Criteria The Uniform Guidance requires that recipients of federal awards maintain accounting records in sufficient detail to accurately track all federal funds received and expended by programs. Organizations must ensure that expenditures are properly recorded, supported, and allocable to specific federal awards. In addition, management is responsible for the preparation of the SEFA, which must accurately reflect expenditures based on qualifying costs actually incurred and must be supported by the underlying accounting records. Further, because expenditures were not tracked at the grant level within the accounting system, UHU was unable to adequately monitor whether costs had already been allocated to a federal award. During our testing, we noted instances in which the same expenditures were used to support charges to multiple funding sources, resulting in duplicate charging ("double dipping") and overcharges to certain federal awards. CONDITION AND CONTEXT Although UHU has a policy requiring expenses to be tracked by project, program, and cost center, this policy was not consistently followed. UHU did not track federal award expenditures within the general ledger using separate cost centers for each grant. Instead, expenses were initially recorded without appropriate grant-level coding and were subsequently assigned to federal programs based on billings and other documentation. Additionally, for two projects where federal funds totaling $1,082,381 were received in advance, UHU was unable to provide adequate supporting documentation, such as billings or other records, to substantiate the expenditures charged to those programs. As a result, there was insufficient evidence to demonstrate that the funds were expended in accordance with grant requirements or that qualifying costs were incurred. These deficiencies also affected the preparation of the SEFA, because expenditures were not tracked at the grant level within the accounting system and were subsequently assigned using secondary documentation. As such the amounts reported on the SEFA were not directly supported by the underlying accounting records. Furthermore, for the projects with advance funding, the lack of supporting documentation limited management’s ability to substantiate that the reported expenditures represented qualifying costs actually incurred during the period. Accordingly, the SEFA was prepared using information that could not be fully reconciled to, or supported by, the general ledger, reducing the reliability and supportability of the reported federal expenditures. Cause - Management did not enforce existing policies requiring expenditures to be tracked by project, program, and cost center within the accounting system at the time transactions were recorded. As a result, expenses were not consistently captured at the grant level in the general ledger, and management relied on retrospective determinations and allocations based on billing records, which were incomplete or unavailable in certain instances. Additionally, UHU did not maintain sufficient supporting documentation to substantiate expenditures, particularly for projects where funds were received in advance. The lack of grant-specific tracking and reconciliation procedures also prevented management from identifying expenditures that had previously been charged to other funding sources, increasing the risk that the same costs would be allocated to multiple awards. EFFECT OR POTENTIAL EFFECT- As a result, expenses were charged to federal programs without adequate supporting documentation. This raises the risk that unallowable costs were charged to the grants, and the accuracy of the SEFA could not be verified. UHU is not in compliance with the requirements of the Uniform Guidance, and this deficiency contributed to the basis for our qualified opinion under the Uniform Guidance. Additionally, because expenditures were not tracked and monitored by specific federal award within the accounting records, UHU charged certain costs to federal awards more than once. As a result, federal programs were overcharged for expenditures that had previously been allocated to other funding sources, resulting in questioned costs and noncompliance with the allowability and allocability requirements of Uniform Guidance. The lack of adequate expenditure tracking prevented management from detecting and correcting these duplicate charges in a timely manner. Furthermore, because the SEFA is derived directly from the underlying accounting records, the lack of contemporaneous tracking of expenditures by grant and insufficient supporting documentation increases the risk that the SEFA is incomplete, inaccurate, or not supported by qualifying costs actually incurred. This impacts the reliability of the SEFA as supplementary information to the financial statements. Recommendation - Management should enforce existing policies requiring expenditures to be recorded by project, program, and cost center within the general ledger at the time transactions are incurred and reconciled periodically to supporting grant records and funding source reports. Controls should be established to ensure that all federal award expenditures are properly coded to the appropriate grant, charged to only one funding source, and supported by sufficient documentation, including invoices, payroll records, contracts, or other relevant evidence demonstrating that costs are allowable, allocable, and adequately supported in accordance with the Uniform Guidance. Management should also implement procedures to ensure that funds received in advance are appropriately monitored and supported by documentation demonstrating that qualifying expenditures have been incurred prior to being reported as federal expenditures. In addition, management should eliminate reliance on retrospective allocations and instead maintain accurate accounting records that directly support financial reporting and federal reporting. Management should implement reconciliation and review controls to ensure expenditures are not duplicated across multiple grants, federal awards, or other funding sources. Such controls should include periodic reconciliations of grant expenditures to the general ledger, supporting documentation, funding source records, and the SEFA, as well as a review of allocation methodologies and cost transfers. Reconciliations should be designed to identify and resolve duplicate charges, unsupported expenditures, and allocation errors on a timely basis and should be reviewed and approved by management. Documentation supporting all cost transfers, allocation adjustments, and reconciliations should be maintained. Periodic reconciliations between the general ledger, supporting documentation, and the SEFA should be performed and reviewed by UHU to ensure completeness, accuracy, and compliance with federal reporting requirements. These reconciliations should be reviewed by management. Strengthening these controls will improve compliance with the Uniform Guidance, enhance the reliability of reporting, and reduce the risk of questioned costs and audit findings.
CRITERIA Recipients of federal grants are required by federal regulations to maintain documentation demonstrating that cash receipts correspond to drawdowns based on actual, allowable costs incurred. Drawdowns for Federal awards should be properly supported with relevant forms and reports to substantiate the costs incurred and evidence management review and approval. CONDITION AND CONTEXT For certain grants within the Research and Development (R&D) cluster, funds were received in advance of expenditures. Of the total $1,700,112 in expenditures for the R&D cluster, $1,082,381 was received as advance drawdowns. For these advance drawdowns, UHU was unable to provide documentation supporting the estimates used to determine the amounts requested or evidence that the cash receipts were supported by eligible grant expenditures incurred, as required by the terms of the awards. The available documentation only substantiates the receipt of cash; there was no documentation supporting the basis or methodology for the estimates used to determine the amounts requested in advance drawdowns. CAUSE This deficiency resulted from the lack of procedures to ensure that advance drawdown amounts were determined based on documented estimates, and to maintain adequate records supporting both the methodology for those estimates and their connection to eligible expenditures incurred under the federal awards. EFFECT OR POTENTIAL EFFECT We were unable to determine whether the federal funds received in advance and recorded as cash receipts during the year were based on allowable costs incurred. As a result, there is a risk that federal funds may have been drawn down prior to, or in excess of, eligible expenditures. This could result in noncompliance with federal regulations regarding advance funding and may lead to a potential misstatement of federal expenditures and the accuracy of the SEFA. RECOMMENDATION We recommend that UHU establish and implement procedures to ensure that all advance drawdowns are supported by documented estimates that clearly outline the methodology used and are tied to allowable costs anticipated to be incurred under the federal programs. Additionally, management should maintain records that demonstrate the connection between amounts requested and qualifying expenditures and ensure that all drawdown requests and related estimates are subject to appropriate review and approval prior to submission. This will help ensure compliance with federal regulations and improve the accuracy of the SEFA.
CRITERIA Under the Uniform Guidance, non-federal entities are prohibited from contracting with or making payments to parties that are suspended or debarred from participating in federal programs. Entities must verify vendor eligibility by performing the required suspension and debarment checks prior to entering into contracts or making payments under federal awards. CONDITION AND CONTEXT UHU did not consistently perform suspension and debarment screening procedures for vendors, suppliers, contractors, subrecipients, employees, and other parties paid with federal funds. During the fiscal year, payments were made without evidence that the required screening procedures were performed prior to disbursement. Although management indicated that screening was performed on an occasional basis, it was not applied consistently across all applicable transactions, and documentation to support such procedures was not retained. In addition, due to the lack of adequate tracking of expenditures by federal award and vendor within the accounting records, management was unable to provide a complete and reliable population of transactions subject to suspension and debarment requirements. As a result, sufficient information was not available to support the identification of applicable vendors and payments for testing purposes. CAUSE These deficiencies were due to the absence of policies, procedures, and controls to ensure that suspension and debarment screening is consistently performed, documented, and retained for all applicable parties prior to payment. In addition, UHU did not maintain an accounting structure capable of tracking expenditures by federal award and vendor, which limited management’s ability to identify the population of transactions subject to suspension and debarment requirements. EFFECT OR POTENTIAL EFFECT Failure to screen potential and current vendors, suppliers, contractors, subrecipients, employees, and other applicable parties increases the risk that federal funds may be inadvertently provided to individuals or entities that are suspended or debarred from participation in federal programs. In addition, due to the lack of adequate tracking of expenses by federal award, we were unable to obtain a complete and reliable population of vendors and transactions subject to suspension and debarment requirements. As a result, testing could not be effectively performed, and samples could not be selected to determine compliance with these requirements. This significantly limits the ability to verify compliance with the Uniform Guidance and increases the risk of undetected noncompliance, potential questioned costs, and regulatory consequences. RECOMMENDATION We recommend that UHU establish and implement formal policies, procedures, and internal controls to ensure that suspension and debarment checks are consistently performed for all applicable parties prior to entering into contracts or making payments using federal funds. These procedures should require that verification is performed through appropriate sources, documented, and retained as part of the organization’s records. Management should also strengthen controls over the tracking of expenditures by federal award and vendor within the accounting system to ensure that all transactions subject to federal compliance requirements can be readily identified. This will enable management to perform monitoring activities, support audit testing, and demonstrate compliance with the Uniform Guidance. Periodic reviews should be conducted to ensure that suspension and debarment procedures are being consistently applied and properly documented.
CRITERIA The Uniform Guidance requires non-federal entities to have documented procurement policies and procedures that reflect applicable federal, state, and local laws and regulations, as well as standards for the purchase of goods and services using federal funds. These requirements are intended to ensure full and open competition, proper cost management, and the allowability and allocability of costs charged to federal awards. In addition, effective internal controls require that procurement activities are properly documented and supported, including evidence of vendor selection, price or cost analyses, and contract terms, to ensure compliance with federal requirements and to support audit and monitoring activities. CONDITION AND CONTEXT UHU did not have a formally documented procurement policy in place that complies with the Uniform Guidance requirements. During our audit, we experienced difficulty obtaining complete procurement documentation for transactions selected for testing, including evidence of vendor selection, competitive bidding, or price analyses. In several instances, procurement documentation was not completed or maintained to support the purchase of goods and services charged to federal awards. In addition, due to the lack of adequate tracking of expenses by federal award and cost center within the accounting system, management was unable to provide a complete and reliable population of procurement transactions subject to federal requirements. As a result, the audit team was unable to identify a comprehensive population or select samples for testing to determine compliance with procurement standards. CAUSE These deficiencies occurred because management did not establish and implement a documented procurement policy in accordance with the Uniform Guidance. In addition, management did not implement controls to ensure that procurement activities were consistently documented and retained. Weaknesses in tracking expenditures by federal award and cost center further contributed to management’s inability to identify and monitor procurement transactions subject to federal compliance requirements. EFFECT OR POTENTIAL EFFECT Without a documented procurement policy and compliance with federal standards, there is an increased risk of noncompliance with the Uniform Guidance requirements, including noncompetitive procurement practices, the potential for unallowable or unreasonable costs to be charged to federal awards, and a lack of fair and open competition. This condition may result in purchases above prevailing market rates, failure to obtain the best value, or conflicts of interest with vendors or contractors not being identified or addressed. In addition, due to the lack of adequate tracking of expenditures by federal award, we were unable to obtain a complete and reliable population of procurement transactions. As a result, testing could not be effectively performed, and samples could not be selected to determine compliance with procurement requirements. This significantly limits the ability to verify compliance, increases the risk of undetected noncompliance, and may result in questioned costs, audit findings, or potential regulatory consequences. RECOMMENDATION Management should develop and implement a formal, documented procurement policy that complies with the Uniform Guidance, including requirements for full and open competition, vendor selection, cost or price analysis, and documentation of procurement decisions. This policy should be communicated to relevant personnel and consistently enforced. Management should also establish controls to ensure that all procurement transactions are properly documented and supported, including maintaining records of vendor selection processes, contracts, approvals, and basis for awarding purchases. In addition, management should strengthen accounting processes to ensure that expenditures are tracked by federal award, program, and cost center within the general ledger, enabling the identification of procurement transactions subject to federal requirements. Periodic monitoring and review procedures should be implemented to ensure compliance with procurement policies and federal requirements, and that all documentation is complete, accurate, and readily available for audit. Strengthening these controls will improve compliance, enhance transparency, and reduce the risk of questioned costs and regulatory findings.
CRITERIA Under the Uniform Guidance, non-federal entities are required to maintain records that accurately reflect the work performed, and payroll costs must be supported by timesheets or other approved documentation that records the actual time worked on federal awards. CONDITION AND CONTEXT UHU did not maintain adequate time records to support amounts charged to the general ledger for payroll costs. For ALN 93.914, payroll allocations to federal awards were based on the original award budget, rather than actual time worked, and UHU did not track personnel time using timesheets or other acceptable records to re-allocate effort each month. While timesheets were maintained for clocking in and out, they did not identify the specific grants, projects, or activities employees worked on. Our audit included internal control testing over a random sample of expenditures and found insufficient support for payroll costs charged to federal programs. Additionally, for certain grants within the Research and Development cluster, we were unable to obtain any time records or time certifications attached to support payroll charges. CAUSE UHU’s current policies do not require employees to complete timesheets with details specifying which grants or funding sources they worked on during each pay period. As a result, payroll is allocated based on budget estimates rather than actual time worked on specific grants. EFFECT OR POTENTIAL EFFECT Failure to maintain adequate time and effort documentation increases the risk of unallowable costs being charged to federal programs, potential questioned costs, and noncompliance with federal regulations. RECOMMENDATION We recommend that UHU implement policies and procedures requiring all employees whose salaries are charged to federal awards to complete timesheets or other acceptable records that specify the actual time worked on each grant or funding source during each pay period. This will ensure that payroll allocations are based on actual effort expended, provide adequate support for amounts charged to federal programs, and help maintain compliance with federal regulations.
CRITERIA The Uniform Guidance requires the reporting package and Data Collection Form be submitted to the Federal Audit Clearinghouse the earlier of 30 days after the reports are received from the auditors or nine months after the end of the audit period. CONDITION AND CONTEXT UHU was required to submit the reporting package and the Data Collection Form for the year ended December 31, 2023, by September 30, 2024. Due to delays in prior year audits, UHU was unable to submit the required reports by the deadline. CAUSE These deficiencies occurred because the audit of UHU’s financial statements and federal programs was not completed in a timely manner, and therefore the reporting package and Data Collection Form could not be submitted by the required deadline. This issue affects all federal programs included in the audit. In addition, management did not have effective controls in place to ensure timely completion of the audit process or to monitor readiness for reporting, including the timely preparation and reconciliation of financial information necessary to support the audit and reporting requirements. EFFECT OR POTENTIAL EFFECT Failure to timely submit the required reporting package and Data Collection Form results in noncompliance with federal regulations and may impact UHU’s eligibility for future federal funding or subject the organization to additional oversight. RECOMMENDATION Management should strengthen controls and oversight processes to ensure the timely completion of audits and submission of required federal reporting. This includes establishing a structured timeline for audit readiness, ensuring that financial records and supporting documentation are prepared and reconciled in advance of the audit, and actively monitoring the progress of the audit process to identify and address delays. Management should also assign responsibility for tracking reporting deadlines and implement periodic reviews to ensure compliance with Uniform Guidance submission requirements. Strengthening these processes will help ensure timely reporting and compliance across all federal programs.
CRITERIA Federal regulations and the terms of the HIV Emergency Relief Project Grants (Ryan White Part A program) require that grantees collect and retain sufficient documentation to support the eligibility of all clients served, including proof of HIV-positive status and low-income status. Only services to eligible clients may be charged to the federal award. CONDITION AND CONTEXT During our review of client eligibility under the Ryan White Part A program, we identified instances where services were incorrectly charged to the program for clients who did not meet federal eligibility requirements. Specifically, mental health assessment services for six clients (totaling 29 services) were charged to the Ryan White Part A program, but these services were related to a different federal award. For one client reviewed in detail, the file did not contain adequate documentation of HIV-positive status, as required, nor documentation of low-income status. The lab results for 2023 noted a negative HIV test, and management’s alternative method for determining eligibility (using “undetectable” ranges from other tests) was not supported by guidance from DC Health or federal agencies. In addition, required eligibility data was not collected or retained in accordance with federal regulations. CAUSE Management relied on local reporting requirements rather than federal regulations and did not implement internal procedures to ensure that eligibility documentation was collected and retained for federal audit purposes. EFFECT OR POTENTIAL EFFECT Charging services for ineligible clients or clients without required documentation to a federal award may result in questioned costs, disallowed costs, noncompliance with federal regulations, and potential repayment of federal funds. Failure to collect and retain proper eligibility documentation undermines the integrity of UHU’s compliance with federal requirements. RECOMMENDATION We recommend that management establish and enforce procedures to ensure that eligibility documentation – including proof of HIV-positive status and low-income status – is collected and retained for all clients served under federal programs. In addition, management should ensure that only services provided to eligible clients are charged to the appropriate federal award, in accordance with federal regulations. Staff should be trained on these requirements, and regular reviews should be conducted to ensure compliance.
CRITERIA Under the Uniform Guidance (2 CFR Part 200, Subpart E), recipients of federal awards must maintain documentation to support costs charged to federal programs, including indirect costs. The documentation should demonstrate that costs are allocable, allowable, and in accordance with the approved indirect cost rate agreement, if applicable. CONDITION AND CONTEXT UHU charged indirect costs to federal awards throughout the fiscal year using a provisional indirect cost rate that exceeded the actual rate calculated based on year-end financial information. Management did not perform a year-end reconciliation or adjustment to align indirect costs charged to federal awards with the actual allowable indirect cost rate. As a result, indirect costs charged to federal programs were overstated by the difference between the provisional and actual rates. CAUSE Management lacked procedures to perform a comprehensive year-end review and reconciliation of indirect costs charged to federal awards. In addition, there was no control in place requiring management to calculate the actual indirect cost rate and record any necessary true-up adjustment before the close of the fiscal year. EFFECT OR POTENTIAL EFFECT This may affect the accuracy of the Schedule of Expenditures of Federal Awards and compliance with federal requirements. RECOMMENDATION We recommend that management establish formal procedures to calculate the actual indirect cost rate at year-end, compare actual indirect costs charged to amounts allowable under the final rate calculation, and record any required adjustments prior to financial reporting and federal reporting. Management should also implement a review control to ensure all indirect cost reconciliations are completed and documented annually.