Audit 410317

Finding #2025-002 – Material Weakness and Other Noncompliance – Cash Management. Applicable federal program: National Endowment for the Arts, Promotion of the Arts Grants to Organizations and Individuals, Assistance Listing #45.024, Annual contract period: 10/01/22 – 09/30/27. Criteria: Under the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) §200.305, if advances are provided, management is required to establish policies to minimize the lapse of time between the receipt and the expenditure of funds. Condition and context: The federal contract with M-AAA is a 5-year grant with annual budget periods that end September 30 of each of the years in the contract thru 2027. M-AAA requested advances in the Spring of 2025 when there was uncertainty in the timing of future grant payments. At June 30, 2025, M‑AAA held approximately $578,000 in refundable advances, approximately $368,000 which was spent subsequent to year end for the period of July 1, 2025 to September 30, 2025. Cause and effect: Failure to follow existing cash management procedures resulted in federal funds being held in excess of amounts needed to cover existing expenditures in a reasonable time period. Recommendation: Re-emphasize internal procedures to ensure federal funds are not being held for an excess period of time. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.

Finding #2025-003 – Material Weakness and Material Noncompliance – Allowable Costs. Applicable federal program: National Endowment for the Arts, Promotion of the Arts Grants to Organizations and Individuals, Assistance Listing #45.024, Annual contract periods: 10/01/23 – 09/30/24; 10/01/24 – 09/30/25. Criteria: Under the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) indirect cost reimbursements are provided to a grantee in a grantor approved indirect cost rate or through a 10% de minimus rate applicable as a percentage of direct costs. Condition and context: M-AAA failed to submit its indirect cost rate application in 2024, which resulted in a lapse in an approved rate. At the direction of the program officer at the National Endowment for the Arts, M-AAA was directed to use the 10% de minimus rate; however, the billings were not adjusted for the change in indirect rates resulting in overbilling to the federal grants. Questioned costs: Approximately $75,000 was billed in excess of the amounts allowed for indirect costs for the period of July 1, 2024 to June 30, 2025. Cause and effect: Failure to timely file the indirect cost rate application resulted in reduced amounts being received for indirect costs and over billing of the grant. Recommendation: Re-emphasize internal procedures for review of allowable indirect costs based upon an approved indirect cost rate or election to use 10% de minimus rate. Views of responsible officials and planned corrective actions: Management agrees with the finding. See Corrective Action Plan.