Audit 411113

Finding 2025-001: Subrecipient Reporting Federal Agency: United States Department of State Federal Program: International Programs to Support Democracy, Human Rights and Labor Assistance Listing Number: 19.345 Award Identification Number and Year: All Criteria: As noted in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements who make first tier subawards of $30,000 or more are required to register in the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS) and report subaward data through FSRS. Condition: FSRS reporting for JDN's subawards under 19.345 was not completed during 2025. We noted that management attempted to complete the submission; however, there were technical issues which remained unresolved as of our audit fieldwork. Cause: JDN did not apply the latest compliance supplement issued by the Office of Management and Budget regarding subaward reporting requirements in FSRS. Effect or Potential Effect: JDN failed to provide the required reporting on subrecipients within FSRS in compliance with the Uniform Guidance. Questioned Costs: None noted. Context: JDN did not register subawards in excess of $30,000 with FSRS. Identification as a Repeat Finding, if Applicable: Repeat of Finding 2024-001 Recommendation: We recommend that JDN update its policies and procedures to ensure all first tier subawards in excess of $30,000 are accurately and timely registered in FSRS and JDN should ensure subawards are reported in FSRS within the required time-frame.

Finding 2025-002: Allowability of Costs and Allocation of Vendor Credits Federal Agency: United States Department of State Federal Program: International Programs to Support Democracy, Human Rights and LaborAssistance Listing Number: 19.345 Award Identification Number and Year: All Criteria: 2 CFR 200.303 requires entities to maintain effective internal controls over Federal awards. 2 CFR 200.403 and 200.405 require costs charged to Federal awards to be allowable, reasonable, and allocable based on benefits received. Condition: Management identified that a staffing agency improperly charged VAT on salaries from mid-2024 through fall 2025. In 2026, a credit of approximately $201,000 was issued and applied to 2026 salary costs. Management performed an analysis and determined that the estimated impact to Federal awards was approximately $40,000 of improperly charged VAT. Management was unable to allocate the credits received back to originally affected awards due to the timing of payments made and credits received. Cause: The Organization did not have a sufficiently designed or operating review process to identify that VAT was being improperly charged on employee salary costs before those costs were recorded and charged to awards. In addition, the Organization did not maintain sufficient award-level tracking to determine the specific awards affected by the VAT overcharges and to allocate the related credit back to the original awards or cost objectives. Effect or Potential Effect: The Organization was able to determine the estimated VAT overcharges that were charged to Federal awards. Federal awards were charged costs that were not allowable or not properly allocable. In addition, because the related credit was applied against 2026 salary costs rather than allocated back to the awards or cost objectives that originally incurred the overcharges, the financial records may not reflect the proper allocation of costs and credits among Federal and non-Federal awards. Questioned Costs: Management identified an aggregate credit of approximately $200,000 of which approximately $40,000 is attributable to Federal awards. Context: The issue relates to VAT charges improperly applied by a staffing agency to employee salary costs from mid-2024 through fall 2025. The related credit was issued in 2026 and applied against 2026 salary costs. Management was unable to allocate the overcharged VAT and related credit back to the original affected awards. Identification as a Repeat Finding, if Applicable: Not a repeat finding. Recommendation: We recommend that management strengthen controls over the review of payroll and staffing agency invoices to ensure that taxes, fees, and other charges included in salary-related costs are allowable and properly allocable before costs are charged to Federal awards. We also recommend that management develop and document a process to:  Identify and review vendor credits, refunds, and adjustments related to prior-period costs;  Determine the original awards, projects, or cost objectives affected by such credits or refunds;  Allocate credits back to the awards or cost objectives that originally incurred the related costs, when practicable;  Evaluate the impact on closed Federal awards and determine whether communication with the Federal agency or pass-through entity is necessary; and  Maintain sufficient documentation supporting management’s evaluation and allocation methodology.