Audit 359016

Finding 2024-001: Completeness of Schedule of Expenditures of Federal Awards – Material Weakness Federal Agency: Institute of Museum and Library Services Federal Program Title: Museums for America Federal Assistance Listing Number: 45.301 Compliance Requirement: Reporting Criteria The Museum should maintain appropriate controls over the compliance process to prevent or detect material misstatements in its schedule of expenditures of federal awards ("SEFA"). In addition, management should review monthly and year-end financial activity to determine if there are any unusual balances that need to be investigated to ensure the completeness and accuracy of the SEFA. Condition During the audit, an error within the SEFA was discovered which required an adjustment to properly state the SEFA. Context The omitted amounts on the SEFA primarily related to a federal grant which was not communicated from the development department to the finance department. Although the associated expenditures were properly recorded in the Museum's financial records, the lack of internal communication resulted in the grant being inadvertently excluded from the SEFA. Cause The limited number of staff within the development and finance departments restricted the Museum's ability to perform the necessary review of the SEFA. Effect This could lead to inaccurate information and reporting compliance for which the Museum's decisions are made upon. Questioned costs None. Identification of a repeat finding This is not a repeat finding. Recommendation We recommend the Museum review and enhance its internal controls and process to ensure the completeness of the SEFA. This should include cross-departmental coordination, particularly between the development and finance departments, to identify all federal funding sources and related expenditures. A checklist or reconciliation procedure should be established to verify that all applicable grants are included and properly reported. Views of responsible officials The National Building Museum has established policies and internal controls to ensure the completeness and accuracy of grant reporting. However, in consideration of the SEFA findings, we will strengthen our processes specific to federal grants. We will enhance cross-departmental coordination between the Development and Finance departments to ensure all federal awards are properly identified and reported. Additionally, we will integrate the SEFA review into our regular grant reporting and performance monitoring procedures. As part of this effort, we enhanced the current reconciliation process and added a SEFA-specific process to support complete and accurate reporting. These improvements will be implemented in advance of the next reporting cycle to ensure compliance and prevent recurrence.

Finding 2024-002: Procurement – Material Weakness Federal Agency: Institute of Museum and Library Services Federal Program Titles: Museums for America Federal Assistance Listing Number: 45.301 Compliance Requirement: Procurement Criteria Under Uniform Guidance, non-federal entities must justify the use of sole source procurement through appropriate documentation. This includes providing a clear rationale for selecting a sole source vendor, conducting and documenting market research to confirm that the product or service is available only from a single source, and obtaining the necessary approvals as required by the recipient's internal procurement policies. Condition We noted several instances of procurement purchases deemed to be sole source that did not adhere to the established procurement requirements. Specifically, required contemporaneous written internal support for sole source awards were either incomplete or not retained. Context The Museum was unable to provide sufficient written documentation to support the justification for sole source vendor selections. Cause The Museum's internal controls to ensure that procurement procedures, particularly those related to sole source procurements, were not effectively implemented. Effect The Museum may inadvertently engage vendors through procurement processes without written documentation of sole sourcing. This could lead to reduced accountability and potential disallowance of federal expenditures. Questioned costs None. Identification of a repeat finding This is not a repeat finding. Recommendation The Museum should review and enhance its procurement procedures and provide periodic staff training to ensure compliance with the Uniform Guidance. This includes clearly defining and enforcing documentation requirements for all procurement types, particularly sole source procurements. Additionally, implementing a standardized procurement checklist and approval workflow will help ensure proper justification, competitive solicitation when required, and appropriate documentation retention. Periodic reviews of procurement activities should also be conducted to verify ongoing compliance and to identify and address any procedural gaps. Views of responsible officials The National Building Museum's existing written procurement policy strives to adhere to all applicable federal regulations and guidelines. In excuting this grant, the Museum selected sole source contracts whose expertise aligned specifically with the project's objectives. The Museum provided regualr updates to the granting agency, the institute of Museum and Library Services (IMLS), which was informed of and verbally agreed to the Museum's intent and justification for sole sourcing. The Museum was awaiting a written acknologement when the agency was disbanded on March 31, 2025.

Finding 2024-001: Completeness of Schedule of Expenditures of Federal Awards – Material Weakness Federal Agency: Institute of Museum and Library Services Federal Program Title: Museums for America Federal Assistance Listing Number: 45.301 Compliance Requirement: Reporting Criteria The Museum should maintain appropriate controls over the compliance process to prevent or detect material misstatements in its schedule of expenditures of federal awards ("SEFA"). In addition, management should review monthly and year-end financial activity to determine if there are any unusual balances that need to be investigated to ensure the completeness and accuracy of the SEFA. Condition During the audit, an error within the SEFA was discovered which required an adjustment to properly state the SEFA. Context The omitted amounts on the SEFA primarily related to a federal grant which was not communicated from the development department to the finance department. Although the associated expenditures were properly recorded in the Museum's financial records, the lack of internal communication resulted in the grant being inadvertently excluded from the SEFA. Cause The limited number of staff within the development and finance departments restricted the Museum's ability to perform the necessary review of the SEFA. Effect This could lead to inaccurate information and reporting compliance for which the Museum's decisions are made upon. Questioned costs None. Identification of a repeat finding This is not a repeat finding. Recommendation We recommend the Museum review and enhance its internal controls and process to ensure the completeness of the SEFA. This should include cross-departmental coordination, particularly between the development and finance departments, to identify all federal funding sources and related expenditures. A checklist or reconciliation procedure should be established to verify that all applicable grants are included and properly reported. Views of responsible officials The National Building Museum has established policies and internal controls to ensure the completeness and accuracy of grant reporting. However, in consideration of the SEFA findings, we will strengthen our processes specific to federal grants. We will enhance cross-departmental coordination between the Development and Finance departments to ensure all federal awards are properly identified and reported. Additionally, we will integrate the SEFA review into our regular grant reporting and performance monitoring procedures. As part of this effort, we enhanced the current reconciliation process and added a SEFA-specific process to support complete and accurate reporting. These improvements will be implemented in advance of the next reporting cycle to ensure compliance and prevent recurrence.

Finding 2024-002: Procurement – Material Weakness Federal Agency: Institute of Museum and Library Services Federal Program Titles: Museums for America Federal Assistance Listing Number: 45.301 Compliance Requirement: Procurement Criteria Under Uniform Guidance, non-federal entities must justify the use of sole source procurement through appropriate documentation. This includes providing a clear rationale for selecting a sole source vendor, conducting and documenting market research to confirm that the product or service is available only from a single source, and obtaining the necessary approvals as required by the recipient's internal procurement policies. Condition We noted several instances of procurement purchases deemed to be sole source that did not adhere to the established procurement requirements. Specifically, required contemporaneous written internal support for sole source awards were either incomplete or not retained. Context The Museum was unable to provide sufficient written documentation to support the justification for sole source vendor selections. Cause The Museum's internal controls to ensure that procurement procedures, particularly those related to sole source procurements, were not effectively implemented. Effect The Museum may inadvertently engage vendors through procurement processes without written documentation of sole sourcing. This could lead to reduced accountability and potential disallowance of federal expenditures. Questioned costs None. Identification of a repeat finding This is not a repeat finding. Recommendation The Museum should review and enhance its procurement procedures and provide periodic staff training to ensure compliance with the Uniform Guidance. This includes clearly defining and enforcing documentation requirements for all procurement types, particularly sole source procurements. Additionally, implementing a standardized procurement checklist and approval workflow will help ensure proper justification, competitive solicitation when required, and appropriate documentation retention. Periodic reviews of procurement activities should also be conducted to verify ongoing compliance and to identify and address any procedural gaps. Views of responsible officials The National Building Museum's existing written procurement policy strives to adhere to all applicable federal regulations and guidelines. In excuting this grant, the Museum selected sole source contracts whose expertise aligned specifically with the project's objectives. The Museum provided regualr updates to the granting agency, the institute of Museum and Library Services (IMLS), which was informed of and verbally agreed to the Museum's intent and justification for sole sourcing. The Museum was awaiting a written acknologement when the agency was disbanded on March 31, 2025.