Audit 413796

Criteria: In accordance with 2 CFR Section 200.430(g)(i), charges to Federal awards for salaries and wages must be based on records that reflect the actual work performed. The charges must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated, and must be incorporated into the official records of the non-Federal entity. In addition, 2 CFR Section 200.430(g)(1)(vii) states that budget estimates alone do not qualify as support for charges to Federal awards, but may be used for interim accounting, provided certain additional internal controls are implemented. Condition: During our testing of salaries and wages, we noted that all 176 sampled transactions did not include detail by program. Charges to Federal awards for salaries and wages were based on estimated allocations, rather than use of a system of internal controls that accounts for actual time and effort. Cause: While there is a time keeping system implemented to track daily hours worked by employees, the Corporation’s current internal control system does not allow for specific coding for time actually spent on each federally funded program that would support the amount charged to the Federal award. Effect or Potential Effect: We were unable to determine whether charges to Federal awards for salaries and wages reflect specific time worked or amounts allocated by employee to specific Federal programs. Allowable costs incurred by the Corporation exceeded the amount of approved grant funding, therefore no questioned costs are reported. Questioned costs: None Context: We selected 176 salary transactions charged to the Federal programs to test controls over allowable costs. All transactions charged to the Federal programs were based on budgeted Full Time Equivalents (FTE), and not actual hours employees worked for each Federal program. No analysis or true-up was performed to determine the accuracy of employee titles or amounts charged versus actual time and effort incurred. This is a condition identified per review of the Corporation’s compliance with specified requirements using a statistically valid sample. Repeat finding: This is a repeat finding from prior year. This was reported as finding 2024-001 in the 2024 report. Recommendation: We recommend the Corporation develop and incorporate internal controls in order to track specific time spent on each Federal program. This can include, time and effort reports completed on a routine basis, such as monthly, and adjust program expenditures as needed to properly reflect actual work performed. Completed time and effort reports should be reviewed and verified by management for accuracy. View of Responsible Officials: The time keeping system and process does not currently allow tracking of time based on funded resources. The past practice had been for the Finance Department manually calculated salary allocations. Due to the influx of grants and staffing resources the Corporation was unable to maintain this process.

Criteria: In accordance with 2 CFR Section 200.431(d), fringe benefits may be assigned to cost objectives by identifying specific benefits to specific individuals or by allocating on the basis of entity-wide salaries and wages of the employees receiving the benefits. When the allocation method is used, separate allocations must be made to selective groupings of employees, unless the non-Federal entity demonstrates that costs in relationships to salaries and wages do not differ significantly for different groups of employees. Condition: During our testing of fringe benefit expenses, we noted that all 176 sampled transactions lacked documentation identifying the specific programs benefiting from the costs incurred. The Corporation charged fringe benefits to Federal awards based on anticipated fringe benefit costs; however, it did not maintain documentation supporting the assignment of fringe benefit costs to applicable cost objectives. Consequently, the Corporation could not demonstrate that fringe benefit costs charged to the Federal award were allowable and allocated to benefiting programs in accordance with Federal requirements. Cause: The Corporation did not have formal process and policies to demonstrate adherence to the fringe benefits cost objectives of 2 CFR Section 200.431(d). Effect or Potential Effect: We were unable to determine whether charges to Federal awards for fringe benefits reflect specific time worked or amounts allocated to specific Federal programs, although the charges were not in excess of amounts approved for the grant. Questioned costs: None Context: We selected 176 fringe benefit transactions charged to Federal programs to test compliance with allowable cost requirements. For each transaction tested, the Corporation calculated fringe benefit charges by applying a fringe benefit rate to employees' actual salaries and wages. The fringe benefit rate was based on anticipated fringe benefit costs and supported by an overall fringe benefit calculation. However, the Corporation did not maintain documentation identifying the benefiting programs or assigning fringe benefit costs to specific cost objectives underlying the charges to Federal awards. This is a condition identified per review of the Corporation’s compliance with specified requirements using a statistically valid sample. Repeat finding: This is a repeat finding from prior year. This was reported as finding 2024-002 in the 2024 report. Recommendation: We recommend the Corporation develop and incorporate internal controls and policies to demonstrate adherence to the fringe benefits cost objectives of 2 CFR Section 200.431(d). View of Responsible Officials: Due to the financial system and time keeping infrastructure, the Corporation did not maintain evidence of fringe benefit cost objectives calculations. Also, the current fringe cost rate and allocations is based on historical assumptions.

Criteria: 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the Federal award that provides assurance that the entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, 2 CFR Appendix IV to Part 200 Section B.2(b) requires that both the direct costs and the indirect costs must exclude capital expenditures and unallowable costs. Per Compliance Supplement, these indirect costs must conform to the allowability of cost provisions in 2 CFR Part 200, Subpart E or award agreement. Condition: During our testing of indirect costs, we noted that the Corporation charges the Federally approved rate of 28.7% on specific grant awards based on direct salaries and wages. However, the Corporation did not maintain ongoing supporting documentation of eligible indirect costs. Cause: The Corporation did not have formal process and policies to demonstrate adherence to the allowability requirements of indirect costs in accordance with 2 CFR Appendix IV to Part 200 Section B.2(b). Effect or Potential Effect: Additional efforts after year end were required to determine whether indirect costs charged to Federal awards conform to the allowability of cost provisions in 2 CFR Part 200, Subpart E or award agreement. Allowable costs incurred by the Corporation exceeded the amount of approved grant funding, therefore no questioned costs are reported. Questioned costs: None Context: Additional efforts after year end were required by management in order to provide sufficient and appropriate evidence that the reported indirect costs conformed to the allowability of cost provisions in 2 CFR Part 200, Subpart E or award agreement. Repeat finding: This is a repeat finding from prior year. This was reported as finding 2024-005 in the 2024 report. Recommendation: We recommend the Corporation develop and incorporate internal controls and policies to demonstrate adherence to the allowability requirements of indirect costs in accordance with 2 CFR Appendix IV to Part 200 Section B.2(b). View of Responsible Officials:Due to staff turnover the Corporation did not have adequate personnel or infrastructure in place to monitor costs in order to calculate and determine an updated indirect cost rate. Also, the current indirect cost rate allocations is based on historical assumptions.