Finding 2024-006 - Noncompliance with Federal Labor Standards Requirements (continued) Criteria or specific requirement: Section 3.5 of the Grant Agreement, Federal Labor Standards Compliance, requires the subrecipient to ensure compliance with all applicable labor standards for federally funded construction activities. Specifically, contracts exceeding $2,000 for construction, alteration, repair, painting, or decorating of a public building or public work financed in whole or in part with federal funds must include the labor standards provisions required by 29 CFR Part 5.5, including prevailing wage requirements. Condition: Management did not ensure that applicable construction contracts contained the required federal labor standards provisions, including prevailing wage requirements and the contract clauses prescribed by 29 CFR Part 5.5. No prevailing wage determinations were obtained or payroll records maintained, Cause of condition: Management did not establish adequate procedures to review federally funded construction contracts for compliance with federal labor standards requirements before execution. Potential effect of condition: Failure to include the required labor standards provisions may result in noncompliance with federal grant requirements, expose workers to improper wage practices, and increase the risk of questioned costs, repayment of grant funds, or other federal sanctions. Recommendation: We recommend Management implement procedures to identify all federally funded construction contracts subject to prevailing wage requirements and ensure that required labor standards provisions, including those contained in 29 CFR Part 5.5, are incorporated into all applicable contracts before work begins. Response of responsible SC UpLift official: SC UpLift Community Outreach, Inc. acknowledges the audit finding and understands the importance of ensuring compliance with all applicable federal labor standards and grant requirements. At the inception of the Richland County Home Repair Project for Seniors, SC UpLift participated in an orientation conducted by the consulting firm retained by Richland County to administer and oversee the ARPA-funded program. During that orientation, SC UpLift was provided guidance regarding program administration, reporting requirements, and the monthly Subrecipient Reports that were required throughout the grant period. Based on the information and technical assistance provided during program implementation, management believed that prevailing wage requirements were applicable primarily to larger federally funded construction projects and was not aware that prevailing wage monitoring requirements applied to this program. At no time during the grant period was prevailing wage documentation requested or identified as a compliance concern during the monthly reporting process. Section III - Federal Award Findings and Questioned Costs (continued) Finding 2024-006 - Noncompliance with Federal Labor Standards Requirements (continued) While this context explains management's understanding, SC UpLift recognizes that ultimate responsibility for complying with all grant requirements rests with the organization. We accept the finding and are committed to strengthening our compliance procedures. To address this finding, SC UpLift will implement the following corrective actions: • Develop written policies and procedures to identify federal labor standards and prevailing wage requirements before the execution of any federally funded construction or rehabilitation contracts. • Review all federal and pass-through award agreements at the beginning of each grant to identify all applicable compliance requirements. • Incorporate a grant compliance checklist that includes prevailing wage determinations, when applicable, before projects are initiated. • Consult with our third-party CPA and grant management professionals, as necessary, to ensure compliance with federal labor standards and other grant requirements. • Provide additional training to management and program staff regarding federal grant compliance requirements, including prevailing wage regulations. Management is committed to strengthening its internal controls and compliance monitoring processes to ensure all applicable federal requirements are identified and implemented for future federally funded projects. Target Completion Date: December 31, 2026. Auditor’s Response: Auditor concurs.
Finding 2024-001 - Internal Controls Over Accounting and Financial Reporting Name of Federal Agency: U. S. Department of Housing and Urban Development (HUD) Assistance Listing Number 14.921 21.027 14.218 Federal Award Number SCHMR0005-21 SLFRF0009 N/A Award Year: 2021, 2023, and 2024 Program Title Older Adult Home Modification Program Richland County Home Repair Project for Seniors CDBG - 7308 Pinedale Renovation Project Criteria or specific requirement: Under the Uniform Guidance (2 CFR Part 200), non-Federal entities that receive Federal awards must maintain an accounting and financial management system that provides adequate internal control, accountability, and reporting. Generally Accepted Accounting Principles (GAAP) require revenues and expenses to be recognized in the period in which they are earned or incurred. Assets, liabilities, and net assets should be accurately recorded and reported as of the applicable reporting date. Organizations should maintain effective controls to ensure proper period-end cutoff and accurate financial reporting. Condition: During our audit, we identified material accounting errors in accounts receivable, equity investments, property and equipment, accumulated depreciation, construction in progress, accounts payable, and the classification of net assets with donor restrictions, where account balances were not recorded, were recorded improperly, or improperly classified. With respect to revenues and expenses, we identified transactions that were recorded in accounting periods other than those in which the underlying economic events occurred. Specifically, some revenues and expenses that should have been reported in the 2023 accounting year were recorded in the 2024 accounting year, Another condition related to this finding is that accounting personnel do not close the books at year-end each year. This condition required SC Uplift's management to engage the services of a third-party Certified Public Accountant (CPA) to correct the underlying accounting records before year-end financial statements could be prepared. The accounting records required approximately 30 adjusting, reclassifying, or correcting journal entries to get the accounting records ready for financial reporting. Cause of condition: The primary cause of this condition appears to be a lack of skill, knowledge, experience, and training of accounting personnel with respect to GAAP, and governmental bookkeeping, accounting, and financial reporting requirements. A secondary cause of this condition may be a lack of supervisory oversight and review of accounting transactions by a knowledgeable individual. Potential effect of condition: The potential effect of this condition is the possible material misstatement of interim and/or year-end financial reporting. Management may make decisions using inaccurate financial information, which could negatively affect SC Uplift's ability to secure additional funding for its programs. Finding 2024-001 - Internal Controls Over Accounting and Financial Reporting (continued) Recommendation: We recommend Management strengthen daily accounting, and period-end closing and review procedures to ensure all transactions are recorded in the appropriate accounting period. Recommended actions include: 1. Implementing formal cutoff procedures for revenue, expense, asset, and liability transactions; 2. Strengthening supervisory review and approval of period-end journal entries and reconciliations; 3. Performing timely reconciliations of significant balance sheet accounts; 4. Providing training to accounting personnel regarding period recognition requirements and accounting cutoff principles; and 5. Establishing documented review controls to verify the completeness and accuracy of period-end financial reporting. Response of Responsible SC Uplift Official: Management of SC Uplift Community Outreach, Inc. acknowledges and understands the audit finding regarding financial reporting and year-end accounting procedures. We appreciate the auditor's recommendations and are committed to strengthening our accounting and financial reporting processes to ensure continued compliance with Generally Accepted Accounting Principles (GAAP), Uniform Guidance (2 CFR Part 200), and nonprofit financial reporting standards. As a small nonprofit organization with limited administrative resources, SC Uplift has consistently sought to maintain sound financial management practices by engaging qualified Certified Public Accountants (CPAs) to assist with our accounting and financial reporting. However, due to the financial constraints common among small nonprofit organizations, we have not always been able to retain those services on a continuous basis because of the associated costs. This was SC Uplift's first Single Audit, and we recognize that the increased reporting requirements associated with federal funding require additional expertise, stronger internal controls, and more formalized year-end closing procedures. We have already engaged a third-party CPA to assist with the preparation of the 2024 audited financial statements and will continue working closely with both our bookkeeper and CPA throughout the upcoming fiscal year to improve our financial reporting processes. Specifically, management will: • Develop and implement formal month-end and year-end closing procedures. • Perform timely reconciliations of all significant balance sheet accounts. • Strengthen supervisory review of journal entries, reconciliations, and financial reports. • Ensure revenues, expenses, assets, and liabilities are recorded in the proper accounting period. • Continue utilizing the expertise of our third-party CPA to review financial records, provide guidance on GAAP compliance, and assist with staff training and implementation of best practices. Management believes these corrective actions will significantly strengthen our internal controls over financial reporting and reduce the likelihood of similar findings in future audits. We are committed to continuous improvement and maintaining financial records that accurately reflect the organization's financial position while meeting all applicable federal and nonprofit reporting requirements. Section II - Financial Statement Findings (continued) Finding 2024-001 - Internal Controls Over Accounting and Financial Reporting (continued) Target Completion Date: December 31, 2026. Auditor's Response: Auditor concur
Finding 2024-002 - Preparation of Schedule of Expenditures of Federal Awards (SEFA) Name of Federal Agency: U. S. Department of Housing and Urban Development (HUD) Award Year: 2021 and 2024 Criteria or specific requirement: Management is required by various regulatory and funding agencies, as well as by due diligence responsibilities to the general-public, to provide a single audit, or if separately, annual audited financial statements, and a program-specific audit (the SEFA). In general, it is management's responsibility to prepare the SEFA, and present it to the auditor. Condition: SC UpLift's management does not internally prepare its own full-disclosure SEFA. Currently the auditor provides significant assistance when preparing the SEFA. Cause of condition: Similar to most small-to-medium sized organizations, SC UpLift lacks the personnel with the accounting expertise and training such as that possessed by a certified public accountant or a chief financial officer of a large organization who customarily and regularly prepares appropriate reporting statements. Potential effect of condition: SC UpLift is dependent upon its external auditor to assist in preparing the SEFA, including footnotes, as part of the audit process. Recommendation: We are obligated by recently adopted auditing standards to bring this condition to the attention of management and the Board. Those charged with governance are obligated to consider the validity of these comments in light of the circumstances surrounding this condition and respond as they consider necessary. Your response may very well entail acceptance and continuance of this condition as the best perceived alternative under the circumstances. Response of Responsible SC UpLift Official: We relied on our auditor to produce the SEFA. Our accounting department is small, and consists of one contracted individual, which makes it difficult. We will continue to evaluate our ability to produce our SEFA, with related footnotes when audits are required. Auditor’s Response: Auditor concurs.
Finding 2024-003 - Segregation of Duties Name of Federal Agency: U. S. Department of Housing and Urban Development (HUD) Award Year: 2021 and 2024 Criteria or specific requirement: Statements on Auditing Standards, Communicating Internal Control Related Matters Identified in an Audit, require the auditor to report on whether SC UpLift has appropriate segregation of duties relating to all aspects of its bookkeeping and accounting procedures. Good internal control requires a complete separation of duties with respect to handling and recording transactions No one person should have access to both physical assets and the related accounting records or to all phases of a transaction. Condition: There is an absence of an absolute segregation of duties in the accounting process due primarily to an accounting department that lacks the size and resources to function in an ideal manner that could assist in reducing the likelihood of a material misstatement. Cause of condition: Limited available staff, coupled with the size of SC UpLift, and prohibitive costs currently prevent an absolute segregation of duties. SC UpLift believes the cost far outweighs the perceived benefits. Potential effect of condition: The lack of an absolute segregation of duties weakens SC UpLift's internal control structure's ability to absolutely prevent and/or detect possible misstatements or compliance issues through second-party independent verification for safeguarding of assets, potential material misstatement, and safeguarding of assets within SC UpLift's financial statements. Recommendation: We understand that the added costs of providing an absolute segregation of duties will, in most cases, outweigh the projected benefits of the added controls, and therefore, may be considered unjustified. However, we are obligated by recently adopted auditing standards to bring this condition to the attention of management and the Board. Those charged with governance are obligated to consider the validity of these comments in light of the circumstances surrounding this condition and respond as they consider necessary. Their response may very well entail acceptance and continuance of this condition as the best perceived alternative under the circumstances. Section II - Financial Statement Findings (continued) Finding 2024-003 - Segregation of Duties (continued) Response of responsible SC UpLift Official: Absolute separation of duties is rarely, if ever, seen within small to medium-sized organizations simply because of the lack of a cost-benefit justification for the added segregation of duties. In the absence of absolute segregation of duties, we implore mitigating controls that reduce the likelihood of material misstatement. We believe that the added costs of providing an absolute segregation of duties will far outweigh the projected benefits of the added controls, and therefore, consider it as unjustifiable. Auditor’s Response: Auditor concurs.
Finding 2024-004 - Section 3 of the Housing Community Development Act (HCDA) Policy and Procedures guide (continued) Repeat Finding: No Recommendation: We recommend SC UpLift’s Management create a written Section 3 Policies and procedures guide when participating in the above referenced program assistance listing number. Response of responsible SC UpLift official: SC UpLift acknowledges the audit finding and understands that a formal written Section 3 Policy and Procedures Guide should have been established for the CDBG-funded project. Although SC UpLift did not maintain a standalone written Section 3 policy during the audit period, the organization did recognize the applicability of Section 3 requirements during the procurement process. Section 3 provisions were incorporated into the project bid documents and executed construction contract to ensure contractors were aware of the federal requirements. Based on the guidance provided during project implementation, management believed these measures adequately addressed the Section 3 requirements for this project. SC UpLift recognizes that HUD requires recipients and subrecipients to maintain a formal written Section 3 Policy and Procedures Guide regardless of whether separate reporting is requested by the pass-through entity. We accept the finding and are committed to strengthening our compliance procedures. Management will develop and adopt a comprehensive Section 3 Policy and Procedures Guide that establishes procedures for: • documenting Section 3 workers and Targeted Section 3 workers; • monitoring contractor compliance with Section 3 requirements; • maintaining required supporting documentation; • retaining labor hour reports and other required records; and • ensuring compliance with 24 CFR Part 75 for all applicable HUD-funded projects. In addition, SC UpLift will incorporate a federal compliance checklist into its grant administration process to ensure all required HUD policies are adopted prior to the commencement of future projects. Target Completion Date: September 30, 2026. Auditor’s Response: Auditor concurs.
Finding 2024-005 - Federal Audit Clearinghouse Reporting Name of Federal Agency: U. S. Department of Housing and Urban Development (HUD) Award Year: 2021 and 2024 Criteria or specific requirement: In accordance with the Uniform Guidance, the single audit reporting package and data collection form are to be submitted to the Federal Audit Clearinghouse within the earlier of 30 calendar days after these reports are received or nine months after the end of the audit period. Condition: The single audit reporting package and data collection form were not submitted to the Federal Audit Clearinghouse within the required time frame. Cause of condition: The auditor was not available to continue the audit engagement until October 2025 due to a personal family issue. As a result, the single audit reporting package and data collection form could not be submitted timely. Potential effect of condition: This condition results in a noncompliance finding for the period under audit. Recommendation: No recommendation, as this condition was outside of Management's control. Response of responsible SC UpLift official: N/A