Documentation of Allocations of Costs (Repeat of Finding 2023-04) - Federal Agency: U.S. Department of Agriculture Pass-Through Agency: MN DEED Assistance Listing Number(s):17.258, 17.278 and 17.259 (WIOA Cluster) Federal Agency: U.S. Department of Health and Human Services Pass-Through Agencies: MN DEED and various counties Assistance Listing Number: 93.558 (TANF) Compliance Requirement: Allowable Costs Criteria: Federal regulations require organizations to maintain records that clearly identify the source and use of funds for federally funded activities. This includes documentation supporting the allocation of costs to ensure they are reasonable, allowable, and allocable. Additionally, organizations must implement internal controls, including review procedures, to ensure the accuracy and compliance of financial allocations. Condition: For the fiscal year ended June 30, 2024, the Organization did not maintain sufficient documentation to support the calculation of its cost allocation. Furthermore, no evidence was provided to demonstrate that a review of the cost allocation was performed to ensure its accuracy and compliance with applicable regulations. Specifically, the Organization was unable to produce detailed records or worksheets showing how costs were allocated across programs and departments, and there was no documentation of a formal review process. For the WIOA Cluster 38 of the 60 disbursements tested (totaling $61,668) could not be traced back to support showing what the allocation percentages by grant should have been or how the allocation percentages were determined. For TANF 55 of the 60 disbursements tested (totaling $33,165) could not be traced back to support showing what the allocation percentages by grant should have been or how the allocation percentages were determined. Cause: The Organization does not have a formalized process for retaining and organizing documentation related to cost allocations. Additionally, the established review procedures were not followed. These issues may stem from inadequate training of staff responsible for financial record-keeping and review, or from weaknesses in internal controls over documentation retention and compliance monitoring. Effect: The lack of supporting documentation and absence of a review process increases the risk that costs may be inaccurately allocated, potentially resulting in noncompliance with federal requirements. This could lead to questioned costs, disallowed expenditures, and the potential repayment of federal funds. Questioned costs: For WIOA Cluster – $61,668 For TANF - $33,165 Recommendation: The Organization should adopt a comprehensive documentation retention policy that includes specific procedures for maintaining records related to cost allocations. This policy should ensure that all relevant documentation is retained for the required period and is readily accessible for audit purposes. Additionally, the Organization should enforce a formal review process to verify the accuracy and compliance of cost allocations. Staff responsible for financial record-keeping and compliance should receive training on documentation standards, review procedures, and the requirements of the Uniform Guidance. Responsible Officials Response: CMJTS has since worked with DEED to updated our cost allocation policy, and DEED approved our new policy. In this policy, the CMJTS fiscal team will work with CMJTS program managers to update allocations for the upcoming month. Changes to allocations will be documents and saved for record retention.
Documentation of Allocations for Salaries and Wage Costs (Repeat Finding 2023-05) - Federal Agency: U.S. Department of Agriculture Pass-Through Agency: MN DEED Assistance Listing Number(s):17.258, 17.278 and 17.259 (WIOA Cluster) Federal Agency: U.S. Department of Health and Human Services Pass-Through Agencies: MN DEED and various counties Assistance Listing Number: 93.558 (TANF) Compliance Requirement: Allowable Costs Criteria: In accordance with the Uniform Guidance, charges to federal awards for salaries and wages must be supported by records that accurately reflect the work performed. These records must be maintained within a system of internal controls that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: For the fiscal year ending June 30, 2024, the Organization did not maintain sufficient documentation to support how an individual’s time was allocated across various federally funded grants. For the WIOA Cluster all 60 payroll disbursements (totaling $49,028) tested could not be traced back to support showing what the allocation percentages by grant should have been or how the allocation percentages were determined. For TANF all 60 payroll disbursements tested (totaling $60,483) could not be traced back to support showing what the allocation percentages by grant should have been or how the allocation percentages were determined. Cause: The Organization does not have a formalized process for retaining and organizing documentation related to employee time allocation. This may be attributed to a lack of training for staff responsible for timekeeping and financial documentation, or to weaknesses in internal controls over record retention. Effect: The absence of adequate documentation increases the risk that personnel costs may be inaccurately allocated, potentially resulting in noncompliance with federal requirements. This could lead to questioned costs, disallowed expenditures, and the potential need to return funds to the federal government. Questioned costs: For WIOA Cluster - $49,028 For TANF - $60,483 Recommendation: The Organization should establish and implement a comprehensive documentation retention policy that includes clear procedures for maintaining records supporting the allocation of employee time. This policy should ensure that all relevant documentation—such as timesheets and work allocation records—is retained for the required period and readily accessible for audit purposes. Additionally, staff involved in timekeeping and financial reporting should receive training on documentation requirements under the Uniform Guidance. Responsible Officials Response: CMJTS has since worked with DEED to updated our cost allocation policy, and DEED approved our new policy. In this policy, the CMJTS fiscal team will work with CMJTS program managers to update allocations for the upcoming month. Changes to allocations will be documents and saved for record retention.
Ineffective Grant Management - Federal Agency: U.S. Department of Agriculture Pass-Through Agency: MN DEED Assistance Listing Number(s):17.258, 17.278 and 17.259 (WIOA Cluster) Federal Agency: U.S. Department of Health and Human Services Pass-Through Agencies: MN DEED and various counties Assistance Listing Number: 93.558 (TANF) Compliance Requirement: Reporting Criteria: Effective grant management requires regular monitoring of budget-to-actual performance to ensure compliance with funder requirements and accurate financial reporting. Timely reviews help prevent reporting errors and support informed decision-making. Condition: Grant budget-to-actual reviews are not being completed on a regular basis. As a result, discrepancies between actual expenditures and budgeted amounts are not identified timely. For the WIOA Cluster 2 of the 7 reports tested required corrections and resubmission to funders. Cause: The Organization lacks a standardized process or schedule for conducting grant budget reviews. Additionally, limited staff capacity and competing priorities have contributed to delays in financial oversight. Effect: Heightened risk of non-compliance with grant requirements, which may result in delayed reimbursements from funders, reputational damage, and increased administrative workload due to report resubmissions and corrective actions. Questioned costs: None Recommendation: Establish a standardized process for reviewing grant budgets against actual expenditures, with clearly defined roles and timelines. Deliver targeted training to relevant staff on grant reporting protocols and variance analysis. Implement a cross-functional review procedure prior to report submission to ensure accuracy and completeness. Responsible Officials Response: Since migrating to the new accounting software, CMJTS program managers have better access to reporting for their budgets. Budgets are also loaded into the system by month, and program managers are then able to track program to date expenses versus the what had been planned. Additionally, CMJTS accounting staff has moved to ‘real-time accounting’, meaning that all transactions are being recorded right away in order to flow through to program manager reports. Additionally, the CMJTS Finance Manager meets with program managers on a monthly basis to review budgets and provide additional training. These additional steps empower the program managers to take ownership of their budgets and be able to make more informed decisions on running their programs.
Inadequate Approval Controls Over Adjusting Journal Entries and Invoices - Federal Agency: U.S. Department of Agriculture Pass-Through Agency: MN DEED Assistance Listing Number(s):17.258, 17.278 and 17.259 (WIOA Cluster) Federal Agency: U.S. Department of Health and Human Services Pass-Through Agencies: MN DEED and various counties Assistance Listing Number: 93.558 (TANF) Compliance Requirement: Allowable Cost Criteria: The Organization’s policy requires that adjusting journal entries be reviewed by someone other than the originator. Additionally, all invoices must be approved by authorized personnel prior to payment. Condition: Testing of disbursements revealed that several adjusting journal entries were posted without the required dual review. Invoice testing also identified payments processed without documented approval. For the WIOA Cluster, 14 of 60 disbursements (totaling $28,161) lacked proper approval. For TANF, 23 of 60 disbursements (totaling $3,281) were missing required sign-offs. Cause: There is a breakdown in enforcing workflow protocols within the accounting system and a lack of consistent supervisory review. Effect: Weak approval controls increase the risk of errors, unauthorized transactions, and non-compliance with audit and grantor requirements, potentially jeopardizing funding eligibility. Questioned costs: For WIOA Cluster - $28,161 Recommendation: We recommend following documented controls to enforce approval for adjusting journal entries. We also recommend ensuring invoice processing workflows include mandatory approvals before payment. We further recommend conducting periodic audits to verify compliance with approval policies. Responsible Officials Response: Our previous accounting software did not allow for systematic enforcement of approvals. CMJTS migrated to a new accounting software (Sage Intacct) in February of 2025. With the new system, only two users (accounting staff) have access to submit journal entries. The system then forces the journal entries to be approved before they are posted to the general ledger. This approval is done by the Accounting Manager, who does not have access to post journal entries. Similarly, only the two accounting staff members can enter accounts payable bills. The system then routes all invoices to the program manager, as well as additional approvals if the transactions is over a certain threshold. This systematic dual control ensures that all journal entries and accounts payable bills have a secondary person reviewing the entry before it posts to the general ledger.
Submission of the Audit Package and Data Collection Form - Federal Agency: Various Assistance Listing Number: Multiple Compliance Requirement: Reporting Criteria: Per 2 CFR §200.510(b), the auditee must prepare a Schedule of Federal Awards (SEFA) for the period covered by the auditee’s financial statements. Per §200.512(a), the SEFA must be submitted to the Federal Audit Clearinghouse (FAC) within the required deadline. Condition: The audit reporting package and data collection form for the year ended June 30, 2024, was not submitted to the FAC within the timeframe as required by the Uniform Guidance. Cause: The delay was due to identified discrepancies and inconsistencies in the initial financial statement reconciliations which the Organization subsequently prepared revised reconciliations, made material adjustments to affected accounts, and issued an updated trial balance. This caused a significant delay in the audit testing and wrap up. Effect: To qualify as a low-risk auditee, 2 CFR section 200.520 requires the audit reporting package and data collection form to be submitted to the FAC by the due date for each of the previous two years. Late filing will result in noncompliance with timely submission of financial information to the grantor agencies. Recommendation: We recommend the Organization strengthen its internal controls over the reconciliation process, including implementing a formal review procedure and ensuring reconciliations are supported by complete and accurate documentation prior to audit fieldwork. Timely and accurate reconciliations are critical to maintaining reliable financial reporting and audit readiness. Questioned costs: None Responsible Official's Response: CMJTS acknowledges the delay and has been making improvements to ensure reconciliations are done timely. Accounting staff have been given additional training on bank reconciliations, and they are now reconciling bank transactions daily. This real time reconciling helps ensure that all transactions are processed accurately. Bank reconciliations are then signed off by Finance Manager and the Board Treasurer monthly. Accounting staff have been given additional training on statement of financial position reconciliations and will be reconciling them monthly. The statement of financial position, with supporting documentation, will then be signed off by the Finance Manager monthly.