Federal Agency: U.S. Department of Health and Human Services Federal Program Name: ACL Centers for Independent Living Assistance Listing Number: 93.432 Federal Award Identification Number and Year: 2004WAILC3 - 2021 2006WAILC3 - 2021 2104WAILCL - 2022 2106WAILCL - 2022 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Period: 2004WAILC3 - 4/1/2020-9/30/22 2006WAILC3 - 4/1/20-9/30/22 2104WAILCL - 9/30/21-9/29/23 2106WAILCL - 9/30/21-9/29/23 Type of Finding: Cash Management • Material Weakness in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR 200.302(b)(3) the nonfederal entity must keep "records that identify adequately the source and application of funds for federally-funded activities" and must maintain effective controls over these procedures. Condition: No accompanying invoices to support drawdown requests. Questioned costs: None Context: While there existed evidence of supporting invoices for Federal expenditures (with the exception of one item for $52 - see finding 2022-006), these were not compiled into an auditable list showing justification for the drawdown amounts. Auditors reviewed the profit and loss schedule for the year and were not able to identify a clear pattern between expenditures and drawdowns. Cause: Lack of procedures requiring supporting documentation. Effect: Reimbursement requests could be made for unallowed expenditures. Repeat Finding: No Recommendation: Implement process to ensure documentation is kept identifying which expenditures are included in reimbursement request. There should be a secondary individual (ED and contract accountant) involved in the process to ensure accuracy - documentation of the two-person preparation and review process should be documented. Implement procedures to document review of subrecipient payment requests and minimize time elapsed between requests and payments. Views of responsible officials: There is no disagreement with the audit finding.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: ACL Centers for Independent Living Assistance Listing Number: 93.432 Federal Award Identification Number and Year: 2004WAILC3 - 2021 2006WAILC3 - 2021 2104WAILCL - 2022 2106WAILCL - 2022 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Period: 2004WAILC3 - 4/1/2020-9/30/22 2006WAILC3 - 4/1/20-9/30/22 2104WAILCL - 9/30/21-9/29/23 2106WAILCL - 9/30/21-9/29/23 Type of Finding: Cash Management • Material Weakness in Internal Control over Compliance Criteria or specific requirement: Per 2 CFR 200.302(b)(3) the nonfederal entity must keep "records that identify adequately the source and application of funds for federally-funded activities" and must maintain effective controls over these procedures. Condition: No accompanying invoices to support drawdown requests. Questioned costs: None Context: While there existed evidence of supporting invoices for Federal expenditures (with the exception of one item for $52 - see finding 2022-006), these were not compiled into an auditable list showing justification for the drawdown amounts. Auditors reviewed the profit and loss schedule for the year and were not able to identify a clear pattern between expenditures and drawdowns. Cause: Lack of procedures requiring supporting documentation. Effect: Reimbursement requests could be made for unallowed expenditures. Repeat Finding: No Recommendation: Implement process to ensure documentation is kept identifying which expenditures are included in reimbursement request. There should be a secondary individual (ED and contract accountant) involved in the process to ensure accuracy - documentation of the two-person preparation and review process should be documented. Implement procedures to document review of subrecipient payment requests and minimize time elapsed between requests and payments. Views of responsible officials: There is no disagreement with the audit finding.
Sufficient controls were not in place for the current fiscal year to ensure that requests for reimbursement were adequately supported by available documentation. The Uniform Guidance sets forth requirements for internal controls over federal programs in 2 CFR sections 200.303 and 200.302 that a grantee must establish and maintain records adequately reflecting the source and application of funds with information including authorizations, unobligated balances, expenditures, and income and that these be supported by source documentation that must be retained for three years from the final expenditure report. Requests for reimbursement and their supporting information could not be located for three of six reimbursement requests. We recommend that a standardized file and documentation system be implemented for all grant reimbursement requests containing the reimbursement request with evidence of review and authorization and including the supporting expenditure reports. The Academy responds that it has contracted with an accounting and administrative contractor who has implemented a recordkeeping system for grant reimbursement requests and related supporting documentation
Sufficient controls were not in place for the current fiscal year to ensure that requests for reimbursement were adequately supported by available documentation. The Uniform Guidance sets forth requirements for internal controls over federal programs in 2 CFR sections 200.303 and 200.302 that a grantee must establish and maintain records adequately reflecting the source and application of funds with information including authorizations, unobligated balances, expenditures, and income and that these be supported by source documentation that must be retained for three years from the final expenditure report. Requests for reimbursement and their supporting information could not be located for three of six reimbursement requests. We recommend that a standardized file and documentation system be implemented for all grant reimbursement requests containing the reimbursement request with evidence of review and authorization and including the supporting expenditure reports. The Academy responds that it has contracted with an accounting and administrative contractor who has implemented a recordkeeping system for grant reimbursement requests and related supporting documentation
Finding 2022-001 – Internal Controls over Grant Management (Significant Deficiency and Noncompliance) Information on the federal program: U.S. Economic Development Administration Economic Development Cluster and U.S. Department of Health and Human Services FAL No 93.568 Low- Income Home Energy Assistance. Criteria: 2 CFR 200.302 establishes the requirements of a financial management system adequate to ensure compliance with federal regulations. This system must include written procedures to implement requirements for payment methods and determine the allowability of costs in accordance with subpart E. Condition: Central Alabama Regional Planning and Development Commission does not have a written grant manual or other written accounting procedures that meet the financial management system requirements established in the regulations. Cause: Central Alabama Regional Planning and Development Commission has processes and procedures in place to administer grant funds but no written policies. Effect: Central Alabama Regional Planning and Development Commission is not in compliance with financial management system requirements. Recommendation: Central Alabama Regional Planning and Development Commission should develop a grants manual or additional written policies to incorporate all the requirements of 2 CFR 200 and ensure compliance. Views of Responsible Officials: See Corrective Action Plan included at the end of the report.
Finding 2022-001 – Internal Controls over Grant Management (Significant Deficiency and Noncompliance) Information on the federal program: U.S. Economic Development Administration Economic Development Cluster and U.S. Department of Health and Human Services FAL No 93.568 Low- Income Home Energy Assistance. Criteria: 2 CFR 200.302 establishes the requirements of a financial management system adequate to ensure compliance with federal regulations. This system must include written procedures to implement requirements for payment methods and determine the allowability of costs in accordance with subpart E. Condition: Central Alabama Regional Planning and Development Commission does not have a written grant manual or other written accounting procedures that meet the financial management system requirements established in the regulations. Cause: Central Alabama Regional Planning and Development Commission has processes and procedures in place to administer grant funds but no written policies. Effect: Central Alabama Regional Planning and Development Commission is not in compliance with financial management system requirements. Recommendation: Central Alabama Regional Planning and Development Commission should develop a grants manual or additional written policies to incorporate all the requirements of 2 CFR 200 and ensure compliance. Views of Responsible Officials: See Corrective Action Plan included at the end of the report.
Finding 2022-001 – Internal Controls over Grant Management (Significant Deficiency and Noncompliance) Information on the federal program: U.S. Economic Development Administration Economic Development Cluster and U.S. Department of Health and Human Services FAL No 93.568 Low- Income Home Energy Assistance. Criteria: 2 CFR 200.302 establishes the requirements of a financial management system adequate to ensure compliance with federal regulations. This system must include written procedures to implement requirements for payment methods and determine the allowability of costs in accordance with subpart E. Condition: Central Alabama Regional Planning and Development Commission does not have a written grant manual or other written accounting procedures that meet the financial management system requirements established in the regulations. Cause: Central Alabama Regional Planning and Development Commission has processes and procedures in place to administer grant funds but no written policies. Effect: Central Alabama Regional Planning and Development Commission is not in compliance with financial management system requirements. Recommendation: Central Alabama Regional Planning and Development Commission should develop a grants manual or additional written policies to incorporate all the requirements of 2 CFR 200 and ensure compliance. Views of Responsible Officials: See Corrective Action Plan included at the end of the report.
FINDING 2022-003 – Cash Draw Downs and Internal Control over Cash Management MATERIAL WEAKNESS, MATERIAL NONCOMPLIANCE Identification of the Federal Program: U.S. Department of Health and Human Services 93.224/93.527 Health Center Program Cluster Criteria: In accordance with 2 CFR Section 200.305, non-federal entities must minimize the time elapsing between the transfer of funds from the federal agency or pass-through entity and disbursement by the Center for program costs and proportionate share of allowable indirect costs. Additionally, 2 CFR Section 200.302(b)(c) requires non-federal entities to establish written procedures to implement the requirements 2 CFR Section 200.305. The Federal Acquisition Regulation clause at 48 CFR Section 52.2160-7(b)(1) requires that the non-federal entity request reimbursement for only allocable, allowable, and reasonable contract costs that have already been paid or incurred. Condition: During our testing of draw requests, we noted certain draw requests were made prior to the related costs being incurred. Although the funds were ultimately expended on items approved by the federal award, they were not expended in a timely manner. Cause: The Center did not maintain detailed listings of eligible costs incurred at the time of the draw request to support the amount requested in the Payment Management System. Additionally, the Center did not maintain documentation of such review or approval that such costs were incurred prior to the draw request, or the amount requested was in accordance with 2 CFR Section 200.305. Effect or Potential Effect: Requests for draws per the Payment Management System may not have minimized the time elapsing between payment by the federal agency or pass-through entity and disbursement by the Center and the amounts drawn down may be inaccurate. Questioned Costs: None Context: We selected a sample of draw requests submitted through the Payment Management System during the year ended September 30, 2022. The Center was unable to provide evidence of timely review and approval of two requests out of 44, totaling $352,340. Repeat Finding: No Recommendation: We recommend the Center establish formal internal controls and documentation of its performance relating to the determination of cash drawn downs and review and approval of drawn downs by appropriate personnel who are knowledgeable of such requirements. View of Responsible Officials: See accompanying Corrective Action Plan.
FINDING 2022-003 – Cash Draw Downs and Internal Control over Cash Management MATERIAL WEAKNESS, MATERIAL NONCOMPLIANCE Identification of the Federal Program: U.S. Department of Health and Human Services 93.224/93.527 Health Center Program Cluster Criteria: In accordance with 2 CFR Section 200.305, non-federal entities must minimize the time elapsing between the transfer of funds from the federal agency or pass-through entity and disbursement by the Center for program costs and proportionate share of allowable indirect costs. Additionally, 2 CFR Section 200.302(b)(c) requires non-federal entities to establish written procedures to implement the requirements 2 CFR Section 200.305. The Federal Acquisition Regulation clause at 48 CFR Section 52.2160-7(b)(1) requires that the non-federal entity request reimbursement for only allocable, allowable, and reasonable contract costs that have already been paid or incurred. Condition: During our testing of draw requests, we noted certain draw requests were made prior to the related costs being incurred. Although the funds were ultimately expended on items approved by the federal award, they were not expended in a timely manner. Cause: The Center did not maintain detailed listings of eligible costs incurred at the time of the draw request to support the amount requested in the Payment Management System. Additionally, the Center did not maintain documentation of such review or approval that such costs were incurred prior to the draw request, or the amount requested was in accordance with 2 CFR Section 200.305. Effect or Potential Effect: Requests for draws per the Payment Management System may not have minimized the time elapsing between payment by the federal agency or pass-through entity and disbursement by the Center and the amounts drawn down may be inaccurate. Questioned Costs: None Context: We selected a sample of draw requests submitted through the Payment Management System during the year ended September 30, 2022. The Center was unable to provide evidence of timely review and approval of two requests out of 44, totaling $352,340. Repeat Finding: No Recommendation: We recommend the Center establish formal internal controls and documentation of its performance relating to the determination of cash drawn downs and review and approval of drawn downs by appropriate personnel who are knowledgeable of such requirements. View of Responsible Officials: See accompanying Corrective Action Plan.
FINDING 2022-003 – Cash Draw Downs and Internal Control over Cash Management MATERIAL WEAKNESS, MATERIAL NONCOMPLIANCE Identification of the Federal Program: U.S. Department of Health and Human Services 93.224/93.527 Health Center Program Cluster Criteria: In accordance with 2 CFR Section 200.305, non-federal entities must minimize the time elapsing between the transfer of funds from the federal agency or pass-through entity and disbursement by the Center for program costs and proportionate share of allowable indirect costs. Additionally, 2 CFR Section 200.302(b)(c) requires non-federal entities to establish written procedures to implement the requirements 2 CFR Section 200.305. The Federal Acquisition Regulation clause at 48 CFR Section 52.2160-7(b)(1) requires that the non-federal entity request reimbursement for only allocable, allowable, and reasonable contract costs that have already been paid or incurred. Condition: During our testing of draw requests, we noted certain draw requests were made prior to the related costs being incurred. Although the funds were ultimately expended on items approved by the federal award, they were not expended in a timely manner. Cause: The Center did not maintain detailed listings of eligible costs incurred at the time of the draw request to support the amount requested in the Payment Management System. Additionally, the Center did not maintain documentation of such review or approval that such costs were incurred prior to the draw request, or the amount requested was in accordance with 2 CFR Section 200.305. Effect or Potential Effect: Requests for draws per the Payment Management System may not have minimized the time elapsing between payment by the federal agency or pass-through entity and disbursement by the Center and the amounts drawn down may be inaccurate. Questioned Costs: None Context: We selected a sample of draw requests submitted through the Payment Management System during the year ended September 30, 2022. The Center was unable to provide evidence of timely review and approval of two requests out of 44, totaling $352,340. Repeat Finding: No Recommendation: We recommend the Center establish formal internal controls and documentation of its performance relating to the determination of cash drawn downs and review and approval of drawn downs by appropriate personnel who are knowledgeable of such requirements. View of Responsible Officials: See accompanying Corrective Action Plan.
FINDING 2022-003 – Cash Draw Downs and Internal Control over Cash Management MATERIAL WEAKNESS, MATERIAL NONCOMPLIANCE Identification of the Federal Program: U.S. Department of Health and Human Services 93.224/93.527 Health Center Program Cluster Criteria: In accordance with 2 CFR Section 200.305, non-federal entities must minimize the time elapsing between the transfer of funds from the federal agency or pass-through entity and disbursement by the Center for program costs and proportionate share of allowable indirect costs. Additionally, 2 CFR Section 200.302(b)(c) requires non-federal entities to establish written procedures to implement the requirements 2 CFR Section 200.305. The Federal Acquisition Regulation clause at 48 CFR Section 52.2160-7(b)(1) requires that the non-federal entity request reimbursement for only allocable, allowable, and reasonable contract costs that have already been paid or incurred. Condition: During our testing of draw requests, we noted certain draw requests were made prior to the related costs being incurred. Although the funds were ultimately expended on items approved by the federal award, they were not expended in a timely manner. Cause: The Center did not maintain detailed listings of eligible costs incurred at the time of the draw request to support the amount requested in the Payment Management System. Additionally, the Center did not maintain documentation of such review or approval that such costs were incurred prior to the draw request, or the amount requested was in accordance with 2 CFR Section 200.305. Effect or Potential Effect: Requests for draws per the Payment Management System may not have minimized the time elapsing between payment by the federal agency or pass-through entity and disbursement by the Center and the amounts drawn down may be inaccurate. Questioned Costs: None Context: We selected a sample of draw requests submitted through the Payment Management System during the year ended September 30, 2022. The Center was unable to provide evidence of timely review and approval of two requests out of 44, totaling $352,340. Repeat Finding: No Recommendation: We recommend the Center establish formal internal controls and documentation of its performance relating to the determination of cash drawn downs and review and approval of drawn downs by appropriate personnel who are knowledgeable of such requirements. View of Responsible Officials: See accompanying Corrective Action Plan.
FINDING 2022-003 – Cash Draw Downs and Internal Control over Cash Management MATERIAL WEAKNESS, MATERIAL NONCOMPLIANCE Identification of the Federal Program: U.S. Department of Health and Human Services 93.224/93.527 Health Center Program Cluster Criteria: In accordance with 2 CFR Section 200.305, non-federal entities must minimize the time elapsing between the transfer of funds from the federal agency or pass-through entity and disbursement by the Center for program costs and proportionate share of allowable indirect costs. Additionally, 2 CFR Section 200.302(b)(c) requires non-federal entities to establish written procedures to implement the requirements 2 CFR Section 200.305. The Federal Acquisition Regulation clause at 48 CFR Section 52.2160-7(b)(1) requires that the non-federal entity request reimbursement for only allocable, allowable, and reasonable contract costs that have already been paid or incurred. Condition: During our testing of draw requests, we noted certain draw requests were made prior to the related costs being incurred. Although the funds were ultimately expended on items approved by the federal award, they were not expended in a timely manner. Cause: The Center did not maintain detailed listings of eligible costs incurred at the time of the draw request to support the amount requested in the Payment Management System. Additionally, the Center did not maintain documentation of such review or approval that such costs were incurred prior to the draw request, or the amount requested was in accordance with 2 CFR Section 200.305. Effect or Potential Effect: Requests for draws per the Payment Management System may not have minimized the time elapsing between payment by the federal agency or pass-through entity and disbursement by the Center and the amounts drawn down may be inaccurate. Questioned Costs: None Context: We selected a sample of draw requests submitted through the Payment Management System during the year ended September 30, 2022. The Center was unable to provide evidence of timely review and approval of two requests out of 44, totaling $352,340. Repeat Finding: No Recommendation: We recommend the Center establish formal internal controls and documentation of its performance relating to the determination of cash drawn downs and review and approval of drawn downs by appropriate personnel who are knowledgeable of such requirements. View of Responsible Officials: See accompanying Corrective Action Plan.
2022-003—Excess Drawdown of Federal Funds Type of Finding: (F) Instance of Noncompliance Related to Federal Awards Funding Agency: U.S. Department of Health and Human Services AL #: 93.137 – Community Programs to Improve Minority Health Grant Program Award #: 5 AIAMP170017-05-00 Award Period: 07/01/2021 – 07/29/2022 Estimated Questioned Costs: $26,426 Compliance Requirement: Cash Management Statement of Condition During our analysis of total grant revenues and expenditures reported on the SEFA, we noted that the entity had drawn down $26,426 more in federal funds than it expended under the Community Programs to Improve Minority Health grant. The excess drawdown remained outstanding as of September 30, 2022, the end of the audit period, and as of the date of this report. Criteria In accordance with 2 CFR § 200.305(b), non-federal entities must minimize the time elapsing between the drawdown of federal funds and the disbursement for program purposes. Additionally, per 2 CFR § 200.302(b)(6), entities must maintain effective internal controls over cash management to ensure that drawdowns are based on actual, allowable expenditures. Effect The entity is not in compliance with federal cash management requirements. The federal award has an outstanding overdrawn balance of $26,426, which may be subject to repayment to the federal awarding agency. Cause The excess drawdown appears to have resulted from an error during the drawdown request process. The entity indicated it was likely due to administrative oversight but was unable to provide specific details due to the passage of time. The discrepancy was disclosed to the auditor during the audit. Recommendation We recommend that the entity remit the excess federal funds or consult with the awarding agency to determine the appropriate resolution. In addition, the entity should strengthen its procedures to reconcile cash drawdowns to actual expenditures on a timely basis to prevent similar overdraws in the future.
Finding 2022 – 003: Activities Allowed and Unallowed, Allowable Costs, Period of Performance (Compliance; Internal Controls Over Compliance) Material Weakness – 93.U01 Title V Criteria: Per Uniform Guidance 2 CFR § 200.302 and 2 CFR § 200.333, entities must maintain records that adequately identify the source and application of federal funds and retain documentation to support compliance with program requirements. Condition: The Organization’s general ledger did not allow for sufficient identification of transactions related to the major program, Title V. Title V expenditures were recorded through journal entries without supporting transaction-level detail. Because of this, the population of expenditures could not be tied to individual transactions, and pulling samples from this population would not provide a reasonable basis for drawing conclusions about the population tested. As a result, we were unable to select transactions for testing or perform the necessary audit procedures to assess compliance with federal requirements. Questioned Costs: Unable to determine due to scope limitation. Cause: Staff turnover and the Organization’s recordkeeping practices did not ensure sufficient documentation was maintained to support federal compliance. Effect: Due to the lack of adequate documentation, we were unable to obtain sufficient, appropriate audit evidence to form an opinion on the Organization’s compliance with these requirements. Consequently, a disclaimed opinion on compliance was issued for this major program. Additionally, these expenditures may be subject to repayment or further review by the granting agency. Recommendation: We recommend that management strengthen documentation and recordkeeping procedures to ensure compliance with federal record retention requirements. The Organization should implement a standardized process for tracking federal grant expenditures, ensuring proper coding within the accounting system, conduct periodic internal reviews to verify completeness and accuracy of financial records, and provide training to finance staff on Uniform Guidance requirements for grant record retention and reporting. Views of Responsible Officials: See the corrective action plan that accompanies the schedule of findings and questioned costs.
Finding 2022 – 003: Activities Allowed and Unallowed, Allowable Costs, Period of Performance (Compliance; Internal Controls Over Compliance) Material Weakness – 93.U01 Title V Criteria: Per Uniform Guidance 2 CFR § 200.302 and 2 CFR § 200.333, entities must maintain records that adequately identify the source and application of federal funds and retain documentation to support compliance with program requirements. Condition: The Organization’s general ledger did not allow for sufficient identification of transactions related to the major program, Title V. Title V expenditures were recorded through journal entries without supporting transaction-level detail. Because of this, the population of expenditures could not be tied to individual transactions, and pulling samples from this population would not provide a reasonable basis for drawing conclusions about the population tested. As a result, we were unable to select transactions for testing or perform the necessary audit procedures to assess compliance with federal requirements. Questioned Costs: Unable to determine due to scope limitation. Cause: Staff turnover and the Organization’s recordkeeping practices did not ensure sufficient documentation was maintained to support federal compliance. Effect: Due to the lack of adequate documentation, we were unable to obtain sufficient, appropriate audit evidence to form an opinion on the Organization’s compliance with these requirements. Consequently, a disclaimed opinion on compliance was issued for this major program. Additionally, these expenditures may be subject to repayment or further review by the granting agency. Recommendation: We recommend that management strengthen documentation and recordkeeping procedures to ensure compliance with federal record retention requirements. The Organization should implement a standardized process for tracking federal grant expenditures, ensuring proper coding within the accounting system, conduct periodic internal reviews to verify completeness and accuracy of financial records, and provide training to finance staff on Uniform Guidance requirements for grant record retention and reporting. Views of Responsible Officials: See the corrective action plan that accompanies the schedule of findings and questioned costs.
Finding 2022 – 004: Procurement and Suspension and Debarment (Compliance; Internal Controls Over Compliance) Material Weakness – 93.U01 Title V Criteria: Per Uniform Guidance 2 CFR § 200.302 and 2 CFR § 200.333, entities must maintain records that adequately identify the source and application of federal funds and retain documentation to support compliance with program requirements. Additionally, per 2 CFR § 200.213, entities must verify that vendors and contractors receiving federal funds are not suspended or debarred by checking the System for Award Management (SAM) or obtaining vendor certifications. Condition: The Organization was unable to provide sufficient documentation to support compliance with federal procurement and suspension and debarment requirements for purchases made under the Title V program. The general ledger did not allow for sufficient identification of transactions related to the Title V program as all expenditures were recorded through journal entries without supporting transaction-level detail. Due to this limitation, we were unable to select procurement transactions for testing or verify whether vendors had been screened for suspension and debarment before contracts were awarded. Questioned Costs: Unable to determine due to scope limitation. Cause: The Organization did not maintain adequate financial records or procurement documentation to demonstrate compliance with Uniform Guidance requirements. The lack of a complete and detailed general ledger further limited the ability to track and substantiate transactions. Finding 2022 – 004: Procurement and Suspension and Debarment (Compliance; Internal Controls Over Compliance), continued Effect: Without sufficient documentation, the Organization was unable to demonstrate compliance with federal procurement regulations, increasing the risk of noncompliance and potential disallowed costs. Additionally, these expenditures may be subject to repayment or further review by the granting agency. Recommendation: We recommend the Organization strengthen its financial recordkeeping and procurement processes by implementing procedures to ensure a complete and accurate general ledger is maintained. This should include appropriate coding to identify federal program expenditures. The Organization should also establish and enforce procurement policies that align with Uniform Guidance, including documentation of procurement methods, price or cost analyses, and vendor selection, implementing a process to verify and document vendor suspension and debarment status before awarding federally funded contracts, and conducting periodic internal reviews to ensure compliance with procurement and recordkeeping requirements. Views of Responsible Officials: See the corrective action plan that accompanies the schedule of findings and questioned costs.
Finding 2022 – 004: Procurement and Suspension and Debarment (Compliance; Internal Controls Over Compliance) Material Weakness – 93.U01 Title V Criteria: Per Uniform Guidance 2 CFR § 200.302 and 2 CFR § 200.333, entities must maintain records that adequately identify the source and application of federal funds and retain documentation to support compliance with program requirements. Additionally, per 2 CFR § 200.213, entities must verify that vendors and contractors receiving federal funds are not suspended or debarred by checking the System for Award Management (SAM) or obtaining vendor certifications. Condition: The Organization was unable to provide sufficient documentation to support compliance with federal procurement and suspension and debarment requirements for purchases made under the Title V program. The general ledger did not allow for sufficient identification of transactions related to the Title V program as all expenditures were recorded through journal entries without supporting transaction-level detail. Due to this limitation, we were unable to select procurement transactions for testing or verify whether vendors had been screened for suspension and debarment before contracts were awarded. Questioned Costs: Unable to determine due to scope limitation. Cause: The Organization did not maintain adequate financial records or procurement documentation to demonstrate compliance with Uniform Guidance requirements. The lack of a complete and detailed general ledger further limited the ability to track and substantiate transactions. Finding 2022 – 004: Procurement and Suspension and Debarment (Compliance; Internal Controls Over Compliance), continued Effect: Without sufficient documentation, the Organization was unable to demonstrate compliance with federal procurement regulations, increasing the risk of noncompliance and potential disallowed costs. Additionally, these expenditures may be subject to repayment or further review by the granting agency. Recommendation: We recommend the Organization strengthen its financial recordkeeping and procurement processes by implementing procedures to ensure a complete and accurate general ledger is maintained. This should include appropriate coding to identify federal program expenditures. The Organization should also establish and enforce procurement policies that align with Uniform Guidance, including documentation of procurement methods, price or cost analyses, and vendor selection, implementing a process to verify and document vendor suspension and debarment status before awarding federally funded contracts, and conducting periodic internal reviews to ensure compliance with procurement and recordkeeping requirements. Views of Responsible Officials: See the corrective action plan that accompanies the schedule of findings and questioned costs.
Finding 2022 – 005: Reporting (Compliance; Internal Controls Over Compliance) Material Weakness – 93.U01 Title V Criteria: Per Uniform Guidance 2 CFR § 200.302 and 2 CFR § 200.333, entities must maintain records that adequately identify the source and application of federal funds and retain documentation to support compliance with program requirements. Condition: The Organization was unable to provide any of the required reports for the Title V program, including the financial report, activity narrative, third-party income report, GPRA/GPRAMA, urban data standards, and property inventory. Without these reports, we were unable to perform the necessary audit procedures to assess compliance with federal requirements. Questioned Costs: None. Cause: The Organization lacked sufficient record retention policies and failed to maintain the required documentation needed for reporting compliance. Effect: The Organization was unable to produce key reports necessary for compliance with grant and audit requirements. Recommendation: We recommend that the Organization implement stronger documentation and recordkeeping procedures to ensure compliance with federal reporting requirements. This should include: • ensuring that all required reports (e.g., financial reports, activity narratives, third-party income reports) are generated and retained according to Uniform Guidance, • establishing a process for regular internal reviews to verify the completeness and accuracy of required federal reports, and • providing staff with training on record retention and reporting obligations to ensure timely and accurate submissions. Views of Responsible Officials: See the corrective action plan that accompanies the schedule of findings and questioned costs.
Finding 2022 – 005: Reporting (Compliance; Internal Controls Over Compliance) Material Weakness – 93.U01 Title V Criteria: Per Uniform Guidance 2 CFR § 200.302 and 2 CFR § 200.333, entities must maintain records that adequately identify the source and application of federal funds and retain documentation to support compliance with program requirements. Condition: The Organization was unable to provide any of the required reports for the Title V program, including the financial report, activity narrative, third-party income report, GPRA/GPRAMA, urban data standards, and property inventory. Without these reports, we were unable to perform the necessary audit procedures to assess compliance with federal requirements. Questioned Costs: None. Cause: The Organization lacked sufficient record retention policies and failed to maintain the required documentation needed for reporting compliance. Effect: The Organization was unable to produce key reports necessary for compliance with grant and audit requirements. Recommendation: We recommend that the Organization implement stronger documentation and recordkeeping procedures to ensure compliance with federal reporting requirements. This should include: • ensuring that all required reports (e.g., financial reports, activity narratives, third-party income reports) are generated and retained according to Uniform Guidance, • establishing a process for regular internal reviews to verify the completeness and accuracy of required federal reports, and • providing staff with training on record retention and reporting obligations to ensure timely and accurate submissions. Views of Responsible Officials: See the corrective action plan that accompanies the schedule of findings and questioned costs.
CASH MANAGEMENT, I NOTED THAT THE NATIVE VILLAGE OF TYONEK (NVT) HAD AN EXCESS OF ACCOUNTS PAYABLE, ACCRUED PAYROLL LIABILITIES AND UNEARNED GRANT REVENUES AS COMPARED TO CASH ON HAND. TOTAL CASH ON HAND AT YEAR END WAS $5,810,414 AND TOTAL UNEARNED GRANT REVENUE WAS $6,181,944. PER 2 CFR, SECTION 200.302, THE NATIVE VILLAGE MUST COMPLY WITH THE REQUIREMENT THAT ANY AND ALL GRANT ADVANCES BE RETAINED WITHIN THE ORGANIZATION UNTIL EXPENDED ON ALLOWABLE GRANT EXPENDITURES. QUESTIONED COSTS NOT DETERMINED. IN PRIOR YEARS, THERE WAS AN OVEREXPENDITURE OF GENERAL AND ADMINISTRATIVE EXPENSES IN EXCESS OF REVENUES FOR THE YEAR. MOST OF THIS WAS BILLINGS FROM THE VILLAGES CONSULTANTS (6 AND 7 YEARS AGO) WHOSE BILLINGS WERE FAR IN EXCESS OF THE AVAILABLE UNRESTRICTED FUNDS WHICH THE VILLAGE HAD TO PAY THEM AS WELL AS LOSSES IN THE KALOA FUND. GRANTING AGENCIES COULD REQUEST REIMBURSEMENT OF THESE UNALLOWABLE ADVANCES CAUSING FINANCIAL HARDSHIP FOR THE NVT. MANAGEMENT NEEDS TO ENSURE THAT ALL NONGRANT EXPENSES NEED TO BE KEPT TO A MINIMUM TO ENSURE THAT ADVANCED GRANT FUNDS ARE NOT SPENT ON UNALLOWABLE ITEMS. IT IS IMPORTANT THAT THE NVT TRACK THROUGHOUT THE YEAR THE NET PROFIT OR LOSS IN THE GENERAL FUND AND IMMEDIATELY TAKE CORRECTIVE STEPS IF THE GENERAL FUND IS SHOWING A LOSS. IT IS ALSO IMPORTANT THAT CONTINUING RELATIONSHIPS WITH VENDORS ARE EVALUATED THROUGHOUT THE YEAR TO ENSURE REASONABLENESS OF PAYMENTS. IT IS ALSO IMPORTANT THAT LOSSES IN THE KALOA BUILDING FUND ARE ELIMINATED. THIS FINDING WAS ALSO NOTED AS FINDING 2021-001. IT HAS ALSO BEEN NOTED SINCE 2014.
2022-023 Reporting ? Monthly Compliance Reports Federal Agency: U.S. Department of the Treasury Federal Program Title: Emergency Rental Assistance Program ALN: 21.023 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 1505-0266 ? 2021, 1505-0270 ? 2021 January 6, 2022?December 29, 2022 and May 5, 2021? September 30, 2025 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: According to ?200.302 Financial management of 2 CFR Part 200, the nonFederal 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. Further, the financial management system of each non-Federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements. Condition: The Texas Department of Housing and Community Affairs (TDHCA) is required to submit ERA 1 and ERA 2 Monthly Compliance Reports, which include the total number of participating households that receive ERA assistance of any kind, and the total amount of ERA funds expended by TDHCA to or for participating households on behalf of eligible households. During our testing of three ERA 1 and three ERA 2 Monthly Compliance Reports, we noted the following: ? TDHCA was unable to provide source data for the October 2021 ERA 1 Monthly Compliance Report. The reported total number of participating households that receive ERA assistance was 42,607 and total amount of ERA funds expended was $197,113,340. ? For the December 2021 ERA 1 Monthly Compliance Report, the number of unique households reported to the Treasury was 1,175. However, the number of unique households was 1,170 based on the supporting documentation provided. ? For the November 2021 ERA 2 Monthly Compliance Report, the number of unique households reported to the Treasury was 78,378. However, the number of unique households was 78,332 based on the supporting documentation provided. TDHCA is also required to submit quarterly reports with reporting periods of one calendar quarter and several cumulative fields covering all activity from the date of award through the quarter close. These reports provide financial and performance data regarding TDHCA?s administration of their ERA projects and capture program design in addition to program status data elements. Key line items include the cumulative amount obligated and the cumulative amount expended by TDHCA. During our testing of three quarterly ERA 1 reports and two quarterly ERA 2 reports, we noted that no support was provided to validate the cumulative obligations and expenditures to date. Questioned costs: None Context: See "Condition" Cause: While management maintained dashboards to support reported information, they did not maintain the underlying supporting documentation. Effect: Failure to accurately report information on federal reports inhibits Treasury?s ability to accurately calculate reallocations and capture other key information in order to assess the performance of the program. Repeat Finding: No Recommendation: We recommend management adopt policies and procedures to ensure supporting documentation for federal reports is maintained, including any reconciling calculations or adjustments to support information reported on the federal reports. Views of responsible officials: Management agrees with the finding and recommendation.
Condition: The Center?s written policies and procedures related to financial management do not meet the requirements of 2 CFR 200, Subpart D and Subpart E. Criteria: According to 2 CFR Section 200.302.b and 2 CFR Section 200.305 of the Uniform Guidance, the Center is required to have a written financial management policy. Cause: The Center was unaware of requirements regarding policies and procedures outlined in the Uniform Guidance. Effect: Written policies necessary for non-Federal entities receiving federal funds were not in place. Repeat Finding: No Questioned Costs: None reported Recommendation: We recommend that the Center update their written policies and procedures that meet the requirements of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Views of Responsible Officials and Planned Corrective Action: We concur with the auditor?s finding and will update the Center?s written policies and procedures for the Uniform Guidance requirements.
2022-002 ? Internal Control over Compliance and Compliance with Reporting (Preparation of Schedule of Expenditures of Federal Awards) Information on the Federal Program: U.S. Small Business Administration Assistance Listing Number: 59.008 Assistance Listing Name: Economic Injury Disaster Loan Criteria ? The Code of Federal Regulation (CFR) Section ?200.510(b) states in part: ?The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with CFR Section ?200.502 Basis for determining Federal awards expended.? The schedule must provide total Federal awards expended for each individual Federal program. In accordance with ?200.302 Financial Management, a 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. The financial management system of each non-Federal entity must provide for the following: (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?200.328 Financial Reporting and ?200.329 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Condition ? During the year ended August 31, 2022, the Center received additional EIDL funds. Prior to the COVID-19 pandemic, the Center did not receive and spend federal dollars in excess of the limit that required a single audit to be performed. Due to the lack of expertise surrounding the preparation of the SEFA and the non-recurring nature of the COVID-19 pandemic relief funding provided by the federal government, the Center was uncertain of some of the specifics on the SEFA statement. Cause ? The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not operate as designed due to new funding received in the current year. Effect ? Management was unaware that the EIDL was a federal award requiring a single audit prior to discussion with the auditors. Questioned Costs: There are no questioned costs related to the items described above. Context: The conditions outlined above are based on our testing of the Center?s major program and our overall testing of the accuracy of the SEFA. The nature of this findings is detailed in the condition section above. Repeat Finding: This is not a repeat finding. Recommendation ? We recommend management attend Federal award trainings and information to ensure the documented policies and procedures can be performed as described. This will ensure the Federal funds are reported accurately on the SEFA and that programs are reported under the correct assistance listing number. Views of Responsible Officials ? Beck Center for the Arts concurs with the finding and the recommendation. The Center will continue to review federal award guidance and requirements to ensure compliance with current and future federal awards. The Center?s corrective action plan is described in Managements Corrective Action Plan included at page 42 of this reporting package.
2022-023 Reporting ? Monthly Compliance Reports Federal Agency: U.S. Department of the Treasury Federal Program Title: Emergency Rental Assistance Program ALN: 21.023 Pass-Through Agency: N/A Pass-Through Number(s): N/A Award Number and Period: 1505-0266 ? 2021, 1505-0270 ? 2021 January 6, 2022?December 29, 2022 and May 5, 2021? September 30, 2025 Statistically Valid Sample: No, and not intended to be a statistically valid sample Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria or specific requirement: According to ?200.302 Financial management of 2 CFR Part 200, the nonFederal 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. Further, the financial management system of each non-Federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements. Condition: The Texas Department of Housing and Community Affairs (TDHCA) is required to submit ERA 1 and ERA 2 Monthly Compliance Reports, which include the total number of participating households that receive ERA assistance of any kind, and the total amount of ERA funds expended by TDHCA to or for participating households on behalf of eligible households. During our testing of three ERA 1 and three ERA 2 Monthly Compliance Reports, we noted the following: ? TDHCA was unable to provide source data for the October 2021 ERA 1 Monthly Compliance Report. The reported total number of participating households that receive ERA assistance was 42,607 and total amount of ERA funds expended was $197,113,340. ? For the December 2021 ERA 1 Monthly Compliance Report, the number of unique households reported to the Treasury was 1,175. However, the number of unique households was 1,170 based on the supporting documentation provided. ? For the November 2021 ERA 2 Monthly Compliance Report, the number of unique households reported to the Treasury was 78,378. However, the number of unique households was 78,332 based on the supporting documentation provided. TDHCA is also required to submit quarterly reports with reporting periods of one calendar quarter and several cumulative fields covering all activity from the date of award through the quarter close. These reports provide financial and performance data regarding TDHCA?s administration of their ERA projects and capture program design in addition to program status data elements. Key line items include the cumulative amount obligated and the cumulative amount expended by TDHCA. During our testing of three quarterly ERA 1 reports and two quarterly ERA 2 reports, we noted that no support was provided to validate the cumulative obligations and expenditures to date. Questioned costs: None Context: See "Condition" Cause: While management maintained dashboards to support reported information, they did not maintain the underlying supporting documentation. Effect: Failure to accurately report information on federal reports inhibits Treasury?s ability to accurately calculate reallocations and capture other key information in order to assess the performance of the program. Repeat Finding: No Recommendation: We recommend management adopt policies and procedures to ensure supporting documentation for federal reports is maintained, including any reconciling calculations or adjustments to support information reported on the federal reports. Views of responsible officials: Management agrees with the finding and recommendation.
Condition: The Center?s written policies and procedures related to financial management do not meet the requirements of 2 CFR 200, Subpart D and Subpart E. Criteria: According to 2 CFR Section 200.302.b and 2 CFR Section 200.305 of the Uniform Guidance, the Center is required to have a written financial management policy. Cause: The Center was unaware of requirements regarding policies and procedures outlined in the Uniform Guidance. Effect: Written policies necessary for non-Federal entities receiving federal funds were not in place. Repeat Finding: No Questioned Costs: None reported Recommendation: We recommend that the Center update their written policies and procedures that meet the requirements of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Views of Responsible Officials and Planned Corrective Action: We concur with the auditor?s finding and will update the Center?s written policies and procedures for the Uniform Guidance requirements.
2022-002 ? Internal Control over Compliance and Compliance with Reporting (Preparation of Schedule of Expenditures of Federal Awards) Information on the Federal Program: U.S. Small Business Administration Assistance Listing Number: 59.008 Assistance Listing Name: Economic Injury Disaster Loan Criteria ? The Code of Federal Regulation (CFR) Section ?200.510(b) states in part: ?The auditee must also prepare a schedule of expenditures of Federal awards for the period covered by the auditee?s financial statements which must include the total Federal awards expended as determined in accordance with CFR Section ?200.502 Basis for determining Federal awards expended.? The schedule must provide total Federal awards expended for each individual Federal program. In accordance with ?200.302 Financial Management, a 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. The financial management system of each non-Federal entity must provide for the following: (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?200.328 Financial Reporting and ?200.329 Monitoring and Reporting Program Performance. (3) Records that identify adequately the source and application of funds for federally funded activities. (4) Effective control over, and accountability for, all funds, property, and other assets. Condition ? During the year ended August 31, 2022, the Center received additional EIDL funds. Prior to the COVID-19 pandemic, the Center did not receive and spend federal dollars in excess of the limit that required a single audit to be performed. Due to the lack of expertise surrounding the preparation of the SEFA and the non-recurring nature of the COVID-19 pandemic relief funding provided by the federal government, the Center was uncertain of some of the specifics on the SEFA statement. Cause ? The internal controls established for the review and approval of the SEFA to ensure its completeness and accuracy did not operate as designed due to new funding received in the current year. Effect ? Management was unaware that the EIDL was a federal award requiring a single audit prior to discussion with the auditors. Questioned Costs: There are no questioned costs related to the items described above. Context: The conditions outlined above are based on our testing of the Center?s major program and our overall testing of the accuracy of the SEFA. The nature of this findings is detailed in the condition section above. Repeat Finding: This is not a repeat finding. Recommendation ? We recommend management attend Federal award trainings and information to ensure the documented policies and procedures can be performed as described. This will ensure the Federal funds are reported accurately on the SEFA and that programs are reported under the correct assistance listing number. Views of Responsible Officials ? Beck Center for the Arts concurs with the finding and the recommendation. The Center will continue to review federal award guidance and requirements to ensure compliance with current and future federal awards. The Center?s corrective action plan is described in Managements Corrective Action Plan included at page 42 of this reporting package.
Federal programs: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) CFDA Number: 84.425E / 84.425F Federal award identification number: P425E205418 / P425F204999 Grant period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control Finding Type: Material Weakness Compliance requirement: Other ? Policies and procedures requirements Condition and context When obtaining an understanding of the internal controls, policies, and procedures regarding the administration of federal programs, and grant term and conditions, we noted the following deficiencies: a. There is no written policy, nor the procedures designed and implemented by the Institution related to Cash Management were documented. The Institution opted to request the funds on a reimbursement basis. b. There were no written procedures for determining the allowability of costs in accordance with 2 CFR 200 subpart E of this part and the terms and conditions of the Federal award. c. After examination of the Institution procurement policy, we noted that the document was not signed by all members required from management and was not dated. Upon inquiry, we noted that the procurement policy was drafted and submitted to the Institution for review in February 2023. Therefore, no written policy and formal procedures were designed and implemented for the procurement transactions tested for the fiscal year ended July 31, 2022 and thereafter. Criteria 2 CFR 200.302 (b) (6) and (7) establish that the financial management system of each non-Federal entity must provide for the following: written procedures to implement the requirements of ? 200.305, and written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award. 2 CFR 200.303 establish that 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); (b) comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards; (c) evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards; (d) take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings; and (e) take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. 2 CFR 200.318 (a) establishes that 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 2 CFR 200.317 through 200.327. 2 CFR 200.400 (a) to (d) establish that the application of these cost principles is based on the fundamental premises that: (a) the non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices; (b) the non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award; (c) the non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award; (d) the application of these cost principles should require no significant changes in the internal accounting policies and practices of the non-Federal entity. However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the Federal award. Cause The Institution?s federal programs received prior the fiscal year ended July 31, 2020 did not require the implementation of written procedures as mentioned in the condition and context section, except for Cash Management policies and procedures for the Student Financial Assistance Programs Cluster for which the Institution has designed and implemented written procedures for such compliance requirement. The Covid-19 pandemic related programs were the reason why this new federal program funds were received, and the entity failed to design and implement on a timely basis the required written documentation and procedures. Effect Noncompliance with the above-mentioned requirement could lead to administrative sanctions by the grantor, including disallowance of costs. It could also be interpreted as a failure to achieve the program?s objectives. Questioned costs None. Identification as a Repeat Finding No repeated finding. Recommendation We recommend the Institution to implement written policies and procedures needed for the administration of federal grants before the acceptance of new grants. Having well sounded policies and procedures will reduce the Institution risk of non-compliance with federal regulations and grants terms and conditions. Also, they will provide guidance to the Institution?s personnel on how to carry-out their responsibilities and functions in relation to the administration of federal programs transactions. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Assistance listing program: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425E / 84.425F Award identification number: P425F204999 / P425E205418 Award period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control Finding Type: Significant Deficiency Compliance requirement: Cash Management Condition and context In testing compliance and internal controls over cash management, we selected a sample of four (4) drawdowns which amounted to $342,787 of the total HEERF Institutional aid funds expenditures. Our sample was a statistically valid sample. During our test, we noted that in one (25%) of the four (4) drawdowns selected, for three payments made by the Institution the time elapsed between the receipt of funds and the check issuance was between 20 to 48 days. The total amount disbursed after the three elapsed days requirement was $4,020 from a drawdown total of $56,065. Criteria 2 CFR 200.302 (b) (6) requires written procedures to implement the requirements of 200.305. 2 CFR 200.305 (b) and (b) (1) establish that for non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. See also 200.302(b)(6). Except as noted elsewhere in this part, Federal agencies must require recipients to use only OMB-approved, governmentwide information collection requests to request payment. The non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. The non-Federal entity must make timely payment to contractors in accordance with the contract provisions. 2 CFR 200.303 (a) to (d) establish that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. 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). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. Cause The Institution did not design and implemented internal controls and procedures for this compliance requirement, including written policies and procedures. Effect Noncompliance with the above-mentioned requirements could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements. Questioned costs Likely questioned costs are less than $25,000. Identification as a Repeat Finding No repeated finding. Recommendations We recommend the Institution to design and implement written internal controls and procedures for the administration of federal funds requests in accordance with the requirements of grant agreements and 2 CFR 200. Internal controls and procedures must consider maintaining adequate documentation to support the petitions of funds and to maintain the audit trail of the payments that will be issued. The Institution shall request only the amount of funds necessary to meet its immediate cash needs to prevent excess cash balances. Whenever payment amounts are adjusted after the funds were requested or received, such excess cash should be returned to the federal agency immediately. Establishing reliable and thorough cash forecasting procedures and subjecting such forecasts to the formal review and approval of Institution?s management should meet this objective. Also, the Institution shall coordinate and provide pertinent training to the finance personnel regarding the federal regulations related to the cash management requirements. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Assistance listing program: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425E / 84.425F Award identification number: P425F204999 / P425E205418 Award period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control / Compliance Finding Type: Material Weakness Compliance requirement: Reporting Condition and context For testing internal controls and compliance with reporting requirements applicable to the HEERF programs, we inquired the Institution about the internal controls and procedures for determining the criteria and methodology used in compiling and reporting the data to be included in the annual and quarterly special reports. We requested a copy of the annual report for the calendar year 2021 and the quarterly reports for the quarter ended on December 31, 2021 related to the institutional aid portion and the student aid portion. As part of our procedures, we tested the method of distribution of grants to ascertain consistency with the method that was actually employed by the Institution to distribute emergency financial aid grants to students. After our examination and tests performed, we noted the following: a) The methodology used to compile the information in the annual report was based on the funds drawdowns which were based on disbursements rather than the actual program expenditures for the Institutional aid funds in accordance with GAAP. b) After examination of the institutional aid portion expenditures amounts reported in the annual special report for the calendar year ended December 31, 2021 to the support provided by the Institution, we noted that the total of institutional annual expenditures was understated by $7,160. c) From the sample of enrollment statistical data selected for verification to the source documents and/or information we noted several differences and were unable to identify some of the information in the source documents in nineteen (19) out of a sample of thirty (30) statistical data lines examined in the annual special report. The exceptions were as follows: d) After examination of the quarterly special report of the student aid portion for the quarter ended December 31, 2021, we noted a difference in the Item #5: ?The total number of students who have received an Emergency Financial Aid Grant to students under the CARES (a)(1) subprogram and the CRRSAA and ARP (a)(1) subprograms?. The total of students that received assistance aid reported was 443; however, the number per the student aid payroll reports examined was 460. Additionally, no support was available to determine if the Institution was timely and accurate in publicly posting the quarterly Student Aid Portion Report selected for testing. e) In one out of a sample of forty (40) disbursements of financial aid to students (2.5%) we noted that the payment made did not agree with the Institution's fund distribution plan to prioritize students with financial need. The aid in excess disbursed to that student was $200. Criteria 2 CFR 200.302 (a) establishes that each state must expend and account for the Federal award in accordance with state laws, and procedures for expending and accounting for the state's own funds. In addition, the state's and the other 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. 2 CFR 200.302 (b) (2) to (4) establish that accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. If a Federal awarding agency requires reporting on an accrual basis from a recipient that maintains its records on other than an accrual basis, the recipient must not be required to establish an accrual accounting system. This recipient may develop accrual data for its reports on the basis of an analysis of the documentation on hand. Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income, and interest and be supported by source documentation. Effective control over, and accountability for, all funds, property, and other assets. 2 CFR 200.303 (a) to (d) establish that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. 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). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. 2 CFR 200.334 establishes that 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. Cause The cause of the deficiencies noted were due to the following situations: a) The source of information provided by the Institution related to the financial information was the G5 report. Such information is on a cash basis; therefore, financial information was not reported on an accrual basis of accounting which is the basis of accounting followed by the Institution. Additionally, the Institution did not appropriately design and maintained documentation and/or analysis performed to prepare and complete the financial information required to be reported in the quarterly and annual reports. b) Lack of recordkeeping controls and procedures to document and maintain the source of information used for the financial and statistical data required in the annual and quarterly special reports. c) The Institution used the student EFC per the ISIR/SAR available at the time of the distribution, even though, an ISIR with a valid EFC was not available since the student FAFSA application was selected for verification by USDE. After the Institution completed the verification the student EFC increased from 0 to 3676. Effect Noncompliance with the reporting requirements could lead to significant administrative actions by the grantor, including a reduction in the amounts to be awarded. It could also be interpreted as a failure to achieve the programs objectives. Questioned costs Likely questioned costs are less than $25,000. Identification as a Repeat Finding No repeated finding. Recommendation We recommend the Institution to establish adequate procedures and controls to ensure that financial and statistical data information is properly supported and detailed to allow adequate audit trail of the information. Establish adequate supervisory procedures to identify, in a reasonable period of time, deficiencies or possible deficiencies in the procedures or guidance established by management to ascertain that the Institution reports the information as required by grantors, and that accurate and adequate support is properly maintained. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Federal programs: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) CFDA Number: 84.425E / 84.425F Federal award identification number: P425E205418 / P425F204999 Grant period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control Finding Type: Material Weakness Compliance requirement: Other ? Policies and procedures requirements Condition and context When obtaining an understanding of the internal controls, policies, and procedures regarding the administration of federal programs, and grant term and conditions, we noted the following deficiencies: a. There is no written policy, nor the procedures designed and implemented by the Institution related to Cash Management were documented. The Institution opted to request the funds on a reimbursement basis. b. There were no written procedures for determining the allowability of costs in accordance with 2 CFR 200 subpart E of this part and the terms and conditions of the Federal award. c. After examination of the Institution procurement policy, we noted that the document was not signed by all members required from management and was not dated. Upon inquiry, we noted that the procurement policy was drafted and submitted to the Institution for review in February 2023. Therefore, no written policy and formal procedures were designed and implemented for the procurement transactions tested for the fiscal year ended July 31, 2022 and thereafter. Criteria 2 CFR 200.302 (b) (6) and (7) establish that the financial management system of each non-Federal entity must provide for the following: written procedures to implement the requirements of ? 200.305, and written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award. 2 CFR 200.303 establish that 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); (b) comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards; (c) evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards; (d) take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings; and (e) take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. 2 CFR 200.318 (a) establishes that 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 2 CFR 200.317 through 200.327. 2 CFR 200.400 (a) to (d) establish that the application of these cost principles is based on the fundamental premises that: (a) the non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices; (b) the non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award; (c) the non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award; (d) the application of these cost principles should require no significant changes in the internal accounting policies and practices of the non-Federal entity. However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the Federal award. Cause The Institution?s federal programs received prior the fiscal year ended July 31, 2020 did not require the implementation of written procedures as mentioned in the condition and context section, except for Cash Management policies and procedures for the Student Financial Assistance Programs Cluster for which the Institution has designed and implemented written procedures for such compliance requirement. The Covid-19 pandemic related programs were the reason why this new federal program funds were received, and the entity failed to design and implement on a timely basis the required written documentation and procedures. Effect Noncompliance with the above-mentioned requirement could lead to administrative sanctions by the grantor, including disallowance of costs. It could also be interpreted as a failure to achieve the program?s objectives. Questioned costs None. Identification as a Repeat Finding No repeated finding. Recommendation We recommend the Institution to implement written policies and procedures needed for the administration of federal grants before the acceptance of new grants. Having well sounded policies and procedures will reduce the Institution risk of non-compliance with federal regulations and grants terms and conditions. Also, they will provide guidance to the Institution?s personnel on how to carry-out their responsibilities and functions in relation to the administration of federal programs transactions. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Assistance listing program: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425F Award identification number: P425F204999 Award period: September 29, 2020 to June 30, 2023 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control / Compliance Finding Type: Material Weakness Compliance requirement: Allowed Cost / Cost Principles Condition and context In testing compliance and internal controls over cost allowability / cost principles, we selected a sample of ten (10) transactions which amounted to $445,522 of HEERF Institutional aid funds expenditures. Our sample was a statistically valid sample. During our expenditure test, we noted the following deficiencies: a) In one transaction of a sample of ten (10) disbursements (10%) the vendor quote was not available for examination. The transaction amounted to $5,899. The Institution indicated that they followed the micro purchase threshold of $10,000 as defined in 48CFR Part 2, subpart 2.1. However, this determination was not properly documented. b) In two (2) transactions of our sample (20%) the cost per quote did not agree with the amount of the invoice. The amount invoiced in excess of the quote cost was $1,090. c) In three (3) transactions of our sample (30%) we did not find documentation that the equipment was received (date and the employee who received the item). We inquired the Institution?s Management about this matter, and they explained that the Institution does not have a formal procedure or form to document the receipt of goods. Management confirmed and represented us that the items were properly received. d) In one transaction of our sample (10%) the expenditure was related to the amount of lost revenue claimed by the Institution in the fiscal year 2021-22. Upon examination of the Institution analysis, we noted that the lost revenue was not properly determined because the following situations: 1. For the loss of revenue calculation, the Institution used the unaudited figures for the fiscal year ended July 31, 2021. 2. We noted that the Institution considered in its analysis revenue that was not in accordance with the program guidelines (transactions that were not reimbursable under the HEERF grant program). 3. We noted that the lost revenue determined by the Institution was incorrectly determined (lost revenue claimed was understated by approximately $80,000) as result of the net effect of the deficiencies 1 and 2, above. Criteria 2 CFR 200.302 (b) (3) and (7) require records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income, and interest and be supported by source documentation. Written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award. 2 CFR 200.303 (a) to (d) establish that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. 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). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. 2 CFR 200.400 (a) to (d) establish that the application of these cost principles is based on the fundamental premises that: (a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. (b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. (c) The non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award. (d) The application of these cost principles should require no significant changes in the internal accounting policies and practices of the non-Federal entity. However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the Federal awards. 2 CFR 200.403, related to factors affecting allowability of cost, (c) and (g) establish that except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: 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. 2 CFR 200.404 establishes 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; (c) market prices for comparable goods or services for the geographic area; (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; and (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. 2 CFR 200.406 (a) establishes that applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal awards as direct or indirect (F&A) costs. Examples of such transactions are: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. 2 CFR 200.334 establishes that 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. 2 CFR 200.337 (a) establishes that the Federal awarding agency, Inspectors General, the Comptroller General of the United States, and the pass-through entity, or any of their authorized representatives, must have the right of access to any documents, papers, or other records of the non-Federal entity which are pertinent to the Federal award, in order to make audits, examinations, excerpts, and transcripts. The right also includes timely and reasonable access to the non-Federal entity's personnel for the purpose of interview and discussion related to such documents. The Higher Education Emergency Relief Fund (HEERF I, II, and III) Lost Revenue Frequently Asked Questions (FAQs) published on March 19, 2021, in question number four establishes that sources of lost revenue that are not reimbursable under the HEERF grant programs include the following: capital outlays associated with facilities related to athletics (including fees assessed for capital athletic facility construction), acquisition of real property (including bond revenue), contributions or donations to the institution, marketing or recruitment activities, revenue related to sectarian instruction or religious worship, alcohol sales, and investment income (including endowment and quasi-endowment revenue. Cause The cause of the deficiencies noted were the result of the following situations: a) Lack of written policies and procedures did not provide the Institution?s personnel responsible for the purchasing process a guidance on how to perform and document the purchase transactions under this federal program. b) The vendor invoice was not compared to the quote and no inquiries were made and/or documented explaining the cause of the difference. c) The Institution does not have formal and written procedures to document when materials and/or equipment are received by the Institution?s personnel. d) The Institution management did not consult or requested assistance from the Department of Education program coordinator to ascertain that the request was properly performed and to clarify questions related to the allowable revenue to be considered in the analysis. Also, the Institution failed to review the financial figures of the audited trial balance for 2021. Effect Noncompliance with the above-mentioned requirements could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements. Also, the above conditions could result in the reimbursement of federal funds to the grantors for those disbursements not properly supported and reviewed by the Institution?s management. Questioned costs Refer to finding 2022-010. Identification as a Repeat Finding No repeated finding. Recommendations We recommend the Institution to establish adequate procedures and controls, which shall consider, among others, the following: ? Maintain adequate documentation to support the allowability of its expenditures. ? Purchases must be properly documented to provide the appropriate audit trail of the transactions and allow proper review of the transactions. Adequate documentation should be sufficient to explain the Institution?s analysis and determination. ? Improve its policies and procedures, and internal controls to incorporate the comparison of the vendor invoices with the quotes after the invoice is received to ascertain that expenses and liabilities are properly recorded. Instruct personnel of accounts payable to contact the vendor when discrepancies are identified and document in writing the inquiry performed, the results, and conclusions. ? Implement a formal process with receiving reports or checklist where upon receipt of equipment and/or materials purchased could detail description, amount received, date of receipt, and a reference to the invoice. Copies of the receiving reports and invoices should then be forwarded to the accounting department for processing. Payment of a vendor?s invoice should not be made unless a copy of a receiving report is attached. ? The Institution management should review the Loss of Revenue claims and/or analysis performed by any employee or consultant that was designated to perform such a task. The Institution?s management should verify and ascertain that the analysis performed using the Institution?s financial information agree with the Institution?s audited financial statements. ? The Institution?s management should consult with the US Department of Education program coordinator when questions or concerns arise, especially if management is not familiar with program regulations and/or the federal program is new. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Assistance listing program: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425E / 84.425F Award identification number: P425F204999 / P425E205418 Award period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control Finding Type: Significant Deficiency Compliance requirement: Cash Management Condition and context In testing compliance and internal controls over cash management, we selected a sample of four (4) drawdowns which amounted to $342,787 of the total HEERF Institutional aid funds expenditures. Our sample was a statistically valid sample. During our test, we noted that in one (25%) of the four (4) drawdowns selected, for three payments made by the Institution the time elapsed between the receipt of funds and the check issuance was between 20 to 48 days. The total amount disbursed after the three elapsed days requirement was $4,020 from a drawdown total of $56,065. Criteria 2 CFR 200.302 (b) (6) requires written procedures to implement the requirements of 200.305. 2 CFR 200.305 (b) and (b) (1) establish that for non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. See also 200.302(b)(6). Except as noted elsewhere in this part, Federal agencies must require recipients to use only OMB-approved, governmentwide information collection requests to request payment. The non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. The non-Federal entity must make timely payment to contractors in accordance with the contract provisions. 2 CFR 200.303 (a) to (d) establish that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. 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). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. Cause The Institution did not design and implemented internal controls and procedures for this compliance requirement, including written policies and procedures. Effect Noncompliance with the above-mentioned requirements could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements. Questioned costs Likely questioned costs are less than $25,000. Identification as a Repeat Finding No repeated finding. Recommendations We recommend the Institution to design and implement written internal controls and procedures for the administration of federal funds requests in accordance with the requirements of grant agreements and 2 CFR 200. Internal controls and procedures must consider maintaining adequate documentation to support the petitions of funds and to maintain the audit trail of the payments that will be issued. The Institution shall request only the amount of funds necessary to meet its immediate cash needs to prevent excess cash balances. Whenever payment amounts are adjusted after the funds were requested or received, such excess cash should be returned to the federal agency immediately. Establishing reliable and thorough cash forecasting procedures and subjecting such forecasts to the formal review and approval of Institution?s management should meet this objective. Also, the Institution shall coordinate and provide pertinent training to the finance personnel regarding the federal regulations related to the cash management requirements. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Assistance listing program: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425E / 84.425F Award identification number: P425F204999 / P425E205418 Award period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control / Compliance Finding Type: Material Weakness Compliance requirement: Reporting Condition and context For testing internal controls and compliance with reporting requirements applicable to the HEERF programs, we inquired the Institution about the internal controls and procedures for determining the criteria and methodology used in compiling and reporting the data to be included in the annual and quarterly special reports. We requested a copy of the annual report for the calendar year 2021 and the quarterly reports for the quarter ended on December 31, 2021 related to the institutional aid portion and the student aid portion. As part of our procedures, we tested the method of distribution of grants to ascertain consistency with the method that was actually employed by the Institution to distribute emergency financial aid grants to students. After our examination and tests performed, we noted the following: a) The methodology used to compile the information in the annual report was based on the funds drawdowns which were based on disbursements rather than the actual program expenditures for the Institutional aid funds in accordance with GAAP. b) After examination of the institutional aid portion expenditures amounts reported in the annual special report for the calendar year ended December 31, 2021 to the support provided by the Institution, we noted that the total of institutional annual expenditures was understated by $7,160. c) From the sample of enrollment statistical data selected for verification to the source documents and/or information we noted several differences and were unable to identify some of the information in the source documents in nineteen (19) out of a sample of thirty (30) statistical data lines examined in the annual special report. The exceptions were as follows: d) After examination of the quarterly special report of the student aid portion for the quarter ended December 31, 2021, we noted a difference in the Item #5: ?The total number of students who have received an Emergency Financial Aid Grant to students under the CARES (a)(1) subprogram and the CRRSAA and ARP (a)(1) subprograms?. The total of students that received assistance aid reported was 443; however, the number per the student aid payroll reports examined was 460. Additionally, no support was available to determine if the Institution was timely and accurate in publicly posting the quarterly Student Aid Portion Report selected for testing. e) In one out of a sample of forty (40) disbursements of financial aid to students (2.5%) we noted that the payment made did not agree with the Institution's fund distribution plan to prioritize students with financial need. The aid in excess disbursed to that student was $200. Criteria 2 CFR 200.302 (a) establishes that each state must expend and account for the Federal award in accordance with state laws, and procedures for expending and accounting for the state's own funds. In addition, the state's and the other 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. 2 CFR 200.302 (b) (2) to (4) establish that accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. If a Federal awarding agency requires reporting on an accrual basis from a recipient that maintains its records on other than an accrual basis, the recipient must not be required to establish an accrual accounting system. This recipient may develop accrual data for its reports on the basis of an analysis of the documentation on hand. Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income, and interest and be supported by source documentation. Effective control over, and accountability for, all funds, property, and other assets. 2 CFR 200.303 (a) to (d) establish that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. 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). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. 2 CFR 200.334 establishes that 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. Cause The cause of the deficiencies noted were due to the following situations: a) The source of information provided by the Institution related to the financial information was the G5 report. Such information is on a cash basis; therefore, financial information was not reported on an accrual basis of accounting which is the basis of accounting followed by the Institution. Additionally, the Institution did not appropriately design and maintained documentation and/or analysis performed to prepare and complete the financial information required to be reported in the quarterly and annual reports. b) Lack of recordkeeping controls and procedures to document and maintain the source of information used for the financial and statistical data required in the annual and quarterly special reports. c) The Institution used the student EFC per the ISIR/SAR available at the time of the distribution, even though, an ISIR with a valid EFC was not available since the student FAFSA application was selected for verification by USDE. After the Institution completed the verification the student EFC increased from 0 to 3676. Effect Noncompliance with the reporting requirements could lead to significant administrative actions by the grantor, including a reduction in the amounts to be awarded. It could also be interpreted as a failure to achieve the programs objectives. Questioned costs Likely questioned costs are less than $25,000. Identification as a Repeat Finding No repeated finding. Recommendation We recommend the Institution to establish adequate procedures and controls to ensure that financial and statistical data information is properly supported and detailed to allow adequate audit trail of the information. Establish adequate supervisory procedures to identify, in a reasonable period of time, deficiencies or possible deficiencies in the procedures or guidance established by management to ascertain that the Institution reports the information as required by grantors, and that accurate and adequate support is properly maintained. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Finding 2022-002: Inaccurate SEFA - Material Weakness Name of Federal Agency: U.S. Department of Health and Human Services Federal Program Name and Assistance Listing Number: CCDF Cluster, 93.575 Federal Award Identification Number and Year: 2101HICSC6, 2021 Name of Pass-through Entity: State of Hawaii Department of Human Services Criteria: In accordance with 2 CFR 200.302 (Financial Management), a grant recipient's financial management system must be sufficient to permit the preparation of reports required by general and program-specific terms and conditions; 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 200.510 (Financial Statements) states in part that the auditee must prepare a schedule of expenditures of Federal awards ("SEFA") for the period covered by the auditee's financial statements which must include the total Federal awards expended as determined in accordance with 2 CFR 200.502. At a minimum, the schedule must include: • All individual Federal programs by Federal agency. • For Federal awards received as a subrecipient, the name of the pass-through entity and identifying number assigned by the pass-through entity must be included. • Provide total Federal awards expended for each individual Federal program and the Assistance Listings Number or other identifying number when the Assistance Listings information is not available. • Include the total amount provided to subrecipients from each Federal program. Condition: The Organization had a significant revision to the SEFA and management's initial review and approval process did not detect the error. Cause: The Organization's internal controls over the preparation and review of the SEFA were not operating effectively. Effect or Potential Effect: Inadequate controls over the preparation of the SEFA could result in financial misstatements or potential noncompliance. Questioned Costs: N/A Context: Management's initial review and approval of the SEFA did not identify $2.5M of expenditures that should have been recorded in the subsequent fiscal year. Identification as a Repeat Finding: This finding is not a repeat finding. Recommendation: We recommend the Organization strengthen its policies, procedures, and controls for the identification of federal awards to ensure a complete and accurate SEFA is prepared in a timely manner. Views of Responsible Officials: Management concurs with the finding and will implement a proper expenditure reporting process, reconciled monthly, to avoid recurrence during future audits.
Federal programs: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) CFDA Number: 84.425E / 84.425F Federal award identification number: P425E205418 / P425F204999 Grant period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control Finding Type: Material Weakness Compliance requirement: Other ? Policies and procedures requirements Condition and context When obtaining an understanding of the internal controls, policies, and procedures regarding the administration of federal programs, and grant term and conditions, we noted the following deficiencies: a. There is no written policy, nor the procedures designed and implemented by the Institution related to Cash Management were documented. The Institution opted to request the funds on a reimbursement basis. b. There were no written procedures for determining the allowability of costs in accordance with 2 CFR 200 subpart E of this part and the terms and conditions of the Federal award. c. After examination of the Institution procurement policy, we noted that the document was not signed by all members required from management and was not dated. Upon inquiry, we noted that the procurement policy was drafted and submitted to the Institution for review in February 2023. Therefore, no written policy and formal procedures were designed and implemented for the procurement transactions tested for the fiscal year ended July 31, 2022 and thereafter. Criteria 2 CFR 200.302 (b) (6) and (7) establish that the financial management system of each non-Federal entity must provide for the following: written procedures to implement the requirements of ? 200.305, and written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award. 2 CFR 200.303 establish that 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); (b) comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards; (c) evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards; (d) take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings; and (e) take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. 2 CFR 200.318 (a) establishes that 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 2 CFR 200.317 through 200.327. 2 CFR 200.400 (a) to (d) establish that the application of these cost principles is based on the fundamental premises that: (a) the non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices; (b) the non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award; (c) the non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award; (d) the application of these cost principles should require no significant changes in the internal accounting policies and practices of the non-Federal entity. However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the Federal award. Cause The Institution?s federal programs received prior the fiscal year ended July 31, 2020 did not require the implementation of written procedures as mentioned in the condition and context section, except for Cash Management policies and procedures for the Student Financial Assistance Programs Cluster for which the Institution has designed and implemented written procedures for such compliance requirement. The Covid-19 pandemic related programs were the reason why this new federal program funds were received, and the entity failed to design and implement on a timely basis the required written documentation and procedures. Effect Noncompliance with the above-mentioned requirement could lead to administrative sanctions by the grantor, including disallowance of costs. It could also be interpreted as a failure to achieve the program?s objectives. Questioned costs None. Identification as a Repeat Finding No repeated finding. Recommendation We recommend the Institution to implement written policies and procedures needed for the administration of federal grants before the acceptance of new grants. Having well sounded policies and procedures will reduce the Institution risk of non-compliance with federal regulations and grants terms and conditions. Also, they will provide guidance to the Institution?s personnel on how to carry-out their responsibilities and functions in relation to the administration of federal programs transactions. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Assistance listing program: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425E / 84.425F Award identification number: P425F204999 / P425E205418 Award period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control Finding Type: Significant Deficiency Compliance requirement: Cash Management Condition and context In testing compliance and internal controls over cash management, we selected a sample of four (4) drawdowns which amounted to $342,787 of the total HEERF Institutional aid funds expenditures. Our sample was a statistically valid sample. During our test, we noted that in one (25%) of the four (4) drawdowns selected, for three payments made by the Institution the time elapsed between the receipt of funds and the check issuance was between 20 to 48 days. The total amount disbursed after the three elapsed days requirement was $4,020 from a drawdown total of $56,065. Criteria 2 CFR 200.302 (b) (6) requires written procedures to implement the requirements of 200.305. 2 CFR 200.305 (b) and (b) (1) establish that for non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. See also 200.302(b)(6). Except as noted elsewhere in this part, Federal agencies must require recipients to use only OMB-approved, governmentwide information collection requests to request payment. The non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. The non-Federal entity must make timely payment to contractors in accordance with the contract provisions. 2 CFR 200.303 (a) to (d) establish that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. 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). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. Cause The Institution did not design and implemented internal controls and procedures for this compliance requirement, including written policies and procedures. Effect Noncompliance with the above-mentioned requirements could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements. Questioned costs Likely questioned costs are less than $25,000. Identification as a Repeat Finding No repeated finding. Recommendations We recommend the Institution to design and implement written internal controls and procedures for the administration of federal funds requests in accordance with the requirements of grant agreements and 2 CFR 200. Internal controls and procedures must consider maintaining adequate documentation to support the petitions of funds and to maintain the audit trail of the payments that will be issued. The Institution shall request only the amount of funds necessary to meet its immediate cash needs to prevent excess cash balances. Whenever payment amounts are adjusted after the funds were requested or received, such excess cash should be returned to the federal agency immediately. Establishing reliable and thorough cash forecasting procedures and subjecting such forecasts to the formal review and approval of Institution?s management should meet this objective. Also, the Institution shall coordinate and provide pertinent training to the finance personnel regarding the federal regulations related to the cash management requirements. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Assistance listing program: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425E / 84.425F Award identification number: P425F204999 / P425E205418 Award period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control / Compliance Finding Type: Material Weakness Compliance requirement: Reporting Condition and context For testing internal controls and compliance with reporting requirements applicable to the HEERF programs, we inquired the Institution about the internal controls and procedures for determining the criteria and methodology used in compiling and reporting the data to be included in the annual and quarterly special reports. We requested a copy of the annual report for the calendar year 2021 and the quarterly reports for the quarter ended on December 31, 2021 related to the institutional aid portion and the student aid portion. As part of our procedures, we tested the method of distribution of grants to ascertain consistency with the method that was actually employed by the Institution to distribute emergency financial aid grants to students. After our examination and tests performed, we noted the following: a) The methodology used to compile the information in the annual report was based on the funds drawdowns which were based on disbursements rather than the actual program expenditures for the Institutional aid funds in accordance with GAAP. b) After examination of the institutional aid portion expenditures amounts reported in the annual special report for the calendar year ended December 31, 2021 to the support provided by the Institution, we noted that the total of institutional annual expenditures was understated by $7,160. c) From the sample of enrollment statistical data selected for verification to the source documents and/or information we noted several differences and were unable to identify some of the information in the source documents in nineteen (19) out of a sample of thirty (30) statistical data lines examined in the annual special report. The exceptions were as follows: d) After examination of the quarterly special report of the student aid portion for the quarter ended December 31, 2021, we noted a difference in the Item #5: ?The total number of students who have received an Emergency Financial Aid Grant to students under the CARES (a)(1) subprogram and the CRRSAA and ARP (a)(1) subprograms?. The total of students that received assistance aid reported was 443; however, the number per the student aid payroll reports examined was 460. Additionally, no support was available to determine if the Institution was timely and accurate in publicly posting the quarterly Student Aid Portion Report selected for testing. e) In one out of a sample of forty (40) disbursements of financial aid to students (2.5%) we noted that the payment made did not agree with the Institution's fund distribution plan to prioritize students with financial need. The aid in excess disbursed to that student was $200. Criteria 2 CFR 200.302 (a) establishes that each state must expend and account for the Federal award in accordance with state laws, and procedures for expending and accounting for the state's own funds. In addition, the state's and the other 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. 2 CFR 200.302 (b) (2) to (4) establish that accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. If a Federal awarding agency requires reporting on an accrual basis from a recipient that maintains its records on other than an accrual basis, the recipient must not be required to establish an accrual accounting system. This recipient may develop accrual data for its reports on the basis of an analysis of the documentation on hand. Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income, and interest and be supported by source documentation. Effective control over, and accountability for, all funds, property, and other assets. 2 CFR 200.303 (a) to (d) establish that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. 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). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. 2 CFR 200.334 establishes that 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. Cause The cause of the deficiencies noted were due to the following situations: a) The source of information provided by the Institution related to the financial information was the G5 report. Such information is on a cash basis; therefore, financial information was not reported on an accrual basis of accounting which is the basis of accounting followed by the Institution. Additionally, the Institution did not appropriately design and maintained documentation and/or analysis performed to prepare and complete the financial information required to be reported in the quarterly and annual reports. b) Lack of recordkeeping controls and procedures to document and maintain the source of information used for the financial and statistical data required in the annual and quarterly special reports. c) The Institution used the student EFC per the ISIR/SAR available at the time of the distribution, even though, an ISIR with a valid EFC was not available since the student FAFSA application was selected for verification by USDE. After the Institution completed the verification the student EFC increased from 0 to 3676. Effect Noncompliance with the reporting requirements could lead to significant administrative actions by the grantor, including a reduction in the amounts to be awarded. It could also be interpreted as a failure to achieve the programs objectives. Questioned costs Likely questioned costs are less than $25,000. Identification as a Repeat Finding No repeated finding. Recommendation We recommend the Institution to establish adequate procedures and controls to ensure that financial and statistical data information is properly supported and detailed to allow adequate audit trail of the information. Establish adequate supervisory procedures to identify, in a reasonable period of time, deficiencies or possible deficiencies in the procedures or guidance established by management to ascertain that the Institution reports the information as required by grantors, and that accurate and adequate support is properly maintained. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Federal programs: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) CFDA Number: 84.425E / 84.425F Federal award identification number: P425E205418 / P425F204999 Grant period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control Finding Type: Material Weakness Compliance requirement: Other ? Policies and procedures requirements Condition and context When obtaining an understanding of the internal controls, policies, and procedures regarding the administration of federal programs, and grant term and conditions, we noted the following deficiencies: a. There is no written policy, nor the procedures designed and implemented by the Institution related to Cash Management were documented. The Institution opted to request the funds on a reimbursement basis. b. There were no written procedures for determining the allowability of costs in accordance with 2 CFR 200 subpart E of this part and the terms and conditions of the Federal award. c. After examination of the Institution procurement policy, we noted that the document was not signed by all members required from management and was not dated. Upon inquiry, we noted that the procurement policy was drafted and submitted to the Institution for review in February 2023. Therefore, no written policy and formal procedures were designed and implemented for the procurement transactions tested for the fiscal year ended July 31, 2022 and thereafter. Criteria 2 CFR 200.302 (b) (6) and (7) establish that the financial management system of each non-Federal entity must provide for the following: written procedures to implement the requirements of ? 200.305, and written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award. 2 CFR 200.303 establish that 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); (b) comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards; (c) evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards; (d) take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings; and (e) take reasonable measures to safeguard protected personally identifiable information and other information the Federal awarding agency or pass-through entity designates as sensitive or the non-Federal entity considers sensitive consistent with applicable Federal, State, local, and tribal laws regarding privacy and responsibility over confidentiality. 2 CFR 200.318 (a) establishes that 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 2 CFR 200.317 through 200.327. 2 CFR 200.400 (a) to (d) establish that the application of these cost principles is based on the fundamental premises that: (a) the non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices; (b) the non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award; (c) the non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award; (d) the application of these cost principles should require no significant changes in the internal accounting policies and practices of the non-Federal entity. However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the Federal award. Cause The Institution?s federal programs received prior the fiscal year ended July 31, 2020 did not require the implementation of written procedures as mentioned in the condition and context section, except for Cash Management policies and procedures for the Student Financial Assistance Programs Cluster for which the Institution has designed and implemented written procedures for such compliance requirement. The Covid-19 pandemic related programs were the reason why this new federal program funds were received, and the entity failed to design and implement on a timely basis the required written documentation and procedures. Effect Noncompliance with the above-mentioned requirement could lead to administrative sanctions by the grantor, including disallowance of costs. It could also be interpreted as a failure to achieve the program?s objectives. Questioned costs None. Identification as a Repeat Finding No repeated finding. Recommendation We recommend the Institution to implement written policies and procedures needed for the administration of federal grants before the acceptance of new grants. Having well sounded policies and procedures will reduce the Institution risk of non-compliance with federal regulations and grants terms and conditions. Also, they will provide guidance to the Institution?s personnel on how to carry-out their responsibilities and functions in relation to the administration of federal programs transactions. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Assistance listing program: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425F Award identification number: P425F204999 Award period: September 29, 2020 to June 30, 2023 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control / Compliance Finding Type: Material Weakness Compliance requirement: Allowed Cost / Cost Principles Condition and context In testing compliance and internal controls over cost allowability / cost principles, we selected a sample of ten (10) transactions which amounted to $445,522 of HEERF Institutional aid funds expenditures. Our sample was a statistically valid sample. During our expenditure test, we noted the following deficiencies: a) In one transaction of a sample of ten (10) disbursements (10%) the vendor quote was not available for examination. The transaction amounted to $5,899. The Institution indicated that they followed the micro purchase threshold of $10,000 as defined in 48CFR Part 2, subpart 2.1. However, this determination was not properly documented. b) In two (2) transactions of our sample (20%) the cost per quote did not agree with the amount of the invoice. The amount invoiced in excess of the quote cost was $1,090. c) In three (3) transactions of our sample (30%) we did not find documentation that the equipment was received (date and the employee who received the item). We inquired the Institution?s Management about this matter, and they explained that the Institution does not have a formal procedure or form to document the receipt of goods. Management confirmed and represented us that the items were properly received. d) In one transaction of our sample (10%) the expenditure was related to the amount of lost revenue claimed by the Institution in the fiscal year 2021-22. Upon examination of the Institution analysis, we noted that the lost revenue was not properly determined because the following situations: 1. For the loss of revenue calculation, the Institution used the unaudited figures for the fiscal year ended July 31, 2021. 2. We noted that the Institution considered in its analysis revenue that was not in accordance with the program guidelines (transactions that were not reimbursable under the HEERF grant program). 3. We noted that the lost revenue determined by the Institution was incorrectly determined (lost revenue claimed was understated by approximately $80,000) as result of the net effect of the deficiencies 1 and 2, above. Criteria 2 CFR 200.302 (b) (3) and (7) require records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income, and interest and be supported by source documentation. Written procedures for determining the allowability of costs in accordance with subpart E of this part and the terms and conditions of the Federal award. 2 CFR 200.303 (a) to (d) establish that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. 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). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. 2 CFR 200.400 (a) to (d) establish that the application of these cost principles is based on the fundamental premises that: (a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. (b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. (c) The non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award. (d) The application of these cost principles should require no significant changes in the internal accounting policies and practices of the non-Federal entity. However, the accounting practices of the non-Federal entity must be consistent with these cost principles and support the accumulation of costs as required by the principles and must provide for adequate documentation to support costs charged to the Federal awards. 2 CFR 200.403, related to factors affecting allowability of cost, (c) and (g) establish that except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: 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. 2 CFR 200.404 establishes 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; (c) market prices for comparable goods or services for the geographic area; (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; and (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. 2 CFR 200.406 (a) establishes that applicable credits refer to those receipts or reduction-of-expenditure-type transactions that offset or reduce expense items allocable to the Federal awards as direct or indirect (F&A) costs. Examples of such transactions are: purchase discounts, rebates or allowances, recoveries or indemnities on losses, insurance refunds or rebates, and adjustments of overpayments or erroneous charges. To the extent that such credits accruing to or received by the non-Federal entity relate to allowable costs, they must be credited to the Federal award either as a cost reduction or cash refund, as appropriate. 2 CFR 200.334 establishes that 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. 2 CFR 200.337 (a) establishes that the Federal awarding agency, Inspectors General, the Comptroller General of the United States, and the pass-through entity, or any of their authorized representatives, must have the right of access to any documents, papers, or other records of the non-Federal entity which are pertinent to the Federal award, in order to make audits, examinations, excerpts, and transcripts. The right also includes timely and reasonable access to the non-Federal entity's personnel for the purpose of interview and discussion related to such documents. The Higher Education Emergency Relief Fund (HEERF I, II, and III) Lost Revenue Frequently Asked Questions (FAQs) published on March 19, 2021, in question number four establishes that sources of lost revenue that are not reimbursable under the HEERF grant programs include the following: capital outlays associated with facilities related to athletics (including fees assessed for capital athletic facility construction), acquisition of real property (including bond revenue), contributions or donations to the institution, marketing or recruitment activities, revenue related to sectarian instruction or religious worship, alcohol sales, and investment income (including endowment and quasi-endowment revenue. Cause The cause of the deficiencies noted were the result of the following situations: a) Lack of written policies and procedures did not provide the Institution?s personnel responsible for the purchasing process a guidance on how to perform and document the purchase transactions under this federal program. b) The vendor invoice was not compared to the quote and no inquiries were made and/or documented explaining the cause of the difference. c) The Institution does not have formal and written procedures to document when materials and/or equipment are received by the Institution?s personnel. d) The Institution management did not consult or requested assistance from the Department of Education program coordinator to ascertain that the request was properly performed and to clarify questions related to the allowable revenue to be considered in the analysis. Also, the Institution failed to review the financial figures of the audited trial balance for 2021. Effect Noncompliance with the above-mentioned requirements could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements. Also, the above conditions could result in the reimbursement of federal funds to the grantors for those disbursements not properly supported and reviewed by the Institution?s management. Questioned costs Refer to finding 2022-010. Identification as a Repeat Finding No repeated finding. Recommendations We recommend the Institution to establish adequate procedures and controls, which shall consider, among others, the following: ? Maintain adequate documentation to support the allowability of its expenditures. ? Purchases must be properly documented to provide the appropriate audit trail of the transactions and allow proper review of the transactions. Adequate documentation should be sufficient to explain the Institution?s analysis and determination. ? Improve its policies and procedures, and internal controls to incorporate the comparison of the vendor invoices with the quotes after the invoice is received to ascertain that expenses and liabilities are properly recorded. Instruct personnel of accounts payable to contact the vendor when discrepancies are identified and document in writing the inquiry performed, the results, and conclusions. ? Implement a formal process with receiving reports or checklist where upon receipt of equipment and/or materials purchased could detail description, amount received, date of receipt, and a reference to the invoice. Copies of the receiving reports and invoices should then be forwarded to the accounting department for processing. Payment of a vendor?s invoice should not be made unless a copy of a receiving report is attached. ? The Institution management should review the Loss of Revenue claims and/or analysis performed by any employee or consultant that was designated to perform such a task. The Institution?s management should verify and ascertain that the analysis performed using the Institution?s financial information agree with the Institution?s audited financial statements. ? The Institution?s management should consult with the US Department of Education program coordinator when questions or concerns arise, especially if management is not familiar with program regulations and/or the federal program is new. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Assistance listing program: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425E / 84.425F Award identification number: P425F204999 / P425E205418 Award period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control Finding Type: Significant Deficiency Compliance requirement: Cash Management Condition and context In testing compliance and internal controls over cash management, we selected a sample of four (4) drawdowns which amounted to $342,787 of the total HEERF Institutional aid funds expenditures. Our sample was a statistically valid sample. During our test, we noted that in one (25%) of the four (4) drawdowns selected, for three payments made by the Institution the time elapsed between the receipt of funds and the check issuance was between 20 to 48 days. The total amount disbursed after the three elapsed days requirement was $4,020 from a drawdown total of $56,065. Criteria 2 CFR 200.302 (b) (6) requires written procedures to implement the requirements of 200.305. 2 CFR 200.305 (b) and (b) (1) establish that for non-Federal entities other than states, payments methods must minimize the time elapsing between the transfer of funds from the United States Treasury or the pass-through entity and the disbursement by the non-Federal entity whether the payment is made by electronic funds transfer, or issuance or redemption of checks, warrants, or payment by other means. See also 200.302(b)(6). Except as noted elsewhere in this part, Federal agencies must require recipients to use only OMB-approved, governmentwide information collection requests to request payment. The non-Federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-Federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a non-Federal entity must be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the non-Federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-Federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. The non-Federal entity must make timely payment to contractors in accordance with the contract provisions. 2 CFR 200.303 (a) to (d) establish that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. 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). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. Cause The Institution did not design and implemented internal controls and procedures for this compliance requirement, including written policies and procedures. Effect Noncompliance with the above-mentioned requirements could lead to administrative actions by the grantor. It could also be interpreted as a failure to manage federal awards in compliance with laws, regulations, and provisions of contracts and grant agreements. Questioned costs Likely questioned costs are less than $25,000. Identification as a Repeat Finding No repeated finding. Recommendations We recommend the Institution to design and implement written internal controls and procedures for the administration of federal funds requests in accordance with the requirements of grant agreements and 2 CFR 200. Internal controls and procedures must consider maintaining adequate documentation to support the petitions of funds and to maintain the audit trail of the payments that will be issued. The Institution shall request only the amount of funds necessary to meet its immediate cash needs to prevent excess cash balances. Whenever payment amounts are adjusted after the funds were requested or received, such excess cash should be returned to the federal agency immediately. Establishing reliable and thorough cash forecasting procedures and subjecting such forecasts to the formal review and approval of Institution?s management should meet this objective. Also, the Institution shall coordinate and provide pertinent training to the finance personnel regarding the federal regulations related to the cash management requirements. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Assistance listing program: Education Stabilization Fund - Higher Education Emergency Relief Fund (HEERF) Assistance Listing Number: 84.425E / 84.425F Award identification number: P425F204999 / P425E205418 Award period: September 29, 2020 to June 30, 2023 and July 23, 2020 to May 23, 2022 Federal agency: U.S. Department of Education Pass-through entity: N/A Category: Internal Control / Compliance Finding Type: Material Weakness Compliance requirement: Reporting Condition and context For testing internal controls and compliance with reporting requirements applicable to the HEERF programs, we inquired the Institution about the internal controls and procedures for determining the criteria and methodology used in compiling and reporting the data to be included in the annual and quarterly special reports. We requested a copy of the annual report for the calendar year 2021 and the quarterly reports for the quarter ended on December 31, 2021 related to the institutional aid portion and the student aid portion. As part of our procedures, we tested the method of distribution of grants to ascertain consistency with the method that was actually employed by the Institution to distribute emergency financial aid grants to students. After our examination and tests performed, we noted the following: a) The methodology used to compile the information in the annual report was based on the funds drawdowns which were based on disbursements rather than the actual program expenditures for the Institutional aid funds in accordance with GAAP. b) After examination of the institutional aid portion expenditures amounts reported in the annual special report for the calendar year ended December 31, 2021 to the support provided by the Institution, we noted that the total of institutional annual expenditures was understated by $7,160. c) From the sample of enrollment statistical data selected for verification to the source documents and/or information we noted several differences and were unable to identify some of the information in the source documents in nineteen (19) out of a sample of thirty (30) statistical data lines examined in the annual special report. The exceptions were as follows: d) After examination of the quarterly special report of the student aid portion for the quarter ended December 31, 2021, we noted a difference in the Item #5: ?The total number of students who have received an Emergency Financial Aid Grant to students under the CARES (a)(1) subprogram and the CRRSAA and ARP (a)(1) subprograms?. The total of students that received assistance aid reported was 443; however, the number per the student aid payroll reports examined was 460. Additionally, no support was available to determine if the Institution was timely and accurate in publicly posting the quarterly Student Aid Portion Report selected for testing. e) In one out of a sample of forty (40) disbursements of financial aid to students (2.5%) we noted that the payment made did not agree with the Institution's fund distribution plan to prioritize students with financial need. The aid in excess disbursed to that student was $200. Criteria 2 CFR 200.302 (a) establishes that each state must expend and account for the Federal award in accordance with state laws, and procedures for expending and accounting for the state's own funds. In addition, the state's and the other 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. 2 CFR 200.302 (b) (2) to (4) establish that accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ?? 200.328 and 200.329. If a Federal awarding agency requires reporting on an accrual basis from a recipient that maintains its records on other than an accrual basis, the recipient must not be required to establish an accrual accounting system. This recipient may develop accrual data for its reports on the basis of an analysis of the documentation on hand. Records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income, and interest and be supported by source documentation. Effective control over, and accountability for, all funds, property, and other assets. 2 CFR 200.303 (a) to (d) establish that the non-Federal entity must: (a) Establish and maintain effective internal control over the Federal awards that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal awards. 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). (b) Comply with the U.S. Constitution, Federal statutes, regulations, and the terms and conditions of the Federal awards. (c) Evaluate and monitor the non-Federal entity's compliance with statutes, regulations and the terms and conditions of Federal awards. (d) Take prompt action when instances of noncompliance are identified including noncompliance identified in audit findings. 2 CFR 200.334 establishes that 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. Cause The cause of the deficiencies noted were due to the following situations: a) The source of information provided by the Institution related to the financial information was the G5 report. Such information is on a cash basis; therefore, financial information was not reported on an accrual basis of accounting which is the basis of accounting followed by the Institution. Additionally, the Institution did not appropriately design and maintained documentation and/or analysis performed to prepare and complete the financial information required to be reported in the quarterly and annual reports. b) Lack of recordkeeping controls and procedures to document and maintain the source of information used for the financial and statistical data required in the annual and quarterly special reports. c) The Institution used the student EFC per the ISIR/SAR available at the time of the distribution, even though, an ISIR with a valid EFC was not available since the student FAFSA application was selected for verification by USDE. After the Institution completed the verification the student EFC increased from 0 to 3676. Effect Noncompliance with the reporting requirements could lead to significant administrative actions by the grantor, including a reduction in the amounts to be awarded. It could also be interpreted as a failure to achieve the programs objectives. Questioned costs Likely questioned costs are less than $25,000. Identification as a Repeat Finding No repeated finding. Recommendation We recommend the Institution to establish adequate procedures and controls to ensure that financial and statistical data information is properly supported and detailed to allow adequate audit trail of the information. Establish adequate supervisory procedures to identify, in a reasonable period of time, deficiencies or possible deficiencies in the procedures or guidance established by management to ascertain that the Institution reports the information as required by grantors, and that accurate and adequate support is properly maintained. Views of Responsible Officials Refer to the Institutional comments included in the Corrective Action Plan.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.
Condition: As part of our auditing procedures, we assisted in the preparation of the financial statements, related disclosures, and the schedule of expenditures of federal awards of the Agency. The preparation of these financial statements in accordance with generally accepted accounting principles (GAAP) and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is the responsibility of the grantee. The authoritative and regulatory standards state in summary that management should authorize, process, reconcile and close out each grant and contract in a timely manner to ensure proper accounting and reporting of such activity in accordance with the specific professional standards and regulatory requirements. The close out process is designed to reduce the risk of errors, fraud, material misstatement of financial and compliance reporting and recognition of expenditures (or revenue) in the proper period. We noted that the current system of internal controls over financial statements and compliance is not designed to ensure that the objectives are achieved. Further, the capacity and experience of the current staff do not allow for adequate analysis of grants and contracts, proper allocations of shared costs and support services provided, grantor receivables, deferred revenue, and the reconciliation of bank accounts accurately and in a timely manner. This resulted in adjustments necessary to properly present the financial statements and disclosures of the Agency as of July 31, 2022. We also noted significant weaknesses in internal controls over personnel payroll and the processing, maintaining and reconciling payroll activity to the general ledger and external regulatory reporting (IRS Form 941's, state filings, etc.) Therefore, the risk exists that grant receivables and/or cash from the various programs are not recorded properly during the reporting period (interim and annually). This condition also makes it difficult to prepare accurate external reports required by the various funding sources in a timely manner (i.e., SF-425, LIHEAP reporting, etc.). The systemic cause appears to be the untimely resignation of key personnel, a change in the accounting system, a lack of personnel with the skills, knowledge, and experience with grant accounting and a weakness in the overall system of internal accounting controls and monitoring. Policies and procedures are not followed consistently throughout the year. Context: Review of internal control structure of the organization in accordance with Government Auditing Standards. Criteria: Controls should be in place to ensure that financial statements are prepared in accordance with GAAP. The auditee shall prepare financial statements that reflect its financial position, results of operations or changes in net assets, and, where appropriate, cash flows for the fiscal year audited. The auditee shall also prepare a schedule of expenditures of Federal awards for the period covered by the auditee's financial statements. [2 CFR ?200.510(a) and (b)] Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in ??200.327 Financial reporting and 200.328 Monitoring and reporting program performance [2 CFR ?200.302(b)(2)]. Effect: Management may not be able to obtain complete and accurate financial statements on an interim or fiscal year basis to be used for internal or external reporting purposes. Cause: Turnover of key staff, change in the accounting system, limited personnel with knowledge and/or the ability to assist and provide needed information to aid in financial statement preparation. The implementation of a new accounting system without an adequate close out of the old system was determined to be the systemic cause. Recommendation: The degree to which the preparation of the financial statements and related disclosures are prepared by the independent auditor is a control deficiency is determined by the knowledge, skills and experience of those in the organization who are charged with the responsibility of its financial reporting. The Agency has hired a new fiscal officer (CFO) and should hire additional staff (grant accountants and a general ledger accountant) to assist the new fiscal officer. New staff should have the adequate skills, knowledge and experience to oversee and/or perform the necessary accounting functions each month. Policies and procedures should be updated to adequately address the challenges and dynamics of the community action agency. We believe that the CFO with the supporting staff and general ledger accountant should have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner so as to eliminate the risk of significant errors occurring. Budget-to-actual schedules should be an integral part of the grant accountant?s basic responsibilities. Program directors should be involved in the closing process. We further recommend that training be provided to all staff engaged in the financial reporting, allocations and reconciliation functions to ensure that a complete and accurate financial statement close out process is achieved each month and annually. Views of Responsible Officials and Planned Corrective Actions: Management is in the process of assessing the organizational structure and capacity to provide adequate financial reporting. With Board review and approval of the agency?s financial funding sources, the agency will hire additional fiscal clerk to further support financial requirements and segregation of duties to ensure adequate internal controls are fully implemented. The CFO will have the overall responsibility of properly reconciling and closing out the accounting system and grant activity each month in an efficient and timely manner to eliminate the risk of significant errors occurring. Budget-to-actual schedules will be an integral part of the grant accountant analyst?s basic responsibilities. The fiscal policies and procedures will be updated with the enhancements implemented within the fiscal department. Staff will be trained on revised policies and procedures and uniform guidance regulations. The new automated financial system, will support financial reporting to meet GAAP requirements and to provide informative reports for Board and Management. All enhancements will be implemented by December 31, 2023.