2024-028 The Office of Superintendent of Public Instruction did not have adequate internal controls over and did not comply with federal activities allowed and subrecipient monitoring requirements for the Education Stabilization Fund program. Assistance Listing Number and Title: 84.425R COVID-19 Coronavirus Response and Relief Supplemental Appropriations Act, Emergency Assistance to Non-Public Schools (CRRSA EANS) 84.425V COVID-19 American Rescue Plan – Emergency Assistance to Non-Public Schools (ARP EANS) program Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: S425D210015; S425R210012; S425U210015; S425V210012; S425W210049 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Components: Activities Allowed or Unallowed Allowable Costs/Cost Principles Subrecipient Monitoring Known Questioned Cost Amount: $47,322,280 Prior Year Audit Finding: No Background Beginning in March 2020, Congress set aside the Elementary and Secondary School Emergency Relief (ESSER) Fund to address the effect the COVID-19 pandemic has had, and continues to have, on elementary and secondary schools across the nation. Several rounds of funding were distributed to states under the Education Stabilization Fund (ESF) program with the intent to support public and nonpublic schools. The U.S. Department of Education awarded ESF grants to the Office of Financial Management, which then dispersed funds to the Office of Superintendent of Public Instruction, to pass through to Local Education Agencies (LEAs). The U.S. Department of Education awarded ESF program funds to grantees under multiple subprograms of the ESF. An alphabetic character at the end of the 84.425 Assistance Listing Number was used to delineate the specific subprogram. Each subprogram has its own funding requirements and compliance requirements. The objective of the CRRSA EANS (84.425R) and ARP EANS (84.425V) subprograms is to provide governors with a reservation of funds to provide services or assistance to eligible nonpublic schools to address the impact the COVID-19 pandemic has had, and continues to have, on nonpublic school students and teachers in the state. In fiscal year 2024, the state spent more than $600 million in ESFs federal funding. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls over and did not comply with federal activities allowed and subrecipient monitoring requirements for the ESF program. After the Office distributed EANS funds to nonpublic schools, there was $47,322,281 in ESF program funds remaining that went unobligated. Those funds reverted to the Governor’s office as CRRSA-GEER funds. After the reversion of these funds, the legislature specifically directed the Office to use the resources to fund Transition to Kindergarten programs. During this process, the Office distributed funds to 149 public LEAs but did not issue subawards as required. As a result, it failed to clearly communicate these awards’ terms and conditions to the subrecipients, including the allowable uses of the funds. We consider this internal control deficiency to be a material weakness which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office believed the information that was sent out through other means would cover the required elements it needed to communicate to the LEAs. The Office did not know the amount each LEA would receive as amounts were not predetermined, and the Office used an apportionment process to allocate funds to meet the legislative intent. Effect of Condition and Questioned Costs Without issuing subawards to subrecipients to ensure proper accountability and compliance with federal requirements, the Office cannot ensure all funds were used for allowable activities and properly supported. In addition, without a subaward, the Office could not distribute funds to these subrecipients. Therefore, we are questioning the $47,322,280 that it distributed to these LEAs. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Office: • Establish effective internal controls to ensure that all federal funds it grants to subrecipients are awarded through a subaward that meets federal requirements • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office’s Response We distributed these funds through the apportionment process instead of our grants system due to the nature of how the payments were calculated. Our grants system provides a grant award notification via e-mail when the grant is awarded that contains the federal elements required in CFR 200.332. While we did not provide a formal subaward that included all of these elements in one document, we provided most of them using other formal communication, such as through a Gov Delivery e-mail and the School District Accounting Manual. If we use the apportionment process to distribute funds in the future, we will include all of the required federal elements in a separate subaward. Additionally, our communication to school districts included the use of allowable activities for these funds. Therefore, we do not agree that the funds should be questioned as not being allowable or properly supported. Auditor’s Remarks The Office asserts the costs should not be questioned for not being allowable or properly supported. However, without a subaward the Office could not distribute federal funds to these subrecipients, therefore we are questioning the costs consistent with criteria established in 2 CFR 200 (Uniform Guidance). We reaffirm our finding and will review the status of the Office’s corrective action during the next audit. Applicable Laws and Regulations Title 34 U.S. Code of Federal Regulations (CFR) Part 75, Direct grant programs, section 702, Fiscal control and fund accounting procedures, states that a grantee shall use fiscal control and fund accounting procedures that ensure proper disbursement of, and accounting for, Federal funds as required in 2 CFR part 200, subpart D—Post Federal Award Requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 332, Requirements for pass-through entities, requires that every subaward is clearly identified to the subrecipient as a subaward and includes the federal identification elements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 U.S. Code of Federal Regulations (CFR) Part 200.1, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for questioned costs. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200.403, Uniform Guidance, establishes the factors affecting the allowability of costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2024-028 The Office of Superintendent of Public Instruction did not have adequate internal controls over and did not comply with federal activities allowed and subrecipient monitoring requirements for the Education Stabilization Fund program. Assistance Listing Number and Title: 84.425R COVID-19 Coronavirus Response and Relief Supplemental Appropriations Act, Emergency Assistance to Non-Public Schools (CRRSA EANS) 84.425V COVID-19 American Rescue Plan – Emergency Assistance to Non-Public Schools (ARP EANS) program Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: S425D210015; S425R210012; S425U210015; S425V210012; S425W210049 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Components: Activities Allowed or Unallowed Allowable Costs/Cost Principles Subrecipient Monitoring Known Questioned Cost Amount: $47,322,280 Prior Year Audit Finding: No Background Beginning in March 2020, Congress set aside the Elementary and Secondary School Emergency Relief (ESSER) Fund to address the effect the COVID-19 pandemic has had, and continues to have, on elementary and secondary schools across the nation. Several rounds of funding were distributed to states under the Education Stabilization Fund (ESF) program with the intent to support public and nonpublic schools. The U.S. Department of Education awarded ESF grants to the Office of Financial Management, which then dispersed funds to the Office of Superintendent of Public Instruction, to pass through to Local Education Agencies (LEAs). The U.S. Department of Education awarded ESF program funds to grantees under multiple subprograms of the ESF. An alphabetic character at the end of the 84.425 Assistance Listing Number was used to delineate the specific subprogram. Each subprogram has its own funding requirements and compliance requirements. The objective of the CRRSA EANS (84.425R) and ARP EANS (84.425V) subprograms is to provide governors with a reservation of funds to provide services or assistance to eligible nonpublic schools to address the impact the COVID-19 pandemic has had, and continues to have, on nonpublic school students and teachers in the state. In fiscal year 2024, the state spent more than $600 million in ESFs federal funding. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls over and did not comply with federal activities allowed and subrecipient monitoring requirements for the ESF program. After the Office distributed EANS funds to nonpublic schools, there was $47,322,281 in ESF program funds remaining that went unobligated. Those funds reverted to the Governor’s office as CRRSA-GEER funds. After the reversion of these funds, the legislature specifically directed the Office to use the resources to fund Transition to Kindergarten programs. During this process, the Office distributed funds to 149 public LEAs but did not issue subawards as required. As a result, it failed to clearly communicate these awards’ terms and conditions to the subrecipients, including the allowable uses of the funds. We consider this internal control deficiency to be a material weakness which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office believed the information that was sent out through other means would cover the required elements it needed to communicate to the LEAs. The Office did not know the amount each LEA would receive as amounts were not predetermined, and the Office used an apportionment process to allocate funds to meet the legislative intent. Effect of Condition and Questioned Costs Without issuing subawards to subrecipients to ensure proper accountability and compliance with federal requirements, the Office cannot ensure all funds were used for allowable activities and properly supported. In addition, without a subaward, the Office could not distribute funds to these subrecipients. Therefore, we are questioning the $47,322,280 that it distributed to these LEAs. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Office: • Establish effective internal controls to ensure that all federal funds it grants to subrecipients are awarded through a subaward that meets federal requirements • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office’s Response We distributed these funds through the apportionment process instead of our grants system due to the nature of how the payments were calculated. Our grants system provides a grant award notification via e-mail when the grant is awarded that contains the federal elements required in CFR 200.332. While we did not provide a formal subaward that included all of these elements in one document, we provided most of them using other formal communication, such as through a Gov Delivery e-mail and the School District Accounting Manual. If we use the apportionment process to distribute funds in the future, we will include all of the required federal elements in a separate subaward. Additionally, our communication to school districts included the use of allowable activities for these funds. Therefore, we do not agree that the funds should be questioned as not being allowable or properly supported. Auditor’s Remarks The Office asserts the costs should not be questioned for not being allowable or properly supported. However, without a subaward the Office could not distribute federal funds to these subrecipients, therefore we are questioning the costs consistent with criteria established in 2 CFR 200 (Uniform Guidance). We reaffirm our finding and will review the status of the Office’s corrective action during the next audit. Applicable Laws and Regulations Title 34 U.S. Code of Federal Regulations (CFR) Part 75, Direct grant programs, section 702, Fiscal control and fund accounting procedures, states that a grantee shall use fiscal control and fund accounting procedures that ensure proper disbursement of, and accounting for, Federal funds as required in 2 CFR part 200, subpart D—Post Federal Award Requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 332, Requirements for pass-through entities, requires that every subaward is clearly identified to the subrecipient as a subaward and includes the federal identification elements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 U.S. Code of Federal Regulations (CFR) Part 200.1, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for questioned costs. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200.403, Uniform Guidance, establishes the factors affecting the allowability of costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2024-028 The Office of Superintendent of Public Instruction did not have adequate internal controls over and did not comply with federal activities allowed and subrecipient monitoring requirements for the Education Stabilization Fund program. Assistance Listing Number and Title: 84.425R COVID-19 Coronavirus Response and Relief Supplemental Appropriations Act, Emergency Assistance to Non-Public Schools (CRRSA EANS) 84.425V COVID-19 American Rescue Plan – Emergency Assistance to Non-Public Schools (ARP EANS) program Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: S425D210015; S425R210012; S425U210015; S425V210012; S425W210049 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Components: Activities Allowed or Unallowed Allowable Costs/Cost Principles Subrecipient Monitoring Known Questioned Cost Amount: $47,322,280 Prior Year Audit Finding: No Background Beginning in March 2020, Congress set aside the Elementary and Secondary School Emergency Relief (ESSER) Fund to address the effect the COVID-19 pandemic has had, and continues to have, on elementary and secondary schools across the nation. Several rounds of funding were distributed to states under the Education Stabilization Fund (ESF) program with the intent to support public and nonpublic schools. The U.S. Department of Education awarded ESF grants to the Office of Financial Management, which then dispersed funds to the Office of Superintendent of Public Instruction, to pass through to Local Education Agencies (LEAs). The U.S. Department of Education awarded ESF program funds to grantees under multiple subprograms of the ESF. An alphabetic character at the end of the 84.425 Assistance Listing Number was used to delineate the specific subprogram. Each subprogram has its own funding requirements and compliance requirements. The objective of the CRRSA EANS (84.425R) and ARP EANS (84.425V) subprograms is to provide governors with a reservation of funds to provide services or assistance to eligible nonpublic schools to address the impact the COVID-19 pandemic has had, and continues to have, on nonpublic school students and teachers in the state. In fiscal year 2024, the state spent more than $600 million in ESFs federal funding. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Office did not have adequate internal controls over and did not comply with federal activities allowed and subrecipient monitoring requirements for the ESF program. After the Office distributed EANS funds to nonpublic schools, there was $47,322,281 in ESF program funds remaining that went unobligated. Those funds reverted to the Governor’s office as CRRSA-GEER funds. After the reversion of these funds, the legislature specifically directed the Office to use the resources to fund Transition to Kindergarten programs. During this process, the Office distributed funds to 149 public LEAs but did not issue subawards as required. As a result, it failed to clearly communicate these awards’ terms and conditions to the subrecipients, including the allowable uses of the funds. We consider this internal control deficiency to be a material weakness which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Office believed the information that was sent out through other means would cover the required elements it needed to communicate to the LEAs. The Office did not know the amount each LEA would receive as amounts were not predetermined, and the Office used an apportionment process to allocate funds to meet the legislative intent. Effect of Condition and Questioned Costs Without issuing subawards to subrecipients to ensure proper accountability and compliance with federal requirements, the Office cannot ensure all funds were used for allowable activities and properly supported. In addition, without a subaward, the Office could not distribute funds to these subrecipients. Therefore, we are questioning the $47,322,280 that it distributed to these LEAs. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Office: • Establish effective internal controls to ensure that all federal funds it grants to subrecipients are awarded through a subaward that meets federal requirements • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Office’s Response We distributed these funds through the apportionment process instead of our grants system due to the nature of how the payments were calculated. Our grants system provides a grant award notification via e-mail when the grant is awarded that contains the federal elements required in CFR 200.332. While we did not provide a formal subaward that included all of these elements in one document, we provided most of them using other formal communication, such as through a Gov Delivery e-mail and the School District Accounting Manual. If we use the apportionment process to distribute funds in the future, we will include all of the required federal elements in a separate subaward. Additionally, our communication to school districts included the use of allowable activities for these funds. Therefore, we do not agree that the funds should be questioned as not being allowable or properly supported. Auditor’s Remarks The Office asserts the costs should not be questioned for not being allowable or properly supported. However, without a subaward the Office could not distribute federal funds to these subrecipients, therefore we are questioning the costs consistent with criteria established in 2 CFR 200 (Uniform Guidance). We reaffirm our finding and will review the status of the Office’s corrective action during the next audit. Applicable Laws and Regulations Title 34 U.S. Code of Federal Regulations (CFR) Part 75, Direct grant programs, section 702, Fiscal control and fund accounting procedures, states that a grantee shall use fiscal control and fund accounting procedures that ensure proper disbursement of, and accounting for, Federal funds as required in 2 CFR part 200, subpart D—Post Federal Award Requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 303, Internal controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 332, Requirements for pass-through entities, requires that every subaward is clearly identified to the subrecipient as a subaward and includes the federal identification elements. Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 U.S. Code of Federal Regulations (CFR) Part 200.1, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for questioned costs. Part 200.410 establishes requirements for the collection of unallowable costs. Title 2 CFR Part 200.403, Uniform Guidance, establishes the factors affecting the allowability of costs. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2024-050 The Department of Commerce did not have adequate internal controls over and did not comply with period of performance requirements for the Low-Income Home Energy Assistance program. Assistance Listing Number and Title: 93.568 Low-Income Home Energy Assistance Program 93.568 COVID-19 Low-Income Home Energy Assistance Program Federal Grantor Name: Department of Health and Human Services Federal Award/Contract Number: 2101WALIEA, 2101WAE5C6, 2101WALWC6, 2101WALWC5, 2201WALIEI, 2201WALIEA, 2201WALIE4 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Period of Performance Known Questioned Cost Amount: $4,409,760 Prior Year Audit Finding: N/A Background The U.S. Department of Health and Human Services, through the Office of Community Services at the Administration for Children and Families (ACF), administers the Low-Income Home Energy Assistance Program (LIHEAP). The agency distributes LIHEAP block grant funds by formula to states, the District of Columbia and U.S. territories. In Washington, the Department of Commerce administers LIHEAP, which provides financial assistance to low-income households to meet their home energy needs. The Department administers and awards LIHEAP funds under two programs: the energy assistance program and the weatherization program. Subawards are issued to community-based organizations to provide this assistance. In fiscal year 2024, the Department spent more than $96 million in federal funds, about $89.5 million of which it paid to subrecipients. Federal regulations require the Department to obligate at least 90% of the LIHEAP block grant funds in the first federal fiscal year in which they are awarded. If funds are left over after the end of the first federal fiscal year, the Department must either return those funds or report to the grantor the amount it intends to carry over and reallot. The Department may carry over up to 10% of the funds payable for obligation no later than the end of the following federal fiscal year. Funds not obligated by the end of the second fiscal year of the award must be returned to ACF. The limits on the period for the expenditure of funds are communicated to award recipients. LIHEAP awards typically have a two-year project period when the Department may obligate funds to subrecipients through subawards and incur administrative costs to execute the award. The subawards define the period of performance for subrecipients to spend these funds. Departmental administrative costs are considered obligated when the expenditure activity occurs. As such, the period of performance for administrative costs aligns with the project period start and end date. If the Department requires more than one year from the project period end date to liquidate allowable costs, it is required to notify the Grantor. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with period of performance requirements for LIHEAP. Obligations During state fiscal year 2024, the Department was required to obligate 90% of funds for the federal fiscal year 2023 award. This amount is reported on the Carryover and Reallotment Report. The Department was unable to provide documentation to support the amount of funds it obligated in the first year of the award. This issue is referenced in finding 2024-051. Expenditures During state fiscal year 2024, there were five awards with project end dates. We judgmentally selected and examined 21 expenditures charged to these awards. We found: • Four (19%) expenditures for which the Department did not provide any documentation to support that the cost occurred during the period of performance • Three (14%) expenditures for which the documentation the Department provided did not support that the costs occurred during the period of performance The total costs associated with these seven expenditures are $1,010,249. In addition, we analyzed expenditures charged to the awards in the accounting system and identified $1,346,137 of administrative activities that occurred after the period of performance. Liquidations There were two awards with liquidation periods ending during state fiscal year 2024. We judgmentally selected and examined eight expenditures the Department charged to grants that were liquidating funds during the audit period. We found: • Three (38%) expenditures for which the Department did not provide any documentation to support that the cost occurred during the period of performance • Two (25%) expenditures for which the documentation the Department provided did not support that the costs occurred during the period of performance The total costs associated with these five expenditures are $1,916,227 In addition, we analyzed expenditures charged to the awards and identified $137,148 of administrative activities that occurred after the period of performance. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Department misinterpreted the federal regulations, which led management to believe it was compliant with period of performance requirements. Further, the Department did not provide us with all the documentation to demonstrate that the Department incurred the charges we examined during the period of performance. Effect of Condition and Questioned Costs Without establishing adequate internal controls, the Department cannot reasonably ensure it uses federal funds within the period of performance. We identified $1,483,285 in known questioned costs for expenditures that occurred outside of the period of performance. We also identified $2,926,476 in known questioned costs for expenditures that did not have adequate support to determine if they were within the period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Design and implement internal controls to ensure it complies with period of performance requirements • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response The Department agrees with the internal control weaknesses identified in the report. However, for the contract periods included in this audit we were operating off of guidance received by the United State Department of Health and Human Services (HHS) in 2022. Directly following notification of this deficiency for this audit, we reached out to HHS to clarify the closeout year requirements. In December 2024 we received updated guidance on how to apply the closeout year to current awards. Beginning with the 2024 program year (October 1, 2023), all subrecipient contracts were issued with a two-year period of performance, which will eliminate new expenses being added to the closeout year. This ensures that all LIHEAP awards will be managed within a consistent two-year period of performance, which aligns with the updated HHS guidance. All future LIHEAP awards will follow the same period of performance principle. The Department will engage with the HHS to determine the appropriate next steps on how to handle the questioned costs. The Department is committed to addressing the internal control weaknesses identified in the audit and will continue to strengthen its processes to ensure ongoing compliance with period of performance requirements. Auditor’s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department's corrective action during our next audit. Applicable Laws and Regulations Title 45 U.S. Code of Federal Regulations (CFR) Part 75, section 303, Internal Controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 45 CFR Part 75, section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards establishes definitions for questioned costs. Part 200.410 establishes requirements for the collection of unallowable costs. Title 45 CFR Part 96, section 81, Carryover and reallotment, establishes the procedures relating to carryover and reallotment of regular LIHEAP block grant funds ACF Supplemental Terms and Conditions, LIHEAP, effective October 1, 2021, states in part: 9. Obligation Deadline: a. The two-year funding (project) period for this award is concurrent with the obligation period: from the first day of the FFY for which these funds were awarded through the last day of the following FFY. (i.e., October 1, FFY 1 through September 30, FFY 2.) A maximum of 10 percent of the federal funds awarded under this grant may be held available for obligation in the FFY 2 of the project period. If more than 10 percent of a recipient's federal funds remains unobligated at the end of the FFY in which they were allotted, those excess funds must be returned to HHS and are subject to reallotment among all recipients in the next fiscal year. Any federal funds not obligated by the end of the two-year obligation period will be recouped by the Department. b. Federal funds awarded under this grant must be expended for the purposes for which they were awarded and in payment for obligations made within the time period allotted. 10. Liquidation: All properly obligated federal funds awarded under this grant must be liquidated in accordance with the recipient’s own fiscal control and funds control procedures. If the recipient requires more than 1 year from the project period end date to liquidate allowable costs, it shall notify the Grants Management Officer identified on its latest Notice of Award. The notification shall include the reason for the delay and the anticipated timeframe for liquidation. Any federal funds from this award not liquidated by the date required under the recipient’s own fiscal control procedures, which may not exceed five years following the fiscal year of award, will be recouped by this Department. ACF-OCS-LIHEAP-IM-2024-04 LIHEAP Obligations, Expenditures, and Refunds, states in part: Federal appropriations accounting law at 31 U.S.C. § 1502(a) states that the balance of an appropriation or fund limited for obligation to a definite period is available only for payment of expenses properly incurred during the period of availability or to complete contracts properly made within that period of availability. Grant recipients may not incur new expenditures beyond the period of performance unless necessary to liquidate obligations made during the period of performance under active agreements or subawards with partnering agencies. Grant recipients must liquidate obligations according to the same rules, including the timeframe, required of its own non-federal funding. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2024-050 The Department of Commerce did not have adequate internal controls over and did not comply with period of performance requirements for the Low-Income Home Energy Assistance program. Assistance Listing Number and Title: 93.568 Low-Income Home Energy Assistance Program 93.568 COVID-19 Low-Income Home Energy Assistance Program Federal Grantor Name: Department of Health and Human Services Federal Award/Contract Number: 2101WALIEA, 2101WAE5C6, 2101WALWC6, 2101WALWC5, 2201WALIEI, 2201WALIEA, 2201WALIE4 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Period of Performance Known Questioned Cost Amount: $4,409,760 Prior Year Audit Finding: N/A Background The U.S. Department of Health and Human Services, through the Office of Community Services at the Administration for Children and Families (ACF), administers the Low-Income Home Energy Assistance Program (LIHEAP). The agency distributes LIHEAP block grant funds by formula to states, the District of Columbia and U.S. territories. In Washington, the Department of Commerce administers LIHEAP, which provides financial assistance to low-income households to meet their home energy needs. The Department administers and awards LIHEAP funds under two programs: the energy assistance program and the weatherization program. Subawards are issued to community-based organizations to provide this assistance. In fiscal year 2024, the Department spent more than $96 million in federal funds, about $89.5 million of which it paid to subrecipients. Federal regulations require the Department to obligate at least 90% of the LIHEAP block grant funds in the first federal fiscal year in which they are awarded. If funds are left over after the end of the first federal fiscal year, the Department must either return those funds or report to the grantor the amount it intends to carry over and reallot. The Department may carry over up to 10% of the funds payable for obligation no later than the end of the following federal fiscal year. Funds not obligated by the end of the second fiscal year of the award must be returned to ACF. The limits on the period for the expenditure of funds are communicated to award recipients. LIHEAP awards typically have a two-year project period when the Department may obligate funds to subrecipients through subawards and incur administrative costs to execute the award. The subawards define the period of performance for subrecipients to spend these funds. Departmental administrative costs are considered obligated when the expenditure activity occurs. As such, the period of performance for administrative costs aligns with the project period start and end date. If the Department requires more than one year from the project period end date to liquidate allowable costs, it is required to notify the Grantor. Federal regulations require recipients to establish and follow internal controls to ensure compliance with program requirements. These controls include understanding grant requirements and monitoring the effectiveness of established controls. Description of Condition The Department did not have adequate internal controls over and did not comply with period of performance requirements for LIHEAP. Obligations During state fiscal year 2024, the Department was required to obligate 90% of funds for the federal fiscal year 2023 award. This amount is reported on the Carryover and Reallotment Report. The Department was unable to provide documentation to support the amount of funds it obligated in the first year of the award. This issue is referenced in finding 2024-051. Expenditures During state fiscal year 2024, there were five awards with project end dates. We judgmentally selected and examined 21 expenditures charged to these awards. We found: • Four (19%) expenditures for which the Department did not provide any documentation to support that the cost occurred during the period of performance • Three (14%) expenditures for which the documentation the Department provided did not support that the costs occurred during the period of performance The total costs associated with these seven expenditures are $1,010,249. In addition, we analyzed expenditures charged to the awards in the accounting system and identified $1,346,137 of administrative activities that occurred after the period of performance. Liquidations There were two awards with liquidation periods ending during state fiscal year 2024. We judgmentally selected and examined eight expenditures the Department charged to grants that were liquidating funds during the audit period. We found: • Three (38%) expenditures for which the Department did not provide any documentation to support that the cost occurred during the period of performance • Two (25%) expenditures for which the documentation the Department provided did not support that the costs occurred during the period of performance The total costs associated with these five expenditures are $1,916,227 In addition, we analyzed expenditures charged to the awards and identified $137,148 of administrative activities that occurred after the period of performance. We consider these internal control deficiencies to be a material weakness, which led to material noncompliance. This issue was not reported as a finding in the prior audit. Cause of Condition The Department misinterpreted the federal regulations, which led management to believe it was compliant with period of performance requirements. Further, the Department did not provide us with all the documentation to demonstrate that the Department incurred the charges we examined during the period of performance. Effect of Condition and Questioned Costs Without establishing adequate internal controls, the Department cannot reasonably ensure it uses federal funds within the period of performance. We identified $1,483,285 in known questioned costs for expenditures that occurred outside of the period of performance. We also identified $2,926,476 in known questioned costs for expenditures that did not have adequate support to determine if they were within the period of performance. We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendations We recommend the Department: • Design and implement internal controls to ensure it complies with period of performance requirements • Consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid Department’s Response The Department agrees with the internal control weaknesses identified in the report. However, for the contract periods included in this audit we were operating off of guidance received by the United State Department of Health and Human Services (HHS) in 2022. Directly following notification of this deficiency for this audit, we reached out to HHS to clarify the closeout year requirements. In December 2024 we received updated guidance on how to apply the closeout year to current awards. Beginning with the 2024 program year (October 1, 2023), all subrecipient contracts were issued with a two-year period of performance, which will eliminate new expenses being added to the closeout year. This ensures that all LIHEAP awards will be managed within a consistent two-year period of performance, which aligns with the updated HHS guidance. All future LIHEAP awards will follow the same period of performance principle. The Department will engage with the HHS to determine the appropriate next steps on how to handle the questioned costs. The Department is committed to addressing the internal control weaknesses identified in the audit and will continue to strengthen its processes to ensure ongoing compliance with period of performance requirements. Auditor’s Remarks We thank the Department for its cooperation and assistance throughout the audit. We will review the status of the Department's corrective action during our next audit. Applicable Laws and Regulations Title 45 U.S. Code of Federal Regulations (CFR) Part 75, section 303, Internal Controls, describes the requirements for auditees to maintain internal controls over federal programs and comply with federal program requirements. Title 45 CFR Part 75, section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 CFR Part 200.1, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards establishes definitions for questioned costs. Part 200.410 establishes requirements for the collection of unallowable costs. Title 45 CFR Part 96, section 81, Carryover and reallotment, establishes the procedures relating to carryover and reallotment of regular LIHEAP block grant funds ACF Supplemental Terms and Conditions, LIHEAP, effective October 1, 2021, states in part: 9. Obligation Deadline: a. The two-year funding (project) period for this award is concurrent with the obligation period: from the first day of the FFY for which these funds were awarded through the last day of the following FFY. (i.e., October 1, FFY 1 through September 30, FFY 2.) A maximum of 10 percent of the federal funds awarded under this grant may be held available for obligation in the FFY 2 of the project period. If more than 10 percent of a recipient's federal funds remains unobligated at the end of the FFY in which they were allotted, those excess funds must be returned to HHS and are subject to reallotment among all recipients in the next fiscal year. Any federal funds not obligated by the end of the two-year obligation period will be recouped by the Department. b. Federal funds awarded under this grant must be expended for the purposes for which they were awarded and in payment for obligations made within the time period allotted. 10. Liquidation: All properly obligated federal funds awarded under this grant must be liquidated in accordance with the recipient’s own fiscal control and funds control procedures. If the recipient requires more than 1 year from the project period end date to liquidate allowable costs, it shall notify the Grants Management Officer identified on its latest Notice of Award. The notification shall include the reason for the delay and the anticipated timeframe for liquidation. Any federal funds from this award not liquidated by the date required under the recipient’s own fiscal control procedures, which may not exceed five years following the fiscal year of award, will be recouped by this Department. ACF-OCS-LIHEAP-IM-2024-04 LIHEAP Obligations, Expenditures, and Refunds, states in part: Federal appropriations accounting law at 31 U.S.C. § 1502(a) states that the balance of an appropriation or fund limited for obligation to a definite period is available only for payment of expenses properly incurred during the period of availability or to complete contracts properly made within that period of availability. Grant recipients may not incur new expenditures beyond the period of performance unless necessary to liquidate obligations made during the period of performance under active agreements or subawards with partnering agencies. Grant recipients must liquidate obligations according to the same rules, including the timeframe, required of its own non-federal funding. The American Institute of Certified Public Accountants defines significant deficiencies and material weaknesses in its Codification of Statements on Auditing Standards, section 935, Compliance Audits, paragraph 11.
2024-024 The Office of Superintendent of Public Instruction improperly charged $5,139 to the Special Education program. Assistance Listing Number and Title: 84.027 Special Education Grants to Staes (IDEA, Part B) 84.027 COVID-19 Special Education Grants to Staes (IDEA, Part B) 84.173 Special Education Preschool Grants (IDEA Preschool) 84.173 COVID-19 Special Education Preschool Grants (IDEA Preschool) Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: H027A210074-21A; H027A220074; H027A230074-23A; H027X210074; H173A210074; H173A220074; H173A230074; H173X210074 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Period of Performance Known Questioned Cost Amount: $5,139 Prior Year Audit Finding: None Background The Individuals with Disabilities Education Act’s (IDEA) Special Education Grants to States program (IDEA, Part B) provides grants to states, and through them to local education agencies (LEAs), to help provide special education and related services to eligible children with disabilities. IDEA’s Special Education Preschool Grants program (IDEA Preschool), also known as the “619 program,” provides grants to states, and through them to LEAs, to assist with providing special education and related services to children with disabilities ages 3 through 5 and, at a state’s discretion, to 2-year-old children with disabilities who will turn 3 during the school year. The Office of Superintendent of Public Instruction administers the Special Education program in Washington, which serves about 143,000 eligible students. The program provides specially designed instruction to address students’ unique needs. The Office offers the program at no cost to parents, and it includes the related services students need to access their educational program. The Office spent about $251 million in federal IDEA grant funds during fiscal year 2024 and passed about $243 million of that funding through to LEAs and educational service districts. The grantor identified that obligations charged to the fiscal year 2022 IDEA grant funds must be obligated or incurred prior to September 30, 2023. Description of Condition The Office improperly charged $5,139 to the program. We found the Office had adequate internal controls to ensure it materially complied with period of performance requirements. We used a nonstatistical sampling method to randomly select and examine 13 payments of a total of 68 that the Office made close to the end of the obligation period to ensure they were allowable and obligated within the proper period. During our testing, we found three charges totaling $5,139 that were obligated after the obligation period ended. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition Office staff made accounting adjustments to the fiscal year 2023 IDEA part B grant. These payments were initially charged to an allowable grant, but staff made adjustments and moved them to the fiscal year 2022 IDEA part B grant. Therefore, the payments were then noncompliant with period of performance requirements. Effect of Condition and Questioned Costs We identified $5,139 in questioned costs that were obligated outside the obligation date. Projection to population Known Questioned Costs Likely Questioned Costs Federal expenditures $5,139 $26,883 We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Office consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Office’s Response The Office of Superintendent of Public Instruction (OSPI) concurs with this finding. To ensure that expenditures occurring outside of a grant’s period of performance are not shifted to the grant during its liquidation period, OSPI has established internal controls to address accounting adjustments made during liquidation periods. Journal vouchers (corrections) will be verified by budget staff prior to submission to ensure expenditures occurred within the grant period of performance. OSPI will communicate the corrective action plan with internal stakeholders to ensure compliance with updated process/procedures. Internal Control Details: • Monitor expenditures (through reconciliation of monthly reports) to ensure the agency stays within the allowable set-aside threshold and grant maximum. • Verify that all expenditures corrected with journal vouchers during the grant liquidation period have occurred during the grant period of performance. • Complete expenditure corrections within the grant liquidation period. • Liquidation is done on the last business day of January (or 120 days after the budget period ends). Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office's corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 U.S. Code of Federal Regulations (CFR) Part 200.1, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for questioned costs. Part 200.410 establishes requirements for the collection of unallowable costs. Fiscal Year 2022 Special Education Grant Award, Grant Award Notification, establishes the federal funding period for award numbers H137A210074 and H027A210074 as July 1, 2021 through September 30, 2023. Tile 20 United States Code 1225(b), General Education Provisions Act, establishes that any funds that are not obligated at the end of the federal funding period shall remain available for obligation for an additional period of 12 months.
2024-024 The Office of Superintendent of Public Instruction improperly charged $5,139 to the Special Education program. Assistance Listing Number and Title: 84.027 Special Education Grants to Staes (IDEA, Part B) 84.027 COVID-19 Special Education Grants to Staes (IDEA, Part B) 84.173 Special Education Preschool Grants (IDEA Preschool) 84.173 COVID-19 Special Education Preschool Grants (IDEA Preschool) Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: H027A210074-21A; H027A220074; H027A230074-23A; H027X210074; H173A210074; H173A220074; H173A230074; H173X210074 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Period of Performance Known Questioned Cost Amount: $5,139 Prior Year Audit Finding: None Background The Individuals with Disabilities Education Act’s (IDEA) Special Education Grants to States program (IDEA, Part B) provides grants to states, and through them to local education agencies (LEAs), to help provide special education and related services to eligible children with disabilities. IDEA’s Special Education Preschool Grants program (IDEA Preschool), also known as the “619 program,” provides grants to states, and through them to LEAs, to assist with providing special education and related services to children with disabilities ages 3 through 5 and, at a state’s discretion, to 2-year-old children with disabilities who will turn 3 during the school year. The Office of Superintendent of Public Instruction administers the Special Education program in Washington, which serves about 143,000 eligible students. The program provides specially designed instruction to address students’ unique needs. The Office offers the program at no cost to parents, and it includes the related services students need to access their educational program. The Office spent about $251 million in federal IDEA grant funds during fiscal year 2024 and passed about $243 million of that funding through to LEAs and educational service districts. The grantor identified that obligations charged to the fiscal year 2022 IDEA grant funds must be obligated or incurred prior to September 30, 2023. Description of Condition The Office improperly charged $5,139 to the program. We found the Office had adequate internal controls to ensure it materially complied with period of performance requirements. We used a nonstatistical sampling method to randomly select and examine 13 payments of a total of 68 that the Office made close to the end of the obligation period to ensure they were allowable and obligated within the proper period. During our testing, we found three charges totaling $5,139 that were obligated after the obligation period ended. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition Office staff made accounting adjustments to the fiscal year 2023 IDEA part B grant. These payments were initially charged to an allowable grant, but staff made adjustments and moved them to the fiscal year 2022 IDEA part B grant. Therefore, the payments were then noncompliant with period of performance requirements. Effect of Condition and Questioned Costs We identified $5,139 in questioned costs that were obligated outside the obligation date. Projection to population Known Questioned Costs Likely Questioned Costs Federal expenditures $5,139 $26,883 We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Office consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Office’s Response The Office of Superintendent of Public Instruction (OSPI) concurs with this finding. To ensure that expenditures occurring outside of a grant’s period of performance are not shifted to the grant during its liquidation period, OSPI has established internal controls to address accounting adjustments made during liquidation periods. Journal vouchers (corrections) will be verified by budget staff prior to submission to ensure expenditures occurred within the grant period of performance. OSPI will communicate the corrective action plan with internal stakeholders to ensure compliance with updated process/procedures. Internal Control Details: • Monitor expenditures (through reconciliation of monthly reports) to ensure the agency stays within the allowable set-aside threshold and grant maximum. • Verify that all expenditures corrected with journal vouchers during the grant liquidation period have occurred during the grant period of performance. • Complete expenditure corrections within the grant liquidation period. • Liquidation is done on the last business day of January (or 120 days after the budget period ends). Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office's corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 U.S. Code of Federal Regulations (CFR) Part 200.1, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for questioned costs. Part 200.410 establishes requirements for the collection of unallowable costs. Fiscal Year 2022 Special Education Grant Award, Grant Award Notification, establishes the federal funding period for award numbers H137A210074 and H027A210074 as July 1, 2021 through September 30, 2023. Tile 20 United States Code 1225(b), General Education Provisions Act, establishes that any funds that are not obligated at the end of the federal funding period shall remain available for obligation for an additional period of 12 months.
2024-024 The Office of Superintendent of Public Instruction improperly charged $5,139 to the Special Education program. Assistance Listing Number and Title: 84.027 Special Education Grants to Staes (IDEA, Part B) 84.027 COVID-19 Special Education Grants to Staes (IDEA, Part B) 84.173 Special Education Preschool Grants (IDEA Preschool) 84.173 COVID-19 Special Education Preschool Grants (IDEA Preschool) Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: H027A210074-21A; H027A220074; H027A230074-23A; H027X210074; H173A210074; H173A220074; H173A230074; H173X210074 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Period of Performance Known Questioned Cost Amount: $5,139 Prior Year Audit Finding: None Background The Individuals with Disabilities Education Act’s (IDEA) Special Education Grants to States program (IDEA, Part B) provides grants to states, and through them to local education agencies (LEAs), to help provide special education and related services to eligible children with disabilities. IDEA’s Special Education Preschool Grants program (IDEA Preschool), also known as the “619 program,” provides grants to states, and through them to LEAs, to assist with providing special education and related services to children with disabilities ages 3 through 5 and, at a state’s discretion, to 2-year-old children with disabilities who will turn 3 during the school year. The Office of Superintendent of Public Instruction administers the Special Education program in Washington, which serves about 143,000 eligible students. The program provides specially designed instruction to address students’ unique needs. The Office offers the program at no cost to parents, and it includes the related services students need to access their educational program. The Office spent about $251 million in federal IDEA grant funds during fiscal year 2024 and passed about $243 million of that funding through to LEAs and educational service districts. The grantor identified that obligations charged to the fiscal year 2022 IDEA grant funds must be obligated or incurred prior to September 30, 2023. Description of Condition The Office improperly charged $5,139 to the program. We found the Office had adequate internal controls to ensure it materially complied with period of performance requirements. We used a nonstatistical sampling method to randomly select and examine 13 payments of a total of 68 that the Office made close to the end of the obligation period to ensure they were allowable and obligated within the proper period. During our testing, we found three charges totaling $5,139 that were obligated after the obligation period ended. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition Office staff made accounting adjustments to the fiscal year 2023 IDEA part B grant. These payments were initially charged to an allowable grant, but staff made adjustments and moved them to the fiscal year 2022 IDEA part B grant. Therefore, the payments were then noncompliant with period of performance requirements. Effect of Condition and Questioned Costs We identified $5,139 in questioned costs that were obligated outside the obligation date. Projection to population Known Questioned Costs Likely Questioned Costs Federal expenditures $5,139 $26,883 We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Office consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Office’s Response The Office of Superintendent of Public Instruction (OSPI) concurs with this finding. To ensure that expenditures occurring outside of a grant’s period of performance are not shifted to the grant during its liquidation period, OSPI has established internal controls to address accounting adjustments made during liquidation periods. Journal vouchers (corrections) will be verified by budget staff prior to submission to ensure expenditures occurred within the grant period of performance. OSPI will communicate the corrective action plan with internal stakeholders to ensure compliance with updated process/procedures. Internal Control Details: • Monitor expenditures (through reconciliation of monthly reports) to ensure the agency stays within the allowable set-aside threshold and grant maximum. • Verify that all expenditures corrected with journal vouchers during the grant liquidation period have occurred during the grant period of performance. • Complete expenditure corrections within the grant liquidation period. • Liquidation is done on the last business day of January (or 120 days after the budget period ends). Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office's corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 U.S. Code of Federal Regulations (CFR) Part 200.1, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for questioned costs. Part 200.410 establishes requirements for the collection of unallowable costs. Fiscal Year 2022 Special Education Grant Award, Grant Award Notification, establishes the federal funding period for award numbers H137A210074 and H027A210074 as July 1, 2021 through September 30, 2023. Tile 20 United States Code 1225(b), General Education Provisions Act, establishes that any funds that are not obligated at the end of the federal funding period shall remain available for obligation for an additional period of 12 months.
2024-024 The Office of Superintendent of Public Instruction improperly charged $5,139 to the Special Education program. Assistance Listing Number and Title: 84.027 Special Education Grants to Staes (IDEA, Part B) 84.027 COVID-19 Special Education Grants to Staes (IDEA, Part B) 84.173 Special Education Preschool Grants (IDEA Preschool) 84.173 COVID-19 Special Education Preschool Grants (IDEA Preschool) Federal Grantor Name: U.S. Department of Education Federal Award/Contract Number: H027A210074-21A; H027A220074; H027A230074-23A; H027X210074; H173A210074; H173A220074; H173A230074; H173X210074 Pass-through Entity Name: None Pass-through Award/Contract Number: None Applicable Compliance Component: Period of Performance Known Questioned Cost Amount: $5,139 Prior Year Audit Finding: None Background The Individuals with Disabilities Education Act’s (IDEA) Special Education Grants to States program (IDEA, Part B) provides grants to states, and through them to local education agencies (LEAs), to help provide special education and related services to eligible children with disabilities. IDEA’s Special Education Preschool Grants program (IDEA Preschool), also known as the “619 program,” provides grants to states, and through them to LEAs, to assist with providing special education and related services to children with disabilities ages 3 through 5 and, at a state’s discretion, to 2-year-old children with disabilities who will turn 3 during the school year. The Office of Superintendent of Public Instruction administers the Special Education program in Washington, which serves about 143,000 eligible students. The program provides specially designed instruction to address students’ unique needs. The Office offers the program at no cost to parents, and it includes the related services students need to access their educational program. The Office spent about $251 million in federal IDEA grant funds during fiscal year 2024 and passed about $243 million of that funding through to LEAs and educational service districts. The grantor identified that obligations charged to the fiscal year 2022 IDEA grant funds must be obligated or incurred prior to September 30, 2023. Description of Condition The Office improperly charged $5,139 to the program. We found the Office had adequate internal controls to ensure it materially complied with period of performance requirements. We used a nonstatistical sampling method to randomly select and examine 13 payments of a total of 68 that the Office made close to the end of the obligation period to ensure they were allowable and obligated within the proper period. During our testing, we found three charges totaling $5,139 that were obligated after the obligation period ended. Federal regulations require the auditor to issue a finding when the known or estimated questioned costs identified in a single audit exceed $25,000. We are issuing this finding because, as stated in the Effect of Condition and Questioned Costs section of this finding, the estimated questioned costs exceed that threshold. This issue was not reported as a finding in the prior audit. Cause of Condition Office staff made accounting adjustments to the fiscal year 2023 IDEA part B grant. These payments were initially charged to an allowable grant, but staff made adjustments and moved them to the fiscal year 2022 IDEA part B grant. Therefore, the payments were then noncompliant with period of performance requirements. Effect of Condition and Questioned Costs We identified $5,139 in questioned costs that were obligated outside the obligation date. Projection to population Known Questioned Costs Likely Questioned Costs Federal expenditures $5,139 $26,883 We question costs when we find an agency has not complied with grant regulations or when it does not have adequate documentation to support its expenditures. Recommendation We recommend the Office consult with the grantor to discuss whether the questioned costs identified in the audit should be repaid. Office’s Response The Office of Superintendent of Public Instruction (OSPI) concurs with this finding. To ensure that expenditures occurring outside of a grant’s period of performance are not shifted to the grant during its liquidation period, OSPI has established internal controls to address accounting adjustments made during liquidation periods. Journal vouchers (corrections) will be verified by budget staff prior to submission to ensure expenditures occurred within the grant period of performance. OSPI will communicate the corrective action plan with internal stakeholders to ensure compliance with updated process/procedures. Internal Control Details: • Monitor expenditures (through reconciliation of monthly reports) to ensure the agency stays within the allowable set-aside threshold and grant maximum. • Verify that all expenditures corrected with journal vouchers during the grant liquidation period have occurred during the grant period of performance. • Complete expenditure corrections within the grant liquidation period. • Liquidation is done on the last business day of January (or 120 days after the budget period ends). Auditor’s Remarks We thank the Office for its cooperation and assistance throughout the audit. We will review the status of the Office's corrective action during our next audit. Applicable Laws and Regulations Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), section 516, Audit findings, establishes reporting requirements for audit findings. Title 2 U.S. Code of Federal Regulations (CFR) Part 200.1, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) establishes definitions for questioned costs. Part 200.410 establishes requirements for the collection of unallowable costs. Fiscal Year 2022 Special Education Grant Award, Grant Award Notification, establishes the federal funding period for award numbers H137A210074 and H027A210074 as July 1, 2021 through September 30, 2023. Tile 20 United States Code 1225(b), General Education Provisions Act, establishes that any funds that are not obligated at the end of the federal funding period shall remain available for obligation for an additional period of 12 months.
2024-002 U.S. Department of the Treasury COVID-19 – Coronavirus State and Local Fiscal Recovery Funds – ALN 21.027 Significant Deficiency in Internal Controls Over Compliance and Other Matter Criteria: The compliance supplement identifies four Key Line Items required to be reported to the federal awarding agency which include (1) current period obligation, (2) cumulative obligation, (3) current period expenditure and (4) cumulative expenditure. Per 2 CFR 200.1, an obligation is an order placed for property and services, contracts and subawards made, and similar transactions that require payment. Condition: Obligations and expenditures were overstated by $93,955 on the March 31, 2024 Project and Expenditure report. Cause: The Town did not have a clear understanding of the reporting requirements and included amounts approved but not obligated as obligated and expended. Effect: The Town is not in compliance with grant reporting requirements. Questioned Costs: None Repeat Finding from Prior Year: No Recommendation: The Town should implement procedures to only report obligations and expenditures on the Project and Expenditure reporting for items that meet the federal criteria for reporting as an obligation and expenditure. Views of Responsible Official: Management agrees with the finding.
Federal Program: ALN 93.600 Head Start Category: Compliance/internal control significant deficiency Compliance Requirement: Allowable Costs/Cost Principles Condition: BGCPR real and personal property records are not complete and did not follow the program requirements. Additionally, prior approval from the Head Start program was not requested for some acquisitions. Criteria: 2 CFR §200.313 (d) establishes that in the management requirements of equipment that regardless of whether equipment is acquired in part or its entirety under the Federal award, the recipient or subrecipient must manage equipment (including replacement equipment) utilizing procedures that meet the following requirements: (1) Property records must include a description of the property, a serial number or another identification number, the source of funding for the property (including the Federal Award Identification Number), the title holder, the acquisition date, the cost of the property, the percentage of the Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property. The recipient and subrecipient are responsible for maintaining and updating property records when there is a change in the status of the property. 2 CFR §200.1 defines equipment as a tangible personal property (including information technology systems) having a useful life of more than one year and a per-unit acquisition cost which equals or exceeds the lesser of the capitalization level established by the non-Federal entity for financial statement purposes, or $5,000.Under U.S. Generally Accepted Accounting Principles (GAAP), the acquisition cost of capital equipment includes all expenses necessary to acquire the asset and prepare it for its intended use. This encompasses the purchase price, import duties, freight and handling charges, installation and assembly costs, site preparation expenses, and professional fees. As per established on BGCPR’s policy of Property and Equipment, the BGCPR will capitalize all items that have a unit cost greater than five thousand dollars ($5,000). Cause: BGCPR did not maintain essential details, such as acquisition costs, funding sources, or the Federal Award Identification Numbers, nor did it obtain the necessary prior approvals from the Head Start program for these acquisitions. Effect or potential effect: Failure to capitalize property and equipment and obtain the necessary approvals to comply with the federal regulations. Questioned Costs: Amount is below the threshold to be considered a questioned cost. Context: Upon reviewing 32 instances, two errors were found where BGCPR failed to properly account for equipment acquisitions exceeding $5,000. Recommendation: BGCPR must identify all properties acquired with Federal funds and maintain adequate accounting records in accordance with Federal regulations. The program must maintain an automated accounting and record keeping system adequate for effective oversight. Additionally, establish a robust internal control system to ensure all equipment purchases exceeding $5,000 are properly capitalized and that prior approvals are obtained. Views of responsible officials: BGCPR recognizes that it must keep and improve the asset capitalization processes and policies, particularly within the accounting system of record. It acknowledges the need to strengthen these processes to ensure accurate and compliant management of equipment acquisitions. To address this, BGCPR will implement a system capable of recording, classifying, and monitoring all capital assets in alignment with the criteria established under federal regulation 2 CFR §200. This improvement is essential to ensure that all asset capitalization activities meet regulatory standards and support greater financial transparency and accountability. As a corrective measure, BGCPR will take the following actions and will anticipate completing on June 30, 2025: a. Implement and maintain an automated accounting and financial records system to enable real-time oversight of the asset capitalization policy. b. Establish a robust internal control framework including pre-approvals for equipment purchases and cross-validations of financial data. c. Periodic internal monitoring’s to ensure compliance and documentation.d. Update BGCPR’s fiscal management guidance to include a formal provision requiring the capitalization policy to be reviewed every three (3) years in compliance with the ensure compliance with federal regulation 2 CFR §200 regarding asset capitalization criteria. e. Conduct a training program for accounting and financial personnel.
Finding No. 2024-004 Procurement Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: SLFRFP4547 – 2021 Award Period: 3/3/21 – 12/31/24 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria or Specific Requirement: The Town must comply with procurement standards set out at 2 CFR sections 200.303 and 200.318 through 200.326 within Uniform Guidance. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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). UG §200.318 General procurement standards. (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. §200.320 states that the non-Federal entity must use one of the prescribed methods of procurement. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in §200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: (1) Micro-purchases. Procurement by micro-purchase is the acquisition of supplies or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold (See the definition of micro-purchase in §200.1). To the maximum extent practicable, the non-Federal entity should distribute micro-purchases equitably among qualified suppliers. Micro-purchases may be awarded without soliciting competitive price or rate quotations if the non-Federal entity considers the price to be reasonable based on research, experience, purchase history or other information and documents it files accordingly. Purchase cards can be used for micropurchases if procedures are documented and approved by the non-Federal entity. (2) Small purchase. Procurement by small purchase is the acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the SAT, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a noncompetitive procurement can be used in accordance with §200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate: (1) Sealed bids. Bids are publicly solicited, and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price. (2) Proposals. Either a fixed price or cost-reimbursement type contract is awarded. Proposals are generally used when conditions are not appropriate for the use of sealed bids. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the allowed circumstances apply. Condition: The Town purchasing policy does not include all elements as outlined in 2 CFR sections 200.303 and 200.318 through 200.326 noted above. Questioned Costs: None Context: Although the Town’s purchasing policies do not include all elements as outlined in 2 CFR sections 200.303 and 200.318 through 200.326, we did not identify transactions where contracts were awarded without proper justification in 7 of 7 procurement transactions tested. Cause: Management was not aware of the procurement standards set out at 2 CFR sections 200.303 and 200.318 through 200.326 within Uniform Guidance. Effect: The Town is at risk for noncompliance with Federal grants as it relates to procurement. Repeat Finding: No Recommendation: We recommend that the Town update its procurement policies to include all elements identified in 2 CFR sections 200.303 and 200.318 through 200.326. Views of Responsible Officials: Management is working with our current auditors to update the Town’s procurement policies to be in compliance with the Uniform Guidance.
Finding No. 2024-038 Federal Awarding Agency: USDHS Impact: Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4094DRAKP00000001, 4413DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DMVA management did not issue a management decision for a finding relating to one subrecipient's single audit. Context: Under federal regulations, pass-through entities are responsible for issuing a management decision for audit findings relating to federal awards provided to subrecipients. The management decisions must clearly state whether or not the audit finding is substantiated, the reason for the decision, and the adequacy of the recipient’s proposed corrective actions to address the finding. If the subrecipient has not completed corrective action, a timetable for follow-up should be given. One Disaster Grants subrecipient’s single audit contained a finding and DMVA management did not issue a management decision to the subrecipient. The finding related to the subrecipient not submitting a single audit to the federal audit clearinghouse within nine months after the end of the subrecipient’s fiscal year as required by federal regulations. Cause: DMVA has controls to ensure a management decision is issued on a subrecipient’s single audit finding. However, due to staff not following procedures, the management decision was not issued. Criteria: Title 2 CFR 200.521 states the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. Furthermore, Title 2 CFR 200.1 defines a management decision as a pass-through entity’s written determination, provided to the auditee, of the adequacy of the auditee’s proposed corrective actions to address the findings, based on its evaluation of the audit findings and proposed corrective actions. Effect: The lack of management decisions may result in the subrecipient not taking appropriate corrective action on findings. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DMVA’s finance officer should ensure procedures are followed and a management decision is issued for all subrecipient single audit findings within six months of a subrecipient audit report’s acceptance by the federal audit clearinghouse. Views of Responsible Officials: Management agrees with this finding.
Finding No. 2024-038 Federal Awarding Agency: USDHS Impact: Noncompliance AL Number and Title: 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) 97.036 Disaster Grants – Public Assistance (Presidentially Declared Disasters) – COVID-19 Federal Award Number: 4094DRAKP00000001, 4413DRAKP00000001, 4533DRAKP00000001 Applicable Compliance Requirement: Subrecipient Monitoring Condition: DMVA management did not issue a management decision for a finding relating to one subrecipient's single audit. Context: Under federal regulations, pass-through entities are responsible for issuing a management decision for audit findings relating to federal awards provided to subrecipients. The management decisions must clearly state whether or not the audit finding is substantiated, the reason for the decision, and the adequacy of the recipient’s proposed corrective actions to address the finding. If the subrecipient has not completed corrective action, a timetable for follow-up should be given. One Disaster Grants subrecipient’s single audit contained a finding and DMVA management did not issue a management decision to the subrecipient. The finding related to the subrecipient not submitting a single audit to the federal audit clearinghouse within nine months after the end of the subrecipient’s fiscal year as required by federal regulations. Cause: DMVA has controls to ensure a management decision is issued on a subrecipient’s single audit finding. However, due to staff not following procedures, the management decision was not issued. Criteria: Title 2 CFR 200.521 states the pass-through entity must be responsible for issuing a management decision for audit findings that relate to Federal awards it makes to subrecipients. Furthermore, Title 2 CFR 200.1 defines a management decision as a pass-through entity’s written determination, provided to the auditee, of the adequacy of the auditee’s proposed corrective actions to address the findings, based on its evaluation of the audit findings and proposed corrective actions. Effect: The lack of management decisions may result in the subrecipient not taking appropriate corrective action on findings. Noncompliance with federal regulations may result in the federal awarding agency imposing additional conditions or taking corrective action, including additional reporting requirements or withholding/terminating funding. Questioned Costs: None Recommendation: DMVA’s finance officer should ensure procedures are followed and a management decision is issued for all subrecipient single audit findings within six months of a subrecipient audit report’s acceptance by the federal audit clearinghouse. Views of Responsible Officials: Management agrees with this finding.
Condition - The Municipality’s staff was unable to provide officially prepared and certified reports supporting compliance with the filing and submission requirements for reports and financial information, as established by federal award and regulatory agreements. Similarly, reconciliations were not provided between the information used to prepare the required and submitted reports and the formal data recorded in the Municipality’s official accounting system. Due to these conditions, compliance with the reporting requirements established by the federal grantor and effectiveness of related internal controls could not be verified. Based on an analysis prepared by the Municipality of the bank accounts and certain records and subsidiary ledgers designated for managing Community Development Block Grant / Disaster Recovery (CDBG-DR) funds, including transactions during the fiscal year ended June 30, 2024, and subsequent disbursements, a total of $850,079 was either expended or transferred to the General Fund to cover eligible expenditures under the terms permitted by the CDBG-DR program. Criteria - Per the Compliance and Reporting Guidance – Part I: General Guidance – Section D: Uniform Administrative Requirements – Section 10: Reporting: establishes that: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Recipients should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, recipients need to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, the non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403 states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause - There is a lack of adequate knowledge and training among personnel assigned to the management and preparation of reports required by this federal award. Additionally, the Municipality did not demonstrate, nor did it provide evidence, that it has designed and implemented an adequate system of procedures and internal controls to monitor the activity, filing, and custody of reports, as required by the federal award and the pass-through entity. These deficiencies limit the Municipality’s ability to document and support compliance with the reporting requirements. Effect - These conditions expose the program to noncompliance with the reporting requirements established in the grant agreement. Furthermore, the Municipality may be at risk of the grantor questioning the allowability and use of federal funds. Recommendation - We recommend that the responsible personnel or department identify, compile, and retain all reports required under the grant agreement, including reconciliations with the Municipality’s official accounting records and subsidiary ledgers. Additionally, it is essential for the Municipality to develop, document, and implement a comprehensive training program, along with written guidelines and procedures, for all personnel involved, directly or indirectly, in the management of these federal funds. Questioned Costs - None
Condition - The Municipality’s staff was unable to provide officially prepared and certified reports supporting compliance with the filing and submission requirements for reports and financial information, as established by federal award and regulatory agreements. Similarly, reconciliations were not provided between the information used to prepare the required and submitted reports and the formal data recorded in the Municipality’s official accounting system. Due to these conditions, compliance with the reporting requirements established by the federal grantor and effectiveness of related internal controls could not be verified. Based on an analysis prepared by the Municipality of the bank accounts and certain records and subsidiary ledgers designated for managing Community Development Block Grant / Disaster Recovery (CDBG-DR) funds, including transactions during the fiscal year ended June 30, 2024, and subsequent disbursements, a total of $850,079 was either expended or transferred to the General Fund to cover eligible expenditures under the terms permitted by the CDBG-DR program. Criteria - Per the Compliance and Reporting Guidance – Part I: General Guidance – Section D: Uniform Administrative Requirements – Section 10: Reporting: establishes that: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Recipients should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, recipients need to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, the non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403 states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause - There is a lack of adequate knowledge and training among personnel assigned to the management and preparation of reports required by this federal award. Additionally, the Municipality did not demonstrate, nor did it provide evidence, that it has designed and implemented an adequate system of procedures and internal controls to monitor the activity, filing, and custody of reports, as required by the federal award and the pass-through entity. These deficiencies limit the Municipality’s ability to document and support compliance with the reporting requirements. Effect - These conditions expose the program to noncompliance with the reporting requirements established in the grant agreement. Furthermore, the Municipality may be at risk of the grantor questioning the allowability and use of federal funds. Recommendation - We recommend that the responsible personnel or department identify, compile, and retain all reports required under the grant agreement, including reconciliations with the Municipality’s official accounting records and subsidiary ledgers. Additionally, it is essential for the Municipality to develop, document, and implement a comprehensive training program, along with written guidelines and procedures, for all personnel involved, directly or indirectly, in the management of these federal funds. Questioned Costs - None
Condition - The Municipality’s staff was unable to provide officially prepared and certified reports supporting compliance with the filing and submission requirements for reports and financial information, as established by federal award and regulatory agreements. Similarly, reconciliations were not provided between the information used to prepare the required and submitted reports and the formal data recorded in the Municipality’s official accounting system. Due to these conditions, compliance with the reporting requirements established by the federal grantor and effectiveness of related internal controls could not be verified. Based on an analysis prepared by the Municipality of the bank account and certain records and subsidiary ledgers designated for managing Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) funds, including transactions during the fiscal year ended June 30, 2024, and subsequent disbursements, a total of $768,525 was either expended or transferred to the General Fund to cover eligible expenditures under the terms permitted by the CSLFRF programs. Criteria - Per the Compliance and Reporting Guidance – Part I: General Guidance – Section D: Uniform Administrative Requirements – Section 10: Reporting: establishes that: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Recipients should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, recipients need to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, the non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403, states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause - There is a lack of adequate knowledge and training among personnel assigned to the management and preparation of reports required by this federal award. Additionally, the Municipality did not demonstrate, nor did it provide evidence, that it has designed and implemented an adequate system of procedures and internal controls to monitor the activity, filing, and custody of reports, as required by the federal award and the pass-through entity. These deficiencies limit the Municipality’s ability to document and support compliance with the reporting requirements. Effect -These conditions expose the program to noncompliance with the reporting requirements established in the grant agreement. Furthermore, the Municipality may be at risk of the grantor questioning the allowability and use of federal funds. Recommendation - We recommend that the responsible personnel or department identify, compile, and retain all reports required under the grant agreement, including reconciliations with the Municipality’s official accounting records and subsidiary ledgers. Additionally, it is essential for the Municipality to develop, document, and implement a comprehensive training program, along with written guidelines and procedures, for all personnel involved, directly or indirectly, in the management of these federal funds. Questioned Costs – None
Condition - The Municipality’s staff was unable to provide officially prepared and certified reports supporting compliance with the filing and submission requirements for reports and financial information, as established by federal award and regulatory agreements. Similarly, reconciliations were not provided between the information used to prepare the required and submitted reports and the formal data recorded in the Municipality’s official accounting system. Due to these conditions, compliance with the reporting requirements established by the federal grantor and effectiveness of related internal controls could not be verified. Based on an analysis prepared by the Municipality of the bank account and certain records and subsidiary ledgers designated for managing Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) funds, including transactions during the fiscal year ended June 30, 2024, and subsequent disbursements, a total of $768,525 was either expended or transferred to the General Fund to cover eligible expenditures under the terms permitted by the CSLFRF programs. Criteria - Per the Compliance and Reporting Guidance – Part I: General Guidance – Section D: Uniform Administrative Requirements – Section 10: Reporting: establishes that: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Recipients should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, recipients need to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Also, as established in the 2 CFR Section 200.302 (a) of the Uniform Guidance, the non-Federal entity’s financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the federal award, must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. In addition, 2 CFR Section 200.403, states that otherwise authorized by statue, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity and be adequately documented. Cause - There is a lack of adequate knowledge and training among personnel assigned to the management and preparation of reports required by this federal award. Additionally, the Municipality did not demonstrate, nor did it provide evidence, that it has designed and implemented an adequate system of procedures and internal controls to monitor the activity, filing, and custody of reports, as required by the federal award and the pass-through entity. These deficiencies limit the Municipality’s ability to document and support compliance with the reporting requirements. Effect -These conditions expose the program to noncompliance with the reporting requirements established in the grant agreement. Furthermore, the Municipality may be at risk of the grantor questioning the allowability and use of federal funds. Recommendation - We recommend that the responsible personnel or department identify, compile, and retain all reports required under the grant agreement, including reconciliations with the Municipality’s official accounting records and subsidiary ledgers. Additionally, it is essential for the Municipality to develop, document, and implement a comprehensive training program, along with written guidelines and procedures, for all personnel involved, directly or indirectly, in the management of these federal funds. Questioned Costs – None
Program: Community Development Block Grant (CDBG) ALN #: 14.218 Pass-through Entity: N/A- Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Year: July 1, 2023–June 30, 2024 Compliance Requirement: Performance Reporting Type of finding: Material weakness and noncompliance Criteria Special Reporting for Federal Funding Accountability and Transparency Act Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No.109-282), as amended by Section 6202 of Public Law 110-252, herein referred to as the “Transparency Act” that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Aspects of the Transparency Act that 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. Title 2 US Code of Federal Regulations Part 200 (2 CFR 200), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, section 200.1 defines subaward as an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract. Further, 2 CFR 200.1 defines subrecipient as a nonfederal entity that receives a subaward from a passthrough entity to carry out part of a federal program but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency. Lastly, 2 CFR 200.303(a) states, the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with 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). Condition The City’s Community Development Department (CDBG) did not report awards granted to subrecipients for the CDBG program by the end of the month following the month in which the City awarded the subrecipient award. FFATA requires the City to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information to be reported, the following key data elements are required to be audited: 1. Subawardee name 2. Subawardee DUNS/UEI number 3. Amount of subaward 4. Subaward obligation/action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing, we noted that the City did not establish control procedures to submit FFATA reports for all subawards as required by federal regulations. Cause The condition found was due to the City not reporting amounts passed through to subrecipients for the period from July 2023 to June 2024, as the City typically reports these on a one-year lag due to the timing of when the contract starts and its final execution. Proper perspective During our testing of the three selected subawards, we noted reporting exceptions as subawards were not reported within the one month following the month that the City awarded the subrecipient contract. Additionally, there was a control exception to ensure that the data submitted is complete and accurate. Possible asserted effect Failure to submit subaward amounts passed through to subrecipients and subcontractors under subawards as defined by 2 CFR 200.1 in the City’s FFATA reporting could result in the City reporting inaccurate and incomplete amounts to the federal government. Questioned costs None noted Statistical sampling The sample was not intended to be, and was not, a statistically valid sample. Repeat finding A similar finding was not reported in the prior year. Recommendation We recommend that the City review and enhance its policies, procedures, and internal controls to ensure that all amounts passed through to subrecipients under subawards, as defined in 2 CFR 200.1 are reported in accordance with the FFATA federal regulations. In addition, we recommend that the City use obligation date for FFATA reporting. Views of responsible officials and corrective actions The City has taken several steps to strengthen its FFATA compliance. Historically, FFATA reporting posed challenges for many recipients, including the City, due to legacy reporting systems that did not fully align with the requirements of SAM.gov. As part of its compliance improvement efforts, the City has transitioned to directly reporting subaward data in SAM.gov. This shift necessitated a thorough review of internal processes, particularly because many of the City's subrecipient contracts are designed to begin on July 1 of each fiscal year but are not fully executed until months later, after the HUD-signed grant agreement is received, which generally occurs between late September and November. These timing discrepancies previously made it difficult to consistently identify and use the correct obligation date for FFATA reporting. The Federal Grants team initially used a manual Excel-based system to compile FFATA data from fully executed contracts. Each contract contains the essential elements required for FFATA reporting, including the Assistance Listing (CFDA) number, the City's and subrecipient's UEI numbers, agency name and address, award amount, and a brief program description. This spreadsheet served as the foundation for reporting subawards in SAM.gov. To address these issues, the City has established an updated standardized data collection and tracking mechanism. In response to this audit finding, the City has implemented the following corrective actions: 1.Standardized Data Collection: An updated subrecipient data collection form has been developed to ensure consistent and complete capture of all required FFATA elements prior to contract execution. 2.Formal Tracking System: The City created a FFATA Tracking Spreadsheet to systematically document and monitor all required reporting elements, including the correct obligation date, which is now tied to the legal execution date of the subaward. 3.Policy and Procedure Development: FFATA reporting policy and procedures have been developed to codify roles, timelines, and compliance responsibilities. This includes guidance on identifying the proper obligation date, data verification steps, and the timeline for submission to SAM.gov (within 30 days of obligation). 4.Staff Training and Oversight: Relevant staff will be trained on FFATA compliance requirements, and the Grants Management Division will conduct quarterly spot checks to ensure accuracy and timeliness of reporting. These corrective actions reflect the City's commitment to strengthening its federal grant oversight and ensuring full compliance with FFATA regulations.
Finding Number: 2024-004 Program: Housing Opportunities for Persons with AIDS (HOPWA) ALN #: 14.241 Pass-through Entity: N/A- Direct Award Federal Agency: Department of Housing and Urban Development Federal Award Year: July 1, 2023–June 30, 2024 Compliance Requirement: Reporting Type of finding: Material weakness and noncompliance Criteria Special Reporting for Federal Funding Accountability and Transparency Act Under the requirements of the Federal Funding Accountability and Transparency Act (FFATA) (Pub. L. No.109-282), as amended by Section 6202 of Public Law 110-252, herein referred to as the “Transparency Act” that are codified in 2 CFR Part 170, recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Aspects of the Transparency Act that 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. Title 2 US Code of Federal Regulations Part 200 (2 CFR 200), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, section 200.1 defines subaward as an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract. Further, 2 CFR 200.1 defines subrecipient as a nonfederal entity that receives a subaward from a passthrough entity to carry out part of a federal program but does not include an individual that is a beneficiary of such program. A subrecipient may also be a recipient of other federal awards directly from a federal awarding agency. Lastly, 2 CFR 200.303(a) states, the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with 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). Condition The City’s Community Development Department did not report awards granted to subrecipients for the HOPWA program by the end of the month following the month in which the City awarded the subrecipient award. FFATA requires the City to report certain identifying information related to awards made to subrecipients in amounts greater than or equal to $30,000. Of the information to be reported, the following key data elements are required to be audited: 1. Subawardee name 2. Subawardee DUNS/UEI number 3. Amount of subaward 4. Subaward obligation/action date 5. Date of report submission 6. Subaward number 7. Subaward project description 8. Subawardee names and compensation of highly compensated officers During our testing, we noted that the City did not establish control procedures to submit FFATA reports for all subawards as required by federal regulations. Cause The condition found was due to the City not reporting amounts passed through to subrecipients for the period from July 2023 to June 2024, as the City typically reports these on a one-year lag due to the timing of when the contract starts and its final execution. Proper perspective During our testing of four selected subawards, we noted reporting exceptions as subawards were not reported within the one month following the month that the City awarded the subrecipient contract. Additionally, there was a control exception to ensure that the data submitted is complete and accurate. Possible asserted effect Failure to submit subaward amounts passed through to subrecipients and subcontractors under subawards as defined by 2 CFR 200.1 in the City’s FFATA reporting could result in the City reporting inaccurate and incomplete amounts to the federal government. Questioned costs None Statistical sampling The sample was not intended to be, and was not, a statistically valid sample. Repeat finding Yes, 2023-006 Recommendation We recommend that the City review and enhance its policies, procedures, and internal controls to ensure that all amounts passed through to subrecipients under subawards, as defined in 2 CFR 200.1 are reported in accordance with the FFATA federal regulations. In addition, we recommend that the City use obligation date for FFATA reporting. Views of responsible officials and corrective actions The City has taken several steps to strengthen its FFATA compliance. Historically, FFATA reporting posed challenges for many recipients, including the City, due to legacy reporting systems that did not fully align with the requirements of SAM.gov. As part of its compliance improvement efforts, the City has transitioned to directly reporting subaward data in SAM.gov. This shift necessitated a thorough review of internal processes, particularly because many of the City's subrecipient contracts are designed to begin on July 1 of each fiscal year but are not fully executed until months later, after the HUD-signed grant agreement is received, which generally occurs between late September and November. These timing discrepancies previously made it difficult to consistently identify and use the correct obligation date for FFATA reporting. The Federal Grants team initially used a manual Excel-based system to compile FFATA data from fully executed contracts. Each contract contains the essential elements required for FFATA reporting, including the Assistance Listing (CFDA) number, the City's and subrecipient's UEI numbers, agency name and address, award amount, and a brief program description. This spreadsheet served as the foundation for reporting subawards in SAM.gov. In response to this audit finding, the City has implemented the following corrective actions: 1.Standardized Data Collection: A subrecipient data collection form has been developed to ensure consistent and complete capture of all required FFATA elements prior to contract execution. 2.Formal Tracking System: The City created a FFATA Tracking Spreadsheet to systematically document and monitor all required reporting elements, including the correct obligation date, which is now tied to the legal execution date of the subaward.
Condition: During the test of 100 % of projects, sixteen (16) projects, for the Coronavirus State and Local Fiscal Recovery Funds, the following noncompliance with the Reporting compliance requirement was noted: • The third quarter report was not submitted. • The fourth quarter report was not timely submitted. • Four (4) projects were coded as revenue loss and should have been coded to an administrative expense code. • Four (4) projects were coded as revenue loss and should have been coded as a subrecipient. • Two (2) projects were coded as a subrecipient and were not a subrecipient relationship. After the review of the quarterly reports, the following exceptions were noted: • The second quarter report was understated by $257,160. • Health Department reported cumulative total of $1,090,483 in expenditures; however, disbursements totaled $1,089,725. • Emergency Management reported cumulative total of $276,279 in expenditures; however, disbursements totaled $333,169. • Rogers County Sheriff reported cumulative total of $300,000 in expenditures; however, disbursements totaled $233,344. • The consultant hired by the county to administer the grant reported cumulative total of $251,427 in expenditures; however, disbursements totaled was $287,346. Jail Remodel had expenditures of $231,765; however, it was no expenditures were listed on the report. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are properly reported in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance with federal grant guidelines. Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements Management Response: Board of County Commissioners: The Board of County Commissioners is responsible for the overall fiscal concerns of the county. See OKLA. STAT. Title 19, § 345. The Board of County Commissioners, with the cooperation and participation of all elected officials, reviews, develops and implements policies and procedures to create a strong internal control environment. The Board of County Commissioners will work with all elected officials, the third-party administrator, and federal, state and local partners to develop policies, procedures, and internal controls designed to accurately track grants, including the application process, verification, oversight, and reporting of grant requirements. These policies and procedures will be designed to identify requirements for recipients and sub-recipients of grants, ensure accurate equipment and real property management, procurement, recipient and subrecipient monitoring and reporting. Further, policies will ensure a proper understanding of all grant requirements and compliance of the same. To assist in this process, the Board of County Commissioners engaged a third-party administrator to oversee the grant process, including application, eligibility, review, requirements, contracting, recipient tracking and oversight, and documentation and reporting. The Board of County Commissioners will work with the third-party administrator to ensure proper grant administration. Criteria: Accountability and stewardship should be overall goals in management’s accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts. Title 2 CFR § 200.303(a) Internal Controls, reads as follows: The non-federal entity must: Establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should be in compliance with 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). Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlines in Part 2 of this guidance. Expenditures may be reported on a cash of accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, your organization needs to establish internal controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR 200.329-Monitoring and reporting Program Performance (c)(1) reads as follows: (c)(1) The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar gays after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also §200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
Criteria or specific requirement: 2 CFR 200.414(f) states that recipients may elect to charge a de minimis rate of up to 10 percent of modified total direct costs (MTDC). 2 CFR 200.1 “Modified Total Direct Cost (MTDC)” excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of each subaward in excess of $50,000. Condition: During testing of indirect costs, 4 of the 4 samples tested erroneously included rental costs in the calculation of Modified Total Direct Costs, resulting in an overcharge of indirect costs to the program. Questioned costs: None. Context: For allowable costs (indirect), a sample of 4 was made from a population of 12 reimbursement requests for the major program. Of the 4 sampled, all rental costs included in the calculation of Modified Total Direct Costs, resulting in a slightly higher indirect cost calculation. Cause: There is a misunderstanding of which costs should be excluded from the MTDC for this specific contract. Occupancy / Space Rental costs are identified but are not removed during the calculation of indirect costs. Effect: Inadequate allocation of indirect costs to federal programs may result in noncompliance with grant regulations, which could result in penalties or repayment obligations. Repeat Finding: 2023-002 Recommendation: CLA recommends that CCS work with the USCCB to update the Reimbursement Request form to include a section that removes items of selected cost from the calculation of indirect costs. Views of responsible officials: There is no disagreement with the audit finding.
Criteria or specific requirement: 2 CFR 200.414(f) states that recipients may elect to charge a de minimis rate of up to 10 percent of modified total direct costs (MTDC). 2 CFR 200.1 “Modified Total Direct Cost (MTDC)” excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs, and the portion of each subaward in excess of $50,000. Condition: During testing of indirect costs, 4 of the 4 samples tested erroneously included rental costs in the calculation of Modified Total Direct Costs, resulting in an overcharge of indirect costs to the program. Questioned costs: None. Context: For allowable costs (indirect), a sample of 4 was made from a population of 12 reimbursement requests for the major program. Of the 4 sampled, all rental costs included in the calculation of Modified Total Direct Costs, resulting in a slightly higher indirect cost calculation. Cause: There is a misunderstanding of which costs should be excluded from the MTDC for this specific contract. Occupancy / Space Rental costs are identified but are not removed during the calculation of indirect costs. Effect: Inadequate allocation of indirect costs to federal programs may result in noncompliance with grant regulations, which could result in penalties or repayment obligations. Repeat Finding: 2023-002 Recommendation: CLA recommends that CCS work with the USCCB to update the Reimbursement Request form to include a section that removes items of selected cost from the calculation of indirect costs. Views of responsible officials: There is no disagreement with the audit finding.
Condition: Expenditures for federal programs were not adequately reported on the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Compliance Reports. Federal expenditures were understated by $1,227,550. The actual expenditures to vendors were $1,272,002, the County reported $44,452. Cause of Condition: Policies and procedures have not been designed and implemented to ensure compliance with reporting compliance requirements. Effect of Condition: This condition could result in noncompliance to grant requirements and could result in unrecorded transactions, undetected errors, and misappropriation of assets and funds.Recommendation: OSAI recommends the County gain an understanding of the grant requirements for this program and implement internal controls to ensure compliance with these grant requirements. Management Response: Chairman of the Board of County Commissioners: I plan to communicate with the Budget Board regarding this finding and have already introduced to the Budget Board, a form guideline called “Payne County Grant Administration Plan” to aid in proper documentation, reporting and proper spending of all grant awards. I plan to discuss all findings with the Budget Board throughout the year during our Budget Board meetings to get updates on how the findings are actively being addressed by each department and get input on how to best combat future findings. I request that responses by the various departments be forwarded to me to ensure action is taken and for discussion during the meetings. Criteria: 2 CFR § 200.303 Internal Controls (a) reads as follows: The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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). Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, you organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
Finding - Due to District control deficiencies, the District made a duplicate payment totaling $120,918 for construction services from ES Fund proceeds, resulting in questioned costs of that amount. Criteria -The ES Fund provides funding to prevent, prepare for, and respond to the COVID-19 pandemic, and the District must comply with the Uniform Guidance in Title 2, Code of Federal Regulations (CFR), Part 200 in their operation of the program. Title 2, Section 200.1, CFR, defines improper payments as a payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements, including any duplicate payment. Condition - During our audit of construction services discussed in Finding No. 2024-005, we identified a duplicate payment of $120,918 charged to the ES Fund. Our audit procedures determined that both the original payment of $120,918, made in January 2024 and the subsequent duplicate payment made in March 2024 were based on the same invoice for construction services. Since the latter payment was improper, $120,918 represents questioned costs to the program. Although we requested, District records were not provided to demonstrate that the District was aware of the duplicate payment, any District efforts to obtain reimbursement for the duplicate payment, or that the vendor had contacted the District about the duplicate payment. Cause - District personnel indicated that turnover and reassignments of duties during the year contributed to inadvertently processing two accounts payable checks for the same invoice. Also, District controls had not been established to require knowledgeable staff to independently review and approve invoices for payment of ES Fund expenditures to ensure payments are reasonable and necessary. Further, District controls were not sufficient to detect duplicate payments. Effect - The duplicate payment of $120,918 resulted in an unnecessary expenditure of ES Fund moneys and the District did not comply with Federal regulations that require all Federal expenditures to represent reasonable and necessary charges. Consequently, the ES Fund incurred questioned costs totaling $120,918. We expanded our audit procedures to determine whether other significant duplicate payments occurred from ES Fund resources and did not identify similar payments. Recommendation - District procedures should be enhanced to prevent duplicate payments from Federal programs. Such procedures should require knowledgeable staff to independently review and approve invoices for payment of ES Fund expenditures to ensure payments are reasonable and necessary. District procedures should also be enhanced to detect and promptly resolve duplicate payments when they do occur. In addition, the District should seek reimbursement of the duplicate payment from the construction service provider and consult with the grantor agency to remedy the questioned costs of $120,918. District Response - The District is in the process of reviewing and updating controls to ensure payments for construction services are made timely and consistently. The District is requesting a refund from the vendor.
Finding 2024-014 – Noncompliance with Reporting Requirements Over Federal Grant – Coronavirus State and Local Fiscal Recovery Fund (Repeat Finding – 2022-0014, 2023-0014) PASS THROUGH GRANTOR: Direct Grant FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.027 FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $0 Condition: In the review of forty-seven (47) expenditures for federal programs, eleven (11) instances were noted where the expenditures were not correctly reported on the Coronavirus State and Local Fiscal Recovery Funds compliance reports. The expenditures were not reported in the correct quarter. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are properly reported in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Recommendation: OSAI recommends the County design and implement a system of internal controls to ensure the accuracy and completeness of information submitted. Management Response: Chairman of the Board of County Commissioners: The Board of County Commissioners have hired a grant administrator to assist with the reporting process. We will ensure that the reports are accurate and reported in the proper period. Criteria: GAO Standards – Section 2 – Establishing an Effective Internal Control System – OV2.23 states in part: Objectives of an Entity – Compliance Objectives Management conducts activities in accordance with applicable laws and regulations. As part of specifying compliance objectives, the entity determines which laws and regulations apply to the entity. Management is expected to set objectives that incorporate these requirements. 2 CFR § 200.303(a) Internal Controls reads as follows: The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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). Additionally, Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: 10. Reporting. All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, you organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
FINDING REFERENCE NUMBER 2024-004 FEDERAL PROGRAMS (ALN – 84.027) SPECIAL EDUCATION – GRANTS TO STATES (IDEA, PART B) (ALN – 84.196A) EDUCATION FOR HOMELESS CHILDREN AND YOUTH (ALN – 84.425D) COVID-19 EDUCATION STABILIZATION FUND: ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND (ALN – 84.425R) COVID-19 EDUCATION STABILIZATION FUND: CORONAVIRUS RESPONSE AND RELIEF SUPPLEMENTAL APPROPRIATIONS ACT, 2021 – EMERGENCY ASSISTANCE TO NON-PUBLIC SCHOOLS (CRRSA EANS) (ALN – 84.425U) COVID-19 EDUCATION STABILIZATION FUND: AMERICAN RESCUE PLAN – ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF (ARP ESSER) (ALN – 84.425V) COVID-19 EDUCATION STABILIZATION FUND: AMERICAN RESCUE PLAN – EMERGENCY ASSISTANCE FOR NON-PUBLIC SCHOOLS (ARP EANS) (ALN – 84.425W) COVID-19 EDUCATION STABILIZATION FUND: AMERICAN RESCUE PLAN – ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF – HOMELESS CHILDREN AND YOUTH (ARP HCY) (ALN – 84.938A) HURRICANE EDUCATION RECOVERY – INMMEDIATE AID TO RESTART SCHOOL OPERATIONS (RESTART) U.S. DEPARTMENT OF EDUCATION AWARD NUMBERS H027A220003 (0701/2022 – 09/30/2023); S196A220040 (0701/2022 – 09/30/2023); S196A230040 (0701/2023 – 09/30/2024); S425D210029 (01/05/2021 – 03/31/2025); S425R210053 (06/28/2021 – 03/31/2025); S425U210029 (03/24/2021 – 03/28/2026); S425V210053 (09/24/2021 – 03/28/2026); S425W210040 (04/23/2021 – 03/28/2026); S938A180002 (04/26/2018 – 09/30/2025); S938A180009 (09/29/2022 – 04/30/2026); CONSOLIDATED FUNDS COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subpart E establish the requirements for Cost Principles – Allowable Costs under Federal awards. This Section at § 200.403 discloses factors affecting allowability of costs – states that costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; and (g) Be adequately documented. Section § 200.404 Reasonable costs add: A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost including (c) Market prices for comparable goods or services for the geographic area. Also, § 200.405 Allocable Costs include that: A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received; including (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods. STATEMENT OF CONDITION During our internal control and compliance tests of disbursements for Federal programs, we selected four (4) payments of professional services of Third-Party Fiduciary Agent Services ("TPFA") as part of our samples of the different Federal major programs. During our tests, we noted the following conditions: 1. Reasonableness of costs: The payment made to the vendor is a "flat fee" monthly payment agreed to in the professional service contract. Although the vendor invoice includes a detail of hours of service and expense summary, this information is solely for "information purposes" and not to be taken into account for the actual invoice payment process. The monthly payment amount only consideration is the agreed upon "flat fee". In the invoices evaluated (see detail below), the vendor includes a total hours incurred for each invoice with a price per hour range from $195 to $695. Also, the invoices include an expense summary for the period. When we compared the actual payment to the hours incurred and related expenditures, we noted an unreasonable charge to the PRDE and its Federal funds based upon the payment being made versus the actual service hours/expenses included on the invoice; when it is compared to price estimates made during the RFP process when the per hour price ranges were from $65 to $352. VOUCHER NUMBER VOUCHER DATE VOUCHER AMOUNT INVOICE NUMBER INVOICE DATE SERVICE PERIOD TOTAL HOURS INVOICED INVOICE AMOUNT TOTAL RELATED EXPENSES AVERAGE HOURLY RATE CALCULATED 24AP7166 8/14/2023 $ 2,333,333.33 830311-2023-27 7/5/2023 June 2023 7,335.00 $ 2,333,333.33 $ 699,296.00 $ 222.77 01180123 9/6/2023 2,333,333.33 830311-2023-28 8/1/2023 July 2023 6,756.00 2,333,333.33 127,620.42 326.48 01184263 9/19/2023 2,333,333.33 830311-2023-29 9/1/2023 August 2023 7,633.30 2,333,333.33 104,084.01 292.04 01188131 10/19/2023 2,333,333.33 830311-2023-30 10/1/2023 September 2023 6,884.00 2,333,333.33 103,238.55 323.95 01195137 11/28/2023 2,333,333.33 830311-2023-31 11/1/2023 October 2023 6,929.00 2,333,333.33 137,665.35 316.88 01201906 1/10/2024 2,333,333.33 830311-2023-32 12/1/2023 November 2023 5,913.00 2,333,333.33 91,491.21 379.14 01210539 1/30/2024 476,208.71 830311-2023-33A 1/1/2024 December 2023 1,130.00 476,208.71 - 421.42 01210542 2/6/2024 1,857,124.62 830311-2023-33B 1/1/2024 December 2023 4,408.00 1,857,124.62 73,628.57 404.60 01221775 3/12/2024 2,333,333.33 830311-2024-34 2/1/2024 January 2024 6,018.00 2,333,333.33 86,982.26 373.27 01226705 4/9/2024 2,333,333.33 830311-2024-35 3/1/2024 February 2024 5,725.00 2,333,333.33 75,861.61 394.32 01235153 4/16/2024 2,333,333.33 830311-2024-36 4/1/2024 March 2024 6,200.00 2,333,333.33 109,583.33 358.67 01251041 5/23/2024 2,500,000.00 830311-2024-37 5/8/2024 April 2024 6,420.00 2,500,000.00 302,908.85 - 01261194 6/24/2024 53,700.00 830311-2024-38A 6/1/2024 May 2024 126.74 53,700.00 - 423.70 01261196 6/24/2024 1,678,208.00 830311-2024-38B 6/1/2024 May 2024 4,245.79 1,678,208.00 180,197.40 352.82 01261198 6/24/2024 768,092.00 830311-2024-38C 6/1/2024 May 2024 1,964.47 768,092.00 - 390.99 $ 28,333,333.30 $ 28,333,333.30 $ 2,092,557.56 2. Allocability – the payment made was distributed among several Federal programs and state funds as follows: CONSOLIDATED FUNDS (SEA/LEA) ALN 84.027 NON-MAJOR ALN 84.196A ALN 84.425D ALN 84.425R ALN 84.425U ALN 84.425V ALN 84.425W ALN 84.938A TOTAL ALLOCATED AMOUNT $ - $ 2,333,333.33 $ - $ - $ - $ - $ - $ - $ - $ - $ 2,333,333.33 - 2,333,333.33 - - - - - - - - 2,333,333.33 - 2,233,379.03 - 24,483.39 - - - - 75,470.91 - 2,333,333.33 2,333,333.33 - - - - - - - - - 2,333,333.33 2,333,333.33 - - - - - - - - - 2,333,333.33 - - 35,000.00 19,542.04 300,000.00 100,000.00 1,523,791.29 55,000.00 - 300,000.00 2,333,333.33 - - - - - - 476,208.71 - - - 476,208.71 1,857,124.62 - - - - - - - - - 1,857,124.62 2,333,333.33 - - - - - - - - - 2,333,333.33 2,333,333.33 - - - - - - - - - 2,333,333.33 2,333,333.33 - - - - - - - - - 2,333,333.33 2,500,000.00 - - - - - - - - - 2,500,000.00 53,700.00 - - - - - - - - - 53,700.00 1,678,208.00 - - - - - - - - - 1,678,208.00 - 65,031.74 - 63,309.25 - - 500,000.00 - 139,751.01 - 768,092.00 $ 17,755,699.27 $ 6,965,077.43 $ 35,000.00 $ 107,334.68 $ 300,000.00 $ 100,000.00 $ 2,500,000.00 $ 55,000.00 $ 215,221.92 $ 300,000.00 $ 28,333,333.30 62.67% 24.58% 0.12% 0.38% 1.06% 0.35% 8.82% 0.19% 0.76% 1.06% Based on the payment documentation of the evaluated invoices, the allocations were made based on available budget of administrative allocation of Federal awards, the invoices didn't include any basis for the allocation of costs between Federal and non-Federal funds. For example, on invoice number 830311-2023-32 the amount of $1,978,791 (85% of total invoice amount) was charged to several programs of ALN 84.425, although the services described in the invoice were not related only to these programs; therefore, the cost objective is not chargeable in accordance with the relative benefit received. In addition, several invoices for a total amount for the year of $6,965,077 or 24.58% of total payments were charged to Consolidated Funds which includes several Federal programs that could be incurred in unallowed costs. QUESTIONED COSTS Based on the Criterias established on Part II, § 200.403 and § 200.404 for Cost Principles – Allowable Costs under Federal awards, the based used for the costs distribution without specific services rendered to Federal Programs, as described in the Statement of Condition, we estimate as minimum the amount of $3,612,556.60 (including $107,334.68 on a Non-Major Program ALN 84.196A) as questioned costs for not supported documentation. This amount should increase if an evaluation of costs charged to Federal Programs included in Consolidated Funds. See also Perspective Information for more support. PERSPECTIVE INFORMATION The total contract amount awarded for the services over the two-year period is $79,675,000, with a flat fee of $3,143,750 for the first twelve months, and $3,495,833 for the next twelve months. In the fiscal year 2023 there were 3 amendments to the original contract where it was agreed to pay a total fee of $2,995,833 for the months of April and May 2023 and the total amount of $23,333,333 for 10 additional months or $2,333,333 monthly from June 2023 to March 2024. During fiscal year 2024 there were two (2) amendments to the original contract where it was agreed to pay a total monthly fee of $2,500,000 for the months of April 2024 to March 2025, and a total monthly fee of $2,375,000 for the months of April 2025 to October 2025. From the first year of the contract up to the last amendment the total contract amount is approximately $155,625,000. Based on the inconsistent cost allocation method and the lack of a requirement for the payments being made for actual works performed, we considered this a systematic problem in the contract management and payment. Based on the information provided and evaluated the allocation between Federal and non-Federal funds is not applied consistently, other eleven (11) invoices for a total amount of $17,755,699 were paid from non-Federal funds, during the fiscal year. In accordance with the documentation provided the allocation used is based on the budget amounts available from state and Federal funds; during this fiscal year the total amount paid to the supplier was $28,333,333. Of this amount 62.67% were covered with state funds, 24.58% with consolidated activities funds, and 12.75% with Federal programs funds. STATEMENT OF CAUSE The PRDE did not include on the RFP process and the contract negotiation a clause that requires that the payment of services will be made upon actual hours incurred or that a final reconciliation process will be made during the contract period of performance based on actual service hours and expense incurred. The PRDE agreed upon a "flat fee" contract based on an estimate / budget of hours presented by the vendor on its proposal without considering the requirement of adjusting the payment for actual workhours incurred as part of its contract negotiation. The PRDE staff could not provide the basis used to distribute the cost between the different programs and state funds in accordance with the benefit obtained from the costs incurred. There is no consistent treatment or basis for the allocation of the payment costs between Federal programs and state funds. The contract includes the accounting codes that can be charged for the contract costs; however, no amounts, limitations, or basis for the cost’s distributions were included on the contract or in the payment documentation. POSSIBLE ASSERTED EFFECT Unreasonable costs may be charged to the PRDE's Federal programs that may result in questionable or unallowable costs by the Federal grantors. IDENTIFICATION OF REPEAT FINDING This is a repeat finding (Finding Reference Numbers 2021-006; 2022-008; and 2023-004). RECOMMENDATIONS We recommend to the PRDE to establish an adequate and consistent allocation method of each invoice amount that reflects the relative benefits that the Federal program received from the services provided by the supplier during the invoice period, so the Federal program can be charged for the costs of that period. In addition, we recommend that the PRDE revised the contract terms to include a reconciliation of total hours and rates to adjust the payments made to the vendor before the contract expiration. Also, we recommend that the PRDE should request that adequate supporting evidence from the vendors be presented for any expenses to be reimbursed by the PRDE. VIEWS OF RESPONSIBLE OFFICIALS The PRDE does not agree with the Recommendation to establish an allocation method for TPFA invoices because TPFA services are overhead costs paid from administrative funds and are not tied to any specific federal grant. In addition, the PRDE does not agree that contract terms should be revised before the contract expiration to require a reconciliation of total hours and rates because again, payments to the TPFA are overhead costs not directly tied to any specific program. Finally, the PRDE does not agree with the recommendation that the TPFA submit supporting evidence for the reimbursement of expenses because (i) the TPFA contract is a fixed fee that is inclusive of all professional service fees and expenses and (ii) the TPFA provides an explanation of major expenses incurred within each monthly invoice. Auditor Comment on Management Response for Finding No. 2024-004 As stated in CONDITION 2., “…on invoice 830311-2023-32 the amount of $1,978,791 (85% of total invoice amount) was charged to several programs of ALN 84.425, although the services described in the invoice were not related only to these programs; therefore, the cost objective is not chargeable in accordance with the relative benefit received.” Further, the 2 CFR 200.1, establishes that: “Indirect [facilities & administrative (F&A)] costs mean those costs incurred for a common or joint purpose benefitting more than one cost objective, and not readily assignable to the cost objectives specifically benefitted, without effort disproportionate to the results achieved. To facilitate equitable distribution of indirect expenses to the cost objectives served, it may be necessary to establish a number of pools of indirect (F&A) costs. Indirect (F&A) cost pools must be distributed to benefitted cost objectives on bases that will produce an equitable result in consideration of relative benefits derived.” This information was not provided for our evaluation. Also, we made reference to the Program Determination Email for ALNs. 84.938 and 84.425 dated September 18, 2024 (Audit Control Number 02-21-39634), received from Ms. Catherine Miers of the Office of Elementary and Secondary Education of the US Department of Education (USDE), in which they required that the PRDE provide documentation for the following corrective actions: “revised the contract terms to include a reconciliation of total hours and rates to adjust the payments made to the vendor before the contract expiration; requested that adequate supporting evidence from the vendors be presented for any expenses to be reimbursed by the PRDE; and develop an adequate review of the vendors invoice to properly identify the actual hours of services that benefited the Federal programs so a correct allocation of the costs incurred can be made within Federal programs and state funds”. IMPLEMENTATION DATE None RESPONSIBLE PERSON Jullymar Octtaviani Vega Sub-Secretary of Administration María de los Angeles Lizardi Valdés Office of Federal Affairs Director
FINDING REFERENCE NUMBER 2024-005 FEDERAL PROGRAMS (ALN – 10.553) SCHOOL BREAKFAST PROGRAM (SBP) – CHILD NUTRITION CLUSTER (ALN – 10.555) NATIONAL SCHOOL LUNCH PROGRAM (NSLP) – CHILD NUTRITION CLUSTER (ALN – 10.559) SUMMER FOOD SERVICE PROGRAM FOR CHILDREN (SFSP) – CHILD NUTRITION CLUSTER (ALN – 10.582) FRESH FRUIT AND VEGETABLE PROGRAM (FFVP) – CHILD NUTRITION CLUSTER (ALN – 10.558) CHILD AND ADULT CARE FOOD PROGRAM (CACFP) U.S. DEPARTMENT OF AGRICULTURE (ALN – 84.010A) TITLE I GRANTS TO LOCAL EDUCATIONAL AGENCIES (TITLE I, PART A OF THE ESSEA) (ALN – 84.027) SPECIAL EDUCATION – GRANTS TO STATES (IDEA, PART B) (ALN – 84.048A) CAREER AND TECHNICAL EDUCATION – BASIC GRANTS TO STATES (PERKINS V) (ALN – 84.367A) SUPPORTING EFFECTIVE INSTRUCTION STATE GRANTS (formerly IMPROVING TEACHER QUALITY STATE GRANTS) (ALN – 84.425D) COVID-19 EDUCATION STABILIZATION FUND: ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF FUND (ALN – 84.425U) COVID-19 EDUCATION STABILIZATION FUND: AMERICAN RESCUE PLAN – ELEMENTARY AND SECONDARY SCHOOL EMERGENCY RELIEF (ARP ESSER) U.S. DEPARTMENT OF EDUCATION AWARD NUMBERS 1PRAEA18SCESUBA (10/01/2018 – 09/30/2019); 1PRAEA19SCESUBA (10/01/2019 – 09/30/2020); 1PRAEA20SCESUBA (10/01/2020 – 09/30/2021); 1PRAEA21SCESUBA (10/01/2021 – 09/30/2022); 1PRAEA22SCESUBA (10/01/2022 – 09/30/2023); 221PR300336E_A (10/01/2022 – 10/30/2024); S010A130052 (07/01/2013 – 09/30/2014); S010A140052 (07/01/2014 – 09/30/2015); S010A160052 (07/01/2015 – 09/30/2016); S010A160052 (07/01/2016 – 09/30/2017); H027A12003 (07/01/2012 – 09/30/2013); H027A14003 (07/01/2014 – 09/30/2015); H027A15003 (07/01/2015 – 09/30/2016); H027A18003 (07/01/2018 – 09/30/2019); H027A19003 (07/01/2019 – 09/30/2020); H027A20003 (07/01/2020 – 09/30/2021); H027A21003 (07/01/2021 – 09/30/2022); V048A180052 (07/01/2018 – 09/30/2019); S367A160052E (07/01/2016 – 09/30/2017); S425D200029 (06/16/2020 – 09/30/2021); S425D210029 (01/05/2021 – 03/31/2025); S425U210029 (03/24/2021 – 03/28/2026) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR Section 200.403 (g) establishes that except where otherwise authorized by statute, costs must be adequately documented in order to be allowable under Federal awards. In addition 2 CFR Section 200.1, defines improper payments as a payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. The term improper payment includes any payment to an ineligible recipient, any payment for ineligible goods or service, any duplicate payment, any payment for a good or service not received (except for those payments where authorized by law), any payment that is not authorized by law, and any payment that does not account for credit for applicable discounts. STATEMENT OF CONDITION As part of our audit procedures and interviews over financial reporting, we obtained a detail of accounts receivable related to duplicate or incorrect payments made for payroll transactions in the amount of $4,659,739. Invoices issued during the fiscal year ended June 30, 2024, balance, were distributed as federal and state, as follows: ALN Number Transaction Balance 10.553/ 10.555/ 10.559/ 10.582 $ 167,694 10.558 1,240 84.010A 64,517 84.027A 228,284 84.041 546 84.048A 4,802 84.367A 1,027 84.425D 35,165 84.425U 27,501 Not Determined 2,357,671 Not Determined 25,907 Not Applicable 1,745,385 $ 4,659,739 Title I Grants to Local Educational Agencies (Title I, Part A of the ESEA) Special Education - Grants to States (IDEA, Part B) Impact Aid (Title VII of ESEA) Program Description Child Nutrition Cluster Child and Adult Care Food Program (CACFP) Supporting Effective Instruction State Grants (formerly Improving Teacher Quality State Grants) COVID-19 Education Stabilizatiopn Fund: Elementary and Secondary School Emergency Relief Fund (ESSER) Total Invoices Issued Balance at 06/30/2024 Career and Technical Education - Basic Grants to States (Perkins V) Schoolwide Program (State and Federal Funds) Consolidated Funds (State and Federal Funds) State Funds COVID-19 Education Stabilizatiopn Fund: American Rescue Plan – Elementary and Secondary School Emergency (ARP ESSER) QUESTIONED COSTS Identified questioned costs are $530,776, which were identified as employees that didn't work for the Federal program. Other amount may be unallowed, if the PRDE can identify the portion of Federal funding incurred in Schoolwide and Consolidated activities. PERSPECTIVE INFORMATION The amount of $4,659,739, corresponds to incorrect payroll payments made from current and prior years, for which during fiscal year 2023-2024, the PRDE determined that an invoice for excess payroll payments proceeds. The PRDE was unable to indicate which amount of Schoolwide or Consolidated funds corresponds to Federal funding, because these funds close at year end. STATEMENT OF CAUSE The PRDE sends the Treasury Department of Puerto Rico a balance of the payroll, before the end of the fortnight, to speed up the payment process. By sending this information without balancing the hours worked, it causes errors in the payroll computations. POSSIBLE ASSERTED EFFECT The PRDE incurred payments to employees for hours not worked, and for which specific grants were received. IDENTIFICATION OF REPEAT FINDING This is a repeat finding (Finding Reference Number 2023-005). RECOMMENDATIONS We recommend PRDE design and implement adequate internal controls and payroll processes that will identify in real – time or sooner any incorrect payroll payment made. FINDING REFERENCE NUMBER 2024-005 – continuation VIEWS OF RESPONSIBLE OFFICIALS Management agrees with the audit finding and has implemented a comprehensive corrective action plan to address payroll processing errors, strengthen internal controls, and ensure accurate and timely payments. As part of PRDE’s Fiscal Plan of 2020–2021, the Department launched the official integration project between the Time, Attendance, and Leave (TAL) system and the Payroll (RHUM) system. This integration ensures that payroll disbursements are made only after the employee’s attendance has been validated through the TAL system. Employees are required to record their attendance using biometric verification or have an authorized leave properly documented and approved by their supervisor before receiving payment. If attendance is not validated, the system automatically issues a notification and applies the necessary adjustment. This project, initiated in November 2020 with the collaboration of the Puerto Rico Fiscal Oversight and Management Board (FOMB), MS Consulting, the Department of the Treasury (Hacienda), the Financial Advisory Authority (AAFAF), and the Puerto Rico Innovation and Technology Service (PRITS), was fully integrated by February 2021. As a result, PRDE has significantly reduced overpayments, duplicate payments, and other payroll inconsistencies. To reinforce this effort, PRDE issued a new Time and Attendance Policy on December 7, 2021, later updated on April 11, 2022, which clearly defines employee responsibilities, authorized leaves, disciplinary procedures, and supervisor accountability. Under this policy, employees and supervisors are required to follow strict timekeeping procedures, and noncompliance triggers automatic system notifications and salary adjustments. The PRDE’s Time and Attendance staff continues to monitor and maintain compliance through: i. Ongoing training sessions for PRDE personnel; ii. System dashboards tracking attendance behaviors; iii. Issuance of notifications and payroll adjustments as required; and iv. Regular follow-up and evaluation activities. Additionally, PRDE’s Finance Office implemented a reconciliation process that integrates data from TAL, RHUM, and SIFDE, ensuring that payroll expenditures align with validated attendance records. The system now performs cross-checks before submission to the Treasury Department, preventing disbursements for unverified time. These combined measures—technological integration, policy enforcement, staff training, and reconciliation controls—have strengthened payroll accuracy, reduced the risk of overpayments, and improved financial accountability across the Department. IMPLEMENTATION DATE Done RESPONSIBLE PERSON Evelyn Rodríguez Cardé Finance Office Director Jullymar Octtaviani Vega Sub-Secretary of Administration
Finding 2024-013 – Noncompliance with Reporting Requirements Over Federal Grant Coronavirus State and Local Fiscal Recovery Funds (Repeat Finding – 2022-013, 2023-013) PASS-THROUGH GRANTOR: Direct Grant FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.027 FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $-0- Condition: The County has not established internal controls to ensure the correct expenditure category is used for reporting payments to the grant administrative contractor. The quarterly reports improperly classified payments totaling $29,578 to a contractor as a ‘Revenue Replacement’ expense instead of using the ‘Administrative’ expense category. Also, the quarterly reports improperly classified payments totaling $513,944 for the Resurrection House as a ‘Revenue Replacement’ expense instead of using the ‘Negative Economic Impact’ expense category as stated in the agreement with the Board of County Commissioners. This entity was also not reflected as a Beneficiary in the quarterly reports. Further, subrecipient agreements for the following pass-through entities were signed and approved by the Board of County Commissioners; however, the entities were not reported as subrecipients in the quarterly reports: • Town of Rush Springs • Grady County Rural Water #6 • Grady County Rural Water #7 • City of Chickasha • City of Minco Additionally, the expense category listed in the quarterly reports differs from the expense category listed in the subrecipient agreements for the following entities: • City of Chickasha • City of Minco Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition could result in noncompliance to grant requirements. Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements. Management Response: Chairman of the Board of County Commissioners: The Board of County Commissioners will take measures to ensure future compliance with all requirements of federal grants. Criteria: Accountability and stewardship should be overall goals in management’s accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts. Title 2 CFR § 200.303(a) Internal Controls reads (a) reads as follows: The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Controls Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, your organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
Criteria or specific requirement: Per 2 CFR section 200.303(a), the Department must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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). Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. §200.332 Requirements for pass-through entities (2 CFR 200.332): All pass-through entities must: (a) Verify that the subrecipient is not excluded or disqualified in accordance with §180.300. Verification methods are provided in §180.300, which include confirming in SAM.gov that a potential subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal funds. (b) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. 1) Federal award identification. a) Subrecipient name (which must match the name associated with its unique entity identifier); b) Subrecipient’s unique entity identifier; c) Federal Award Identification Number (FAIN); d) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; e) Subaward Period of Performance Start and End Date; f) Subaward Budget Period Start and End Date; g) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; h) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; i) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; j) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); k) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; l) Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; m) Identification of whether the award is R&D; and n) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per §200.414. (c) Evaluate each subrecipient’s fraud risk and risk of noncompliance with a subaward to determine the appropriate subrecipient monitoring described in paragraphs (f) of this section. When evaluating a subrecipient’s risk, a passthrough entity should consider the following: 1) The subrecipient’s prior experience with the same or similar subawards: 2) The results of previous audits. This includes considering whether or not the subrecipient receives a Single Audit in accordance with Subpart F and the extent to which the same or similar subawards have been audited as a major program; 3) Whether the subrecipient has new personnel or new or substantially changed systems; and 4) The extent and results of Federal agency monitoring (for example, if the subrecipient also receives Federal awards directly from the Federal agency). Condition: Public Health established a formal risk assessment process over its subrecipients of federal awards by which to determine the frequency and extent of subrecipient monitoring to be performed, however the process was established after the period under audit and applied prospectively. In addition, Public Health used a Department Allocation Letter (DAL) for the COVID-19 program instead of an agreement or contract for the subaward to subrecipients. Certain required information for the subaward federal award information such as Assistance Listings number and Title and Federal Award Identification Number (FAIN) were not clearly identified in the DAL. Questioned costs: None Context: See “Condition.” Cause: Procedures to ensure that all relevant information is included in the grant agreements and risk assessments are performed were not in place at the time of the agreements which resulted in the oversight. Effect: By not properly evaluating the risk of noncompliance, Public Health may inadvertently award grant funds to subrecipients who lack the necessary mechanisms or understanding to comply with federal statutes. This increases the likelihood of noncompliance arising during the performance of the grant-funded activities. Furthermore, failure to provide the necessary documentation to subrecipients may result in misuse or misreporting of funding. Repeat Finding: This was reported in the previous year as finding 2023-009. Recommendation: Public Health should ensure every subaward includes all requirements imposed on the subrecipient so that the federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the federal award. Views of responsible officials: Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
Finding: Failure to adequately document adherence to procurement compliance requirements Criteria: Per the Office of Management and Budget Compliance Supplement (2 CFR Part 200, Appendix XI), procurement is a relevant compliance requirement for recipients of federal funding under the Unaccompanied Children Program. The recipient must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award, and administration of contracts. Further, they must follow proper procurement procedures. • Procurement records. The recipient or subrecipient must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. • Formal procurement methods. Formal procurement methods are required when the value of the procurement transaction under a Federal award exceeds the simplified acquisition threshold of the recipient or subrecipient. Formal procurement methods are competitive and require public notice. • Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT) ($250,000), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include micro-purchases (generally, the acquisition of supplies or services whose aggregate amount does not exceed $10,000) and small purchases (the acquisition of property or services where the aggregate dollar amount is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity.Condition and Context: During our audit, we identified significant expenditures categorized as Cleaning Expense and Repairs and Maintenance charged to the Unaccompanied Minor Programs paid to one vendor (“the Contractor”). Review of the Cayuga Centers website shows that a member of the Board of Directors during the period under audit was also the owner of the Contractor. We inquired with management if the Organization went out to bid on the renovations charged to repairs and maintenance in the current year. Management noted that at the start of the UC Transitional Contract, the President at that time met with several vendors regarding work to be done on the building. As the Contractor was already doing other work for the building, the President made the decision to continue using the Contractor. The President has since separated from the Organization and management was unable to provide any official documentation regarding bid/price comparisons made. The Organization provided emails dated throughout 2014 which included fragmented information regarding management contacting contractors at that time. The information provided was not sufficient to support the assertion that management followed proper procedures with respect to obtaining bids for significant procurement activities in fiscal year ended June 30, 2024. In addition to the renovations, the total amounts paid for repairs, security, and maintenance exceeded the micro-purchase threshold and therefore should have documentation regarding the procurement decisions. Amounts charged to the grant are listed below. Cause: The Organization was unable to provide proof of proper procurement procedures being followed for expenditures paid to the Contractor due to the former President separating from the Organization and not maintaining relevant documentation. Result: Amounts paid to the Contactor for renovations are included in the Summary of Unallowable Costs. See finding 2024-011. Amounts paid to the contractor for repairs, security, and maintenance are included in the Summary of Questioned Costs for failure to adequately document the use of proper procurement procedures. In several instances, these expenses also resulted in the Organization going over the total approved budget by cost category. See the Summary of Questioned Costs for detail. Recommendation: We recommend the Organization establish procedures to review significant recurring expenditures to ensure they are following the procurement procedures as required under the Code of Federal Regulations and Compliance Supplement.
2024-001 Reporting (Significant Deficiency in Internal Controls over Compliance) Assistance Listing Number(s): 21.027 Name of Federal Program: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Award Number: N/A Award Year: 2021 Criteria: Federal reporting requirements mandate that all recipients of federal funds submit financial, performance, and compliance reports as specified in Part 2 of the Uniform Guidance. Expenditures may be reported on either a cash or accrual basis, provided that the chosen method is clearly disclosed and applied consistently. All reported expenditures must align with the definition set forth in 2 CFR 200.1. Additionally, organizations are required to maintain accurate and complete accounting records to support the preparation and submission of compliant financial data, in accordance with applicable accounting standards and principles. Condition: During fiscal year 2024, the City submitted a Coronavirus State and Local Fiscal Recovery Fund Annual Project and Expenditure report with the incorrect current period expenditures amount and total cumulative obligations and expenditures. Context: During our testing we noted that the expenditures reported on the Annual Project and Expenditure report did not agree to the accounting records by a difference of $41,127 for the current period and accumulated expenditures. Cause: The City did not properly reconcile expenditures between internal records and amounts reported and no review was performed prior to submission. Effect: The Annual Project and Expenditure report was filed with incorrect current period and accumulated expenditures. Questioned Costs: None Repeat finding: No Recommendation: We recommend City management reconcile internal records with reports prior to submission. We also recommend City management submit corrected reports as needed, and corrected reports should be submitted by no later than the final report due date. Views of Responsible Officials: Management agrees with this finding.
FINDING 2024-009 Subject: Special Education Cluster (IDEA) - Period of Performance Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 21611-045-PN01, 22611-045-PN01, 22611-045-ARP, 21619-045-PN01, 22619-045-PN01, 22619-045-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Period of Performance Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-009. Condition and Context The School Corporation had not properly designed or implemented a system of internal controls to ensure transactions made with the Special Education Grant funding occurred within the appropriate period of performance. Claims for the Special Education programs were paid without an appropriate level of review or oversight to ensure the expenditures charged to each grant were within the allowed time frame. Although the reimbursement requests submitted to the Indiana Department of Education were prepared by the Director of Business and approved by the Director of Special Education, the School Corporation was unable to provide tangible audit evidence of this review and approval process, which may have included a review of the costs included on each request to verify they were within the correct period of performance. The lack of effective internal controls resulted in the following errors: • A total of 21 of the 60 items tested were incurred after the period of performance for a total of $22,845. • A total of 11 of the 60 items tested were liquidated after the allowed time period for a total of $2,817. • Of the 23 adjustments tested, there were 6 adjustments that were for an expense that was incurred after the period of performance for a total of $23,430. The lack of internal controls and noncompliance was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: INDIANA STATE BOARD OF ACCOUNTS 34 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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). . . ." 2 CFR 200.1 states in part: ". . . Financial obligations, when referencing a recipient's or subrecipient's use of funds under a Federal award, means orders placed for property and services, contracts and subawards made, and similar transactions that require payment. . . . Period of performance means the total estimated time interval between the start of an initial Federal award and the planned end date, which may include one or more funded portions, or budget periods. Identification of the period of performance in the Federal award per § 200.211(b)(5) does not commit the awarding agency to fund the award beyond the currently approved budget period. . . . Unliquidated financial obligations means, for financial reports prepared on a cash basis, financial obligations incurred by the non-Federal entity that have not been paid (liquidated) . . ." Cause Due to turnover of staffing in both the Special Education personnel and the School Corporation's administrative office, the School Corporation's management had not developed nor implemented a system of internal controls that would have ensured compliance with the grant agreement and the Period of Performance compliance requirement. The School Corporation had not filed reimbursement requests in a timely manner. Effect The failure to establish an effective system of internal controls placed the School Corporation at risk of noncompliance with the grant agreement and the Period of Performance compliance requirement. This resulted in grant expenditures being obligated and liquidated outside of the period of performance. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs We identified $49,092 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls, which includes ensuring grant expenditures are obligated and liquidated timely to ensure compliance with the grant agreement and the Period of Performance compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-010 Subject: Special Education Cluster (IDEA) - Procurement and Suspension and Debarment Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 21611-045-PN01, 22611-045-PN01, 22611-045-ARP, 21619-045-PN01, 22619-045-PN01, 22619-045-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the Procurement and Suspension and Debarment compliance requirement. Procurement - Small Purchases Federal regulations allow for informal procurement methods when the value of the procurement for property or services does not exceed the simplified acquisition threshold, which is set at $250,000 unless a lower, more restrictive threshold is set by a nonfederal entity. As Indiana Code has set a more restrictive threshold of $150,000, the informal procurement method is permitted when the value of the procurement does not exceed $150,000. This informal process allows for methods other than the formal bid process. The informal process is divided between two methods based on thresholds: micro-purchases, typically for those purchases $10,000 or under, and small purchase procedures for those purchases above the micro-purchase threshold but below the simplified acquisition threshold. Micro-purchases may be awarded without soliciting competitive price rate quotations. If small purchase procedures are used, then price or rate quotations must be obtained from an adequate number of qualified sources. The population for those procurements that fell within the small purchase range consisted of three vendors with a total purchased amount from those vendors of $75,284. The School Corporation did not provide adequate documentation detailing the history of procurement, which must include the reason for the procurement method used, for all three vendors. Suspension and Debarment Prior to entering into subawards and covered transactions with federal award funds, recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the SAM exclusions, collecting a certification from that vendor, or adding a clause or condition to the covered transaction with that vendor. One vendor provided contracted services paid with Special Education Grant funds during the audit period totaling $44,827. Upon inquiry of the School Corporation, it was determined that the School Corporation did not verify that the contractor was not suspended, debarred, or otherwise excluded. INDIANA STATE BOARD OF ACCOUNTS 36 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of effective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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). . . ." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . ." 2 CFR 200.320 states in part: "The non-Federal entity must have and use document procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases— (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . ." INDIANA STATE BOARD OF ACCOUNTS 37 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Indiana Code 5-22-8-3 states in part: "(a) . . . if the purchasing agent expects the purchase to be: (1) at least fifty thousand dollars ($50,000); and (2) not more than one hundred fifty thousand dollars ($150,000). . . . (d) . . . the purchasing agent shall award a contract to the lowest responsible and responsive offeror for each line or class of supplies required. . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to affect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to, and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure there are appropriate procurement procedures for goods and services and contractors and subrecipients, as appropriate, are not suspended, debarred, or otherwise excluded prior to entering into any contracts or subawards. INDIANA STATE BOARD OF ACCOUNTS 38 NORTH LAWRENCE COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FA 2024-002 Strengthen Controls over Journal Entries Compliance Requirements: Activities Allowed or Unallowed Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Agriculture Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: 10.553 – School Breakfast Program 10.555 – National School Lunch Program COVID-19 – 10.555 – National School Lunch Program Federal Award Numbers: 245GA32N1199 (Year: 2024), 225GA324N1099 (Year: 2024) Questioned Costs: Unknown Description: The policies and procedures of the School District were insufficient to ensure that journal entries made for the Child Nutrition Cluster were properly documented. Background Information: The Child Nutrition Cluster (CNC) is comprised of various programs that are intended to assist states in administering and overseeing food service program operators that provide healthful, nutritious meals to eligible children in public and non-profit private schools, residential childcare institutions, and summer programs. This Cluster of programs also fosters healthy eating habits in children by providing fresh fruits and fresh vegetables to children attending elementary and secondary schools and encourages the domestic consumption of nutritious agricultural commodities. CNC funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Agriculture. GaDOE is responsible for distributing funds to local educational agencies (LEAs) and overseeing the various CNC programs. CNC funds totaling $2,692,854.62 were expended and reported on the Monroe County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” In addition, provisions included in the Uniform Guidance, Section 200.404 – Reasonable Costs state that “a cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound business practices; arm’s-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award… (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award’s cost.” Furthermore, provisions included in the Uniform Guidance, Section 200.1 state “Improper payment means: (1) Any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. (v) The term ‘‘payment’’ in this definition means any disbursement or transfer of Federal funds (including a commitment for future payment, such as cash, securities, loans, loan guarantees, and insurance subsidies) to any non-Federal person, non-Federal entity, or Federal employee, that is made by a Federal agency, a Federal contractor, a Federal grantee, or a governmental or other organization administering a Federal program or activity.” Lastly, provisions included in Title 34 CFR Section 210.14(a) state that “school food authorities shall maintain a nonprofit school food service. Revenues received by the nonprofit school food service are to be used only for the operation or improvement of such food service, except that, such revenues shall not be used to purchase land or buildings, unless otherwise approved… FNS, or to construct buildings.” Condition: Auditors performed a review of transfer activity associated with CNC to determine if appropriate internal controls were implemented and applicable compliance requirements were met. This testing revealed that journal entries utilized to transfer cash totaling $6,000,000 from the School Nutrition Fund to the General Fund were not properly supported by adequate documentation. Questioned Costs: Though questioned costs may exist, these amounts are unknown as adequate documentation to support the transfer of $6,000,000 in cash was not maintained. Cause: The School District transferred funds from the School Nutrition Fund to the General Fund in an attempt to reimburse the General Fund for several years’ worth of salary payments made on behalf of the School Food Service program; however, adequate documentation was not maintained due to oversight. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance or GaDOE guidance related to the CNC programs. Failure to ensure that appropriate policies and procedures are followed when managing federal funds may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable transfers. Recommendation: The School District should review current internal control procedures related to School Nutrition Fund journal entries. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all journal entries, including transfers, are supported by adequate documentation. In addition, the transfer of cash associated with salary reimbursements should be made on a more timely basis and supported by payroll data. Furthermore, the School District should implement a monitoring process to ensure that all journal entry activity is compliant with the School District’s policies and procedures. Views of Responsible Officials: We concur with this finding.
Condition: Expenditures for federal program, Coronavirus State and Local Fiscal Recovery Funds were not accurately reported on the Compliance Report. Federal expenditures were underreported by $753,744. The County reported $0, resulting in an understatement of $753,744 This was due to the County failing to report expenditures on a cash basis. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition could result in noncompliance with grant requirements. Recommendation: OSAI recommends the County gain an understanding of the grant requirements for this program and implement internal controls to ensure compliance with these grant requirements. Management Response: Chairman of the Board of County Commissioners: This issue originated under the prior County Clerk’s administration where key reporting processes were not followed. The Board of County Commissioners and the other elected officials have made correcting this a top priority. Together, we are: • developing a comprehensive SOP to ensure accurate and timely tracking and reporting of federal funds, • improving communication and oversight between all county offices to ensure consistent reporting standards, • and ensuring annual compliance with federal reporting requirements. Our collective goal is to implement the policies and structures that will keep Osage County operating with the highest standard of accountability and excellence. County Clerk: I was not the County Clerk in office at this time. To correct this issue. the County plans to develop a SOP to timely and accurately track and report on federal funds. The SOP will be reviewed, adopted, and monitored by the Board of County Commissioners. County Treasurer: The County was under the understanding that once we established we were reporting as Loss Revenue, we would not have to submit the report annually. The final reporting was submitted prior to deadline. Criteria: Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, you organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
Finding 2024-011: Material Weakness and Material Noncompliance Finding, Reporting – Special Reporting Assistance Listing Program Title and Number: Coronavirus State and Local Fiscal Recovery Funds (ALN# 21.027) Federal Agency: U.S. Department of Treasury Pass-through Entity: N/A Award year: 2023-2024 Criteria or specific requirement: Generally, recipients must submit one initial Interim Report, quarterly or annual Project and Expenditure reports which include subaward reporting, and in some cases annual Recovery Plan reports. The Project and Expenditure Reports are due quarterly and/or annually based on 2 CFR 200.328 and 31 CFR section 35.4(c) Reporting and requests for other information. Cities were required to submit quarterly Project and Expenditure Reports which cover one calendar quarter and must be submitted to Treasury by the last day of the month following the end of the period covered. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Condition: None of the quarterly Project and Expenditure Reports were submitted as required, and instead the City elected to submit an annual Project and Expenditure Report that was submitted past the deadline for the fourth quarterly report. Cause: Grant management and reporting is not fully centralized within the City and there was turnover in the grant administrator position. The City did not have sufficient internal controls in place to ensure the reports were filed. Effect: Failure to file timely reports resulted in non-compliance with the Reporting requirements of the program. This could also result in the Federal government cancelling funding of the program or denying eligible expenditures. Context: There were four Project and Expenditure Reports required to be submitted during the audit period. Of the four quarterly Project and Expenditure reports required, none were submitted. The City elected to submit an annual Project and Expenditure Report, which was submitted 13 days after the deadline for the fourth quarterly report. Questioned Cost: None Repeating Finding: 2023-006 Recommendation We recommend that the City implement controls to ensure all reports are prepared, reviewed and submitted by the due date to the requisite agency, as well as contact the grantor about whether or not the delinquent reports should still be filed. Views of Responsible Officials: Management agrees with the finding.
Condition: During our test of the annual expenditure report filed by the County for compliance with grant reporting requirements, it was noted that the report listed inaccurate information regarding the actual expenditures. The annual report listed the expenditures totaling $3,765,498; however, the confirmed amount on the financial statement and SEFA indicated the actual expenditures were $4,453,372 resulting in an understatement of $687,874. Cause of Condition: Policies and procedures have not been designed and implemented to ensure compliance with federal grant requirements. Effect of Condition: This condition resulted in noncompliance with federal grant requirements for this program and could result in loss of federal funds to the County. Recommendation: OSAI recommends the County gain an understanding of the compliance requirements for federal programs to ensure compliance with the grant requirements and filing accurate quarterly reports. Management Response: Chairman of the Board of County Commissioners and County Clerk: The Creek County Clerk's Office will work with the SEFA preparer to ensure that the correct paid dates are being used when reporting. This should eliminate the actual expenditures differences. We will work to educate all offices involved in the reporting process on financial statement and SEFA. Criteria: Title 2 CFR § 200.303(a) Internal Controls reads (a) reads as follows: The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Controls Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, your organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting.
Finding: Failure to adequately document adherence to procurement compliance requirements Criteria: Per the Office of Management and Budget Compliance Supplement (2 CFR Part 200, Appendix XI), procurement is a relevant compliance requirement for recipients of federal funding under the Unaccompanied Children Program. The recipient must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award, and administration of contracts. Further, they must follow proper procurement procedures. • Procurement records. The recipient or subrecipient must maintain records sufficient to detail the history of each procurement transaction. These records must include the rationale for the procurement method, contract type selection, contractor selection or rejection, and the basis for the contract price. • Formal procurement methods. Formal procurement methods are required when the value of the procurement transaction under a Federal award exceeds the simplified acquisition threshold of the recipient or subrecipient. Formal procurement methods are competitive and require public notice. • Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT) ($250,000), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include micro-purchases (generally, the acquisition of supplies or services whose aggregate amount does not exceed $10,000) and small purchases (the acquisition of property or services where the aggregate dollar amount is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold). If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity.Condition and Context: During our audit, we identified significant expenditures categorized as Cleaning Expense and Repairs and Maintenance charged to the Unaccompanied Minor Programs paid to one vendor (“the Contractor”). Review of the Cayuga Centers website shows that a member of the Board of Directors during the period under audit was also the owner of the Contractor. We inquired with management if the Organization went out to bid on the renovations charged to repairs and maintenance in the current year. Management noted that at the start of the UC Transitional Contract, the President at that time met with several vendors regarding work to be done on the building. As the Contractor was already doing other work for the building, the President made the decision to continue using the Contractor. The President has since separated from the Organization and management was unable to provide any official documentation regarding bid/price comparisons made. The Organization provided emails dated throughout 2014 which included fragmented information regarding management contacting contractors at that time. The information provided was not sufficient to support the assertion that management followed proper procedures with respect to obtaining bids for significant procurement activities in fiscal year ended June 30, 2024. In addition to the renovations, the total amounts paid for repairs, security, and maintenance exceeded the micro-purchase threshold and therefore should have documentation regarding the procurement decisions. Amounts charged to the grant are listed below. Cause: The Organization was unable to provide proof of proper procurement procedures being followed for expenditures paid to the Contractor due to the former President separating from the Organization and not maintaining relevant documentation. Result: Amounts paid to the Contactor for renovations are included in the Summary of Unallowable Costs. See finding 2024-011. Amounts paid to the contractor for repairs, security, and maintenance are included in the Summary of Questioned Costs for failure to adequately document the use of proper procurement procedures. In several instances, these expenses also resulted in the Organization going over the total approved budget by cost category. See the Summary of Questioned Costs for detail. Recommendation: We recommend the Organization establish procedures to review significant recurring expenditures to ensure they are following the procurement procedures as required under the Code of Federal Regulations and Compliance Supplement.
Finding 2024-013 – Noncompliance with Reporting Over Major Federal Program - Coronavirus State and Local Fiscal Recovery Funds (Repeat Finding – 2023-013) PASS-THROUGH GRANTOR: Direct Grant FEDERAL AGENCY: U.S. Department of Treasury ASSISTANCE LISTING: 21.027 FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Reporting QUESTIONED COSTS: $-0- Condition: During the test of 100% of expenditures for the Coronavirus State and Local Fiscal Recovery Funds, totaling $1,152,068, twenty-three (23) expenditures totaling $905,330 were not accurately reported in the proper period on the quarterly reports as required by the Reporting compliance requirement. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Recommendation: OSAI recommends the County design and implement a system of internal controls to ensure the accuracy and completeness of reports and to ensure compliance with federal requirements. Management Response: Chairman of the Board of County Commissioners: The Board of County Commissioners will take measures to ensure future compliance with all requirements of federal grants. Criteria: Accountability and stewardship should be overall goals in management’s accounting of federal funds. Internal controls should be designed to monitor compliance with laws and regulations pertaining to grant contracts. Title 2 CFR § 200.303(a) Internal Controls reads (a) reads as follows: The non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Controls Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, your organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
FINDING REFERENCE NUMBER 2024-039 FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117 (Federal Award Year: 10/1/2021 – 9/30/2022) 2023G996117 (Federal Award Year: 10/1/20212 – 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – SPECIAL REPORTS FOR FFATA TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA In accordance with 2 CFR Part 170, establishes that recipients (i.e., direct recipients) of grants or cooperative agreements are required to report first-tier subawards of $30,000 or more to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). The non-Federal entity or Federal agency must report each obligating action to http://www.fsrs.gov. For subaward information, report no later than the end of the month following the month in which the obligation was made. STATEMENT OF CONDITION During our testing of reporting compliance requirements applicable to the TANF program, we noted that Administration for Socioeconomic Development of the Family (ADSEF) did not submit the required FFATA reports for applicable first-tier subawards equal to or exceeding $30,000 to the Federal Funding Accountability and Transparency Act Subaward Reporting System (FSRS). Based on the amounts reported in the SEFA, certain entities receiving TANF funds were identified as subrecipients as defined in 2 CFR 200.1. However, ADSEF does not have appropriate internal control procedures related to reporting requirements and, as a result, did not identify the related payments as reportable subawards under 2 CFR Part 170. Consequently, ADSEF could not provide evidence that the required FFATA subaward reports were submitted accurately and within the required reporting timeframe. QUESTIONED COSTS None. PERSPECTIVE INFORMATION ADSEF consultants identified entities for which they understand are subrecipients. There were a total of twenty (20) agreements/contracts executed during fiscal year 2023-2024 that could be subject to FFATA reporting requirements, however, ADSEF cannot certify if all are subrecipients. According to the audit procedures performed, the agency did not have an established process for identifying first-tier subawards subjects to reporting or for submitting the corresponding FFATA notification through the FSRS. The deficiency is systemic, since the situation stemmed from ADSEF's general process and methodology for classifying entities that receive TANF funds and determining the applicability of FFATA reports. STATEMENT OF CAUSE ADSEF did not establish adequate policies, procedures, and internal controls to properly evaluate and determine whether entities receiving TANF funds should be classified as subrecipients or contractors in accordance with 2 CFR 200.331. As a result, applicable subawards subject to FFATA reporting requirements were not identified and reported to FSRS. POSSIBLE ASSERTED EFFECT Failure to report first-tier subawards in FSRS results in noncompliance with Federal transparency and reporting requirements established under 2 CFR Part 170 and may impair public transparency and accountability over the use of Federal funds. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADSEF strengthen its internal control procedures over FFATA compliance to ensure that all applicable first-tier subawards equal to or exceeding $30,000 are identified, monitored, and reported timely and accurately in FSRS in accordance with 2 CFR Part 170 requirements.
Condition: Expenditures for federal programs were not adequately reported on the Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Compliance Reports. The actual expenditures to vendors were $1,163,327. The County reported $941,437, resulting in an understatement of $221,890. In addition, it was noted one vendor was reported under the wrong category in the amount of $135,409. This amount was reported as revenue loss and should have been reported as administrative expense. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with federal compliance requirements. Effect of Condition: This condition resulted in noncompliance with grant requirements. Management Response: Chairman of the Board of County Commissioners: To correct this issue, the County will develop policy and procedures to timely and accurately track and report on federal funds. The policy and procedures will be reviewed, adopted, and monitored by the Board of County Commissioners. County Clerk: County will implement internal controls to ensure compliance with grant requirements. Recommendation: OSAI recommends the County gain an understanding of the grant requirements for this program and implement internal controls to ensure compliance with these grant requirements. Criteria: Compliance and Reporting Guidance, State and Local Fiscal Recovery Funds (10. Reporting.) reads as follows: All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. In addition, where appropriate, your organization needs to establish controls to ensure completion and timely submission of all mandatory performance and/or compliance reporting. Further, 2 CFR § 200.329 Monitoring and Reporting Program Performance (c)(1) reads as follows: The non-Federal entity must submit performance reports at the interval required by the Federal awarding agency or pass-through entity to best inform improvements in program outcomes and productivity. Intervals must be no less frequent than annually nor more frequent than quarterly except in unusual circumstances, for example where more frequent reporting is necessary for the effective monitoring of the Federal award or could significantly affect program outcomes. Reports submitted annually by the non-Federal entity and/or pass-through entity must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. Alternatively, the Federal awarding agency or pass-through entity may require annual reports before the anniversary dates of multiple year Federal awards. The final performance report submitted by the non-Federal entity and/or pass-through entity must be due no later than 120 calendar days after the period of performance end date. A subrecipient must submit to the pass-through entity, no later than 90 calendar days after the period of performance end date, all final performance reports as required by the terms and conditions of the Federal award. See also § 200.344. If a justified request is submitted by a non-Federal entity, the Federal agency may extend the due date for any performance report.
Finding 2024-003 Internal Control and Compliance over Subrecipient Monitoring (Material Weakness) Information on the Federal Program: Assistance Listing Number(s): 17.258, 17.259, 17.278 Federal Program Name: Workforce Innovation and Opportunity Act (WIOA) Federal Agency: U.S. Department of Labor Pass-Through Entity: California Employment Development Department Federal Award Number and Award Year: AA211008/AA311008/AA411008/AA411009/AA411010 Criteria: Title 2 - Grants and Agreements. Subtitle A - Office of Management and Budget Guidance for Grants and Agreements. Chapter II - Office of Management and Budget Guidance. Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D - Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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). Title 2: Grants and Agreements, Subtitle A - Office of Management and Budget Guidance for Grants and Agreements, Chapter II - Office of Management and Budget Guidance, Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subpart D - Post Federal Award Requirements, Subrecipient Monitoring and Management, §200.331 Requirements for pass-through entities (2 CFR 200.331): All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification i. Subrecipient name (which must match the name associated with its unique entity identifier); ii. Subrecipient's unique entity identifier; iii. Federal Award Identification Number (FAIN); iv. Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; v. Subaward Period of Performance Start and End Date; vi. Subaward Budget Period Start and End Date; vii. Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; viii. Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; ix. Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; x. Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); xi. Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; xii. Assistance Listings number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; xiii. Identification of whether the award is R&D; and xiv. Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414.; (1) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; (2) Any additional requirements that the pass-through entity imposes on the subrecipient in order for the pass-through entity to meet its own responsibility to the Federal awarding agency including identification of any required financial and performance reports; Title 2: Grants and Agreements, Subtitle A - Office of Management and Budget Guidance for Grants and Agreements, Chapter II - Office of Management and Budget Guidance, Part 200 - Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Subpart D - Post Federal Award Requirements, Subrecipient Monitoring and Management, §200.332 Requirements for pass-through entities (2 CFR 200.332): All pass-through entities must: (a) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include consideration of such factors as: (1) The subrecipient's prior experience with the same or similar subawards; (2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F of this part, and the extent to which the same or similar subaward has been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a Federal awarding agency). Condition: During our testing of the Imperial County Workforce Development Office’s (ICWDO) provisions for subrecipient monitoring under the WIOA Cluster, we noted two (2) of the two (2) subrecipient selected for testing, there was no review or approval over the monitoring procedures performed by ICWDO monitoring staff. The entire population consisted of two (2) subrecipients. Also, the County did not document their evaluation of the subrecipient’s risk of noncompliance. The following information was not provided at the time of the subaward for two (2) of the two (2) subawards selected for testing: o Federal award identification number o Federal award date of award to recipient by the Federal agency o Name of federal awarding agency o Federal Financial Assistance Listing/CFDA Number o Identification of whether the award is research and development Cause: The County’s ICWDO department does not have a formal procedure in place for the department’s review and approval over the monitoring procedures performed by the department over its subrecipients. The ICWDO department did not ensure that the required award information and applicable requirements were communicated to the subrecipients and did not maintain documentation of their evaluation of each subrecipient’s risk of noncompliance. Effect: The County’s ICWDO department did not review and approve monitoring procedures performed over its subrecipients. Additionally, the ICWDO department did not maintain policies and procedures to align with the Subrecipient Monitoring requirements in 2 CFR 200.332 (a) and 200.332(b). Identification as a Repeat Finding, If Applicable: Yes. See Finding 2023-004. Questioned Costs: No questioned costs were identified. Recommendation: We recommend ICWDO implement policies and procedures in accordance with 2 CFR 200.331(a) 200.332(b) to ensure compliance with subrecipient monitoring requirements and that require the review and approval of the monitoring procedures performed over its subrecipients by a separate individual. View of Responsible Officials and Planned Corrective Action: See separate Corrective Action Plan.
FINDING NO: 2024-047 Strengthen Controls over Record Retention for Consultant Selection and Indirect Cost Rate Review STATE AGENCY: Oklahoma Department of Transportation FEDERAL AGENCY: U.S. Department of Transportation ALN: 20.205 FEDERAL PROGRAM NAME: Highway Planning and Construction FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Procurement and Suspension and Debarment QUESTIONED COSTS: $0 Condition and Context: Engineering consultants are selected by an Oklahoma Department of Transportation (Department) Consultant Selection Committee (DCSC). A DCSC is formed for each project as a designated group responsible for evaluating, interviewing, and ranking engineering consultants based on their qualifications, experience, and project approach (qualifications-based selection). The DCSC evaluates interested consultants and develops a short-list of consultants, which is provided to the Director of Engineering for concurrence and the Chief Engineer for approval. After the short-list is approved, the DCSC interviews the consultants and performs evaluations to rank the consultants. The final results are sent to the Director of Engineering for recommendation, to the Chief Engineer for concurrence, and to the Executive Director for approval. The Department’s Grants & Contracts Audit Office (Audit Office, formerly Operations Review and Evaluation) is responsible for reviewing and accepting consultant indirect cost rates to ensure that overhead rates charged to consultant contracts are reasonable, allowable, and compliant with Federal Acquisition Regulations (FAR). The Audit Office maintains the review files and the accepted FAR internal cost rate and/or a provisional indirect cost rate. The timeline from DCSC selection, to contracting with a consultant, to reimbursement of eligible consultant claims can span multiple state fiscal years. The Department reimbursed 516 consultant contracts during the audit period, totaling $64,125,923. We tested 47 of the contracts, which included a total of 29 consultants, to determine whether the contracts had related DCSC selection approvals and an accepted FAR indirect cost rate when the Department contracted with the consultant. We identified: • One (1) of the 47 (2.12%) consultant contracts in which the Department was unable to provide the DCSC’s short-list, final recommendation, or the associated selection approvals. • 14 of the 47 (29.79%) contracts, relating to 9 consultants, in which the Department did not have an accepted FAR indirect cost rate and/or a provisional indirect cost rate on record with the Audit Office. Cause: The Department’s record retention process lacked the necessary strength and consistency to ensure the DCSC selection and approval documentation was maintained. Further, the Audit Office experienced turnover in 2021 and 2022, which affected the performance and maintenance of FAR indirect cost rates. Effect: Without a DCSC approved short-list of consultants, the Department is unable to provide proof that consultant contract procurement guidelines were followed. There is also the risk that the consultant selected may not be the most qualified consultant for the project or that the contract was selected due to wrong-doing.* The consultant’s indirect cost rate charged to the contracts may be unreasonable, unallowable, and/or noncompliant with Federal Acquisition Regulations. * The vendor associated with this contract has been used by the Department for years and is an established consultant; therefore, there are no concerns regarding the consultant’s existence, just the methodology used to select the consultant. Recommendation: We recommend the Department evaluate DCSC record retention process and implement training necessary to ensure all DCSC recommendations are maintained in the contract file. Furthermore, we recommend the Department evaluate the FAR indirect cost rate review and retention process and strengthen indirect cost rate review tracking to ensure that all consultants’ indirect cost rates are reviewed annually and retained, and necessary adjustments to the consultants’ provisional indirect cost rates are made. Criteria: 2 CFR § 1201.1 states in part: “Except as otherwise provided in this part, the Department of Transportation adopts the Office of Management and Budget Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR part 200)….” 2 CFR § 200.334 states in part: “Retention requirements for records. Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. … “ 23 CFR § 172.11(b) states in part: “Elements of contract costs. The following requirements shall apply to the establishment of the specified elements of contract costs: (1) Indirect Cost Rates. (i) Indirect cost rates shall be updated on an annual basis in accordance with the consultant's annual accounting period and in compliance with the Federal cost principles. (ii) Contracting agencies shall accept a consultant's or subconsultant's indirect cost rate(s) established for a 1-year applicable accounting period by a cognizant agency that has: (A) Performed an audit in accordance with generally accepted government auditing standards to test compliance with the requirements of the Federal cost principles and issued an audit report of the consultant's indirect cost rate(s); or (B) Conducted a review of an audit report and related workpapers prepared by a certified public accountant and issued a letter of concurrence with the related audited indirect cost rate(s).” 2 CFR § 200.303 states in part: “The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” 2 CFR § 200.1 states in part: “Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; and (iii) Compliance with applicable laws and regulations.” Oklahoma Department of Transportation Guidelines for the Administration of Consultant Contracts, dated June 22, 2016, contains the following guidance: • Section 4.01 Short-List Development states in part: “a) Department Consultant Selection Committee Determination. … The DCSC will review the LOIs submitted by each Consultant. The DCSC is a working committee which consists of a minimum of three (3) representatives (Committee Chair and two (2) members) and is generally determined by the different components of a project (i.e. roadway design, bridge design, survey etc.). The DCSC will be composed of Department representatives with knowledge and expertise in critical aspects of the projects and/or services, and are generally recommended by the Director of Engineering, for Chief Engineer concurrence and Executive Director approval.…” • Section 4.04 Interview Evaluation states in part: “Based upon the DCSC’s evaluation of the proposals and oral presentations, a final ranking is established and the CA provides the Director of Engineering recommendation for Chief Engineer concurrence and Executive Director approval….” • Section 6.11 Federal Acquisition Regulations (FAR) states: “The Consultant shall certify that the indirect cost rate submitted does not include any costs which are expressly unallowable and that the indirect cost rate was established only with allowable costs in accordance with the applicable cost principles contained in the FAR. The Department’s OR&E Division will be responsible for ensuring that a Consultant’s indirect cost rate complies with the FAR cost principles.” • Section 16.3 states: “An audited FAR indirect cost rate and related information must be submitted by the Consultant to the Department for review and acceptance no later than July 31st following the end of the previous calendar year. A provisional overhead rate may be used until such time that an annual overhead rate is audited and established. In the event the Consultant is unable to provide the audit report within the time frame specified, the Consultant shall submit a written request for an extension citing the reason for the delay. Submittal of the Consultant’s annual indirect cost rate audit will be documented in the Consultant’s contract evaluation.” Views of Responsible Official(s) Contact Person: Jennifer Hankins Anticipated Completion Date: 12/31/2026 Corrective Action Planned: The Oklahoma Department of Transportation agrees with the finding. See corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2024-054 (Repeat 2023-097) Strengthen Internal Controls Over Claim Voucher Approvals STATE AGENCY: Oklahoma Department of Transportation (Department) FEDERAL AGENCY: Federal Highway Administration ALN: 20.205 FEDERAL PROGRAM NAME: Highway Planning and Construction Program FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Allowable Cost/Cost Principles QUESTIONED COSTS: $50,910 Condition and Context: To initiate the payment of program expenditures, individual divisions review and approve invoices related to the divisions’ operations and prepare the Claim Voucher Form (ODOT Form 324) before submitting them to the Comptroller Division for processing. We analyzed 100% of federally reimbursed Highway Planning and Construction Program (ALN 20.205) claims that were paid during the audit period. The population consisted of 11,622 claims, totaling $1,062,621,905. During the analysis, we identified three (3) duplicate claims, totaling $50,910, which are considered improper payments. Cause: The Department’s claim preparation and review processes lacked the necessary strength and consistency to ensure personnel verified whether the invoices had previously been paid prior to processing the duplicate claims. Further, the review and approval process was not robust enough to detect the duplicate claim. Effect: The Department made three (3) improper payments for $50,910 with ALN 20.205 funding. Continued noncompliance with 2 CFR § 200.1 increases the risk of Federal claw backs, which impacts state dollars. Recommendation: We recommend the Department evaluate and strengthen the claim preparation and review processes in the divisions involved and provide appropriate training to ensure that future duplicate payments are prevented. Additionally, we recommend the affected Divisions maintain a log documenting the invoice date and number, vendor name, and payment amount and review the log for prior claim vouchers issued before approving and processing potential duplicate invoices for payment. Criteria: 2 CFR § 1201.1 states: “Except as otherwise provided in this part, the Department of Transportation adopts the Office of Management and Budget Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR Part 200). This part supersedes and repeals the requirements of the Department of Transportation Common Rules (49 CFR Part 18 - Uniform Administrative Requirements for Grants and Cooperative Agreements to State and Local Governments and 49 CFR Part 19 - Uniform Administrative Requirements - Uniform Administrative Requirements for Grants and Agreements with Institutions of Higher Education, Hospitals, and other Non-Profit Organizations), except that grants and cooperative agreements executed prior to December 26, 2014 shall continue to be subject to 49 CFR Parts 18 and 19 as in effect on the date of such grants or agreements. New parts with terminology specific to the Department of Transportation follow.” 2 CFR § 200.303 states in part: “The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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).” 2 CFR § 200.1 states in part: “Internal controls for non-Federal entities means: (1) Processes designed and implemented by non-Federal entities to provide reasonable assurance regarding the achievement of objectives in the following categories: (i) Effectiveness and efficiency of operations; (ii) Reliability of reporting for internal and external use; and (iii) Compliance with applicable laws and regulations.” 2 CFR § 200.1 states in part: “Improper payment means: (1) Any payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. (i) Incorrect amounts are overpayments or underpayments that are made to eligible recipients (including inappropriate denials of payment or service, any payment that does not account for credit for applicable discounts, payments that are for an incorrect amount, and duplicate payments). An improper payment also includes any payment that was made to an ineligible recipient or for an ineligible good or service, or payments for goods or services not received (except for such payments authorized by law).” Views of Responsible Official(s) Contact Person: Sam Ddamba Anticipated Completion Date: 07/02/2025 Corrective Action Planned: The Oklahoma Department of Transportation agrees with the finding. See corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2024-015 (Partial Repeat # 2023-061) Strengthen Internal Controls Over Review and Approval or Claims STATE AGENCY: Oklahoma State Department of Education (OSDE) FEDERAL AGENCY: United States Department of Education (USDE) ALN: 10.558; 84.010; 84.425 - 84.425U FEDERAL PROGRAM NAME: Child and Adult Care Food Program (CACFP); Title I, Part A – Grants to Local Educational Agencies; Education Stabilization Fund (ESF): Elementary and Secondary School Emergency Relief Fund (ESSER); American Rescue Plan – Elementary and Secondary Schools Emergency Relief Fund (ARP ESSER) FEDERAL AWARD NUMBER: 6OK300330, 6OK300349; S010A230036; S425U210024 FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Activities Allowed or Unallowed & Allowable Costs/Cost Principles QUESTIONED COSTS: ALN 84.425U - $1,549 Condition and Context: OSDE has policies and procedures in place to review and approve claims. In addition, the Comptroller’s Office has policies and procedures in place to determine which claims are to be included in accounts payable We tested a sample of 35 of 745 (4.7%) Education Stabilization Fund (ESF) accounts payable claims totaling $57,843,297, and identified: • One of 35 (2.86%) ESF claims lacked supporting invoices which were not obtained by OSDE until after our inquiry, indicating inadequate review and approval. We subsequently received supporting documentation and were able to verify the invoices were for allowable costs. • One of 35 (2.86%) ESF claims had invoiced amounts less than the expenditure within the claim, resulting in an overclaim of $1,549. We tested a sample of 23 of 456 (5.04%) Title I, Part A accounts payable claims totaling $34,218,534 and identified: • One of 23 (4.35%) Title I, Part A claims lacked supporting invoices which were not obtained until after our inquiry, indicating an inadequate review and approval. We subsequently received supporting documentation and were able to verify the invoices for allowable costs. We tested a sample of 6 of 1,491 (.40%) CACFP accounts payable claims totaling $16,763, reported on the state fiscal year (SFY) 2024 Schedule of Federal Awards (SEFA) dated July 1, 2024 to August 15, 2024, and identified: • Four of six (66.67%) CACFP claims totaling $6,268 with claim months after June 30, 2024 should not have been included in the SFY 2024 CACFP accounts payable population. Cause: OSDE’s claims review and approval process lacked the necessary strength and consistency to adequately review Title I and CACFP claims to ensure proper supporting documentation, including invoices, agrees with the expenditures submitted on the claim to ensure the amounts claimed were accurate and for allowable costs. In addition, OSDE’s accounts payable determination lacked necessary strength and consistency to accurately review and account for accounts payable transactions for goods and services received after June 30, 2024. Effect: Inadequate review of claims with proper supporting documentation increases the risk of reimbursement of unallowable expenses resulting in noncompliance. Furthermore, noncompliance increases the risk of Federal claw backs, which impacts state dollars. Noncompliance during the audit period resulted in $1,549 of state funds owed to the USDE. Additionally, inaccurate reporting of goods and services received during the period increases the risk of accounts payable in the CACFP SEFA accrual amount to be overstated. The exception rate in our testwork indicates a significant overstatement of accounts payable is likely. Recommendation: We recommend OSDE strengthen its claims review and approval process to ensure accurate supporting documentation for claims is included and only allowable costs are reimbursed. We also recommend OSDE strengthen its accounts payable determination process to accurately account for claims identified as accounts payable for the audit period. Criteria: 2 CFR § 200.403 states in part: “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. … (g) Be adequately documented.” 2 CFR Part 200 §200.1 states in part: “Improper payment means a payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. The term improper payment includes: any payment to an ineligible recipient; any payment for an ineligible good or service; any duplicate payment; any payment for a good or service not received, except for those payments where authorized by law; any payment that is not authorized by law; and any payment that does not account for credit for applicable discounts.” 2 CFR § 200.303(a) states in part: “The non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” Management Response Contact Person: Tammy Smith | Senior Director of Federal Programs Anticipated Completion Date: July 31, 2026 Corrective Action Planned: The Oklahoma State Department of Education agrees with the finding. See corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2024-031 (Repeat 2023-104) Strengthen Internal Controls over Monitoring for Desert Grant Awards STATE AGENCY: Oklahoma Department of Human Services (OKDHS) FEDERAL AGENCY: Department of Health and Human Services ALN: 93.575 FEDERAL PROGRAM NAME: CCDF Cluster FEDERAL AWARD NUMBER: 2101OKCDC6 FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility QUESTIONED COSTS: $12,616,296 Condition and Context: OKDHS begam implementing a new Childcare Desert Grant (DG) program starting in August 2022 in order to help increase accessibility to quality childcare for working families living in a county where there is not enough licensed childcare to support the needs of the residents. The grants were available for new or existing daycare homes or centers seeking to increase licensed capacity. Funds awarded under this program were intended to be used for minor construction, program materials, or technology and software for business development necessary to meet licensing requirements. For new daycares, applicants could receive a total of $10,000 per child with an initial advance of $5,000 per child payment made at the time of approval based on the licensed capacity, and a second $5,000 payment made at 12 months based on the enrollment and attendance. For expansion/ existing daycares, applicants could receive a total of $10,000 per child with an initial advance of $5,000 per child payment made at the time of approval based on the number of expanded slots, and a second $5,000 per child payment made at 12 months based on the number of children enrolled and attending in the expanded slots. We tested a sample of 71 (55 new and 14 existing sites) Child Care Centers (CCC) or Family Daycare Homes (FDCH) that received American Rescue Plan (ARP) Desert grant supplemental funds during SFY 2024 (July 1, 2023 – June 30, 2024). The universe included 253 Child Care providers with $24,050,000 in total awards. Tested awards for sampled providers totaled $13,295,000. We noted the following Desert grant Eligibility or Activities Allowed expenditure exceptions: ACTIVITIES ALLOWED and ELIGIBILITY • The 2nd round DG payment was based on both the attendance records and the enrollment records for the recertification month. However, OKDHS did not obtain the attendance records and ensure enrollment records agreed to attendance records for 10 of 71 (14.08%) facilities. Questioned costs totaled $1,956,582. We also noted that OKDHS did not obtain the attendance records for any of the facilities that had their 2nd round recertification performed in October of 2023. Total award amount paid by OKDHS without verifying attendance records is $3,450,000, of which nine facilities are already included in the questioned costs of $1,956,582 and an additional 22 facilities not in our sample were paid the remaining $1,493,418. • For 30 of 71 (42.25%) awards paid, the Desert grant award amount per CCC/FDCH was not calculated correctly based on the attendance and enrollment records submitted: overpayments totaled $1,340,000. We questioned these costs. • Eligibility criteria per the 2nd round Desert Grant Application was not met prior to the application approval date for the following: o For 4 of 71 (5.63%) new facilities, the CCC had a change in ownership or change in license number without a break in operations. Questioned costs totaled $1,080,000 for the 2nd round award. In addition, the CCC’s should not have received the 1st round of awards totaling $1,765,000 as the facilities did not meet the DG requirements for a new facility. o For 1 of 71 (1.41%) the amount of the 2nd round payment exceeds the amount of the 1st round payment. Questioned costs totaled $10,000. • The new/expanded CCC's/FDCH's did not comply with all post application approval eligibility criteria applicable to the SFY24 time period as follows: o For eight of 71 (11.27%) of facilities, the facility closed prior to two years from the date of the 1st round award payment; overpayments totaled $575,000 We questioned these costs. We also noted that six of 71 (8.45%) facilities closed prior to two years from the date the facility first started offering childcare, and another 11 of 71 (15.49%) had closed as of 11/6/2025 per OKDHS. The total amount of DG funds (1st and 2nd rounds) paid to facilities that are no longer operating is $8,190,000. o For 24 of 71 (33.80%) awardees paid a totaling total $2,091,582 (15.73% of total award amount of $13,295,000), the CCC/FDCH did not provide program expenditure records as required o For the 47 of 71 (66.20%) of Desert Grant awardees that reported expenditures for the 2nd round of Desert Grant awards, $10,534,714 (79.24% of the total award amount of $13,295,000), was spent on activities not designated as allowable per the Desert Grant application and OKDHS program objectives. We questioned these costs Inadequate Desert Grant program design and administration resulted in mismanagement of funds by OKDHS per the following: • For 55 of 71 (77.46%) Desert Grant awardees, OKDHS awarded STARS under the OKDHS Quality Rating Improvement System (QRIS) without any monitoring visits to verify the program met the requirements for the STAR level awarded. • For 32 of 71 (45.07%) Desert Grant awardees, the number of children present during monitoring visits does not reasonably support the number of children claimed in attendance and/ or enrollment in the documentation submitted by the facilities and used by OKDHS to calculate the 2nd round DG award amount. Fifteen of the 32 facilities had closed as of 11/6/2025. Eleven of the 32 facilities did not provide any expenditure records to SAI. Twenty-five of the 32 facilities received an increased STAR level without any monitoring visits to verify the program met the requirements for the STAR level awarded. While reviewing monitoring activities, we identified one recipient of the 1st round DG award who applied as a new childcare center and received $600,0000 in DG funds. However, the facility was already an existing childcare center. We determined the total number of facilities awarded DG funds in rounds 1 and 2 that closed as of 11/6/2025 is 128 (36.78 % of 348 total awarded the DG) with total desert grant payments for closed facilities totaling $19,865,000 or 29.31% of $67,775,000 in total DG payments made. Note: Because a tested provider may have questioned costs for one type of exception that overlaps with other types of exceptions, we are providing the following information: • Total non-compliance for exceptions related to issues with attendance/ enrollment support, facility closures, non-compliance with eligibility requirements and failure to provide records are $ 4,841,582 and projected non-compliance is $8,057,287 • Total non-compliance for exceptions related to issues with reported expenditures for activities not designated as allowable per the Desert Grant application and DHS program objectives are $7,774,714 and projected noncompliance is $15,028,104. • Total combined questioned costs for all exceptions (netted to ensure amounts do not exceed 2nd round award payment) are $12,616,296 and projected non-compliance is $23,085,391. Cause: The Department did not design the Desert grant program to ensure ARP Act CCDF funds were only used to expand access to childcare assistance to more income eligible families and improve the quality and availability of childcare. • The Department did not award funds based on the actual costs necessary for each individual CCC or FDCH to meet licensing requirements, which resulted in many providers that had large amounts of cash at their disposal even after meeting licensing requirements. • The Department advanced Desert grant funds to awardees in two lump sums instead of on an incremental basis ensuring planned remodeling work and program equipment and materials were being completed and/or acquired appropriately and were reasonable and necessary to meet program requirements. • The Department awarded Desert Grant funds based first on potential capacity and then enrollment and attendance but did not consider any other significant factors (i.e., business experience, number of children likely to be enrolled, ability to hire, train and retain qualified staff, etc.) essential to the operational sustainability of the new CCC or FDCH at the capacity level awarded. This contributed to many instances in which the CCC/ FDCH has already closed or is currently operating at an enrollment level significantly below the awarded capacity. • The Desert Grant Application included language that was insufficient to adequately inform the Desert grant awardees of all unallowable uses of the funds, including remodeling funding limits, limitations for sectarian organizations, and expenditures that were only allowable under other ARP CCDF stabilization grants. • The Department did not have adequate safeguards in place to ensure Desert Grant funds were appropriately awarded only to awardees that met the requirements to be considered a ‘new’ daycare center. • The Department allowed programs with the least restrictive licensing requirements (i.e., out of school, after school, summer programs) to receive the same amount per child as a program offering full time infant to school age childcare. The Department has not established adequate policies and procedures to monitor Desert Grant funds expended by childcare providers. The Desert Grant program may not effectively increase and/or sustain the increase in total capacity of childcare centers in low-income areas as intended. OKDHS CCDF did not normally create or administer new grant programs other than CCDF regular childcare subsidy program. In addition, the ARP CCDF Discretionary and supplemental funds had to be obligated by September 30, 2023, and liquidated by September 30, 2024, which reduced the timeline available to develop the new grant programs. However, OKDHS CCDF did have extensive experience with childcare licensing requirements and associated costs of operating the various types of childcare programs. Effect: The Desert Grant program may not effectively increase and/or sustain the increase in total capacity of childcare centers in low-income areas as intended. The combined effects of making advanced payments for all Desert Grant awards and the failure to monitor the use of Desert grant funds may lead to the Departments inability to recover grant funds not used in accordance with the grant requirements and/or used for non-childcare expenditures or misappropriated for other uses. Desert grant funds were not used by majority of CCC and FDCH to expand daycare attendance within desert regions; there were no repercussions to not meeting the licensing capacity they were paid on. Recommendation: We recommend the Department enhance its program design and planning processes to ensure that key elements—such as funding mechanisms and implementation workflows—are fully developed prior to launch. Strengthening the upfront design phase will help prevent challenges like those experienced with this grant and support more effective program execution in the future. We recommend the Department develop policies and procedures to ensure providers are adequately monitored to ensure Desert grant funds are expended properly to meet the objective of the grant. We recommend the Department perform a review of all Desert grant funds awarded and expended, identify all funds not used for the Desert grants intended purposes, and ensure remaining funds are expended appropriately or returned. We also recommend the Department recoup all funds for the following: o Funds awarded based on incorrect capacity counts and enrollment and attendance counts o Funds awarded to facilities that did not meet the requirements to be considered a new CCC/FDCH. o Expenditures for non-childcare purposes o Expenditures that benefited entities other than the facility awarded the desert grant o Excessive or unreasonable expenditures o Unexpended funds not needed to meet program requirements o Unaccounted for funds (i.e., funds transferred out or comingled with investment accounts, personal accounts, or other business/non-profit accounts) We recommend the Department improve their monitoring procedures to ensure significant discrepancies between the number of children claimed in attendance and the number of children present during monitoring visits are appropriately follow-up on. We also recommend that monitoring visits are performed during non-traditional hours and during before and after care hours for all providers offering these services at these times. Criteria: 2 CFR § 200.303(a) – Internal Controls states in part, “The Non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” 2 CFR § 200.403 Factors affecting allowability of costs states in part, “Costs must…(a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, and (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, and (g) Be adequately documented.” The Desert grant FAQs state in part, …“How much are the Child Care Desert grants? For New Programs: Applicants may receive a total of $10,000 per child with an initial payment made at the time of approval based on license capacity, and a second $5,000 per child payment made at 12 months based on enrollment. The second payment cannot exceed the amount of the first payment. For Expansion Programs: Applicants may receive a total of $10,000 per child with an initial payment made at the time of approval based on the number of expanded slots, and a second $5,000 per child payment made at 12 months based on the number of children enrolled in the expansion slots. … What are the Qualifications for grant eligibility? … • Must accept subsidy payments • Must participate in the Quality Rating Improvement System (QRIS/STARS) • Must operate for a minimum of two years after date of initial award. • Be located in an identified child care desert. (A list of Child Care Desert counties can be reviewed at the end of this document.) • Make services available to families regardless of race, color, creed, religion, national origin, sex, marital status, disability, age, sexual orientation, or familial status. • Complete grant participation agreement, located at the end of the application. • Complete and return questionnaire that will be provided to you via email after you submit the grant application. • Be determined eligible by Oklahoma Human Services staff who review the applications. NOTE: Programs that have recently closed and reopen without an increase in capacity do not qualify OR Programs that have recently had a change in ownership without a break in operation do not qualify. … Childcare providers must NOT use the funds for any of the following purposes: • Purchase of land or property • Major construction or renovations. Major renovation means: (1) structural changes to the foundation, roof, floor, exterior or load-bearing walls of a facility or the extension of a facility to increase its floor area; or (2) extensive alteration of a facility such as to significantly change its function and purpose, even if such renovation does not include any structural change. • Consumable supplies (diapers, wipes, soap, paper products) or office supplies (paper, staples, pens) • One-time field trips for children • Child care tuition (scholarships) • Items prohibited by licensing • Used items • Non-childcare expenses … How long do I have to start operating my program after I receive the initial award? Childcare programs will have 90 days from receipt of the awarded grant funds to complete the application process and be placed on a six-month permit. Once you have a permit, you can begin serving children. If you are not on permit within 90 days, you may be required to return the initial award amount. … You must be approved for a 2-star level or higher within 12 months of receipt of initial award. If you do not meet this requirement, you may be required to return the initial award and will not qualify for a second award. You must be approved for a subsidy contract within 12 months of receipt of initial award. If you do not meet this requirement, you may be required to return the initial award and will not qualify for a second award. Childcare programs must participate in QRIS at two star or higher in order to receive a subsidy contract. The Desert Grant application states in part, “By signing this application, I understand that it is my responsibility to maintain records and other documentation to support the use of funds I receive, as well as to document my compliance with the requirements. I understand I must provide these documents to Oklahoma Human Services if requested. … Allowable uses of Grant Funds: Grant funds can be used to cover minor construction projects or program materials per application. All materials must be new, and must be purchased from a retail store, not a private party. In the event the grant recipient wishes to have the cost of assembly and/or installation covered by a grant, the labor must be performed by a licensed and bonded contractor. The grant may be used for technology and software to create and maintain business management systems. Provider Affirmation The following signature affirms that I will adhere to the qualifications listed above and will only spend the funds on allowable uses. I understand that I may be required to re-pay grant funds if I do not adhere to all the terms of this agreement. 42 U.S. Code § 9858 c(c)(2)(I) states in part, “In the case of a sectarian agency or organization, no funds made available under this subchapter may be used for the purposes described in paragraph (1) except to the extent that renovation or repair is necessary to bring the facility of such agency or organization into compliance with health and safety requirements…” 42 U.S. Code § 9858k(a) states, “No financial assistance provided under this subchapter, pursuant to the choice of a parent under section 9858c(c)(2)(A)(i)(I) of this title or through any other grant or contract under the State plan, shall be expended for any sectarian purpose or activity, including sectarian worship or instruction.” 42 U.S. Code § 9858k(b) states in part, “With regard to services provided to students enrolled in grades 1 through 12, no financial assistance provided under this subchapter shall be expended for— (1) any services provided to such students during the regular school day; (2) any services for which such students receive academic credit toward graduation.” 42 U.S. Code § 9858d(b) states in part, “…no funds shall be expended for the purchase or improvement of land, or for the purchase, construction, or permanent improvement (other than minor remodeling) of any building or facility. 45 CFR § 98.2, states in part, Definitions states in part, “Major renovation means any renovation that has a cost equal to or exceeding $350,000 in CCDF funds for child care centers and $50,000 in CCDF funds for family child care homes, which amount shall be adjusted annually for inflation and published on the Office of Child Care website. If renovation costs exceed these thresholds and do not include: (1) Structural changes to the foundation, roof, floor, exterior or load-bearing walls of a facility, or the extension of a facility to increase its floor area; or (2) Extensive alteration of a facility such as to significantly change its function and purpose for direct child care services, even if such renovation does not include any structural change; and improve the health, safety, and/or quality of child care, then it shall not be considered major renovation;” Views of Responsible Official(s) Contact Person: Kayla Urtz Anticipated Completion Date: N/A Corrective Action Planned: The Department of Human Services partially agrees with the finding. Please see the corrective action plan located in the corrective action plan section of this report. Auditor Response: Per OKDHS disagreement with SAI’s characterization of questioned costs, the treatment of unsupported expenditures as unallowable expenditures: For Single Audits, SAI is required to comply with 2 C.F.R. § 200.1 which states in part “(1) Questioned cost means an amount, expended or received from a Federal award, that in the auditor's judgment: (i) Is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award; (ii) At the time of the audit, lacked adequate documentation to support compliance; or (iii) Appeared unreasonable and did not reflect the actions a prudent person would take in the circumstances. (2) The questioned cost amount under (1)(ii) is calculated as if the portion of a transaction that lacked adequate documentation were confirmed noncompliant. We are required to report as questioned costs the $2,091,582 in Desert Grant funds, for which 24 providers did not submit any records. These providers were required to maintain these records and agreed to this per their Desert Grant application agreement which states in part, “Child Care Desert Grant Agreement - By signing this application, I understand that it is my responsibility to maintain records and other documentation to support the use of funds I receive, as well as to document my compliance with the requirements. I understand I must provide these documents to Oklahoma Human Services if requested.” Of note, 21 of the 24 providers that refused to provide records for the Desert Grant award also had other questioned costs related to enrollment and/or attendance records that did not support the award amount paid, the facility closed prior to the 2 year minimum an/or the facility was not a new daycare but received Desert Grant funds for being a new daycare. We also identified numerous other exceptions for these daycares that did not result in questioned costs due to the nature of the exception. SAI has also noted that investigations carried out by the OKDHS OIG unit also treat unsupported costs as questioned costs. With regard to sampling methodology and the extrapolation of questioned costs, SAI follows the AICPA Government Auditing Standards and Single Audits audit guide. All questioned costs identified in individually selected items (ISI’s) (not part of the sampled population) are not extrapolated, only the questioned costs identified in the sample. The sampling methodology we used for testing Desert Grant payments is appropriate for the attributes tested in this population and reflects the separate requirements for the daycare centers and family daycare homes related to the Desert Grant. The types and amounts of questioned costs identified in our audit are presented separately in the ‘Condition’ of the finding and the extrapolation methodology used does not duplicate any overlapping exception amounts. Please see the paragraph right above the ‘Cause’ section which breaks out the exception types between 1) expenditures reported by providers that did not align with the allowable uses of funds stated in the Desert grant application and 2) all other non-compliance issues that resulted in questioned costs. Also, there are not any questioned costs identified that are associated with “retrospective assessments regarding how the program could have been structured differently”. The Department of Human Services advanced all Supplemental Desert grant funds without having proper controls in place to ensure the funds were spent on allowable CCDF costs. Federal regulations state the lead agency (i.e., DHS) is responsible for fiscal controls and accounting procedures sufficient to permit the tracing of funds to a level adequate to establish that CCDF funds have not been used in violation of this grant.
FINDING NO: 2024-033 (Repeat 2023-099) Strengthen Internal Controls over Monitoring for Stabilization Awards STATE AGENCY: Oklahoma Department of Human Services (OKDHS) FEDERAL AGENCY: Department of Health and Human Services ALN: 93.575 FEDERAL PROGRAM NAME: CCDF Cluster FEDERAL AWARD NUMBER: 2101OKCSC6 FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility QUESTIONED COSTS: $698,608 Condition and Context: OKDHS began implementing a new Quality Rating and Improvement System (QRIS), also known as Stars, that became effective January 1, 2023. Under the new system, the State of Oklahoma has five levels (1-5) of quality ratings for all licensed childcare programs. All licensed programs immediately qualify as a 1 Star. In preparation of the new system, all daycares were asked to submit an updated Stars application (also called reapplication period). A Stars resource booklet, applicable to the daycare type, facility, small home, or large home, and a cover letter was e-mailed to each daycare on June 1, 2022, to provide guidance when requesting a Stars level. OKDHS offered a financial incentive to those daycares who submitted an application on or before November 30, 2022. The application asked each daycare to provide Stars Level Requested; the higher the Stars level approved the greater the grant funding and subsidy payments. For example, if you were a 1 Star facility for cycles 5 & 6 and you requested and were approved to become a 5 Star facility for cycles 7 & 8, you would receive approximately 3 times more funding for those cycles. Daycares were informed that Stars criteria reviews would not be performed during the reapplication period unless a serious non-compliance was observed during a regular monitoring visit. Also, the Stars yearly monitoring visit, and two partial visits, were waived by OKDHS for calendar year 2023. OKDHS provided Childcare ARP Act Stabilization grant funding to daycare homes and centers for SFY 2024 (July 1, 2023 to June 30, 2024) based on an approved grant application per cycle. Stabilization grant funding for cycle 9 (July 2023 – September 2023) were awarded based on licensed capacity and Stars rating. When attempting to obtain the supporting documentation for discretionary stabilization benefit payments, we were informed by OKDHS that no financial documentation was requested from the homes or centers for the funding provided in SFY 2024 and no monitoring of these payments to ensure the funds were used appropriately was performed. As a result, we requested the documentation directly from the homes and centers in order to determine if grant funds were spent in accordance with the objectives of the DHS child-care stabilization program. We tested a total of 84 daycare homes and centers that received ARP Act Discretionary stabilization funds during SFY 2024 (July 1, 2023 – June 30, 2024). The universe included 2,488 providers with $86,335,000 in total awards. Tested awards for daycare homes and centers totaled $3,419,000. We noted the following issues for the 84 grant recipients tested: • For 4 (4.76%) of 84 daycare providers tested, stabilization funds were not expended on allowable activities. Expenditures for unallowable activities totaled $20,014. • For 25 (33.33%) of 84 daycare providers tested, stabilization funds could not be supported with adequate documentation; therefore, we could not determine whether the stabilization funds were expended on allowable activities. Expenditures for unsupported activities totaled $678,595. • For 42 (50%) of 84 daycare providers tested, the Stars rating increased by at least 2 from cycles 5-6 to cycles 7-8. This greatly increased the amount of child-care subsidy payments these providers received, often doubling the amount. For example, a childcare center provider with a 2 Star rating would receive $22.80 per day for an infant aged 0 to 12 months. By increasing the star rating to 5, the daily rate is increased to $50.60. Other COVID-19 exceptions also increased the subsidy amounts by $5 per day per child and decreased the number of days a child must attend the day care from (14 to 11) before receiving subsidy payments for all absent days as well. SAI noted a large number of childcare centers received increased star ratings during the period DHS did not review the Stars requirements that later were not able to qualify for Star rating they received. Cause: OKDHS had no process or internal controls in place to adequately monitor stabilization funds awarded to childcare providers to ensure the grant funds were actually spent on the approved activities per the application. Also, OKDHS did not have adequate controls in place to support the increase in Stars rating for homes and centers since there were no reviews and/or monitoring performed on which to quantify their assessments. Effect: Stabilization funds were not expended in compliance with Section 2202(e)(1) of the ARP Act of 2021. Further, allowing daycares to request their own Star level increase dramatically increased the amount of funding most daycare homes or centers received, and the increased Star level may not have been appropriate based on the actual performance, or quality and safety level, of the daycare. Lastly, without OKDHS monitoring stabilization funds expended by providers, grant funds could continue to be expended on unallowable activities that did not align with the objectives of the DHS child-care stabilization program. Recommendation: We recommend OKDHS continue to strengthen its internal controls over monitoring daycares to ensure stabilization funds are expended in accordance with the objectives of the DHS child-care stabilization program. Further, we recommend OKDHS ensure adequate Stars reviews and/or monitoring have been performed prior to increasing grant funding and subsidy payments. Lastly, we recommend OKDHS develop an appropriate process to ensure daycare homes and centers are adequately documenting and supporting grant expenditures and that the records are available for review. Criteria: 45 CFR 98.67 states: “Fiscal Requirements. (a) Lead Agencies shall expend and account for CCDF funds in accordance with their own laws and procedures for expending and accounting for their own funds. (b) Unless otherwise specified in this part, contracts that entail the expenditure of CCDF funds shall comply with the laws and procedures generally applicable to expenditures by the contracting agency of its own funds. (c) Fiscal control and accounting procedures shall be sufficient to permit: (1) Preparation of reports required by the Secretary under this subpart and under subpart H; and (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part.” 2 CFR § 200.303(a) states in part, “The Non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” 2 CFR § 200.403 states in part, “Costs must…(a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, … and (g) Be adequately documented.” American Rescue Plan Act of 2021 (ARP) § 2202(e)(1) states in part, USES OF FUNDS-, ”In GENERAL - A qualified child care provider that receives funds through such a subgrant shall use the funds for at least one of the following: (A) Personnel costs, including payroll and salaries or similar compensation for an employee (including any sole proprietor or independent contractor), employee benefits, premium pay, or costs for employee recruitment and retention. (B) Rent (including rent under a lease agreement) or payment on any mortgage obligation, utilities, facility maintenance or improvements, or insurance. (C) Personal protective equipment, cleaning and sanitization supplies and services, or training and professional development related to health and safety practices. (D) Purchases of or updates to equipment and supplies to respond to the COVID–19 public health emergency. (E) Goods and services necessary to maintain or resume childcare services. (F) Mental health supports for children and employees.” Views of Responsible Official(s) Point of Contact: Kayla Urtz, Director of Internal Audit Anticipated Completion Date: N/A Corrective Action Planned: The Department of Human Services partially agrees with the finding. Please see the corrective action plan located in the corrective action plan section of this report. Auditor Response: SAI would like to clarify our position with regard to OKDHS responsibility to ensure funds awarded under any COVID-19 program are expended for the purposes for which they were awarded. The term ‘monitoring’ in this finding refers to OKDHS oversight and review of how the Stabilization funds were expended. While there are portions of the CCDF regulations that the Stabilization funds are exempted from, including formal subrecipient monitoring under Uniform Guidance (45 CFR Part 75), the following regulations do apply: Per the Notice of Grant Award for Child Care Stabilization Funds American Rescue Plan (Arp) Act: “APPLICABLE LEGISLATION, STATUTE, REGULATIONS 1. The administration of this program is subject to: … Child Care and Development Block Grant (CCDBG) Act and related regulations a. The CCDBG Act is codified at 42 U.S.C. §9857 et seq., b. Implementing program regulations are located at 45 CFR Part 98 and 99 … Financial Reporting and Requirements 10. Federal funds awarded under this grant must be expended for the purposes for which they were awarded. 11. Each grantee's fiscal and accounting procedures must be sufficient to permit the preparation of required reports and the tracing of expenditures to a level necessary to establish that Federal funds have not been used in violation of the terms and conditions.” The applicable regulations include the following: 45 CFR 98.67 states: “Fiscal Requirements. (a) Lead Agencies shall expend and account for CCDF funds in accordance with their own laws and procedures for expending and accounting for their own funds. (b) Unless otherwise specified in this part, contracts that entail the expenditure of CCDF funds shall comply with the laws and procedures generally applicable to expenditures by the contracting agency of its own funds. (c) Fiscal control and accounting procedures shall be sufficient to permit: (1) Preparation of reports required by the Secretary under this subpart and under subpart H; and (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part.” The Stabilization program award application includes the following attestation: “To receive a stabilization grant, I agree to use the funds only for the categories and purposes indicated on this application and have marked above which categories I plan to fund. I also understand that it is my responsibility to maintain records and other documentation to support the use of funds I receive, as well as to document my compliance with the requirements described in A, B, and C. By signing this application, I am certifying that I will meet requirements throughout the period of the subgrant, including the following: 1. When open and providing services, I will implement policies in line with guidance and orders from corresponding state, territorial, Tribal, and local authorities and, to the greatest extent possible, implement policies in line with guidance from the U.S. Centers for Disease Control and Prevention (CDC). I will remain open during the grant periods. 2. For each employee (including lead teachers, aides, and any other staff who are employed by the child care provider to work in transportation, food preparation, or other type of service), I must continue paying at least the same amount of weekly wages and maintain the same benefits (such as health insurance and retirement) for the duration of the subgrant. I understand that I may not furlough employees from the date of application submission through the duration of the subgrant period. 3. I will provide relief from copayments and tuition payments for the families enrolled in the child care program, to the extent possible, and prioritize such relief for families struggling to make either type of payment. Note: Child care providers must agree to use the funds for one or more of the following purposes: 1. Personnel costs, benefits, premium pay, and employee recruitment and retention for an employee (someone who owns their own business, like a sole proprietor or an independent contractor, can count themselves as an employee) 2. Rent or mortgage payments, utilities, facilities maintenance and improvements, or insurance 3. Personal protective equipment, cleaning and sanitation supplies and services, or training Provider Affirmation The following signature affirms that I will adhere to the items noted in A, B, and C. It also affirms I will only use the funds in the areas noted in section 5 of this application.” It is the position of SAI that OKDHS cannot adequately ensure the funds were expended appropriately without implementing procedures for oversight and review of amounts actually expended. This would require OKDHS to have procedures to obtain and review the records and other documentation the provider has to determine whether the provider complied with the required use of funds per the Stabilization agreement for at least a sample (or other selected number) of providers receiving the award. SAI would also like to clarify our position with regard to questioned costs related to providers that failed to submit any records requested which the providers are required to maintain and provide for audit purposes. For Single Audits, SAI is required to comply with 2 C.F.R. § 200.1 which states in part “(1) Questioned cost means an amount, expended or received from a Federal award, that in the auditor's judgment: (i) Is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award; (ii) At the time of the audit, lacked adequate documentation to support compliance; or (iii) Appeared unreasonable and did not reflect the actions a prudent person would take in the circumstances. (2) The questioned cost amount under (1)(ii) is calculated as if the portion of a transaction that lacked adequate documentation were confirmed noncompliant. We are required to report as questioned costs the $678,595 in Stabilization funds for which 23 providers did not submit any records. These providers were required to maintain these records and agreed to this per their application attestation. Of note, eight of the providers that refused to provide records for the Stabilization award also received the Desert grant award for which they also did not provide any records among other exceptions noted. SAI has also noted that investigations carried out by the OKDHS OIG unit also treat unsupported costs as questioned costs. Lastly, with regard to sampling methodology and the extrapolation of questioned costs, SAI follows the AICPA Government Auditing Standards and Single Audits audit guide. All questioned costs identified in individually selected items (ISI’s) (not part of the sampled population) are not extrapolated, only the questioned costs identified in the sample. The sampling methodology we used for testing Stabilization payments is appropriate for the attributes tested in this population. Questioned Costs Projected Questioned Costs Noncompliance noted in ISI's for records not provided by Provider $146,750 N/A Noncompliance noted in sample for unallowable uses of funds $20,014 $15,624,863 Noncompliance noted in sample for records not provided by Provider $531,845 Total noncompliance noted in sample $551,858 Total Questioned Costs $698,608 Total Projected Questioned Costs $15,771,613
FINDING NO: 2024-025- Improve Subrecipient Monitoring (Repeat 2023-006) STATE AGENCY: Oklahoma Department of Human Services (DHS) FEDERAL AGENCY: Department of Health and Human Services (DHHS) ALN: 93.658 FEDERAL PROGRAM NAME: Foster Care – Titel IV-E FEDERAL AWARD NUMBER: 2301 OKFOST and 2401 OKFOST FEDERAL AWARD YEAR: 2023 and 2024 CONTROL CATEGORY: Subrecipient Monitoring QUESTIONED COSTS: $0 Condition and Context: We judgmentally selected 2 of the 11 subrecipients (18.18%) to determine whether controls were designed and implemented to ensure a risk assessment of the subrecipient was performed by the Pass-Through Entity (PTE) and noted the following: For 2 subrecipients (100%), we determined a risk assessment was performed based on previous year’s performance to determine the appropriate subrecipient monitoring of each subrecipient; however, the date the risk assessments were performed are not documented, the award amount on the risk assessment equals the amount of funds paid during SFY24, and the line items Results of Single Audit are dated in July 2024. We randomly selected 4 of the 11 subrecipients (36.36%) to determine if all requirements imposed by the PTE on the subrecipient so that the federal award was used in accordance with federal statutes, regulations, and the terms and conditions of the award (2 CFR section 200.331(a)(2)); and any additional requirements that the PTE imposed on the subrecipient in order for the PTE to meet its own responsibility for the federal award and we noted: • Two of four (50%) subawards, cost allocation plans were not received per the contract. • Four of four (100%) subawards, the statement of work had insufficient detail to determine if deliverables were met. For both of our samples, we reviewed the subrecipient contracts to determine whether they included information required in accordance with 2 CFR 200.332(b) and we noted: • Two of six (33.33%) subawards did not include the subrecipient name and unique entity identifier • Six of six (100%) subawards did not include the Federal Award Identification Number (FAIN) • Six of six (100%) subawards did not include the Federal Award Date • One of six (17%) subawards did not include the Federal Award project description • Two of six (33.33%) subawards did not include the name of Federal awarding agency, pass through entity (PTE), and PTE awarding official contact information in the award document • One of six (16.67%) subawards did not include the ALN (Assistance Listings number) and title as required on the contract • Six of six (100%) subawards did not include identification of whether the award was for Research & Development • Three of six (50%) subawards did not include an indirect cost rate negotiated between the subrecipient and the Federal Government and also did not include an appropriate rate determined by the PTE in collaboration with the subrecipient. Cause: Management does not properly understand the program requirements. This is a prior audit finding dating back to SFY2017; however, DHS Management has shown some corrective action has been implemented to address identifying the award and applicable requirements and monitoring as required in 2 CFR 200.332. DHS does not have adequate controls in place to properly monitor subrecipients to ensure the contractual obligations are met. Effect: DHS is not in compliance with the monitoring requirements for this program. Therefore, subrecipients may not administer federal funds in accordance with program requirements. Recommendation: We recommend DHS further modify its subrecipient agreements and related documentation to ensure all required award information is provided and that any additional requirements imposed by DHS in their subrecipient agreements are complied with. Further, the contract should explicitly state the program duties to be performed by the subrecipient. Additionally, we recommend DHS perform risk assessments on all subrecipients at the start of the fiscal year to determine the level of monitoring necessary. Criteria: 45 CFR §75.303(a) states in part: “The Non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with 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).” Per 2 CFR §200.1 Definitions defines subaward as “Subaward means an award provided by a pass-through entity to a subrecipient for the subrecipient to carry out part of a federal award received by the pass-through entity. It does not include payments to a contractor or payments to an individual that is a beneficiary of a federal program. A subaward may be provided through any form of legal agreement, including an agreement that the pass-through entity considers a contract [emphasis added].” 2 CFR §200.332 Requirements for pass-through entities states in part “All pass-through entities must: … (b) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (1) Federal award identification. (i) Subrecipient name (which must match the name associated with its unique entity identifier); (ii) Subrecipient's unique entity identifier; (iii) Federal Award Identification Number (FAIN); (iv) Federal Award Date (see the definition of Federal award date in § 200.1 of this part) of award to the recipient by the Federal agency; (v) Subaward Period of Performance Start and End Date; (vi) Subaward Budget Period Start and End Date; (vii) Amount of Federal Funds Obligated by this action by the pass-through entity to the subrecipient; (viii) Total Amount of Federal Funds Obligated to the subrecipient by the pass-through entity including the current financial obligation; (ix) Total Amount of the Federal Award committed to the subrecipient by the pass-through entity; (x) Federal award project description, as required to be responsive to the Federal Funding Accountability and Transparency Act (FFATA); (xi) Name of Federal awarding agency, pass-through entity, and contact information for awarding official of the Pass-through entity; (xii) Assistance Listings title and number; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement; (xiii) Identification of whether the award is R&D; and (xiv) Indirect cost rate for the Federal award (including if the de minimis rate is charged) per § 200.414. (2) All requirements imposed by the pass-through entity on the subrecipient so that the Federal award is used in accordance with Federal statutes, regulations and the terms and conditions of the Federal award; (3) Any additional requirements that the pass-through entity imposes on the subrecipient for the passthrough entity to meet its responsibilities under the Federal award. This includes information and certifications (see § 200.415) required for submitting financial and performance reports that the pass-through entity must provide to the Federal agency; (4) Indirect cost rate: (i) An approved indirect cost rate negotiated between the subrecipient and the Federal Government. If no approved rate exists, a pass-through entity must determine the appropriate rate in collaboration with the subrecipient. (c) Evaluate each subrecipient's risk of noncompliance with Federal statutes, regulations, and the terms and conditions of the subaward for purposes of determining the appropriate subrecipient monitoring described in paragraphs (d) and (e) of this section, which may include consideration of such factors as: (1) The subrecipient's prior experience with the same or similar subawards; (2) The results of previous audits including whether or not the subrecipient receives a Single Audit in accordance with Subpart F of this part, and the extent to which the same or similar subaward has been audited as a major program; (3) Whether the subrecipient has new personnel or new or substantially changed systems; and (4) The extent and results of Federal awarding agency monitoring (e.g., if the subrecipient also receives Federal awards directly from a federal awarding agency) … (e) Monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward. The pass-through entity is responsible for monitoring the overall performance of a subrecipient to ensure that the goals and objectives of the subaward are achieved. In monitoring a subrecipient, a pass-through entity must: (1) Review financial and performance reports.” Paragraph 7 of the agency’s subrecipient contract states in part “Sub-Recipient will provide a cost allocation plan to OKDHS within thirty (30) calendar days of this Agreement being signed. In the event there are any changes to the Cost Allocation Methodology, Sub-Recipient will notify OKDHS of those changes before submitting any affected quarterly claim invoice. Views of Responsible Official(s) Contact Person: Kayla Urtz, Director of Internal Audit Anticipated Completion Date: 9/30/2026 Corrective Action Planned: The Department of Human Services agrees with the finding. Please see the corrective action plan located in the corrective action plan section of this report.
ALLOWABLE COSTS/COST PRINCIPLES – INDIRECT COSTS Repeat of finding 2023-010 Finding Type: Significant Deficiency in Internal Controls over Compliance ALN/CSFA and Program Title: 93.558 – Temporary Assistance for Needy Families, 93.658 – Foster Care - Title IV-E, 93.676- Unaccompanied Alien Children Program Federal/State Agency: U.S. Department of Health and Human Services Pass-Through Entity: Big Bend Community Based Care, Inc. dba NWF Health Network; Brevard Family Partnership; Children’s Network of Hillsborough; Children’s Network of Southwest Florida Social Services; Communities Connected for Kids; Community Partnership for Children; Embrace Families, Inc.; Family Support Services of North Florida, Inc.; Family Support Services of Suncoast; Heartland for Children; Kids Central, Inc.; Partnership for Strong Families; Safe Children Coalition, Inc., Liberty Wilderness Crossroads Camp Contract Number: 0299-22, C0900, PCM783, PCM788, 90ZU0501 Criteria: The Organization has elected to charge the de minimis rate of 10% of modified total direct costs (MTDC). 2 CFR 200.1 of the Uniform Guidance defines MTDC as all direct salaries and wages, applicable fringe benefits, materials and supplies, services, travel, and up to the first $25,000 of each subaward (regardless of the period of performance of the subawards under the award). MTDC excludes equipment, capital expenditures, charges for patient care, rental costs, tuition remission, scholarships and fellowships, participant support costs and the portion of each subaward in excess of $25,000. Other items may only be excluded when necessary to avoid a serious inequity in the distribution of indirect costs, and with the approval of the cognizant agency for indirect costs. Additionally, 2 CFR 200.303(a) of the Uniform Guidance requires non-federal entities to establish and maintain effective internal control over federal awards that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award, and Section 215.97(10), Florida Statutes, requires nonstate entities to have internal controls in place to provide reasonable assurance of compliance with the provisions of laws, regulations, and other rules, pertaining to state awards that have a material effect on each major state project. Condition: The Organization used total program expenses as the MTDC base for calculating the 10% de minimis indirect costs and did not exclude certain items that are required to be excluded, such as rental costs, equipment, and charges for patient care. Additionally, the Organization's internal controls do not require review of the indirect costs charged to programs. Cause: Management was unaware of the requirements for calculating the MTDC and procedures have not been established for reviewing the indirect cost allocations. Effect: While indirect costs charged to programs in the current year did not exceed the allowable amount, the use of direct costs excluded from MTDC in the calculation and lack of review may result in excess indirect costs charged. Questioned Costs: None Recommendation: We recommend management calculate the MTDC in accordance with Uniform Guidance and apply the indirect cost rate consistently for all programs. We also recommend a procedure be established for review of the indirect cost allocations performed. Views of Responsible Officials and Planned Corrective Actions: See management’s response and Corrective Action Plan on page 55.