Audit 367399

Criteria: Per 2 CFR 200.303, non-Federal entities must establish and maintain effective internal control over Federal awards that provides reasonable assurance of compliance with Federal statutes, regulations, and the terms and conditions of the award. Controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” (Green Book) and the “Internal Control Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: During the audit, we noted that the Organization lacked documented internal controls over compliance in several key areas, including disbursements/expenditures, payroll, and progress reporting. Specifically, there was insufficient evidence of review and approval processes during the period from the beginning of the fiscal year through March 2024. In April 2024, the Organization implemented written policies and formalized internal controls; however, these were not retroactively applied to transactions prior to that date. Cause: The Organization had not previously developed or implemented formal written policies and procedures to document control activities, such as review and approval of expenditures and programmatic reporting, due in part to limited staffing and evolving compliance infrastructure. Effect: The absence of documented internal controls increased the risk of noncompliance with Federal program requirements related to allowable costs, payroll documentation, and performance reporting. Questioned Cost: None identified. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization continue to enforce and refine the internal controls implemented in April 2024 to ensure consistent documentation of review and approval for expenditures, payroll, and reporting. Furthermore, we encourage management to conduct periodic internal reviews to confirm that controls are functioning as intended across all departments handling Federal awards. Views of Responsible Officials and Planned Corrective Action (unaudited): See Corrective Action Plan.

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. These records must: [1] be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, [2] reflect the total activity for which the employee is compensated, [3] encompass both federally assisted, and all other activities compensated by the non-Federal entity on an integrated basis, and [4] be incorporated into the official records of the entity. Condition: During testing of payroll and compensation expenses charged to the federal award for the period January 1, 2024 through March 31, 2024, we identified two employees who charged a portion of their time to the federal program but did not maintain timesheets or other documentation reflecting total hours worked. Timesheets maintained only showed hours worked on the federal program. As a result, we were unable to recalculate or verify the accuracy of the amounts charged to the award for these individuals during this period. Cause: The Organization had not yet implemented formal time and effort documentation procedures for employees working part-time on federal programs during the first quarter of 2024. Policies and internal controls requiring complete timesheet documentation were developed and implemented beginning in April 2024. Effect: Due to the lack of contemporaneous time and effort documentation, there is an increased risk that personnel costs charged to the federal award during the affected period may not accurately reflect the time actually devoted to the program. This may result in noncompliance with federal requirements and unallowable costs being charged to the award. Questioned Cost: We identified $14,071 in payroll charges made between January 1 and March 31, 2024 by two employees who were not working 100% on the federal program and for whom incomplete time and effort documentation was maintained. Specifically, the timesheets only reflected hours worked on the federal program and did not include total hours worked across all activities. As a result, we were unable to verify the accuracy of the charges allocated to the federal award. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization continue to enforce the policies implemented in April 2024 requiring all employees who work less than full-time on federal programs to maintain detailed timesheets or equivalent documentation. These records should be reviewed and approved in accordance with the organization's internal control procedures and retained to support all payroll charges to federal awards. Views of Responsible Officials and Planned Corrective Action (unaudited): See Corrective Action Plan.