Audit 407643

Condition: During our testing of allowable activities/cost and period of performance it was noted the Organization did not perform or document required approval/review over expenditures. Criteria: Per § 200.303 of the Code of Federal Regulations, recipients must establish, document, and maintain internal controls over Federal awards that provides reasonable assurance that the recipient is managing the Federal Award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Cause: The Organization lacked formal policies and procedures to ensure documentation and performance of approval/review over expenditures and applications. The responsibility for oversight along with monitoring activities was not documented. Effect: Failure to establish, document, and maintain internal controls increases the risk that federal funds may not be used in accordance with applicable laws and regulations, potentially resulting in noncompliance with program requirements. Context: This condition was identified in all sampled populations of allowable activities/cost and period of performance. This finding is a repeat finding of the immediate prior audit. Reference number includes 2023-004. Recommendation: We recommend the Organization develop and implement formal documented review/approval and monitoring procedures which include the written or electronic signature of authorized individuals on invoices. Management has noted that they have implemented procedures beginning in 2025 to address this finding. Views of Responsible Officials: Management agrees with the finding.

Condition: During our testing of direct expenditures and payroll charges to the major program, we identified that the Organization charged direct expenditures and payroll costs to the federal award based on budgeted estimates rather than actual costs and time spent on the federal program. Criteria: Per §200.400(d) and §200.430(g)(1) of the Code of Federal Regulations, charges to Federal awards for cost and salaries and wages must be based on records that accurately reflect the work performed. These records must support the expenditures and distribution of employees’ salary among specific activities or cost objectives and must not exceed the actual time worked. Cause: The Organization lacked adequate internal controls to reconcile budgeted direct cost and payroll estimates to actual direct expenditures and payroll cost incurred. Employees did not prepare time and effort documentation reflecting actual hours worked on the federal program activities, and there was no after-the-fact review or adjustment process in place to ensure accuracy. Effect: Federal expenditures on the Schedule of Federal Awards (SEFA) could be overstated resulting in noncompliance with federal cost principles and unallowable cost. Context: During our testing of payroll transactions charged to the federal program, we selected a sample of five out of 27 payroll periods to test. In all five payroll periods tested, the amount charged to the federal program were based on budgeted amounts rather than actual payroll cost incurred for time spent on program activities. During our testing of reporting, we selected a sample of two out of four quarterly financial reports to test. In one of the reports tested, the amount charged to the federal program within certain cost categories exceeded amounts incurred during the period. Total known questioned costs amounted to $7,113. This finding is a repeat finding of the immediate prior audit. Reference number includes 2023-005. Recommendation: We recommend the Organization implement written policies and procedures to ensure that direct expenditures and payroll charges to federal awards are based on actual costs incurred. Employees should prepare time and effort documentation reflecting actual hours worked on the federal program activities for each payroll period. There should be a process for reconciling estimated charges to actual invoices and payroll records and making timely adjustments. Management has noted that they have implemented procedures beginning in 2025 to address this finding. Views of Responsible Officials: Management agrees with the finding.

Condition: During our testing of participant eligibility, we found that some participants did not met eligibility criteria due to not meeting the definition of “Urban Indian” as defined within the federal award. Criteria: In accordance with eligibility requirements outlined in the federal award, the Organization is responsible for ensuring that only eligible beneficiaries receive program services provided under the federal award. Cause: The Organization performed eligibility determinations, but the Organization did not have sufficient review controls in place to prevent participants not meeting the eligibility criteria from receiving program services provided with the federal award funds. Effect: Federal funds were expended on behalf of individuals who did not qualify to receive program services. Context: During our testing of compliance with eligibility requirements, we selected a sample of 37 out of 122 participants to test. Seven out of the 37 participants tested did not meet the eligibility criteria. Recommendation: We recommend the Organization review and update its procedures to ensure that federal award funds are used only for eligible participants. This could include allocating program costs among eligible and ineligible individuals to determine what portion of the program costs should be applied to the federal award. Views of Responsible Officials: Management agrees with the finding.

Condition: During our testing of cash management, we noted that the Organization received federal funds on an advance basis and maintained those funds in an interest-bearing account. During the fiscal year, the Organization earned interest in excess of $500 on these federal funds, but the Organization did not remit the interest earned in excess of $500. Criteria: In accordance with 2 CFR 200.305(b)(12), for entities that receive advance payments of federal funds, interest in excess of $500 per year earned on Federal funds must be returned annually to the Department of Health and Human Services Payment Management System (PMS). Cause: The Organization does not have formal written procedures in place to monitor interest earned on federal advances or to ensure compliance with cash management requirements under Uniform Guidance. Effect: Excess interest earned on federal advance payments was not returned in a timely manner. This could result in repayment obligations. Context: Interest earned on federal advance funds during the fiscal year was $109,662, resulting in excess interest of $109,162 that should have been remitted. No remittance was made during the audit period. Recommendation: We recommend the Organization review and update its policies and procedures addressing compliance with cash management requirements. The Organization should establish procedures to remit interest earned in excess of $500 on federal advance funds annually. Views of Responsible Officials:Management agrees with the finding.