Audit 403707

Finding 2025 – 001 Subject: Apprenticeship USA Grants – internal controls Federal Agency: U.S. Department of Labor Federal Programs: Apprenticeship USA Grants Assistance Listing Number (ALN): 17.285 Direct Agency: Department of Labor Compliance Requirements: Allowable Costs/Cost Principles Audit finding: Significant Deficiency Condition and Context An effective internal control system was not designed or implemented at the Organization related to payroll and incentives/subscriptions to ensure compliance with requirements related to the grant agreements and Allowable Costs/Cost Principles compliance requirements. Payroll The Organization did not design an effective system of internal controls to ensure that actual payroll costs were charged to the grant based on each employee’s time and effort for the time period January through June 2025. The Organization charged amounts that did not reflect the actual amounts paid which created costs charged to the grant over and above those allowable. The total payroll costs found to be unallowable totaled $23,228 and were computed as the difference between the amount charged to the grant and the time and effort allocations of actual payroll costs. Incentives/Subscriptions The Organization did not design an effective system of internal controls to ensure that incentive/subscription costs for the individuals shops were charged to the grant based on amounts agreed upon with the grantor. The total incentive/subscription costs found to be unallowable totaled $7,688 and were computed as the difference between the amount charged to the grant and a capped amount of $1,500 per shop for subscriptions and $8,500 per shop for incentives. Criteria ‘The auditee shall: . . . (b) Maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its Federal programs. . . ." 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items… (g) Be adequately documented… 2 CFR 200.430(i) states in part: “Standards for documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) 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 non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using difference allocation bases; or an unallowable activity and a direct or indirect cost activity…” Cause The Organization’s management had not developed or implemented a system of internal controls to ensure compliance with the grant agreement, internal policy and the compliance requirements listed above. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs that could result in the repayment of federal funds. Questioned Costs Known questioned costs of $30,916 were identified as detailed in Condition and Context. Recommendation We recommend that the Inter-Industry Organization’s management establish controls to ensure compliance with the grant agreement and the Allowable Costs/Cost Principles compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.