System of Internal Controls Over Compliance: Activities Allowed and Unallowed, Allowable
Costs/Cost Principles, and Period of Performance; U.S. Department of Treasury, Assistance Listing #21.027, Coronavirus State and Local Fiscal Recovery Funds, Passed Through St. Jude’s Ranch for Children, Boulder City Campus.
Criteria: In accordance with 2 CFR 200.62(a)(3), the auditee must maintain a system of internal control over compliance to provide reasonable assurance that expenditures submitted for reimbursement are related to allowed activities, considered allowable costs and adhere to relevant cost principles, and are incurred within the period of performance.
Condition: Through our initial scanning procedures, as related to the federal award request for reimbursement requests (RFRs) submitted to the grantor, it was noted that RFR submissions through June 30, 2024 were not submitted in accordance with accounting principles generally accepted in the United States of America. This indicated that the internal control over allowed activities, allowable costs/cost principles, and period of performance was not operating effectively.
Context: As a result of the condition noted above, as well as the grantor not yet reimbursing the organization for the improper RFR submissions when discovered, the organization elected to revise and resubmit all RFRs in order to be in accordance with accounting principles generally accepted in the United States of America.
Effect: Submission of RFRs on an inconsistent basis of accounting could result in duplication and/or omission of expenditures the organization may be entitled to be reimbursed for.
Cause: The design and implementation of the system of internal control over activities allowed and unallowed, allowable costs/cost principles, and period of performance was not operating effectively.
Recommendation: We recommend management design and implement a system of internal controls over compliance whereby expenditures submitted for reimbursement are related to allowed activities, considered allowable costs and adhere to relevant cost principles, are incurred within the period of performance, and are in accordance with accounting principles generally accepted in the United States of America.
Views of Responsible Officials and Planned Corrective Actions: St. Jude’s Ranch for Children (the parent entity of HSB Holding Company) acknowledges that weaknesses in the financial oversight process contributed to this finding. Specifically, limited knowledge of Generally Accepted Accounting Principles (GAAP) and federal cost principles by key financial personnel led to misclassification of costs and errors in reimbursement requests in a new type of grant unfamiliar to the accounting team. In response, the organization is restructuring its finance department to ensure that individuals with appropriate qualifications and experience in nonprofit GAAP and federal grant compliance are responsible for reviewing accounting records and reimbursement requests. This includes a new Chief Financial Officer with demonstrated experience in federal grant accounting and compliance and a dedicated grants manager to prepare all reimbursement submissions under the oversight of the CFO.
System of Internal Controls Over Compliance: Procurement, Suspension, and Debarment; U.S.
Department of Treasury, Assistance Listing #21.027, Coronavirus State and Local Fiscal Recovery Funds, Passed Through St. Jude’s Ranch for Children, Boulder City Campus
Criteria: In accordance with 2 CFR 200.62(a)(3), the auditee must maintain a system of internal control over compliance to provide reasonable assurance that expenditures under federal award programs adhere to procurement standards as outlined in 2 CFR Part 200, Subpart D.
Condition: The organization did not adhere to the procurement standards as required under 2 CFR Part 200, Subpart D, and/or the written purchasing and procurement policy.
Context: On July 15, 2022, the organization entered into a construction contract to construct a capital asset. Subsequently, on June 24, 2024, the organization was awarded funding through the Coronavirus State and Local Fiscal Recovery Fund to construct said capital asset. As the capital project construction contract was executed prior to the federal award being received, the organization did not adhere to the procurement standards as required under 2 CFR Part 200, Subpart D, and/or the written purchasing and procurement policy.
Effect: Lack of adherence to procurement standards as outlined in 2 CFR Part 200, Subpart D, could result in contractual liabilities incurred by the organization that are related to suspended, debarred, or otherwise unauthorized contractors.
Cause: Upon receipt of the federal award intended to fund the capital project, the organization did not appropriately consider the potential remedial action(s) needed as related to adherence to 2 CFR Part 200, Subpart D.
Recommendation: We recommend management design and implement a system of internal controls over compliance whereby procurement standards are adhered to for all expenditures requested for reimbursement under federal award programs.
Views of Responsible Officials and Planned Corrective Actions: The CFO, Finance Director, and/or outsourced accountant will review all contracts involving federal funds prior to execution to verify adherence to 2 CFR Part 200, Subpart D. Given the unique nature of the contract in question being executed prior to the awarding of federal funds but subsequently using the federal funds to cover expenditures related to the contract, St. Jude’s Ranch for Children (the parent entity of HSB Holding Company) does not anticipate a similar scenario in the future. However, SJRC will meet with legal counsel to review existing boilerplate contracts and incorporate a 2 CFR Part 200, Subpart D compliance clause for use in any contracts with the potential to be funded by federal awards. Training will be provided to SJRC finance and program staff, led by legal counsel, covering: (i) contract negotiation basics; (ii) federal clauses that are non-negotiable (e.g., 2 CFR 200 provisions); and (iii) when legal review is required.
System of Internal Controls Over Compliance: Activities Allowed and Unallowed, Allowable
Costs/Cost Principles, and Period of Performance; U.S. Department of Treasury, Assistance Listing #21.027, Coronavirus State and Local Fiscal Recovery Funds, Passed Through St. Jude’s Ranch for Children, Boulder City Campus.
Criteria: In accordance with 2 CFR 200.62(a)(3), the auditee must maintain a system of internal control over compliance to provide reasonable assurance that expenditures submitted for reimbursement are related to allowed activities, considered allowable costs and adhere to relevant cost principles, and are incurred within the period of performance.
Condition: Through our initial scanning procedures, as related to the federal award request for reimbursement requests (RFRs) submitted to the grantor, it was noted that RFR submissions through June 30, 2024 were not submitted in accordance with accounting principles generally accepted in the United States of America. This indicated that the internal control over allowed activities, allowable costs/cost principles, and period of performance was not operating effectively.
Context: As a result of the condition noted above, as well as the grantor not yet reimbursing the organization for the improper RFR submissions when discovered, the organization elected to revise and resubmit all RFRs in order to be in accordance with accounting principles generally accepted in the United States of America.
Effect: Submission of RFRs on an inconsistent basis of accounting could result in duplication and/or omission of expenditures the organization may be entitled to be reimbursed for.
Cause: The design and implementation of the system of internal control over activities allowed and unallowed, allowable costs/cost principles, and period of performance was not operating effectively.
Recommendation: We recommend management design and implement a system of internal controls over compliance whereby expenditures submitted for reimbursement are related to allowed activities, considered allowable costs and adhere to relevant cost principles, are incurred within the period of performance, and are in accordance with accounting principles generally accepted in the United States of America.
Views of Responsible Officials and Planned Corrective Actions: St. Jude’s Ranch for Children (the parent entity of HSB Holding Company) acknowledges that weaknesses in the financial oversight process contributed to this finding. Specifically, limited knowledge of Generally Accepted Accounting Principles (GAAP) and federal cost principles by key financial personnel led to misclassification of costs and errors in reimbursement requests in a new type of grant unfamiliar to the accounting team. In response, the organization is restructuring its finance department to ensure that individuals with appropriate qualifications and experience in nonprofit GAAP and federal grant compliance are responsible for reviewing accounting records and reimbursement requests. This includes a new Chief Financial Officer with demonstrated experience in federal grant accounting and compliance and a dedicated grants manager to prepare all reimbursement submissions under the oversight of the CFO.
System of Internal Controls Over Compliance: Procurement, Suspension, and Debarment; U.S.
Department of Treasury, Assistance Listing #21.027, Coronavirus State and Local Fiscal Recovery Funds, Passed Through St. Jude’s Ranch for Children, Boulder City Campus
Criteria: In accordance with 2 CFR 200.62(a)(3), the auditee must maintain a system of internal control over compliance to provide reasonable assurance that expenditures under federal award programs adhere to procurement standards as outlined in 2 CFR Part 200, Subpart D.
Condition: The organization did not adhere to the procurement standards as required under 2 CFR Part 200, Subpart D, and/or the written purchasing and procurement policy.
Context: On July 15, 2022, the organization entered into a construction contract to construct a capital asset. Subsequently, on June 24, 2024, the organization was awarded funding through the Coronavirus State and Local Fiscal Recovery Fund to construct said capital asset. As the capital project construction contract was executed prior to the federal award being received, the organization did not adhere to the procurement standards as required under 2 CFR Part 200, Subpart D, and/or the written purchasing and procurement policy.
Effect: Lack of adherence to procurement standards as outlined in 2 CFR Part 200, Subpart D, could result in contractual liabilities incurred by the organization that are related to suspended, debarred, or otherwise unauthorized contractors.
Cause: Upon receipt of the federal award intended to fund the capital project, the organization did not appropriately consider the potential remedial action(s) needed as related to adherence to 2 CFR Part 200, Subpart D.
Recommendation: We recommend management design and implement a system of internal controls over compliance whereby procurement standards are adhered to for all expenditures requested for reimbursement under federal award programs.
Views of Responsible Officials and Planned Corrective Actions: The CFO, Finance Director, and/or outsourced accountant will review all contracts involving federal funds prior to execution to verify adherence to 2 CFR Part 200, Subpart D. Given the unique nature of the contract in question being executed prior to the awarding of federal funds but subsequently using the federal funds to cover expenditures related to the contract, St. Jude’s Ranch for Children (the parent entity of HSB Holding Company) does not anticipate a similar scenario in the future. However, SJRC will meet with legal counsel to review existing boilerplate contracts and incorporate a 2 CFR Part 200, Subpart D compliance clause for use in any contracts with the potential to be funded by federal awards. Training will be provided to SJRC finance and program staff, led by legal counsel, covering: (i) contract negotiation basics; (ii) federal clauses that are non-negotiable (e.g., 2 CFR 200 provisions); and (iii) when legal review is required.