Criteria: Under 2 CFR 200.414(f), if an entity does not have a negotiated indirect cost rate, the entity may elect to charge a de minimis rate of up to 15% of modified total direct costs (MTDC). Condition: For the year ended December 31, 2025, management calculated indirect costs charged to the grant using the de minimis indirect cost rate by applying 15% to the overall grant total, rather than applying 15% to modified total direct costs (MTDC). As a result, questioned costs were identified for indirect costs of approximately $24,554 for the year ended December 31, 2025. Cause: The condition appears to have resulted from an insufficient review control over the calculation of indirect costs charged to the federal award using the de minimis indirect cost rate and a misunderstanding of the base to use when calculating the indirect amount for each draw request. Effect: The use of an incorrect base for application of the de minimis indirect cost rate resulted in indirect costs charged to the program in excess of those allowable under the de minimis calculation, resulting in questioned costs of approximately $24,554 for the year ended December 31, 2025. If not corrected, the deficiency could result in continued overstatement of indirect costs charged to the award and additional questioned costs in future periods. Questioned Costs: $24,554 Perspective: Questioned costs were determined by calculating MTDC for the year times 15% and comparing that allowable amount to actual indirect costs billed for the year; the difference represents the questioned costs of approximately $24,554. Recommendation: We recommend that management strengthen internal controls over the calculation of indirect costs charged to federal awards using the de minimis indirect cost rate by establishing and documenting procedures to determine MTDC in accordance with applicable award terms and Uniform Guidance requirements, implementing a standardized worksheet that calculates allowable indirect costs by applying the de minimis rate to MTDC, with clear identification of the MTDC base used, and providing training to personnel responsible for grant billing on indirect cost requirements, including the appropriate base for applying the de minimis rate and award-specific transition provisions
Criteria: Program income is gross income earned by a recipient/subrecipient that is directly generated by a supported activity or earned as a result of the federal award during the period of performance. Program income earned during the period of performance must be retained and used in accordance with federal awarding agency regulations or the terms and conditions of the award. Under the terms of the major program grant, program income is to be added to the federal award. Condition: Under the terms of the grant agreement, program income is required to be added to the award and used in accordance with the terms of the grant agreement. Management did not identify this requirement when setting up the grant; accordingly, no program income was added to the award in 2025. Program income for this program consists of rental income on single-family homes renovated with major program dollars, less incidental costs. Based on our review of the 2025 profit and loss (P&L) reports for the homes renovated with major program dollars, approximately $30,153 of program income should have been added to the award in 2025. Cause: The condition appears to have resulted from an insufficient review control over the identification and implementation of award terms related to program income at grant setup and during ongoing grant monitoring, including a lack of procedures to (1) identify program income provisions in the award terms and conditions and (2) ensure rental income (net of incidental costs) is calculated and applied in accordance with the required method (addition method) during the period of performance. Effect: Failure to identify and apply the program income requirement resulted in program income not being added to the award and used in accordance with the grant terms during 2025. This resulted in questioned costs of approximately $30,153 for the year ended December 31, 2025. If not corrected, the deficiency could result in continued noncompliance with program income requirements, additional questioned costs in future periods, and potential noncompliance with SEFA reporting implications when program income is required to be added to the award Questioned Costs: $30,153 Perspective: Questioned costs were determined by reviewing the 2025 P&L activity for the single-family homes renovated with major program dollars and calculating program income as rental income less incidental costs. The resulting amount of approximately $30,153 represents program income that should have been added to the award in 2025 under the grant terms. Recommendation: We recommend that management strengthen internal controls over compliance with program income requirements and establish and document procedures to identify program income provisions in the award terms and conditions at grant setup (including the required method – addition, deduction, or cost sharing/matching) and document the determination.
Criteria: The Uniform Guidance procurement standards are located in 2 CFR, Subpart D, Sections 200.317 through 200.327. All organizations are required to follow specific procurement standards when making major purchases with federal funds, including purchases of supplies, property, equipment, real property, and services. Procurement and Suspension and Debarment compliance requires that (1) recipients establish and follow written procurement procedures that conform to applicable federal statutes and procurement requirements identified in 2 CFR part 200 and (2) contracts and subawards under covered transactions not be made with parties listed on the General Services Administration's System for Award Management (SAM) Exclusions (debarred, suspended, otherwise excluded, or declared ineligible) Condition: Management has an established procurement policy. However, during our testing of a non-statistical sample of three procurements for the year ended December 31, 2025, we identified the following exceptions: • For one procurement tested, management did not document a formal cost/price analysis, and a competitive bid was not obtained. • For another procurement tested, the contract was a covered contract over $25,000; however, management did not document review of whether the contractor was suspended or debarred. Sikich performed a search of SAM (or the applicable exclusion listing) and noted the contractor was not listed as suspended or debarred; however, management did not retain documentation evidencing its verification procedures. Cause: The condition appears to have resulted from insufficient controls to ensure procurement files include required documentation supporting (1) the basis for vendor selection (including competitive procurement support and cost/price analysis, where applicable) and (2) verification that contractors on covered transactions are not suspended or debarred prior to contract execution. Effect: The lack of required procurement documentation increases the risk that procurements are not made in accordance with procurement requirements and the Organization’s procurement policy. In addition, lack of documented verification of suspension and debarment status increases the risk the Organization could enter into covered transactions with ineligible contractors, which could result in unallowable costs and noncompliance with federal requirements. Questioned Costs: None identified. Although management did not document its suspension and debarment review for the covered contract tested, Sikich’s search noted the contractor was not suspended or debarred. In addition, no specific dollar disallowance was identified from the procurement documentation exceptions based on procedures performed. Perspective: The finding was identified during testing of the Organization’s major program for the year ended December 31, 2025. We tested a non-statistical sample of three procurements and identified two exceptions Recommendation: We recommend that management strengthen internal controls over procurement and suspension/debarment compliance and implement a standardized procurement file checklist to document key requirements for each procurement, including the procurement method, evidence of competition (as applicable), and documented cost/price analysis, where required. We also recommend that management require retention of documentation evidencing verification that contractors are not suspended or debarred for covered transactions (for example, a dated SAM Exclusions search result or equivalent evidence) prior to contract execution.
Criteria: Under 2 CFR 200.303, non-federal entities must establish, document, and maintain effective internal control over federal awards to provide reasonable assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. In addition, the grant agreement requires semi-annual reports to be submitted no later than 30 days after the end of each reporting period. Condition: During our testing of semi-annual reporting requirements, we selected 2 of 2 reports due during the year ended December 31, 2025. Both semi-annual reports tested were submitted after the required due date. In addition, management did not maintain documentation evidencing that the reports were reviewed and approved by a secondary level prior to submission. We also noted that internal controls were not designed effectively to ensure semi-annual reports were prepared, reviewed, approved, and submitted within the required timeframe. Cause: The Organization did not have a sufficiently designed and documented control process to monitor reporting deadlines, assign responsibility for timely submission, and retain evidence of secondary-level review and approval before reports were submitted. Specifically, existing procedures did not include an effective mechanism, such as a reporting calendar, escalation process, or documented supervisory review requirement, to ensure timely filings. Effect: Failure to submit required reports by the deadline results in noncompliance with the terms and conditions of the grant agreement and may impair the federal agency’s ability to monitor program performance and compliance on a timely basis. Questioned Costs: No questioned costs were identified as a result of this finding because the matter relates to timeliness of reporting and internal control over report review rather than the allowability of expenditures. Perspective: The audit procedures covered 2 of 2 semi-annual reports required to be submitted during the year. Both reports tested were submitted late, representing 100% of the reports subject to testing for the period under audit. This testing was not based on a statistically valid sample because the entire population of reports due during the year was tested. Recommendation: We recommend that management strengthen internal controls over grant reporting to ensure compliance with reporting deadlines and review requirements including: development of a grant reporting calendar that identifies all required reports, reporting period end dates, due dates, preparer responsibilities, reviewer responsibilities, and submission requirements, retain documentation evidencing the preparer, reviewer, date of review, approval, and date of submission and establish a monitoring or escalation process to ensure reports are completed and submitted before the required deadline.