Type of Finding: (C) Finding that Does Not Rise to the Level of a Significant Deficiency (Other Matters) Involving Internal Control Over Financial Reporting Condition During our review of personnel documentation, we selected 8 employee personnel files for testing from a population of 8 employees for the year ended December 31, 2023. For 5 of 8 employees selected, management was unable to provide a completed Form I-9 (or evidence of compliant electronic completion/retention) upon request. Criteria Federal regulations require employers to complete and retain Form I-9 for each individual hired for employment in the United States and to make Forms I-9 available for inspection. Forms I-9 must generally be retained for three years after the date of hire or one year after employment is terminated, whichever is later. Effect Not properly completing and retaining Form I-9s may result in noncompliance with federal employment eligibility requirements and could expose the organization to potential fines, penalties, or sanctions. Additionally, inadequate personnel records weaken internal controls over human resources and payroll. Cause Staff responsible for onboarding were not trained on I-9 requirements, and management did not implement compensating review controls. Recommendation Management should implement a documented I-9 compliance process that requires Form I-9 completion within required timeframes for all new hires. Management should also review current personnel records to identify missing I-9s and remediate where permissible, retaining documentation of remediation actions. Views of Responsible Officials and Planned Corrective Action New Space will comply with federal employment eligibility requirements by ensuring a Form I-9 is completed for every employee within three business days of their start date. Employees must provide acceptable documentation as required, and completed forms will be securely maintained and retained for the required period. The Financial Analyst will periodically review personnel files to confirm compliance, and any missing or incomplete forms will be addressed promptly with documentation of corrective actions retained. Policy Owner: Financial Analyst; Implementation Date: January 31, 2024
Type of Finding: (B) Significant Deficiency in Internal Control Over Financial Reporting Condition During our audit, we noted that New Space has not established comprehensive, formalized written policies and procedures governing key financial and compliance areas. While certain processes appear to be performed in practice, they are not documented in a consistent or formal manner, nor do they explicitly incorporate requirements outlined in the Uniform Guidance. Criteria In accordance with the Uniform Guidance (2 CFR Part 200), non-federal entities are required to establish and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing awards in compliance with federal statutes, regulations, and the terms and conditions of the federal award. This includes the development and implementation of formal, written policies and procedures that incorporate applicable requirements of the Uniform Guidance. Effect Without formalized policies and procedures that incorporate Uniform Guidance requirements, there is an increased risk of inconsistent practices, noncompliance with federal regulations, and errors in financial reporting or grant administration. Additionally, the absence of documented controls may hinder continuity in operations and training of personnel. Cause Policies and procedures were not formally designed, approved, and maintained; responsibility for maintaining compliance documentation was not assigned and monitored. Recommendation We recommend that management develop, document, and implement comprehensive written policies and procedures over financial management and federal award compliance. These policies should be aligned with the requirements of the Uniform Guidance and address, at a minimum: • Allowable costs and cost principles • Procurement standards • Cash management • Subrecipient monitoring (if applicable) • Reporting and record retention • Internal controls over compliance • Management should also ensure these policies are communicated to relevant personnel and reviewed periodically for updates and compliance with current regulations. Views of Responsible Officials and Planned Corrective Action New Space will maintain written financial and grants management policies to support consistent operations and compliance with Uniform Guidance (2 CFR Part 200). These policies will cover key areas including allowable costs, procurement, cash management, subrecipient monitoring, reporting, record retention, and internal controls. The Financial Analyst will be responsible for maintaining and updating these policies, with oversight from the Executive Director, and policies will be reviewed at least annually and updated as needed. Policy Owner: Financial Analyst; Implementation Date: March 31, 2024
Type of Finding: (F) Significant Deficiency in Internal Control Over Compliance of Federal Awards (G) Instance of Non-compliance related to Federal Awards Federal Award Information Funding Agency: U.S. Department of Defense, passed through the Air Force Research Laboratory Title: New Space New Mexico Small Satellite Manufacturing and Innovation Hub (iHub) AL #: 12.599 Award #: FA9453-21-3-1001 Compliance Requirement: Reporting Award Period: 06/01/2021-05/31/2026 Questioned Costs: None Noted Condition For the year ended December 31, 2023, we reviewed required reporting for the award. Of 4 required quarterly Federal Financial Reports (FFR, SF-425), 1 was submitted after the required due date (reporting period: Q2]; due date: 30 days after end of quarter; submitted: 9/14/2023). Of 4 quarterly Technical Progress Reports tested, 1 was submitted late (periods: 1; due: 30 days after end of quarter; submitted: 6/1/2023). The 3 remaining Technical Progress Report had no evidence of submission. Required annual reports (Annual Performance Progress Report and SAM.gov annual financial assistance representations/certifications, were not submitted to AFRL as of 12/31/2023. Criteria The terms and conditions of Award No. FA9453-21-3-1001 require submission of specified financial and performance/technical reports by the 30th calendar day after the end of each reporting period, and require specified annual reports. Additionally, Uniform Guidance includes requirements addressing financial and performance reporting as applicable to the award. Effect Late or missing reporting reduces AFRL/DoD’s ability to timely monitor award performance and compliance and increases the risk of delayed identification of performance or financial issues requiring corrective action. Cause Reporting calendar control not established; responsibilities not assigned; supervisory review not performed; staff turnover; unclear interpretation of award terms. Recommendation All status reports should be prepared on time and reviewed before submission to AFRL. Management should implement a documented reporting control that (1) maps each required report to due dates, (2) assigns preparation/review/approval responsibilities (titles), (3) retains evidence of review and submission, and (4) performs periodic supervisory monitoring of on-time submission (e.g., quarterly checklist). Views of Responsible Officials and Planned Corrective Action New Space will ensure all required financial and programmatic reports are prepared and submitted on time in accordance with grant requirements. A centralized reporting calendar will track deadlines, and responsibilities for preparation, review, and submission will be clearly assigned. Program reports will be prepared by the VP Programs Manager, reviewed by the Executive Director, and documentation of submission will be retained. Financial reports will be prepared by the Financial Analyst, reviewed by the Executive Director, and documentation of submission will be retained. Periodic checks will be performed to ensure compliance, and any issues will be addressed promptly. Policy Owner: Financial Analyst; Implementation Date: March 31, 2024
Type of Finding: (E) Material Weakness in Internal Control Over Compliance of Federal Awards (H) Instance of Material Non-Compliance related to Federal Awards Federal Award Information Funding Agency: U.S. Department of Defense, passed through the Air Force Research Laboratory Title: New Space New Mexico Small Satellite Manufacturing and Innovation Hub (iHub) AL #: 12.599 Award #: FA9453-21-3-1001 Compliance Requirement: Procurement Award Period: 06/01/2021-05/31/2026 Questioned Costs: $419,036 Condition We tested 12 noncompetitive/sole-source procurement(s) from a population of 15 procurement transactions charged to the award during 2023, totaling $628,722. For 10 of 12 procurement files (totaling $419,036), the files did not include (a) documentation supporting the rationale for using a noncompetitive method and (b) documentation of approvals required by New Space policy and/or award terms. New Space provided a sole-source justification during inquiry; however, it was not retained in the procurement file at the time of our testing. Criteria Management is responsible for establishing and maintaining internal controls to ensure procurement activities are conducted in accordance with applicable requirements and that sufficient documentation is maintained to support procurement decisions, including the use of noncompetitive procurement methods. Recipients/subrecipients must maintain procurement records sufficient to detail the history of each procurement transaction, including the rationale for the procurement method, contractor selection/rejection, and the basis for the contract price. Noncompetitive procurement may be used only under specific circumstances (e.g., single source; emergency; written Federal/PTE approval when required; inadequate competition after solicitation). Recipients/subrecipients must establish, document, and maintain effective internal control over the Federal award. Effect Without adequate documentation supporting sole-source procurements, New Space cannot demonstrate that procurement decisions were appropriate or compliant. This increases the risk of noncompliance with procurement requirements, limits transparency, and may result in questioned costs or disallowed expenditures. Cause Procurement policy lacked a required checklist/control for documenting sole-source basis and retaining approvals; or control not operating due to training/turnover. Recommendation Management should implement a documented sole-source procurement control requiring: (1) pre-award written justification tying to an allowable noncompetitive circumstance, (2) documented price/cost basis, (3) documented required approvals, and (4) retention in the procurement file; assign ownership to the financial analyst and require periodic file quality reviews. Management should also review existing procurement files to identify and remediate missing documentation and provide training to staff responsible for procurement activities. Views of Responsible Officials and Planned Corrective Action New Space will follow federal procurement requirements in accordance with 2 CFR 200 to ensure all purchases are properly documented and supported. All purchases must be necessary, reasonable, and allowable. For sole-source procurements, a written justification, price or cost support, and required approvals must be completed prior to purchase and retained in the procurement file. The Financial Analyst will ensure documentation is complete before payment, and the Executive Director will perform periodic reviews. Existing files will be reviewed and updated as needed. Policy Owner: Financial Analyst; Implementation Date: January 31, 2024
Type of Finding: (F) Significant Deficiency in Internal Control Over Compliance of Federal Awards (G) Instance of Non-compliance related to Federal Awards Federal Award Information Funding Agency: U.S. Department of Defense, passed through the Air Force Research Laboratory Title: New Space New Mexico Small Satellite Manufacturing and Innovation Hub (iHub) AL #: 12.599 Award #: FA9453-21-3-1001 Compliance Requirement: Subrecipient Monitoring Award Period: 06/01/2021-05/31/2026 Questioned Costs: None Noted Condition We tested 2 grant subrecipients of New Space from a population of 2 subrecipients awarded during 2023, totaling $110,721. For 2 of 2 subrecipient files (totaling $110,721), the files did not include (a) documentation supporting submission of subaward contract to FSRF (now SAM.gov at time of testing) (b) documentation supporting submission of subrecipient monitoring and management plan to AFRL (c) documentation supporting submission of subrecipient agreement including scope of work to AFRL. Criteria The terms and conditions of Award No. FA9453-21-3-1001 require submission of specified subaward information by the end of the month following the month the award was made, and require specified subrecipient monitoring reports be submitted no later than 90 days after the award date. Additionally, Uniform Guidance includes requirements addressing subrecipient financial and performance reporting as applicable to the award. Effect Failure to report subawards may result in noncompliance with grant requirements, reduced transparency, and increased risk that subrecipients are not properly monitored. This could lead to questioned costs, potential repayment of funds, or jeopardize future funding. Cause Subaward setup and reporting responsibilities were not assigned and tracked via a standardized checklist; supervisory review and documentation retention controls were not in place. Recommendation New Space should implement formal policies and procedures to ensure all subawards are properly documented and reported to the grantor and related federal online system in accordance with grant requirements. This should include assigning responsibility, implementing tracking mechanisms, conducting periodic reviews for compliance, and maintaining documentation of submission of required information to all sources. Views of Responsible Officials and Planned Corrective Action New Space will implement procedures to ensure subrecipients are properly documented, reported, and monitored in accordance with grant requirements. Each subaward will include a formal agreement and defined scope of work, and required information will be submitted within established timelines. Documentation of submissions and monitoring activities will be maintained, and a tracking process will be used to ensure compliance. The Financial Analyst will manage subrecipient monitoring, with oversight from the Executive Director, and periodic reviews will be conducted. Policy Owner: Financial Analyst; Implementation Date: March 31, 2024