Audit 394928

FY End
2024-09-30
Total Expended
$9.49M
Findings
36
Programs
18
Organization: South Texas Development Council (TX)
Year: 2024 Accepted: 2026-03-26

Organization Exclusion Status:

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Findings

ID Ref Severity Repeat Requirement
1187291 2024-001 Material Weakness Yes L
1187292 2024-001 Material Weakness Yes L
1187293 2024-002 Material Weakness Yes N
1187294 2024-002 Material Weakness Yes N
1187295 2024-002 Material Weakness Yes N
1187296 2024-002 Material Weakness Yes N
1187297 2024-003 Material Weakness Yes L
1187298 2024-003 Material Weakness Yes L
1187299 2024-004 Material Weakness Yes P
1187300 2024-004 Material Weakness Yes P
1187301 2024-004 Material Weakness Yes P
1187302 2024-004 Material Weakness Yes P
1187303 2024-004 Material Weakness Yes P
1187304 2024-004 Material Weakness Yes P
1187305 2024-004 Material Weakness Yes P
1187306 2024-004 Material Weakness Yes P
1187307 2024-004 Material Weakness Yes P
1187308 2024-004 Material Weakness Yes P
1187309 2024-004 Material Weakness Yes P
1187310 2024-004 Material Weakness Yes P
1187311 2024-004 Material Weakness Yes P
1187312 2024-004 Material Weakness Yes P
1187313 2024-004 Material Weakness Yes P
1187314 2024-004 Material Weakness Yes P
1187315 2024-004 Material Weakness Yes P
1187316 2024-004 Material Weakness Yes P
1187317 2024-004 Material Weakness Yes P
1187318 2024-004 Material Weakness Yes P
1187319 2024-004 Material Weakness Yes P
1187320 2024-004 Material Weakness Yes P
1187321 2024-004 Material Weakness Yes P
1187322 2024-004 Material Weakness Yes P
1187323 2024-004 Material Weakness Yes P
1187324 2024-004 Material Weakness Yes P
1187325 2024-004 Material Weakness Yes P
1187326 2024-004 Material Weakness Yes P

Contacts

Name Title Type
K9J3VGVPK6C3 Juan E. Rodriguez Auditee
9567223995 Benjamin De La Graza Auditor
No contacts on file

Notes to SEFA

The accompanying Schedule of Expenditures of Federal and State Awards (the "Schedule") presents the federal and state award activity of the South Texas Development Council (STDC) for the fiscal year ended September 30, 2024. The Council's reporting entity is defined in Note 1 to the basic financial statements. Federal and state awards received directly from federal and state agencies, as well as those passed through other governmental entities, are included on the Schedule.
The Schedule has been prepared on the modified accrual basis of accounting used for the governmental fund financial statements. The information in the Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and the Texas Grant Management Standards (TxGMS), issued by the Texas Comptroller of Public Accounts. Therefore, some amounts presented in the Schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements.
Expenditures reported on the Schedule are reported on the modified accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance and TxGMS, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Pass-through entity identifying numbers are presented where available.
STDC has elected to use a negotiated indirect cost rate for federal and state programs. The negotiated rate is applied to direct salaries and wages as the base for cost allocation. The indirect cost rate schedule and budget-to-actual comparison are presented in the supplementary schedules section of this report.
Of the federal and state expenditures presented in the Schedule, STDC provided the following amounts to subrecipients during fiscal year 2024: Program ALN Amount Ryan White HIV/AIDS Program 93.917 $2,749,703 Housing Opportunities for Persons with AIDS (HOPWA) 14.241 1,727,249 State Services — HIV/SRVS HHS001317000004 2,668,120 State-R / RW State Administration HHS001122200004 269,643 Total $7,414,715 The Ryan White HIV/AIDS Program and HOPWA amounts represent subrecipient pass-through expenditures only. The remaining balance of each program represents administrative costs retained by STDC for program oversight and administration. The State Services — HIV/SRVS and State-R / RW State Administration contracts are fully passed through to subrecipients. STDC is responsible for monitoring subrecipient compliance with program requirements as further described in the Schedule of Findings and Questioned Costs. Subrecipients under these programs include: Coastal Bend Wellness Foundation, Centro De Salud Familiar La Fe, City of Laredo Health Department, Project Vida Health Center, South Plains Community Action Association, and Valley AIDS Council.
The total expenditures reported on the Schedule differ from the total expenditures reported in the governmental fund financial statements. The difference represents expenditures that are not federal or state awards subject to the Uniform Guidance or TxGMS and are therefore excluded from the Schedule. The following reconciles the Schedule to the financial statements: Total expenditures of federal and state awards per Schedule $12,832,368 Non-federal/non-state expenditures not subject to Uniform Guidance or Texas Grant Management Standards (TxGMS): Local and general fund expenditures 72,472 Professional services and fee-for-service 27,942 Indirect cost and fringe benefit pools 103,571 SMP stipends and other non-award expenditures 5,798 Energy assistance — private utility funds 2,297 Total non-federal/non-state expenditures 212,080 Total expenditures per financial statements $13,044,448 Non-federal/non-state expenditures include general fund administrative costs, fee-for-service and professional services expenditures, indirect cost and fringe benefit pool allocations, State Senior Medicare Patrol (SMP) stipend payments, and energy assistance funded through private utility contributions. These amounts are included in total expenditures per the financial statements but do not represent federal or state awards subject to audit under the Uniform Guidance or TxGMS.
STDC administers loan activity through S.T.E.D. Corporation, a blended component unit, under the Economic Development Administration (EDA) Title IX Revolving Loan Fund program. During fiscal year 2024, STDC ceased active loan operations under this program and returned the accumulated revolving loan fund corpus of $364,340 to EDA. Outstanding CARES Act loan receivables of $37,729 remain as of September 30, 2024. EDA has authorized STDC to retain all collections on outstanding loans, including accrued interest, for program purposes. The balance of outstanding loans as of September 30, 2024 is $37,729.

Finding Details

Finding 2024-001 | Untimely Submission of Financial Status Reports — Ryan White HIV/AIDS Program Significant Deficiency in Internal Control over Compliance | Noncompliance | First-Time Finding Program: Ryan White HIV/AIDS Program ALN: 93.917 Contract: HHS001122200004, Amendment No. 2 (DSHS pass-through) Compliance Requirement: L — Reporting Federal Award Year: April 1, 2023 – March 31, 2024 Questioned Costs: $0 Known / $0 Likely Repeat Finding: No — First-Time Finding Condition: FSR #1 (April 1 – September 30, 2023) under Contract HHS001122200004 was submitted on February 14, 2024 — 106 days after the October 31, 2023 contractual due date. Criteria: Contract HHS001122200004 and 2 CFR Part 200 require the submission of Financial Status Reports by specified deadlines. FSR #1 for the period April 1 through September 30, 2023 was due October 31, 2023. Cause: No formal, cross-program FSR submission calendar with assigned responsibility and automated advance reminders was in place during FY2024. The former Finance Director, Ms. Julia C. Gonzalez, had prepared related reports but had not completed this FSR prior to her departure on October 13, 2023. The Interim Fiscal Officer, Mr. Josafat Saldivar, was newly appointed at the time. Additionally, on November 3, 2023, STDC suffered a ransomware attack that impacted the accounting system. Database recovery was completed in January 2024, after which staff began data entry and catching up on required reports for all funding agencies. Effect: The late submission constitutes noncompliance with the reporting requirements of Contract HHS001122200004 and 2 CFR Part 200. No financial impact or loss of funding resulted from the late submission. Recommendation: STDC should implement a formal, written FSR Submission Calendar covering all active federal and state programs, with assigned responsibility, contractual due dates, and automated advance reminder notifications to the Fiscal Officer and Executive Director at 30 and 7 days prior to each deadline.
Finding 2024-002 | Subrecipient Not Monitored — City of Laredo Across Three Programs Material Weakness in Internal Control over Compliance | First-Time Finding Programs Affected: Ryan White HIV/AIDS Program (ALN 93.917) | HOPWA (ALN 14.241) | State Services (HHS001317000004) Compliance Requirement: N — Special Tests / Subrecipient Monitoring (2 CFR 200.332) Questioned Costs: $0 Known / $0 Likely — no noncompliance identified at City of Laredo Repeat Finding: No — First-Time Finding Condition: City of Laredo was not monitored in FY2024 under any of the three programs for which it served as a subrecipient: Ryan White — $377,343 (11.7% of program total); State Services — $654,132 (24.5% of program total); HOPWA — $130,943 (7.5% of program total). Combined unmonitored expenditures: $1,162,418. Criteria: 2 CFR §200.332 requires pass-through entities to monitor the activities of subrecipients to ensure that federal awards are used for authorized purposes in compliance with applicable laws, regulations, and the terms of the subaward. STDC's Subrecipient Monitoring Policy, adopted as part of the corrective action for Finding 2022-006, requires annual monitoring of all subrecipients under each program. Cause: No formal, documented annual subrecipient monitoring schedule was maintained during FY2024. The absence of a structured tracking mechanism allowed the City of Laredo to go unmonitored across all three programs for the full fiscal year. STDC notes that five of six Ryan White and State Services subrecipients and three of four HOPWA subrecipients were monitored during FY2024; the lapse was isolated to the City of Laredo. Effect: STDC did not fulfill its pass-through entity obligations under 2 CFR §200.332 for the City of Laredo across three programs with combined subrecipient expenditures of $1,162,418. No noncompliance was identified at the City of Laredo based on available documentation. Recommendation: STDC should develop and maintain a formal Annual Subrecipient Monitoring Schedule at the start of each grant year, covering all active programs and all subrecipients. The schedule should identify the monitoring method, assigned staff, planned dates, and actual completion dates, and should be reviewed and approved by the Executive Director. A Monitoring Tracking Log should be maintained and reviewed weekly, with quarterly progress reports to the Executive Director.
Finding 2024-003 | Untimely Submission of Financial Status Reports — State Services HIV/SRVS Program Significant Deficiency in Internal Control over Compliance | Noncompliance | First-Time Finding Program: State Services — HIV/SRVS Program Contract: HHS001317000004 (DSHS pass-through to STDC) Compliance Requirement: L — Reporting (Contract Attachment B §C) Federal Award Year: September 1, 2023 – August 31, 2024 Questioned Costs: $0 Known / $0 Likely Repeat Finding: No — First-Time Finding Condition: FSR #1 (September 1, 2023 – February 29, 2024) under Contract HHS001317000004 was submitted on April 22, 2024 — 22 days after the March 31, 2024 contractual due date under Contract Attachment B §C. Criteria: Contract HHS001317000004, Attachment B §C requires the timely submission of Financial Status Reports by specified contractual deadlines. FSR #1 for the period September 1, 2023 through February 29, 2024 was due March 31, 2024. Cause: Finding 2024-003 shares the same root cause as Finding 2024-001: the absence of a formal, cross-program FSR submission calendar with assigned responsibility and advance reminder controls, compounded by the Fiscal Officer being new to the role during FY2024 and the recovery effort following the ransomware attack in November 2023. Effect: The late submission constitutes noncompliance with the reporting requirements of Contract HHS001317000004. No financial impact or loss of funding resulted from the late submission. Recommendation: The integrated corrective action described under Finding 2024-001 — implementation of a cross-program FSR Submission Calendar covering all active federal and state contracts — will address this finding simultaneously.
Finding 2024-004 | Untimely Submission of Single Audit Reporting Package Noncompliance | Repeat Finding | Third Consecutive Year (2022-001, 2023-006, 2024-004) Program: Multiple Programs — Entity-Wide Compliance Requirement: 2 CFR §200.512(a) — Federal Audit Clearinghouse Submission Required Deadline: June 30, 2025 (9 months after September 30, 2024 fiscal year end) Questioned Costs: $0 Known / $0 Likely Repeat Finding: Yes — Repeat of Finding 2023-006 and Finding 2022-001 (third consecutive year) Condition: The Single Audit reporting package for the fiscal year ended September 30, 2024, was not submitted to the Federal Audit Clearinghouse (FAC) by the required deadline of June 30, 2025, under 2 CFR §200.512(a). The package was submitted approximately nine months after the required deadline. Criteria: 2 CFR §200.512(a) requires non-federal entities that expend $750,000 or more in federal awards during a fiscal year to submit their single audit reporting package to the FAC within the earlier of 30 calendar days after receipt of the auditor's reports, or nine months after the end of the audit period. For the fiscal year ended September 30, 2024, the required submission deadline was June 30, 2025. Cause: The late submission is attributable to the cumulative effect of significant operational disruptions beginning in FY2022. On November 3, 2023, STDC suffered a ransomware attack that impacted its accounting system. Database recovery was not completed until January 2024, after which staff were required to perform extensive data entry and catch-up work for all reporting periods affected by the system outage. The transition to the AccuFund accounting system and the subsequent ransomware recovery created cascading delays in the preparation of financial records sufficient for audit, which in turn delayed the completion and submission of the FY2024 single audit reporting package. This finding represents the third consecutive year in which the single audit was submitted late, following Finding 2022-001 and Finding 2023-006. Effect: The late submission constitutes noncompliance with 2 CFR §200.512(a). As a result of prior year late submissions, STDC has been designated as a high-risk auditee for the current audit year. Continued late submissions may result in additional oversight requirements, conditions on federal awards, or other adverse actions by federal oversight agencies. Recommendation: STDC should establish a formal audit preparation timeline at the beginning of each fiscal year, with milestone dates for completion of the trial balance, resolution of audit adjustments, and delivery of final financial records to the auditor. The Executive Director and Finance Director should monitor progress against this timeline monthly and report status to the Board of Directors. STDC should target submission of the FY2025 single audit reporting package by June 30, 2026.