Condition: Employees who charged 100% of their time to the grant lacked required certifications or timecards documenting that their time was spent exclusively on grant-related activities. - In several instances, no timecards were available. - In other cases, available timecards showed no evidence of review or approval. - Timecards did not indicate program activity. - Timecards lacked evidence of supervisor approval. - Employees whose time was allocated to multiple programs had no indication of how their time was allocated on the time card. We did note, however, that most allocated employees were working on multiple contracts within the same Federal program, and that costs were allocated among the programs based on the number of beds in each facility, which appears to be a reasonable methodology. - Salaried employees did not have a method for indicating time worked. Cause: The organization failed to implement adequate internal controls to ensure compliance with federal timekeeping and documentation requirements for personnel expenses. Additionally, there appears to be a lack of understanding of the documentation and certification requirements under 2 CFR Part 200, Subpart E. Possible effect: The lack of proper documentation and certification creates a risk that unallowable costs were charged to the grant. Questioned cost: Undetermined. Recommendation: Develop and implement policies and procedures to ensure that timecards and/or certifications are completed and retained for all employees who charge 100% of their time to the grant. Implement a compliant system of time and effort reporting for employees whose time is allocated across multiple activities to align with 2 CFR §200.430(g)(vi). Conduct training for all employees and supervisors on the requirements for documenting and certifying time and effort for federal grants. Perform periodic reviews of timekeeping records and compensation charges to verify compliance with federal requirements.Views of responsible officials: During this period, Hope the Mission experienced rapid organizational growth in which our internal infrastructure had not yet caught up to support the significant growth in programs and funding. Since then, management changed our 3rd party payroll provider in order to better support our payroll and reporting needs. As part of this transition, we worked closely with our new payroll provider to implement job-costing functionality that will accurately track time across grants funded programs. In addition, we have established a process requiring department leads to review and approve all timesheets prior to submission. We are also partnering with our new 3rd party payroll provider to set up time allocation for salaried employees.
Condition: During our testing of non-payroll expenditures charged to Federal grants, we noted that most payments lacked evidence of invoice review and approval before payment. Federal regulations require that expenditures charged to Federal awards be properly reviewed, approved, and documented to ensure allowability and compliance with grant terms. Cause: The lack of documentation appears to be due to inadequate enforcement of the Organization's invoice approval process, which may stem from insufficient training, oversight, or procedural weaknesses. Possible effect: Failure to review and approve invoices before payment increases the risk of unauthorized or unallowable costs being charged to the Federal award, potentially leading to questioned costs and noncompliance with Federal grant requirements. Questioned cost: Recommendation: We recommend that management: - Reinforce policies requiring documented approval of invoices before payment. - Conduct training for staff responsible for invoice processing to ensure awareness of Federal documentation requirements. - Implement regular monitoring to ensure compliance with invoice review procedures. Views of responsible officials: Management acknowledges this finding and agrees that during the period under audit—while the organization was experiencing rapid growth and increased program activity—our documentation and approval processes did not consistently keep pace with operational demands. Since that time, we have taken significant steps to strengthen accounting procedures and internal controls, reinforce our invoice approval policies, and ensure all expenditures charged to Federal awards are properly reviewed and authorized prior to processing. We have enhanced our Accounts Payable workflow by implementing standardized process approval requirements, added additional leadership staffing and oversight within the Finance and Accounting team and provided targeted training to all personnel involved in invoice processing to ensure understanding of Federal cost principles and documentation standards. These corrective actions have improved our control environment since the audit period, and management is committed to continuing to develop and maintain strong financial controls and to prevent recurrence of this issue.
Criteria: Under 2 CFR §200.318-326, non-federal entities must adhere to procurement standards for purchases made with federal funds. Key requirements include: - Full and Open Competition: Procurement transactions must be conducted to ensure open competition and prevent practices that may unduly restrict competition (2 CFR §200.319(a)). - Documentation of Procurement History: Entities must maintain records that detail the procurement history, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price (2 CFR §200.318(i)). -Use of Non-Competitive Procurement: Non-competitive procurement is only allowed under limited circumstances, such as when the item is available from a single source, there is a public emergency, or after solicitation of multiple sources, competition is deemed inadequate (2 CFR §200.320(c)). Condition: During 2023, the organization incurred expenditures of approximately $16.5 million for the acquisition renovation of motels into permanent housing using federal funds under the SLFRF program. However: - No documentation was available to demonstrate compliance with federal procurement standards, including the contractor solicitation process, selection method, or the basis for the contract price. - It is unclear whether the contractor was selected through a competitive process, or if justification for non-competitive procurement was appropriately documented as required by 2 CFR §200.320(c). - Contractor costs totaled approximately $16.5 million expended during the year. Additionally, the organization also did not maintain documentation for vendors used in its Emergency Solutions Grant Program sites. These vendors consisted primarily of food providers and security services. During the course of our audit, we learned that one catering vendor utilized by the organization was owned by an employee who was also involved in authorizing payments to the vendor. Cause: The organization did not establish or follow sufficient internal controls to ensure compliance with federal procurement requirements, including maintaining the required documentation for procurement activities.Possible effect: The lack of procurement documentation creates a significant risk that noncompliant practices occurred, such as non-competitive procurement or payments exceeding fair market value. Questioned cost: $1,318,527 related to the catering vendor Recommendation: Implement comprehensive procurement policies and procedures that comply with federal regulations under 2 CFR §200.318-326. Ensure all procurement transactions are documented, including evidence of competitive bidding or justification for non-competitive procurement under 2 CFR §200.320(c). Conduct staff training on procurement standards for federal awards, focusing on documentation, competition, and conflict of interest requirements. Perform periodic internal reviews to confirm compliance with procurement policies. Consult with California's HCD regarding their expectations of contractor selection policies for the HomeKey program. Views of responsible officials: Management acknowledges this finding, which occurred during a period of rapid program expansion when procurement infrastructure had not yet been fully developed. Since the audit period, we have completely overhauled our procurement process to ensure full compliance with the Federal procurement standards. We have implemented a formal procurement policy, created a dedicated Procurement sub-department within Finance, hired a Procurement Supervisor and support team, and launched a new procurement software platform to ensure proper solicitation, documentation, approval routing, and record retention for all Federally funded programs. These upgrades establish consistent competitive bidding, justification procedures, conflict-of-interest safeguards, and transparent procurement. In addition, we have strengthened oversight, provided staff training on Federal procurement standards, and embedded monitoring practices to ensure ongoing compliance. Management is confident these substantial structural improvements have significantly reduced the risk of noncompliance and positioned the organization for full alignment with federal procurement standards going forward.
Criteria: Per 2 CFR §200.510(b), the SEFA must include: - A list of individual federal programs by agency, including the Assistance Listing number. - The total federal awards expended for each program, including capital projects funded by federal grants. - Amounts passed through to subrecipients. - Outstanding balances for loan or loan guarantee programs. - Significant accounting policies used in preparing the SEFA. Condition: During our audit of the Schedule of Expenditures of Federal Awards (SEFA), we identified that the schedule was incomplete. Specifically, certain federal awards were either omitted or incorrectly reported, including a significant omission of During 2023, there was approximately $16.5 million in federal funds received for capital projects. These amounts should have been included in the SEFA as part of the entity's total federal expenditures. Cause: The omission of the capital project funds appears to have resulted from a misunderstanding of what constitutes an expenditure for SEFA reporting purposes. The entity may not have recognized that capital outlays funded by federal grants must be included, leading to an understated SEFA. Other errors in the SEFA appear to have resulted from inadequate reconciliation processes between the entity's accounting records and federal grant reports. Possible effect: An incomplete SEFA could result in noncompliance with the Uniform Guidance and an incomplete Single Audit. Questioned cost: N/A Recommendation: We recommend that management: - Implement a reconciliation process to ensure that all federal expenditures are accurately captured in the SEFA. - Provide additional training for accounting personnel on federal reporting requirements. - Review all local government awards to determine whether Federal funds are a component of the contracts. - Review SEFA data for completeness and accuracy before submission. Views of responsible officials: The Schedule of Expenditures of Federal Awards (SEFA) provided to the audit firm was incomplete due to two primary factors: (1) insufficient understanding by staff regarding the requirement to include federally funded capital expenditures, and (2) improper recording of property acquisitions. Management acknowledges this oversight, which occurred during the implementation of a new program and at a time when staff were not fully aware that such expenditures must be reflected on the SEFA. Furthermore, certain capital expenditures paid directly through escrow were not recorded in the organization's accounting records. To remediate these issues, management has taken the following corrective actions: - Delivered targeted training to staff on the proper treatment and reporting of federally funded capital expenditures; - Updated internal closing and reporting procedures to incorporate a formal review of balance sheet activity; and - Updated internal closing and reporting procedures to incorporate a reconciliation to settlement statements when recording new property acquisitions; and - Strengthened internal controls to ensure all federally funded capital items are accurately captured in future SEFA submissions. Management is committed to maintaining compliance with federal reporting requirements and ensuring the completeness and accuracy of future SEFAfilings.