Audit 414277

Criteria: In accordance with 2 CFR 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. Budget estimates alone do not qualify as support for charges to Federal awards. Condition: During our testing of payroll expenditures charged to the Weatherization Assistance Program, we noted that salary and wage costs were allocated to the Federal program using budgeted allocation percentages rather than documentation that demonstrates the actual distribution of employee activities. While the employees whose salaries were charged to the program performed work supporting program operations, AEA did not maintain records sufficient to support the percentage of time charged to the Federal award based on actual work performed. As a result, management could not demonstrate that payroll costs allocated to the program reasonably reflected employee effort devoted to program activities. Cause: AEA did not maintain a documented process for periodically reviewing and supporting payroll allocations using records that reflect employees' actual activities. Instead, payroll costs were allocated based on budgeted amounts established at the beginning of the contract period. Effect: AEA cannot demonstrate that salary and wage charges allocated to the Federal award were supported by records that accurately reflect the distribution of employee activities as required by 2 CFR 200.430(i). Consequently, there is an increased risk that payroll costs charged to the Federal award may not accurately reflect the relative benefit received by the program. Questioned Costs: Undeterminable. Context: A random sampling of the federal expenditures. Repeat Finding: This finding was not corrected. See finding item 2024-005 in the prior year findings. Recommendation: We recommend that AEA establish procedures to periodically review and document employee activities to support payroll allocations charged to Federal awards. Documentation should be maintained demonstrating the basis for salary allocations and should reasonably reflect the actual work performed in support of program and non-program activities. View of Responsible Officials: Refer to management’s corrective action plan.

Criteria: In accordance with 2 CFR 200.405, costs must be allocated to the projects based on the proportional benefit. If this cannot be determined, costs may be allocated or transferred to benefitted projects on any reasonable documented basis. Condition: For the year ended December 31, 2025, AEA did not maintain support for their allocation methodology for 15 out of 60 cash disbursement items selected. Cause: The expense allocations may not be appropriate. Effect: AEA is not in compliance with 2 CFR 200.405. Questioned Costs: Undeterminable. Context: A random sampling of the federal expenditures. Repeat Finding: This finding was not corrected. See finding item 2024-006 in the prior year findings. Recommendation: We recommend that AEA review and reestablish their allocation methodology for allocated costs. View of Responsible Officials: Refer to management’s corrective action plan.

Criteria: In accordance with 2 CFR 200.405, a cost is allocable to a Federal award if the goods or services involved are chargeable or assignable to that Federal award in accordance with the relative benefits received. Costs that benefit overall organizational activities, including expenses for AEA’s senior management, should be charged in a manner consistent with their administrative nature. Condition: The funding agency breaks down the budget for items including Program Operations, Health & Safety and Administration. For the year ended December 31, 2025, we identified 5 out of 60 expenditures that were allocated to program costs that appear to primarily benefit the administrative operations of AEA. Cause: The expense allocations may not be appropriate. Effect: AEA is not in compliance with 2 CFR 200.405. Questioned Costs: Undeterminable. Context: A random sampling of the federal expenditures. Repeat Finding: Not applicable. Recommendation: We recommend that AEA evaluate expenditures based on the nature of the activity receiving the benefit and maintain documentation supporting the basis for classification of costs as either program or administrative. View of Responsible Officials: Refer to management’s corrective action plan.

Criteria: In accordance with 2 CFR 200.328, AEA is required to submit performance reports as required by the terms and conditions of the Federal award. These reporting requirements are further described by the pass-through funder to AEA. Condition: During our testing of AEA’s financial and performance reporting requirements, AEA was unable to demonstrate full timely submission of required financial reports and performance reports. Timely compliance submission is required for financial reports and performance reports. For the grants tested, reporting requirements ranged from monthly to quarterly financial and/or performance reports. We noted 18 instances where the financial report was not submitted within the required time frame and 10 instances where the performance report was not filed within the required timeframe. Cause: AEA did not maintain sufficient procedures to ensure required reports were submitted timely and that documentation evidencing submission and review was retained. Effect: Failure to maintain support demonstrating submission of required reports increases the risk that federal awarding agency and pass-through entities may not receive complete, accurate, and timely information necessary to monitor program performance, expenditures, and compliance with Federal award requirements. Questioned Costs: None reported. Context: We tested a sample of financial reports and performance report submitted during the fiscal year and identified 10 out of 20 reports that was submitted after the required due date. Repeat Finding: Not applicable. Recommendation: We recommend that AEA strengthen its reporting controls to ensure all required financial and performance reports are prepared, reviewed, submitted, and retained in accordance with Federal award requirements. Procedures should include maintaining evidence of submission, management review, and monitoring of reporting deadlines. View of Responsible Officials: Refer to management’s corrective action plan.