Finding 2025-002: Significant Deficiency in Internal Control over Compliance – Documentaon, Drawdown Support, and Timeliness Type of Finding: Significant Deficiency in Internal Control over Compliance (Uniform Guidance) Criteria In accordance with 2 CFR 200.303, non-Federal enes must establish and maintain effecve internal control over federal awards to provide reasonable assurance of compliance with federal statutes, regulaons, and the terms and condions of the federal award. 2 CFR 200.516 requires auditors to report, as audit findings in the federal awards secon of the schedule of findings and quesoned costs, significant deficiencies and material weaknesses in internal control over major programs and material noncompliance with the provisions of federal statutes, regulaons, or the terms and condions of federal awards related to a major program. Condion During the audit of ALN 93.959, we encountered significant delays in obtaining supporng documentaon for expenditures selected for tesng. In many instances, documentaon was not readily available and required substanal me and effort for management to locate, assemble, or reconstruct. In addion, we observed that: Documentaon supporng drawdown requests and reimbursement claims was not maintained in a centralized, organized manner that would allow for mely retrieval or ready tracing to the underlying accounng records; and Drawdown acvity for the program was not performed on a roune basis (for example, reimbursement requests were somemes accumulated over several months and then requested in large batches, rather than through a more regular process), and support for these batched drawdowns oen had to be recreated at the me of the audit. Although the expenditures and drawdowns tested were ulmately supported and agreed to the underlying accounng records, the delays and need to recreate drawdown support indicate that documentaon and internal control over compliance with recordkeeping and cash-management-related requirements were not consistently maintained in an organized and readily accessible manner. Cause The enty does not have sufficiently effecve procedures and internal controls in place to ensure that: Supporng documentaon for federal program expenditures and drawdowns is maintained contemporaneously with the underlying transacons; Drawdown requests are rounely prepared and supported in a manner that clearly demonstrates that costs were incurred prior to requesng reimbursement; and Documentaon is organized and stored in a centralized manner that allows for mely retrieval for management, auditors, or federal/pass-through agencies. Effect As a result of these deficiencies: There is an increased risk that noncompliance with federal requirements (including documentaon and cash-management-related requirements) could occur and not be prevented, or detected and corrected, in a mely manner; The enty may be unable to readily support expenditures or drawdowns upon request by auditors, federal awarding agencies, or pass-through enes; and Audit inefficiencies and delays occurred due to the me required to obtain and/or recreate necessary documentaon. While our tesng did not idenfy unsupported or unallowable costs for the items selected, the described deficiencies represent a significant deficiency in internal control over compliance for the affected major program. Recommendaon We recommend that management strengthen internal control over compliance and documentaon for federal programs by: 1. Implemenng procedures to ensure that all supporng documentaon for federal expenditures and drawdowns is prepared and retained contemporaneously with the underlying transacons; 2. Organizing documentaon in a centralized, consistent manner (for example, by grant and period) that permits mely retrieval and clear linkage to the general ledger and reimbursement requests; 3. Establishing and following a regular process and metable for preparing and subming reimbursement requests, supported by schedules that reconcile drawdowns to underlying expenditures and accounng records; and 4. Periodically reviewing documentaon and drawdown files for completeness, organizaon, and compliance with applicable Uniform Guidance and award-specific requirements. Management Response Management agrees with the finding and will strengthen procedures over documentaon and drawdown processes, including mely, organized maintenance of supporng documentaon and improved processes for preparing and supporng reimbursement requests.