Audit 401763

Inadequate Approval Controls Over Adjusting Journal Entries and Invoices (Repeat of Finding 2024-006) Federal Agency: U.S. Department of Agriculture Pass-Through Agency: MN DEED Assistance Listing Number(s):17.258, 17.278 and 17.259 (WIOA Cluster) Federal Agency: U.S. Department of Health and Human Services Pass-Through Agencies: MN DEED and various counties Assistance Listing Number: 93.558 (TANF) Compliance Requirement: Allowable Cost Criteria: The Organization’s policy requires that adjusting journal entries be reviewed by someone other than the originator. Additionally, all invoices must be approved by authorized personnel prior to payment. Condition: Testing of disbursements revealed that several adjusting journal entries were posted without the required dual review. Invoice testing also identified payments processed without documented approval. For the WIOA Cluster, 4 of 60 disbursements (totaling $9,456) lacked proper approval, but were otherwise allowable costs. For TANF, 7 of 60 disbursements tested (totaling $1,760) lacked proper approval, but were otherwise allowable costs. Cause: There is a breakdown in enforcing workflow protocols within the accounting system and a lack of consistent supervisory review. Effect: Weak approval controls increase the risk of errors, unauthorized transactions, and non-compliance with audit and grantor requirements, potentially jeopardizing funding eligibility. Questioned Costs: None Recommendation: We recommend following documented controls to enforce proper approval for adjusting journal entries. We also recommend ensuring invoice processing workflows include mandatory approvals before payment. We further recommend conducting periodic internal reviews to verify compliance with approval policies. Responsible Officials Response: CMJTS migrated to a new accounting software in February of 2025. This software has systematic approval workflows built in to ensure approvals are done on journal entries before they are posted and invoices before they can be paid.

Documentation of Allocations for Certain Costs (Repeat of Finding 2024-003) Federal Agency: U.S. Department of Agriculture Pass-Through Agency: MN DEED Assistance Listing Number(s):17.258, 17.278 and 17.259 (WIOA Cluster) Federal Agency: U.S. Department of Health and Human Services Pass-Through Agencies: MN DEED and various counties Assistance Listing Number: 93.558 (TANF) Compliance Requirement: Allowable Cost Criteria: In accordance with the Uniform Guidance, charges to federal awards must be supported by records that accurately reflect the work performed. These records must be maintained within a system of internal controls that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: For the fiscal year ending June 30, 2025, the Organization started implementing a process for retaining and documenting cost allocation methodologies for expenses charged to federal awards. However, this process was not consistently applied to all disbursements tested during the audit period. For the WIOA Cluster 4 of the 60 disbursements tested (totaling $148, all related to communication expenses) could not be traced back to support showing what the allocation percentages by grant should have been or how the allocation percentages were determined. For the TANF 4 of the 60 disbursements tested (totaling $2, all related to communication expenses) could not be traced back to support showing what the allocation percentages by grant should have been or how the allocation percentages were determined. Cause: While the Organization has developed a process for documenting and retaining allocation support, the process was not consistently followed in all instances. Effect: Failure to consistently retain and apply allocation documentation increases the risk that costs may be inaccurately allocated among federal programs, resulting in potential noncompliance with Uniform Guidance requirements. This could lead to questioned costs, disallowed expenditures, and the potential need to return funds to the federal government. Questioned Costs: None Recommendation: The Organization should reinforce its existing allocation documentation procedures by ensuring they are consistently applied to all disbursements charged to federal programs. Management should enhance oversight and monitoring controls to verify that required documentation is completed and retained for every applicable transaction. Responsible Officials Response: CMJTS has since worked with DEED to update our cost allocation policy, and DEED approved our new policy. In this policy, the CMJTS fiscal team will work with CMJTS program managers to update allocations for the upcoming month. Changes to allocations will be documented and saved for record retention. CMJTS also migrated to a new accounting system in February 2025 which makes it easier to track allocations and ensure required documentation is completed and retained.

Lack of Proper Updating and Review of Agency Administration Allocations Federal Agency: U.S. Department of Agriculture Pass-Through Agency: MN DEED Assistance Listing Number(s):17.258, 17.278 and 17.259 (WIOA Cluster) Federal Agency: U.S. Department of Health and Human Services Pass-Through Agencies: MN DEED and various counties Assistance Listing Number: 93.558 (TANF) Compliance Requirement: Allowable Costs Criteria: Federal regulations require organizations to maintain records that clearly identify the source and use of funds for federally funded activities. This includes documentation supporting the allocation of costs to ensure they are reasonable, allowable, and allocable. Additionally, organizations must implement internal controls, including review procedures, to ensure the accuracy and compliance of financial allocations. Condition: For the fiscal year ended June 30, 2025, the Organization updated their agency administration allocation monthly. On February 5, 2025 an update should have been entered into the system, however, it was missed in error and the prior agency administration allocation was applied through June 2025. For the WIOA Cluster 6 of the 60 disbursements tested (totaling $234) were allocated using the January 2025 agency administration allocation without evidence that the agency allocation was updated or reviewed during the remaining of the fiscal year. For TANF 6 of the 60 disbursements tested (totaling $245) were allocated using the January 2025 agency administration allocation without evidence that the agency allocation was updated or reviewed during the remaining of the fiscal year. Cause: The issue was caused by a breakdown in internal controls over the timely updating and review of agency administrative allocations, resulting in the continued use of outdated allocation rates after January 2025. Effect: The use of outdated allocation rates may have resulted in costs being improperly allocated to federal programs, potentially leading to noncompliance with allowable cost requirements. Questioned Costs: None Recommendation: The Organization should ensure agency administration allocation schedules are updated and reviewed monthly to reflect current operations. Management should document the review and approval of allocation updates were properly made in the system. Responsible Officials Response: When migrating to the new accounting system, CMJTS did not originally have a process to ensure allocations were updated appropriately. We have since implemented a review process to ensure that all allocations are updated accurately and timely.

Submission of the Audit Reporting Package and Data Collection Form (Repeat of Finding 2024-007) Federal Agency: Various Assistance Listing Number: Multiple Compliance Requirement: Reporting Criteria: Per 2 CFR §200.510(b), the auditee must prepare a Schedule of Expenditures Federal Awards (SEFA) for the period covered by the auditee’s financial statements. Per §200.512(a), the SEFA must be submitted to the Federal Audit Clearinghouse (FAC) within the required deadline. Condition: The audit reporting package and data collection form for the year ended June 30, 2025, was not submitted to the FAC within the timeframe as required by the Uniform Guidance. Cause: The Organization did not timely submit the audit reporting package and data collection form due to delays in completing the FY25 audit. The delayed completion of the FY24 audit caused a cascading impact on the timing of the FY25 audit. Effect: To qualify as a low-risk auditee, 2 CFR section 200.520 requires the audit reporting package and data collection form to be submitted to the FAC by the due date for each of the previous two years. Late filing will result in noncompliance with timely submission of financial information to the grantor agencies. Recommendation: We recommend the Organization develop and monitor a formal audit timeline that accounts for the audit reporting package and data collection form submission deadlines to help ensure future filings are submitted in accordance with federal requirements. Questioned Costs: None Responsible Official's Response: CMJTS acknowledges the delay and has been making improvements to ensure that the Audit Reporting package and Data Collection Form are submitted timely and accurately. Accounting staff have been given additional training and internal procedures have been updated. Continued ongoing training and procedure updates will be done to ensure compliance.