Audit 370743

2023-001 Financial Reporting on Indirect Costs Criteria: According to 2 CFR Part 200, a cost may not be allocated to a federal award as an indirect cost if any other cost incurred for the same purpose, in like circumstances, has been assigned to a federal award as a direct cost. The Organization recorded audit fees as direct and indirect costs. The Organization lacks controls and segregation of duties over the financial reporting of indirect costs. Condition and Context: The Organization listed the single audit fees on the final grant reports as direct costs. The single audit fees were recorded as indirect costs and not as direct costs to the grants in the Organization’s financial system, which resulted in an overallocation of audit fees as direct and indirect costs. With the audit fees included in direct costs, the Organization does not have enough indirect costs to cover what was claimed on their grant reports resulting in the Organization receiving more in federal funds than the Organization’s expenses. Cause: Indirect cost allocations were not reviewed for compliance and accuracy. Effect: The Organization did not have enough indirect costs to substantiate what was claimed on the grant reports as indirect costs. The granting agency subsequently approved the carryforward of the unused money to a future period. Recommendation: The Organization should develop a process to record indirect costs appropriately in the Organization’s financial system to avoid duplication and develop a review process for indirect costs to ensure sufficient expenses and accurate reporting. Management Response: Management agrees with finding. Procedures are being implemented to ensure an appropriate review process as well as a proper way of recording indirect costs, see attached corrective action plan.

2023-002 Oversight over the Revenue Process Criteria: The Organization lacks controls and segregation of duties over the deposit process. Condition and Context: The deposits are primarily handled by one person with little oversight. Timing differences may occur between receipt of payment and deposit into the financial institution. Cause: There is not currently a review and/or reconciliation of the bank statement in comparison to the deposit log. Effect: Receipts could potentially be misappropriated. The financial records may not reflect the correct revenue and/or receivables for the period due to timing differences. Repeat Finding: Repeat finding of 2022-001. Recommendation: We recommend routine review and reconciliation of the bank statement to ensure all receipts are included and activity through the bank accounts appear to be in accordance with the activities of the Organization. Management Response: Management agrees with finding. Procedures are being implemented to ensure an appropriate review process, see attached corrective action plan.

2023-003 Allowable Costs of Indirect Costs U.S. Environment Protection Agency Pass-Through from Kansas Department of Health and Environment No. 66.460 - 319 Program: Nonpoint Source Implementation Grants John Redmond Reservoir WRAPS Implementation SFY20-22, Milford WRAPS Implementation SFY20-22, and Upper Wakarusa WRAPS Implementation SFY20-22 Grant Period Year Ended December 31, 2023 Type of Finding: Internal Control/Noncompliance Criteria: According to 2 CFR Part 200, a cost may not be allocated to a federal award as an indirect cost if any other cost incurred for the same purpose, in like circumstances, has been assigned to a federal award as a direct cost. The Organization recorded audit fees as direct and indirect costs. Condition and Context: The Organization listed the single audit fees on the final grant reports as direct costs. The single audit fees were recorded as indirect costs and not as direct osts to the grants in the Organization’s financial system, which resulted in an overallocation of audit fees as direct and indirect costs. With the audit fees included in direct costs, the Organization does not have enough indirect costs to cover what was claimed on their grant reports resulting in the Organization receiving more in federal funds than the Organization’s expenses. Cause: Indirect cost allocations were not reviewed for compliance and accuracy. Effect: The Organization did not have enough indirect costs to substantiate what was claimed on the grant reports as indirect costs. The granting agency subsequently approved the carryforward of the unused money to a future period. Questioned Costs: The Organization recorded audit fees of $40,952 as direct and indirect costs to three federal grants. There is estimated additional over-allocated indirect costs of $8,800 that are not part of the major program. The reversal of the duplicate audit fees expenses were reversed and included in the audit journal entries. Recommendation: The Organization should develop a process to record indirect costs appropriately in the Organization’s financial system to avoid duplication and develop a review process for indirect costs to ensure sufficient expenses and accurate reporting. Management Response: Management agrees with finding. Procedures are being implemented to ensure an appropriate review process as well as a proper way of recording indirect costs, see attached corrective action plan.

2023-004 Internal Control over Cash Management and Matching U.S. Environment Protection Agency Pass-Through from Kansas Department of Health and Environment No. 66.460 - 319 Program: Nonpoint Source Implementation Grants John Redmond Reservoir WRAPS Implementation 2022-2025, Fall River/Toronto WRAPS Implementation 2022-2025, R Michael Rhoades Community Wetlands Project, and Land and Water Preservation Through Conservation Easements Grant Period Year Ended December 31, 2023 Type of Finding: Internal Control Criteria: The Organization lacked consistent use of internal control procedures over cash management and matching. Condition and Context: The Organization had ten different WRAPS grants included in the major program during the year ended December 31, 2023. The Organization files Financial Status Reports quarterly for each grant. Two of the four quarterly WRAPS reports were tested for each grant open during the year. Of the ten WRAPS grants, two grants were not reviewed prior to submission to the granting agency for the third quarter. Two additional grants under the assistance listing number had no control over matching. Cause: Internal control procedures were not documented and applied consistently to ensure accurate reporting. Effect: Internal controls were lacking on four of the twelve grants, which could lead to improper reporting of grant expenses. Recommendation: The Organization should develop a written policy that includes an internal review of grant matching expenses and reports filed along with the related supporting documentation. Proper segregation of duties includes a person performing the process with oversight from another person. We recommend that another person review the expenses being claimed as matching expenses and review the reports prior to being filed with the state. Management Response: Management agrees with finding. Procedures are being implemented to ensure an appropriate review process, see attached corrective action plan.