Audit 367706

2022-007 Payroll (Material Weakness) Criteria: Title 2 CFR Part 200 §200.430(g). Charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. Condition: Timesheets were not always obtained and did not include information to support employee time and effort as required by federal regulations. Time records did not always include evidence of review/approval. Additionally, for two employees of 60 tested, differences existed between the approved hourly pay rate and the hourly rate paid per the payroll summary. Cause: As discussed at Finding 2022-005, we noted that no policy exists over the form and content of documentation to support employee time and effort under 2 CFR Part 200. And policies are not in place for the review and approval of payroll transactions. Effect: Payroll records did not comply with federal regulations. Because of the failure to require appropriate documentation and review/approval, there is increased risk that payroll transactions could be inappropriately charged to government programs. Questioned Costs: Not determinable due to limitations in the Organization’s accounting system. Perspective: When timesheets were not obtained, we were able to examine other evidence of time worked (such as emails). Forty of 60 tested had no evidence of approval. Repeat Finding: Yes Recommendation: Procedures should be implemented to require appropriate contemporaneous documentation to support time and effort reporting under 2 CFR Part 200. In addition, procedures should also be implemented to require the review and approval of payroll. Views of Responsible Officials: Management acknowledges the control weaknesses as described above as there was not proper documentation of payroll transactions including evidence of review and approval. The Organization has undertaken a review of its policies and procedures, including consultation of an outside accounting firm to ensure proper control procedures over payroll are implemented.

2022-008 Grant Expenditures (Material Weakness) Criteria: Title 2 CFR Part 200 §200.400. Accounting practices must support the accumulation costs including maintaining adequate documentation to support costs charged to the Federal award. Title 2 CFR Part 200 §200.302 requires that the financial management system must maintain records that sufficiently identify the amount, source, and expenditure of Federal funds. Condition: Actual grant expenses were not accumulated in the Organization’s accounting system by individual grant and indirect costs were not appropriately applied. As discussed at 2022-006, the Organization prepared grant submissions based on estimates of monthly average expenses to be incurred over the life of the grant as opposed to expenses actually incurred. This led to noncompliance of the grant provisions for reimbursement. Cause: The Organization’s accounting system is not properly designed to accumulate expenses by grant. Policies and procedures were not adequately designed for the appropriate level of oversight to ensure that grant submissions complied with grant agreements. Effect: Submissions for grants reimbursement exceeded actual expenses incurred. In addition, because of the failure to assign expenses to individual grants, there is an increased risk that expenditures could be inappropriately charged to government programs. Questioned Costs: Not determinable at the major program level. Perspective: Pervasive, this was not an isolated incident. Repeat Finding: Yes Recommendation: The Organization’s accounting system should be modified to accommodate expense tracking by individual grant and policies and procedures should be implemented to require direct expenses be assigned to specific grants. A method should be established to allocate indirect costs in accordance with federal regulations. Policies and procedures are also needed to provide appropriate oversight of all grant accounting including reporting. Views of Responsible Officials: Management acknowledges the control weaknesses related to the accumulation of grant expenses and accurate completion of grant reimbursement requests. The Organization has undertaken a review of its policies and procedures, including consultation of an outside accounting firm to implement policies and procedures to properly account for grant expenses and accurately prepared requests for reimbursement.

2022-009 Cash Disbursements (Material Weakness) Criteria: CFR 200 §200.403. Allowable costs under Federal awards must be necessary and reasonable for the performance of the Federal award and be allocable thereto. CFR 200 §200.302. Effective control and accountability must be maintained, all assets must be safeguarded and used solely for authorized purposes. Condition: In June 2022, the former Executive Director authorized bonuses for himself and two other senior management members without the knowledge of the board of directors and accounting staff. In December 2022, holiday bonuses were paid without documentation to ensure the expenditure was reasonable and necessary. In addition, approval was not documented on invoices selected for testing. Cause: As discussed at Finding 2022-003, the Organization’s policies and procedures were not adequately designed for the proper segregation of accounting and banking functions. As discussed at Finding 2022-004, the Organization’s policy requiring two signatures on all checks over $1,000 was not followed and no policy existed to ensure all invoices are approved and evidence of approval retained. Effect: Disbursements were made that were not in compliance with applicable regulations and grant agreement. Allowing these functions to be performed without separating incompatible duties and requiring appropriate documentation and review increases the risk that errors or misappropriation could occur. Questioned Costs: Unauthorized bonuses $39,342. Perspective: The unauthorized bonuses are a known amount (not projected). As noted at 2022-004, none of the transactions selected for testing contained evidence of approval. Repeat Finding: Yes Recommendation: We recommend policies and procedures over the segregation of duties between the accounting and banking functions be strengthened. In addition, policies and procedures should be implemented to ensure support for expenditures is retained and includes evidence of approval. Additional oversight should be provided by those charged with governance. Views of Responsible Officials: Management acknowledges the control weaknesses as described above as there was not a proper segregation of duties in place. The Organization has undertaken a review of its policies and procedures, including consultation of an outside accounting firm to ensure proper control procedures are in place including appropriate segregation of duties.

2022-010 Timely Submission of Audit Reports (Significant Deficiency) Criteria: According to 2 CFR §200.512, the Organization is required to submit its audit report within 30 calendar days after receipt or 9 months after the end of the audit period. Condition: The Organization’s audit report for 2022 was not completed and submitted to the Federal Audit Clearinghouse by the due date. Criteria: According to 2 CFR §200.512, the Organization is required to submit its audit report within 30 calendar days after receipt or 9 months after the end of the audit period. Cause: The Organization’s policies and procedures were not designed to ensure compliance with Uniform Guidance. Auditors were not engaged in a timely manner and information was not available to complete the audits for submission by the due dates. Effect: Findings may not be identified and corrected in a timely manner. Questioned Costs: None. Perspective: This is first year the Organization has been subject to Uniform Guidance. Repeat Finding: No. Recommendation: We recommend the Organization become familiar with the requirements of Uniform Guidance and implement policies to ensure compliance. Views of Responsible Officials: Management agrees with the finding and is working to develop proper written policies and procedures for internal control over compliance in consultation with an outside accounting firm, including timely submission of audit reports.

2022-011 Written Controls over Compliance (Significant Deficiency) Criteria: CFR 200 §200.303. The Organization is required to have written policies and procedures for controls surrounding compliance. Condition: The Organization does not maintain written internal control policies and procedures over compliance as required by Uniform Guidance. Cause: The Organization’s policies and procedures were not designed to ensure compliance with Uniform Guidance. Effect: Increased risk of noncompliance with laws and regulations. Questioned Costs: None. Perspective: The Organization has multiple compliance findings and was unaware of the requirement to have written internal control policies and procedures over compliance. Repeat Finding: No. Recommendation: We recommend the Organization become familiar with the requirements of Uniform Guidance draft control procedures to ensure compliance. Views of Responsible Officials: Management agrees with the finding and is working to develop proper written policies and procedures for internal control over compliance in consultation with an outside accounting firm.