Audit 385125

Condition: During our testing of allowable activities/cost and period of performance it was noted the Organization did not perform or document required approval/review over expenditures and participant applications submitted. Criteria: Per § 200.303 of the Code of Federal Regulations, recipients must establish, document, and maintain internal controls over Federa 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. Cause: The Organization lacked formal policies and procedures to ensure documentation and performance of approval/review over expenditures and applications. The responsibility for oversight along with monitoring activities was not documented. Effect: Failure to establish, document, and maintain internal controls increases the risk that federal funds may not be used in accordance with applicable laws and regulations, potentially resulting in noncompliance with program requirements. Context: This condition was identified in all sampled populations of allowable activities/cost and period of performance. Recommendation: We recommend the Organization develop and implement formal documented review/approval and monitoring procedures which include the written or electronic signature of authorized individuals on invoices and participant applications Views of Responsible Officials: Management agrees with the finding.

Condition: During our testing of direct expenditures and payroll charges to the major program, we identified that the Organization reported direct expenditures and personnel expenditures based on budgeted estimates rather than actual time worked. Criteria: Per § 200.400(d) and 200.430(h) of the Code of Federal Regulations, charges to Federal awards for cost and salaries and wages must be based on records that accurately reflect the work performed. These records must support the expenditures and distribution of employee’s salary among specific activities or cost objectives and must not exceed the actual time worked. Cause: The Organization lacked adequate internal controls to reconcile budgeted direct cost and payroll estimates to actual direct expenditures and payroll cost incurred. There was no after-the-fact review or adjustment process in place to ensure accuracy. Effect: The Organization overstated federal expenditures on the Schedule of Federal Awards (SEFA), which resulted in noncompliance with federal cost principles and disallowable cost. Context: In 5 out of the 26 payroll periods tested, the amount charged to the federal exceeded the actual payroll cost incurred, resulting in an overstatement of federal expenditures. Know question cost amounted to $10,693. This finding is a repeat finding of the immediate prior audit. Reference number includes 2022-3. Recommendation: We recommend the Organization implement procedures to ensure that payroll and direct expenditures charges to federal awards are based on actual cost incurred. This should include a process for reconciling estimated charges to actual invoices and payroll records and making timely adjustments. Views of Responsible Officials: Management agrees with the finding.