2023-001 Supporting Documentation and Approval of Disbursements
Federal Program - U.S. Department of the Treasury – Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027)
Federal Award Number - SLFRP0136
Compliance Requirement - Allowable Costs/Cost Principles (2 CFR § 200.403 and § 200.302)
Criteria - Per 2 CFR § 200.403(g), to be allowable under a federal award, costs must be adequately documented. Additionally, 2 CFR § 200.302 requires the non-Federal entity to establish and maintain effective internal controls over federal awards that provide reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of the award.
Condition - During our testing of expense and disbursement transactions charged to the federal program, we identified instances where payments were made without adequate supporting documentation or evidence of appropriate review and approval. While the costs appear consistent with the purpose of the program and are considered allowable in nature, the absence of documentation limits the ability to verify the appropriateness and accuracy of the expenditures. A majority of these transactions were related to temporary housing assistance, including payments to hotels.
Cause - The organization does not currently have or did not follow a formal process to ensure that all disbursements are properly documented and reviewed.
Effect - Failure to maintain adequate documentation impairs the organization’s ability to demonstrate compliance with federal requirements and increases the risk of errors or inappropriate expenditures going undetected.
Questioned Costs - $0. No costs are questioned at this time, as the disbursements appear consistent with program objectives.
Recommendation - We recommend that the organization strengthen internal controls over the disbursement process by implementing procedures requiring all expenses to be supported by documentation such as invoices or receipts and be reviewed and approved by appropriate personnel prior to payment. This is especially important for recurring or program-critical costs such as temporary housing.
Views of Responsible Officials - we agree with the finding and determined it was due to an oversight by the organization on establishing proper procedures for a new program. Verbal communications were not recorded appropriately and approvals were not signed by management.
2023-002 Payroll Costs
Federal Program - U.S. Department of the Treasury – Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027)
Federal Award Number - SLFRP0136
Compliance Requirement - Allowable Costs/Cost Principles (2 CFR § 200.430)
Criteria - Under 2 CFR § 200.430(g), charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Compensation for leave must be granted under established leave policies and must be allocable and reasonable for the services rendered. Costs for leave that is not earned or used, or that is forfeited, are generally not allowable under federal awards.
Condition - The organization uses a calculated hourly rate to allocate payroll costs to programs. This rate includes a pro rata amount for vacation and sick time earned each pay period. However, the organization’s leave policy does not allow for carryover of unused vacation or sick time. As a result, some of the accrued leave may never be used or paid out but was still charged to federal programs through the calculated rate.
Cause - The organization’s methodology for allocating payroll costs does not differentiate between earned and used leave and does not account for the forfeiture of unused time at year-end.
Effect - Federal awards may have been charged for leave benefits that were never realized or paid to employees, resulting in an overstatement of payroll costs charged to the program. However, based on our analysis, the financial impact of this condition was not material to the federal award and the estimated questioned costs were below the $25,000 reporting threshold.
Questioned Costs - $0. No questioned costs are reported as the estimated impact is below the reporting threshold and not material to the award.
Recommendation - We recommend that the organization revise its payroll allocation methodology to ensure only used or vested leave is charged to federal awards. If estimates are used, they should be supported by documentation and periodically reconciled to actual costs. Non-vested leave that may be forfeited should not be included in federally funded rates.
Views of Responsible Officials - We agree with the findings and determined it was due to outdated processes and a gap in technical expertise utilizing the payroll allocations within the accounting software.
2023-003 Documented Procurement Policy
Federal Program - U.S. Department of the Treasury – Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027)
Federal Award Number - SLFRP0136
Compliance Requirement - Procurement, Suspension, and Debarment
Criteria - Per 2 C.F.R. § 200.318(a), non-federal entities must use documented procurement procedures that reflect applicable state and local laws and regulations and conform to applicable federal laws and the procurement standards identified in the Uniform Guidance, including those set forth in §§ 200.317 through 200.327.
Condition - During our audit, we noted that the Organization did not have a documented procurement policy in place that complies with the Uniform Guidance.
Cause - The Organization has historically had a low volume of procurement activity and has not formalized written procurement procedures.
Effect - Without a documented procurement policy, there is an increased risk that future procurements may not comply with applicable federal requirements, which could result in unallowable costs or other compliance issues.
Questioned Costs - None noted.
Context - This condition was identified during our testing of internal controls over compliance for the Procurement, Suspension, and Debarment requirement. Although the Organization did not enter into any contracts or purchases during the audit period that exceeded the micro-purchase threshold, the absence of a required policy represents a significant deficiency in internal control over compliance.
Recommendation - We recommend that the Organization develop and implement a written procurement policy that complies with 2 C.F.R. §§ 200.318–.327 and ensure that staff are trained on its provisions.
View of Responsible Officials - We agree with the finding. The organization lacked a formal procurement policy.
2023-001 Supporting Documentation and Approval of Disbursements
Federal Program - U.S. Department of the Treasury – Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027)
Federal Award Number - SLFRP0136
Compliance Requirement - Allowable Costs/Cost Principles (2 CFR § 200.403 and § 200.302)
Criteria - Per 2 CFR § 200.403(g), to be allowable under a federal award, costs must be adequately documented. Additionally, 2 CFR § 200.302 requires the non-Federal entity to establish and maintain effective internal controls over federal awards that provide reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of the award.
Condition - During our testing of expense and disbursement transactions charged to the federal program, we identified instances where payments were made without adequate supporting documentation or evidence of appropriate review and approval. While the costs appear consistent with the purpose of the program and are considered allowable in nature, the absence of documentation limits the ability to verify the appropriateness and accuracy of the expenditures. A majority of these transactions were related to temporary housing assistance, including payments to hotels.
Cause - The organization does not currently have or did not follow a formal process to ensure that all disbursements are properly documented and reviewed.
Effect - Failure to maintain adequate documentation impairs the organization’s ability to demonstrate compliance with federal requirements and increases the risk of errors or inappropriate expenditures going undetected.
Questioned Costs - $0. No costs are questioned at this time, as the disbursements appear consistent with program objectives.
Recommendation - We recommend that the organization strengthen internal controls over the disbursement process by implementing procedures requiring all expenses to be supported by documentation such as invoices or receipts and be reviewed and approved by appropriate personnel prior to payment. This is especially important for recurring or program-critical costs such as temporary housing.
Views of Responsible Officials - we agree with the finding and determined it was due to an oversight by the organization on establishing proper procedures for a new program. Verbal communications were not recorded appropriately and approvals were not signed by management.
2023-002 Payroll Costs
Federal Program - U.S. Department of the Treasury – Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027)
Federal Award Number - SLFRP0136
Compliance Requirement - Allowable Costs/Cost Principles (2 CFR § 200.430)
Criteria - Under 2 CFR § 200.430(g), charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Compensation for leave must be granted under established leave policies and must be allocable and reasonable for the services rendered. Costs for leave that is not earned or used, or that is forfeited, are generally not allowable under federal awards.
Condition - The organization uses a calculated hourly rate to allocate payroll costs to programs. This rate includes a pro rata amount for vacation and sick time earned each pay period. However, the organization’s leave policy does not allow for carryover of unused vacation or sick time. As a result, some of the accrued leave may never be used or paid out but was still charged to federal programs through the calculated rate.
Cause - The organization’s methodology for allocating payroll costs does not differentiate between earned and used leave and does not account for the forfeiture of unused time at year-end.
Effect - Federal awards may have been charged for leave benefits that were never realized or paid to employees, resulting in an overstatement of payroll costs charged to the program. However, based on our analysis, the financial impact of this condition was not material to the federal award and the estimated questioned costs were below the $25,000 reporting threshold.
Questioned Costs - $0. No questioned costs are reported as the estimated impact is below the reporting threshold and not material to the award.
Recommendation - We recommend that the organization revise its payroll allocation methodology to ensure only used or vested leave is charged to federal awards. If estimates are used, they should be supported by documentation and periodically reconciled to actual costs. Non-vested leave that may be forfeited should not be included in federally funded rates.
Views of Responsible Officials - We agree with the findings and determined it was due to outdated processes and a gap in technical expertise utilizing the payroll allocations within the accounting software.
2023-003 Documented Procurement Policy
Federal Program - U.S. Department of the Treasury – Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027)
Federal Award Number - SLFRP0136
Compliance Requirement - Procurement, Suspension, and Debarment
Criteria - Per 2 C.F.R. § 200.318(a), non-federal entities must use documented procurement procedures that reflect applicable state and local laws and regulations and conform to applicable federal laws and the procurement standards identified in the Uniform Guidance, including those set forth in §§ 200.317 through 200.327.
Condition - During our audit, we noted that the Organization did not have a documented procurement policy in place that complies with the Uniform Guidance.
Cause - The Organization has historically had a low volume of procurement activity and has not formalized written procurement procedures.
Effect - Without a documented procurement policy, there is an increased risk that future procurements may not comply with applicable federal requirements, which could result in unallowable costs or other compliance issues.
Questioned Costs - None noted.
Context - This condition was identified during our testing of internal controls over compliance for the Procurement, Suspension, and Debarment requirement. Although the Organization did not enter into any contracts or purchases during the audit period that exceeded the micro-purchase threshold, the absence of a required policy represents a significant deficiency in internal control over compliance.
Recommendation - We recommend that the Organization develop and implement a written procurement policy that complies with 2 C.F.R. §§ 200.318–.327 and ensure that staff are trained on its provisions.
View of Responsible Officials - We agree with the finding. The organization lacked a formal procurement policy.