Audit 402412

U.S. Department of Commerce Pass-through Entity: South Carolina Department of Commerce Program Name: COVID19 Community Development Block Grant Federal Assistance Listing Number: 14.218 Significant Deficiency – Activities Allowed and Allowable Costs Finding 2023-002 Criteria: Invoices should be reviewed and approved prior to payment to ensure allowability in accordance with the grant agreement and accuracy and classification of expenses recorded. Condition: The Organization did not properly maintain records that invoices were reviewed and approved prior to payment. Cause: The Organization experienced significant turnover in the finance department during the year, and therefore, the Organization was unable to implement adequate internal controls over the activities allowed and allowable costs of the grant. Effect: Invoices could be paid that are not allowed by the grant, are for the incorrect amount, or expenses are not classified or recorded properly in the general ledger. Questioned Costs: No questioned costs reported. Context: There were 18 instances out of 40 samples tested where the invoice was not reviewed and approved prior to payment. However, reimbursement requests which included the invoices of grant related expenses submitted for reimbursement were reviewed and approved, indicating that there was a control over the allowability of the expenses for the grant. Auditor’s recommendation: All invoices should be reviewed and approved prior to payment and verifiable documentation of the review and approval should be maintained. Views of Responsible Officials: See Corrective Action Plan.

U.S. Department of Agriculture Pass-through Entity: South Carolina Department of Agriculture Program Name: Food Distribution Cluster Federal Assistance Listing Number: 10.568-CL Significant Deficiency and Non-Material Noncompliance – Special Tests Finding 2023-003 Criteria: Accurate and complete records must be maintained with respect to the receipt, distribution/use, and inventory of USDA foods; including end products processed from USDA foods in TEFAP. The Organization must perform an annual physical inventory of all storage facilities. Such inventory must be reconciled annually with the Organization’s inventory records and maintained on file by the Organization. Condition: While the Organization maintains clean and organized warehouses and performs annual physical inventory counts, these counts are not properly reconciled to the inventory records within the financial system and accurate and complete reporting cannot be obtained with respect to the receipt, distribution/use, and inventory of USDA foods. Cause: The Organization experienced significant turnover in the finance department during the year, and therefore, the Organization was unable to implement adequate internal controls over inventory process. Additionally, the system implementation was not successful, and there were several script errors and inventory reporting was inconsistent and inaccurate. Effect: Inventory balances were materially misstated prior to the audit adjusting entries. Questioned Costs: USDA food distributed was understated by $3,999 after all adjusting entries were made. Context: The annual inventory counts were not reconciled to the inventory records. Several adjustments were posted to the inventory accounts to correct incorrect quantities and prices. Auditor’s recommendation: Inventory counts should be properly reconciled to the inventory records, and inventory records should be maintained separately for USDA foods to properly report the required information in the consolidated financial statements and the SEFA. Views of Responsible Officials: See Corrective Action Plan.

U.S. Department of Agriculture Pass-through Entity: South Carolina Department of Agriculture Program Name: Food Distribution Cluster Federal Assistance Listing Number: 10.568-CL Material Weakness and Non-Material Noncompliance – Eligibility Finding 2023-004 Criteria: A recipient agency must be either a public agency or a private entity possessing tax-exempt status under the Internal Revenue Code and must enter into a written agreement with the state agency, or with another recipient agency where permitted, binding it to perform the duties of a recipient agency. These written agreements are referred to as “Partner Agency agreements”. Additionally, before any food is distributed to a partner agency, the Organization should review the agency’s eligibility by signing the “Food Distribution agreement”. Condition: The Organization did not have signed Partner Agency or Food Distribution agreements with partner agencies during the year ended June 30, 2023 for all partner agencies subjected to testing procedures. Cause: The Organization experienced significant turnover in the finance department during the year, and therefore, the Organization was unable to implement adequate internal controls over the partner agency and food distribution agreement tracking and retention process. Additionally, there was a flood that occurred during the year ended June 30, 2023, whereby documentation was lost and had not been backed up. Effect: The Organization could provide federal food commodities to agencies that are not eligible. Questioned Costs: No questioned costs reported. Context: There were 26 instances out of 42 samples tested where a signed Partner Agency agreement was obtained; however, it was not signed within the year ended June 30, 2023. Additionally, there was one instance out of 42 samples selected where a signed Partner Agency agreement was not obtained. There were 10 instances of 42 samples tested where a Food Distribution agreement was obtained; however, it was not signed within the year ended June 30, 2023. Additionally, there were two instances out of 42 samples tested where a signed Food Distribution agreement was not obtained. Identification as a Repeat Finding: 2022-003 Auditor’s recommendation: All required documentation should be tracked, maintained and properly backed up to prevent loss due to staff turnover or unexpected calamities. Views of Responsible Officials: See Corrective Action Plan.

U.S. Department of Agriculture Pass-through Entity: South Carolina Department of Agriculture Program Name: Food Distribution Cluster Federal Assistance Listing Number: 10.568-CL Material Weakness – Activities Allowed and Allowable Costs Finding 2023-005 Criteria: The Organization should maintain proper documentation of the review and approval of reimbursement requests for administrative costs. Condition: The Organization did not have documentation that the reimbursement requests were being reviewed and approved prior to submission. Cause: The Organization experienced significant turnover in the finance department during the year, and therefore, the Organization was unable to implement adequate internal controls over reimbursement request submission process. Effect: The Organization could calculate administrative costs incorrectly or submit costs that are not allowable under the grant for reimbursement. Questioned Costs: No questioned costs reported. Context: There were 4 instances out of 4 samples tested where the reimbursement requests related to the Food Distribution Cluster were not reviewed and approved prior to submission. Auditor’s recommendation: All documentation of review and approval of reimbursement requests should be formally documented and maintained. Views of Responsible Officials: See Corrective Action Plan.