Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Federal regulations (45 CFR 1630.5 and 2 CFR 200.403) state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Condition: During our testing we noted: Payroll transactions: Eleven instances of errors totaling a net amount of $2,009 (an absolute value amount of $2,009) where the incorrect percentages were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee’s pay, and
Payroll transactions: Seven instances of errors totaling a net amount of $109 (an absolute value amount of $4,405) where an unsupported allocation percentage was used to allocate the employee's pay to the grant - typically, employee salaries are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund.
Fringe-benefit transactions: Two instances of an error totaling $91 where an unsupported allocation percentage was used to allocate employer-paid employee insurance costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund.
Fringe-benefit transactions: Two instances of errors totaling $275 where employer-paid employee insurance and HSA contribution deductions per the employee's pay stub were allocated to the grant at a rate of 100%.
Non-payroll and fringe transactions: one instance of an error totaling $884 where an unsupported allocation percentage was used to allocate general costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Additionally, we noted inconsistency in the general fund (LSC and two other private grants) allocation basis used during the year - grant hours and projected revenue were both utilized at different times during the year. Additionally, we noted that allocations in the general fund are done using projected revenue. However as revenue was recognized as expenses were incurred for the general fund the allocation based on revenue approximated an allocation method based on costs. As such, the costs mentioned above were allocated in an inconsistent manner to other grant costs and were not fully representative of the employees’ time and effort. However, we noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
2024 – 002: Cost Allocation of Expenses to LSC Grants (Continued)
Questioned Costs: A net amount of $3,150 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060.
Context: These 23 instances were noting during testing of 55 disbursements.
Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund, but it often includes manual adjustments based on review of individual time records, expense and other data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations.
Effect: The inclusion of frequent manual adjustments in the Organization’s cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities and in a manner where costs are not applied uniformly to both LSC (or, federally)-funded and non-LSC (of, federally) -funded activities.
Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2023-003 and 2023-004.
Recommendation: We recommend that the Organization consider updating its cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations that are calculated in a consistent manner that ensure costs are applied uniformly to respective benefited activities, and that are reflective on employees’ time and effort records
Views of responsible officials: Management partially agrees with this finding. First, 45 CFR Part 1635 codifies the timekeeping requirement. CLS keeps track of every case and time dedicated by staff in strict compliance with this requirement. Additionally, the distribution of expenses in the general fund, which includes LSC and two other funding sources, represents a fair method and allocation. Regarding the questioned costs, CLS disagrees with the finding of material weakness given the extremely low total dollar value.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Criteria or Specific Requirement: Federal regulations (45 CFR 1614.7) states that federal award recipients shall demonstrate compliance with the PAI requirement by utilizing financial systems and procedures and maintaining supporting documentation to identify and account separately for costs related to the PAI requirement. It also states that non-personnel costs shall be allocated on the basis of reasonable operating data and that all methods of allocating common costs shall be clearly documented. In addition, it states that any direct or indirect time of staff attorneys or paralegals is allocated as a cost to PAI, such costs must be documented by time sheets accounting for the time those employees have spent on PAI activities.
Condition: During our testing, we noted that: Eight instances where a salary different from the employee's approved salary was used to allocate the employee's pay to PAI, resulting in an under allocation of employee salaries to PAI totaling $36,049.
Seven instances where estimated benefit costs per employee were used to allocate employee benefits to PAI rather than actual benefit costs per employee, resulting in net errors under-allocating expense by $8,356 (absolute value errors totaling $11,774).
Three general expense cost allocations where an unsupported allocation percentage was used to allocate general costs to PAI - typically, costs are allocated to LSC and two other private grants using a base of total specific grant hours for the period divided by total hours coded to the Organization’s general fund. This resulted in an overallocation of costs of $19.As such, the costs mentioned above were allocated in an inconsistent manner to other grant payroll, fringe benefit, and general expense costs and were not fully representative of the employees’ time and effort and compensation, or direct costs incurred in support of the grant.
Questioned Costs: None. The original variances represent a net under-allocation of costs. Management elected to correct the allocation during audit fieldwork.
Context: These instances were noting during testing of 60 payroll, employee fringe benefit, and general PAI requirement costs.
Cause: The Organization’s salary, wage and employee benefit and general expense cost allocation methodology is primarily based on time and effort records and a periodic calculation of grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments in the Organization’s salaries, wages, employee benefit, and general expense cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It would also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-006.
Recommendation: We recommend that the Organization consider updating its salaries, wages, employee benefit, and general expense cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management partially agrees with this finding. CLS recognizes manual miscalculations due to human errors but considers that the allocation methodology is correct. CLS is undertaking improvements oriented toward automatization of the process while recognizing that complete automatization is not possible without an expensive and complete overhaul of our systems.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations (45 CFR 1614.7) states that federal award recipients shall demonstrate compliance with the PAI requirement by utilizing financial systems and procedures and maintaining supporting documentation to identify and account separately for costs related to the PAI requirement.
Criteria or Specific Requirement Procurement: Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type.
Suspension and Debarment: Part 2 CFR Section 180.300 describes federal requirements related to suspension and debarment for federal award recipients. The standards require that a federal award recipient verify that an entity with which it plans to enter into a covered transaction is not suspended and debarred. Procedures for satisfying such requirements should be documented, and evidence of such procedures should be maintained. Condition Procurement: The Organization has a documented procurement policy. However, we were unable to view records detailing the history of the Organization’s two procurement transactions and that steps required by the Organization’s procurement were completed for the transactions.
Suspension and Debarment: We were unable to see evidence that the Organization verified two vendors with which it entered a covered transaction were not suspended and debarred before the date it entered the transaction with such vendors. During our audit procedures, we noted that the vendors were not suspended and debarred.Questioned Costs: None Context: Procurement: Two instances were noted during testing of eight transactions above the Organization’s micro purchase threshold.
Suspension and Debarment: Two instances were noted during testing of two coveredtransactions.
Cause: We were unable to view evidence that the Organization's documented procurement, and suspension and debarment policies were followed. Effect: The Organization is not in compliance with federal requirements related to documented procurement, and suspension and debarment procedures.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization document and maintain evidence of: its completion of the required steps of its procurement policy for applicable transactions, and
suspension and debarment checks and procedures the Organization performs over vendors.Documentation and evidence of these procedures should be maintained to help show that the Organization in compliance with requirements specified in the Uniform Guidance.
Views of responsible officials: Management partially agrees with this finding. Regarding suspension and debarment, CLS agrees on improving the documentation to comply and demonstrate compliance with this requirement, though CLS disagrees with the characterization of material weakness. Regarding the two procurement transactions, CLS disagrees strongly that these transactions were procurements subject to the CLS accounting manual procurement section. CLS provided documentation to the auditors demonstrating that these were not procurements but were, in fact, required by existing leases. In one instance, our Denver landlord required us to pay a “catch-up” payment for operating expenses it had underbilled us previously; this cannot conceivably have been a procurement as we did not have discretion not to pay it and it was required by an existing lease. The second instance was a payment related to the expansion of leased office space in Colorado Springs; that also was not a procurement as there was no alternative but to pay the existing landlord for increased space, and it could not conceivably have been conducive to third-party bidding etc. We understand that the auditors may prefer to have a sole source letter in these instances, but we disagree with any finding that this is required by our accounting manual and the auditors have pointed to no specific language in the accounting manual for this requirement.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type. We were unable to see evidence of the federally required documentation. The Organization’s accounting manual states that leases of office buildings and office storage space and contracted services are considered procurements.
Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Federal regulations (45 CFR 1630.5 and 2 CFR 200.403) state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Condition: During our testing we noted: Payroll transactions: Eleven instances of errors totaling a net amount of $2,009 (an absolute value amount of $2,009) where the incorrect percentages were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee’s pay, and
Payroll transactions: Seven instances of errors totaling a net amount of $109 (an absolute value amount of $4,405) where an unsupported allocation percentage was used to allocate the employee's pay to the grant - typically, employee salaries are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund.
Fringe-benefit transactions: Two instances of an error totaling $91 where an unsupported allocation percentage was used to allocate employer-paid employee insurance costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund.
Fringe-benefit transactions: Two instances of errors totaling $275 where employer-paid employee insurance and HSA contribution deductions per the employee's pay stub were allocated to the grant at a rate of 100%.
Non-payroll and fringe transactions: one instance of an error totaling $884 where an unsupported allocation percentage was used to allocate general costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Additionally, we noted inconsistency in the general fund (LSC and two other private grants) allocation basis used during the year - grant hours and projected revenue were both utilized at different times during the year. Additionally, we noted that allocations in the general fund are done using projected revenue. However as revenue was recognized as expenses were incurred for the general fund the allocation based on revenue approximated an allocation method based on costs. As such, the costs mentioned above were allocated in an inconsistent manner to other grant costs and were not fully representative of the employees’ time and effort. However, we noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
2024 – 002: Cost Allocation of Expenses to LSC Grants (Continued)
Questioned Costs: A net amount of $3,150 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060.
Context: These 23 instances were noting during testing of 55 disbursements.
Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund, but it often includes manual adjustments based on review of individual time records, expense and other data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations.
Effect: The inclusion of frequent manual adjustments in the Organization’s cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities and in a manner where costs are not applied uniformly to both LSC (or, federally)-funded and non-LSC (of, federally) -funded activities.
Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2023-003 and 2023-004.
Recommendation: We recommend that the Organization consider updating its cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations that are calculated in a consistent manner that ensure costs are applied uniformly to respective benefited activities, and that are reflective on employees’ time and effort records
Views of responsible officials: Management partially agrees with this finding. First, 45 CFR Part 1635 codifies the timekeeping requirement. CLS keeps track of every case and time dedicated by staff in strict compliance with this requirement. Additionally, the distribution of expenses in the general fund, which includes LSC and two other funding sources, represents a fair method and allocation. Regarding the questioned costs, CLS disagrees with the finding of material weakness given the extremely low total dollar value.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Criteria or Specific Requirement: Federal regulations (45 CFR 1614.7) states that federal award recipients shall demonstrate compliance with the PAI requirement by utilizing financial systems and procedures and maintaining supporting documentation to identify and account separately for costs related to the PAI requirement. It also states that non-personnel costs shall be allocated on the basis of reasonable operating data and that all methods of allocating common costs shall be clearly documented. In addition, it states that any direct or indirect time of staff attorneys or paralegals is allocated as a cost to PAI, such costs must be documented by time sheets accounting for the time those employees have spent on PAI activities.
Condition: During our testing, we noted that: Eight instances where a salary different from the employee's approved salary was used to allocate the employee's pay to PAI, resulting in an under allocation of employee salaries to PAI totaling $36,049.
Seven instances where estimated benefit costs per employee were used to allocate employee benefits to PAI rather than actual benefit costs per employee, resulting in net errors under-allocating expense by $8,356 (absolute value errors totaling $11,774).
Three general expense cost allocations where an unsupported allocation percentage was used to allocate general costs to PAI - typically, costs are allocated to LSC and two other private grants using a base of total specific grant hours for the period divided by total hours coded to the Organization’s general fund. This resulted in an overallocation of costs of $19.As such, the costs mentioned above were allocated in an inconsistent manner to other grant payroll, fringe benefit, and general expense costs and were not fully representative of the employees’ time and effort and compensation, or direct costs incurred in support of the grant.
Questioned Costs: None. The original variances represent a net under-allocation of costs. Management elected to correct the allocation during audit fieldwork.
Context: These instances were noting during testing of 60 payroll, employee fringe benefit, and general PAI requirement costs.
Cause: The Organization’s salary, wage and employee benefit and general expense cost allocation methodology is primarily based on time and effort records and a periodic calculation of grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments in the Organization’s salaries, wages, employee benefit, and general expense cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It would also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-006.
Recommendation: We recommend that the Organization consider updating its salaries, wages, employee benefit, and general expense cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management partially agrees with this finding. CLS recognizes manual miscalculations due to human errors but considers that the allocation methodology is correct. CLS is undertaking improvements oriented toward automatization of the process while recognizing that complete automatization is not possible without an expensive and complete overhaul of our systems.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations (45 CFR 1614.7) states that federal award recipients shall demonstrate compliance with the PAI requirement by utilizing financial systems and procedures and maintaining supporting documentation to identify and account separately for costs related to the PAI requirement.
Criteria or Specific Requirement Procurement: Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type.
Suspension and Debarment: Part 2 CFR Section 180.300 describes federal requirements related to suspension and debarment for federal award recipients. The standards require that a federal award recipient verify that an entity with which it plans to enter into a covered transaction is not suspended and debarred. Procedures for satisfying such requirements should be documented, and evidence of such procedures should be maintained. Condition Procurement: The Organization has a documented procurement policy. However, we were unable to view records detailing the history of the Organization’s two procurement transactions and that steps required by the Organization’s procurement were completed for the transactions.
Suspension and Debarment: We were unable to see evidence that the Organization verified two vendors with which it entered a covered transaction were not suspended and debarred before the date it entered the transaction with such vendors. During our audit procedures, we noted that the vendors were not suspended and debarred.Questioned Costs: None Context: Procurement: Two instances were noted during testing of eight transactions above the Organization’s micro purchase threshold.
Suspension and Debarment: Two instances were noted during testing of two coveredtransactions.
Cause: We were unable to view evidence that the Organization's documented procurement, and suspension and debarment policies were followed. Effect: The Organization is not in compliance with federal requirements related to documented procurement, and suspension and debarment procedures.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization document and maintain evidence of: its completion of the required steps of its procurement policy for applicable transactions, and
suspension and debarment checks and procedures the Organization performs over vendors.Documentation and evidence of these procedures should be maintained to help show that the Organization in compliance with requirements specified in the Uniform Guidance.
Views of responsible officials: Management partially agrees with this finding. Regarding suspension and debarment, CLS agrees on improving the documentation to comply and demonstrate compliance with this requirement, though CLS disagrees with the characterization of material weakness. Regarding the two procurement transactions, CLS disagrees strongly that these transactions were procurements subject to the CLS accounting manual procurement section. CLS provided documentation to the auditors demonstrating that these were not procurements but were, in fact, required by existing leases. In one instance, our Denver landlord required us to pay a “catch-up” payment for operating expenses it had underbilled us previously; this cannot conceivably have been a procurement as we did not have discretion not to pay it and it was required by an existing lease. The second instance was a payment related to the expansion of leased office space in Colorado Springs; that also was not a procurement as there was no alternative but to pay the existing landlord for increased space, and it could not conceivably have been conducive to third-party bidding etc. We understand that the auditors may prefer to have a sole source letter in these instances, but we disagree with any finding that this is required by our accounting manual and the auditors have pointed to no specific language in the accounting manual for this requirement.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type. We were unable to see evidence of the federally required documentation. The Organization’s accounting manual states that leases of office buildings and office storage space and contracted services are considered procurements.
Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Federal regulations (45 CFR 1630.5 and 2 CFR 200.403) state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Condition: During our testing we noted: Payroll transactions: Eleven instances of errors totaling a net amount of $2,009 (an absolute value amount of $2,009) where the incorrect percentages were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee’s pay, and
Payroll transactions: Seven instances of errors totaling a net amount of $109 (an absolute value amount of $4,405) where an unsupported allocation percentage was used to allocate the employee's pay to the grant - typically, employee salaries are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund.
Fringe-benefit transactions: Two instances of an error totaling $91 where an unsupported allocation percentage was used to allocate employer-paid employee insurance costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund.
Fringe-benefit transactions: Two instances of errors totaling $275 where employer-paid employee insurance and HSA contribution deductions per the employee's pay stub were allocated to the grant at a rate of 100%.
Non-payroll and fringe transactions: one instance of an error totaling $884 where an unsupported allocation percentage was used to allocate general costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Additionally, we noted inconsistency in the general fund (LSC and two other private grants) allocation basis used during the year - grant hours and projected revenue were both utilized at different times during the year. Additionally, we noted that allocations in the general fund are done using projected revenue. However as revenue was recognized as expenses were incurred for the general fund the allocation based on revenue approximated an allocation method based on costs. As such, the costs mentioned above were allocated in an inconsistent manner to other grant costs and were not fully representative of the employees’ time and effort. However, we noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
2024 – 002: Cost Allocation of Expenses to LSC Grants (Continued)
Questioned Costs: A net amount of $3,150 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060.
Context: These 23 instances were noting during testing of 55 disbursements.
Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund, but it often includes manual adjustments based on review of individual time records, expense and other data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations.
Effect: The inclusion of frequent manual adjustments in the Organization’s cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities and in a manner where costs are not applied uniformly to both LSC (or, federally)-funded and non-LSC (of, federally) -funded activities.
Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2023-003 and 2023-004.
Recommendation: We recommend that the Organization consider updating its cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations that are calculated in a consistent manner that ensure costs are applied uniformly to respective benefited activities, and that are reflective on employees’ time and effort records
Views of responsible officials: Management partially agrees with this finding. First, 45 CFR Part 1635 codifies the timekeeping requirement. CLS keeps track of every case and time dedicated by staff in strict compliance with this requirement. Additionally, the distribution of expenses in the general fund, which includes LSC and two other funding sources, represents a fair method and allocation. Regarding the questioned costs, CLS disagrees with the finding of material weakness given the extremely low total dollar value.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Criteria or Specific Requirement: Federal regulations (45 CFR 1614.7) states that federal award recipients shall demonstrate compliance with the PAI requirement by utilizing financial systems and procedures and maintaining supporting documentation to identify and account separately for costs related to the PAI requirement. It also states that non-personnel costs shall be allocated on the basis of reasonable operating data and that all methods of allocating common costs shall be clearly documented. In addition, it states that any direct or indirect time of staff attorneys or paralegals is allocated as a cost to PAI, such costs must be documented by time sheets accounting for the time those employees have spent on PAI activities.
Condition: During our testing, we noted that: Eight instances where a salary different from the employee's approved salary was used to allocate the employee's pay to PAI, resulting in an under allocation of employee salaries to PAI totaling $36,049.
Seven instances where estimated benefit costs per employee were used to allocate employee benefits to PAI rather than actual benefit costs per employee, resulting in net errors under-allocating expense by $8,356 (absolute value errors totaling $11,774).
Three general expense cost allocations where an unsupported allocation percentage was used to allocate general costs to PAI - typically, costs are allocated to LSC and two other private grants using a base of total specific grant hours for the period divided by total hours coded to the Organization’s general fund. This resulted in an overallocation of costs of $19.As such, the costs mentioned above were allocated in an inconsistent manner to other grant payroll, fringe benefit, and general expense costs and were not fully representative of the employees’ time and effort and compensation, or direct costs incurred in support of the grant.
Questioned Costs: None. The original variances represent a net under-allocation of costs. Management elected to correct the allocation during audit fieldwork.
Context: These instances were noting during testing of 60 payroll, employee fringe benefit, and general PAI requirement costs.
Cause: The Organization’s salary, wage and employee benefit and general expense cost allocation methodology is primarily based on time and effort records and a periodic calculation of grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments in the Organization’s salaries, wages, employee benefit, and general expense cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It would also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-006.
Recommendation: We recommend that the Organization consider updating its salaries, wages, employee benefit, and general expense cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management partially agrees with this finding. CLS recognizes manual miscalculations due to human errors but considers that the allocation methodology is correct. CLS is undertaking improvements oriented toward automatization of the process while recognizing that complete automatization is not possible without an expensive and complete overhaul of our systems.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations (45 CFR 1614.7) states that federal award recipients shall demonstrate compliance with the PAI requirement by utilizing financial systems and procedures and maintaining supporting documentation to identify and account separately for costs related to the PAI requirement.
Criteria or Specific Requirement Procurement: Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type.
Suspension and Debarment: Part 2 CFR Section 180.300 describes federal requirements related to suspension and debarment for federal award recipients. The standards require that a federal award recipient verify that an entity with which it plans to enter into a covered transaction is not suspended and debarred. Procedures for satisfying such requirements should be documented, and evidence of such procedures should be maintained. Condition Procurement: The Organization has a documented procurement policy. However, we were unable to view records detailing the history of the Organization’s two procurement transactions and that steps required by the Organization’s procurement were completed for the transactions.
Suspension and Debarment: We were unable to see evidence that the Organization verified two vendors with which it entered a covered transaction were not suspended and debarred before the date it entered the transaction with such vendors. During our audit procedures, we noted that the vendors were not suspended and debarred.Questioned Costs: None Context: Procurement: Two instances were noted during testing of eight transactions above the Organization’s micro purchase threshold.
Suspension and Debarment: Two instances were noted during testing of two coveredtransactions.
Cause: We were unable to view evidence that the Organization's documented procurement, and suspension and debarment policies were followed. Effect: The Organization is not in compliance with federal requirements related to documented procurement, and suspension and debarment procedures.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization document and maintain evidence of: its completion of the required steps of its procurement policy for applicable transactions, and
suspension and debarment checks and procedures the Organization performs over vendors.Documentation and evidence of these procedures should be maintained to help show that the Organization in compliance with requirements specified in the Uniform Guidance.
Views of responsible officials: Management partially agrees with this finding. Regarding suspension and debarment, CLS agrees on improving the documentation to comply and demonstrate compliance with this requirement, though CLS disagrees with the characterization of material weakness. Regarding the two procurement transactions, CLS disagrees strongly that these transactions were procurements subject to the CLS accounting manual procurement section. CLS provided documentation to the auditors demonstrating that these were not procurements but were, in fact, required by existing leases. In one instance, our Denver landlord required us to pay a “catch-up” payment for operating expenses it had underbilled us previously; this cannot conceivably have been a procurement as we did not have discretion not to pay it and it was required by an existing lease. The second instance was a payment related to the expansion of leased office space in Colorado Springs; that also was not a procurement as there was no alternative but to pay the existing landlord for increased space, and it could not conceivably have been conducive to third-party bidding etc. We understand that the auditors may prefer to have a sole source letter in these instances, but we disagree with any finding that this is required by our accounting manual and the auditors have pointed to no specific language in the accounting manual for this requirement.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type. We were unable to see evidence of the federally required documentation. The Organization’s accounting manual states that leases of office buildings and office storage space and contracted services are considered procurements.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement Procurement: Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type.
Suspension and Debarment: Part 2 CFR Section 180.300 describes federal requirements related to suspension and debarment for federal award recipients. The standards require that a federal award recipient verify that an entity with which it plans to enter into a covered transaction is not suspended and debarred. Procedures for satisfying such requirements should be documented, and evidence of such procedures should be maintained. Condition Procurement: The Organization has a documented procurement policy. However, we were unable to view records detailing the history of the Organization’s two procurement transactions and that steps required by the Organization’s procurement were completed for the transactions.
Suspension and Debarment: We were unable to see evidence that the Organization verified two vendors with which it entered a covered transaction were not suspended and debarred before the date it entered the transaction with such vendors. During our audit procedures, we noted that the vendors were not suspended and debarred.Questioned Costs: None Context: Procurement: Two instances were noted during testing of eight transactions above the Organization’s micro purchase threshold.
Suspension and Debarment: Two instances were noted during testing of two coveredtransactions.
Cause: We were unable to view evidence that the Organization's documented procurement, and suspension and debarment policies were followed. Effect: The Organization is not in compliance with federal requirements related to documented procurement, and suspension and debarment procedures.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization document and maintain evidence of: its completion of the required steps of its procurement policy for applicable transactions, and
suspension and debarment checks and procedures the Organization performs over vendors.Documentation and evidence of these procedures should be maintained to help show that the Organization in compliance with requirements specified in the Uniform Guidance.
Views of responsible officials: Management partially agrees with this finding. Regarding suspension and debarment, CLS agrees on improving the documentation to comply and demonstrate compliance with this requirement, though CLS disagrees with the characterization of material weakness. Regarding the two procurement transactions, CLS disagrees strongly that these transactions were procurements subject to the CLS accounting manual procurement section. CLS provided documentation to the auditors demonstrating that these were not procurements but were, in fact, required by existing leases. In one instance, our Denver landlord required us to pay a “catch-up” payment for operating expenses it had underbilled us previously; this cannot conceivably have been a procurement as we did not have discretion not to pay it and it was required by an existing lease. The second instance was a payment related to the expansion of leased office space in Colorado Springs; that also was not a procurement as there was no alternative but to pay the existing landlord for increased space, and it could not conceivably have been conducive to third-party bidding etc. We understand that the auditors may prefer to have a sole source letter in these instances, but we disagree with any finding that this is required by our accounting manual and the auditors have pointed to no specific language in the accounting manual for this requirement.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type. We were unable to see evidence of the federally required documentation. The Organization’s accounting manual states that leases of office buildings and office storage space and contracted services are considered procurements.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Federal regulations (45 CFR 1630.5 and 2 CFR 200.403) state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Condition: During our testing we noted: Payroll transactions: Eleven instances of errors totaling a net amount of $2,009 (an absolute value amount of $2,009) where the incorrect percentages were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee’s pay, and
Payroll transactions: Seven instances of errors totaling a net amount of $109 (an absolute value amount of $4,405) where an unsupported allocation percentage was used to allocate the employee's pay to the grant - typically, employee salaries are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund.
Fringe-benefit transactions: Two instances of an error totaling $91 where an unsupported allocation percentage was used to allocate employer-paid employee insurance costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund.
Fringe-benefit transactions: Two instances of errors totaling $275 where employer-paid employee insurance and HSA contribution deductions per the employee's pay stub were allocated to the grant at a rate of 100%.
Non-payroll and fringe transactions: one instance of an error totaling $884 where an unsupported allocation percentage was used to allocate general costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Additionally, we noted inconsistency in the general fund (LSC and two other private grants) allocation basis used during the year - grant hours and projected revenue were both utilized at different times during the year. Additionally, we noted that allocations in the general fund are done using projected revenue. However as revenue was recognized as expenses were incurred for the general fund the allocation based on revenue approximated an allocation method based on costs. As such, the costs mentioned above were allocated in an inconsistent manner to other grant costs and were not fully representative of the employees’ time and effort. However, we noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
2024 – 002: Cost Allocation of Expenses to LSC Grants (Continued)
Questioned Costs: A net amount of $3,150 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060.
Context: These 23 instances were noting during testing of 55 disbursements.
Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund, but it often includes manual adjustments based on review of individual time records, expense and other data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations.
Effect: The inclusion of frequent manual adjustments in the Organization’s cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities and in a manner where costs are not applied uniformly to both LSC (or, federally)-funded and non-LSC (of, federally) -funded activities.
Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2023-003 and 2023-004.
Recommendation: We recommend that the Organization consider updating its cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations that are calculated in a consistent manner that ensure costs are applied uniformly to respective benefited activities, and that are reflective on employees’ time and effort records
Views of responsible officials: Management partially agrees with this finding. First, 45 CFR Part 1635 codifies the timekeeping requirement. CLS keeps track of every case and time dedicated by staff in strict compliance with this requirement. Additionally, the distribution of expenses in the general fund, which includes LSC and two other funding sources, represents a fair method and allocation. Regarding the questioned costs, CLS disagrees with the finding of material weakness given the extremely low total dollar value.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Criteria or Specific Requirement: Federal regulations (45 CFR 1614.7) states that federal award recipients shall demonstrate compliance with the PAI requirement by utilizing financial systems and procedures and maintaining supporting documentation to identify and account separately for costs related to the PAI requirement. It also states that non-personnel costs shall be allocated on the basis of reasonable operating data and that all methods of allocating common costs shall be clearly documented. In addition, it states that any direct or indirect time of staff attorneys or paralegals is allocated as a cost to PAI, such costs must be documented by time sheets accounting for the time those employees have spent on PAI activities.
Condition: During our testing, we noted that: Eight instances where a salary different from the employee's approved salary was used to allocate the employee's pay to PAI, resulting in an under allocation of employee salaries to PAI totaling $36,049.
Seven instances where estimated benefit costs per employee were used to allocate employee benefits to PAI rather than actual benefit costs per employee, resulting in net errors under-allocating expense by $8,356 (absolute value errors totaling $11,774).
Three general expense cost allocations where an unsupported allocation percentage was used to allocate general costs to PAI - typically, costs are allocated to LSC and two other private grants using a base of total specific grant hours for the period divided by total hours coded to the Organization’s general fund. This resulted in an overallocation of costs of $19.As such, the costs mentioned above were allocated in an inconsistent manner to other grant payroll, fringe benefit, and general expense costs and were not fully representative of the employees’ time and effort and compensation, or direct costs incurred in support of the grant.
Questioned Costs: None. The original variances represent a net under-allocation of costs. Management elected to correct the allocation during audit fieldwork.
Context: These instances were noting during testing of 60 payroll, employee fringe benefit, and general PAI requirement costs.
Cause: The Organization’s salary, wage and employee benefit and general expense cost allocation methodology is primarily based on time and effort records and a periodic calculation of grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments in the Organization’s salaries, wages, employee benefit, and general expense cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It would also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-006.
Recommendation: We recommend that the Organization consider updating its salaries, wages, employee benefit, and general expense cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management partially agrees with this finding. CLS recognizes manual miscalculations due to human errors but considers that the allocation methodology is correct. CLS is undertaking improvements oriented toward automatization of the process while recognizing that complete automatization is not possible without an expensive and complete overhaul of our systems.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations (45 CFR 1614.7) states that federal award recipients shall demonstrate compliance with the PAI requirement by utilizing financial systems and procedures and maintaining supporting documentation to identify and account separately for costs related to the PAI requirement.
Criteria or Specific Requirement Procurement: Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type.
Suspension and Debarment: Part 2 CFR Section 180.300 describes federal requirements related to suspension and debarment for federal award recipients. The standards require that a federal award recipient verify that an entity with which it plans to enter into a covered transaction is not suspended and debarred. Procedures for satisfying such requirements should be documented, and evidence of such procedures should be maintained. Condition Procurement: The Organization has a documented procurement policy. However, we were unable to view records detailing the history of the Organization’s two procurement transactions and that steps required by the Organization’s procurement were completed for the transactions.
Suspension and Debarment: We were unable to see evidence that the Organization verified two vendors with which it entered a covered transaction were not suspended and debarred before the date it entered the transaction with such vendors. During our audit procedures, we noted that the vendors were not suspended and debarred.Questioned Costs: None Context: Procurement: Two instances were noted during testing of eight transactions above the Organization’s micro purchase threshold.
Suspension and Debarment: Two instances were noted during testing of two coveredtransactions.
Cause: We were unable to view evidence that the Organization's documented procurement, and suspension and debarment policies were followed. Effect: The Organization is not in compliance with federal requirements related to documented procurement, and suspension and debarment procedures.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization document and maintain evidence of: its completion of the required steps of its procurement policy for applicable transactions, and
suspension and debarment checks and procedures the Organization performs over vendors.Documentation and evidence of these procedures should be maintained to help show that the Organization in compliance with requirements specified in the Uniform Guidance.
Views of responsible officials: Management partially agrees with this finding. Regarding suspension and debarment, CLS agrees on improving the documentation to comply and demonstrate compliance with this requirement, though CLS disagrees with the characterization of material weakness. Regarding the two procurement transactions, CLS disagrees strongly that these transactions were procurements subject to the CLS accounting manual procurement section. CLS provided documentation to the auditors demonstrating that these were not procurements but were, in fact, required by existing leases. In one instance, our Denver landlord required us to pay a “catch-up” payment for operating expenses it had underbilled us previously; this cannot conceivably have been a procurement as we did not have discretion not to pay it and it was required by an existing lease. The second instance was a payment related to the expansion of leased office space in Colorado Springs; that also was not a procurement as there was no alternative but to pay the existing landlord for increased space, and it could not conceivably have been conducive to third-party bidding etc. We understand that the auditors may prefer to have a sole source letter in these instances, but we disagree with any finding that this is required by our accounting manual and the auditors have pointed to no specific language in the accounting manual for this requirement.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type. We were unable to see evidence of the federally required documentation. The Organization’s accounting manual states that leases of office buildings and office storage space and contracted services are considered procurements.
Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Federal regulations (45 CFR 1630.5 and 2 CFR 200.403) state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Condition: During our testing we noted: Payroll transactions: Eleven instances of errors totaling a net amount of $2,009 (an absolute value amount of $2,009) where the incorrect percentages were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee’s pay, and
Payroll transactions: Seven instances of errors totaling a net amount of $109 (an absolute value amount of $4,405) where an unsupported allocation percentage was used to allocate the employee's pay to the grant - typically, employee salaries are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund.
Fringe-benefit transactions: Two instances of an error totaling $91 where an unsupported allocation percentage was used to allocate employer-paid employee insurance costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund.
Fringe-benefit transactions: Two instances of errors totaling $275 where employer-paid employee insurance and HSA contribution deductions per the employee's pay stub were allocated to the grant at a rate of 100%.
Non-payroll and fringe transactions: one instance of an error totaling $884 where an unsupported allocation percentage was used to allocate general costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Additionally, we noted inconsistency in the general fund (LSC and two other private grants) allocation basis used during the year - grant hours and projected revenue were both utilized at different times during the year. Additionally, we noted that allocations in the general fund are done using projected revenue. However as revenue was recognized as expenses were incurred for the general fund the allocation based on revenue approximated an allocation method based on costs. As such, the costs mentioned above were allocated in an inconsistent manner to other grant costs and were not fully representative of the employees’ time and effort. However, we noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
2024 – 002: Cost Allocation of Expenses to LSC Grants (Continued)
Questioned Costs: A net amount of $3,150 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060.
Context: These 23 instances were noting during testing of 55 disbursements.
Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund, but it often includes manual adjustments based on review of individual time records, expense and other data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations.
Effect: The inclusion of frequent manual adjustments in the Organization’s cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities and in a manner where costs are not applied uniformly to both LSC (or, federally)-funded and non-LSC (of, federally) -funded activities.
Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2023-003 and 2023-004.
Recommendation: We recommend that the Organization consider updating its cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations that are calculated in a consistent manner that ensure costs are applied uniformly to respective benefited activities, and that are reflective on employees’ time and effort records
Views of responsible officials: Management partially agrees with this finding. First, 45 CFR Part 1635 codifies the timekeeping requirement. CLS keeps track of every case and time dedicated by staff in strict compliance with this requirement. Additionally, the distribution of expenses in the general fund, which includes LSC and two other funding sources, represents a fair method and allocation. Regarding the questioned costs, CLS disagrees with the finding of material weakness given the extremely low total dollar value.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Criteria or Specific Requirement: Federal regulations (45 CFR 1614.7) states that federal award recipients shall demonstrate compliance with the PAI requirement by utilizing financial systems and procedures and maintaining supporting documentation to identify and account separately for costs related to the PAI requirement. It also states that non-personnel costs shall be allocated on the basis of reasonable operating data and that all methods of allocating common costs shall be clearly documented. In addition, it states that any direct or indirect time of staff attorneys or paralegals is allocated as a cost to PAI, such costs must be documented by time sheets accounting for the time those employees have spent on PAI activities.
Condition: During our testing, we noted that: Eight instances where a salary different from the employee's approved salary was used to allocate the employee's pay to PAI, resulting in an under allocation of employee salaries to PAI totaling $36,049.
Seven instances where estimated benefit costs per employee were used to allocate employee benefits to PAI rather than actual benefit costs per employee, resulting in net errors under-allocating expense by $8,356 (absolute value errors totaling $11,774).
Three general expense cost allocations where an unsupported allocation percentage was used to allocate general costs to PAI - typically, costs are allocated to LSC and two other private grants using a base of total specific grant hours for the period divided by total hours coded to the Organization’s general fund. This resulted in an overallocation of costs of $19.As such, the costs mentioned above were allocated in an inconsistent manner to other grant payroll, fringe benefit, and general expense costs and were not fully representative of the employees’ time and effort and compensation, or direct costs incurred in support of the grant.
Questioned Costs: None. The original variances represent a net under-allocation of costs. Management elected to correct the allocation during audit fieldwork.
Context: These instances were noting during testing of 60 payroll, employee fringe benefit, and general PAI requirement costs.
Cause: The Organization’s salary, wage and employee benefit and general expense cost allocation methodology is primarily based on time and effort records and a periodic calculation of grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments in the Organization’s salaries, wages, employee benefit, and general expense cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It would also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-006.
Recommendation: We recommend that the Organization consider updating its salaries, wages, employee benefit, and general expense cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management partially agrees with this finding. CLS recognizes manual miscalculations due to human errors but considers that the allocation methodology is correct. CLS is undertaking improvements oriented toward automatization of the process while recognizing that complete automatization is not possible without an expensive and complete overhaul of our systems.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations (45 CFR 1614.7) states that federal award recipients shall demonstrate compliance with the PAI requirement by utilizing financial systems and procedures and maintaining supporting documentation to identify and account separately for costs related to the PAI requirement.
Criteria or Specific Requirement Procurement: Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type.
Suspension and Debarment: Part 2 CFR Section 180.300 describes federal requirements related to suspension and debarment for federal award recipients. The standards require that a federal award recipient verify that an entity with which it plans to enter into a covered transaction is not suspended and debarred. Procedures for satisfying such requirements should be documented, and evidence of such procedures should be maintained. Condition Procurement: The Organization has a documented procurement policy. However, we were unable to view records detailing the history of the Organization’s two procurement transactions and that steps required by the Organization’s procurement were completed for the transactions.
Suspension and Debarment: We were unable to see evidence that the Organization verified two vendors with which it entered a covered transaction were not suspended and debarred before the date it entered the transaction with such vendors. During our audit procedures, we noted that the vendors were not suspended and debarred.Questioned Costs: None Context: Procurement: Two instances were noted during testing of eight transactions above the Organization’s micro purchase threshold.
Suspension and Debarment: Two instances were noted during testing of two coveredtransactions.
Cause: We were unable to view evidence that the Organization's documented procurement, and suspension and debarment policies were followed. Effect: The Organization is not in compliance with federal requirements related to documented procurement, and suspension and debarment procedures.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization document and maintain evidence of: its completion of the required steps of its procurement policy for applicable transactions, and
suspension and debarment checks and procedures the Organization performs over vendors.Documentation and evidence of these procedures should be maintained to help show that the Organization in compliance with requirements specified in the Uniform Guidance.
Views of responsible officials: Management partially agrees with this finding. Regarding suspension and debarment, CLS agrees on improving the documentation to comply and demonstrate compliance with this requirement, though CLS disagrees with the characterization of material weakness. Regarding the two procurement transactions, CLS disagrees strongly that these transactions were procurements subject to the CLS accounting manual procurement section. CLS provided documentation to the auditors demonstrating that these were not procurements but were, in fact, required by existing leases. In one instance, our Denver landlord required us to pay a “catch-up” payment for operating expenses it had underbilled us previously; this cannot conceivably have been a procurement as we did not have discretion not to pay it and it was required by an existing lease. The second instance was a payment related to the expansion of leased office space in Colorado Springs; that also was not a procurement as there was no alternative but to pay the existing landlord for increased space, and it could not conceivably have been conducive to third-party bidding etc. We understand that the auditors may prefer to have a sole source letter in these instances, but we disagree with any finding that this is required by our accounting manual and the auditors have pointed to no specific language in the accounting manual for this requirement.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type. We were unable to see evidence of the federally required documentation. The Organization’s accounting manual states that leases of office buildings and office storage space and contracted services are considered procurements.
Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Federal regulations (45 CFR 1630.5 and 2 CFR 200.403) state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Condition: During our testing we noted: Payroll transactions: Eleven instances of errors totaling a net amount of $2,009 (an absolute value amount of $2,009) where the incorrect percentages were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee’s pay, and
Payroll transactions: Seven instances of errors totaling a net amount of $109 (an absolute value amount of $4,405) where an unsupported allocation percentage was used to allocate the employee's pay to the grant - typically, employee salaries are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund.
Fringe-benefit transactions: Two instances of an error totaling $91 where an unsupported allocation percentage was used to allocate employer-paid employee insurance costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund.
Fringe-benefit transactions: Two instances of errors totaling $275 where employer-paid employee insurance and HSA contribution deductions per the employee's pay stub were allocated to the grant at a rate of 100%.
Non-payroll and fringe transactions: one instance of an error totaling $884 where an unsupported allocation percentage was used to allocate general costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Additionally, we noted inconsistency in the general fund (LSC and two other private grants) allocation basis used during the year - grant hours and projected revenue were both utilized at different times during the year. Additionally, we noted that allocations in the general fund are done using projected revenue. However as revenue was recognized as expenses were incurred for the general fund the allocation based on revenue approximated an allocation method based on costs. As such, the costs mentioned above were allocated in an inconsistent manner to other grant costs and were not fully representative of the employees’ time and effort. However, we noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
2024 – 002: Cost Allocation of Expenses to LSC Grants (Continued)
Questioned Costs: A net amount of $3,150 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060.
Context: These 23 instances were noting during testing of 55 disbursements.
Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund, but it often includes manual adjustments based on review of individual time records, expense and other data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations.
Effect: The inclusion of frequent manual adjustments in the Organization’s cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities and in a manner where costs are not applied uniformly to both LSC (or, federally)-funded and non-LSC (of, federally) -funded activities.
Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2023-003 and 2023-004.
Recommendation: We recommend that the Organization consider updating its cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations that are calculated in a consistent manner that ensure costs are applied uniformly to respective benefited activities, and that are reflective on employees’ time and effort records
Views of responsible officials: Management partially agrees with this finding. First, 45 CFR Part 1635 codifies the timekeeping requirement. CLS keeps track of every case and time dedicated by staff in strict compliance with this requirement. Additionally, the distribution of expenses in the general fund, which includes LSC and two other funding sources, represents a fair method and allocation. Regarding the questioned costs, CLS disagrees with the finding of material weakness given the extremely low total dollar value.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations state that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Criteria or Specific Requirement: Federal regulations (45 CFR 1614.7) states that federal award recipients shall demonstrate compliance with the PAI requirement by utilizing financial systems and procedures and maintaining supporting documentation to identify and account separately for costs related to the PAI requirement. It also states that non-personnel costs shall be allocated on the basis of reasonable operating data and that all methods of allocating common costs shall be clearly documented. In addition, it states that any direct or indirect time of staff attorneys or paralegals is allocated as a cost to PAI, such costs must be documented by time sheets accounting for the time those employees have spent on PAI activities.
Condition: During our testing, we noted that: Eight instances where a salary different from the employee's approved salary was used to allocate the employee's pay to PAI, resulting in an under allocation of employee salaries to PAI totaling $36,049.
Seven instances where estimated benefit costs per employee were used to allocate employee benefits to PAI rather than actual benefit costs per employee, resulting in net errors under-allocating expense by $8,356 (absolute value errors totaling $11,774).
Three general expense cost allocations where an unsupported allocation percentage was used to allocate general costs to PAI - typically, costs are allocated to LSC and two other private grants using a base of total specific grant hours for the period divided by total hours coded to the Organization’s general fund. This resulted in an overallocation of costs of $19.As such, the costs mentioned above were allocated in an inconsistent manner to other grant payroll, fringe benefit, and general expense costs and were not fully representative of the employees’ time and effort and compensation, or direct costs incurred in support of the grant.
Questioned Costs: None. The original variances represent a net under-allocation of costs. Management elected to correct the allocation during audit fieldwork.
Context: These instances were noting during testing of 60 payroll, employee fringe benefit, and general PAI requirement costs.
Cause: The Organization’s salary, wage and employee benefit and general expense cost allocation methodology is primarily based on time and effort records and a periodic calculation of grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments in the Organization’s salaries, wages, employee benefit, and general expense cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It would also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-006.
Recommendation: We recommend that the Organization consider updating its salaries, wages, employee benefit, and general expense cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management partially agrees with this finding. CLS recognizes manual miscalculations due to human errors but considers that the allocation methodology is correct. CLS is undertaking improvements oriented toward automatization of the process while recognizing that complete automatization is not possible without an expensive and complete overhaul of our systems.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations (45 CFR 1614.7) states that federal award recipients shall demonstrate compliance with the PAI requirement by utilizing financial systems and procedures and maintaining supporting documentation to identify and account separately for costs related to the PAI requirement.
Criteria or Specific Requirement Procurement: Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type.
Suspension and Debarment: Part 2 CFR Section 180.300 describes federal requirements related to suspension and debarment for federal award recipients. The standards require that a federal award recipient verify that an entity with which it plans to enter into a covered transaction is not suspended and debarred. Procedures for satisfying such requirements should be documented, and evidence of such procedures should be maintained. Condition Procurement: The Organization has a documented procurement policy. However, we were unable to view records detailing the history of the Organization’s two procurement transactions and that steps required by the Organization’s procurement were completed for the transactions.
Suspension and Debarment: We were unable to see evidence that the Organization verified two vendors with which it entered a covered transaction were not suspended and debarred before the date it entered the transaction with such vendors. During our audit procedures, we noted that the vendors were not suspended and debarred.Questioned Costs: None Context: Procurement: Two instances were noted during testing of eight transactions above the Organization’s micro purchase threshold.
Suspension and Debarment: Two instances were noted during testing of two coveredtransactions.
Cause: We were unable to view evidence that the Organization's documented procurement, and suspension and debarment policies were followed. Effect: The Organization is not in compliance with federal requirements related to documented procurement, and suspension and debarment procedures.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization document and maintain evidence of: its completion of the required steps of its procurement policy for applicable transactions, and
suspension and debarment checks and procedures the Organization performs over vendors.Documentation and evidence of these procedures should be maintained to help show that the Organization in compliance with requirements specified in the Uniform Guidance.
Views of responsible officials: Management partially agrees with this finding. Regarding suspension and debarment, CLS agrees on improving the documentation to comply and demonstrate compliance with this requirement, though CLS disagrees with the characterization of material weakness. Regarding the two procurement transactions, CLS disagrees strongly that these transactions were procurements subject to the CLS accounting manual procurement section. CLS provided documentation to the auditors demonstrating that these were not procurements but were, in fact, required by existing leases. In one instance, our Denver landlord required us to pay a “catch-up” payment for operating expenses it had underbilled us previously; this cannot conceivably have been a procurement as we did not have discretion not to pay it and it was required by an existing lease. The second instance was a payment related to the expansion of leased office space in Colorado Springs; that also was not a procurement as there was no alternative but to pay the existing landlord for increased space, and it could not conceivably have been conducive to third-party bidding etc. We understand that the auditors may prefer to have a sole source letter in these instances, but we disagree with any finding that this is required by our accounting manual and the auditors have pointed to no specific language in the accounting manual for this requirement.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type. We were unable to see evidence of the federally required documentation. The Organization’s accounting manual states that leases of office buildings and office storage space and contracted services are considered procurements.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement Procurement: Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type.
Suspension and Debarment: Part 2 CFR Section 180.300 describes federal requirements related to suspension and debarment for federal award recipients. The standards require that a federal award recipient verify that an entity with which it plans to enter into a covered transaction is not suspended and debarred. Procedures for satisfying such requirements should be documented, and evidence of such procedures should be maintained. Condition Procurement: The Organization has a documented procurement policy. However, we were unable to view records detailing the history of the Organization’s two procurement transactions and that steps required by the Organization’s procurement were completed for the transactions.
Suspension and Debarment: We were unable to see evidence that the Organization verified two vendors with which it entered a covered transaction were not suspended and debarred before the date it entered the transaction with such vendors. During our audit procedures, we noted that the vendors were not suspended and debarred.Questioned Costs: None Context: Procurement: Two instances were noted during testing of eight transactions above the Organization’s micro purchase threshold.
Suspension and Debarment: Two instances were noted during testing of two coveredtransactions.
Cause: We were unable to view evidence that the Organization's documented procurement, and suspension and debarment policies were followed. Effect: The Organization is not in compliance with federal requirements related to documented procurement, and suspension and debarment procedures.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization document and maintain evidence of: its completion of the required steps of its procurement policy for applicable transactions, and
suspension and debarment checks and procedures the Organization performs over vendors.Documentation and evidence of these procedures should be maintained to help show that the Organization in compliance with requirements specified in the Uniform Guidance.
Views of responsible officials: Management partially agrees with this finding. Regarding suspension and debarment, CLS agrees on improving the documentation to comply and demonstrate compliance with this requirement, though CLS disagrees with the characterization of material weakness. Regarding the two procurement transactions, CLS disagrees strongly that these transactions were procurements subject to the CLS accounting manual procurement section. CLS provided documentation to the auditors demonstrating that these were not procurements but were, in fact, required by existing leases. In one instance, our Denver landlord required us to pay a “catch-up” payment for operating expenses it had underbilled us previously; this cannot conceivably have been a procurement as we did not have discretion not to pay it and it was required by an existing lease. The second instance was a payment related to the expansion of leased office space in Colorado Springs; that also was not a procurement as there was no alternative but to pay the existing landlord for increased space, and it could not conceivably have been conducive to third-party bidding etc. We understand that the auditors may prefer to have a sole source letter in these instances, but we disagree with any finding that this is required by our accounting manual and the auditors have pointed to no specific language in the accounting manual for this requirement.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Part 2 CFR Section 200.318 requires that recipients and subrecipients maintain and use documented procedures for procurement transactions under federal awards and subawards, including for acquisition of property or services. It also requires that recipients and subrecipients maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract type. We were unable to see evidence of the federally required documentation. The Organization’s accounting manual states that leases of office buildings and office storage space and contracted services are considered procurements.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented.
Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay.
As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit.
Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044.
Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements.
Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations.
Repeat Finding: This is not a repeat finding.
Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds.
Condition: During our testing we noted that the Organization did not meet its required match for four separate grants. The Organization’s matching requirements for the grant period of these grants totaled $42,179 and the Organization contributed a total of $34,126 of matching funds during the period, resulting in an undermatch of $8,053. We also noted that in total the Organization over matched one other separate grant tested for a total of $523.
Questioned Costs: None
Context: These instances were noting during testing of matching requirements for 14 federal award pass-through agreements.
Cause: The Organization does not have a control process in place to ensure that it meets its matching requirements within the grant period.
Effect: The Organization may not meet its matching requirements under federal award agreements.
Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-008.
Recommendation: We recommend that the Organization implement a control process to ensure that it meets its matching requirements within the grant period.
Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness.
Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations and specific federal award pass-through agreements require the Organization to contribute matching funds to support the services to be provided with the federal award funds. We were unable to see evidence that showed grants received required matching funds.