Finding 2025-001 Lack of Internal Control over Activities Allowed or Unallowed and Allowable Cost Principles – Cash Disbursements – Approvals Significant Deficiency Criteria: The Organization’s internal control policies and procedures should provide for appropriate authorization and approval of significant financial transactions. Approvals should be documented and retained to provide evidence that transactions have been reviewed and authorized by appropriate personnel. Condition and Context: During our review of the Organization’s internal control procedures, we noted that the Organization does not have a formal, documented approval system for certain financial transactions. Due to the small size of the Organization, approvals are generally communicated verbally. As a result, there is limited documentation available to demonstrate that transactions were reviewed and approved by appropriate personnel prior to being processed. Cause: The Organization has relied primarily on informal and verbal approval procedures due to its limited number of personnel and the small size of its operations. Effect: The lack of documented approvals increases the risk that unauthorized or inappropriate transactions could be processed without timely detection. Additionally, the absence of supporting documentation makes it difficult to verify that transactions were properly reviewed and approved and may reduce management’s ability to demonstrate that appropriate internal controls were consistently performed. Questioned Costs: None noted. Repeat Finding: This is not a repeat finding. Recommendation: Management should establish and implement a documented approval process for significant financial transactions. The approval process should identify the individuals authorized to approve transactions and should require evidence of approval, such as signatures, initials, email confirmations, or electronic approvals. The procedures should be designed to be practical for the size of the Organization while providing sufficient documentation that transactions have been appropriately reviewed and authorized. Management Response: Management concurs with this finding. See Corrective Action Plan.
Finding 2025-002 Noncompliance over Cash Management Material Weakness/ Material Noncompliance Criteria: Federal regulations require recipients and subrecipients to maintain appropriate cash management procedures over Federal awards. Under 2 CFR § 200.305(b), advance payments of Federal funds must be limited to the minimum amounts needed and timed to coincide with the organization’s actual, immediate cash requirements. The timing and amount of Federal cash draws should be as close as administratively feasible to the organization’s actual disbursements for allowable program costs. Condition and Context: During our testing of the Organization’s compliance with cash management requirements, we noted that in January 2025, the Board approved the withdrawal of substantially all remaining funds available under the Federal award. Management indicated that the decision was made due to concerns that Federal funding for the grant could be terminated or otherwise become unavailable. At the time of the drawdown, the Organization had incurred approximately $63,000 of program expenditures. As a result, approximately $3.7 million of Federal funds were drawn in excess of expenditures incurred and the Organization’s immediate cash needs. Accordingly, the funds were drawn substantially in advance of the related program expenditures. We considered this matter to represent material noncompliance with the cash management requirements applicable to the Federal award. Cause: The Organization elected to draw substantially all available grant funds due to concerns regarding the potential premature termination or loss of Federal funding. Additionally, the Organization did not have adequate controls in place to ensure that Federal cash draws were limited to amounts necessary to meet immediate program cash requirements. Effect: The Organization maintained a significant amount of Federal funds in excess of its immediate cash needs, resulting in material noncompliance with Federal cash management requirements and the terms and conditions of the Federal award. The excess draw also exposes the Organization to potential repayment requirements and obligations related to interest earned on Federal funds. Under 2 CFR § 200.305, Federal advance payments generally must be maintained in interest-bearing accounts when applicable, and interest earned in excess of $500 per year must be remitted to the Federal government. Questioned Costs: None noted. Repeat Finding: This is not a repeat finding. Recommendation: Management should strengthen its internal controls over Federal cash management and establish written procedures requiring Federal cash draws to be based on actual, immediate cash needs. Prior to each draw, management should document the expenditures incurred and anticipated near-term disbursements supporting the amount requested. Cash draw requests should be reviewed and approved by appropriate personnel and periodically reconciled to actual program expenditures. Management should also review the excess Federal funds on hand and coordinate with the awarding agency or pass-through entity, as appropriate, to determine whether amounts should be returned and whether any interest earned is required to be remitted. Although management indicated that verbal approval was received, written documentation should be obtained and retained to support the organization’s treatment and use of the interest earned. Management Response: Management concurs with this finding. See Corrective Action Plan.
Finding 2025-003 Noncompliance over Reporting Significant deficiency/ Noncompliance Criteria: The Organization should establish procedures to ensure that all required financial and compliance reports are prepared, reviewed, and submitted by the applicable due dates. Timely reporting helps ensure compliance with applicable grant, contractual, and regulatory requirements. Condition and Context: During our review of the Organization’s reporting requirements, we noted that the October semiannual report was submitted one day after the required due date. Cause: The Organization did not have sufficient procedures in place to ensure that the semiannual report was completed, reviewed, and submitted by the required deadline. Effect: Failure to submit required reports by established deadlines may result in noncompliance with applicable reporting requirements and could increase the risk of administrative actions or other consequences associated with untimely reporting. Questioned Costs: None noted. Repeat Finding: This is not a repeat finding. Recommendation: Management should establish procedures to monitor reporting deadlines and ensure that required reports are prepared, reviewed, and submitted timely. Such procedures may include maintaining a reporting calendar, assigning responsibility for each required report, and establishing internal due dates sufficiently in advance of the required submission date. Management Response: Management concurs with this finding. See Corrective Action Plan.
Finding 2025-004 Noncompliance Over Activities Allowed or Unallowed/Allowable Costs/Cost Principles Significant deficiency/ Noncompliance Criteria: The Organization should establish and maintain procedures to ensure that amounts charged to federal awards are supported by adequate source documentation and are reviewed for compliance with applicable grant, contractual, and regulatory requirements. Under 2 CFR § 200.1, a questioned cost includes an amount expended from a federal award that, at the time of the audit, lacked adequate documentation to support compliance. Condition and Context: During our testing of the Organization’s compliance requirements, we selected a sample of 25 transactions. We noted that the Organization was unable to provide an invoice or other adequate supporting documentation for one sampled expenditure. The unsupported transaction item totaled $9. Questioned costs do not exceed the 2 CFR § 200.516 greater-than-$25,000 reporting threshold. This finding is being reported due to the identified significant deficiency in internal control over compliance related to maintaining and providing adequate support for amounts charged to the federal award. Cause: The Organization did not have sufficient procedures in place to ensure that adequate supporting documentation was retained for all transactions charged to the federal program. Effect: Failure to maintain adequate supporting documentation may result in costs being unsupported or disallowed and may increase the risk of noncompliance with applicable grant, contractual, and regulatory requirements. In addition, insufficient documentation reduces management’s ability to demonstrate that costs charged to federal awards are allowable, allocable, reasonable, and properly supported. Questioned Costs: The known questioned cost associated with this exception is $9. Based on extrapolation to the applicable population, likely questioned costs are estimated at $81. Repeat Finding: This is not a repeat finding. Recommendation: Management should establish or strengthen procedures to ensure that all expenditures charged to federal awards are supported by adequate documentation. Such procedures may include maintaining centralized electronic files for invoices and related approvals, assigning responsibility for documentation retention, performing periodic reviews of sampled expenditures, and requiring follow-up on missing documentation before costs are included in federal award reporting or reimbursement requests. Management Response: Management concurs with this finding. See Corrective Action Plan.
Finding 2025-005 Noncompliance over Procurement Significant deficiency/ Noncompliance Criteria: The Organization should establish and maintain written procurement procedures to ensure that purchases and contracts supported by federal awards are conducted in accordance with applicable federal procurement standards, including required full and open competition and required methods of procurement. The Uniform Guidance procurement standards are contained in 2 CFR Part 200, Subpart D, §§ 200.317–200.327 generally, including 2 CFR § 200.319 (Competition) and 2 CFR § 200.320 (Methods of procurement to be followed). Condition and Context: During our testing of the Organization’s procurement compliance requirements, we noted two contracts that should have been procured using competitive bidding; however, the Organization did not complete competitive bidding for these contracts. Cause: The Organization did not have sufficient procedures in place to ensure that procurement actions were consistently evaluated for required competitive procurement methods and that compliance with applicable procurement requirements was documented and reviewed prior to contract award. Effect: Failure to follow applicable competitive procurement requirements may result in noncompliance with federal procurement standards and may increase the risk that contracts are awarded without maximizing open and free competition. In addition, inadequate procurement documentation reduces management’s ability to demonstrate that procurement actions are conducted in accordance with applicable requirements. Questioned Costs: None noted. Repeat Finding: This is not a repeat finding. Recommendation: Management should establish or strengthen procurement policies and procedures to ensure that contracts subject to competitive procurement requirements are competitively bid and that procurement actions are appropriately documented. Such procedures may include developing standardized procurement checklists, requiring supervisory review of procurement method selection and documentation prior to contract award, and providing periodic training to staff responsible for procurement. Management Response: Management concurs with this finding. See Corrective Action Plan.