Audit 371690

Finding 2024-002 – Activities Allowed/Allowable Costs & Cash Management Type of Finding: Material weakness over controls over compliance and noncompliance Federal Agency: U.S. Department of Treasury & U.S. Department of Health and Human Services Federal Program: Coronavirus State and Local Fiscal Recovery Funds – ALN 21.027 and Refugee and Entrant Assistance State/Replacement Designee Administered Program – ALN 93.566 Criteria: An organization should have a strong system of internal control that includes review of general disbursement for proper classification and allowability in accordance with the terms and conditions of the award agreements and federal regulations. An organization should also have controls in place that minimizes the time elapsing between the transfer of federal funds and the disbursement by the organization for direct program or project costs. Condition and Context: During the year September 30, 2024 a dispute arose between the Organization and its landlord. After consulting with a lawyer, the Organization stopped paying rent to the landlord and instead deposited the monthly rent money into its own separate cash account. The Organization still drew down the amount of the rental costs from the above funding sources to make the monthly deposits into the separate cash account. After year end the Organization and landlord settled their dispute which included the landlord waiving its right to the escrowed rent. Questioned Costs: For the year ended September 30, 2024 federal funds of $247,379 and $56,737 were drawn down from assistance listing numbers 93.566 and 21.027, respectively, for rent expense that ultimately was never incurred. Cause:The organization drew down amounts that for costs it had not incurred at the time and would ultimately not incur. Effect or Potential Effect: Grants were overcharged for rental payments that were never made. Recommendation: We recommend that management implement procedures to ensure expenditures implement controls that ensure grants are only drawn down for costs that have been incurred.

Finding 2024-003 – Activities Allowed/Allowable Costs Type of Finding: Material weakness over controls over compliance and noncompliance Federal Agency: U.S. Department of Treasury & U.S. Department of Health and Human Services Federal Program: Coronavirus State and Local Fiscal Recovery Funds – ALN 21.027 and Refugee and Entrant Assistance State/Replacement Designee Administered Program – ALN 93.566 Criteria: An organization should have a strong system of internal control that includes review of general disbursements and payroll transactions for proper classification and allowability in accordance with the terms and conditions of the award agreements and federal regulations. Uniform Guidance section 200.430, paragraph (i) standards for documentation of personnel expenses requires that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must (i) be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable and properly allocated; (ii) be incorporated into the official records of the non-federal entity; (iii) reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100 percent of compensated activities; (iv) encompass both federally assisted and all other activities compensated by the nonfederal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-federal entity’s written policy; (vi) comply with the established accounting policies and practices of the non-federal entity; (vii) support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and non-federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity; and (viii) budget estimates alone do not qualify as support for charges to federal awards but may be used for interim accounting purposes. Condition and Context: Salaries and wages of employees charged or allocated to the grant were not all supported by formal records that accurately reflected the work performed. During our testing of eighty payroll transactions, we noted forty-two transactions had no formal timesheets and the Organization recorded amounts based on budgeted estimates rather than actual amounts. Questioned Costs: The payroll transactions selected for testing but were without timesheets amounted to $122,990. $32,370 was charged to ALN 93.566 and $90,620 was charged to ALN 21.027. Cause: For certain employees and periods payroll costs charged to the grants were approximated for budgetary purposes which was utilized for reporting; however, a subsequent review of time and effort for the individuals allocated to the grant and evaluation of allowability of costs incurred was not performed, which resulted in inaccurate amounts charged to the grant. Effect or Potential Effect: Because the actual time spent by certain employees was not appropriately charged to the grant, the amounts charged to the grant could be under or overcharged and unallowable. Identification as a Repeat Finding: 2023-001 Recommendation: We recommend the Organization implement a process and related controls related to review and approval of payroll expenditures for allowability in accordance with the terms of the grant award and federal regulations. Payroll amounts charged to the grant should be based on actual time and effort reported by the employee working on the grant and related documentation maintained by the Organization to support those amounts. The Organization should implement a review process over recording time and effort for payroll transactions, for proper classification and allowability.