Audit 413997

Finding SA 2025-001: Allowable Cost/Cost Principles – Internal Controls Over the Documentation of Cost Allocation (Repeat Finding) Federal Program Information Assistance Listing Number: 93.914 Federal Program Name: HIV Emergency Relief Project Grants (Ryan White HIV/AIDS Program Part A) Federal Agency: U.S. Department of Health and Human Services Pass-through Entities: County of Los Angeles, CA Department of Public Health, RW Part A Contract Number and Name: PH-003738 Medical Care Coordination; PH-005706 Medical Care Coordination; PH-003799 Oral Health Care Services Compliance Requirement: Allowable Cost/Cost Principles Criteria or Specific Requirements Per 2 CFR Part 200.430 (g)(1), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must support the distribution of the employee's salary or wages among specific activities or cost objectives. Per Uniform Guidance Compliance Supplement part 6 – Internal Control, non-federal entities are required to establish and maintain internal control over the federal awards that provides reasonable assurance that the non-federal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Condition Summary Description A. Improved Documentation for Basis of Cost Allocation for Employee Time Charges For 5 of the 60 employees selected for allowable costs / cost principles testing, the timesheet hours did not agree with the hours billed on the related reimbursement request invoice. In each case, the invoice hours exceeded the timesheet hours. B. Improved Documentation of Routinary Reviews of Employee Hours Charged to the Grants For 1 of the 60 employees selected for allowable costs/cost principles testing, the review of tracked hours was performed more than 90 days after the reimbursement month. Questioned Costs A. Improved Documentation for Basis of Cost Allocation for Employee Time Charges None. The Foundation corrected the noted discrepancies for the related employees in subsequent monthly reimbursement requests. We consider this an internal control finding. B. Improved Documentation of Routinary Reviews of Employee Hours Charged to Grants None. We consider this an internal control finding. Cause and Effect A. Improved Documentation for Basis of Cost Allocation for Employee Time Charges Although procedures were in place to review payroll costs charged to grants, the control activities were not consistently performed or sufficiently documented to ensure that hours billed on reimbursement requests agreed to supporting timesheets and that related payroll reallocations were completed timely. Documentation supporting certain employee time charges was therefore not consistently maintained or reconciled to reimbursement requests. The Foundation should improve how it demonstrates that payroll costs charged to federal awards are complete, accurate, and supportable. B. Improved Documentation of Routinary Reviews of Employees' Hours Charged to Grants. This exception related to one employee occurred before the Foundation's corrective action plan and formal policy were implemented effective August 1, 2025. The formal policy requires timely review of payroll allocations and related reclassifications. For this employee, the review and reclassification were not completed within the timeframe required under the policy effective August 1, 2025. Recommendation A. Improved Documentation for Basis of Cost Allocation for Employee Time Charges We recommend that the Foundation require a documented reconciliation of employee timesheets, payroll allocation records, and reimbursement invoices before each reimbursement request is submitted. The reconciliation should evidence preparation and supervisory review and identify the timely resolution of any differences. Management should also ensure that payroll reallocations and cost transfers are completed timely and supported by appropriate documentation. These procedures will help support the accuracy, completeness, and supportability of personnel costs charged to federal awards. B. Improved Documentation of Routinary Reviews of Employee Hours Charged to Grants We recommend that the Foundation enforce its established review policy and retain documentation demonstrating that employee hours and related payroll reclassifications are reviewed and completed within the required timeframe. This will help support the accuracy and allowability of payroll costs charged to grant programs.

Finding SA 2025-002: Reporting – Federal Financial Report Federal Program Information Assistance Listing Number: 93.918 Federal Program Name: Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease Federal Agency: U.S. Department of Health and Human Services Pass-through Entities: Health Resources and Services Administration (HRSA) Contract Number and Name: H7646006, H7646007, H7646008, H7624724 - Ryan White Part C Outpatient EIS Program Compliance Requirement: Reporting Criteria or Specific Requirements Under 2 CFR Part 200.328, a recipient or subrecipient must submit the financial reports required by the federal award. For the Ryan White Part C Outpatient EIS Program, the Notice of Award requires program income to be accounted for using the addition method. In addition, the OMB 2025 Compliance Supplement, Part 6 – Internal Control, requires federal program recipients to maintain effective internal controls over federal award reporting. These controls should ensure that:  Data presented is accurate, complete, and in accordance with the award terms  Reports reconcile to accounting records and underlying support  Review and approval processes are in place before submission Condition In performing reporting testwork over the Foundation’s submitted Federal Financial Report (FFR) for the grant year ending June 30, 2025, we noted that the program income was incorrectly classified and reported under the deduction method, instead of the addition method as required by the Notice of Award. Questioned Costs None. Cause and Effect Per inquiry with the Associate Director of Contract Accounting, the grantor required program income reporting on the FFR for the first time this period, and the guidance provided by the grantor for completing the related data fields was limited. As a result, certain fields were not completed as the grantor intended. The Foundation has requested additional clarification from the grantor to ensure accurate reporting going forward. Recommendation We recommend that management strengthen its controls and implement additional procedures over reporting compliance. These procedures should require management to: • Maintain a central reference and database of program income requirements by ALN, including whether the addition or deduction method applies; • Perform a formal review of FFR preparation to verify that each FFR report aligns with its award-specific requirements; • Provide targeted training regarding grants and Uniform Guidance reporting requirements (2 CFR 200.328) program income rules (2 CFR 200.307); • Perform a formal supervisory review and approval of FFRS before submission; and • Consult with granting agencies on whether a revised FFR is required to be submitted in accordance with grantor reporting requirements.