Material noncompliance and material weakness in internal control over compliance with allowable costs/cost principles requirements. Federal Agency: Department of Health and Human Services Program Title: Social Services Research and Demonstration Program Assistance Listing Number: 93.647 Project Number: 90XP0459-01-00 Award Period: August 31, 2022 – August 30, 2023 Criteria Nonfederal entities must follow the standards for documentation of personnel expenses set out at 2 CFR section 200.430(i) (the Uniform Guidance). Under those standards, charges to Federal awards for compensation must be based on records that accurately reflect the work performed. Those standards require that the records support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one federal award; a federal award and nonfederal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. Budget estimates, alone, do not qualify as support for charges to Federal awards and must include after-the-fact reviews of interim charges to Federal awards based on actual activity. Condition The Organization utilized budget estimates for the allocation of compensation and fringe benefits to Federal awards and lacked the tracking of actual activity and related after-the-fact review of charges. Cause The Organization’s system of internal control was not designed appropriately to comply with the standards for documentation of personnel expenses as prescribed by the Uniform Guidance. Effect The allocation of personnel expenses and related fringe benefit were not properly supported. Questioned Costs The total payroll and fringe benefit costs of $618,611 were charged to the major program during the year ended December 31, 2023. Recommendation We recommend management update its payroll system to add procedures to capture and document an after-the fact determination of work effort for each employee to support the percentage of payroll cost allocated to federal programs.
Significant deficiency in internal control over compliance related to subrecipient monitoring Federal Agency: Department of Health and Human Services Program Title: Social Services Research and Demonstration Program Assistance Listing Number: 93.647 Project Number: 90XP0459-01-00 Award Period: August 31, 2022 – August 30, 2023 Criteria Title 2 U.S. Code of Federal Regulations (CFR) 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), specifically 2 CFR 200.332, requires pass-through entities to clearly identify every subaward as a subaward and include specific information in the subrecipient agreement at the time of the subaward. This includes the Assistance Listing number (formerly CFDA number) and the federal award name (title), as well as other key elements. If this information is not available at the time of the subaward, the pass-through entity must provide the best information available and update the subrecipient when the correct information becomes available. These requirements are intended to ensure subrecipients can properly identify the federal program and comply with all applicable requirements under the award, including compliance with federal statutes, regulations, and the terms and conditions of the agreement, as well as the evaluation of each subrecipient’s risk of noncompliance and review of the results of a subrecipient’s annual Single Audit, if required. Condition The Organization’s subaward agreements do not clearly identify all Federal award information and other terms as required—such as the Assistance Listing number, federal award name, and other key elements—in subrecipient agreements at the time of the subaward. Cause The Organization’s subrecipient monitoring policies and procedures were not sufficient to ensure all required subaward terms were included. Effect or Potential Effect For the two subrecipient selected for testing, the Organization’s subaward agreements do not have the correct documentation required to be in compliance with 2 CFR 200.332. Questioned Costs Not applicable. Recommendation We recommend that management develop and formalize procedures to ensure all subawards are clearly identified and that all required information is included in subrecipient agreements at the time of the award. Views of Responsible Officials Management concurs with the finding and has provided the accompanying management corrective action plan.
Significant deficiency in internal control over compliance with procurement procedures meeting the requirements of 2 CFR Part 200. Federal Agency: Department of Health and Human Services Program Title: Social Services Research and Demonstration Program Assistance Listing Number: 93.647 Project Number: 90XP0459-01-00 Award Period: August 31, 2022 – August 30, 2023 Criteria Requirements contained in Title 2 U.S. Code of Federal Regulations Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Subpart D – Post Federal Award Requirements, Sections 200.318 through 200.326, require that a nonfederal entity establish and follow a written procurement policy that conforms to federal standards. Among other requirements, the written procurement policy must identify formal and informal procurement actions to be taken based on the size of the procurement, covering both goods and services. In this instance, the Organization did not follow their established procurement policy when conducting procurement actions, resulting in noncompliance with both their internal procedures and the federal requirements outlined in 2 CFR 200.318–200.326.. Condition The Organization did not follow their established written procurement policy when conducting procurement transactions. Cause The Organization’s internal controls were insufficient to ensure that the Organization’s written procurement policy provisions were followed. Effect or Potential Effect In our testing, the Organization did not follow the written procurement policy in all 5 samples selected for testing. Questioned Costs $23,064 Recommendation We recommend the Organization implement measures to ensure that its procurement policy is followed for all transactions that fall within the policy. Management should ensure procurement transactions are documented in such detail to evidence the method of procurement.
Significant deficiency in internal control over compliance with allowable costs and cost allocation under the requirements of 2 CFR Part 200. Federal Agency: Department of Health and Human Services Program Title: Social Services Research and Demonstration Program Assistance Listing Number: 93.647 Project Number: 90XP0459-01-00 Award Period: August 31, 2022 – August 30, 2023 Criteria In accordance with 2 CFR Part 200, costs charged to a federal award must be necessary, reasonable, allowable under the cost principles, allocable, and adequately documented; entertainment costs are specifically unallowable per 2 CFR 200.438, and costs must be allocated consistently between federal awards and other activities, as inconsistent allocation is not permitted under the Uniform Guidance. Condition Unallowable costs were charged to federal programs, and the Organization was unable to substantiate the allocation percentages used for nonpayroll costs during our testing. Cause Unallowable costs were charged because the Organization lacked adequate review procedures to ensure compliance with federal cost principles, and was unable to substantiate allocation percentages used in the allocation of nonpayroll costs during our testing. Effect or Potential Effect The absence of review of charge resulted in $138 of unallowable costs charged to the Federal Program. In addition, our testing of 6 out of 40 selections, adequate supporting documentation was not present to support the allocation of nonpayroll costs. Questioned Costs $4,185 Recommendation We recommend that management develop and implement enhanced review procedures and formal written policies for allocating shared costs to ensure all costs charged to federal awards are allowable under Uniform Guidance, provide training to staff responsible for approving expenditures on federal cost principles, and periodically review allocations for consistency and compliance with federal requirements.
Significant deficiency in internal control over compliance related to reporting for the Federal Funding Accountability and Transparency Act Federal Agency: Department of Health and Human Services Program Title: Social Services Research and Demonstration Program Assistance Listing Number: 93.647 Project Number: 90XP0459-01-00 Award Period: August 31, 2022 – August 30, 2023 Criteria Under the requirements of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109‐282) (FFATA) that are codified in Title 2 U.S. Code of Federal Regulations, Part 170 ‐ Reporting Subaward and Executive Compensation Information. The prime awardee is required to file a FFATA sub‐award report by the end of the month following the month in which the prime recipient awards any sub‐grant in total greater than or equal to $30,000. The report must be filed in the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Condition The Organization did not complete required FFATA reporting for covered subawards. Cause The Organization’s system of internal control is not designed appropriately due to a lack of formal written policies and procedures governing established a process by which to perform FFATA reporting. Effect The Organization did not comply with the FFATA sub-award reporting requirements that are codified in Title 2 U.S. Code of Federal Regulations for all 2 of the sub-award selections. Questioned Costs None. Recommendation We recommend management develop and implement formal written policies and procedures for allocating shared costs, provide training to staff, periodically review allocations for consistency and compliance with federal requirements, review the FFATA requirements to ensure they are implemented for all applicable sub-awards, and complete all required FFATA reporting for past covered sub-awards.