Audit 391683

Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care Development Block Grant Assistance Listing Number: 93.575 Pass-Through Agency: State of Colorado, Department of Health and Human Services Pass-Through Numbers: N/A Award Period: March 1, 2022 – September 30, 2023 Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matter Criteria or Specific Requirement: 2 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award state that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Federal regulations state that expenditures are allowable under a federal grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both federally-funded and non-federally-funded activities. Condition: During testing of a sample of 38 payroll and payroll-related disbursements, we identified two instances with errors totaling a net amount of $19 that was charged to the federal award above what should have been charged to the federal award based on supporting documentation. Both instances related to an allocation of workers compensation to the federal award for employees who worked on the activities of the federal award during the tested pay period. Questioned Costs: No questioned costs over $25,000. Context: These two instances were noting during testing of 38 disbursements. Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic allocations of workers compensation cost by multiplying individual salaries per pay period by the ratio of total workers compensation cost divided by total salaries for the period. The workers compensation allocation is performed manually using ratios that change from period to period. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments in the Organization’s cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities and in a manner where costs are not applied uniformly to both federally-funded and non-federally-funded activities. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations that are calculated in a consistent manner that ensure costs are applied uniformly to respective benefited activities, and that are reflective on employees’ time and effort records Views of Responsible Officials: There is no disagreement with the audit finding.

Federal Agency: U.S. Department of Health and Human Services Federal Program Title: Child Care Development Block Grant Assistance Listing Number: 93.575 Pass-Through Agency: State of Colorado, Department of Health and Human Services Pass-Through Numbers: N/A Award Period: March 1, 2022 – September 30, 2023 Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matter Criteria or Specific Requirement: In accordance with 2 CFR 200.77 and 2 CFR 200.309, a non-federal entity may charge to a federal award only allowable costs incurred during the period of performance. Condition: During testing of a sample of 40 disbursements, we identified three instances of costs totaling a net amount of $182 that were charged to the federal award and management was not able to provide documentation to support the charges and that they were incurred during the period of performance. Questioned Costs: No questioned costs over $25,000. Context: These three instances were noting during testing of 40 disbursements. Cause: The control to ensure costs are supported and coded to federal awards within the period of performance – supervisor review – did not detect instances of time coded and charged to the project outside of the period of performance. Effect: The inefficacy of the control to ensure costs are supported and coded to federal awards within the period of performance – supervisor review – could result in charges to projects outside of their related period of performance. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that management reinforce the importance of its control to ensure costs are charged to federal awards within the period of performance with employees through on-going training. Views of Responsible Officials: There is no disagreement with the audit finding.