Audit 371654

Finding 2024-001: Payroll Accruals - Material Weakness in Internal Controls over Financial Reporting and Internal Control over Federal Programs and Compliance Finding Federal Agency(ies): United States Agency for Global Media Federal Program(s): International Broadcasting Independent Grantee Organizations Assistance Listing Number(s): 90.500 Pass-through Entity (if applicable): N/A Award Identification Number and Year: MN01-24-GO-00001 (2024) Criteria or Specific Requirement: The general standards for internal controls over financial reporting set forth the objective of a system of internal control that provides for management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. Additionally, 2 CFR 200.303 Internal Controls states that recipients must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control-Integrated Framework" issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: Prior to the start of our audit, the Organization noted that they had gone through an extensive balance sheet account cleanup process but had a few balance sheet accounts that had not yet been reconciled or cleaned and they were aware of adjustments that still needed to be made, but with the reduction in staff had not been able to address. The largest balance of these remaining accounts was the payroll accruals. As such, the Organization had not yet accrued payroll expenditures for the final pay period of the fiscal year. Additionally, it was confirmed that accrued payroll balances presented in the preliminary trial balance were related to prior year activity that was not accounted for properly. Such balances were adjusted during the audit, and a restatement of the opening net deficit was posted. Cause: At the end of the 2024 fiscal year, the Organization was in the midst of a restructuring, and did not have adequate resources in place in the finance and accounting department to properly review and reconcile the year end payroll accruals. This has now been corrected through the audit process. Effect or Potential Effect: Material errors with respect to year payroll accruals increase the risk that the financial statements as a whole, as well as the expenditures reported to USAGM, will not be presented correctly and also impacts the ability of management to make accurate financial decisions. However, the Organization knew what the correct balance should be so the ability to make accurate financial decisions was not impacted. Questioned Costs: NoneContext: The misstatement attributable to missed September 2024 payroll accruals was an understatement of expenses of approximately $2.48 million. The misstatement attributable to prior year activity was approximately $1 million (an increase in the net deficit). Identification as a Repeat Finding, if Applicable: Repeat of Finding 2023-001 and 2023-002 Recommendation: We recommend that management devote additional resources to the accounting and finance team to provide capacity for the implementation of thorough review and reconciliation process during year-end close.

Finding 2024-002: Late Filing of Data Collection Form - Material Weakness in Internal Control over Reporting and Compliance Finding Federal Agency(ies): United States Agency for Global Media Federal Program(s): International Broadcasting Independent Grantee Organizations Assistance Listing Number(s): 90.500 Pass-through Entity (if applicable): N/A Award Identification Number and Year: MN01-24-GO-00001 (2024) Criteria or Specific Requirement: In accordance with the Uniform Guidance, the audit package and the Data Collection Form must be submitted within 30 days after receipt of the auditor's report or nine months after the end of the fiscal year, whichever comes first. Condition: The fiscal year 2024 audit was not able to be commenced timely, and thus MBN was not able to complete the audit and file the Data Collection Form within nine months of the fiscal year-end. Cause: The primary cause of the delay was a disruption in funding attributable to changes at USAGM. MBN was temporarily unable to enter into a contract for audit services due to lack of available funding, and thus the commencement of the audit was delayed. Effect or Potential Effect: Noncompliance with Federal requirements with respect to reporting. Questioned Costs: None Context: The Data Collection Form for the year ended September 30, 2024 was not submitted to the Federal Audit Clearinghouse by the June 30, 2024 deadline.Identification as a Repeat Finding, if Applicable: Repeat of Finding 2023-003 Recommendation: While the circumstances leading to the delay in the 2024 audit were unforeseen, we recommend that going forward, management ensure that the annual audit planning process be prioritized and started within three months after fiscal year-end.

Finding 2024-003: Disposition of Property and Equipment (Material Weakness in Internal Controls over Equipment and Compliance Finding) Federal Agency(ies): United States Agency for Global Media Federal Program(s): International Broadcasting Independent Grantee Organizations Assistance Listing Number(s): 90.500 Pass-through Entity (if applicable): N/A Award Identification Number and Year: MN01-24-GO-00001 (2024) Criteria or Specific Requirement: MBN's Federal award requires that requests for disposition instructions concerning property purchased with Grant Funds with an estimated fair market value (at the time of such disposition) of U.S. $5,000 or more must be submitted to USAGM 7 days in advance of the proposed disposition. Condition: During fiscal year 2024, MBN reported disposals of Federally funded property and equipment with a cost basis of approximately $3.1M. While we noted that the book value of the disposed equipment was zero, as it had been fully depreciated, we were unable to determine whether MBN conducted a fair market value assessment of the disposed items, or whether MBN submitted a request for disposition instructions to USAGM related to such property and equipment. Cause: MBN did not have adequate internal controls or resources in place to ensure compliance, due in part to the Organization's restructuring and downsizing. Effect or Potential Effect: Potential noncompliance with the equipment reporting requirements of USAGM Questioned Costs: None Context: As noted above, the total disposals reported in the financial statements during FY 2024 were approximately $3.1M at cost basis. Identification as a Repeat Finding, if Applicable: Repeat of Finding 2023-004Recommendation: We recommend that in the future, MBN implement a process whereby equipment dispositions are only posted to the accounting system after the preparation and submission of disposition requests to USAGM, and that the items disposed of be specifically identified both in the disposition request, and in the equipment subledger, such that the two can be directly reconciled.