Audit 375704

Condition: During our testing of cash management procedures, we identified instances where the Organization submitted reimbursement requests for expenses supported by invoices dated after the reimbursement date. Specifically, we noted that the reimbursement was requested and received for construction and remodeling services totaling $143,467 that had not yet been invoiced, indicating that the costs had not yet been incurred. Criteria: When an entity is funded on a reimbursement basis, it must disburse funds only after the costs have been incurred and paid. Reimbursement requests must be based on actual expenditures, not expected or anticipated cost. Cause: The Organization misunderstood the timing requirements for reimbursement and believed that requesting reimbursement based on expected invoices was acceptable. Effect: Premature drawdown of federal funds. Recommendation: Management should revise its reimbursement procedures to ensure federal funds are only requested after the related expenses have been both incurred and paid. Staff involved in grant administration should receive training on the compliance requirements under the Uniform Guidance.

Condition: During testing of procurement transactions, it was noted that while the Organization has a documented procurement policy that aligns with Uniform Guidance requirements, several procurement files lacked sufficient documentation to support compliance with federal procurement standards. Specifically, records were missing for vendor selection rationale, bid evaluations, and contract approvals. Criteria: Entities must maintain records sufficient to detail the history of procurement. These records must include, but are not limited to, the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: The lack of documentation was primarily attributed to staff turnover and insufficient training of personnel on federal documentation requirements. Staff were unaware of the specific recordkeeping obligations under Uniform Guidance, resulting in inconsistent application of the procurement policy. Effect: Without adequate documentation, the Organization cannot demonstrate that procurements were conducted in accordance with federal regulations. This creates a risk of noncompliance, including potential questioned costs and reputational harm during federal audits. Recommendation: Management should implement a training program for procurement staff to ensure awareness of documentation requirements. Additionally, a standardized procurement checklist should be used for each transaction to ensure all required documentation is collected and retained. Periodic internal reviews should be conducted to monitor compliance and reinforce accountability.

Condition: During the audit, it was noted that the Organization failed to submit the required semiannual progress report to the granting agency. The report was not submitted by the deadline specified in the award terms, and no documentation was available to support that an extension was requested or granted Criteria: Entities must submit performance and financial reports as required by the terms of the federal award. These reports must be accurate, complete, and submitted timely. Cause: The failure to submit the required report was due to a breakdown in internal controls over the reporting process. Specifically, staff responsible for grant reporting were unaware of the reporting deadlines and requirements, and no secondary review or monitoring process was in place to ensure timely and accurate submission. Effect: Non-submission of required reports may result in noncompliance with federal award terms, delayed reimbursements, or potential suspension of funding. It also impairs the granting agency’s ability to monitor the financial performance and compliance of the program. Recommendation :Management should strengthen internal controls over grant reporting by implementing a tracking system for report due dates, assigning clear responsibilities, and conducting periodic reviews to ensure compliance. Staff should receive training on Uniform Guidance reporting requirements and the specific terms of each federal award.