Audit 44998

Federal Program Information Funding Agency: U.S. Department of Treasury Federal ALN: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Pass Through Agency: Tennessee Arts Commission Criteria As required by the Uniform Guidance, non-federal entities are prohibited from contracting with parties that are suspended or debarred. The Uniform Guidance also requires the entities to follow documented procurement procedures that are in compliance with the procurement standards in the federal guidelines. Condition During the period under audit, FAM did not have a procurement policy in place. In addition, there was no policy in place to determine whether vendors are suspended or debarred prior to entering into a contract for services. Cause FAM had not received federal funding previously and therefore did not have a procurement policy in place that met the requirements of the Uniform Guidance. In addition, because of the new funding, FAM did not have a policy in place for reviewing whether vendors had been suspended or debarred. Effect Purchases may occur that do not meet the procurement standards, and payments to vendors that had been suspended or debarred could be made and not detected. Auditor's Recommendation FAM should ensure that the procurement policy subsequently implemented meets the procurement standards outlined in the Uniform Guidance, and should be followed for all purchases meeting the established thresholds. In addition, FAM should establish a written policy for reviewing vendors for suspension or debarment. Management Response Management agrees with the auditor?s recommendation. We encountered difficulties complying with this criterion because the grant was not awarded and under contract until over nine months after the grant period began. Long-standing vendor relationships were already in place and so costs were incurred prior to award knowledge. On a prospective basis, we will develop and adhere to a procurement policy that meets the procurement standards outlined in the Uniform Guidance including established thresholds. As part of this policy we will include reviewing vendors for suspension or debarment.

Federal Program Information Funding Agency: U.S. Department of Treasury Federal ALN: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Pass Through Agency: Tennessee Arts Commission Criteria The Uniform Guidance contains cost principles which establish guidelines for allowable charges to federal grants. According to section 2 CFR 200.425, only audit services required by, and performed in accordance with, the Single Audit Act are allowed to be charged to federal grants. Condition Out of a sample of 15 charges to the grant that were tested, 1 of the charges was unallowed. The charge was determined to be unallowed as it was for the 2021 audit, which was not required by the Single Audit Act. This resulted in questioned costs totaling $23,768. Cause FAM had not received federal funding previously and therefore did not have a clear understanding of the cost principles contained in the Uniform Guidance. Effect Improper charges, in addition to those identified above, could be remitted to grantors for reimbursement. Auditor's Recommendation FAM should ensure that charges to federal grants are allowable in accordance with cost principles contained in Uniform Guidance. Additional training should be obtained to gain a further understanding of these requirements. Management Response Management agrees with the auditor?s recommendation. Because the grant period is still open, we will subtract the 2021 audit cost of $23,768 from the final period report and replace it with an allowed cost. This will enable us to close out the grant with only allowable costs.

Federal Program Information Funding Agency: U.S. Department of Treasury Federal ALN: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Pass Through Agency: Tennessee Arts Commission Criteria As required by the Uniform Guidance, non-federal entities are prohibited from contracting with parties that are suspended or debarred. The Uniform Guidance also requires the entities to follow documented procurement procedures that are in compliance with the procurement standards in the federal guidelines. Condition During the period under audit, FAM did not have a procurement policy in place. In addition, there was no policy in place to determine whether vendors are suspended or debarred prior to entering into a contract for services. Cause FAM had not received federal funding previously and therefore did not have a procurement policy in place that met the requirements of the Uniform Guidance. In addition, because of the new funding, FAM did not have a policy in place for reviewing whether vendors had been suspended or debarred. Effect Purchases may occur that do not meet the procurement standards, and payments to vendors that had been suspended or debarred could be made and not detected. Auditor's Recommendation FAM should ensure that the procurement policy subsequently implemented meets the procurement standards outlined in the Uniform Guidance, and should be followed for all purchases meeting the established thresholds. In addition, FAM should establish a written policy for reviewing vendors for suspension or debarment. Management Response Management agrees with the auditor?s recommendation. We encountered difficulties complying with this criterion because the grant was not awarded and under contract until over nine months after the grant period began. Long-standing vendor relationships were already in place and so costs were incurred prior to award knowledge. On a prospective basis, we will develop and adhere to a procurement policy that meets the procurement standards outlined in the Uniform Guidance including established thresholds. As part of this policy we will include reviewing vendors for suspension or debarment.

Federal Program Information Funding Agency: U.S. Department of Treasury Federal ALN: 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Pass Through Agency: Tennessee Arts Commission Criteria The Uniform Guidance contains cost principles which establish guidelines for allowable charges to federal grants. According to section 2 CFR 200.425, only audit services required by, and performed in accordance with, the Single Audit Act are allowed to be charged to federal grants. Condition Out of a sample of 15 charges to the grant that were tested, 1 of the charges was unallowed. The charge was determined to be unallowed as it was for the 2021 audit, which was not required by the Single Audit Act. This resulted in questioned costs totaling $23,768. Cause FAM had not received federal funding previously and therefore did not have a clear understanding of the cost principles contained in the Uniform Guidance. Effect Improper charges, in addition to those identified above, could be remitted to grantors for reimbursement. Auditor's Recommendation FAM should ensure that charges to federal grants are allowable in accordance with cost principles contained in Uniform Guidance. Additional training should be obtained to gain a further understanding of these requirements. Management Response Management agrees with the auditor?s recommendation. Because the grant period is still open, we will subtract the 2021 audit cost of $23,768 from the final period report and replace it with an allowed cost. This will enable us to close out the grant with only allowable costs.