Finding 2023-004: Lack of Documentation and Internal Controls for Federal
Program Expenditures
Identification of the Federal Program: Assistance Listing Number 17.259 - WIOA Youth Activities Program - U.S. Department of Labor. Pass-through Entity: New York City Department of Youth and Community Dev...
Finding 2023-004: Lack of Documentation and Internal Controls for Federal
Program Expenditures
Identification of the Federal Program: Assistance Listing Number 17.259 - WIOA Youth Activities Program - U.S. Department of Labor. Pass-through Entity: New York City Department of Youth and Community Development. Award Number: 90535A / 90536A / 90537A / 90538A. Compliance Requirement: Allowable Costs/Cost Principles.
Criteria: Requirements per section 2 CFR Part 200 Subpart E of the Uniform Guidance state that costs charged to federal awards must be determined in accordance with GAAP (Generally Accepted Accounting Principles), be adequately documented, and be allocable to the federal award, and be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated.
Condition: During our testing of 42 disbursements for the year ended June 30, 2023, we noted that there were 22 instances where there was a lack of adequate documentation, or the amount allocated to the major program could not be substantiated.
Cause: With personnel changes at most levels within the Organization, documentation from the former employees could not be located, and the current employees were unfamiliar with the requirements of the federal awards.
Effect or Potential Effect: Due to the lack of internal controls in this area, support for various expenditures could not be found, which could lead to costs being allocated improperly to the federal grants.
Questioned Costs: $338,554
Context: In our testing sample, approximately 32% of total expenditures tested did not have proper documentation or the allocation to the federal award could not be provided. The potential error was extrapolated to the population leading to questioned costs of $338,554.
Plan:
1. Internal Control Review: OBT conducted a thorough review of internal controls related to compliance with allowable cost principles, including the documentation of expenditures and allocation methodologies used. OBT has contracted with a new financial firm (BDO) familiar with government awards and allowable expenses. Each expense is now reviewed by two members of the executive team and the accounting contractor, making sure allocations are appropriately recorded in the GL (General Ledgers).
2. Documentation Enhancement: OBT has enhanced document retention procedures to ensure that all required documentation for federal program expenditures is adequately retained, including records of allocation methodologies.
3. Training and Awareness: OBT has provided training to all relevant personnel, especially those involved in expenditure documentation and allocation to ensure they understand the requirements of federal awards and the importance of proper documentation.
4. Documentation Verification: OBT has implemented procedures for ongoing verification and reconciliation of expenditures to ensure they are accurate, allowable, and properly allocated. BDO has also shared best practices.
5. Continuous Monitoring: OBT is continuously monitoring compliance with allowable cost principles, identifying any gaps, and taking corrective actions as needed.
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Name of Contact Person: Greg Rideout, Co-CEO
Target Date: OBT implemented all five steps within this plan by December 31, 2023, with ongoing monitoring and improvement.