subrecipient should be audited as defined in 2 CFR § 200.332 (d).
Cause
Due to significant turnover in key personnel in the Organization’s finance department and management in past years, the Organization has no documented policies and procedures for subrecipient monitoring.
Effect
Not providing sufficient documentation to auditors to demonstrate compliance with federal compliance results in an audit scope limitation. Failure to provide all the required subaward information may result in subrecipients incorrectly reporting on federal pass-through awards in their Single Audit reports. Failure to document subrecipient risk assessment and verifying the subrecipient audit requirement result in noncompliance with the subrecipient monitoring requirements 2 CFR § 200.332.
Questioned Costs
Questioned costs were not determinable.
Context
For one (1) subrecipient selected for testing, with total expenditures of $325,977, from a population of one (1) subrecipient, the Company did not communicate all of the required subaward data elements, did not perform subrecipient risk assessment, and did not verify if subrecipient received audit.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization perform the following:
(1) Develop procedures for future subrecipient agreements to ensure agreements will include all the required elements of 2 CFR § 200.332 (a)(1).
(2) For existing subrecipients that were not provided the required elements, provide a letter or amended agreement to include all the required elements of 2 CFR § 200.332 (a)(1).
(3) Maintain sufficient records of subrecipient risk assessment and monitoring subrecipients in accordance with subrecipient monitoring requirements noted in 2 CFR § 200.332 (b) – (d).
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: The Organization will update its subrecipient monitoring policies to ensure all required elements as defined in 2 CFR § 200.332 (a)(1) are included in subrecipient agreements, Additionally, a checklist will be established to perform a risk assessment process to evaluate subrecipient risk prior to contract execution and annually thereafter and to verify each subrecipient’s that meets the audit threshold and if required has a current Single Audit on file or is otherwise in compliance.
Anticipated Implementation Date: July 1, 2025
Reference Number: 2024-001 – Inadequate Controls over Grant Revenue
Type of Finding: Significant Deficiency in Internal Control over Financial Reporting
Criteria
Management is responsible for the preparation and fair presentation, as well as the accuracy of its financial statements in accordance with accounting principles generally accepted in the United States of America. This includes the design, implementation, and maintenance of internal controls relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to error or fraud. Accounting principles promulgated over the years for not-for-profit organizations require substantial interpretation and judgment relating to the proper classification of net assets as well as the difficult question regarding the determination of whether grant funds are to be recorded as a contribution or an exchange transaction.
Condition
During the audit, we found that the Organization has no formal processes in place for the reconciliation and analysis of its grants and for making these classification decisions. Audit adjustments were required to properly record grant revenue with and without donor restrictions and net assets with and without donor restrictions. In addition, the Organization required assistance in reconciling grant programs to the Schedule of Expenditures of Federal Awards (SEFA) and identifying that all federal grant programs were included in the SEFA.
This is a repeat finding of 2023-001.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
Due to turnover of key personnel, internal controls were either lacking or not designed properly and mitigating controls were not sufficient to effectively identity misstatements in grant revenue. Audit adjustments were required to properly record grant revenue with and without donor restrictions and net assets with and without donor restrictions.
Recommendation
We suggest that, in order to ensure understanding of and compliance with specific grant terms as well as consistency of reporting for all such grant agreements, the appropriate personnel review grant agreements on a timely basis and establish documented and consistent procedures pertaining to the appropriate accounting for all grants. We believe that this process will make accounting for and classifying of grants an easier and more routine task. Thus, this should also achieve more consistent accounting and financial statement presentation.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: In the year being audited (July 1, 2023-June 30, 2024), we have removed our Fiscal Audit Consultant and replaced that with a Director of Finance employee that has the skill, knowledge, and education for this matter to be resolved for subsequent audits. Also, moving forward each new grant contract will be discussed with our CPA firm for guidance on the proper application of the grant/contract as it relates to the proper classification of restricted and unrestricted funds.
Anticipated Implementation Date: July 1, 2024
Reference Number: 2024-002 – Inadequate Documentation for Participant Stipends
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Department
Federal Award Number and Year: AA211079 Fiscal Year 2023-2024
Category of Finding: Activities Allowed or Unallowed; Allowable Costs/Cost Principles
Type of Finding: Material Weakness in Internal Control over Compliance, Instance of Noncompliance
Criteria
Title 2 Code of Federal Regulations (2 CFR) §200.343(g) states that for costs to be allowable under federal awards, costs be adequately documented.
2 CFR §200.303 states that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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).
Condition
During our audit of compliance with activities allowed or unallowed and allowable costs/cost principles, we noted that the Organization was unable to provide adequate supporting documentation (attendance sheets and/or sign in sheets with signatures) for thirty-nine (39) direct non payroll costs.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
Not providing sufficient documentation to auditors to demonstrate compliance with federal compliance results in an audit scope limitation. Failure to adequately document and maintain support for expenditures results in non-compliance with 2 CFR) §200.343(g) and there is a risk that federal funds may be used for unallowable activities and/or costs.
Questioned Costs
Questioned costs were not determinable.
Context
For thirty-nine (39) out of sixty (60) direct nonpayroll costs selected for testing, the Company did not provide adequate supporting documentation (attendance sheets and/or sign in sheets with signatures).
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes and procedures for participant attendance tracking and participant stipends paid.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: The organization will strengthen and document a formal process for documenting attendance. This process will include provide training to employees responsible for tracking attendance, implementing a signature sheet to be submitted and reviewed by program managers after each class, and incorporate review of attendance sheets into the payment processes for participant stipend payments ensuring only participants who correctly documented attendance are able to receive the stipend funds.
Anticipated Implementation Date: July 1, 2025
Criteria
Title 2 Code of Federal Regulations (2 CFR) §200.303 states that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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).
Condition
During our review of participant intake forms for the WIOA programs, we noted that thirty-nine (39) forms did not contain documentation of review and approval by the Executive Director and there was no documented process for case management participant eligibility determinations.
This is a repeat finding of 2023-003.
Cause
The Organization has experienced significant turnover in key personnel in the Organization’s finance department and management in past years. Absent robust accounting policies and procedures, when vacancies occur, information can be lost and as individuals are getting up to speed, some processes may not be fully executed if they are manual and not fully embedded into an automated system.
Effect
No documented review processes for participant intake forms or participant eligibility determinations are deficiencies in internal control and could result in ineligible participants being noted as eligible and included in the program.
Questioned Costs
Questioned costs were not identified.
Context
For the thirty-nine (39) participate intake forms selected for testing, all thirty-nine were missing evidence of review.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document review processes to ensure all participant intake forms are reviewed by a second person in addition to the case manager and that all participant eligibility determinations are reviewed.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: During the period being audited internal controls for program participants documents were not reviewed by the former Executive Director. The new Executive Director has implemented a check and balance procedure that requires the Case Manager, Program Manager, and Executive Director to review and sign off on participant application forms and to be documented on the participants application before the participant can move forward in the program.
Anticipated Implementation Date: July 1, 2024
Reference Number: 2024-004 – Ineligible Participants
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Department
Federal Award Number and Year: AA211079 Fiscal Year 2023-2024
Category of Finding: Eligibility
Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Noncompliance
Criteria
In accordance with Section 3 WIOA, 128 Stat. 1431 and grant agreements, participants must meet the WIOA definition of adult, dislocated worker, or dislocated homemaker.
Condition
During our review of participant eligibility, we noted eleven (11) participants were ineligible due to being fully employed and did not meet the definition of either dislocated worker per Section 3(15), WIOA, 128 Stat. 1431 or dislocated homemaker per Section 3(16), WIOA, 128 Stat. 1432.
This is a repeat finding of 2023-005.
Cause
Due to significant turnover in key personnel in the Organization’s finance department and management in past years, the Organization has no documented policies and procedures for determining eligibility and for reviewing eligibility.
Effect
Failure to adequately document and maintain support for eligibility determinations may result in non-compliance with WIOA regulations and there is risk that federal funds may be used on ineligible participants.
Questioned Costs
We identified costs of $13,245 that could be considered questionable. We are unable to estimate total likely questioned costs.
Context
For the thirty-nine (39) participants selected for testing, eleven (11) were found to be ineligible.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes for determining participant eligibility and for reviewing case manager determination of participant eligibility. We also recommend the Organization develop a recurring training program for staff involved with grant processes and procedures and compliance requirements.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: During the period being audited internal controls for program participants documents were not reviewed by the former Executive Director. The new Executive Director has implemented a check and balance procedure that requires the Case Manager, Program Manager, and Executive Director to review and sign off on participant application forms and to be documented on the participants application before the participant can move forward in the program.
Anticipated Implementation Date: July 1, 2024
Reference Number: 2024-005 – Missing Selective Service Registration
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Department
Federal Award Number and Year: AA211079 Fiscal Year 2023-2024
Category of Finding: Eligibility
Type of Finding: Significant Deficiency in Internal Control over Compliance, Instance of Noncompliance
Criteria
In accordance with Section 188(h) WIOA, 128 Stat. 1599 and Title 50 United States Code “Military Selective Service Act,” Appendix 453, males who are who are subject to the registration requirements of the Military Selective Service Act must have complied with these requirements to be eligible for participation in WIOA-funded programs and services.
Condition
During our review of participant eligibility, we noted the Organization was unable to provide adequate supporting documentation for selective service registration for three (3) participants.
Cause
Due to significant turnover in key personnel in the Organization’s finance department and management in past years, the Organization has no documented policies and procedures for determining eligibility and for reviewing eligibility.
Effect
Failure to adequately document and maintain support for eligibility determinations may result in non-compliance with WIOA regulations and there is risk that federal funds may be used on ineligible participants.
Questioned Costs
Questioned costs were not determinable.
Context
For the thirty-nine (39) participants selected for testing, nineteen (19) were required to comply with the selective service registration requirements. From these nineteen (19), the Organization was unable to provide adequate supporting documentation for selective service registration for three (3) participants.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization develop and document processes for determining participant eligibility and for reviewing case manager determination of participant eligibility. We also recommend the Organization develop a recurring training program for staff involved with grant processes and procedures and compliance requirements.
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: During the period being audited internal controls for program participants documents were not reviewed by the former Executive Director. The new Executive Director has implemented a check and balance procedure that requires the Case Manager, Program Manager, and Executive Director to review and sign off on participant application forms and to be documented on the participants application before the participant can move forward in the program.
Anticipated Implementation Date: July 1, 2025
Reference Number: 2024-006 – Subrecipient Monitoring
Federal Program Title: WIOA Cluster
Federal Assistance Listing Number: 17.258 BWC
Federal Agency: Department of Labor (DOL)
Pass-Through Entity: State of California Employment Development Department
Federal Award Number and Year: AA211079 Fiscal Year 2023-2024
Category of Finding: Subrecipient Monitoring
Type of Finding: Material Weakness in Internal Control over Compliance, Instance of Noncompliance
Criteria
In accordance with Title 2 U.S. Code of Federal Regulations (CFR) § 200.332, all pass-through entities (PTE) must:
(a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes:
(1) Federal award identification:
i. Subrecipient name (which must match the name associated with its unique entity identifier);
ii. Subrecipient's unique entity identifier;
iii. Federal Award Identification Number (FAIN);
iv. Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency;
v. Subaward Period of Performance Start and End Date;
vi. Subaward Budget Period Start and End Date;
vii. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient;
viii. Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation;
ix. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity;
x. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA);
xi. Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity;
xii. Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;
xiii. Identification of whether the award is R&D; and
xiv. Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414.
(b) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section.
(c) Monitor the activities of the subrecipient as necessary to ensure that the subaward is used for authorized purposes, in compliance with Federal statutes, regulations, and the terms and conditions of the subaward; and that subaward performance goals are achieved.
(d) Verify that every subrecipient is audited as required by Subpart F of this part when it is expected that the subrecipient's Federal awards expended during the respective fiscal year equaled or exceeded the threshold set forth in § 200.501.
Condition
During our audit of compliance with subrecipient monitoring, we noted that for one (1) subrecipient agreement, the agreement did not include one or more of the required elements defined in 2 CFR § 200.332 (a)(1) in the subrecipient’s agreement. For the same one (1) subrecipient, the Organization did not perform the risk assessment procedures defined in 2 CFR § 200.332 (b) or verify that the subrecipient should be audited as defined in 2 CFR § 200.332 (d).
Cause
Due to significant turnover in key personnel in the Organization’s finance department and management in past years, the Organization has no documented policies and procedures for subrecipient monitoring.
Effect
Not providing sufficient documentation to auditors to demonstrate compliance with federal compliance results in an audit scope limitation. Failure to provide all the required subaward information may result in subrecipients incorrectly reporting on federal pass-through awards in their Single Audit reports. Failure to document subrecipient risk assessment and verifying the subrecipient audit requirement result in noncompliance with the subrecipient monitoring requirements 2 CFR § 200.332.
Questioned Costs
Questioned costs were not determinable.
Context
For one (1) subrecipient selected for testing, with total expenditures of $325,977, from a population of one (1) subrecipient, the Company did not communicate all of the required subaward data elements, did not perform subrecipient risk assessment, and did not verify if subrecipient received audit.
The sample was not a statistically valid sample.
Recommendation
We recommend that the Organization perform the following:
(1) Develop procedures for future subrecipient agreements to ensure agreements will include all the required elements of 2 CFR § 200.332 (a)(1).
(2) For existing subrecipients that were not provided the required elements, provide a letter or amended agreement to include all the required elements of 2 CFR § 200.332 (a)(1).
(3) Maintain sufficient records of subrecipient risk assessment and monitoring subrecipients in accordance with subrecipient monitoring requirements noted in 2 CFR § 200.332 (b) – (d).
Views of Responsible Officials and Planned Corrective Action
Person responsible: Leona Smith Di Faustino, Interim Executive Director
Corrective Action Plan: The Organization will update its subrecipient monitoring policies to ensure all required elements as defined in 2 CFR § 200.332 (a)(1) are included in subrecipient agreements, Additionally, a checklist will be established to perform a risk assessment process to evaluate subrecipient risk prior to contract execution and annually thereafter and to verify each subrecipient’s that meets the audit threshold and if required has a current Single Audit on file or is otherwise in compliance.
Anticipated Implementation Date: July 1, 2025