Audit 396088

2025-002 – Activities Allowed or Unallowed, Allowable Costs/Cost Principles – Significant Deficiency in Internal Control over Compliance and Noncompliance Federal Agencies: Department of Agriculture Federal Assistance Listing Numbers: 10.182 Programs: Pandemic Relief Activities: Local Food Purchase Agreements with States, Tribes, and Local Governments Award/Pass-Through Entity Identifying Numbers: F4303 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-federal entities receiving federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with federal statues, regulations, and the terms and conditions of the federal award. Per 2 CFR §200.403(e), costs must be in accordance with Generally Accepted Accounting Procedures (GAAP) to be allowable under federal awards. Condition: During the testing of non-payroll related costs for the year ended June 30, 2025, two of 20 transactions selected for testing within the program were incurred in the year ended June 30, 2024. This practice is not in accordance with GAAP, which requires that costs be recorded in the period in which they are incurred. Both transactions were incurred and reported within the grant’s period of performance. Cause: The Organization did not have adequate policies and procedures in place to ensure that federal expenditures are properly accrued and recorded in the fiscal year in which the costs are actually incurred. Effect or Potential Effect: Failure to accrue costs in accordance with GAAP may result in expenditures being materially misstated on the schedule of expenditures of federal awards that could lead to inaccurate reporting to the federal agencies. Questioned Costs: Known Questioned Costs: $5,095 Likely Questioned Costs: $31,125 Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Known questioned costs are $5,095 out of the total non-payroll related costs during the year ended June 30, 2025, which were $443,033. Identification as a Repeat Finding: Not a repeat finding. Recommendation: We recommend the Organization implement policies and procedures to accrue for federal expenditures in the period the costs were incurred to ensure costs are being recorded in accordance with GAAP and the schedule of expenditures of federal awards is representative of all federal expenditures incurred in the reporting year. Views of Responsible Officials: Management agrees with the finding. Management is formalizing and enhancing policies and procedures over cutoff and accruals.

2025-003 – Activities Allowed or Unallowed, Allowable Costs/Cost Principles – Significant Deficiency in Internal Control over Compliance Federal Agencies: Department of Housing and Urban Development Federal Assistance Listing Numbers: 14.239 Programs: Home Investment Partnerships Program Award/Pass-Through Entity Identifying Numbers: #165 59601114110 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-federal entities receiving federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with federal statues, regulations, and the terms and conditions of the federal award. Condition: Internal controls failed to prevent or detect an incorrect unallowable cost from being allocated to the grant. The cost was able to be replaced with allowable costs. Cause: Employees responsible for determining the allowability of costs did not have adequate training on allowably costs.. Effect or Potential Effect: Without adequate controls to ensure that costs allocated to federal programs are allowable, the Organization could incorrectly charge expenditures to the federal program. Questioned Costs: None. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. The cost was replaced with allowable costs. Identification as a Repeat Finding: Not a repeat finding. Recommendation: We recommend the Organization ensure internal controls are designed and performed by individuals with sufficient training on federal awards and allowable costs. Views of Responsible Officials: Management agrees with the finding. Management is strengthening internal controls over allowable costs and providing additional training to staff working with federal awards.

2025-004 – Activities Allowed or Unallowed, Allowable Costs/Cost Principles – Significant Deficiency in Internal Control over Compliance and Noncompliance Federal Agencies: Department of Health and Human Services Federal Assistance Listing Numbers: 93.243 Programs: Substance Abuse and Mental Health Services Project of Regional and National Significance Award/Pass-Through Entity Identifying Numbers: S24-SM84816-053-CTP, S25-SM84816-053-CTP, S24-SM84816-053-LGBTQCT, S25-SM84816-053-LGBTQCT, and CBO27589 Criteria: Per the 2024 Revised Uniform Guidance in 2 CFR §200.414 (f), “Recipients and subrecipients that do not have a current federal negotiated indirect cost rate (including provisional rate) may elect to charge a de minimis rate of up to 15% of modified total direct costs (MTDC). The recipient or subrecipient is authorized to determine the appropriate rate up to this limit.” Prior to the revisions, a de minimis rate of up to 10% was allowed. Condition: The Organization’s Negotiated Indirect Cost Rate expired on June 30, 2024. The Organization charged indirect costs using a percentage in excess of the applicable de minimis rate to two awards from July 1, 2024 to September 30, 2024. Cause: The Organization failed to revisit their indirect cost calculations when their negotiated indirect cost rate expired. Effect or Potential Effect: Indirect costs were charged in excess of allowable amounts. Questioned Costs: Known and likely questioned costs are $149,766. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Total indirect costs of the program were $1,861,380 for the year ended June 30, 2025. Identification as a Repeat Finding: Not a repeat finding. Recommendation: We recommend the Organization provide training to staff on all applicable compliance requirements to the Organization, especially related to the 2024 Uniform Guidance revisions. Views of Responsible Officials: Management agrees with the finding. Management is improving policies and procedures surrounding transition events.

2025-005 – Special Tests and Provisions, Wage Rate Requirements – Significant Deficiency in Internal Control over Compliance Federal Agencies: Department of Housing and Urban Development Federal Assistance Listing Numbers: 14.251 Programs: Economic Development Initiative, Community Project Funding, and Miscellaneous Grants Award/Pass-Through Entity Identifying Numbers: B-23-CP-WA-1539 Criteria: The Uniform Guidance in 2 CFR §200.303 requires that non-federal entities receiving federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with federal statues, regulations, and the terms and conditions of the federal award. Nonfederal entities shall include in their construction contracts subject to the Wage Rate Requirements (which still may be referenced as the Davis-Bacon Act) a provision that the contractor or subcontractor comply with those requirements and the DOL regulations (29 CFR Part 5, Labor Standards Provisions Applicable to Contacts Governing Federally Financed and Assisted Construction). This includes a requirement for the contractor or subcontractor to submit to the nonfederal entity weekly, for each week in which any contract work is performed, a copy of the payroll and a statement of compliance (certified payrolls). Condition: The Organization did not implement internal controls to ensure certified payrolls were being submitted. During the testing of certified payrolls, it was identified that three of 21 contractor and subcontractor selections of certified payrolls were not being submitted timely. Cause: Internal controls were not designed to ensure the certified payrolls were being submitted timely and were received and reviewed by the nonfederal entity with each pay application from the contractor. Effect or Potential Effect: Certified payrolls could fail to be prepared and/or wages not in accordance with federal requirements could be allowed in error. Questioned Costs: None. Context: This is a condition identified per review of the Organization’s compliance with specified requirements not using a statistically valid sample. Total contractor costs were $1,162,720. Identification as a Repeat Finding: Not a repeat finding. Recommendation: We recommend the Organization provide training to staff on all applicable compliance requirements to the Organization and implement internal controls to ensure certified payrolls are received prior to payment of a pay application. Views of Responsible Officials: Management agrees with the finding. Management is establishing policies and procedures to ensure certified payrolls are received by contractors and subcontractors at regular intervals over the course of a project.