Audit 353090

Finding number: 2024-001 AL number: 21.027 AL title: Coronavirus State and Local Recovery Funds Federal award identification number and year: n/a Name of federal agency: U.S. Department of the Treasury Name of pass-through entity: State Bar of California, Legal Aid Foundation of Los Angeles, and Bet Tzedek Legal Services Repeat finding: Yes Criteria: The Uniform Guidance Cost principles require consistency in treatment of costs and, specifically, that compensation costs be consistent. In addition, the Uniform Guidance requires that there be a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated and conform to the established accounting policies and practices of the Organization. Condition: Continuing the practice of the prior fiscal year for the first several months of this fiscal year, costs allocated to Federal grants were calculated by multiplying the hourly rate times the number of hours worked on the Federal grant. This methodology is effective for hourly employees, but can result in a variance in amounts charged to Federal programs when salaried employees work more or less than the base hours. Additionally, we noted other variances in that timeframe that were not associated with this methodology. Cause: Management was not able to implement changes to its methodology for the first part of its fiscal year, since the error was not discovered until the current fiscal year was already in progress. Possible effect: Minor discrepancies were found in the amounts allocated to Federal programs, though analysis indicated that a material impact was unlikely. Questioned cost: N/A Recommendation: The process implemented by management during the year appears to have addressed the ongoing variances satisfactorily, and management should continue with its new process. Views of responsible officials: The prior year recommendation was adopted in January 2024, immediately after the condition was first identified by Armanino. We updated the allocation methodology from that point to ensure that we are making allocations for employees on a fully pro rata basis by allocating a portion of gross pay based on hours worked on the Federal Grant and dividing that by total hours worked. We calculate the pro rata allocations in a single allocation spreadsheet and have added in check-formulas to ensure no allocations exceed an employee’s total compensation. These new practices were in place for the remainder of the fiscal year and continue to the present. We agree that the old process continued through the first four months of the fiscal year before it was identified for the first time by Armanino in January 2024, and we believe that no further action is necessary at this time with the changes that have been made.

Finding number: 2024-001 AL number: 21.027 AL title: Coronavirus State and Local Recovery Funds Federal award identification number and year: n/a Name of federal agency: U.S. Department of the Treasury Name of pass-through entity: State Bar of California, Legal Aid Foundation of Los Angeles, and Bet Tzedek Legal Services Repeat finding: Yes Criteria: The Uniform Guidance Cost principles require consistency in treatment of costs and, specifically, that compensation costs be consistent. In addition, the Uniform Guidance requires that there be a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated and conform to the established accounting policies and practices of the Organization. Condition: Continuing the practice of the prior fiscal year for the first several months of this fiscal year, costs allocated to Federal grants were calculated by multiplying the hourly rate times the number of hours worked on the Federal grant. This methodology is effective for hourly employees, but can result in a variance in amounts charged to Federal programs when salaried employees work more or less than the base hours. Additionally, we noted other variances in that timeframe that were not associated with this methodology. Cause: Management was not able to implement changes to its methodology for the first part of its fiscal year, since the error was not discovered until the current fiscal year was already in progress. Possible effect: Minor discrepancies were found in the amounts allocated to Federal programs, though analysis indicated that a material impact was unlikely. Questioned cost: N/A Recommendation: The process implemented by management during the year appears to have addressed the ongoing variances satisfactorily, and management should continue with its new process. Views of responsible officials: The prior year recommendation was adopted in January 2024, immediately after the condition was first identified by Armanino. We updated the allocation methodology from that point to ensure that we are making allocations for employees on a fully pro rata basis by allocating a portion of gross pay based on hours worked on the Federal Grant and dividing that by total hours worked. We calculate the pro rata allocations in a single allocation spreadsheet and have added in check-formulas to ensure no allocations exceed an employee’s total compensation. These new practices were in place for the remainder of the fiscal year and continue to the present. We agree that the old process continued through the first four months of the fiscal year before it was identified for the first time by Armanino in January 2024, and we believe that no further action is necessary at this time with the changes that have been made.