Audit 396681

Finding # 2025-001 Reporting Allowable/Allocable Costs Federal Agency: U.S. Department of Treasury Federal Program: Coronavirus State and Local Fiscal Recovery Funds Pass-Through: Connecticut Department of Housing Assistance Listing Number: 21.027 Federal Agency: U.S. Department of Housing and Urban Development Federal Program: Continuum of Care Pass-Through: Connecticut Department of Housing Assistance Listing Number: 14.267 Type of Finding: Significant Deficiency in Internal Control over Compliance Other Matters Criteria Grant expenditure reports submitted to funders must be supported by detailed accounting records. Condition There were variances between type and amount of expenses reported to grantors when compared to the expenses recorded in the grant cost center in QuickBooks. Costs reported on submitted grant reports did not consistently reconcile directly back to what was allocated in the underlying accounting records (general ledger). Questioned Costs None noted. Context Costs were not consistently allocated to the grant cost center in the underlying accounting records (general ledger). In some cases, timesheets did not support the time charged to specific grants. Instead, journal entries were used to allocate costs. Effect The amount of allocated costs reported and reimbursed by grantors could not be readily traced back to the underlying accounting records (general ledger) in some cases. Because the amounts reported to funders by expense category did not consistently agree to the underlying QuickBooks general ledger, the Center was unable, in some instances, to readily demonstrate that reported and reimbursed costs were fully supported by its accounting records. This reduces transparency, weakens audit trails, and increases the risk that costs reported to grantors may be misstated or deemed unsupported upon review. Cause The Center was not consistently recording expenses to grant cost centers in QuickBooks which would have served to ensure the cost allocation plan and underlying accounting records were in line and consistent with what was being reported to grantors. Repeat Finding Yes, repeat of prior year finding 2024-001. Recommendation The Center should strengthen its cost allocation and reconciliation procedures to ensure that all costs reported and submitted for reimbursement are fully supported by, and directly traceable to, the underlying accounting records. Specifically, the Center should: • Perform timely and documented reconciliations between the cost allocation plan outputs and the general ledger cost centers prior to submission of grant reimbursement requests. • Ensure that costs are consistently and accurately allocated to the appropriate grant cost centers in the general ledger. • Implement review and approval controls over grant cost allocations to verify consistency between reported amounts and underlying accounting records. • Provide periodic training to accounting and grants personnel on cost allocation requirements and reconciliation procedures. • Grant reports should undergo review by someone other than the preparer, prior to submission to the grantor agency. • Perform routine review of grant budget versus actual results to identify any variances timely so that corrections can be made. These actions will help ensure compliance with grant requirements and reduce the risk of unsupported or misstated costs being reported to grantors. Management’s Response/ Views of Responsible Officials Management agrees with this finding and has outlined its resulting actions in a separately issued corrective action plan.

Finding # 2025-002 Internal Controls over Allowable Costs Federal Agency: All Federal Program: All Assistance Listing Number: All Type of Finding: Significant Deficiency in Internal Control over Compliance Other Matters Criteria Title 2, Chapter 2, Part 200 of the Code of Federal Regulations (2 CFR Part 200) establishes cost principles for determining costs applicable to federal awards with nonprofit organizations. An important method of adhering to these cost principles and ensuring allowable and allocable costs are charged to federal programs is through the use of a cost allocation plan. As important as the plan is, internal controls over the cost allocation plan are just as necessary. Nonprofit organizations must maintain internal controls over the allocation of costs to ensure costs are not over or under allocated, consistency across programs, and that they are traceable back to the accounting records themselves. Condition Although the Center has a written cost allocation plan in place, internal controls to ensure the plan was properly implemented and followed were not consistently applied. Questioned Costs None noted. Context The Center has made progress in implementing its corrective action plan. Most costs are now recorded in accordance with the Center’s cost allocation plan. However, inconsistencies remain in allocating costs to individual grant contract cost centers within the general ledger. Effect The Center incurs the risk of allocating disallowed costs to federal programs contrary to the Federal Regulations. Cause The Center was not consistently performing reconciling and other activities which would have served to ensure the cost allocation plan and underlying accounting records were in line and consistent. Repeat Finding Yes, repeat of prior year finding 2024-002. Recommendation The Center should strengthen internal controls over grant cost reporting to ensure that amounts reported to funders are fully supported by, and traceable to, the QuickBooks general ledger. Specifically, the Center should: • Perform documented reconciliations between grant reimbursement reports and QuickBooks cost center detail by expense category prior to submission to funders. • Record all allocation calculations, reallocations, and adjustments used for grant reporting as journal entries in QuickBooks so that the general ledger reflects the same amounts reported to grantors. • Implement a formal review and approval process to verify that reported payroll, fringe, indirect, guest support, and other direct costs agree to QuickBooks by cost center. • Retain reconciliation and review documentation to support reported costs and facilitate audit and grantor review. Management’s Response/ Views of Responsible Officials Management agrees with this finding and has outlined its resulting actions in a separately issued corrective action plan