Finding 2025-003 – Material Weakness in Internal Control and Compliance Over Special Reporting – Federal Funding Accountability and Transparency Act (FFATA) Identification of Federal Program: AL Number: 11.611 Manufacturing Extension Partnership Condition – During the year ended June 30, 2025, OMEP entered into four first-tier subawards greater than $30,000 under AL number 11.611. The auditor tested one of these subawards, noting that the award was not yet reported under the Federal Funding Accountability and Transparency Act to the Federal Subaward Reporting System (FSRS). Per further inquiry, all of the first-tier subawards were yet to be reported to the FSRS. Criteria – 2 CFR section 200.303 requires that non-federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Under the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282), as amended by Section 6202 of Pub. L. No. 110-252, that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). The subawards meeting the above definition are to be reported no later than the last day of the month following the month in which the subaward/subaward amendment obligation was made or the subcontract award/subcontract modification was made. Context and Cause – OMEP was aware of the FFATA reporting requirements, but the reporting was not made timely. Internal controls were not adequately designed, and procedures were not in place to track and report first-tier subawards within the time frame required by federal requirements. Effect of Condition – The failure to maintain sufficient internal controls and proper procedures, including identifying and tracking over reporting first-tier subawards may result in wrongful use of federal funds and non-compliance with federal awards. Questioned Cost – None. Recommendation – The Organization should establish written policies and procedures for reporting first-tier subawards. Views of Responsible Officials and Planned Corrective Actions – Management concurs with the finding and has developed a corrective action plan. We understand a material weakness is identified in internal control and compliance over special reporting. The finding does not impact the Organization’s ability to manage federal funds. Regardless, we place the utmost importance on the summary of auditors’ results and will work to increase the strength of our internal controls over special reporting.
Finding 2025-004 – Significant Deficiency – Internal Controls Over Allowable Costs Identification of Federal Program: AL Number: 11.611 Manufacturing Extension Partnership Condition – During the year ended June 30, 2025, a severance payment was issued to an employee that worked on more than one federal program. The payment was an allowable cost, but was not allocated across the other federal programs based on time and effort per their policy. Criteria – Per allowable costs 2 CFR section 200.431(i)(1), severance pay is allowed to be charged to federal grants only to the extent that it is required by law, employer-employee agreement, established policy, or circumstances of the particular employment. Per 2 CFR 200.403(c), costs should be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient, therefore severance pay must be allocated based on the activities performed by the associated employee. Context and Cause – While internal controls and procedures have been established for payroll expenses, the procedures were bypassed when processing the severance payment. It should be noted that the employee spent the majority of their time on the program the severance was allocated to, and the transaction was isolated. Effect of Condition – The failure to allocate all payroll expenses may result in wrongful use of federal funds and non-compliance with federal awards. Questioned Cost – None. Recommendation – The Organization should follow established written policies for allocation. Views of Responsible Officials and Planned Corrective Actions – Management concurs with the finding and has developed a corrective action plan. We analyzed the funds the employee charged to and did not identify another federal funding source available to charge the severance to. As a result, we did not complete the standard payroll allocation spreadsheet, as the severance was determined to be appropriately charged to the one fund. In the future, we will include this payroll allocation documentation. The finding does not impact the Organization’s ability to manage federal funds. Regardless, we place the utmost importance on the summary of auditors’ results and will work to increase the strength of our internal controls over compliance.