2025-003 – Material Weakness in Internal Controls over Compliance – Activities Allowed or Unallowed and Allowable Costs/Cost Principles US Department of Agriculture / Oregon Department of Human Services Federal Assistance Listing Number: 10.565, 10.568, 10.569, 10.182 Federal Program Name: Food Distribution Cluster, Local Food Purchase Agreements Criteria – 2 CFR §200.430(g) – Standards for Documentation of Personnel Expenses require that charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed and are supported by a system of internal control which provides reasonable assurance that charges are accurate, allowable, and properly allocated. Estimates determined before services are performed do not qualify as support. Condition/context –The Organization allocates personnel expenses to federal awards using estimates, not records that accurately reflect the work performed. The Organization estimates how much time each employee spends on activities allowable for each grant, but these estimates are not supported by records that reflect the work performed. The Organization has an electronic timekeeping system, but the system does not track the activities an employee performs. Employees are not required to complete certifications or Personnel Activity Reports (PARs) to support the hours worked on allowable activities. Total payroll costs charged to grants were $1,722,096. Management was able to substantiate $1,111,400 of payroll costs charged to these grants as 100% of personnel in this group worked 100% on food movement related work, which was backed up by job descriptions, employee attestations signed at year-end, and timesheets that show total hours worked. Remaining questioned costs of $610,696 relate to employees with time allocated across programs that were not substantiated with timecards that track which activities were performed. Questioned costs – ALN 10.568 - $533,410, ALN 10.182 - $77,286 Total questioned costs for all programs – $610,696, which is the payroll expenditures for employees who had allocated estimates charged to the food distribution cluster grants. Cause/effect – The Organization has not developed a system of internal control which provides reasonable assurance that charges are accurate, allowable, and properly allocated. Personnel expenses charged to federal awards are not supported by records that reflect the work performed. Repeat finding – Yes, prior year finding 2024-003. Recommendation – We recommend the Organization establish a system of time and effort reporting that meets the standards for documentation of personnel expenses, and a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Views of responsible officials and planned corrective actions – Oregon Food Bank acknowledges this repeat finding and agrees with the auditors' assessment. Ben Ardell, Director of Finance, is the party responsible. Since the prior audit period, management has taken steps to develop and implement a time and effort reporting system that meets federal documentation standards, such as activating the electronic timekeeping system to track actual work performed and testing adoption of reporting procedures across departments and teams. Finance will continue implementing the corrective actions necessary to establish an effective and compliant time and effort reporting system, including providing training for employees and regularly monitoring for effective system utilization. These actions will strengthen internal controls and ensure personnel costs are accurately recorded and appropriately allocated. The anticipated completion date remains June 30, 2027.
2025-004 – Significant Deficiency in Internal Controls over Compliance – Activities Allowed or Unallowed and Allowable Costs/Cost Principles US Department of Agriculture / Oregon Department of Human Services / Farmers Market Fund Federal Assistance Listing Number: 10.565, 10.568, 10.569, 10.182 Federal Program Name: Food Distribution Cluster, Local Food Purchase Agreements Criteria – 2 CFR §200.414 Indirect Costs – Entities must maintain accurate records and apply indirect costs consistently across all federal awards. They must also ensure that subrecipient indirect costs are managed in accordance with federal regulations. Condition/context – Indirect costs are not being requested, applied, billed, or reported consistently by the Organization. Indirect costs are not being applied to subrecipients consistently. During the FY24 audit, we observed numerous inconsistencies in the application of indirect costs by the Oregon Food Bank, including: not requesting indirect costs in grant applications, negotiating non-de minimis rates with passthrough agencies after electing a de minimis rate, billing indirect costs in excess of indirect costs awarded in the grant agreement, erroneously including passthrough awards greater than $25,000 per subrecipient in the modified total direct cost base, approving indirect cost rates for subrecipients that did not match the subrecipient's elected de minimis rate, and including subrecipient indirect costs in the section of SF-425 reports reserved for reporting its own indirect costs. During the FY25 audit, indirect costs were not subjected to testing as the total amounts charged were less than program materiality. Due to the timing of the completion of the FY24 single audit, this finding remains applicable in the year under audit. Questioned costs – $19,788 Cause/effect – The Organization has decentralized grant controls which are not designed to ensure compliance over indirect costs and consistency of application across all federal awards. Indirect costs in excess of allowable indirect costs were billed to federal awards. Repeat finding – Yes, prior year finding 2024-004. Recommendation – The Organization should develop procedures and internal controls to ensure indirect cost rates are requested, applied, billed, and reported consistently across all federal awards using the same rate. The Organization should develop similar procedures to ensure it is awarding and reporting subrecipient indirect costs accurately. The Organization should ensure individuals responsible for these controls are adequately trained. Views of responsible officials and planned corrective actions – Oregon Food Bank acknowledges this repeat finding and agrees with the auditors' assessment. Ben Ardell, Director of Finance, is the party responsible. Since the prior audit period, management has taken steps to establish procedures and internal controls to ensure consistent application, billing, and reporting of indirect cost rates across all federal awards. Such steps include defining and documenting roles and responsibilities for applicable staff members during each phase of the grants management lifecycle, as well as implementing procedures and tools to ensure compliance with subrecipient monitoring requirements. These steps involve multiple levels of review for accurate and consistent application of indirect cost rates. Finance will continue implementing the corrective actions necessary to achieve effective controls over compliance with indirect cost rate requirements. Policy and procedures on allowable and allocable costs will be drafted to clearly document how direct and indirect costs will be billed to federal awards. Training will be provided to relevant staff members to ensure accurate implementation and ongoing compliance. These actions will improve our ability to manage indirect costs effectively and ensure compliance with federal requirements. The anticipated completion date remains June 30, 2026.
2025-005 – Significant Deficiency in Internal Controls over Compliance and Noncompliance – Procurement US Department of Agriculture / Oregon Department of Human Services / Farmers Market Fund Federal Assistance Listing Number: 10.565, 10.568, 10.569, 10.182 Federal Program Name: Food Distribution Cluster and Local Food Purchase Agreements Criteria – 2 CFR §200.317 to 327 – Procurement Standards. The recipient or subrecipient must maintain and use documented procedures for procurement transactions under a Federal award or subaward, including for acquisition of property or services. These documented procurement procedures must be consistent with State, local, and tribal laws and regulations and the standards identified in §200.317 through §200.327. Condition/context – The Organization’s procurement policy that complied with Federal regulations was implemented in October 2024. Procurements before this date did not have sufficient documentation as to the significant history of procurements that would show compliance with the policy. We observed that the Organization awarded contracts to vendors but did not have a procurement policy that matched Federal procurement standards. Questioned costs – None reported. Cause/effect – The Organization did not have policies or controls throughout the whole year to ensure compliance with Federal regulations regarding procurements. Documentation as to the significant history of procurements, including from vendors, was not available to show compliance with procurement standards. Repeat finding – Yes, prior year finding 2024-005. Recommendation – The Organization should develop a procurement policy that matches Federal procurement standards and internal controls to ensure the policy is followed. The Organization should also retain documentation as to the significant history of procurements to show that the procurement policy was followed. Views of responsible officials and planned corrective actions – Oregon Food Bank acknowledges this repeat finding and agrees with the auditors' assessment. Ben Ardell, Director of Finance, is the party responsible. Since the prior audit period, management has taken steps to review and revise OFB’s procurement policy and procedures, in alignment with federal procurement standards. Finance will continue implementing the corrective actions and establishing the internal controls to ensure adherence to the policy, retaining documentation of the procurement process to demonstrate compliance. These recent and planned improvements will enhance transparency, strengthen accountability, and reduce compliance risk, ensuring a more efficient and well-documented procurement process that supports the organization’s long-term financial integrity and operational effectiveness. The anticipated completion date remains June 30, 2026.