Finding 2024-002 Finding Type: Material noncompliance and material weakness in internal control Federal Department: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention Identification of the Federal Program: Assistance Listing Number 93.988 – Cooperative Agreements for Diabetes Control Programs Award Number: NU58DP007394 Compliance Requirement(s): Activities Allowed or Unallowed, Allowable Costs/Cost Principles Criteria: Per 2 CFR Part 200.303(a), the recipient and subrecipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Other than Personnel Services: 2 CFR Part 200.403(g) states that for costs to be allowable under federal awards they must be adequately documented. Indirect Costs: 2 CFR Part 200.403 outlines the factors affecting allowability of costs, including indirect costs charged to federal grants. Specifically, the Year 1 Notice of Award (NOA) for budget period June 30, 2023 through June 29, 2024, did not obligate any funds for indirect costs. In addition, the Year 2 NOA for budget period June 30, 2024 through June 29, 2025, obligated $250,000 for indirect costs. Personnel Services: Under 2 CFR Part 200.430(g) (Standards for Documentation of Personnel Services), charges to federal awards for salaries and wages must be based on records that accurately reflect the actual work performed. Budget estimates (meaning, estimates determined before the services are performed) alone does not qualify as support for charges to federal awards, but may be used for interim accounting purposes. Condition: Other than Personnel Services: During our testing of credit card transactions, we noted that adequate support was not maintained for four selections, which totaled $138. In total, there were 64 transactions charged to the grant in the amount of $6,398. Because supporting documentation was not maintained, we were unable to determine whether the charges were allowable. Indirect Costs: 1. In January 2024, the Imperative received approval for a negotiated indirect cost rate agreement (NICRA) of 28.5%, As part of the NICRA, the Year 1 award agreement (NOA) was to have been amended to apply the rate to the award. However, the Imperative was unable to provide a copy of the amended NOA. The original copy of the Year 1 NOA did not obligate any funds for indirect costs. When Imperative charged $200,000 of indirect costs to the federal program toward the Year 1 award, it was determined that the indirect costs was deemed to be unallowable costs for calendar year 2024. 2. Per the Year 2 NOA, indirect costs of $250,000 were allowed. However, per review of general ledger detail and per discussion with management, the Imperative did not calculate indirect costs as the indirect cost rate times the allowable actual direct costs base when they calculated the monthly indirect costs but instead calculated the monthly indirect costs as one-twelfth of the $250,000 budgeted amount. We recalculated the amount charged for July through December 2024 under the Year 2 award for reasonableness and verified that it would have exceeded the amount the Imperative actually charged using their straight-line method. 3. Overall, per review of the indirect cost journal entries and supporting documentation, we verified that the outside accountant or the EVP of Finance prepared and booked the monthly indirect costs expense with no review and approval performed by someone other than the preparer for calendar year 2024. Personnel Services: The Imperative charged payroll costs to the federal program based on the percentage allocated in the approved grant budget. However, payroll costs should have been charged to the federal program based on the actual time incurred in accordance with 2 CFR Part 200.430. We were unable to determine actual payroll costs incurred because the Imperative did not maintain records of the actual hours incurred (timesheets, etc.) during 2024. In addition, two out of 25 personnel cost transactions tested amounting to $5,724 were charged to the AL #93.988 federal program in error and, therefore, was determined unallowable costs for calendar year 2024. Per review of the personnel cost transactions journal entries and supporting documentation, we verified that there was no review and approval for allowability performed by someone other than the preparer for calendar year 2024. Cause: Other than Personnel Services: Due to oversight, the Imperative did not establish or maintain adequate internal controls and documentation over the credit card purchase process. Indirect Costs: Due to oversight, the Imperative charged $200,000 in indirect costs to the Year 1 award that were not allowed per the Year 1 NOA. The Imperative did not establish or maintain adequate internal controls and documentation over the indirect costs expenditure process. Personnel Services: Due to oversight, the Imperative charged $5,724 of personnel costs to the AL #93.988 federal program that were unallowed. The Imperative did not establish or maintain adequate internal controls and documentation over the personnel costs expenditure process. Effect: Other than Personnel Services: We are unable to determine whether the credit card transactions charged to the grant program were allowable. Indirect Costs: Unallowable costs of $200,000 relating to indirect costs was charged to the grant program. Personnel Services: Unallowable costs of $5,724 relating to personnel costs was charged to the grant program. Questioned Costs: Other than Personnel Services: Questioned costs of $6,398 Indirect Costs: Questioned costs of $200,000 Personnel Services: Questioned costs of $5,724 Repeat Finding: Not applicable. Recommendation: Other than Personnel Services: We recommend that the Imperative implement procedures to establish, document, and maintain adequate internal controls and supporting documentation over the credit card purchase process. Indirect Costs: We recommend that the Imperative implement procedures to establish, document, and maintain adequate internal controls over the indirect costs expenditures process. Personnel Services: We recommend that the Imperative implement procedures to establish, document, and maintain adequate internal controls over the personnel costs expenditures process. View of Responsible Officials: See management’s corrective action plan.
Finding 2024-003 Finding Type: Significant deficiency in internal control Federal Department: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention Identification of the Federal Program: Assistance Listing Number 93.988 – Cooperative Agreements for Diabetes Control Programs Award Number: NU58DP007394 Compliance Requirement(s): Cash Management Criteria: Under 2 CFR Part 200.303 (Internal Controls) and 2 CFR Part 200.305 (Federal Payment Standards), non-federal entities must maintain internal controls that provide reasonable assurances that drawdowns are accurate, reviewed, and aligned with actual immediate cash needs. Condition: For all five cash drawdowns performed during 2024 totaling $1,114,944, we noted no evidence of review prior to submission in the Payment Management Services (PMS) system. Cause: This finding occurred due to oversight and inadequate procedures. Effect: The potential exists for general ledger expenditures to not align with drawn-down funds. Questioned Costs: None. Repeat Finding: Not applicable. Recommendation: We recommend that the Imperative implement procedures to establish, document, and maintain adequate internal controls over the cash drawdown process. View of Responsible Officials: See management’s corrective action plan.
Finding 2024-004 Finding Type: Noncompliance and significant deficiency in internal control Federal Department: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention Identification of the Federal Program: Assistance Listing Number 93.988 – Cooperative Agreements for Diabetes Control Programs Award Number: NU58DP007394 Compliance Requirement(s): Reporting Criteria: Federal Funding Accountability and Transparency Act Aspects of the Federal Funding Accountability and Transparency Act (Pub. L. No. 109-282) (Transparency Act), as amended by Section 6202 of Pub. L. No. 110-252, which relate to subaward reporting (1) under grants and cooperative agreements were implemented in OMB in 2 CFR Part 170 and (2) under contracts, by the regulatory agencies responsible for the Federal Acquisition Regulation (FAR at 5 FR 39414 et seq., July 8, 2010). The requirements pertain to recipients (i.e., direct recipients) of grants or cooperative agreements who make first-tier subawards and contractors (i.e., prime contractors) that award first-tier subcontracts. There are limited exceptions as specified in 2 CFR Part 170 and the FAR. The guidance at 2 CFR Part 170 currently applies only to federal financial assistance awards in the form of grants and cooperative agreements (e.g., it does not apply to loans made by a federal agency to a recipient); however, the subaward reporting requirement applies to all types of first-tier subawards under a grant or cooperative agreement. Direct recipients are required to report each first-tier subaward or subaward amendment that results in an obligation of $30,000 or more in federal funds. Prime contractors are required to report each first-tier subcontract award of $30,000 or more in federal funds. Grant and cooperative agreement recipients and contractors are required to register in FSRS and report subaward data through FSRS. To do so, they will first be required to register in the System for Award Management (SAM) (if they have not done so previously for another purpose (e.g., submission of applications through Grants.gov) and actively maintain that registration. Prime contractors have previously been required to register in SAM. Information input to FSRS is available at USASpending.gov as the publicly available website for viewing this information (https://www.usaspending.gov/search). Certain key data elements are required to be reported on the Federal Funding Accountability and Transparency Act (FFATA) report via the FSRS system. Per the 2025 OMB Compliance Supplement, the amount of subaward is defined as, “the net dollar amount of federal funds awarded to the subawardee including modifications.” Condition: During the current audit period, the Imperative did not comply with its FFATA reporting requirements as outlined in its grant agreement and federal regulations. We selected six AL# 93.988 subawards for testing from a population of six subawards and noted the absence of submission. The total federal funds of the six subawards amounted to $575,000 per the subaward agreements. The exceptions are summarized in the chart below. Cause: Due to oversight, the Imperative did not submit FFATA reports via the Federal Subaward Reporting system (FSRS). Effect: Failure to prepare and submit the required reports is a violation of federal regulations and impairs the grantor agency’s ability to adequately monitor the program activities/federally funded program. Questioned Costs: None. Repeat Finding: Not applicable. Recommendation: We recommend that the Imperative implement procedures to ensure accurate and timely reporting of all required subawards on FFATA reports prior to submission. View of Responsible Officials: See management’s corrective action plan.
Finding 2024-005 Finding Type: Noncompliance and significant deficiency in internal control Federal Department: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention Identification of the Federal Program: Assistance Listing Number 93.988 – Cooperative Agreements for Diabetes Control Programs Award Number: NU58DP007394 Compliance Requirement(s): Procurement and Suspension and Debarment Criteria: Per 2 CFR Part 200.318(a) (Documented Procurement Procedures), the recipient or subrecipient must maintain and use documented procedures for procurement transactions under a federal award or subaward, including for acquisition of property or services. These documented procurement procedures must be consistent with state, local, and tribal laws and regulations and the standards identified in 2 CFR Part 200.317 through 2 CFR Part 200.327. Non-federal entities are prohibited from contracting with parties that are suspended or debarred. Covered transactions include contracts or goods and services that are expected to equal or exceed $25,000 or meet certain other criteria as specified in 2 CFR 180.220. Per 2 CFR Part 180.300, when a non-federal entity enters into a covered transaction with another entity at the next lower tier, the non-federal entity must verify that the entity with whom it intends to do business is not excluded or disqualified by: 1) Checking SAM.gov exclusions; or 2) Collecting a certification from that entity; or 3) Adding a clause or condition to the covered transaction with that entity. Per 2 CFR Part 200.303(a), the recipient and subrecipient must establish, document, and maintain effective internal control over the federal award that provides reasonable assurance that the recipient or subrecipient is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the COSO. Condition: The Imperative did not have a written procurement policy in place for 2024 as required by 2 CFR Part 200.318(a). The Imperative provided AL #93.988 funds equal to or exceeding $25,000 to seven subgrantees and contractors during 2024. The Imperative failed to perform and document a verification check on SAM.gov for one contractor totaling $25,000. Additionally, the corresponding contract did not contain a suspension and debarment certification clause, and the Imperative did not obtain a signed vendor-specific suspension and debarment certification. Cause: Due to oversight, the Imperative did not establish a written procurement policy or maintain adequate internal controls and documentation over the procurement and suspension and debarment process for the AL #93.988 program for 2024. Effect: The potential exists that the Imperative could have provided federal funds to suspended or debarred parties, resulting in the Imperative being in noncompliance with federal procurement regulations. Questioned Costs: None. Repeat Finding: Not applicable. Recommendation: We recommend that the Imperative implement procedures to establish a written procurement policy, establish a process of vetting vendors and maintain adequate internal controls over the procurement and suspension and debarment process. View of Responsible Officials: See management’s corrective action plan.
Finding 2024-006 Finding Type: Noncompliance and significant deficiency in internal control Federal Department: U.S. Department of Health and Human Services, Centers for Disease Control and Prevention Identification of the Federal Program: Assistance Listing Number 93.988 – Cooperative Agreements for Diabetes Control Programs Award Number: NU58DP007394 Compliance Requirement(s): Subrecipient Monitoring Criteria: Per 2 CFR Part 200.332(g), a pass-through entity must verify that a subrecipient is audited as required by 2 CFR Part 200, Subpart F. Per 2 CFR Part 200.332(e), a pass-through entity must: 1) Ensure that the subrecipient takes corrective action on all significant developments that negatively affect the subaward. Significant developments include Single Audit findings related to the subaward, other audit findings, site visits, and written notifications from a subrecipient of adverse conditions which will impact their ability to meet the milestones or the objectives of a subaward. When significant developments negatively impact the subaward, a subrecipient must provide the pass-through entity with information on their plan for corrective action and any assistance needed to resolve the situation, 2) Issue a management decision for audit findings pertaining only to the federal award provided to the subrecipient from the pass-through entity as required by 2 CFR Part 200.521, and 3) Resolve audit findings specifically related to the subaward. However, the pass-through entity is not responsible for resolving cross-cutting audit findings that apply to the subaward and other federal awards or subawards. If a subrecipient has a current Single Audit report and has not been excluded from receiving federal funding (meaning, has not been debarred or suspended), the pass-through entity may rely on the subrecipient's cognizant agency for audit or oversight agency for audit to perform audit follow up and make management decisions related to cross-cutting audit findings in accordance with 2 CFR Part 200.513(a)(4)(viii). Such reliance does not eliminate the responsibility of the pass-through entity to issue subawards that conform to agency and award-specific requirements, to manage risk through ongoing subaward monitoring, and to monitor the status of the findings that are specifically related to the subaward. Condition: We selected six AL #93.988 subrecipients for testing from a population of six subrecipients. For all six subrecipients, the Imperative did not verify whether their subrecipients were subject to audit as required by 2 CFR Part 200, Subpart F (Single Audit). Since the Imperative did not obtain or review their subrecipients’ Single Audit reports, the Imperative was unable to ensure the subrecipient took corrective action on any significant developments that negatively affected the subaward, issue management decisions for audit findings pertaining to the federal award provided to the subrecipient or resolve audit findings specifically related to the subaward. Cause: This finding occurred due to oversight. Effect: Failure to adequately communicate and monitor the activities and performance of a subrecipient could result in federal awards being used for unauthorized purposes and the Imperative’s inability to adequately perform risk assessments on its subrecipient(s). Questioned Costs: None. Repeat Finding: Not applicable. Recommendation: We recommend that the Imperative implement procedures to ensure compliance with subrecipient monitoring requirements. View of Responsible Officials: See management’s corrective action plan.