Finding 2023-006 – Activities Allowed or Unallowed/Allowable Costs/Cost Principles – Material Weakness in Internal Controls over Compliance and Instance of Noncompliance Head Start ALN# 93.600 (Repeat 2022-008) U.S. Department of Health & Human Services Federal Grant/Contract Number: 10CH011215-03-03; 10CH011215-03-C3; 10CH011215-04; 10HE000901-01-C6 Grant period – 2022 & 2023 Criteria – Per 2 CFR 200.303, the non-federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should follow guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Per 2 CFR section 200.403 – Factors affecting allowability of costs – Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: paragraph (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; paragraph (g) Be adequately documented. Per 2 CFR section 200.404 – Reasonable costs – A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. Per 2 CFR section 200.405 – Allocable costs –focuses on how costs are allocable, ensuring they are directly tied to the federal award or its benefits. Per 2 CFR 200.430(i), charges to Federal awards for salaries and wages must be based on records that are supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated and that are incorporated into the official records of the non-Federal entity. Condition – From the population of all disbursements charged to the grant, we selected 25 program disbursements, of which 9 invoices could not be located. Cause – Turnover in staff and the passage of time since the period under audit has caused documentation to be misplaced. Effect – Inadequate or inconsistent documentation of expenses may result in erroneous or fraudulent transactions occurring, loss of funding, or disallowed costs. Questioned Costs – Known questioned costs totaling $121 were identified related to 10 invoices could not be located. In addition, likely questioned costs are estimated at $34,616, based on the projection of the error identified in the tested transactions to the applicable population. Recommendation – Documentation should be prepared, reviewed, and retained to support the expense. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.
Item 2023-007 – Equipment/Real Property Management – Material Weakness in Internal Controls over Compliance and Instance of Noncompliance Head Start ALN# 93.600 (Repeat 2022-009) US Department of Health & Human Services Federal Grant/Contract Number: 10CH011215-03-03; 10CH011215-03-C3; 10CH011215-04; 10HE000901-01-C6 Grant period – 2022 & 2023 Criteria – 2 CFR 200.439(d)(1) requires that property records must be maintained for equipment acquired under a federal award that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of federal participation in the project costs for the federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. Condition – During testing it was noted that the Inventory tracking sheet did not contain all assets with federal interest under the Head Start program. It was also noted that there were items not included in the physical inventory observation taken. Cause – The Agency did not properly include all additions in the current year to the fixed asset schedule, which resulted in a lack of proper property records and missing physical inventory observation was made for assets included on properly records. Effect – Failure to include all items and take a full physical inventory observation could result in noncompliance with the grant agreements. Questioned Costs – Not applicable. Recommendation – We recommend the Agency follow its capital asset management policy to ensure all assets are adequately accounted for and properly safeguarded. CRI also recommends that the Agency include all of the information required by the Uniform Guidance in one central tracking spreadsheet or database. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.
Finding 2023-008 – Eligibility – Material Weakness in Internal Controls over Compliance and Instance of Noncompliance Low-Income Home Energy Assistance ALN# 93.568 (Repeat 2022-015) US Department of Health and Human Services Passed through Oregon Housing and Community Services Federal Grant/Contract Number: 2302ORLIEA, 2202ORLIEA Grant period – 2022 & 2023 Criteria – Per the 2021-2023 Master Grant Agreement. Subgrantee shall, and shall cause and shall require its subrecipients by contract to administer the program in a manner satisfactory to OHCS and in compliance with all program requirements, including but not limited to the following terms and conditions: (4) Serve only households whose eligibility has been determined in compliance with program requirements. (8) Be responsible for maintaining an internal controls framework, satisfactory to OHCS, which assures compliance with program requirements. (11) Maintain other program records satisfactory to the department, which document, among other things, client eligibility requirements, receipt of allowable program services, termination of services and the basis for same, housing and income status of clients, administrative actions, contracts with subcontractors, review of subcontractor performance, action taken with respect to deficiency notices, and any administrative review proceedings. Such records shall be in substance and formatsatisfactory to the department. Condition – From the population of program beneficiaries, we selected a sample of 40 items, of which we identified 6 instances where client applications could not be produced. Cause – Supporting applications and required documentation were not retained by the Organization to substantiate eligibility and services provided. Effect – Applicants could receive improper benefit amounts based on eligibility criteria, excessive disbursements could be made, and a return of funds could be required to grantor. Questioned Costs – None Recommendation – Documentation should be prepared, reviewed, and retained to support the period of performance and earmarking. The documentation should clearly document who prepared the information, who reviewed the information, and that the reviewer considered whether the information was complete and accurate. Management’s Response – Management has reviewed and accepted the finding. See “Corrective Action Plan”.