Audit 389877

2025-001 Finding - Federal Award Type: Matching, Level of Effort, Earmarking - Significant Deficiency in Internal Control over Compliance. Criteria / Requirement: 2 CFR section 200.303 requires that non-federal entities receiving federal awards establish, document, 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. Earmarking includes requirements that specify the minimum and/or maximum amount or percentage of the program’s funding that must/may be used for specific activities, including funds provided to subrecipients. Per the grant agreement, grantee may use up to ten percent of the total amount of grant funds awarded for the youth and adult activities for grant’s administrative costs, as allowed under the federal regulations governing these programs. Condition / Context: During the year June 30, 2025, WSI was tracking administrative cost by fund, but inadvertently had coded program expenses into the administrative fund. This error was corrected and WSI is in compliance with the earmarking requirement, however it was noted that WSI did not have a process to monitor and ensure that they were under the maximum earmark percentage allowed. Cause: WSI was aware of the requirement and has an established system to track costs but did not have procedures in place to monitor the earmarking requirement of the maximum percentage of administrative costs allowed. Effect: Failure to maintain sufficient internal controls and proper procedures may result in wrongful use of federal funds and non-compliance with federal awards. Questioned Costs: None. Recommendation: The Organization should establish written policies and procedures regarding monitoring of the maximum earmark percentage allowed. Management’s Response: Management concurs with the finding and has developed a report to monitor WIOA administrative expenditures to ensure compliance with applicable earmarking requirements. The corrective action has been implemented prior to this report and has been incorporated into the monthly close process.