Audit 395627

Finding 2025-001 – Allowability and Period of Performance Information of the federal program: Federal Grantor: United States Department of Homeland Security Assistance Listing No.: 97.036, Disaster Grants – Public Assistance (Presidentially Declared Disasters) Criteria or specific requirement (including statutory, regulatory or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: “The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Condition: The timekeeping system used by management did not require timecards to be reviewed and approved. Further, there was no process in place to review wage rates to ensure they were reasonable. Cause: Management had not implemented adequate internal control procedures to require supervisory review and approval of timecards or verification of wage rates. Effect or potential effect: The absence of supervisory review and verification controls increases the risk that unallowable payroll costs could be charged to the award, that inaccurate or unsupported labor costs could be reported, and that noncompliance with Federal requirements could occur. Questioned costs: None Context: The population consisted of $6,727,441 of salaries expense. A sample of 40 items was selected, and all 40 items contained exceptions related to the absence of review and approval of timecards and the lack of review of pay rates for reasonableness. Identification as a repeat finding, if applicable: This finding is not a repeat finding. Recommendation: Management should implement and document internal control procedures to ensure all timecards are independently reviewed and approved by supervisors and that wage rates charged to the award are reviewed for reasonableness. Controls should operate consistently and be designed to prevent and detect errors or unsupported charges. Views of responsible officials: Management concurs with the finding and has developed a plan to correct the finding.

Finding 2025-002 – Earmarking Information of the federal program: Federal Grantor: United States Department of Homeland Security Assistance Listing No.: 97.036, Disaster Grants – Public Assistance (Presidentially Declared Disasters) Criteria or specific requirement (including statutory, regulatory or other citation): Section 200.303 of the Uniform Guidance states the following regarding internal control: “The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Section 516b(b)(2)(B) of Title 42 of the United States Code establishes that management costs are subject to a statutory cap of 5 percent of the total FEMA obligation. Amounts exceeding this cap are unallowable. Condition: Management costs exceeded the 5 percent statutory limitation. The total FEMA obligation was $14,897,837, resulting in the allowable management cost cap amount being $744,892. The Company received $770,709 in management costs, which exceeded the allowable amount. Cause: Management did not implement adequate monitoring controls to ensure that management costs remained within the 5 percent statutory cap. Effect or potential effect: The lack of monitoring procedures resulted in excess management costs being charged to the award. Exceeding the statutory cap increases the risk of noncompliance and financial exposure to repayment. Questioned costs: Questioned costs total $25,817. This represents the amount by which management costs received ($770,709) exceeded the 5 percent allowable cap ($744,892). Context: The population consisted of $770,709 in total management cost charges. We identified one exception related to the Company exceeding the statutory 5 percent management cost cap. Identification as a repeat finding, if applicable: This finding is not a repeat finding. Recommendation: Management should establish monitoring procedures to ensure management costs charged to FEMA awards do not exceed the statutory 5 percent threshold. Monitoring should occur on a recurring basis to ensure compliance with earmarking requirements. Views of responsible officials: Management concurs with the finding and has developed a plan to correct the finding.