Federal Agency: U.S. Department of Agriculture Federal Program Name: Supplemental Nutrition Assistance Program Cluster Assistance Listing Number: 10.561 Federal Award Identification Number and Year: 232MN101S2514 – 2024 Passed Through Entity: Minnesota Department of Human Services Pass Through Numbers: H55240010 Compliance Requirement: Procurement, Suspension, and Debarment Award Period: 2024 Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria or specific requirement: The County must follow Uniform Guidance Subsection 200.320 Methods of Procurement for all applicable procurements over the County’s micro-purchase threshold. For purchases over the County's micro-purchase threshold of $10,000 but not exceeding the simplified acquisition threshold of $250,000, the County should follow small purchase procedures. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the County. Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: During our testing, it was noted that for one contract out of four tested the County was unable to provide documentation showing that the county followed the open competition requirement. Questioned costs: None Context: One out of the four contracts tested had no documentation of open competition. Cause: The County purchasing likely followed County purchase policies for nonfederal expenditures. Effect: It would be possible that the County could end up spending more federal dollars than necessary for a product or service, if they are not going through the steps to ensure they are utilizing the best vendor for the county and documenting this process each year. Repeat finding: 2023-010 Recommendation: We recommend the County follow their federal purchasing policy in all their federal programs and retain documentation of that process occurring. As necessary, the County may need to add internal controls that are specific to each program to ensure this properly occurs. Views of responsible officials: There is no disagreement with the finding.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Medical Assistance Assistance Listing Numbers: 93.778 Federal Award Identification Numbers and Years: 2405MN5ADM - 2024 Passed Through Entity: Minnesota Department of Human Services Pass Through Numbers: H55245048 Compliance Requirement: Allowable Activities Award Period: 2024 Type of Finding: Material Weakness in Internal Control Over Compliance, Other Matters Criteria or specific requirement: The Minnesota Department of Human Services (DHS) requires a listing of employees working on social services programs to be submitted quarterly, known as a random moment study listing (RMS listing). DHS then determines the amount applicable to the applicable income maintenance programs through random moment studies. Each quarter the County’s coordinator reviews their RMS listing to ensure the employees listed are accurate for the people working and being coded in the general ledger. Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: One individual was included in the 2nd quarter Social Services RMS listing sent to the State that was not supposed to be included in the listing, one individual was noted to have the same issue on the 2nd quarter of the public health local collaborative time study participant listing. Questioned costs: None Context: In our testing of two of the eight quarterly RMS listings, one individual was included in the 2nd quarter Social Services RMS listing sent to the State that was not supposed to be included in the listings, one individual was noted to have the same issue on the 2nd quarter public health local collaborative time study participant listing. There were 335 County staff listed in the 2nd quarter’s RMS listing and 52 participants listed in the 2nd quarter public health LCTS RMS listing. Cause: The County's RMS controls and procedures were not robust enough to note that the RMS listings should have excluded the noted individuals. Increased turnover and growth of the programs also created an increase in the number changes that were needed to be made to the listings. Effect: Lack of proper controls could affect allocation of fundings due to the staff not being in MAXIS or actually assigned to social services or public health LCTS case files to properly respond to the random moment requests that are sent by the State as part of the random moment study. Repeat Finding: Yes 2023-009 Recommendation: We recommend that the County review its procedures and control to ensure all RMS listings sent to the State properly exclude those necessary individuals no longer working in the programs. 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: Medical Assistance Assistance Listing Numbers: 93.778 Federal Award Identification Numbers and Years: 2405MN5ADM - 2024 Passed Through Entity: Minnesota Department of Human Services Pass Through Numbers: H55245048 Compliance Requirement: Special Provisions Award Period: 2024 Type of Finding: Material Weakness in Internal Control Over Compliance, Other Matters Criteria or specific requirement: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The County and the Minnesota Department of Human Services (DHS) have a contract surrounding the federal funds. This contract has several obligations and reporting requirements the County must follow including the requirement the county must work with its collaborative partners to ensure that the LCTS coordinators and staff sampled by the LCTS have completed training approved by the State in the LCTS. Condition: The County was unable to provide a documented formal review process to ensure that LCTS fiscal site contacts were trained on completing cost schedules. Questioned costs: None Context: The County did not provide the documentation of the review over the noted requirement. Cause: The County did not maintain a record of their review process. Also, there has been fewer resources provided in recent years from the Minnesota Department of Human Services to help meet the specific training requirements of LCTS fiscal site contacts completing cost schedule reports. Effect: There is no way to verify the review process was completed and completed timely. Repeat finding: 2023-013 Recommendation: We recommend that the County reviews its polices and controls to ensure there is a formally documented control that ensures all required training of LCTS fiscal site contacts is completed and the documentation of the completions of the training is retained. Views of responsible officials: There is no disagreement with the finding.
2024-001: Internal Controls Over SEFA Preparation Federal Assistance Listing Number: 21.027 Name of Program or Cluster: Coronavirus State and Local Fiscal Recovery Funds Agency: U.S. Department of the Treasury Criteria Per 2 CFR §200.510(b), non-federal entities that expend $750,000 or more in federal awards during the fiscal year are required to prepare a SEFA that includes accurate and complete information about all federal awards expended. The Uniform Guidance also emphasizes the importance of internal control systems over compliance and reporting, as outlined in 2 CFR §200.303. Entities must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms and conditions of federal awards Condition Life Management, Inc. (LMI) does not appear to have implemented sufficient internal controls to ensure the complete and accurate preparation of the Schedule of Expenditures of Federal Awards (SEFA) for the year ended December 31, 2024. Although LMI’s SEFA preparation memo states that the Chief Financial Officer (CFO) is responsible for compiling the SEFA using information from the accounting system and supporting grant documentation, in practice, we noted that the entity relied on an external entity to provide essential grant documentation necessary for SEFA preparation. Additionally, the SEFA/SESFA provided appeared to be outdated and not reflective of current-year grant activity. Cause The absence of a fully developed control structure and oversight mechanism appears to have contributed to reliance on external or related-party sources for preparing SEFA-related documentation. This suggests a lack of staff with adequate skills, knowledge, and experience (SKE) necessary for SEFA preparation. Repeat Finding No Recommendation We recommend that Life Management, Inc. strengthen its internal control processes over SEFA preparation. This may include: • Providing training to appropriate staff to ensure they have the requisite skills, knowledge, and experience to independently prepare the SEFA in accordance with federal requirements. • Engaging or hiring qualified personnel with federal grant accounting expertise to oversee the SEFA preparation process. • Reducing reliance on external or related parties for documentation by maintaining a centralized, internal repository of grant agreements and related records. Views of Responsible Officials See Corrective Action Plan
Federal Agency: U.S. Department of Treasury Federal Program Name: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Passed Through: N/A Finding Type: Material weakness Condition: During our testing of this major program, we noted that the County incorrectly completed the SLFRF Compliance Report – SLT-2073 – P&E Report – 2025 by reporting erroneous amounts for all categories of obligations and expenditures during the period. Criteria: The Uniform Guidance (2 CFR section 200.303) requires that non-federal entities receiving federal awards establish and maintain 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. Effective internal controls should include procedures in place to ensure accurate reporting of the activity. Cause: The County has not designed and implemented internal controls over its federal award programs to ensure compliance with the terms and conditions of its federal award programs. Effect: The County could provide incorrect information to the federal government regarding the actual federal awards expended and obligated. Context: Reporting was direct and material to the program. Each category of the report had incorrect information reported. Questioned Costs: None Recommendation: We recommend that management design and implement internal controls that would ensure the accurate preparation of all required reporting. Repeat Finding: No Views of Responsible Officials and Planned Corrective Action: The County agrees with the finding and the recommendation will be implemented.
Criteria:2 CFR §200.303(a) requires non-federal entities to establish and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Effective internal control should be consistent with the COSO Internal Control—Integrated Framework or the GAO Green Book. In addition, Uniform Guidance requires written policies and procedures in certain compliance areas. Condition:The entity does not have a formally documented system of internal control, including written policies and procedures, over its federal programs. While certain controls are performed in practice, these controls are not formally documented Cause:Management has not developed or formally documented written policies and procedures related to internal control over compliance with federal requirements. Effect / Potential Effect: The absence of written policies and procedures increases the risk that controls may not be consistently applied, that staff may not have clear guidance regarding compliance responsibilities, and that noncompliance with federal requirements could occur and not be detected or prevented in a timely manner. No instances of noncompliance were identified during audit testing. Questioned Costs:None. Repeat Finding:No. Recommendation:We recommend that management develop, implement, and maintain written policies and procedures documenting its system of internal control over federal programs to ensure compliance with Uniform Guidance and applicable federal requirements. Views of Responsible Officials and Planned Corrective Action:Management agrees with the finding and plans to develop and implement written internal control policies and procedures over federal programs. Management anticipates completion by June 30, 2026.
Program: ALL No. 10.523 Centers of Excellence at 1890 Institutions Significant Deficiency and Noncompliance over Subrecipient Monitoring Repeat Finding: Yes Condition: Management did not verify that its subrecipients were not suspended or debarred or otherwise excluded from participating in the transactions. Criteria: In accordance with 2 CFR §200.303, the non-federal entity must establish and maintain effective internal controls 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. Pursuant to 31 USC 7502(f)(2) (Single Audit Act Amendments of 1996 (Pub. L. No. 104-156)), 2 CFR sections 200.330, .331, and .501(h), a pass-through entity must identify the award and applicable requirements, evaluate risk, monitor, and ensure accountability of subrecipients. Additionally, when entering into subaward transactions, the non-federal entity must verify that the entity, as defined in 2 CFR section 180.995 and agency adopting regulations, not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration (GSA), (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2CFR 180.300). Cause: Program personnel were unaware of the requirement included in Uniform Guidance related to procedures required for subrecipient monitoring. Effect: If subrecipients were not in compliance with Uniform Guidance, the Foundation would not identify the noncompliance timely. Questioned Costs: Unknown. Recommendation: We recommend that the Foundation implements subrecipient monitoring controls by documenting and implementing procedures in accordance with Uniform Guidance requirements, including providing training to program personnel and developing written policies and checklists to ensure consistent compliance. Auditee Response and Corrective Action Plan: Refer to management’s corrective action plans. Auditor’s Conclusion: Finding remains as stated.
CRITERIA: In accordance with Uniform Guidance (2 CFR 200.303), recipients of federal awards are required to establish and maintain effective internal controls. These internal controls over major federal programs are essential to ensure that federal funds are managed properly, used efficiently, and administered in compliance with all applicable laws, regulations, and award provisions. CONDITION: During our audit, we noted that while the Organization has established procurement policies and procedures, it does not have comprehensive written accounting policies and procedures. Additionally, the Organization is not currently utilizing accounting software to track and manage federal award activity. CAUSE: The Organization operates with limited personnel, making it challenging to appropriately segregate financial duties. The absence of detailed policies and procedures further increases the likelihood of inconsistent practices, operational inefficiencies, and errors. EFFECT: These conditions weaken the Organization’s overall internal control environment, increasing the risk that errors, misstatements, or irregularities may occur and remain undetected. RECOMMENDATION: We recommend that the Organization enhance its internal control environment by developing and implementing formal accounting policies and procedures. This should include strengthening processes related to federal award management and improving segregation of duties where feasible. Implementing appropriate accounting software would also support more efficient and accurate financial reporting. MANAGEMENT’S RESPONSE: See management’s corrective action plan on page 17.
2024-002 – IMPROPER REPORTING OF EXPENDITURES - ALN 21.027 – OTHER NONCOMPLIANCE AND SIGNIFICANT DEFICIENCY FINDING TYPE: OTHER NONCOMPLIANCE AND SIGNIFICANT DEFICIENCY Finding 2024-002 Federal Program: Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Year(s): SLFRP5402, 2024 Federal Agency: U.S. Department of Treasury Pass Through Agency: North Dakota State Treasurer Office Questioned Cost: $0 Condition Morton County did not properly report expenditures on the March 31, 2024, Project and Expenditure Report for the Coronavirus State and Local Fiscal Recovery Funds program. The total cumulative expenditures were understated by $233,268. Context As stated in the SLFRF Compliance and Reporting Guidance for counties allocated less than $10 million with a population below 250,000 residents such as Morton County, "the initial Project and Expenditure Report covered the period from March 3, 2021 to March 31, 2022 and was required to be submitted to Treasury by April 30, 2022. The subsequent annual reports will cover one calendar year and must be submitted to Treasury by April 30 each year." Therefore, each year after March 31, 2022, Morton County must then submit an annual P&E report for the period covering April 1 202X - March 31, 202Y. Morton County did submit the 2024 (period covering April 2023 - March 31, 2024) report by April 30, 2024, but did not properly include 6 expenses that were incurred between January 2024 - March 2024, totaling $233,268 on the 2024 P&E report. Effect The amounts reported as cumulative expenditures on the March 31, 2024, Project and Expenditure Report were inaccurate. Cause Morton County did not ensure that all expenditures were included when completing reporting for the March 31, 2024 Project and Expenditure Report. The County identified the misstatement after the P&E Report had been submitted. As Treasury does not allow revisions to submitted reports, the County was unable to amend the inaccurate report. Criteria Page 19 of the Coronavirus State and Local Fiscal Recovery Funds: Project and Expenditure Report User Guide Version 12 (September 30, 2024) states: • An expenditure is the amount that has been incurred as a liability of the entity (the service has been rendered or the good has been delivered to the entity). • 2 CFR 200.303 states that the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Repeat Finding No. Recommendation We recommend Morton County develop a review process that includes reconciling SLFRF expenditures to supporting documentation prior to preparing and submitting the P&E Report. Strengthening review steps will help ensure accurate reporting in accordance with Treasury and Uniform Guidance requirements. Morton County’s Response See Corrective Action Plan.
2024-003 –LACK OF CONTROLS OVER SUSPENSION AND DEBAREMENT - ALN 21.027 – SIGNIFICANT DEFICIENCY FINDING TYPE: SIGNIFICANT DEFICIENCY Finding 2024-003 Federal Program: Coronavirus State and Local Fiscal Recovery Funds ALN: 21.027 Year(s): SLFRP5402, 2024 Federal Agency: U.S. Department of Treasury Pass Through Agency: North Dakota State Treasurer Office Questioned Cost: $0 Condition Morton County did not have documented policies in place to verify that vendors receiving federal funds were not suspended or debarred from participation in federal programs. During the audit period, the County did not perform checks of the federal System for Award Management (SAM.gov) or obtain certifications from vendors to demonstrate compliance with federal suspension and debarment requirements. Context During the audit period, Morton County entered one contract in the amount of $190,400. The vendor was not on the suspension and debarment listing on SAM.gov. Effect Without documented controls to verify vendor eligibility, the County was exposed to an increased risk of noncompliance with federal requirements. Although no instances of transactions with suspended or debarred parties were identified during audit testing, the lack of controls limits the County’s ability to demonstrate ongoing compliance with suspension and debarment regulations. Cause Morton County was not aware of the requirement to establish and document procedures specific to suspension and debarment compliance under the Uniform Guidance. As a result, controls and documentation practices were not implemented during the audit period. Criteria 2 CFR §200.214 and 2 CFR §180.300 require non-federal entities to verify that parties to covered transactions are not suspended or debarred prior to entering such transactions. Additionally, 2 CFR 200.303 states that the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Repeat Finding NO. Recommendation We recommend Morton County develop and implement documented procedures to verify vendor eligibility under federal suspension and debarment requirements prior to entering into contracts. Acceptable verification methods include SAM.gov checks, vendor certifications, or contract clauses, and documentation of compliance should be retained. Morton County’s Response See Corrective Action Plan.
2 CFR § 300 codified in 45 CFR part 75 gives regulatory effect to the Department of Health and Human Services. 2 CFR § 200.303(a) provides that the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. The General Health District has established procedures to approve timesheets by requiring the employee and department supervisor to sign the timesheets indicating they are accurate (employee) and approved (supervisor). For 2024, 11% of payroll disbursement timesheets tested over the Community Health Workers for Public Health Response and Resilient Program were not signed by the Health Commissioner and/or Director of Administration to indicate timesheets were accurate. Failure to follow the approved procedures could result in the occurrence of unallowable payroll transactions. The General Health District should ensure that both the employee and department supervisor sign the timesheets. These approvals should be maintained for audit.
2024-004 Procurement and Suspension and Debarment Prior Year Finding Number: N/A Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Transportation Program: 20.205 Highway Planning and Construction Award Number and Year: 1057187; 2024 Pass-Through Agency: Minnesota Department of Transportation Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Minnesota Department of Transportation State Aid Manual provides guidance and responsibilities for project sponsors. In addition to acting as the fiscal agent, the sponsor is taking on responsibility that the project will be completed in accordance with all of the federal and state rules and regulations that apply. Title 2 U.S. Code of Federal Regulations § 200.318(i) states that the County must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Federal requirements prohibit non-federal entities from contracting with or making subawards under covered transactions to parties that are suspended or debarred. Title 2 U.S. Code of Federal Regulations § 180.300 describes a required verification process. Prior to entering into the transaction, one of the following must be performed: (1) checking SAM.gov exclusions, (2) collecting a certification, or (3) adding a clause or condition to the covered transaction with the contracting party. Condition: Faribault County acted as the sponsor for a project for a local city and the Minnesota Department of Transportation. The County did not develop controls over the sponsored project to ensure compliance for procurement. This included: • The County did not maintain records to support the history of procurement. • The County did not maintain documentation that the requirements for suspension or debarment were met by (a) checking SAM.gov exclusions, (b) collecting a certification from the vendor, or (c) verifying a clause or condition was included in the contract. Questioned Costs: None. Context: In June 2024, the County approved a resolution to act as a sponsoring agent for a city project. The project expenditures were $61,458 with payments made to the city for reimbursement. Effect: Without controls in place over the sponsored project, there is an increased risk of noncompliance with applicable laws, rules, and regulations. Cause: The County was unaware of the responsibilities of a project sponsor. Recommendation: We recommend the County implement controls to ensure projects the County sponsors are completed in accordance with all the federal and state rules and regulations that apply. View of Responsible Official: Acknowledge
2024-005 Suspension and Debarment Prior Year Finding Number: 2023-007 Year of Finding Origination: 2023 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of the Treasury Program: 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Award Number and Year: Federal Direct; 2022 Pass-Through Agency: N/A – Direct Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must maintain internal control over federal programs that provides reasonable assurance that the auditee is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Federal requirements prohibit non-federal entities from contracting with or making subawards under covered transactions to parties that are suspended or debarred. Title 2 U.S. Code of Federal Regulations § 180.300 describes a required verification process. Prior to entering into the transaction, one of the following must be performed: (1) checking SAM.gov exclusions, (2) collecting a certification, or (3) adding a clause or condition to the covered transaction. The County’s procurement policy requires SAM.gov search results to be documented prior to entering into a covered transaction. Condition: The County did not have documentation to support that verification for suspension or debarred vendors was performed by County staff prior to entering into the covered transactions. Questioned Costs: None. Context: None of the vendors tested were listed as suspended or debarred on SAM.gov at the time of the audit. There were two covered transactions during 2024. Effect: Failure to verify vendors are not suspended, debarred, or otherwise excluded prior to entering into a covered transaction may result in the County entering into a transaction with a vendor that is not authorized to provide goods and services under the grant. Cause: The County informed us that documentation of SAM.gov searches for covered transactions could not be located due to staffing changes. In addition, staff were unaware of the requirements. Recommendation: We recommend the County maintain documentation to demonstrate that vendors were not suspended, debarred, or otherwise excluded from conducting business with the County; the County should complete this documentation prior to entering into a covered transaction. View of Responsible Official: Acknowledge
2024-006 Reporting Prior Year Finding Number: 2023-006 Year of Finding Origination: 2023 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of the Treasury Program: 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Award Number and Year: Federal Direct; 2022 Pass-Through Agency: N/A – Direct Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must maintain internal control over federal programs that provides reasonable assurance that the auditee is managing federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. The U.S. Department of the Treasury requires submission of an annual Project and Expenditure Report for Coronavirus State and Local Fiscal Recovery Funds (SLFRF) that includes current period expenditures. Condition: The County overstated current period obligations and expenditures reported on the annual Project and Expenditure Report submitted to the U.S. Department of the Treasury by $997,578 and $1,149,654, respectively, due to not updating projects reported in prior annual reports. Additionally, cumulative expenditures were understated by $49,837, due to not including all applicable expenditures. Also, the County did not submit the annual Project and Expenditure Report by the federal deadline of April 30, 2025. Questioned Costs: None. Context: The County opted to spend the SLFRF award under the Revenue Replacement category, which allows spending on broader types of government services. The annual Project and Expenditure Report required to be submitted to the U.S. Department of the Treasury by April 30 of each year for the reporting period ending March 31 was submitted June 6, 2025. Effect: The County is not in compliance with federal reporting requirements. Cause: The County indicated difficulty tracking project expenditures due to staff turnover. Recommendation: We recommend the County review the U.S. Department of the Treasury’s guidance and form instructions to ensure accurate reporting of SLFRF activity. We also recommend the County submit future Project and Expenditure Reports by the federal deadline. View of Responsible Official: Acknowledge
2024-002 – CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS – IMPROPER REPORTING OF EXPENDITURES & OBLIGATIONS – ALN 21.027 – MATERIAL WEAKNESS & MATERIAL NONCOMPLIANCE FINDING TYPE: MATERIAL WEAKNESS & MATERIAL NONCOMPLIANCE Finding 2024-003 Federal Program: FAIN: CORONAVIRUS STATE AND LOCAL FISCAL RECOVERY FUNDS SLFRP3716, 2024 ALN: 21.027 Year(s): 2024 Federal Agency: U.S. Department of Treasury Questioned Cost: $0 Condition Mountrail County did not properly report total expenditures and obligations on the March 31, 2024, Project and Expenditure Report for the Coronavirus State and Local Fiscal Recovery Funds program. The total reported cumulative and current period expenses were overstated by $516,186 and $500,897, respectively, and the total cumulative and current period obligations were overstated by $49,056 and $144,401, respectively. Effect The amounts reported as cumulative and current expenditures and obligations on the March 31, 2024, Project and Expenditure Report were inaccurate. Cause Mountrail County did not ensure that all expenditures and obligations were in agreement with their ledger when completing reporting for the March 31, 2024 Project and Expenditure Report. Criteria Page 19 of the Coronavirus State and Local Fiscal Recovery Funds: Project and Expenditure Report User Guide Version 12 (September 30, 2024) states: • An expenditure is the amount that has been incurred as a liability of the entity (the service has been rendered or the good has been delivered to the entity). • An obligation is an order placed for property and services, contracts and subawards made, and similar transactions that require payment. An obligation also means a requirement under federal law or regulation or provision of the award terms and conditions to which a recipient becomes subject as a result of receiving or expending funds. • 2 CFR 200.303 states that the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Context As stated in the SLFRF Compliance and Reporting Guidance, for counties allocated less than $10 million with a population below 250,000 residents such as Mountrail, "the initial Project and Expenditure Report covered the period from March 3, 2021 to March 31, 2022 and was required to be submitted to Treasury by April 30, 2022. The subsequent annual reports will cover one calendar year and must be submitted to Treasury by April 30 each year." Therefore, each year after March 31, 2022, the Mountrail County must then submit an annual P&E report for the period covering April 1 202X - March 31, 202Y. Mountrail County did submit the 2024 (period covering April 1, 2023-March 31, 2024) report by April 30, 2024, but did not properly include the current and cumulative expenses and obligations on the 2024 P&E report. Repeat Finding No. Recommendation We recommend Mountrail County review and comply with all reporting requirements of the Coronavirus State and Local Fiscal Recovery Funds program by properly reporting all expenditures and obligations in the Project and Expenditure Reports. Mountrail County’s Response See Corrective Action Plan.
Finding 2024-001: Lack of documentation of review and approval - Material Weakness Program name:Office for Coastal Management Assistance Listing: 11.473 Federal award Identification number: 20 NFWF 339630 Federal award year: 9/1/2020 - 9/30/2024 Federal awarding agency: U.S. Department of Commerce Criteria - In accordance with 2 CFR 200.303, recipients and subrecipients must establish, document and maintain effective internal control over Federal awards. These controls should be in compliance with Federal statutes, regulations, and the terms and conditions of the award, and should align with standards such as the “Standards for Internal Control in the Federal Government” (Green Book) or the COSO framework. This includes controls over: Expenses: Ensuring proper documentation and approval. (2 CFR 200.400(d) ) Reporting: Ensuring financial reports are accurate, complete, and reviewed prior to submission (2 CFR 200.328). Condition - The Organization has limited written processes of certain transaction classes. There was a pervasive lack of documentation of approval over transactions, including expenses, and reporting. Cause - The Organization did not maintain or consistently apply documentation protocols for internal control reviews. Formal documentation practices were not in place during the audit period. Effect - Lack of documentation as evidence that controls over compliance were being performed. Documentation should be maintained as evidence that sufficient control activities are in place and would effectively prevent or detect and correct noncompliance. Controls must be followed for every transaction and documentation of the control being performed must be maintained. Questioned costs - None identified. Perspective - The deficiency was pervasive across multiple compliance areas and was not isolated to a specific transaction or department. The scope indicates a systemic control weakness during the audit period. Identification of Repeat Findings - This is a repeat finding from the prior year (Finding 2023-002). As a result of the 2023 audit report, issued in February 2026, the Organization began the process of developing updated policies for compliance. In 2025, the Organization formally adopted new policies and procedures that align with the internal control standards per 2 CFR Part 200. Recommendation - We recommend that the Organization ensure updated policies and procedures are implemented and consistently applied. This includes: Documented review and approval of all transactions related to expenses, and reporting. Maintenance of written evidence supporting such reviews. Regular training and internal monitoring to ensure control procedures are consistently followed. Management response - Management agrees with this assessment and has committed to a corrective action plan. Management has also engaged with a new accounting firm to oversee the financial reporting functions at the Organization.
2024 – 004 INTERNAL CONTROLS OVER CASH MANAGEMENT Federal Agency: Department of Transportation Federal Program: Formula Grants for Rural Areas and Tribal Transit Program Assistance Listing Number: 20.509 Federal Award Identification Number and Year: MN-2020-020-01, MN-2023-045-00 Pass-Through Agency: Minnesota Department of Transportation Pass-Through Number: MN-2020-020-01, MN-2023-045-00 Award Period: Year Ended December 31, 2024 Compliance Requirement Affected: Cash Management Type of Finding: Significant Deficiency in Internal Controls over Compliance Criteria or specific requirement: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: The Transit Board did not have adequate internal controls over the cash management reports. Questioned Costs: None Context: The Transit Board did not have anyone internally reviewing the quarterly reports being submitted. Cause: Limited personnel. Effect: The Transit Board could be reporting inaccurate information effecting the status of cash management. Repeat Finding: No Recommendation: We recommend the Transit Board designate qualified personnel for conducting the quarterly reporting review. The review should be performed and documented. Formal procedures should be documented to ensure consistency and effectiveness of the quality review process. Views of responsible officials: There is no disagreement with the audit finding.
Finding Reference Number: 2024-002 Reportable finding considered a significant deficiency - Inadequate support for distribution of donated food Title and CFDA Number of Federal Program: Emergency Food Assistance Program: 10.568 & 10.569 Federal award numbers & periods: 22-MOU-00108 23/24. 10/1/2023 - 9/30/2024 22-MOU-00108 24/25. 10/1/2024 - 9/30/2025 Type of Finding: Financial Statement and Federal Award Finding Finding Resolution Status: In Process Identification of Repeat Finding and Finding Reference Number: This is not a repeat finding Criteria: Organizations are required to maintain adequate documentation and an audit trail for all food distributions, including goods sent to distribution sites and goods used for on-site meal preparation, in accordance with sound internal control practices and applicable grant requirements (e.g., Uniform Guidance 2 CFR §200.302 – Financial Management and §200.303 – Internal Controls). Statement of Condition: During the audit, Food Bank Distribution Reports were provided showing goods sent to three locations, including recipient sign-offs, stating they received the food. Each location tracks food received and distributed to individuals. Leftover food is sent to various nonprofits to assist with distribution, if any. However, documentation for goods that were received and not distributed, at these three locations, could not be produced for review as an audit trail for who received and distributed leftover food. Additionally, Congregate Aggregate Feeding Reports, which track goods used for on-site meal preparation, and subsequent distribution, were also not available for review as they were not kept on file. The Organization lacked distribution documentation to support their monthly Distribution Report for goods distributed resulting in an incomplete audit trail. Cause: The Organization did not have formalized procedures or controls to ensure that all food distributions and on-site meal preparation activities were consistently documented and retained. Tracking was handled internally without standardized reporting requirements, resulting in incomplete records. Effect or Potential Effect: The absence of complete supporting documentation limits the Organization’s ability to demonstrate compliance with internal policies and donor requirements. It increases the risk of misstatement, misappropriation of goods, and potential noncompliance with grant or regulatory requirements. Questioned Costs: There are no questioned costs associated with this finding. Context: During our testing of food distribution documentation, we selected Food Bank Distribution Reports from three distribution locations for the audit period. For each location, we reviewed documentation supporting goods received, goods distributed, and any goods remaining at the end of the distribution cycle. While signed recipient logs were available to support goods initially received at the locations, supporting documentation for goods that were received but not distributed—including records identifying where leftover food was subsequently sent—was not available for any of the three locations reviewed. Additionally, for onsite meal preparation activities, we requested Congregate Aggregate Feeding Reports used to track the quantities of goods prepared and served; however, the Organization did not retain these reports for the period under audit. As a result, none of the sampled items related to meal preparation activities had supporting documentation available for review. Recommendation: We recommend that management implement and enforce policies to ensure that all food distributions, including on-site meal preparation and any goods not distributed separately, are properly tracked and supported by documentation. This should include maintaining Congregate Aggregate Feeding Reports, retaining all distribution records and reconciling them to the Monthly Distribution Report, establishing procedures to ensure discarded goods are documented appropriately. These steps will strengthen internal controls and provide a clear audit trail for all commodities. Auditors’ Summary of the Auditee’s Comments on the Findings and Recommendations: See Corrective Action Plan
Finding 2024-005 - Reporting Federal Award Information: Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: Texas Department of Housing and Community Affairs Assistance Listing Number (ALN): 93.568 Federal Program Name: Low-Income Home Energy Assistance Type of Finding: Material Weakness in Internal Control Over Compliance Reporting Compliance Requirement No Questioned Costs Criteria: Under 2 CFR 200.303, the Organization is required to establish and maintain effective internal control over Federal awards that provides reasonable assurance of compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, 2 CFR 200.302(a) requires that the financial management system provide accurate, current, and complete disclosure of the financial results of each Federal award. Further, 2 CFR 200.334 requires financial records, supporting documents, statistical records, and all other records pertinent to a Federal award be retained to support amounts reported. The OMB Compliance Supplement identifies Reporting as a compliance requirement for this program and requires that financial reports be supported by underlying accounting records and subject to appropriate review prior to submission. Condition: During our audit, we noted that financial reports submitted to the Federal awarding agency were not consistently supported by retained documentation demonstrating how reported amounts were calculated. In addition, there was no documented evidence of supervisory review or approval of the reports prior to submission. During interim testing of reports, we noted that certain periodic financial reports submitted to the pass-through entity did not reconcile to the Organization’s general ledger at the time of submission. The variances were attributable to journal entries, voided checks, and other posting adjustments recorded after report submission. While cumulative and final reports ultimately agreed to the Organization’s accounting records and no amended reports were required, documentation reconciling the differences at the time of submission was not retained. documentation was retained for amounts reported to the Federal awarding agency or to require documented supervisory review of reports prior to submission. Effect or Potential Effect: The absence of supporting documentation and independent review increases the risk that inaccurate, incomplete, or unsupported information could be reported to the Federal awarding agency and not be detected in a timely manner. Although no questioned costs were identified as a result of our audit procedures, this deficiency creates a reasonable possibility that material noncompliance with reporting requirements could occur and not be prevented or detected on a timely basis. Questioned Costs: None. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that management implement procedures to: Retain supporting documentation for all amounts reported to Federal awarding agencies, including reconciliations to the general ledger; Require documented supervisory review and approval of reports prior to submission; and Ensure that adjustments occurring after report submission are documented and, when necessary, corrected through revised reporting. Views of Responsible Officials and Planned Corrective Action: Management acknowledged that supporting documentation was not consistently retained and that supervisory review was not formally documented. Management has indicated that procedures will be implemented to ensure reports are reconciled to accounting records, properly supported, and reviewed prior to submission.
Finding 2024-006 – DCF Audit Submission Federal Reporting Requirement: Uniform Guidance – Subpart F Reporting Requirements Type of Finding: Significant Deficiency in Internal Control Over Compliance Noncompliance with Federal Reporting Requirements No Questioned Costs Criteria: Under 2 CFR 200.512(a), the auditee must submit the reporting package and Data Collection Form (DCF) to the Federal Audit Clearinghouse (FAC) no later than the earlier of: 30 calendar days after receipt of the auditor’s report(s), or Nine months after the end of the audit period. Further, 2 CFR 200.303 requires the Organization to establish and maintain effective internal control over Federal awards to provide reasonable assurance that the entity complies with Federal statutes, regulations, and the terms and conditions of Federal awards. Effective internal control includes procedures to monitor compliance with required reporting deadlines. Condition: The Organization did not submit the reporting package and Data Collection Form (DCF) for the year ended December 31, 2023 within the timeframe required by 2 CFR 200.512(a). The reporting package was due no later than September 30, 2024 (nine months after fiscal year-end). The Organization submitted the reporting package to the Federal Audit Clearinghouse (FAC) on March 15, 2025, which was 166 days after the required deadline. Cause: The Organization did not have adequate procedures in place to monitor and ensure timely submission of the reporting package and Data Collection Form. In addition, broader financial reporting control deficiencies contributed to delays in completing the audit process, which affected the timeliness of submission. Effect or Potential Effect: Failure to submit the reporting package and Data Collection Form timely constitutes noncompliance with Uniform Guidance reporting requirements. Late submission delays Federal oversight and public transparency of audit results and increases the risk of heightened Federal scrutiny or potential funding restrictions. Questioned Costs: None. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that management implement procedures to ensure timely submission of the reporting package and Data Collection Form. Such procedures should include: Establishing a formal compliance calendar with assigned responsibility; Monitoring audit progress against statutory deadlines; and Addressing underlying financial reporting control deficiencies that impact audit completion timelines. Views of Responsible Officials and Planned Corrective Action: Management acknowledged that the prior year reporting package and Data Collection Form were not submitted within the required timeframe. Management indicated that procedures will be implemented to monitor deadlines and improve the timeliness of financial reporting and audit completion going forward.
Finding 2024-001 - U.S. Department of Housing and Urban Development, Mortgage Insurance Rental and Cooperative Housing for Moderate Income Families and Elderly, Market Interest Rate, CFDA #14.135 Statement of Condition: Internal control processes over financial accounting did not ensure that all transactions were properly recorded. Internal control processes over financial accounting did not ensure that key accounts were reconciled or reviewed on a periodic basis. Criteria: The HUD Handbook 4370.2 REV-1, Chapter 2 requires the books and accounts to be complete and accurate. HUD Handbook 4370.2 REV-1, Chapter 2, Section 12 requires monthly reconciliations of all cash accounts. Additionally, 2 CFR Part 200 Section 200.302 Financial Management states that the financial management system of each non-federal entity must provide accurate, current, and complete disclosure of the financial results of each Federal award in accordance with the reporting requirements. Additionally, 2 CFR Part 200 Section 200.303(a), Internal Controls, requires that non-federal entities must establish and maintain effective internal controls over the federal award that provides reasonable assurance that the non-federal entity is managing the award in compliance with federal statutes, regulations and the terms and conditions. Effect: Noncompliance with HUD and Uniform Guidance requirements and the possibility of undetected material misstatements and/or undetected misappropriation of assets. Cause: Prior management oversight. Context: An understanding of processes and internal controls was performed with the Corporation's management and tests were performed to determine if the processes and internal controls were implemented and effective. As part of this process we noted the following processes and internal controls were not effective and/or implemented. 1) Only two of the six bank accounts were reconciled. The outsourced bookkeeper only performed a bank reconciliation for the operating and security deposit cash accounts. 2) The accounts receivable, tenants and accounts receivable, HUD were not reconciled. 3) The monthly review process of the Corporation's financial information is not fully supported by evidence of such review. Questioned Costs: N/A Recommendation: We recommend management review/enhance its accounting and internal control procedures to ensure that all key accounts are reconciled and reviewed with supporting evidence of such review. Views of Responsible Officials and Corrective Action Plan: Management agrees with the finding and will review the accounting and financial procedures, system of internal controls and policies. The Corporation has executed a new management agreement with Remnant Management Inc. effective October 1, 2024. Remnant Management Inc. will ensure that all transactions are properly recorded and that key accounts are reconciled and reviewed on a periodic basis beginning October 1, 2024 and going forward.
2024-003 Reporting Prior Year Finding Number: N/A Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Health and Human Services Program: 93.778 Medicaid Cluster Award Number and Year: 2405MN5ADM; 2024 Pass-Through Agency: Minnesota Department of Human Services Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. For County federal awards received from the Minnesota Department of Human Services (DHS), internal control should be established and maintained to provide assurance that program reports submitted to DHS are completed in accordance with DHS reporting instructions. As part of Western Prairie Human Services’ reporting requirements, the County submits the Social Service Fund Report, Form DHS-2556 on a quarterly basis to DHS. Condition: The following errors were noted in the Social Service Fund Report, Form DHS-2556 submitted to DHS for the third quarter of 2024: • State revenues were understated by $158,645. • Federal revenues were understated by $41,926. • Charges for services were understated by $1,130. • Miscellaneous revenue was overstated by $51,837. Questioned Costs: None. Context: Western Prairie Human Services was unable to submit corrections for the Social Service Fund Report, Form DHS-2556 for the third quarter of 2024. The population consisted of eight quarterly reports: four for the Income Maintenance Quarterly Expense Report, Form DHS-2550 and four for the Social Services Fund Report, Form DHS-2556. The sample size of four quarterly reports was based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: Incorrect information relating to revenues was reported to DHS on a Social Service Fund Report, Form DHS-2556. Cause: The Western Prairie Human Services’ controls over preparation of the quarterly reports were not sufficient to identify that the related revenues were not properly reported. Recommendation: We recommend that Western Prairie Human Services implement controls that ensure that all applicable amounts are reported on the reports in a manner that is consistent with DHS guidance. View of Responsible Official: Concur
Department of the Treasury Local Assistance and Tribal Consistency Fund (ALN 21.032) Activities Allowed and Unallowed, Allowable Costs / Cost Principles, and Reporting Criteria or specific requirement: In accordance with 2 CFR Part 200.303, non-Federal entities must establish and maintain effective internal control over the federal award that provides reasonable assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Furthermore, effective internal control should include regular reconciliations between subsidiary tracking systems (spreadsheets) and the primary accounting system (General Ledger) to ensure data integrity. Condition: While the County utilizes General Ledger software for its primary accounting functions, grant-level financial tracking and reporting are often performed using manual spreadsheets. Although the data entered into these spreadsheets is intended to reflect the same transactions recorded in the General Ledger, formal reconciliations are not regularly performed to ensure the spreadsheet data matches the General Ledger records. Cause: Management relied on the assumption that because the spreadsheet data originates from General Ledger transactions, the output would inherently remain consistent. Management has not implemented a formal policy or procedure requiring a periodic, documented reconciliation between these two data sets. Effect of potential effect: The lack of reconciliation between spreadsheets and the General Ledger increases the risk of misstatements within the Schedule of Expenditures of Federal Awards or noncompliance of individual grants and programs. Furthermore, the use of spreadsheets alone lack the automated controls found in the General Ledger software, such as: 1) Data Protection: Risk of accidental deletion or modification of formulas/data. 2) Data Validation: No automated prevention of duplicate entries or formatting errors. 3) Dual Entry/Audit Trail: No systematic record of who changed data or why. Questioned costs: No reportable questioned costs. Context: A total of 60 transactions were selected for testing from programs that relied on spreadsheets for tracking and reporting. Of the 60 transactions selected, a sole deviation was identified. The difference between what was reported on the tracking spreadsheet and the General Ledger was trivial in amount and clearly immaterial to the program and Schedule of Expenditures of Federal Awards as a whole. However, the reliance on spreadsheets, and a lack of reconciliation back to the General Ledger for grant tracking and reporting, was found to be systemic to the County’s system of internal control over grant reporting. Repeat finding: No Recommendation: We recommend that the County implement a formal reconciliation process between the grant tracking spreadsheets and the General Ledger. This reconciliation should be performed periodically, such as monthly, and should include: 1) Documented Comparison: A side-by-side verification of total expenditures and revenues per grant on amounts reported within the general ledger and amounts included on subsidiary tracking spreadsheets. This verification should include specific general ledger account numbers used for tracking revenues and expenditures. 2) Supervisory Review: Reconciliations should be reviewed and signed off by a person independent of the spreadsheet preparation. 3) System Integration: The County should explore available grant management features and modules within their existing General Ledger software to eliminate the reliance on manual "shadow" systems or spreadsheets. Views of responsible officials: Management acknowledged the finding and recommendation, and plans to implement a formal reconciliation process between grant tracking spreadsheets and the General Ledger. This reconciliation will be performed at minimum quarterly (when most grants are submitted).
U.S. Department of Agriculture Federal Financial Assistance Listing #10.766 FaCommunity cilities Loans and Grants Special Tests and Provisions Material Weakness in Internal Control Over Compliance and Material Noncompliance Criteria – 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and conditions of the federal award. The Loan Resolution Security Agreement requires a monthly amount to be set aside in a reserve fund until the specific account balance is reached. Condition – The Hospital did not sufficiently fund their reserve account. As of December 31, 2024, the Hospital should have USDA debt reserves at least equal to $459,327. The USDA debt reserves equaled $141,821 as of December 31, 2024. Cause – Management has not funded the USDA debt reserves adequately. Effect – The Hospital was not in compliance with their provisions of the USDA debt agreements. Questioned Costs – None reported. Context – Sampling was not used. Repeat Finding from Prior Years – Yes, repeated finding 2023-003. Recommendation – We recommend the Hospital fund the reserve account adequately at each measurement date. Views of Responsible Officials – Management agrees with the finding.
FINDING 2024-003 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Suspension and Debarment Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): FY2024 Pass-Through Entity: Indiana Finance Authority Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context Prior to entering into subawards and covered transactions with COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF), recipients are required to verify that contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (e.g., grant agreement) that are expected to equal or exceed $25,000 and all subawards. The verification is to be done by checking the System for Award Management (SAM) Excluded Parties List System (EPLS), collecting a certification from the person or entity, or adding a clause or condition to the covered transaction with that person or entity. One covered transaction paid from the SLFRF award during the audit period was identified and tested. The covered transaction, totaling $262,504, did not include the appropriate provisions in the contract, nor did the Town require a certification or check the SAM EPLS to ensure the entity was not suspended or debarred prior to entering into the contract. The lack of internal controls and noncompliance was isolated to the instance noted above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 31 CFR 19.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you do business is not excluded or disqualified. You do this by: (a) Checking the EPLS; or INDIANA STATE BOARD OF ACCOUNTS 20 TOWN OF FLORA SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (b) Collecting a certification from that person if allowed by this rule; or (c) Adding a clause or condition to the covered transaction with that person." Cause Management of the Town did not develop a system of internal controls to ensure that policies and procedures related to suspension and debarment were in place and followed as they were unaware of the requirements. Effect Without the proper implementation of an effectively designed system of internal controls, the Town could not ensure the vendors paid with federal funds were eligible to participate in federal programs. Any program funds the Town used to pay vendors that have been suspended or debarred would be unallowable, and the funding agency could potentially recover them. Furthermore, noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the Town. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the Town develop written policies and procedures to ensure its compliance with requirements related to suspension and debarment. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-004 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Reporting Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): FY2024 Pass-Through Entity: Indiana Finance Authority Compliance Requirement: Reporting Audit Finding: Material Weakness Condition and Context Recipients are required to submit quarterly or annual Project and Expenditure (P&E) reports to the U.S. Department of the Treasury (Treasury). The reporting periods, as well as the respective due dates, are based upon type of recipient and its population, as well as the recipient's allocation amount. Information to be reported includes projects funded, expenditures, and contracts for the appropriate reporting period. INDIANA STATE BOARD OF ACCOUNTS 21 TOWN OF FLORA SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The Town was classified as a metropolitan town with a population below 250,000 residents that received an allocation of less than $10 million in COVID-19 - Coronavirus State and Local Fiscal Recovery Funds. The annual report was to cover one calendar year and must be submitted to the Treasury by April 30, 2024. The Town submitted the required P&E report during the audit period timely, and the report agreed to the Town's records. However, there were no internal controls in place to prevent, or detect and correct, errors in the P&E report prior to submission. The Clerk-Treasurer prepared and submitted the P&E report without an oversight or review process in place. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause The Town's management did not have properly designed internal controls in place to review reports prior to submission. Effect Without the proper implementation of an effectively designed system of internal controls over reporting, the Town could not ensure that the report submitted was materially accurate and correct. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the Town establish a system of internal controls to provide for segregation of duties in the preparation and review of federal reports prior to submission. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
2024-002 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Prior Year Finding Number: N/A Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of the Treasury Program: 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Award Number and Year: Direct, Not Provided Pass-Through Agency: Direct and City of Saint Paul Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 2 U.S. Code of Federal Regulations §§ 200.403(a) and 200.403(g) require costs to be necessary and reasonable, and be adequately documented. Condition: The County did not obtain itemized documentation for five out of 44 disbursements tested. Questioned Costs: $181,377; known questioned costs were determined based on individual expenditures with exceptions identified. Context: The County treated one vendor as a subrecipient and approved a budget for this vendor by type of expenditure. The County monitored the vendor's actual expenditures against approved budgeted expenditures. Total expenditures reported on the Schedule of Expenditures of Federal Awards is $50,901,938 for this program. The sample tested included approximately $2,570,500. The sample size was based on guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Additionally, four individually important items were selected for testing. Effect: The County has insufficient documentation to demonstrate expenditures were for allowable activities and met the requirements of allowable costs. Cause: The County felt its procedures over monitoring actual expenditures to budgeted expenditures were sufficient in lieu of reviewing itemized supporting documentation. Recommendation: We recommend the County obtain supporting documentation related to expenditures, including payroll reports and supporting receipts for purchases, sufficient to determine expenditures were for allowable activities. View of Responsible Official: Concur.
2024-003 Eligibility and Child Support Non-Cooperation Prior Year Finding Number: N/A Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Significant Deficiency and Other Matter Federal Agency: U.S. Department of Health and Human Services Program: 93.558 Temporary Assistance for Needy Families Award Number and Year: 2401MNTANF; 2024 Pass-Through Agency: Minnesota Department of Human Services Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 42 United States Code § 602(a)(1)(B)(iii) requires each state to create a written document that shall set forth the objective criteria for the delivery of benefits and the determination of eligibility. The Minnesota Department of Human Services’ State Plan for Temporary Assistance for Needy Families (TANF) and Minn. Stat. § 256J.10 [see now Minn. Stat. § 142G.10, subd. 1] establish the general eligibility requirements for TANF benefits. Title 45 U.S. Code of Federal Regulations § 264.30 states: “What procedures exist to ensure cooperation with the child support enforcement requirements? (a)(1) The State agency must refer all appropriate individuals in the family of a child, for whom paternity has not been established or for whom a child support order needs to be established, modified, or enforced, to the child support enforcement agency (i.e., the IV-D agency). (2) Referred individuals must cooperate in establishing paternity and in establishing, modifying, or enforcing a support order with respect to the child. (b) If the IV-D agency determines that an individual is not cooperating, and the individual does not qualify for a good cause or other exception established by the State agency responsible for making good cause determinations in accordance with section 454(29) of the Act or for a good cause domestic violence waiver granted in accordance with § 260.52 of this chapter, then the IV-D agency must notify the IV-A agency promptly. (c) The IV-A agency must then take appropriate action by: (1) Deducting from the assistance that would otherwise be provided to the family of the individual an amount equal to not less than 25 percent of the amount of such assistance; or (2) Denying the family any assistance under the program.” Condition: The Minnesota Department of Human Services maintains the computer system, MAXIS, which is used by Ramsey County to support the eligibility determination process. In the case files reviewed for eligibility, not all documentation was available, updated, or input correctly to support participant eligibility. The following exceptions were noted in the sample of 40 MAXIS case files tested: • one case file where the relationship between the minor child and the parent or other caretaker relative was not documented, • one case file where the social security number of one member of the assistance unit was not documented, and • one case file where the income in MAXIS did not agree with the supporting documentation on file. In a sample of 11 cases with non-cooperation in establishing paternity tested, an exception was noted in one case file where sanctions were not imposed for four months when they should have been based on supporting documentation on file. Questioned Costs: Not applicable. The County administers the program, but the State of Minnesota pays benefits to participants in this program. Context: The State of Minnesota and Ramsey County split the eligibility determination process. Pursuant to Minnesota statutes, Ramsey County performs the “intake function” needed for this program, while the State maintains the MAXIS system, which supports the eligibility determination process. Participants receive benefit payments from the State. The total population of eligible participants was 4,025. Child support non-cooperation is determined by the County, and the Providing Resources to Improve Support in Minnesota (PRISM) system maintains the information and recipient status. When a Child Support Officer at the County updates PRISM to show non-cooperation, it interfaces with MAXIS. From this interface, MAXIS receives a Worker’s Daily Report message which notifies the entity of child support non-cooperation. The County is responsible for updating the recipient’s record in MAXIS, including entering child support sanctions, or closing a case on the seventh occurrence of noncompliance. The total population of cases of non-cooperation at the County was 370. Sample sizes were based on guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The lack of updated information in MAXIS documenting verification of key eligibility-determining factors increases the risk that program participants will receive benefits when they are not eligible. In addition, benefit overpayments could be paid when child support non-cooperation is not properly processed for a benefit month. Cause: Program personnel entering case data into MAXIS did not ensure all required information was input correctly, supported, and obtained or retained. Recommendation: We recommend the County implement additional procedures to provide reasonable assurance that all necessary documentation to support eligibility determinations exists, information is properly input or updated in MAXIS, and child support non-cooperation case files benefits are being reduced as necessary in MAXIS. In addition, the County should consider providing further training to program personnel. View of Responsible Official: Concur.
2024-004 Eligibility Prior Year Finding Number: N/A Year of Finding Origination: 2024 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of Health and Human Services Program: 93.778 Medical Assistance Program Award Number and Year: 2405MN5ADM; 2024 Pass-Through Agency: Minnesota Department of Human Services Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Title 42 U.S. Code of Federal Regulations §§ 435.911 and 435.945 require the state Medicaid agency to determine and verify eligibility of enrollees in Medicaid. The Minnesota Department of Human Services provides the Minnesota Health Care Programs Eligibility Policy Manual. The manual contains the Minnesota Department of Human Services eligibility policies for the Minnesota Health Care Programs, including the eligibility requirements of Medical Assistance. Specific eligibility requirements are included for participants’ citizenship verification, income limits, applications, and asset verification. Minnesota Statutes, Section 256B.05, requires county agencies to administer Medical Assistance. Condition: The Minnesota Department of Human Services maintains the computer system, MAXIS, which is used by Ramsey County to support the eligibility determination process. In the case files reviewed for eligibility, not all documentation was available, updated, or input correctly to support participant eligibility. The following exceptions were noted in the sample of 40 MAXIS case files tested: • two case files where the verification of citizenship was not documented, • one case file where the application was not documented, • two case files where the verification of income was not documented or documentation did not agree with MAXIS, and • nine case files where the verification of assets was not documented or documentation did not agree with MAXIS. Questioned Costs: Not applicable. The County administers the program, but the State of Minnesota pays benefits to participants in this program. Context: The State of Minnesota and Ramsey County split the eligibility determination process. Pursuant to Minnesota statutes, Ramsey County performs the “intake function” needed for this program, while the State maintains the MAXIS system, which supports the eligibility determination process. Participants receive benefit payments from the State. The total population of eligible participants was 32,937. The sample size was based on guidance from Chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The lack of updated information in MAXIS documenting verification of key eligibility-determining factors increases the risk that program participants will receive benefits when they are not eligible. Cause: Program personnel entering case data into MAXIS did not ensure all required information was input correctly, supported, and obtained or retained. Recommendation: We recommend the County implement additional procedures to provide reasonable assurance that all necessary documentation to support eligibility determinations exists and information is properly input or updated in MAXIS. In addition, the County should consider providing further training to program personnel. View of Responsible Official: Concur.
Finding 2024- 007 – Timecard Approval Controls – Payroll Charge to Federal Grant, Significant Deficiency Federal award agency: US Department of Transportation Federal Transit Administration Program name and ALN: Federal Transit Cluster ALN 20.507 Federal Transit Formula Grants, ALN 20.525 State of Good Repair Grants Federal award identification number: IL-2017-028-00, IL-2018-024-00, IL-2019-022-01, IL-2021-050-00, IL-2022-005-01, IL-2022-032-00, IL-2023-036-01, IL-2024-025-00 Federal award year: 2017, 2018, 2019, 2022, 2023, 2024 Criteria: The Uniform Guidance requires non‑Federal entities to establish and maintain effective internal control over Federal awards that provides reasonable assurance that the entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award (2 CFR §200.303). In addition, payroll costs charged to Federal awards must be adequately supported and properly authorized to ensure that only allowable and accurate costs are charged (2 CFR §200.430(i)). Condition: During testing of payroll transactions charged to the Federal program, RSM identified instances in which employee timecards were not supported by evidence of timely supervisory review and approval. Specifically, for certain timecards tested, approval either could not be substantiated, occurred after fiscal year end, or lacked documentation evidencing the date of approval. Cause: Management did not consistently maintain documentation evidencing timely supervisory review and approval of employee timecards charged to Federal grants. Additionally, monitoring controls over the timeliness of timecard approvals were not sufficient to ensure compliance with established payroll control procedures. Effect or potential effect: Without timely supervisory approval of timecards, there is an increased risk that unallowable, inaccurate, or improperly allocated payroll costs could be charged to Federal awards. Questioned costs: None noted. Context: 16 control exceptions out of 60 selections. The sample was not intended to be, and was not, a statistically valid sample. Recommendation: RSM recommends that management strengthen internal controls over payroll charged to Federal grants by ensuring that all employee timecards are reviewed and approved by supervisors in a timely manner and that documentation evidencing the approval date is retained. Management should also implement periodic monitoring to verify compliance with timecard approval requirements. Views of responsible officials: Management acknowledges the finding and agrees that remediation is necessary. Management will implement the recommendations that it has defined within the corrective action plan required by Title 2 CFR 200.511(c) executed on April 16, 2026.
FINDING 2024-001 Information on the federal program: Federal Agency: Department of the Treasury Pass-Through Entity: N/A – Direct Grant Federal Program: Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Assistance Listing Number: 21.027 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Noncompliance Criteria: 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)...." 2 CFR 200.318 states in part: "(a) The non-Federal entity must have and use documented procurement procedures, consistent with State, local, and tribal laws and regulations and the standards of this section, for the acquisition of property or services required under a Federal award or subaward. The non-Federal entity's documented procurement procedures must conform to the procurement standards identified in §§ 200.317 through 200.327. . . . (i) The non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. . . .” 2 CFR 200.320 states in part: “The non-Federal entity must have and use documented procurement procedures, consistent with the standards of this section and §§ 200.317, 200.318, and 200.319 for any of the following methods of procurement used for the acquisition of property or services required under a Federal award or sub-award. (a) Informal procurement methods. When the value of the procurement for property or services under a Federal award does not exceed the simplified acquisition threshold (SAT), as defined in § 200.1, or a lower threshold established by a non-Federal entity, formal procurement methods are not required. The non-Federal entity may use informal procurement methods to expedite the completion of its transactions and minimize the associated administrative burden and cost. The informal methods used for procurement of property or services at or below the SAT include: . . . (2) Small purchases — (i) Small purchase procedures. The acquisition of property or services, the aggregate dollar amount of which is higher than the micro-purchase threshold but does not exceed the simplified acquisition threshold. If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources as determined appropriate by the non-Federal entity. . . . “ 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking the SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Condition: The City did not have internal controls in place to ensure compliance with the procurement and suspension and debarment requirements. The City had not designed or implemented adequate policies or procedures to ensure that proper procurement procedures for small purchase and simplified acquisition procurement thresholds were followed. Cause: The City had not developed a system of internal controls that would have ensured compliance with Procurement and Suspension and Debarment compliance requirements for covered transactions. Effect: Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, procurement procedures for goods and services were not adhered to and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. The failure to comply with the grant agreement and the compliance requirement could have resulted in the loss of federal funds to the City. Questioned costs: There are no questioned costs. Context: For one out of three samples selected for the small purchase procurement threshold, three quotes and rationale for selecting the vendor were not documented. Small purchase procurements require three competing quotes and rationale for selection of the vendor. The procurement was for park improvement design services. The City was unaware that professional services are required to follow the federal procurement process. Per grant requirements, all grant funded expenditures require appropriate procurement, regardless of whether it is a good or service. For two out of three samples selected for suspension and debarment testing, the City did not have support that vendors procured under CSLFRF funding were not suspended or debarred. Identification as a repeat finding, if applicable: Yes, finding 2023-003 in the prior year report. Recommendation: We recommend that the City establish and implement control procedures to ensure compliance with the grant agreement and the Procurement and Suspension and Debarment compliance requirement. This should include ensuring proper procurement methods are followed, suspension and debarment checks are performed and documented prior to entering into the transaction. Views of responsible officials and planned corrective actions: Management acknowledges the finding. See management’s corrective action plan attached to this audit report.
Rural eConnectivity Pilot Program U.S. Department of Agriculture Loan ID MO1704-A59, April 2, 2020 – April 1, 2043 Criteria or Specific Requirement – Internal Controls over Compliance (2 CFR 200.303(a). non‑federal entities must establish and maintain effective internal controls over Federal awards, including segregation of duties to reasonably ensure reports submitted to the federal awarding agency or a pass-through entity include all activity of the reporting period, are supported by underlying accounting or performance records, and are fairly presented in accordance with governing requirements. Condition – The Cooperative did not maintain appropriate segregation of duties for approval of quarterly reports. Specifically, reports were not separately reviewed for completeness and accuracy by an individual in management at the appropriate level, the same individual prepared and approved the quarterly reports. Cause – The Cooperative’s internal controls were not adequate to ensure reports submitted were reviewed by a separate individual. The Cooperative had not assigned separate personnel to perform the preparation and approval functions for required quarterly reports. Effect or Potential Effect – A lack of segregation of duties increases the risk that errors or omissions in quarterly reports may not be prevented or detected in a timely manner. As a result, reports submitted to USDA may be inaccurate or incomplete. Questioned Costs – None Context – We selected a sample of two out of four quarterly reports submitted during the year for detailed testing. For both reports documentation showed the same individual was responsible for both preparing and approving the submissions. The sampling methodology used is not, and is not intended to be, statistically valid. Identification of a Repeat Finding – Yes Recommendation – The Cooperative should implement internal control procedures that ensure adequate segregation of duties for the preparation and approval of quarterly reports. At a minimum, report preparation and approval responsibilities should be assigned to different individuals. Views of Responsible Officials and Planned Corrective Actions – The Cooperative concurs with the finding and management will implement procedures to ensure appropriate segregation of duties are in place for reporting requirements.
2024-003 Federal Agency: U.S. Department of the Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: 2024; FAIN not available. Award Period: January 1, 2024 through December 31, 2024 Compliance Requirement: Procurement, Suspension and Debarment Type of Finding: Material weakness in internal control over compliance Criteria or Specific Requirement: The United States Code of Federal Regulations (CFR) Title 2, Part 200.319 indicates procurement transactions under the Federal award must be conducted in a manner that provides full and open competition. Additionally, 2 CFR Part 200.320 indicates that for any allowable method chosen, the recipient or subrecipient must maintain and use documented procurement procedures, consistent with the requirements of 2 CFR Part 200, Subpart D. When a non-federal entity enters into a covered transaction with an entity at a lower tier, the nonfederal entity must verify that the entity, as defined in 2 CFR Part 180.995 and agency adopting regulations, is not suspended or debarred or otherwise excluded from participating in the transaction. This verification may be accomplished by (1) checking the System for Award Management (SAM) Exclusions maintained by the General Services Administration (GSA), (2) collecting a certification from the entity, or (3) adding a clause or condition to the covered transaction with that entity (2 CFR Part 180.300). 2 CFR Part 200.303 indicates that non-Federal entities receiving Federal awards must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: The Borough did not maintain documentation to support the suspension and debarment procedures performed for covered transactions in order to demonstrate compliance with 2 CFR Part 180 and 2 CFR Part 200. Questioned Costs: None. Context: One (1) of two (2) selections subject to suspension and debarment compliance requirements did not include adequate documentation to demonstrate that the Borough properly verified the vendor was not suspended or debarred prior to entering into the services agreement. Cause: Procedures were not implemented to maintain documentation to support compliance with the standards of suspension and debarment contained in 2 CFR Part 180 and 2 CFR Part 200. Effect: Compliance with the requirements of the federal award could not be demonstrated. Repeat Finding: No Recommendation: We recommend management enhance procedures and controls to ensure documentation is maintained to support all suspension and debarment verifications related to expenditures from federal award programs. Such documentation should be consolidated and maintained in a secure, accessible location. Views of Responsible Officials: Management agrees with the finding.
(3) Findings and Questioned Costs Relating to Federal Awards Finding No. 2024 002 Loan Origination Involving Fraudulent Documentation Program Name: EDA Revolving Loan Fund Program Capital Allocation - New York Contractor Loans (a non-major program) Federal Department/Agency: U.S. Department of Commerce Economic Development Administration Assistance Listing Number: 11.307 Federal Award Year: January 1, 2024 December 31, 2024 Grant Number Award #01-79-15074 Compliance Requirements: Activities Allowed and Unallowed and Allowable Costs Criteria Federal regulations and the Organization’s own policies require effective internal controls to ensure that loans, including those funded by federal programs, are made only to eligible, legitimate recipients and are properly authorized and documented. Specifically, 2 CFR §200.303 (Internal Controls) mandates that recipients of federal funds establish effective controls to safeguard assets and ensure proper use of federal awards. 2 CFR Part 200 establishes cost principles for determining costs applicable to federal awards with nonprofit organizations. The Uniform Guidance (2 CFR 200.403) requires that costs charged to federal awards be necessary, reasonable, allocable, adequately documented, and in compliance with the terms and conditions of the federal award. The Organization’s Contractor Mobilization Loan Program guidelines also require verification of each subcontractor’s legitimacy and confirmation of their engagement by a general contractor before loan disbursement. Condition and context In 2025, management conducted an internal review that uncovered several instances of fraud within the Organization’s Contractor Mobilization Loan Program. One of the loans, valued at $410,000, was funded using a grant provided by a U.S. Department of Commerce Economic Development Administration (EDA). The Schedule of Expenditures of Federal Awards includes approximately $3.3 million in federal expenditures related to EDA grants. The internal review determined that the borrower was not a legitimate subcontractor and did not hold contractual relationships or involvement with the general contractor identified in the loan applications; consequently, the loan was determined to be fraudulent. Furthermore, during the approval process, the employee responsible for verifying subcontractor eligibility misrepresented to the Organization’s underwriters that appropriate due diligence, including confirmation of existence and project participation from general contractor had been completed. However, those verifications were not performed, resulting in the loan being issued based on inaccurate information. Cause The primary cause of this finding was a gap in internal controls and oversight that allowed required due diligence procedures to be bypassed. The designated loan officer responsible for verifying subcontractors’ legitimacy failed to perform the mandated verification steps and misrepresented to underwriters that all requisite due diligence had been completed including claims of general contractor confirmation. This misrepresentation was possible due to a lack of segregation of duties in the loan approval process which enabled the loan officer to circumvent controls without detection. The Organization relied on a single designated individual to verify subcontractor legitimacy and project approval without sufficient independent checks or supervisory review. Effect This gap in the control resulted in the disbursement of $410,000 from a U.S. Department of Commerce Economic Development Administration grant to a an illegitimate subcontractor who did not hold contractual relationships or involvement with the general contractor. This lack of proper segregation of duties represents a material weakness in internal control over financial reporting and material noncompliance with federal award requirements. Questioned Costs $410,000. Statistical Sample Not applicable Repeat Finding A similar finding was not reported in the prior year. Recommendation We recommend that the Organization’s management design and implement enhanced internal control procedures over the subcontractor verification process that include considerations regarding segregation of duties, independent verification of general contractors, enhanced communication protocols and employee training. Views of Responsible Officials Management acknowledges the questioned cost and the need for improved controls as highlighted in this audit finding. However, the borrower referenced in this finding was a registered business whose corporate credentials and credit history were verified through standard underwriting procedures at the time of origination. The issue pertains specifically to documentation intended to demonstrate subcontractor engagement with general contractors, which was subsequently found to be invalid following further examination. In response, management has implemented several corrective actions including the adoption of a Know Your Customer (KYC) Policy, a Fraud and Suspicious Activity Reporting Policy and a Mandatory Leave Policy. Collectively, these policies introduce enhanced verification procedures, multiple and independent contractor confirmation requirements, comprehensive IRS tax transcript reviews, new fraud and suspicious activity reporting protocols, site visits, annual borrower review requirements and mandatory leave for employees in sensitive positions. Additionally, an independent Internal Audit function will be established in the third quarter of 2026. The matter referenced in this finding is currently the subject of a criminal investigation, and all characterizations of employee conduct remain alleged until the investigation concludes. Subsequent to year-end and prior to the issuance of this report, TruFund received instructions from the EDA to replenish the EDA Revolving Loan Fund with the $410,000 question cost and complied with those instructions.
2024-001 REPORTING - SIGNIFICANT DEFICIENCY Federal Program Community Development Block Grant-Entitlement/Special Purpose Grants Cluster ALN 14.218; passed through the County of Berks COVID-19 - Emergency Rental Assistance ALN 21.023; passed through the County of Berks Criteria Per 2 CFR §200.303, non-federal entities must establish and maintain effective internal control over federal awards to provide reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of the award. The OMB Compliance Supplement for reporting requires entities to have controls to ensure accurate and timely submission of required reports. Condition/Cause The auditee did not have any documented or implemented internal controls over the review of federal program reporting requirements. Reports were prepared and submitted without documentation of supervisory review or verification of accuracy and completeness. Management did not design or implement procedures to review reports prior to submission, relying solely on preparer knowledge without formal oversight. Effect Without internal controls, there is an increased risk that reports submitted to the federal agency or pass-through entity may contain inaccurate or incomplete information, potentially resulting in noncompliance with reporting requirements. Questioned Costs None. Repeat Finding Yes; 2023-01. Recommendation We recommend that all grant reports are reviewed by a person independent of the preparer who has knowledge of the grant requirements. This review should include comparing the amounts reported to detailed support for accuracy. We also recommend the Authority review their recordkeeping procedures for documentation related to grant reporting. There should be a process in place to ensure all required documentation is maintained and filed in an orderly system that allows the Authority to locate and provide documentation when required. Management Response In general, management agrees with the finding. It should be noted that internal controls for supervisory review of reporting requirements were in place but were not written controls or processes. Reporting for the CDBG Program is accomplished through the preparation of the annual Comprehensive Annual Performance and Evaluation Report (CAPER). Written policies and procedures for the CAPER have been developed. Reporting for the Emergency Rental Assistance Program is accomplished through an online reporting system of the U.S. Treasury and by email to the Pennsylvania Human Services Department. This finding has since been resolved in 2025, with a new policy developed and implemented on December 12, 2025.
Finding 2024-002 Information on the federal program: Federal Agency: Federal Transportation Administration Pass-Through Entity: N/A Federal Program: Federal Transit Cluster Assistance Listing Number: 20.507 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs – Cost Principles Audit Findings: Material Weakness Criteria: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable, under federal awards, cost must meet certain criteria: a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity. d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period. g) Be adequately documented. h) Cost must be incurred during the approved budget period. Additionally, 2 CFR 200.303 indicates that non-Federal Entities receiving Federal awards must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the nonfederal entity is managing the Federal award in compliance with Federal statutes, regulations and terms and conditions of the Federal award. The Corporation should have controls in place to document that salaries and overtime paid with federal funds were allowable. Timecards supporting hours worked should be approved and pay rates reviewed. Condition and Context: A summary of allowable charges for the grant was prepared for submission. Within the sample of 42, we noted that 9 timecards for bus operators did not have documented review. Documented review was implemented in September 2024. All instances of the error were prior to September 2024. We also noted 1 timecard showed 2 hours more than reflected on the pay register, resulting in a net underpayment. Effect: Payroll expenditures could be inaccurately charged as an allowable activity or allowable costs to the federal grant. Cause: Management noted that time is tracked in a spreadsheet and is reviewed but formal documentation of review was not maintained. Questioned Costs: None. Identification as a Repeat Finding, if Applicable: This is a repeat finding. See finding 2023-001 in the prior report. Recommendation: We recommend the Corporation maintain documented approval of all timecards. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Significant deficiency in internal control over compliance and compliance as it relates to allowable costs and activities. Federal Agency: All awards within the Research and Development Cluster Program Title: All awards within the Research and Development Cluster Assistance Listing Number: All awards within the Research and Development Cluster Award Number: All awards within the Research and Development Cluster Award Period: All awards within the Research and Development Cluster Criteria 2 U.S. Code of Federal Regulations (CFR) 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Section 200.303 requires that each recipient of federal awards “Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” Condition/Context for Evaluation During our audit, we tested nonpayroll costs charged to the federal awards for adherence to necessary compliance requirements and internal control over compliance requirements. Out of 25 sample selections, we noted the following related to seven sample items: - Five of seven sample items selected involved overcharges to the grants. All five showed management approval for the incorrect amounts. - One of seven sample items selected had no supporting documentation. - One of seven sample items had no management approval. Questioned Costs $1,790 Effect or Potential Effect AAHI may have charged unallowable or incorrect costs to the federal awards. Repeat Finding No. Recommendation We recommend AAHI implement the necessary internal controls to (1) ensure documentation is retained to support costs spent on federal awards and (2) ensure all costs are properly approved and for the correct amounts. Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying corrective action plan.
2024-007: Bureau of Indian Affairs – 105(l) Leases ALN 15.048, Lack of Approvals (Material Weakness) Condition There were several instances of lack of approvals for disbursements. Criteria Federal grant recipients are required to maintain effective internal controls over federal awards, as outlined in 2 CFR §200.303. Cause Turnover and inadequate staffing. Effect Some disbursements had no approvals. Perspective Information Nine of 27 tested. Recommendation All disbursements should have one approval and ensure the expenditure is eligible under the grant. View of Responsible Officials and Planned Corrective Action The Tribe has taken steps to strengthen internal controls over disbursement approvals and ensure that all expenditures are properly reviewed and documented including: Establishment of a standardized disbursement approval process requiring documented approval prior to payment for non-routine/recurring expenditures. Implementation of procedures to ensure all disbursements are reviewed for allowability under applicable grant requirements before payment is issued. Maintenance of supporting documentation, including approval evidence, within the accounting records. Ongoing review of disbursement procedures to ensure compliance with internal control requirements under 2 CFR §200.303. These measures are designed to ensure that all disbursements are properly authorized, documented, and compliant with applicable grant requirements. Corrective actions began implementation during throughout 2025. These procedures are currently in place and will continue to be refined as part of ongoing internal control improvements.
FINDING 2024‐001 – Allowable Cost Principles and Activities Allowed or Unallowed Material Weakness in Internal Control over Compliance Assistance Listing Number: 21.029 Federal Program Name: COVID-19 - Coronavirus Capital Projects Fund Award Year: 2024 Criteria: Uniform Guidance requires non-Federal entities to establish and maintain effective internal controls over Federal awards, including ensuring transactions are properly recorded, reported, and allowable. Specifically: • 2 CFR §200.302(b)(1) and (b)(2) require financial management systems to provide accurate, current, and complete disclosure of financial results and to identify expenditures by Federal award. • 2 CFR §200.302(b)(6) requires written procedures for determining the allowability of costs. • 2 CFR §200.303 requires entities to establish and maintain effective internal controls over compliance, including appropriate segregation of duties. Condition and context: The Cooperative does not have formalized written policies and procedures governing the coding, review, and reporting of expenditures charged to Federal awards, including payroll costs. Additionally, adequate segregation of duties is not in place over the review and approval of expenditure coding and financial reporting. As a result, payroll expenditures were not consistently or timely coded to the appropriate grant. Payroll expenditures totaling $16,990 were identified subsequent to year-end and recorded and reported late. These costs were not included in the appropriate reporting period, resulting in delayed recognition of allowable expenditures. Questioned costs: None. Effect: The absence of formal policies, procedures, and proper segregation of duties increases the risk that expenditures are not accurately, completely, or timely recorded and reported by Federal award. This may result in: • Financial reports that do not reflect complete and accurate program expenditures for the reporting period; • Increased risk of noncompliance with Federal reporting requirements; • Potential misstatement or omission of allowable costs; and • Delays in reimbursement or increased risk of questioned costs. Additionally, the late identification and backdating of payroll expenditures contributed to the triggering of Single Audit requirements, which are now being performed after the required timeframe. Cause: The deficiencies are due to a lack of formalized written policies and procedures over expenditure coding, allowability determinations, and reporting, as well as inadequate segregation of duties in the preparation, review, and approval of grant-related expenditures and reports. Repeat finding: No Recommendation: We recommend the Cooperative develop and implement written policies and procedures to ensure timely, consistent, and correct coding of all grant-related expenditures (payroll and non-payroll). Within these policies and procedures, we recommend establishing review and approval controls, including periodic review of expenditure coding by supervisory or accounting personnel. Implementing these policies and procedures will ensure expenditures are recorded within the appropriate reporting period. Views of responsible officials and planned corrective actions: Wabash currently maintains informal procedures for coding and reviewing invoices and payroll records, management recognizes the need for a formalized, written policy governing expenditures charged to federal awards. To address identified material weaknesses, Wabash is committed to implementing a comprehensive written policy by June 30, 2026. This policy will formalize the coding, review, and reporting processes for all federal expenditures. Contact Person(s): Cheryl Gaither, Controller Justin Gephart, Chief Operating Officer
Significant deficiency in internal control over compliance and compliance as it relates to allowable costs and activities. Federal Agency: All awards within the Research and Development Cluster Program Title: All awards within the Research and Development Cluster Assistance Listing Number: All awards within the Research and Development Cluster Award Number: All awards within the Research and Development Cluster Award Period: All awards within the Research and Development Cluster Criteria 2 U.S. Code of Federal Regulations (CFR) 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards Section 200.303 requires that each recipient of federal awards “Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” Condition/Context for Evaluation During our audit, we tested nonpayroll costs charged to the federal awards for adherence to necessary compliance requirements and internal control over compliance requirements. Out of 25 sample selections, we noted the following related to seven sample items: - Five of seven sample items selected involved overcharges to the grants. All five showed management approval for the incorrect amounts. - One of seven sample items selected had no supporting documentation. - One of seven sample items had no management approval. Questioned Costs $1,790 Effect or Potential Effect AAHI may have charged unallowable or incorrect costs to the federal awards. Repeat Finding No. Recommendation We recommend AAHI implement the necessary internal controls to (1) ensure documentation is retained to support costs spent on federal awards and (2) ensure all costs are properly approved and for the correct amounts. Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying corrective action plan.
Finding Number:2024-006 Instance of Non-Compliance:Allowability of Costs Assistance Listing # 66.466 Questioned Cost $0 Repeat Finding: No Condition: During testing of disbursements, including both federal grant expenditures and nonfederal funded transactions, it was noted that a majority of the sampled items lacked documented evidence of review and approval. While approvals may have occurred, there was no retained written or system-based documentation to substantiate that such reviews were performed in accordance with the organization’s established approval requirements. Criteria: In accordance with 2 CFR Part 200, specifically § 200.303 (Internal Controls), nonfederal entities are required to establish and maintain effective internal controls over federal awards, including proper authorization and documentation of transactions. Additionally, the Organization’s accounting policies require that all disbursements and employee reimbursements be reviewed and approved by appropriate personnel, with supporting documentation maintained within designated systems such as QuickBooks Online (QBO) and Gusto. Cause: The deficiency appears to result from inconsistent adherence to established policies and procedures, as well as insufficient monitoring and enforcement controls to ensure that approvals are properly documented and retained within the accounting system. Effect: The lack of documented approvals increases the risk of unauthorized, inappropriate, or unsupported expenditures. This control weakness may result in noncompliance with federal regulations and internal policies and could lead to questioned costs or additional audit findings. Recommendation: Management should strengthen internal controls by reinforcing compliance with existing approval and documentation requirements. Specifically, all disbursements and reimbursements should include verifiable evidence of review and approval (e.g., documented electronic approvals within QBO or Gusto, or appropriately signed supporting documentation) prior to payment processing. Additionally, management should implement periodic monitoring procedures to ensure compliance and provide training to relevant personnel on documentation and approval standards. Views of Responsible Officials: Management acknowledges the finding and agrees that documentation of disbursement approvals needs to be strengthened. While approvals were generally occurring, they were not consistently documented or retained in accordance with established policies. To address this, the organization has implemented a requirement for documented email approvals from appropriate managers prior to processing payments. In addition, the organization is evaluating and implementing an electronic system to capture and retain approvals for accounts payable and credit card transactions. Management will also reinforce compliance through periodic monitoring and staff training to ensure adherence to approval and documentation requirements. Responsible Official: Abel Olivo, Executive Director, in coordination with the organization’s outsourced accounting firm Anticipated Completion Date: May 31, 2026
Criteria: Per 2 CFR § 200.303(a), the non-Federal entity must establish, document, and maintain effective internal control over Federal awards that provides reasonable assurance that the entity is managing the award in compliance with Federal statutes, regulations, and the terms and conditions of the awards. Additionally, per 2 CFR §200.403 and §200.302, costs charged to federal awards must be allowable, allocable, and properly documented, and financial reporting must be accurate, complete, and supported by the accounting system. Condition: Although the Parish has implemented internal controls related to the allowability of costs and the preparation of required reports for the Coronavirus State and Local Fiscal Recovery funds, they were not operating effectively during fiscal year 2024. Tests of controls indicated that transactions were not tracked appropriately to ensure they were charged to the correct funding source. In addition, quarterly project and expenditure reports submitted to the U.S. Treasury included inaccurate or unsupported information due to a lack of tracking and reconciliation procedures. Cause: As discussed in item 2024-001, the Parish encountered several challenges during the transition of administration and key personnel. Parish administration and management were immediately tasked with enhancing operations related to procedural concerns from the prior administration and performing the accounting function without sufficient documentation on several balances and transactions. The documented controls were not in practice because of this. Effect: While no instances of noncompliance were noted, the lack of documented controls in practice increases the risk that future required reports could be incomplete, inaccurate, or untimely, as well as, federal costs being unallowed per the cost principles which could potentially result in program noncompliance. Recommendation: We recommend that the Parish enhance and document internal controls over financial reporting, as described in our recommendations described under item 2024-001, to prevent noncompliance of the Uniform Guidance as required. Views of responsible officials: See management’s responses to findings on Page 116.
Criteria: In accordance with 2 CFR § 200.331, a non-federal entity that passes federal awards to subrecipients is responsible for 1) evaluating each subrecipient’s risk of noncompliance, 2) monitoring the activities of subrecipients to ensure that the subaward is used for authorized purposes, in compliance with laws and the terms and conditions of the subaward, and 3) verifying that subrecipients have audits in accordance with the Uniform Guidance, if applicable. Adequate internal controls are required to ensure compliance with these requirements under 2 CFR § 200.303. Condition: During our audit, we noted that the Parish did not have sufficient internal controls in place to ensure effective subrecipient monitoring. Specifically, there was no documented risk assessment of subrecipients prior to issuing subawards, the Parish did not perform periodic reviews or site visits to monitor subrecipient performance or compliance, and the subrecipient audit reports were not consistently obtained or reviewed. Cause: As discussed in item 2024-001, the Parish encountered several challenges during the transition of administration and key personnel. Parish administration and management were immediately tasked with enhancing operations related to procedural concerns from the prior administration and performing the accounting function without sufficient documentation on several balances and transactions. The documented controls were not in practice because of this. Effect: Failure to properly monitor subrecipients increases the risk that federal funds may be misused or not spent in accordance with program requirements to achieve program objectives. It also exposes the Parish to potential liability for questioned costs incurred by subrecipients to be repaid to the federal agency. Recommendation: We recommend that the entity establish and implement formal policies and procedures for subrecipient monitoring in accordance with 2 CFR § 200.331. This should include conducting and documenting pre-award risk assessments, developing a subrecipient monitoring plan (e.g., site visits, desk reviews), reviewing subrecipient performance and audit reports on a regular basis. Views of responsible officials: See management’s responses to findings on Page 116
Finding 2024-004 Lack of documented approval of Other Than Personal Services (OTPS) expenditures charged to federal awards (Assistance Listings 19.510, 93.566, 93.583 and 93.576) Criteria: Under 2 CFR 200.303, the nonfederal entity must establish, document, and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award; those internal controls should align with the Green Book or COSO framework and include adequate authorization and review of disbursements. To be allowable under a federal award, costs must be necessary and reasonable, allocable, accorded consistent treatment, determined in accordance with GAAP, not used to meet cost-sharing of other federal programs, adequately documented, and incurred during the approved budget period per 2 CFR 200.403. Inadequate or missing documentation may result in costs being considered improper payments or disallowed costs. Condition and Context: During testing of OTPS expenditures charged to the programs, the Organization did not consistently document required management approval prior to payment. For 13 of 23 OTPS transactions tested, totaling $49,393, the supporting documentation did not contain evidence of review and approval by an individual with appropriate authority in accordance with the Organization’s written policies and procedures. In addition, for these items, there was no alternative documentation demonstrating that the costs had been reviewed for allowability, allocability, and reasonableness before being charged to the federal award. Cause: The Organization’s policies require documented approval for OTPS expenditures; however, management did not effectively enforce these procedures, and staff responsible for processing OTPS transactions were not consistently following the policy and procedures on the documentation and approval requirements. Effect: Because documented approval was not consistently obtained prior to payment, there is an increased risk that unallowable, unreasonable, or non-program-related OTPS costs could be charged to the federal award. The transactions identified without documented approval may be subject to disallowance by the federal awarding agency or pass-through entity. Identification as a repeat finding: No. Questioned costs: None. Recommendation: We recommend that management: Reinforce and, if necessary, update written policies and procedures to require documented review and approval of all OTPS expenditures charged to federal awards prior to payment, including documentation of the program, funding source, and allowability assessment. Provide training to staff responsible for initiating, reviewing, and approving OTPS transactions to ensure understanding of Uniform Guidance requirements for allowability, allocability, and documentation. Implement periodic monitoring (for example, supervisory review of a sample of OTPS transactions) to verify that approvals are documented and that OTPS costs charged to federal awards are properly supported and in compliance with 2 CFR 200.303 and 2 CFR 200.403. Views of Responsible Officials: The Organization proactively enacted rigorous internal controls and systemic enhancements for FY25 to ensure optimal oversight and adherence to federal guidelines. Management has addressed this recommendation by deploying a strict, comprehensive expense request process to ensure robust internal controls over all Other Than Personal Services (OTPS) expenditures. To ensure full compliance with 2 CFR 200.303 and 200.403, Finance has deployed the following enhancements to our accounts payable workflows: Strict Electronic Approval Workflow: Finance has established a stringent review and approval protocol that requires direct involvement from Program Directors and Department Heads. All OTPS expenditures are now routed through a formalized electronic workflow, which mandates documented review and secure electronic signatures from authorized leadership prior to any payment processing. System-Integrated Documentation: The new process strictly requires that all supporting documentation-including invoices, receipts, and evidence of allowability-be provided upfront. These documents are now uploaded and attached directly to the specific transaction within the accounting program, creating a permanent, easily accessible, and audit-ready trail for every federal charge. Targeted Training and Oversight: To support this modernized workflow, Finance is providing targeted training to all staff responsible for initiating and approving transactions, ensuring a clear understanding of Uniform Guidance requirements. Furthermore, Finance leadership conducts periodic supervisory reviews directly within the accounting system to verify that all electronic approvals are captured and source documents are properly attached.
Information on Federal Programs: 93.083 – Centers for Disease Control and Prevention: Prevention of Disease, Disability, and Death through Immunization & Control of Respiratory & Related Diseases. Criteria or Specific Requirements: 2 CFR §200.303 requires the non-Federal entity to establish and maintain effective internal control over the Federal award that provides reasonable assurance that the award is managed 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 (Green Book), issued by the Comptroller General of the United States, or the COSO Internal Control Integrated Framework. 2 CFR §200.318-200.320 require the non-Federal entity to have and use documented procurement procedures for the acquisition of property or services under a Federal award that are consistent with the standards for general procurement, competition, and methods of procurement. Condition: ATS’s organization-wide procurement policy does not include documented procurement procedures that address the Uniform Guidance requirements for procurement under Federal awards (for example, methods of procurement, competition requirements, and applicable thresholds) as required by 2 CFR §200.318-200.320. For the federally funded program, ATS implemented a separate written selection policy for contractors/health systems; however, this policy does not fully address all Uniform Guidance procurement elements. Cause: Management had not fully updated its written procurement policies and procedures to incorporate the specific requirements of 2 CFR §200.318-200.320 for procurements under Federal awards. As a result, internal control procedures over procurement under the Federal program were not fully documented in a manner consistent with the Uniform Guidance. Effect: Failure to have and use fully documented procurement policies and procedures compliant with the Uniform Guidance could result in noncompliance with Federal procurement requirements and increase the risk of unallowable or improperly procured costs under Federal awards. In the current year, our testing did not identify specific instances in which procurement transactions under the Federal program were noncompliant; however, the lack of fully compliant written procedures represents a significant deficiency in internal control over compliance. Perspective: ATS did not have documented procurement policies and procedures that were fully compliant with 2 CFR §200.320 for procurement under Federal awards. However, for the Federal program, ATS established a documented selection criteria policy for contractors/health systems. Under this policy, a selection subcommittee reviews, evaluates, and selects health systems based on defined criteria, and each selected application is submitted to the prime awardee for review and approval before ATS issues contracts. In a random sample of 8 procurement contracts tested, all 8 followed the documented selection process and were supported by appropriate documentation. Questioned Costs: None. Identification as a Repeat Finding: Continued Finding 2023-005. Recommendation: ATS should update and formalize its procurement policies and procedures to incorporate the requirements of 2 CFR §200.318-200.320 for all procurements under Federal awards, including: methods of procurement and thresholds, competition requirements, documentation of procurement history, and oversight responsibilities. Once updated, ATS should ensure the procurement under the Federal program is carried out in accordance with these policies and that staff are trained on the revised requirements.
FINDING 2024-003 Subject: Water and Waste Disposal System for Rural Communities - Internal Controls Federal Agency: Department of Agriculture Federal Program: Water and Waste Disposal System for Rural Communities Assistance Listings Number: 10.760 Federal Award Number and Year (or Other Identifying Number): 1780-12 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Finding: Material Weakness Condition and Context An effective internal control system, which would include segregation of duties, was not in place at the Town to ensure compliance with requirements related to the grant agreement and the following compliance requirements: Activities Allowed or Unallowed and Allowable Costs/Cost Principles. There was no documented oversight, review, or approval process in place over federal expenditures related to the grant. Although the Town Council approved grant project-related contracts, individual expenditures did not have a documented review process in place (or consistent Town Council approval) to ensure disbursements made were allowable and in accordance with contract provisions and the grant agreement. Additionally, related grant expenditures from the Town's Sewer Construction fund were not consistently or appropriately recorded in the Town's general ledger. The lack of internal controls was a systemic issue throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 18 TOWN OF NEW MARKET SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." Cause The Town relied on its Rural Development Grant Administrator to handle approvals of related expenditures, reimbursements, and other grant compliance tasks. The Clerk-Treasurer is new to the position and is still working to implement internal controls over the Town's federal grant programs. Effect Without the proper implementation of an effectively designed system of internal controls, including policies and procedures that provide segregation of duties and additional oversight as needed, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. It also placed the Town at risk of noncompliance with the grant agreement, as grant related disbursements without adequate review could be unallowable. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the Town design and implement a proper system of internal controls, including policies and procedures that would provide segregation of duties to ensure appropriate reviews, approvals, and oversight of grant related disbursements are taking place. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-004 Subject: Water and Waste Disposal System for Rural Communities - Equipment Federal Agency: Department of Agriculture Federal Program: Water and Waste Disposal System for Rural Communities Assistance Listings Number: 10.760 Federal Award Number and Year (or Other Identifying Number): 1780-12 Compliance Requirement: Equipment and Real Property Management Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 19 TOWN OF NEW MARKET SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The Town had not properly designed and implemented a system of internal controls to ensure compliance with requirements related to the grant agreement and the Equipment and Real Property Management compliance requirement. A property record or capital asset listing is required to be maintained for all equipment purchased with federal grant awards to ensure adequate safeguards are in place to prevent loss or damage of items. The Town disbursed federal funds for its Sewer Construction project and added $1,600,438 to its capital asset records in 2024 noted as "Infrastructure." None of the required information, including description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date, the cost of the property, the percentage of the federal agency contribution towards the original purchase, the location, etc., was included in the Town's property/asset records. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.313(d) states: "Management requirements. Procedures for managing equipment (including replacement equipment), whether acquired in whole or in part under a Federal award, until disposition takes place will, as a minimum, meet the following requirements: (1) Property records must be maintained that include a description of the property, a serial number or other identification number, the source of funding for the property (including the FAIN), who holds title, the acquisition date, and cost of the property, percentage of Federal participation in the project costs for the Federal award under which the property was acquired, the location, use and condition of the property, and any ultimate disposition data including the date of disposal and sale price of the property. (2) A physical inventory of the property must be taken and the results reconciled with the property records at least once every two years. (3) A control system must be developed to ensure adequate safeguards to prevent loss, damage, or theft of the property. Any loss, damage, or theft must be investigated. INDIANA STATE BOARD OF ACCOUNTS 20 TOWN OF NEW MARKET SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (4) Adequate maintenance procedures must be developed to keep the property in good condition. (5) If the non-Federal entity is authorized or required to sell the property, proper sales procedures must be established to ensure the highest possible return." Cause The Town was unaware of the requirements regarding identifying information for assets purchased with federal funds. The Clerk-Treasurer is new to the position and is still working to implement internal controls over the Town's federal grant programs. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, assets purchased with federal dollars were not properly identified in the Town's asset listing. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the Town. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the Town establish a proper system of internal controls and develop policies and procedures to ensure asset records include all the necessary information for assets purchased with federal funds. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-005 Subject: Water and Waste Disposal System for Rural Communities - Suspension and Debarment Federal Agency: Department of Agriculture Federal Program: Water and Waste Disposal System for Rural Communities Assistance Listings Number: 10.760 Federal Award Number and Year (or Other Identifying Number): 1780-12 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the Town to ensure compliance with requirements related to the grant agreement and the suspension and debarment portion of the Procurement and Suspension and Debarment compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 21 TOWN OF NEW MARKET SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Prior to entering into subawards and covered transactions with federal funds, recipients are required to verify that contractors and vendors are not suspended, debarred, or otherwise excluded from receiving those federal funds. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under procurement and nonprocurement transactions (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking SAM exclusions online, collecting a certification from that vendor/contractor, or adding a clause or condition to the covered transaction with that vendor/contractor. The Town had two contracted vendors related to this project with combined federal expenditures of $1,530,838 during the audit period including its engineering and main construction firms. The Town could not provide documentation that procedures were performed to verify that each of these vendors paid from the grant were not excluded or disqualified from participation in federal programs. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause Town officials were unaware of the grant's requirements regarding suspension and debarment. The Town did not have a documented federal procurement policy to ensure that the suspension and debarment status of contractors and vendors receiving federal funds was conducted prior to entering into the covered transactions or contracts. The Clerk-Treasurer is new to the position and is still working to implement internal controls over the Town's federal grant programs. INDIANA STATE BOARD OF ACCOUNTS 22 TOWN OF NEW MARKET SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect Without the proper implementation of an effectively designed system of internal controls, the Town cannot ensure the vendors paid with federal funds are eligible to participate in federal programs. Any program funds the Town used to pay vendors that have been suspended or debarred would be unallowable, and the funding agency could potentially recover them. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions or the federal award could result in the loss of future federal funding to the Town. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the Town adopt a federal procurement policy and implement a system of internal controls to ensure that all contractors and vendors that are paid $25,000 or more, all or in-part with federal funds, are not suspended or debarred from participating in federal programs before entering into any covered transactions. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-006 Subject: Water and Waste Disposal Systems for Rural Communities - Reporting Federal Agency: Department of Agriculture Federal Program: Water and Waste Disposal Systems for Rural Communities Assistance Listings Number: 10.760 Federal Award Number and Year (or Other Identifying Number): 1780-12 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The Town had not designed or implemented adequate internal controls and procedures to ensure that reports were prepared, accurate, and submitted in accordance with the applicable compliance requirements for the federal grant. The United States Department of Agriculture (USDA) requires the following reports be submitted annually: • Statement of Budget, Income, and Equity (Form RD 442-2) • Balance Sheet (Form RD 442-3) The Form RD 442-2 covers financial operations relating to the Town's sewer construction and improvement project, and the Form RD 442-3 presents the financial status of the project. In both instances, a borrower may submit the financial data on other forms, provided the forms are in a similar format and signed and dated by the organization's official to certify the correctness of the information. Alternatively, an annual audit may be submitted in lieu of the forms. INDIANA STATE BOARD OF ACCOUNTS 23 TOWN OF NEW MARKET SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The Town was required to file each report, as noted above, during the audit period; however, the reports were not filed nor was an annual audit filed by the September 30, 2025 Single Audit deadline, as the Town did not report any federal expenditures to the USDA or the Indiana State Board of Accounts. The lack of internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 7 CFR 1780.47(e) states in part: ". . . within 60 days following the end of each fiscal year, furnish the RUS with annual financial statements, consisting of a verification of the organization's balance sheet and statement of income and expense by an appropriate official of the organization. Forms RD 442-2, 'Statement of Budget, Income and Equity,' and 442-3 may be used." Cause The Town was unable to provide documentation to show that the Form RD 442-2 and the Form RD 442-3 reports were filed. The Clerk-Treasurer is new to the position and is still working to implement internal controls over the Town's federal grant programs. Effect Without the proper implementation of an effectively designed system of internal controls, the Town could not ensure that the required reports were filed with the awarding agency. As such, the awarding agency did not have accurate and current information to discern the financial status of the Town's project. Furthermore, noncompliance with the provisions of federal statutes, regulations, and the terms and conditions or the federal award could result in the loss of future federal funding to the Town. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 24 TOWN OF NEW MARKET SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that the Town's management design and implement a system of internal controls that would provide segregation of duties for the preparation and review of federal reports to ensure appropriate reviews, approvals, and oversight are taking place. Additionally, management should develop policies and procedures to ensure that all required reports are filed timely and accurately and ensure that federal awards are properly reported to both the federal and state regulatory agencies to ensure the federal Single Audit deadline is met. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Criteria: HUD’s Continuum of Care program (ALN 14.267) requires that participant eligibility determinations, including income calculations and rent reasonableness assessments, be accurate, properly supported, and in compliance with program requirements. These determinations should be subject to appropriate internal control procedures, including review controls, to ensure accuracy and reduce the risk of error or conflict of interest. In accordance with 2 CFR § 200.303, organizations must establish and maintain effective internal controls over compliance, including segregation of duties and ongoing monitoring activities. Additionally, 24CFR § 578.103 requires recipients to maintain sufficient documentation to support eligibility determinations and related compliance requirements. Conditions: In a nonstatistical sample of 18 tenant files tested, there was no evidence of documented supervisory review of eligibility determinations, income calculations, or supporting documentation. These results indicate that controls designed to ensure completeness and accuracy of eligibility determinations are not operating effectively. Cause and Effect: This condition appears to be due to the absence of a formalized policy or consistent practice requiring documented supervisory review of eligibility determinations. We identified a significant deficiency in internal control over compliance related to this process. Although eligibility determinations were generally appropriate based on testing, the lack of documented review indicates that a key control is not operating effectively. This increases the risk that errors or noncompliance could occur and not be detected in a timely manner. No questioned costs were identified as a result of this condition. Recommendations: We recommend management strengthen controls over eligibility determinations by requiring documented supervisory review of all initial eligibility decisions and periodic file reviews. This review should be evidenced by a formal sign-off (electronic or manual) and include verification of key eligibility criteria. Management may also consider implementing a standardized review checklist to ensure consistency and completeness of the review process.