Criteria: The Company should establish and maintain effective internal control over federal awards to provide reasonable assurance that the award is managed in compliance with federal statutes, regulations, and the terms and conditions of the award. Adequate documentation must be maintained to support internal control activities and compliance with federal requirements. Statement of Condition: During our walkthroughs and substantive testing, supporting documentation was not available to allow us to evaluate whether required internal controls were performed. The documents were unavailable due to the expiration of the entity’s document retention period and employee turnover, which resulted in the loss of institutional knowledge about the controls performed during the award period. Because the requested documentation could not be provided, we were unable to verify the performance or effectiveness of internal controls related to the compliance requirement tested. Cause of Condition: The entity did not maintain documentation of internal control activities beyond the minimum required retention period and did not have processes in place to preserve institutional knowledge during employee turnover. As a result, supporting records necessary for testing internal controls over federal awards were no longer available. Effect of Condition: Due to the absence of supporting documentation, we were unable to determine whether internal controls over the compliance requirement were properly designed and operating effectively. This results in the inability to test internal controls and assess control risk at a “low” level. Recommendation: We recommend that management (1) strengthen record retention practices to ensure that documentation of internal control activities is preserved in accordance with 2 CFR 200.334 and is available for future audits, (2) implement procedures to maintain institutional knowledge, particularly during periods of employee turnover (e.g., documented policies, crosstraining, centralized recordkeeping), and (3) consider extending retention periods for documents supporting high-risk federal programs or key internal control activities. Management should ensure documentation is sufficient to demonstrate compliance and support internal control operations. Identification of Repeat Finding: This finding is a repeat of the finding noted in the audit for December 31, 2019 as finding 2019-003. Views of Responsible Officials: Management understands and accepts the recommendation as outlined in the Corrective Action Plan.
Criteria: Under the Uniform Guidance, payroll costs charged to a federal award must be supported by accurate time-and-effort documentation that reflects the actual hours worked on the program. Statement of Condition: During our testing over compliance of allowable costs, for 1 out of 5 invoices tested, the payroll charges funded by the federal award were higher than were supported by the corresponding timesheet for the same period. Cause of Condition: The discrepancy resulted from an administrative error during the billing process, where hours were incorrectly charged to the grant without adequate reconciliation to approved timesheets. Effect of Condition: Because adequate reconciliation to approved timesheets was not performed, payroll charges costs charged to the grant were overstated for the pay period reviewed, resulting in a questioned cost for the excess hours billed. Questioned Costs: Questioned costs total $2,800, representing the excess hours billed for the 1 out of 5 invoices tested. Recommendation: We recommend that management strengthen billing review and reconciliation procedures to ensure that hours billed to grants are fully supported by approved timesheets prior to submission and reimbursement. Identification of Repeat Finding: This is a new finding. Views of Responsible Officials: Management understands and accepts the recommendation as outlined in the Corrective Action Plan.
Criteria: Under the Uniform Guidance only allowable costs incurred during the approved period of performance may be charged to a federal award. Costs incurred before or after the award period are unallowable unless specifically authorized by the federal agency. Statement of Condition: During our testing over compliance of period of performance, we noted 1 out of 5 expenditures tested was incurred before the award’s period of performance had begun. The invoice date of March 18, 2020 was before the period of performance start date of April 16, 2020, resulting in an unallowable charge to the federal award. Cause of Condition: The entity did not have sufficient controls in place to verify that costs were incurred within the authorized performance period before being charged to the federal award. Contributing factors included inadequate review procedures during invoice processing. Effect of Condition: Charging costs incurred before the period of performance resulted in unallowable costs being charged to the award and noncompliance with federal requirements. Questioned Costs: Questioned costs total $299,880, representing the full amount of expenditure incurred before the period of performance for 1 of 5 expenditures selections. Recommendation: We recommend that management (1) implement or strengthen review procedures to ensure all costs charged to federal awards are incurred within the approved performance period, (2) train personnel responsible for grant accounting on the importance of verifying dates of service, invoice dates, and award period limitations, and (3) consider implementing system-based controls that prevent posting expenditures with dates outside the award period. Identification of Repeat Finding: This finding is a repeat of the finding noted in the audit for December 31, 2019 as finding 2019-005. Views of Responsible Officials: Management understands and accepts the recommendation as outlined in the Corrective Action Plan.
Criteria: Under 2 CFR 200.512(a), an auditee must submit the single audit reporting package, including financial statements and the schedule of expenditures of federal awards (SEFA), no later than 30 days after receipt of the auditor’s report or nine months after the fiscal year-end, whichever comes first. Company management is responsible for ensuring the financial statements are prepared and issued timely to meet the Single Audit submission deadline established by the Federal Audit Clearinghouse (FAC). Statement of Condition: The auditee’s single audit financial statements were not issued by the required due date. The fiscal year ended on December 31, 2020, making the reporting package due no later than September 30, 2021. However, the audit report date is February 13, 2026, resulting in the late submission of the single audit reporting package to the FAC. Additionally, the audit reports for the years ended December 31, 2021 to 2024 have not yet been issued. Cause of Condition: The delay occurred because of employee turnover and lack of adequate internal controls over financial reporting timelines. The auditee did not have sufficient processes in place to ensure the timely preparation and issuance of financial statements. Effect of Condition: Because the financial statements and reporting package were issued late the auditee failed to comply with federal reporting requirements, federal agencies and pass-through entities did not receive timely financial and compliance information needed for monitoring and oversight, and the delay increases the risk that financial reporting issues may go undetected or unresolved. Questioned Costs: None. Recommendation: We recommend that management (1) strengthen internal controls over year-end financial reporting to ensure timely completion of the audit, (2) implement a detailed closing schedule and tracking process to monitor deadlines, (3) ensure adequate staffing or external support during the financial statement preparation and audit process, and (4) conduct periodic reviews to confirm compliance with federal Single Audit submission deadlines. Identification of Repeat Finding: The finding is a repeat of the finding noted in the audit for December 31, 2019 as finding 2019-006. Views of Responsible Officials: Management understands and accepts the recommendation as outlined in the Corrective Action Plan.