Audit 368368

#2024-004 – Major Federal Award Finding - Period of Performance Nature of Finding: Period of Performance – Compliance Finding and Material Weakness in Internal Control over Compliance Criteria/Condition: The Organization recorded certain expenses upon payment of invoices rather than when the service was provided. The guidelines provided at 2 CFR 200.403(e) require that costs be determined in accordance with GAAP to be allowable. In accordance with GAAP and the accrual basis of accounting, such expenses are to be recorded when services are performed, rather than upon payment of invoice. Cause/Context: The Organization had limited accounting resources which impacted timing and frequency of processing certain transactions. In addition, the Organization has contracts with providers that include pre-determined payment terms that may not precisely correlate to the actual work performed in terms of timing. The Organization recorded certain contract costs as the invoices were processed, and not necessarily as the providers’ actual work was completed. Effect: Adjusting journal entries were proposed during the audit to record expenses in the proper period for the financial statements. Federal grant expenses of approximately $100,700 were originally recorded in 2024 that related to 2025 services. Similarly, federal grant expenses of approximately $117,100 were recorded in 2025 that related to 2024 services. These net adjustments increased federal grant revenue and expenditures by approximately $16,400 for the year ended December 31, 2024. Recommendation: We recommend that care be exercised to evaluate financial activity considering the cost factors contained in 2 CFR 200.403, the accrual basis of accounting and period of performance. Controls should be enhanced to ensure that expenses are recorded to the proper period based on when the service or work is provided. Views of Responsible Officials and Planned Corrective Actions: Contracts are recorded as prepaid or accrued expenses and are being expensed monthly. Salaries and benefits incurred before month-end will be accrued to grants at grant cutoff dates and at year-end. Estimated monthly accruals for salaries will be implemented.

#2024-005 – Major Federal Award Finding – Reporting; Procurement and Suspension and Debarment Nature of Finding: Reporting and Procurement, Maintenance of Documentation/Records – Compliance Finding and Significant Deficiency in Internal Control over Compliance Criteria/Condition: Documentation was not maintained to support financial data provided in reports submitted to the funding source. Documentation was also not maintained to support certain procurement procedures. Per 2 CFR 200.334, financial records and supporting documentation must be maintained for three years from the date of the final financial report. Per 2 CFR 200.318(i), recipients must maintain records sufficient to detail the history of each procurement transaction, including (among other items) rationale for contractor selection or rejection. Cause/Context: The following activities did not have supporting documentation: • Expenditure balances reported to the State of Michigan in quarterly reports were not amended or reconciled to the final accounting records for each reporting period. The accounting periods were impacted by various transactions between the dates of the grant expenditure reports and the close of the respective period financial statement. • Performance of contractor/vendor suspension and debarment search on SAM.gov. Effect: Evidence to support a reconciliation between reports submitted to a funding source and the general ledger is not readily available. Evidence to support that the appropriate contractor/vendor vetting process was conducted is not available. Recommendation: The Organization should produce and maintain supporting documentation for all reports submitted to funding sources, including information to reconcile reports to the final financial statements for the respective period and resolution of any reporting differences with the funding agency. We also recommend that the Organization maintain all documentation to support the decision process associated with procurement. Views of Responsible Officials and Planned Corrective Actions: All procurement following the adoption of the procurement policy have been done in alignment with the policy. We also introduced procurement “kickoff meetings’ for new grants to review each budget line, determine the correct procurement method and plan documentation. All vendors now have debarment searches in their QuickBooks vendor information tab.

#2024-006 – Major Federal Award Finding – Procurement and Suspension and Debarment Nature of Finding: Administrative Requirements – Procurement Policy/Documentation Compliance Finding and Material Weakness in Internal Control over Compliance Criteria/Condition: The Organization did not have a formal procurement policy as required by 2 CFR 200.320 until June 2024. Six out of thirteen vendor contracts were in place before the policy was formalized. Documentation supporting various procurement decisions was not retained. Cause/Context: Documentation was lacking for the following contracts as required by the procurement standards of 2 CFR 200.320: • Evidence of price quotations was not retained for one contract tested above the micro-purchase threshold (but below the simplified acquisition threshold). Such evidence would be required under the Organization’s current procurement policy (in place June 2024). • Evidence of procurement rationale was not retained for three contractor selections above the micro-purchase threshold (but below the simplified acquisition threshold). Management provided memorandums documenting vendor selection process and rationale during the audit. • Evidence of public solicitation for bid/proposal was not retained for one contract that was above the simplified acquisition threshold (currently $250,000) in accordance with 2 CFR 200.320(b). Management provided a memorandum documenting the assessment and solicitation of various providers, the selection process and rationale during the audit. Effect: Contracts executed prior to the enacted procurement policy could have been created without ensuring full and open competition in compliance with 2 CFR 200.320. Recommendation: We recommend that TalentFirst, Inc. follow procurement standards that comply with the requirements of Uniform Guidance and 2 CFR 200.320, including the retention of documentation to support purchasing decisions. Views of Responsible Officials and Planned Corrective Actions: All procurement following the adoption of the procurement policy have been done in alignment with the policy. We also introduced procurement “kickoff meetings’ for new grants to review each budget line, determine the correct procurement method and plan documentation.

#2024-007 – Major Federal Award Finding – Federal Grants Management Nature of Finding: Federal Grants Management – Preparation and Maintenance of Schedule of Expenditures of Federal Awards Compliance Finding and Significant Deficiency in Internal Controls over Compliance Criteria/Condition: Per 2 CFR 200.510(b), the auditee must prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the auditee’s financial statements, which must include the total federal awards expended, as determined in accordance with §200.502. For SEFA reporting, the components of the SEFA were not accurately maintained. Cause/Context: While the Organization has a policy related to grant administration and tracking of expenditures, the procedures and controls relating to the policy were not properly implemented during 2024. Effect: Expenditures for the Coronavirus State and Local Fiscal Recovery Funds grants were not accurately reported on the auditee-prepared SEFA. The SEFA presented has been adjusted for these errors. Controls in place did not sufficiently ensure the completeness and accuracy of the SEFA. Recommendation: We recommend the Organization enhance its procedures and controls to ensure data accumulated to prepare the SEFA is complete and accurate. Views of Responsible Officials and Planned Corrective Actions: We lacked consistent grant-level financial reporting, which made preparation of the required Schedule of Expenditures of Federal Awards (SEFA) difficult and time consuming. We have improved our accounting systems and can now procedure regular internal financial reports by grant. All grant managers are given a monthly transaction listing for their grants to ensure transactions are posted to the correct grant. They are also given monthly financial statements for each grant to reconcile to their records. Financial reporting will be done on a timely basis, ideally no more than 5 days after the month closing so grant managers can reconcile their records.