Audit 353775

Finding 2024-001 - Allowable Costs/Cost Principles Identification of federal program: Assistance Listing No. 93-493 - Congressional Directives Criteria or specific requirement: Section 200.406 of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance) provides the requirements for applicable credits. Applicable credits refer to tansactions are purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the recipient or subrecipient relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. Condition: We noted an instance of a reimbursement that was not net of applicable credits. Cause: The System does not have internal controls in place requiring supervisory review and approval for allowability and adherence to cost principles specifically related to reimbursement net of applicabable credits. Effect or potential effect: Unallowable costs may have been charged to the program. Questioned cost: $6,945 known. Context: The System received funding that was not net of applicable credits. The funding received from the grantor was the full invoice amount, however, the actual expenditure was net of applicable credits ($6,945). Recommendation: We recommend the System establish formal internal control policies and procedures requiring supervisory review and approval for allowability and adherence to cost principles specifically related to reimbursement net of applicable credits. Views of responsible officials: The System concurs with this finding. See page 50 for corrective action plan.

Finding 2024-002 - Material Weakness: Allowable Costs/Cost Principles Idenfication of federal program: Assistance Listing No. 93.493 - Congressional Directives Criteria or specific requirement: Section 200.403(e) of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards requires that "(e) Be determined in accordance with generally accepted accounting principles (GAAP)". GAAP does not allow reconding of the expenditure until the expense is incurred. In addition, Section 200.502(a) of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards required that "The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs". Condition: Expenditures were included on the 2024 Schedule of Expenditures of Federal Awards, however, the expenditures were not incurred until 2025. Cause: Drawdown on reimbursement requests were submitted to the grantor prior to the System incurring qualifying expenditures. Effect or potential effect: This resulted in material non-compliance with the allowable costs/cost principles requirement for the grant program. The expenditures included on the 2024 Schedule of Expenditures of Federal Awards was overstated. Questioned cost: $92,130 known. The 2024 Schedule of Expenditures of Federal Awards has been corrected for this finding. Context: The finding is considered systemic in nature. Recommendation: We recommend that the System personnel administering the grant program comply with the System's established process, whereby qualifying expenditures are incurred prior to requesting reimbursement from the grantor. Views of responsible officials: The System concurs with this finding. See page 52 for corrective action plan.

Finding 2024-003 - Reporting Idenfication of federal program: Assistance Listing No. 93.493 - Congressional Directives Criteria or specific requirement: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards requires that the auditee maintain internal control over financial reporting which includes supervisory review of reports prepared and submitted to the grantor to assure accuracy and completeness of data included in the reports. Condition: We noted an incorrect progress report being submitted to the grantor. Cause: Formal internal control policies and procedures requiring supervisory review of reports have not been established. Effect or potential effect: The lack of adequate internal control policies and procedures requiring timely supervisory review of reports filed with grantor may result in inaccurate information being reported and non-compliance with program requirements. This finding resulted in an incorrect progress report being submitted to the grantor. Questioned cost: not applicable. Context: An incorrect progress report was submitted to the grantor. Recommendation: We recommend that the System establish formal internal control policies and procedures requiring supervisory review and approval of all reports filed with the grantor to assure the accuracy and completeness of data included in such reports. All such reviews and approvals should be properly documented. Views of responsible officials: The System concurs with this finding. See page 54 for corrective action plan.

Finding 2024-004 - Material Weakness: Period of Performance Identification of federal program: Assistance Listing No. 93-493 - Congressional Directives Criteria or specific requirement: Section 200.1 of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards requires that, "A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award's period of performance and any costs incurred before the federal awarding agency or pass-through entity" Condition: The aproved grant includes a budget period from September 30, 2023 through September 29,2026. Expenditures were included on the 2024 Schedule of Expenditures of Federal Awards, however, the expenditures were incurred prior to the budget period start date. Cause: Expenditures were incurred prior to the budget period start date, however, reimbursement was requested from the grantor. Effect or potential effect: This resulted in material non-compliance with the period of performance requirement for the grant programs. The expenditures included on the 2024 Schedule of Expenditures of Federal Awards were overstated. Questioned cost: $232,870. The 2024 Schedule of Expenditures of Federal Awards has been corrected for this finding. Context: Expenditures were included on the 2024 Schedule of Expenditures of Federal Awards, however, the expenditures were incurred prior to the budget period start date. Recommendation: We recommend that the System personnel administering the grant program comply with the System's established process, whereby the drawdown on reimbursement requests include expenditures incurred within the budget period of the approved grant. Views of responsible officials: The System concurs with this finding. See page 55 for corrective action plan.

Finding 2024-005 -Material Weakness: Cash Management Identification of federal program: Assistance Listing No. 93-493 - Congressional Directives Criteria or specific requirement: Per the OMB Compliance Supplement, "For grants and cooperative agreements to non-federal entities that are funded on a reimbursement basis, determine that expenditures, as defined by 2 CFR 200.1, were incurred prior to date of the reimbursement request." Condition: We noted two instances of request for reimbursement prior to the expenditures being incurred. Cause: Drawdown on reimbursement requests were submitted to the grantor prior to the System incurring qualifyig expenditures. Effect or potential effect: This resulted in material non-compliance with the cash management requirement for the grant program. Questioned cost: $92,130 known. The 2024 Schedule of Expenditures of Federal Awards has been corrected for this finding. Context: The finding is considered systemic in nature. Recommendation: We recommend that the System personnel administering the grant program comply with the System's established process, whereby qualifying expenditured are incurred prior to requesting reimbursement from the grantor. Views of responsible officials: The System concur wuth this finding. See page 57 for corrective action plan.

Finding 2024-001 - Allowable Costs/Cost Principles Identification of federal program: Assistance Listing No. 93-493 - Congressional Directives Criteria or specific requirement: Section 200.406 of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance) provides the requirements for applicable credits. Applicable credits refer to tansactions are purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the recipient or subrecipient relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. Condition: We noted an instance of a reimbursement that was not net of applicable credits. Cause: The System does not have internal controls in place requiring supervisory review and approval for allowability and adherence to cost principles specifically related to reimbursement net of applicabable credits. Effect or potential effect: Unallowable costs may have been charged to the program. Questioned cost: $6,945 known. Context: The System received funding that was not net of applicable credits. The funding received from the grantor was the full invoice amount, however, the actual expenditure was net of applicable credits ($6,945). Recommendation: We recommend the System establish formal internal control policies and procedures requiring supervisory review and approval for allowability and adherence to cost principles specifically related to reimbursement net of applicable credits. Views of responsible officials: The System concurs with this finding. See page 50 for corrective action plan.

Finding 2024-002 - Material Weakness: Allowable Costs/Cost Principles Idenfication of federal program: Assistance Listing No. 93.493 - Congressional Directives Criteria or specific requirement: Section 200.403(e) of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards requires that "(e) Be determined in accordance with generally accepted accounting principles (GAAP)". GAAP does not allow reconding of the expenditure until the expense is incurred. In addition, Section 200.502(a) of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards required that "The determination of when a Federal award is expended must be based on when the activity related to the Federal award occurs". Condition: Expenditures were included on the 2024 Schedule of Expenditures of Federal Awards, however, the expenditures were not incurred until 2025. Cause: Drawdown on reimbursement requests were submitted to the grantor prior to the System incurring qualifying expenditures. Effect or potential effect: This resulted in material non-compliance with the allowable costs/cost principles requirement for the grant program. The expenditures included on the 2024 Schedule of Expenditures of Federal Awards was overstated. Questioned cost: $92,130 known. The 2024 Schedule of Expenditures of Federal Awards has been corrected for this finding. Context: The finding is considered systemic in nature. Recommendation: We recommend that the System personnel administering the grant program comply with the System's established process, whereby qualifying expenditures are incurred prior to requesting reimbursement from the grantor. Views of responsible officials: The System concurs with this finding. See page 52 for corrective action plan.

Finding 2024-003 - Reporting Idenfication of federal program: Assistance Listing No. 93.493 - Congressional Directives Criteria or specific requirement: Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards requires that the auditee maintain internal control over financial reporting which includes supervisory review of reports prepared and submitted to the grantor to assure accuracy and completeness of data included in the reports. Condition: We noted an incorrect progress report being submitted to the grantor. Cause: Formal internal control policies and procedures requiring supervisory review of reports have not been established. Effect or potential effect: The lack of adequate internal control policies and procedures requiring timely supervisory review of reports filed with grantor may result in inaccurate information being reported and non-compliance with program requirements. This finding resulted in an incorrect progress report being submitted to the grantor. Questioned cost: not applicable. Context: An incorrect progress report was submitted to the grantor. Recommendation: We recommend that the System establish formal internal control policies and procedures requiring supervisory review and approval of all reports filed with the grantor to assure the accuracy and completeness of data included in such reports. All such reviews and approvals should be properly documented. Views of responsible officials: The System concurs with this finding. See page 54 for corrective action plan.

Finding 2024-004 - Material Weakness: Period of Performance Identification of federal program: Assistance Listing No. 93-493 - Congressional Directives Criteria or specific requirement: Section 200.1 of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards requires that, "A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award's period of performance and any costs incurred before the federal awarding agency or pass-through entity" Condition: The aproved grant includes a budget period from September 30, 2023 through September 29,2026. Expenditures were included on the 2024 Schedule of Expenditures of Federal Awards, however, the expenditures were incurred prior to the budget period start date. Cause: Expenditures were incurred prior to the budget period start date, however, reimbursement was requested from the grantor. Effect or potential effect: This resulted in material non-compliance with the period of performance requirement for the grant programs. The expenditures included on the 2024 Schedule of Expenditures of Federal Awards were overstated. Questioned cost: $232,870. The 2024 Schedule of Expenditures of Federal Awards has been corrected for this finding. Context: Expenditures were included on the 2024 Schedule of Expenditures of Federal Awards, however, the expenditures were incurred prior to the budget period start date. Recommendation: We recommend that the System personnel administering the grant program comply with the System's established process, whereby the drawdown on reimbursement requests include expenditures incurred within the budget period of the approved grant. Views of responsible officials: The System concurs with this finding. See page 55 for corrective action plan.

Finding 2024-005 -Material Weakness: Cash Management Identification of federal program: Assistance Listing No. 93-493 - Congressional Directives Criteria or specific requirement: Per the OMB Compliance Supplement, "For grants and cooperative agreements to non-federal entities that are funded on a reimbursement basis, determine that expenditures, as defined by 2 CFR 200.1, were incurred prior to date of the reimbursement request." Condition: We noted two instances of request for reimbursement prior to the expenditures being incurred. Cause: Drawdown on reimbursement requests were submitted to the grantor prior to the System incurring qualifyig expenditures. Effect or potential effect: This resulted in material non-compliance with the cash management requirement for the grant program. Questioned cost: $92,130 known. The 2024 Schedule of Expenditures of Federal Awards has been corrected for this finding. Context: The finding is considered systemic in nature. Recommendation: We recommend that the System personnel administering the grant program comply with the System's established process, whereby qualifying expenditured are incurred prior to requesting reimbursement from the grantor. Views of responsible officials: The System concur wuth this finding. See page 57 for corrective action plan.