Audit 406213

02 Cash Management - Significant Deficiency Federal agency: Department of State Assistance Listing Number: 19.015 Program: Cultural, Technical and Educational Centers Criteria: Per 2 CFR §200.305(b), recipients must minimize the time elapsing between the transfer of funds from the Federal agency and the disbursement of funds by the recipient regardless of whether the payment is made by electronic funds transfer or by other means. Per 2 CFR §200.305(b)(1), advance payments to the recipient must be limited to the minimum amounts needed and should be timed with the actual, immediate cash requirements of the recipient in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the recipient for direct program or project costs and the proportionate share of any allowable indirect costs. Condition: During our audit, we noted one (1) instance in which a draw of $5,570,800 was requested and executed, which represented the remaining balance of the grant award near fiscal year end. The drawdown was made in anticipation of a potential federal government shutdown. Management was aware that the drawdown would exceed the Center’s immediate cash requirements, however the Center was concerned that access to federal funds could be delayed or unavailable during the shutdown period, potentially impacting program operations and reimbursement of allowable costs. Cause: The Center drew down the remaining funds in anticipation of a potential government shutdown and to mitigate the risk of delayed or unavailable access to federal funding during the shutdown period. Additionally, the Center did not have a formal protocol in place for addressing situations in which regulatory requirements may conflict with operational risks from events such as a potential government shutdown.Effect: Federal funds were received in advance of the Center’s immediate cash needs, which is inconsistent with the timing requirements of 2 CFR §200.305(b). Although the funds were drawn based on guidance from the awarding agency and in anticipation of a potential government shutdown, the timing of the advance did not minimize the time between receipt and disbursement. $ -- Identification as a Repeat Finding, if applicable: Not applicable. Recommendation: The Center should ensure its cash management policies and procedures fully adhere to 2 CFR §200.305. Specifically, the Center should formalize protocol for addressing situations in which operational risks, such as a potential government shutdown, may conflict with Uniform Guidance requirements or other applicable federal regulations. In such circumstances, the Center should continue to comply with Uniform Guidance requirements unless formal regulatory exception from the awarding agency is obtained. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding and the recommendation. See Part IV Corrective Action Plan.

2025-03 Eligibility - Significant Deficiency Federal agency: Department of State Assistance Listing Number: 19.015 Program: Cultural, Technical and Educational Centers Criteria: Eligibility under the program requires that the ratio of scholarships and grants provided from funds made available under the appropriation should be approximately one participant from the United States to one participant from elsewhere in the Asia Pacific region. The Center is responsible for establishing and maintaining effective internal controls to ensure compliance with eligibility requirements, including adherence to participant ratio provisions outlined in the agreement. Condition: During our audit, we noted that the ratio of United States participants to international participants was 1.4:1. Cause: Due to uncertainty regarding the availability of federal funding during Spring 2025, the Center proceeded with student enrollment using non-federal funding sources for participants selected to begin in Fall 2025. When federal funds later became available near the end of fiscal year 2025, these students could not be converted to federally funded participants as they had already commenced their programs and in some cases, entered under visa types that restricted their eligibility for federal funding. Effect: The Center did not comply with the eligibility requirements specified in the program agreement, which may impact the Center’s ability to meet program objectives. $ -- Identification as a Repeat Finding, if applicable: Not applicableRecommendation: The Center should strengthen it procedures to ensure compliance with participant eligibility requirements outlined in the program agreement. The Center should implement a process to monitor the composition of participants on an ongoing basis to ensure that the ratio of United States to international participants remains in alignment with program requirements. Additionally, the Center should incorporate funding availability and program requirements into its participant selection and funding decisions to ensure that enrollment timing, funding source, and participant eligibility are appropriately aligned. The Center should also evaluate the impact of visa classifications and other eligibility constraints prior to enrollment to ensure participants can be supported with federal funds when required. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding and the recommendation. See Part IV Corrective Action Plan.

2025-04 Activities Allowed or Unallowed, Allowable Costs/Cost Principles - Significant Deficiency Federal agency: Department of State Assistance Listing Number: 19.015 Program: Cultural, Technical and Educational Centers Criteria: Per 2 CFR §200.430(g)(1)(i), charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed and be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our audit, we noted that benefit charges were not consistent with approved benefit rates. Of the forty (40) payroll samples selected for testing, there was one (1) instance in which the approved benefit rates per the employee records did not agree to the amounts allocated and charged to the federal program. Cause: During an update to benefit rates in the payroll system, the revised long-term disability rate was inadvertently entered as the life insurance rate, and the long-term disability rate was not updated. Effect: Payroll related benefit costs charged to the appropriation were not based on approved rates, resulting in an overcharge for life insurance benefits and an undercharge for long-term disability benefits. $ -- Identification as a Repeat Finding, if applicable: Not applicable. Recommendation: The Center should strengthen its controls over payroll and benefit rate updates to ensure that changes are accurately entered and applied within the payroll system. The Center should implement a review and verification process whereby all updates to benefit rates are independently reviewed and reconciled to approved rates prior to processing payroll. Additionally, the Center should perform periodic monitoring of payroll calculations and benefit allocations to confirm that amounts charged to federal programs are consistent with approved rates and supporting documentation. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding and the recommendation. See Part IV Corrective Action Plan.