Audit 390264

Finding 2025-002: Time/Salary Allocations (Significant Deficiency) Federal Agency: United States Department of Health and Human Services. Federal Program: Unaccompanied Children Program. Assistance Listing Number: 93.676 Pass-through Entity, if applicable: Not applicable. Award Identification Number and Year: All awards and all of 2025 fiscal year. Criteria or Specific Requirement (including Statutory, Regulatory, or Other Citation): CFR §200.430 Compensation—personal services. States; (g) Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (vii) Support the distribution of the employee’s Salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities, which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Condition: During our audit of Everstand’s compensation practices, we noted that certain salaries and benefits charged to Federal programs were allocated using predetermined estimates rather than contemporaneous records reflecting actual time spent. These allocations were not supported by detailed documentation, such as timekeeping records or personnel activity reports. Cause: Everstand has not implemented a system for documenting time and effort in a manner that complies with Federal requirements. The current process relies on estimates rather than actual, verifiable work performed. Effect or Potential Effect: Without accurate and documented time and effort reporting, there is a risk that Federal awards are either overcharged or undercharged for salaries and benefits. This creates the potential for noncompliance with Federal cost principles, and could lead to disallowed costs in the event of a monitoring or program audit. Questioned Costs: Without a system to track actual time and effort, the determination of questioned costs is not available. Context: We tested a statistically valid sample of employee salaries charged to Federal awards. The deficiencies noted were isolated to those employees working on multiple programs at a time. Identification as a Repeat Finding, if applicable: Not a repeat finding. Recommendation: We recommend improvements to the controls around time and effort reporting that identifies and allocates time based on actual level of effort. Additionally, we recommend periodic trainings for key personnel that discusses the requirements and importance of compliance with the Federal regulation.

Finding 2025-003: Subrecipient Monitoring (Significant Deficiency) Federal Agency: United States Department of Health and Human Services. Federal Program: Unaccompanied Children Program. Assistance Listing Number: 93.676 Pass-through Entity, if applicable: Not applicable. Award Identification Number and Year: All awards and all of 2025 fiscal year. Criteria or Specific Requirement (including Statutory, Regulatory, or Other Citation): Criteria or specific requirement (including statutory, regulatory, or other citation): Per 2 CFR 200.332 Requirements for pass-through entities:  Verify that the subrecipient is not excluded or disqualified in accordance with § 180.300.  Pass-through entities must evaluate each subrecipient’s risk of noncompliance to determine the appropriate subrecipient monitoring (§200.332(b)).  Verify that a subrecipient is audited as required. Condition: During our testing of subrecipient monitoring, we noted several exceptions as follows:  No process was in place to verify that subrecipients are suspended or debarred from receiving Federal funds.  Pre-award risk assessments were not completed. The monitoring procedures were not linked to assessed risk levels.  The audited financial statements of the subrecipients were not received in order to assist in the risk assessment process. Cause: These conditions occurred due to a lack of formalized procedures to align subrecipient agreements, reporting requirements, and monitoring activities with the specific requirements of 2 CFR 200.332. Management relied on existing subcontract templates and internal policies that were not fully updated to reflect Uniform Guidance requirements. Effect or Potential Effect: Failure to properly structure subaward agreements, and obtain adequate financial reporting, increases the risk that subrecipients may not comply with Federal statutes and regulations. Questioned Costs: Costs associated with qualitative monitoring procedures are not identifiable. Context: We tested a statistically valid sample of subawards charged to Federal awards. The deficiencies noted were consistent across the sample population, indicating a systemic issue rather than isolated exceptions. Identification as a Repeat Finding, if applicable: Not a repeat finding. Recommendation: We recommend that management implement processes and procedures as follows:  Establish formalized policies and procedures on subrecipient monitoring;  Include a screening of subrecipients against the Federal suspended and debarred list as part of the contracting process;  Implement pre-award risk assessments that clearly links monitoring procedures to the level of assessed risk;  Document the monitoring procedures that occurred throughout the year in accordance with the established policies and procedures and identified risk assessment for each subrecipient.

Finding 2025-004: Federal Funding Accountability and Transparency Act of 2006 (FFATA) Reporting (Significant Deficiency) Federal Agency: United States Department of Health and Human Services. Federal Program: Unaccompanied Children Program. Assistance Listing Number: 93.676 Pass-through Entity, if applicable: Not applicable. Award Identification Number and Year: All awards and all of 2025 fiscal year. Criteria or Specific Requirement (including Statutory, Regulatory, or Other Citation): In accordance with 2 CFR 200.332 and as required by the Federal Funding Accountability and Transparency Act of 2006 (Pub. L. 109–282), as amended by section 6202 of Public Law 110–252, recipients must report information for each subaward of $30,000 or more in Federal funds and executive total compensation, as outlined in Appendix A to 2 CFR Part 170. The information is to be submitted to the FFATA Subaward Reporting System (FSRS) by the end of the month following the month in which the subaward was awarded. Condition: During our review of subrecipient activities, we noted that Everstand was not submitting the required reporting under FFATA regulations. Cause: Internal controls over financial reporting were not operating effectively to ensure reporting under FFATA in a timely manner. Effect or Potential Effect: Failure to submit the required reports by the submission deadline results in noncompliance with the Federal Funding Accountability and Transparency Act of 2006 as outlined in Appendix A to 2 CFR Part 170. Questioned Costs: Costs associated with qualitative reporting requirements are not identifiable. Context: We tested a statistically valid sample of subawards charged to Federal awards. The deficiencies noted were consistent across the sample population, indicating a systemic issue rather than isolated exceptions. Identification as a Repeat Finding, if applicable: Not a repeat finding. Recommendation: We recommend that management strengthen controls over reporting requirements for each Federal award to ensure timely submission of required reports.