ALN 21.027 Finding #2024‐002 Incomplete Schedule of Expenditures of Federal Awards Repeat Finding: No Condition: The auditee’s Schedule of Expenditures of Federal Awards (SEFA) for the year ended December 31, 2024 did not include all federal awards. Specifically, two federal pass‐through grants (ALN# 21.027) in the aggregate amount of $1,035,393 were omitted. Criteria: Per 2 CFR §200.510(b), auditees must prepare a SEFA that is complete and accurate for the period covered by the financial statements. The SEFA must list individual federal programs by Federal agency, identify pass‐through entities, and present total federal awards expended. Government Auditing Standards require auditors to assess whether internal controls over federal reporting are designed and implemented effectively to ensure completeness and accuracy. Cause: The omission occurred because the auditee did not have adequate internal control procedures to ensure all federal awards were identified and reconciled to supporting accounting records. Effect: The omission resulted in the SEFA being materially misstated prior to auditor detection. This could have impacted the determination of major programs and the scope of the audit. Failure to prepare a complete SEFA increases the risk that federal oversight agencies and pass‐through entities may not have reliable information for monitoring federal funds. Perspective Information: The omitted grants totaled $1,035,393 of the Organization’s total federal expenditures for the year ended December 31, 2024. This indicates a systemic deficiency in the Organization’s SEFA preparation process. Recommendation: We recommend that management strengthen its internal control process over SEFA preparation. Specifically, management should establish procedures to: · Reconcile the SEFA to the general ledger and grant agreements, · Review grant award schedules with program and finance staff to ensure completeness, and · Implement a secondary review of the SEFA prior to submission. Reporting Views of Responsible Officials: The Organization agrees with the finding. The Organization was unaware that passthrough funds from federal sources are required to be presented on the SEFA and has implemented procedures to ensure all grants are evaluated to ensure the SEFA is complete.
ALN 14.251 and ALN 21.027 Finding #2024‐003 Subrecipient Monitoring Repeat Finding: No Condition: The Organization did not perform adequate monitoring of its subrecipient to ensure compliance with federal procurement and suspension/debarment requirements. Specifically: · The subrecipient did not have procurement policies that conform to the Uniform Guidance requirements at 2 CFR 200.317–200.327. · The subrecipient did not perform suspension or debarment verifications for vendors, as required by 2 CFR 200.214. · The Organization, as pass‐through entity, did not identify or address these deficiencies through its monitoring procedures. Criteria: In accordance with 2 CFR 200.332(d), pass‐through entities are required to monitor the activities of subrecipients as necessary to ensure that subawards are used for authorized purposes, in compliance with federal statutes, regulations, and the terms and conditions of the subaward. Additionally, 2 CFR 200.317–200.327 establish procurement standards applicable to non‐federal entities, including the requirement to have written procurement procedures that conform to applicable federal law and standards. Under 2 CFR 200.214, non‐federal entities are prohibited from contracting with or making subawards to parties that are suspended or debarred. Cause: The Organization’s monitoring procedures did not include a review of subrecipient procurement policies and practices, nor did they require confirmation that the subrecipient was performing suspension/debarment checks. Effect: There is an increased risk that federal funds could be expended on unallowable costs, including purchases from suspended or debarred vendors. Lack of proper procurement policies also creates a risk that procurements may not be conducted in a manner providing full and open competition, as required by federal regulations. Questioned Costs: None at this time. Perspective Information: The condition noted applied to the subrecipient responsible for administering $1,525,133 of the Organization’s federal expenditures under ALN 14.251 and $900,000 of the Organization’s pass‐through funds expenditures under ALN 21.027. This represents 100% of the Organization’s subrecipient expenditures for the program. Accordingly, the lack of subrecipient procurement and debarment compliance is considered systemic to the subrecipient relationship and not an isolated instance. Recommendation: We recommend that the Organization strengthen its subrecipient monitoring procedures to include verification that subrecipients have procurement policies in compliance with Uniform Guidance and are performing suspension and debarment checks prior to entering into vendor agreements. The Organization should provide training and technical assistance to subrecipients to help them implement compliant procurement and debarment procedures. Reporting Views of Responsible Officials: The Organization agrees with the finding. The Organization has partnered with a firm to administer the development of the project and was unaware of its responsibilities to monitor the subrecipient relating to procurement and debarment. The Organization is in process of implementing procedures to ensure the subrecipient complies with the requirements of the Uniform Guidance.
ALN 14.251 and ALN 21.027 Finding #2024‐004 Incorrect Recording of Expenditures that were Notes Receivable Draws Repeat Finding: No Condition: The Organization recorded $2,425,133 of federal program expenditures as expenses in the year ended December 31, 2024. These amounts represented disbursements made to a subrecipient under terms that required repayment, and therefore should have been recorded as a note receivable. The Organization did not recognize the note receivable nor properly classify the related transactions, resulting in a misstatement of expenditures and assets. Criteria: In accordance with 2 CFR 200.302 and generally accepted accounting principles (GAAP), the Organization is required to maintain accurate, current, and complete disclosure of financial results of each federal award. Accounting records must adequately identify the source and application of federal funds and properly classify transactions, assets, liabilities, and equity in accordance with GAAP. Cause: The misclassification occurred because the Organization did not have sufficient internal controls to ensure that disbursements under this program were evaluated for the proper accounting treatment (i.e., expense versus note receivable/loan). Effect: Federal program expenditures were overstated by $2,245,133 and assets were understated by the same amount. The lack of proper classification may affect stakeholders’ understanding of the Organization’s financial position and federal compliance. Questioned Costs: None noted, as the expenditures were incurred under the program; however, the classification error represents a material reporting misstatement. Perspective Information: The condition noted represents $2,425,133 of expenditures, which were inaccurately reported. Recommendation: We recommend that the Organization strengthen its review process over accounting for federal program disbursements. Policies and procedures should require evaluation of whether disbursements meet the definition of an expense or a loan/note receivable in accordance with GAAP and federal reporting requirements. Reporting Views of Responsible Officials: The Organization agrees with the finding. The Organization’s accountant was unaware that the federal grant payments to the subrecipient were considered draws on a note receivable. Corrections have been made to improve communication with the accountant to ensure the accountant is aware of key grant provisions and to ensure note receivable draws are being properly accounted for in the general ledger.
ALN 21.027 Finding #2024‐005 Insufficient Accounting to Track Federal Grant Expenditures Repeat Finding: No Condition: The Organization did not maintain accounting records that sufficiently tracked expenditures relating to the federal program. Instead, federal program expenditures were co‐mingled with all other organizational expenditures. As a result, the Organization was unable to readily identify the federal share of costs or demonstrate that the costs charged were allowable under the terms of the award. Criteria: Per 2 CFR 200.302, non‐federal entities must maintain financial management systems that provide for: · Accurate, current, and complete disclosure of financial results of each federal award; · Records that identify adequately the source and application of federal funds; and · Effective control and accountability for all funds, property, and other assets. These requirements include maintaining accounting records that segregate federal program expenditures from non‐federal activity to ensure compliance with applicable statutes, regulations, and terms of the award. Cause: The Organization did not implement accounting controls and procedures to establish separate accounts or cost centers for federal program expenditures. Effect: Because federal program expenditures were not separately tracked, there is an increased risk of: · Unallowable or unsupported costs being charged to the program, · Inaccurate reporting on the Schedule of Expenditures of Federal Awards (SEFA), and · Noncompliance with Uniform Guidance financial management standards. Questioned Costs: None noted. Perspective Information: The condition affected one of the Coronavirus State and Fiscal Recovery – ARPA grants, ALN 21.027, which accounted for $153,653 of federal expenditures for 2024. Recommendation: We recommend that the Organization implement an accounting system that separately tracks federal program expenditures, either through distinct general ledger accounts, cost centers, or project codes. The system should allow management to readily identify federal expenditures, prepare accurate SEFA reporting, and demonstrate compliance with federal requirements. Reporting Views of Responsible Officials: The Organization agrees with the finding. The Organization is in process of implementing a project‐based ledger and procedures to ensure federal expenditures are properly coded so they are readily identifiable.
ALN 14.251 and ALN 21.027 Finding #2024‐006 Financial Policies and Procedures Repeat Finding: No Condition: The Organization did not have formalized, written financial policies and procedures that address key Uniform Guidance requirements. Criteria: Under 2 CFR 200.302(b), non‐federal entities must establish and maintain effective financial management systems that provide accurate, current, and complete disclosure of the financial results of each federal award. Uniform Guidance further requires that entities implement written policies and procedures governing: · Allowable costs (2 CFR 200.302(b)(7) and 200.403–200.405), · Procurement (2 CFR 200.317–200.327), · Cash management (2 CFR 200.305), · Travel costs (2 CFR 200.475), and · Conflict of interest (2 CFR 200.318(c)(1)). Written policies serve as the framework for consistent compliance with federal requirements. Cause: The Organization had not developed or adopted written financial policies, relying instead on informal practices and staff knowledge to manage federal awards. Effect: The absence of formalized financial policies increases the risk of noncompliance with Uniform Guidance, inconsistent application of requirements, and potential misuse of federal funds. The lack of a documented framework also limits accountability and makes it difficult to train new staff or demonstrate compliance to oversight agencies. Questioned Costs: None noted. Perspective Information: This condition applied to the Organization’s overall financial management system and impacted all federal programs administered during the year ended December 31, 2024. As such, the lack of formalized financial policies represents a systemic issue and a material weakness in internal control over compliance. Recommendation: We recommend that the Organization adopt formal, written financial policies and procedures that address all Uniform Guidance requirements applicable to federal awards. These policies should be approved by management and the governing body, disseminated to staff, and reviewed periodically to ensure continued compliance. Reporting Views of Responsible Officials: The Organization agrees with the finding. The Organization will establish formalized accounting policies and procedures that adhere to the requirements of the Uniform Guidance.
ALN 14.251 and ALN 21.027 Finding #2024‐007 Regulatory Deadline for Submission of Schedule of Expenditures of Federal Awards Repeat Finding: No Condition: The Organization did not submit its SEFA and reporting package to the FAC within the required nine‐month deadline. For the year ended December 31, 2024, the reporting package was due by September 30, 2025, but was not submitted by the required deadline. Criteria: Per 2 CFR 200.512(a), the auditee must submit the reporting package, which includes the financial statements, schedule of expenditures of federal awards (SEFA), and the auditor’s reports, to the Federal Audit Clearinghouse (FAC) within the earlier of 30 calendar days after receipt of the auditor’s report, or nine months after the end of the auditee’s fiscal year end. Timely submission is a condition of receiving and maintaining federal awards. Cause: The delay occurred because the Organization did not have adequate procedures in place to ensure timely preparation and submission of the SEFA and reporting package in accordance with Uniform Guidance deadlines. Effect: Failure to submit the SEFA and reporting package timely constitutes noncompliance with Uniform Guidance reporting requirements. This increases the risk that federal oversight agencies may delay or restrict future funding, and may affect the Organization’s risk classification under 2 CFR 200.520. Questioned Costs: None noted. Perspective Information: The condition noted applied to the reporting package for the year ended December 31, 2024, and represents systemic noncompliance with the Uniform Guidance submission requirements. Recommendation: We recommend that the Organization implement procedures to ensure timely completion and submission of the SEFA and reporting package to the FAC within the nine‐month deadline. This should include assignment of responsibility, a compliance calendar, and oversight by management or the governing body. Reporting Views of Responsible Officials: The Organization agrees with the finding. The Organization engaged a firm to perform the audit with the intent of completing and submitting the audit within the requirement timeframe. Due to unforeseen issues, the completion of the audit was delayed. Procedures are being put into place to ensure the audit commences earlier so the federal submission can be completed timely
Finding #2024‐008 Procurement, Suspension/Debarment Repeat Finding: No Condition: During testing of procurement transactions, it was noted that the Organization did not perform required procurement procedures or suspension/debarment verifications prior to executing contracts funded by federal awards. Specifically, the Organization did not document competitive procurement processes or maintain supporting documentation to demonstrate compliance with Uniform Guidance procurement standards. No evidence was provided that vendors were checked against SAM.gov or otherwise verified to ensure they were not suspended or debarred at the time of award. Criteria: Under 2 CFR 200.317 through 200.327, non‐federal entities must follow procurement standards that promote full and open competition, include written procurement procedures, and maintain records sufficient to detail the history of procurements. Additionally, per 2 CFR 200.214, non‐federal entities are prohibited from contracting with or making subawards to parties that are suspended or debarred. Entities must verify vendor eligibility by checking the System for Award Management (SAM.gov) or by obtaining a vendor certification prior to award. Cause: The Organization lacked formal procurement policies and internal controls to ensure Uniform Guidance procurement and debarment procedures were followed. Responsibility for compliance was not clearly assigned, and no review process existed to confirm that required verifications were completed. Effect: Failure to follow federal procurement and debarment requirements represents a material weakness in internal control over compliance and increases the risk that: Contracts could be awarded to suspended or debarred vendors; purchases may not reflect fair and open competition; and Federal funds could be expended on unallowable costs. Questioned Costs: None at this time. Perspective Information: This condition applied to all federal procurement transactions tested during the year ended June 30, 2025, totaling approximately $51,520 in expenditures. Recommendation: We recommend that the Organization: · Develop and implement written procurement policies that comply with 2 CFR 200.317–200.327. · Require staff to perform and document SAM.gov checks (or equivalent verification) prior to entering into any federally funded contracts. · Maintain procurement documentation that includes bids, quotes, selection rationale, and evidence of price reasonableness. · Provide training to staff on Uniform Guidance procurement and debarment requirements. · Establish a review and approval process to verify compliance before purchases are finalized. Reporting Views of Responsible Officials: The Organization agrees with the finding. The Organization will establish formalized financial policies that comply with procurement and debarment requirements of the Uniform Guidance and ensure compliance with such policies when procuring vendors.
ALN 14.251 Finding #2024‐009 Untimely or Incomplete Performance and Financial Reporting Repeat Finding: No Condition: The Organization did not submit required federal performance and financial reports in accordance with federal deadlines. Specifically, several required reports were either not completed, or were submitted after the required due dates set forth in the grant agreements. In some instances, supporting documentation was incomplete or insufficient. Criteria: Per 2 CFR 200.328 and 2 CFR 200.329, recipients of federal awards are required to submit performance and financial reports as required by the awarding agency. Reports must be accurate, complete, and submitted timely, in accordance with the terms and conditions of the award. Timely reporting allows federal agencies to monitor progress and ensure funds are used for authorized purposes. Cause: The Organization did not have adequate internal controls to track reporting due dates or ensure that reports were completed, reviewed, and submitted on time. Effect: Failure to submit complete and timely reports represents noncompliance with Uniform Guidance requirements and the terms of the federal awards and increases risk relating to the ability of the federal oversight agency to monitor the grant. Questioned Costs: None noted. Perspective Information: Performance and financial reports for each semi‐annual period were not submitted timely. Recommendation: We recommend that the Organization implement internal controls to ensure all required federal reports are completed accurately and submitted on time. Reporting Views of Responsible Officials: The Organization agrees with the finding. Procedures are being implemented to ensure all reports are provided to the Organization to ensure compliance with the federal grants.