Noncompliance with Subrecipient Monitoring Requirements and Material Weakness in Internal Control over Subrecipient Monitoring Assistance Listing Number: 21.027 Name of Federal Program or Cluster: COVID-19: Coronavirus State and Local Fiscal Recovery Funds Name of Federal Agency: Department of Treasury Name of Pass-Through Entities: State of Wisconsin Department of Administration Subrecipient Monitoring 2 CFR§200.332 requirements for pass-through entities: The Code of Federal Regulations (CFR) Section 200.332(e) requires a pass-through entity must monitor the activities of a subrecipient as necessary to ensure that the subrecipient complies with Federal statutes, regulations, and the terms and conditions of the subaward. The pass-through entity is responsible for monitoring the overall performance of a subrecipient to ensure that the goals and objectives of the subaward are achieved. In monitoring a subrecipient, a pass-through entity must: (1) Review financial and performance reports. (2) Ensure that the subrecipient takes corrective action on all significant developments that negatively affect the subaward. Significant developments include Single Audit findings related to the subaward, other audit findings, site visits, and written notifications from a subrecipient of adverse conditions which will impact their ability to meet the milestones or the objectives of a subaward. (3) Issue a management decision for audit findings pertaining only to the Federal award provided to the subrecipient from the pass-through entity as required by §200.521. (4) Resolve audit findings specifically related to the subaward. 2 CFR§200.303 requires the Organization to establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). The organization did not perform subrecipient monitoring procedures as listed in the criteria above for the subrecipient of the COVID-19: Coronavirus State and Local Fiscal Recovery Funds. In addition, the Organization’s internal controls over subrecipient monitoring did not prevent or detect noncompliance with subrecipient monitoring requirements. The Organization did, however, confirm with SAM.gov that the subrecipient is not suspended, debarred, or otherwise excluded from receiving Federal Funds; included the required information in the subaward agreement, and performed the required risk assessment. The Organization has policies and procedures related to subrecipient monitoring in its fiscal procedures manual. However, management did not monitor to ensure that the requirements listed in its policies and procedures manual as well as the Uniform Guidance are being followed. Failure to adequately monitor subrecipients may result in the subrecipient not properly administering the federal program in accordance with laws, regulations, and the grant agreement. Recommendation: We recommend that Organization management monitor their compliance with their subrecipient monitoring procedures to ensure that the required subrecipient monitoring is occurring. No WRTP has reviewed the organization’s fiscal policy manual including all subsections regarding monitoring responsibilities. Additional training has been provided and completed by management and staff. Management has reviewed all monitoring with the subrecipient in good faith efforts.
Noncompliance with Contract Provisions for Non-Federal Entity Contracts Under Federal Awards and Material Weakness in Internal Control over Procurement and Suspension and Debarment Assistance Listing Number: 10.561 Name of Federal Program or Cluster: State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (SNAP Cluster) Name of Federal Agency: Department of Agriculture Name of Pass-Through Entities: State of Wisconsin Department of Health Services passed through Dane County Procurement and Suspension and Debarment 2 CFR§200.201(a) requires a pass-through entity must decide on the appropriate type of agreement for a Federal award (for example, a grant, cooperative agreements, subaward, or contract). 2 CFR§200.327 contract provisions requires the recipients or subrecipient contracts must contain the applicable provisions described in Appendix II of the Uniform Guidance. Appendix II Part 200-Contract Provisions for Non-Federal Entity Contracts Under Federal Awards requires all contracts made by the non-Federal entity under the Federal award must contain the provisions listed in the section as applicable. 2 CFR§200.303 requires the Organization to establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). The Organization did not create a written contract with one of its contractors that contains the required contractual provisions listed in the criteria. In addition, the Organization’s internal controls over procurement did not prevent or detect noncompliance with the applicable requirements.Cause: The Organization has policies and procedures related to procurement in its fiscal procedures manual. However, management did not monitor to ensure that the applicable policies and procedures were being followed. Failure to enter into the required contracts that contain the applicable contractual provisions could lead the Organization to inappropriately disburse Federal Award funds to contractors. We recommend that Organization management monitor compliance with procurement procedures to ensure that the required contracting is occurring. No WRTP has reviewed the organization’s fiscal policy manual including all subsections regarding contractual provisions and procurement. Additional training has been provided and completed by management and staff. The fiscal policy manual procurement section will undergo further review by a third party and if recommended, will be updated and presented to the Finance Committee of the Board of Directors.
Noncompliance with Contract Provisions for Non-Federal Entity Contracts Under Federal Awards and Material Weakness in Internal Control over Procurement and Suspension and Debarment Assistance Listing Number: 10.561 Name of Federal Program or Cluster: State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (SNAP Cluster) Name of Federal Agency: Department of Agriculture Name of Pass-Through Entities: State of Wisconsin Department of Health Services passed through Dane County Procurement and Suspension and Debarment 2 CFR§200.201(a) requires a pass-through entity must decide on the appropriate type of agreement for a Federal award (for example, a grant, cooperative agreements, subaward, or contract). 2 CFR§200.327 contract provisions requires the recipients or subrecipient contracts must contain the applicable provisions described in Appendix II of the Uniform Guidance. Appendix II Part 200-Contract Provisions for Non-Federal Entity Contracts Under Federal Awards requires all contracts made by the non-Federal entity under the Federal award must contain the provisions listed in the section as applicable. 2 CFR§200.303 requires the Organization to establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). The Organization did not create a written contract with one of its contractors that contains the required contractual provisions listed in the criteria. In addition, the Organization’s internal controls over procurement did not prevent or detect noncompliance with the applicable requirements.Cause: The Organization has policies and procedures related to procurement in its fiscal procedures manual. However, management did not monitor to ensure that the applicable policies and procedures were being followed. Failure to enter into the required contracts that contain the applicable contractual provisions could lead the Organization to inappropriately disburse Federal Award funds to contractors. We recommend that Organization management monitor compliance with procurement procedures to ensure that the required contracting is occurring. No WRTP has reviewed the organization’s fiscal policy manual including all subsections regarding contractual provisions and procurement. Additional training has been provided and completed by management and staff. The fiscal policy manual procurement section will undergo further review by a third party and if recommended, will be updated and presented to the Finance Committee of the Board of Directors.
Noncompliance with Contract Provisions for Non-Federal Entity Contracts Under Federal Awards and Material Weakness in Internal Control over Procurement and Suspension and Debarment Assistance Listing Number: 10.561 Name of Federal Program or Cluster: State Administrative Matching Grants for the Supplemental Nutrition Assistance Program (SNAP Cluster) Name of Federal Agency: Department of Agriculture Name of Pass-Through Entities: State of Wisconsin Department of Health Services passed through Dane County Procurement and Suspension and Debarment 2 CFR§200.201(a) requires a pass-through entity must decide on the appropriate type of agreement for a Federal award (for example, a grant, cooperative agreements, subaward, or contract). 2 CFR§200.327 contract provisions requires the recipients or subrecipient contracts must contain the applicable provisions described in Appendix II of the Uniform Guidance. Appendix II Part 200-Contract Provisions for Non-Federal Entity Contracts Under Federal Awards requires all contracts made by the non-Federal entity under the Federal award must contain the provisions listed in the section as applicable. 2 CFR§200.303 requires the Organization to establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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). The Organization did not create a written contract with one of its contractors that contains the required contractual provisions listed in the criteria. In addition, the Organization’s internal controls over procurement did not prevent or detect noncompliance with the applicable requirements.Cause: The Organization has policies and procedures related to procurement in its fiscal procedures manual. However, management did not monitor to ensure that the applicable policies and procedures were being followed. Failure to enter into the required contracts that contain the applicable contractual provisions could lead the Organization to inappropriately disburse Federal Award funds to contractors. We recommend that Organization management monitor compliance with procurement procedures to ensure that the required contracting is occurring. No WRTP has reviewed the organization’s fiscal policy manual including all subsections regarding contractual provisions and procurement. Additional training has been provided and completed by management and staff. The fiscal policy manual procurement section will undergo further review by a third party and if recommended, will be updated and presented to the Finance Committee of the Board of Directors.
FINDING 2024-001 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Activities Allowed or Unallowed and Allowable Costs/Cost Principles 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): 2024 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report for Allowable Costs/Cost Principles. The prior audit finding number was 2023-003. Condition and Context As a condition of receiving COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF) award funds, all eligible entities were required to execute a financial assistance agreement that set forth the applicable terms and conditions. In accordance with this agreement, the County was responsible for the proper administration of the federal award, the application of sound financial management practices, and ensuring that all expenditures complied with the program's objectives and the requirements of the award. The SLFRF offers recipients significant flexibility to address local needs across seven eligible use categories. One eligible use category is providing government services. Under this category, entities may use award funds for government services up to the greater of $10 million or the amount of revenue loss due to the pandemic. The County chose this category and elected the standard allowance of up to $10 million, allowing it to use its entire allocation of $4,014,711, for the provision of government services. On May 11, 2021, the Board of County Commissioners passed Ordinance 2021-07 that created a new fund and adopted the American Rescue Plan (ARP). The Ordinance included the procedures for spending the ARP funding, which included the following: The Board of County Commissioners will establish the plan, conditions, and rules upon which the funds are to be requested and used. Funds shall be appropriated by the County's fiscal body before use. All expenditure of funds shall be approved by the Board of County Commissioners with any and all claims to be paid from the County's ARP fund. During the audit period, the County Council approved appropriations for 17 expenditures from the ARP fund. All 17 expenditures were tested to verify that costs were allowable and adhered to the cost principles. Of these, 9 expenditures, totaling $300,000, were approved for payment by the Board of County Commissioners and classified by the County Council as appropriated and obligated for donations. The donations were distributed as follows: INDIANA STATE BOARD OF ACCOUNTS 14 SULLIVAN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Local camp and retreat center for insurance costs. Youth sportsplex for facility upgrades. Two non-profits for food purchases for needy individuals. Local volunteer fire department for a generator and equipment. Local fire territory for firefighting gear. Local humane society for connection into the wastewater system. Local ambulance service to assist with the purchase of an ambulance. Local park for road resurfacing. Documentation provided to support each expenditure consisted of a proposal for donations submitted by the requesting entity. The payment of donations does not constitute a government service of the County and is not an allowable cost. Therefore, the $300,000 disbursed as donations was considered questioned costs. The lack of internal controls and noncompliance were isolated to the donations identified 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). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.434(a) states: "Costs of contributions and donations, including cash, property, and services, from the non-Federal entity to other entities, are unallowable." INDIANA STATE BOARD OF ACCOUNTS 15 SULLIVAN COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 31 CFR 35.6 states in part: "(a) . . . a recipient may use funds for one or more of the purposes described in paragraphs (b) through (h) of this section. . . . (d) Providing government services. . . ." 31 CFR 35.9 states in part: "A recipient must comply with all other applicable Federal statutes, regulations, and executive orders . . ." Cause The lack of effective internal controls allowed for the County to charge questionable expenditures to the SLFRF program. County officials believed that the expenditures were allowable as they were made to organizations that provided services and benefits to residents of the County and did not understand that expenditures designated as donations are strictly prohibited under federal regulations. Effect Without a proper system of internal controls in place that operated effectively, the County expended $300,000 from the federal award that was not an allowable use of funds. The U.S. Department of the Treasury could request these funds be returned. Questioned Costs We identified $300,000 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended the County's management establish a proper system of internal controls and develop policies and procedures to ensure that costs are allowable for SLFRF award funds. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-002 Subject: Drinking Water State Revolving Fund - Procurement and Suspension and Debarment Federal Agency: Environmental Protection Agency Federal Program: Drinking Water State Revolving Fund Assistance Listings Number: 66.468 Federal Award Number and Year (or Other Identifying Number): DW 23 512703 Pass-Through Entity: Indiana Finance Authority Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Condition and Context An effective internal control system was not in place at the City in order to ensure compliance with requirements related to the grant agreement and the following compliance requirement: Procurement and Suspension and Debarment. Procurement - Policy The City did not have an approved procurement policy that reflected applicable state laws and regulations including procedures to avoid acquisition of unnecessary or duplicative items and procedures to ensure that all solicitations incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. The City is required to have and use documented procurement procedures, which are 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. Suspension and Debarment Prior to entering into subawards and covered transactions with the Drinking Water State Revolving Fund, recipients are required to verify that such contracts and subrecipients are not suspended, debarred, or otherwise excluded. "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, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. INDIANA STATE BOARD OF ACCOUNTS 16 CITY OF JONESBORO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Upon the inquiry of the City to determine its policies and procedures related to suspension and debarment requirements, the City stated that a suspension and debarment clause is included in contracts or bid packets. Contracts and bid packets are reviewed by the Mayor and the Common Council. One covered transaction, totaling $718,000, was identified and tested. The City could not provide documentation that procedures were performed to verify that the vendor paid from the Drinking Water State Revolving Fund with contracts over $25,000 were not excluded or disqualified from participation in federal programs. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "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." 2 CFR 180.300 states: "When you enter into a covered transaction with another person at the next lower tier, you must verify that the person with whom you intend to do business is not excluded or disqualified. You do this by: (a) Checking SAM Exclusions; or (b) Collecting a certification from that person; or (c) Adding a clause or condition to the covered transaction with that person." Cause A proper system of internal controls was not designed by the management of the City. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the City's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. The City failed to adopt a procurement policy as required for federal grants. Additionally, the City contracted with outside engineers and a CPA firm to manage the compliance requirement, and there was no documentation that showed a suspension or debarment clause was included in the contract or that was in the bid packet. INDIANA STATE BOARD OF ACCOUNTS 17 CITY OF JONESBORO SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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, there was no procurement policy, and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. Any program funds the City used to pay vendors that have been suspended or debarred could be unallowable, and the funding agency could potentially recover them. Additionally, 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 City. Questioned Costs There were no questioned costs identified. Recommendation We recommended the City establish documented procurement procedures consistent with state and local laws for the acquisition of property or services required under a federal award or subaward as outlined in the code of federal regulations. In addition, we recommended that the City strengthen its system of internal controls to ensure that all 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. We also recommended that the City gain a thorough understanding of the grant requirements to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Allowable Costs – Nonpayroll Disbursements Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name / Assistance Listing Number / Pass-Through Agency(ies) / Pass-Through Number(s): • Block Grants for Prevention and Treatment of Substance Abuse, 93.959 o Passed through the State of Connecticut, Department of Mental Health and Addiction Services, 24MHA1009 o Passed through the Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs, 4100089071 o Passed through the State of Louisiana, Department of Health, 2000758195 o Passed through the State of Oklahoma, Department of Mental Health and Substance Abuse Services, B08TI083962 & B08TI084602 • COVID-19 - Substance Abuse and Mental Health Services Projects of Regional and National Significance, 93.243 o Passed through the State of California, Department of Health Care Services, 21-10299 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: 2 CFR Part 200.303 (a) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award, Internal Controls requires that the recipient must: “Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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).” Shatterproof should have internal controls designed and effectively operating to ensure compliance with those provisions. Condition: Shatterproof changed credit card vendors after March 2024. Documentation of electronic approvals maintained by the prior vendor were not retained or accessible during the audit. Included in these transactions was one instance where supporting documentation for the transaction was not located. Questioned costs: Total questioned costs are $53,632 and are shown by program below: • 93.959 - $7,130 $3,539 State of Connecticut, Department of Mental Health and Addiction Services $1,773 Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs $155 State of Louisiana, Department of Health $1,663 State of Oklahoma, Department of Mental Health and Substance Abuse Services • 93.243 $46,502 State of California, Department of Health Care Services Context: Documentation of electronic approvals maintained by the prior credit card vendor were not retained or accessible during the audit. Documentation for 1 of 80 transactions tested could not be located. Cause: Approvals of credit card transactions are maintained electronically within the vendor’s system. When Shatterproof changed credit card vendors after March 2024 the electronic approvals maintained by the prior vendor were not retained and were no longer accessible by Shatterproof personnel. Effect: The lack of internal controls over these compliance requirements provides an opportunity for noncompliance and questioned costs. Repeat Finding: The finding is a modified repeat of findings in the immediately prior year. Prior year finding numbers were 2023-008 and 2023-009. Recommendation: We recommend Shatterproof ensure internal controls are in place and operating effectively so that when changes in vendors involved in the financial reporting process occur there is an evaluation of the electronic evidence of the performance of internal controls and other data to ensure needed documentation is retained or continues to be accessible in line with their record retention policies and requirements of the grant agreements. Views of responsible officials: There is no disagreement with the audit finding.
Cash Management Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name / Assistance Listing Number / Pass-Through Agency(ies) / Pass-Through Number(s): • Block Grants for Prevention and Treatment of Substance Abuse, 93.959 o Passed through the State of Connecticut, Department of Mental Health and Addiction Services, 24MHA1009 o Passed through the Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs, 4100089071 o Passed through the State of Louisiana, Department of Health, 2000758195 o Passed through the State of Oklahoma, Department of Mental Health and Substance Abuse Services, B08TI083962 & B08TI084602 • COVID-19 - Substance Abuse and Mental Health Services Projects of Regional and National Significance, 93.243 o Passed through the State of California, Department of Health Care Services, 21-10299 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: 2 CFR Part 200.303 (a) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award, Internal Controls requires that the recipient must: “Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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).” Shatterproof should have internal controls designed and effectively operating to ensure compliance with those provisions. Condition: Shatterproof was unable to provide documentation to support the review and approval for 4 requests for reimbursement. Questioned costs: None Context: Documentation of the review and approval for 4 of 14 requests for reimbursements could not be provided. Cause: Controls over the performance and documentation of the review and approval of reimbursement requests were implemented in 2025. Effect: The lack of internal controls over these compliance requirements provides an opportunity for noncompliance and questioned costs. Repeat Finding: The finding is a modified repeat of findings in the immediately prior year. Prior year finding numbers were 2023-006 and 2023-007. Recommendation: We recommend Shatterproof implement controls to ensure an adequate review process is in place to review reimbursement requests to determine and document the request is properly supported and in compliance with the grant agreement. Views of responsible officials: There is no disagreement with the audit finding.
Allowable Costs – Nonpayroll Disbursements Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name / Assistance Listing Number / Pass-Through Agency(ies) / Pass-Through Number(s): • Block Grants for Prevention and Treatment of Substance Abuse, 93.959 o Passed through the State of Connecticut, Department of Mental Health and Addiction Services, 24MHA1009 o Passed through the Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs, 4100089071 o Passed through the State of Louisiana, Department of Health, 2000758195 o Passed through the State of Oklahoma, Department of Mental Health and Substance Abuse Services, B08TI083962 & B08TI084602 • COVID-19 - Substance Abuse and Mental Health Services Projects of Regional and National Significance, 93.243 o Passed through the State of California, Department of Health Care Services, 21-10299 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: 2 CFR Part 200.303 (a) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award, Internal Controls requires that the recipient must: “Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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).” Shatterproof should have internal controls designed and effectively operating to ensure compliance with those provisions. Condition: Shatterproof changed credit card vendors after March 2024. Documentation of electronic approvals maintained by the prior vendor were not retained or accessible during the audit. Included in these transactions was one instance where supporting documentation for the transaction was not located. Questioned costs: Total questioned costs are $53,632 and are shown by program below: • 93.959 - $7,130 $3,539 State of Connecticut, Department of Mental Health and Addiction Services $1,773 Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs $155 State of Louisiana, Department of Health $1,663 State of Oklahoma, Department of Mental Health and Substance Abuse Services • 93.243 $46,502 State of California, Department of Health Care Services Context: Documentation of electronic approvals maintained by the prior credit card vendor were not retained or accessible during the audit. Documentation for 1 of 80 transactions tested could not be located. Cause: Approvals of credit card transactions are maintained electronically within the vendor’s system. When Shatterproof changed credit card vendors after March 2024 the electronic approvals maintained by the prior vendor were not retained and were no longer accessible by Shatterproof personnel. Effect: The lack of internal controls over these compliance requirements provides an opportunity for noncompliance and questioned costs. Repeat Finding: The finding is a modified repeat of findings in the immediately prior year. Prior year finding numbers were 2023-008 and 2023-009. Recommendation: We recommend Shatterproof ensure internal controls are in place and operating effectively so that when changes in vendors involved in the financial reporting process occur there is an evaluation of the electronic evidence of the performance of internal controls and other data to ensure needed documentation is retained or continues to be accessible in line with their record retention policies and requirements of the grant agreements. Views of responsible officials: There is no disagreement with the audit finding.
Cash Management Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name / Assistance Listing Number / Pass-Through Agency(ies) / Pass-Through Number(s): • Block Grants for Prevention and Treatment of Substance Abuse, 93.959 o Passed through the State of Connecticut, Department of Mental Health and Addiction Services, 24MHA1009 o Passed through the Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs, 4100089071 o Passed through the State of Louisiana, Department of Health, 2000758195 o Passed through the State of Oklahoma, Department of Mental Health and Substance Abuse Services, B08TI083962 & B08TI084602 • COVID-19 - Substance Abuse and Mental Health Services Projects of Regional and National Significance, 93.243 o Passed through the State of California, Department of Health Care Services, 21-10299 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: 2 CFR Part 200.303 (a) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award, Internal Controls requires that the recipient must: “Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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).” Shatterproof should have internal controls designed and effectively operating to ensure compliance with those provisions. Condition: Shatterproof was unable to provide documentation to support the review and approval for 4 requests for reimbursement. Questioned costs: None Context: Documentation of the review and approval for 4 of 14 requests for reimbursements could not be provided. Cause: Controls over the performance and documentation of the review and approval of reimbursement requests were implemented in 2025. Effect: The lack of internal controls over these compliance requirements provides an opportunity for noncompliance and questioned costs. Repeat Finding: The finding is a modified repeat of findings in the immediately prior year. Prior year finding numbers were 2023-006 and 2023-007. Recommendation: We recommend Shatterproof implement controls to ensure an adequate review process is in place to review reimbursement requests to determine and document the request is properly supported and in compliance with the grant agreement. Views of responsible officials: There is no disagreement with the audit finding.
Allowable Costs – Nonpayroll Disbursements Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name / Assistance Listing Number / Pass-Through Agency(ies) / Pass-Through Number(s): • Block Grants for Prevention and Treatment of Substance Abuse, 93.959 o Passed through the State of Connecticut, Department of Mental Health and Addiction Services, 24MHA1009 o Passed through the Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs, 4100089071 o Passed through the State of Louisiana, Department of Health, 2000758195 o Passed through the State of Oklahoma, Department of Mental Health and Substance Abuse Services, B08TI083962 & B08TI084602 • COVID-19 - Substance Abuse and Mental Health Services Projects of Regional and National Significance, 93.243 o Passed through the State of California, Department of Health Care Services, 21-10299 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: 2 CFR Part 200.303 (a) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award, Internal Controls requires that the recipient must: “Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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).” Shatterproof should have internal controls designed and effectively operating to ensure compliance with those provisions. Condition: Shatterproof changed credit card vendors after March 2024. Documentation of electronic approvals maintained by the prior vendor were not retained or accessible during the audit. Included in these transactions was one instance where supporting documentation for the transaction was not located. Questioned costs: Total questioned costs are $53,632 and are shown by program below: • 93.959 - $7,130 $3,539 State of Connecticut, Department of Mental Health and Addiction Services $1,773 Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs $155 State of Louisiana, Department of Health $1,663 State of Oklahoma, Department of Mental Health and Substance Abuse Services • 93.243 $46,502 State of California, Department of Health Care Services Context: Documentation of electronic approvals maintained by the prior credit card vendor were not retained or accessible during the audit. Documentation for 1 of 80 transactions tested could not be located. Cause: Approvals of credit card transactions are maintained electronically within the vendor’s system. When Shatterproof changed credit card vendors after March 2024 the electronic approvals maintained by the prior vendor were not retained and were no longer accessible by Shatterproof personnel. Effect: The lack of internal controls over these compliance requirements provides an opportunity for noncompliance and questioned costs. Repeat Finding: The finding is a modified repeat of findings in the immediately prior year. Prior year finding numbers were 2023-008 and 2023-009. Recommendation: We recommend Shatterproof ensure internal controls are in place and operating effectively so that when changes in vendors involved in the financial reporting process occur there is an evaluation of the electronic evidence of the performance of internal controls and other data to ensure needed documentation is retained or continues to be accessible in line with their record retention policies and requirements of the grant agreements. Views of responsible officials: There is no disagreement with the audit finding.
Cash Management Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name / Assistance Listing Number / Pass-Through Agency(ies) / Pass-Through Number(s): • Block Grants for Prevention and Treatment of Substance Abuse, 93.959 o Passed through the State of Connecticut, Department of Mental Health and Addiction Services, 24MHA1009 o Passed through the Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs, 4100089071 o Passed through the State of Louisiana, Department of Health, 2000758195 o Passed through the State of Oklahoma, Department of Mental Health and Substance Abuse Services, B08TI083962 & B08TI084602 • COVID-19 - Substance Abuse and Mental Health Services Projects of Regional and National Significance, 93.243 o Passed through the State of California, Department of Health Care Services, 21-10299 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: 2 CFR Part 200.303 (a) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award, Internal Controls requires that the recipient must: “Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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).” Shatterproof should have internal controls designed and effectively operating to ensure compliance with those provisions. Condition: Shatterproof was unable to provide documentation to support the review and approval for 4 requests for reimbursement. Questioned costs: None Context: Documentation of the review and approval for 4 of 14 requests for reimbursements could not be provided. Cause: Controls over the performance and documentation of the review and approval of reimbursement requests were implemented in 2025. Effect: The lack of internal controls over these compliance requirements provides an opportunity for noncompliance and questioned costs. Repeat Finding: The finding is a modified repeat of findings in the immediately prior year. Prior year finding numbers were 2023-006 and 2023-007. Recommendation: We recommend Shatterproof implement controls to ensure an adequate review process is in place to review reimbursement requests to determine and document the request is properly supported and in compliance with the grant agreement. Views of responsible officials: There is no disagreement with the audit finding.
Allowable Costs – Nonpayroll Disbursements Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name / Assistance Listing Number / Pass-Through Agency(ies) / Pass-Through Number(s): • Block Grants for Prevention and Treatment of Substance Abuse, 93.959 o Passed through the State of Connecticut, Department of Mental Health and Addiction Services, 24MHA1009 o Passed through the Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs, 4100089071 o Passed through the State of Louisiana, Department of Health, 2000758195 o Passed through the State of Oklahoma, Department of Mental Health and Substance Abuse Services, B08TI083962 & B08TI084602 • COVID-19 - Substance Abuse and Mental Health Services Projects of Regional and National Significance, 93.243 o Passed through the State of California, Department of Health Care Services, 21-10299 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: 2 CFR Part 200.303 (a) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award, Internal Controls requires that the recipient must: “Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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).” Shatterproof should have internal controls designed and effectively operating to ensure compliance with those provisions. Condition: Shatterproof changed credit card vendors after March 2024. Documentation of electronic approvals maintained by the prior vendor were not retained or accessible during the audit. Included in these transactions was one instance where supporting documentation for the transaction was not located. Questioned costs: Total questioned costs are $53,632 and are shown by program below: • 93.959 - $7,130 $3,539 State of Connecticut, Department of Mental Health and Addiction Services $1,773 Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs $155 State of Louisiana, Department of Health $1,663 State of Oklahoma, Department of Mental Health and Substance Abuse Services • 93.243 $46,502 State of California, Department of Health Care Services Context: Documentation of electronic approvals maintained by the prior credit card vendor were not retained or accessible during the audit. Documentation for 1 of 80 transactions tested could not be located. Cause: Approvals of credit card transactions are maintained electronically within the vendor’s system. When Shatterproof changed credit card vendors after March 2024 the electronic approvals maintained by the prior vendor were not retained and were no longer accessible by Shatterproof personnel. Effect: The lack of internal controls over these compliance requirements provides an opportunity for noncompliance and questioned costs. Repeat Finding: The finding is a modified repeat of findings in the immediately prior year. Prior year finding numbers were 2023-008 and 2023-009. Recommendation: We recommend Shatterproof ensure internal controls are in place and operating effectively so that when changes in vendors involved in the financial reporting process occur there is an evaluation of the electronic evidence of the performance of internal controls and other data to ensure needed documentation is retained or continues to be accessible in line with their record retention policies and requirements of the grant agreements. Views of responsible officials: There is no disagreement with the audit finding.
Cash Management Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name / Assistance Listing Number / Pass-Through Agency(ies) / Pass-Through Number(s): • Block Grants for Prevention and Treatment of Substance Abuse, 93.959 o Passed through the State of Connecticut, Department of Mental Health and Addiction Services, 24MHA1009 o Passed through the Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs, 4100089071 o Passed through the State of Louisiana, Department of Health, 2000758195 o Passed through the State of Oklahoma, Department of Mental Health and Substance Abuse Services, B08TI083962 & B08TI084602 • COVID-19 - Substance Abuse and Mental Health Services Projects of Regional and National Significance, 93.243 o Passed through the State of California, Department of Health Care Services, 21-10299 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: 2 CFR Part 200.303 (a) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award, Internal Controls requires that the recipient must: “Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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).” Shatterproof should have internal controls designed and effectively operating to ensure compliance with those provisions. Condition: Shatterproof was unable to provide documentation to support the review and approval for 4 requests for reimbursement. Questioned costs: None Context: Documentation of the review and approval for 4 of 14 requests for reimbursements could not be provided. Cause: Controls over the performance and documentation of the review and approval of reimbursement requests were implemented in 2025. Effect: The lack of internal controls over these compliance requirements provides an opportunity for noncompliance and questioned costs. Repeat Finding: The finding is a modified repeat of findings in the immediately prior year. Prior year finding numbers were 2023-006 and 2023-007. Recommendation: We recommend Shatterproof implement controls to ensure an adequate review process is in place to review reimbursement requests to determine and document the request is properly supported and in compliance with the grant agreement. Views of responsible officials: There is no disagreement with the audit finding.
Allowable Costs – Nonpayroll Disbursements Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name / Assistance Listing Number / Pass-Through Agency(ies) / Pass-Through Number(s): • Block Grants for Prevention and Treatment of Substance Abuse, 93.959 o Passed through the State of Connecticut, Department of Mental Health and Addiction Services, 24MHA1009 o Passed through the Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs, 4100089071 o Passed through the State of Louisiana, Department of Health, 2000758195 o Passed through the State of Oklahoma, Department of Mental Health and Substance Abuse Services, B08TI083962 & B08TI084602 • COVID-19 - Substance Abuse and Mental Health Services Projects of Regional and National Significance, 93.243 o Passed through the State of California, Department of Health Care Services, 21-10299 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: 2 CFR Part 200.303 (a) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award, Internal Controls requires that the recipient must: “Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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).” Shatterproof should have internal controls designed and effectively operating to ensure compliance with those provisions. Condition: Shatterproof changed credit card vendors after March 2024. Documentation of electronic approvals maintained by the prior vendor were not retained or accessible during the audit. Included in these transactions was one instance where supporting documentation for the transaction was not located. Questioned costs: Total questioned costs are $53,632 and are shown by program below: • 93.959 - $7,130 $3,539 State of Connecticut, Department of Mental Health and Addiction Services $1,773 Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs $155 State of Louisiana, Department of Health $1,663 State of Oklahoma, Department of Mental Health and Substance Abuse Services • 93.243 $46,502 State of California, Department of Health Care Services Context: Documentation of electronic approvals maintained by the prior credit card vendor were not retained or accessible during the audit. Documentation for 1 of 80 transactions tested could not be located. Cause: Approvals of credit card transactions are maintained electronically within the vendor’s system. When Shatterproof changed credit card vendors after March 2024 the electronic approvals maintained by the prior vendor were not retained and were no longer accessible by Shatterproof personnel. Effect: The lack of internal controls over these compliance requirements provides an opportunity for noncompliance and questioned costs. Repeat Finding: The finding is a modified repeat of findings in the immediately prior year. Prior year finding numbers were 2023-008 and 2023-009. Recommendation: We recommend Shatterproof ensure internal controls are in place and operating effectively so that when changes in vendors involved in the financial reporting process occur there is an evaluation of the electronic evidence of the performance of internal controls and other data to ensure needed documentation is retained or continues to be accessible in line with their record retention policies and requirements of the grant agreements. Views of responsible officials: There is no disagreement with the audit finding.
Cash Management Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name / Assistance Listing Number / Pass-Through Agency(ies) / Pass-Through Number(s): • Block Grants for Prevention and Treatment of Substance Abuse, 93.959 o Passed through the State of Connecticut, Department of Mental Health and Addiction Services, 24MHA1009 o Passed through the Commonwealth of Pennsylvania, Department of Drug and Alcohol Programs, 4100089071 o Passed through the State of Louisiana, Department of Health, 2000758195 o Passed through the State of Oklahoma, Department of Mental Health and Substance Abuse Services, B08TI083962 & B08TI084602 • COVID-19 - Substance Abuse and Mental Health Services Projects of Regional and National Significance, 93.243 o Passed through the State of California, Department of Health Care Services, 21-10299 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: 2 CFR Part 200.303 (a) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award, Internal Controls requires that the recipient must: “Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the 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).” Shatterproof should have internal controls designed and effectively operating to ensure compliance with those provisions. Condition: Shatterproof was unable to provide documentation to support the review and approval for 4 requests for reimbursement. Questioned costs: None Context: Documentation of the review and approval for 4 of 14 requests for reimbursements could not be provided. Cause: Controls over the performance and documentation of the review and approval of reimbursement requests were implemented in 2025. Effect: The lack of internal controls over these compliance requirements provides an opportunity for noncompliance and questioned costs. Repeat Finding: The finding is a modified repeat of findings in the immediately prior year. Prior year finding numbers were 2023-006 and 2023-007. Recommendation: We recommend Shatterproof implement controls to ensure an adequate review process is in place to review reimbursement requests to determine and document the request is properly supported and in compliance with the grant agreement. Views of responsible officials: There is no disagreement with the audit finding.
Information on Federal Programs: 45.312 – The Institute of Museum and Library Services: National Leadership Grants. Criteria or Specific Requirements: According to 2 CFR §200.303, the non-Federal entity must: establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in Standards for Internal Control in the Federal Government, issued by the Comptroller General of the United States, or the Internal Control Integrated Framework, issued by COSO. Additionally, according to 2 CFR §200.320(c), the noncompetitive procurement method may only be used if one of the following circumstances applies: 1. The aggregate amount of the procurement transaction does not exceed the micro-purchase threshold (see paragraph (a)(1) of this section); 2. The procurement transaction can only be fulfilled by a single source; 3. The public exigency or emergency for the requirement will not permit a delay resulting from providing public notice of a competitive solicitation; 4. The recipient or subrecipient requests in writing to use a noncompetitive procurement method, and the Federal agency or pass-through entity provides written approval; or 5. After soliciting several sources, competition is determined inadequate. Condition: During the testing of the procurement compliance requirement related to the major programs, it was determined that AAM used the noncompetitive procurement method without meeting any one of the criteria applicable for use of this method. Cause: Management did not have internal control procedures in place to ensure that procurement requirements were adequately followed, documented and retained when Federal awards were obtained. Effect: Failure to use documented procurement policies and procedures could have resulted in noncompliance with the Criteria or Specific Requirements section above. Perspective: While AAM did have documented procurement policies and procedures compliant with 2 CFR §200.320, AAM issued contracts under noncompetitive procurement method without meeting the applicable requirements for use of this method. Within a random sample of 10 procurement contracts, 4 were selected based on the noncompetitive method. Questioned Costs: Questioned costs were not identified. Repeat Finding: Not applicable. Recommendation: AAM should strengthen its internal controls for procurement of property or services required under a Federal award or subaward to ensure compliance with the Uniform Guidance
Information on Federal Programs: 45.312 – The Institute of Museum and Library Services: National Leadership Grants. Criteria or Specific Requirements: According to 2 CFR §200.303, the non-Federal entity must: establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in Standards for Internal Control in the Federal Government, issued by the Comptroller General of the United States, or the Internal Control Integrated Framework, issued by COSO. Additionally, according to 2 CFR §200.214, the non-Federal entity is subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participation in Federal assistance programs or activities. Condition: During our audit, we noted that AAM did not perform checks via SAM.gov to ensure that potential contractors or consultants were not suspended or debarred. Cause: Management did not have internal control procedures in place to ensure that suspension and debarment checks were being performed prior to entering into contracts with contractors and consultants. Effect: The failure to screen such parties increases the possibility that U.S. Government funds may inadvertently be provided to individuals or organizations deemed to be suspended or disbarred by the U.S. Government. Perspective: Within a random sample of 60 disbursements, 1 disbursement to 1 contractor would have required compliance with the suspension and debarment check. AAM’s debarment certification representation paragraph is now automatically included on all the current contractor agreements. Questioned Costs: Questioned costs were not identified. Repeat Finding: Not applicable. Recommendation: AAM should continue including the debarment certification paragraph on all new contracts to ensure compliance with the Uniform Guidance going forward.
FEDERAL FINDING INTERNAL CONTROL - SIGNIFICANT DEFICIENCY Criteria: According to Title 2 CFR Part 200.303(a), the recipient must 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. Additionally, the Market Access Program, specifically section 1485.31(a), states that all participants are required to annually submit a fraud prevention program for approval. Condition: Segregation of duties of Council disbursements were not being followed as outlined in the fraud prevention program previously approved by the Foreign Agricultural Service (FAS). Effect: Council was not in compliance with fraud prevention program for a portion of 2024. A lack of further disbursement approval could result in fraudulent activity. Cause: Council underwent Executive Director and accounting personnel changes mid-year that resulted in an internal control weakness. Recommendation: Council either follows existing fraud prevention program to incorporate a level of disbursement and documentation approval from a party other than the contracted finance management company to improve segregation of duties, or revises fraud prevention program to appropriately depict internal control framework and receives approval from FAS. Repeat finding: No.
Reporting Federal Agency: U.S. Department of Human Services Federal Program Name: Medical Assistance (Medicaid Cluster) Assistance Listing Number: 93.778 Federal Award Identification Number and Year: 2405MN5ADM, 2405MN5MAP; 2024 Pass-Through Agency: Minnesota Department of Human Services Compliance Requirement Affected: Reporting Award Period: Year Ended December 31, 2024 Type of Finding: Significant Deficiency in Internal Control over Compliance and Other Matters Criteria or Specific Requirement: 2 CFR 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. Additionally, 2 CFR 200.403 lists general criteria for allowability of costs under federal awards, and the 2556 Social Services quarterly report has further guidance on what is allowed to be reported. Condition: Reports for the 2556 Social Services Quarterly Expense Report were reviewed, but were not reported correctly and sent to the state with incorrect direct charges reported. Auditor estimates that the reimbursed amount based on these ineligible costs reported on the 2556 is less than $25,000. Questioned Costs: Amount less than $25,000. Context: The quarterly report was reviewed, however it was determined that incorrect expenses were reported and was not caught during the review process. Cause: Lack of review of the requirements of the 2556 instructions by the County. Effect: Ineligible costs could be reported. Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-009. Recommendation: We recommend that the County implement review procedures to ensure that the reports are submitted timely and accurately, and record of review is kept on file. Views of responsible officials: There is no disagreement with the audit finding. There is a corrective action plan in place.
Reporting Federal Agency: U.S. Department of Human Services Federal Program Name: Medical Assistance (Medicaid Cluster) Assistance Listing Number: 93.778 Federal Award Identification Number and Year: 2405MN5ADM, 2405MN5MAP; 2024 Pass-Through Agency: Minnesota Department of Human Services Compliance Requirement Affected: Reporting Award Period: Year Ended December 31, 2024 Type of Finding: Significant Deficiency in Internal Control over Compliance and Other Matters Criteria or Specific Requirement: 2 CFR 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. Additionally, 2 CFR 200.403 lists general criteria for allowability of costs under federal awards, and the 2556 Social Services quarterly report has further guidance on what is allowed to be reported. Condition: Reports for the 2556 Social Services Quarterly Expense Report were reviewed, but were not reported correctly and sent to the state with incorrect direct charges reported. Auditor estimates that the reimbursed amount based on these ineligible costs reported on the 2556 is less than $25,000. Questioned Costs: Amount less than $25,000. Context: The quarterly report was reviewed, however it was determined that incorrect expenses were reported and was not caught during the review process. Cause: Lack of review of the requirements of the 2556 instructions by the County. Effect: Ineligible costs could be reported. Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023-009. Recommendation: We recommend that the County implement review procedures to ensure that the reports are submitted timely and accurately, and record of review is kept on file. Views of responsible officials: There is no disagreement with the audit finding. There is a corrective action plan in place.
Finding 2024-002 Information on the federal program: Subject: Home Investment Partnership Program – Internal Controls Federal Agency: Department of Housing and Urban Development Federal Program: Home Investment Partnership Program Assistance Listing Number: 14.239 Pass-Through Entity: N/A - Direct Grant Compliance Requirement: Special Tests and Provisions - Underwriting Requirements Audit Findings: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over 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). . . ." 29 CFR 92.250(b) states in part: Participating jurisdictions must underwrite and evaluate projects to ensure that Home funds are not invested in projects with unreasonable costs, that the project is financially viable, and that the level of Home investment is not more than necessary. Additionally, the Uniform Guidance requires entities to maintain adequate documentation to demonstrate compliance with federal program requirements. Condition: The Consortium did not have a documented review control in place to ensure the underwriting calculation was prepared, reviewed, and maintained. Cause: The Consortium's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Consortium at risk of noncompliance with the grant agreement and the underwriting compliance requirements. Questioned Costs: There were no questioned costs identified. Context: In a sample of three, the following items were noted: • For the first selection, project underwriting support was not available. The underwriting calculation was prepared by a former employee. Review of the calculation was also performed by a former employee. The Consortium does not have record of the calculation. • For the second selection, the underwriting calculation did not have formal sign off by the reviewer. Only the preparer signed the calculation. • For the third selection, the underwriting calculation did not have formal sign off by the preparer. Only the reviewer signed the calculation. Identification as a repeat finding: No. Recommendation: We recommend the Consortium implement a formal process to ensure the required underwriting calculations are prepared, reviewed, and maintained. Adequate documentation should be maintained to support the underwriting calculations. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Finding 2024-002 Information on the federal program: Subject: Home Investment Partnership Program – Internal Controls Federal Agency: Department of Housing and Urban Development Federal Program: Home Investment Partnership Program Assistance Listing Number: 14.239 Pass-Through Entity: N/A - Direct Grant Compliance Requirement: Special Tests and Provisions - Underwriting Requirements Audit Findings: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over 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). . . ." 29 CFR 92.250(b) states in part: Participating jurisdictions must underwrite and evaluate projects to ensure that Home funds are not invested in projects with unreasonable costs, that the project is financially viable, and that the level of Home investment is not more than necessary. Additionally, the Uniform Guidance requires entities to maintain adequate documentation to demonstrate compliance with federal program requirements. Condition: The Consortium did not have a documented review control in place to ensure the underwriting calculation was prepared, reviewed, and maintained. Cause: The Consortium's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Consortium at risk of noncompliance with the grant agreement and the underwriting compliance requirements. Questioned Costs: There were no questioned costs identified. Context: In a sample of three, the following items were noted: • For the first selection, project underwriting support was not available. The underwriting calculation was prepared by a former employee. Review of the calculation was also performed by a former employee. The Consortium does not have record of the calculation. • For the second selection, the underwriting calculation did not have formal sign off by the reviewer. Only the preparer signed the calculation. • For the third selection, the underwriting calculation did not have formal sign off by the preparer. Only the reviewer signed the calculation. Identification as a repeat finding: No. Recommendation: We recommend the Consortium implement a formal process to ensure the required underwriting calculations are prepared, reviewed, and maintained. Adequate documentation should be maintained to support the underwriting calculations. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Finding 2024-002 Information on the federal program: Subject: Home Investment Partnership Program – Internal Controls Federal Agency: Department of Housing and Urban Development Federal Program: Home Investment Partnership Program Assistance Listing Number: 14.239 Pass-Through Entity: N/A - Direct Grant Compliance Requirement: Special Tests and Provisions - Underwriting Requirements Audit Findings: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over 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). . . ." 29 CFR 92.250(b) states in part: Participating jurisdictions must underwrite and evaluate projects to ensure that Home funds are not invested in projects with unreasonable costs, that the project is financially viable, and that the level of Home investment is not more than necessary. Additionally, the Uniform Guidance requires entities to maintain adequate documentation to demonstrate compliance with federal program requirements. Condition: The Consortium did not have a documented review control in place to ensure the underwriting calculation was prepared, reviewed, and maintained. Cause: The Consortium's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Consortium at risk of noncompliance with the grant agreement and the underwriting compliance requirements. Questioned Costs: There were no questioned costs identified. Context: In a sample of three, the following items were noted: • For the first selection, project underwriting support was not available. The underwriting calculation was prepared by a former employee. Review of the calculation was also performed by a former employee. The Consortium does not have record of the calculation. • For the second selection, the underwriting calculation did not have formal sign off by the reviewer. Only the preparer signed the calculation. • For the third selection, the underwriting calculation did not have formal sign off by the preparer. Only the reviewer signed the calculation. Identification as a repeat finding: No. Recommendation: We recommend the Consortium implement a formal process to ensure the required underwriting calculations are prepared, reviewed, and maintained. Adequate documentation should be maintained to support the underwriting calculations. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Finding 2024-002 Information on the federal program: Subject: Home Investment Partnership Program – Internal Controls Federal Agency: Department of Housing and Urban Development Federal Program: Home Investment Partnership Program Assistance Listing Number: 14.239 Pass-Through Entity: N/A - Direct Grant Compliance Requirement: Special Tests and Provisions - Underwriting Requirements Audit Findings: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over 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). . . ." 29 CFR 92.250(b) states in part: Participating jurisdictions must underwrite and evaluate projects to ensure that Home funds are not invested in projects with unreasonable costs, that the project is financially viable, and that the level of Home investment is not more than necessary. Additionally, the Uniform Guidance requires entities to maintain adequate documentation to demonstrate compliance with federal program requirements. Condition: The Consortium did not have a documented review control in place to ensure the underwriting calculation was prepared, reviewed, and maintained. Cause: The Consortium's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Consortium at risk of noncompliance with the grant agreement and the underwriting compliance requirements. Questioned Costs: There were no questioned costs identified. Context: In a sample of three, the following items were noted: • For the first selection, project underwriting support was not available. The underwriting calculation was prepared by a former employee. Review of the calculation was also performed by a former employee. The Consortium does not have record of the calculation. • For the second selection, the underwriting calculation did not have formal sign off by the reviewer. Only the preparer signed the calculation. • For the third selection, the underwriting calculation did not have formal sign off by the preparer. Only the reviewer signed the calculation. Identification as a repeat finding: No. Recommendation: We recommend the Consortium implement a formal process to ensure the required underwriting calculations are prepared, reviewed, and maintained. Adequate documentation should be maintained to support the underwriting calculations. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Finding 2024-002 Information on the federal program: Subject: Home Investment Partnership Program – Internal Controls Federal Agency: Department of Housing and Urban Development Federal Program: Home Investment Partnership Program Assistance Listing Number: 14.239 Pass-Through Entity: N/A - Direct Grant Compliance Requirement: Special Tests and Provisions - Underwriting Requirements Audit Findings: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over 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). . . ." 29 CFR 92.250(b) states in part: Participating jurisdictions must underwrite and evaluate projects to ensure that Home funds are not invested in projects with unreasonable costs, that the project is financially viable, and that the level of Home investment is not more than necessary. Additionally, the Uniform Guidance requires entities to maintain adequate documentation to demonstrate compliance with federal program requirements. Condition: The Consortium did not have a documented review control in place to ensure the underwriting calculation was prepared, reviewed, and maintained. Cause: The Consortium's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Consortium at risk of noncompliance with the grant agreement and the underwriting compliance requirements. Questioned Costs: There were no questioned costs identified. Context: In a sample of three, the following items were noted: • For the first selection, project underwriting support was not available. The underwriting calculation was prepared by a former employee. Review of the calculation was also performed by a former employee. The Consortium does not have record of the calculation. • For the second selection, the underwriting calculation did not have formal sign off by the reviewer. Only the preparer signed the calculation. • For the third selection, the underwriting calculation did not have formal sign off by the preparer. Only the reviewer signed the calculation. Identification as a repeat finding: No. Recommendation: We recommend the Consortium implement a formal process to ensure the required underwriting calculations are prepared, reviewed, and maintained. Adequate documentation should be maintained to support the underwriting calculations. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Finding 2024-002 Information on the federal program: Subject: Home Investment Partnership Program – Internal Controls Federal Agency: Department of Housing and Urban Development Federal Program: Home Investment Partnership Program Assistance Listing Number: 14.239 Pass-Through Entity: N/A - Direct Grant Compliance Requirement: Special Tests and Provisions - Underwriting Requirements Audit Findings: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over 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). . . ." 29 CFR 92.250(b) states in part: Participating jurisdictions must underwrite and evaluate projects to ensure that Home funds are not invested in projects with unreasonable costs, that the project is financially viable, and that the level of Home investment is not more than necessary. Additionally, the Uniform Guidance requires entities to maintain adequate documentation to demonstrate compliance with federal program requirements. Condition: The Consortium did not have a documented review control in place to ensure the underwriting calculation was prepared, reviewed, and maintained. Cause: The Consortium's management had not developed a system of internal controls to ensure compliance with the compliance requirements listed above. Effect: The failure to establish an effective internal control system placed the Consortium at risk of noncompliance with the grant agreement and the underwriting compliance requirements. Questioned Costs: There were no questioned costs identified. Context: In a sample of three, the following items were noted: • For the first selection, project underwriting support was not available. The underwriting calculation was prepared by a former employee. Review of the calculation was also performed by a former employee. The Consortium does not have record of the calculation. • For the second selection, the underwriting calculation did not have formal sign off by the reviewer. Only the preparer signed the calculation. • For the third selection, the underwriting calculation did not have formal sign off by the preparer. Only the reviewer signed the calculation. Identification as a repeat finding: No. Recommendation: We recommend the Consortium implement a formal process to ensure the required underwriting calculations are prepared, reviewed, and maintained. Adequate documentation should be maintained to support the underwriting calculations. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Criteria According to the Code of Federal Regulations, 200 CFR 200.303 requires the Organization to establish and maintain effective internal control over the Federal award that provides reasonable assurance that the Organization is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. One of those requirements is to have a knowledgeable person of federal cost approve disbursement before being paid. Condition The disbursements tested none of them had written approval to be paid. Cause Management visually/verbally reviewed disbursement before processing but did not realize they needed to document that review and approval process. Effect Unnecessary or unapproved expenses could be processed and charged to federal programs. Context We test 60 disbursements of which none had written proof of review or approval to be processed. Recommendation Management should take the extra time needed to document their approval process as required by federal regulations.
Internal control deficiency and noncompliance over procurement. Identification of the federal program: Assistance Listing Number 21.027: • COVID-19 – Coronavirus State and Local Fiscal Recovery Funds • U.S. Department of the Treasury • Federal award identification number – Not Applicable • Federal award year – March 3, 2021 to December 31, 2024 • Pass-through entity – State of Colorado Department of Human Services Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (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; (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders; (c) (1) the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (i) the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.319 Competition (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and 200.320. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. 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) (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; (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate – (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price; (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold; (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.324 Contract cost and price. (a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals. Condition: During our testing over procurement, we observed management did not have documented procurement procedures that conformed to the procurement standards identified in 2 CFR section 200.318 to 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management did not have internal controls in place over small purchase procurements to ensure price or rate quotations were obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals were obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management did not maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Procurements were not supported by internal controls and could potentially include unreasonable prices or rates. Questioned costs: $1,306,305 – Assistance Listing Number 21.027 – Federal award identification number – Not Applicable Questioned costs were computed by taking the total small purchase and formal procurement samples not in compliance with the compliance requirements as stated in the criteria or specific requirement section above. Questioned costs means an amount, expended or received from a Federal award, that (1) is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award or (2) at the time of the audit, lacked adequate documentation to support compliance. Context: During our testing over procurements, we obtained a listing of 12 small purchase procurements and 1 formal procurement. We selected a sample of 5 small purchase procurements and 1 formal procurement. There were 4 ($131,790) out of 5 ($170,634) small purchase procurements and 1 ($1,174,515) out of 1 ($1,174,515) formal procurements where we observed management did not have internal controls in place to ensure the compliance requirements as stated in the criteria or specific requirement section above were performed. Identification as a repeat finding, if applicable: No. Recommendation: Management should create documented procurement procedures that conform to the procurement standards identified in 2 CFR section 200.318 through 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management should develop and implement internal controls over small purchase procurements to ensure price or rate quotations are obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals are obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management should maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Management should review the procurements identified as questioned costs to identify if any improper payments were made to the entity. Views of responsible officials: We agree with the finding that internal controls were not sufficient to maintain compliance with federal procurement standards under Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 to 200.327 for a non-federal entity. However, the funds were expended for the intended purpose of the federal award. The Health System is committed to implementing internal controls to ensure procurement related to federal awards follow 2 CFR section 200.318 to 200.327. The Health System will create a procurement policy to ensure it complies with the requirements of 2 CFR section 200.318 through 200.327, that includes the written standards of conduct covering conflicts of interest, governing the actions of its employees who select, award and administer procurement contracts. This policy will include procedures to ensure proper procurement for small purchases to ensure sufficient price quotations are obtained from the required number of qualified sources, proper sealed bids or proposals are obtained through public advertising, an appropriate cost or price analysis is performed for procurement actions exceeding the simplified acquisition threshold, documentation is retained, and proper oversight is exercised to demonstrate compliance with 2 CFR section 200.318 through 200.327.
Internal control deficiency and noncompliance over procurement. Identification of the federal program: Assistance Listing Number 21.027: • COVID-19 – Coronavirus State and Local Fiscal Recovery Funds • U.S. Department of the Treasury • Federal award identification number – Not Applicable • Federal award year – March 3, 2021 to December 31, 2024 • Pass-through entity – State of Colorado Department of Human Services Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (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; (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders; (c) (1) the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (i) the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.319 Competition (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and 200.320. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. 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) (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; (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate – (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price; (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold; (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.324 Contract cost and price. (a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals. Condition: During our testing over procurement, we observed management did not have documented procurement procedures that conformed to the procurement standards identified in 2 CFR section 200.318 to 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management did not have internal controls in place over small purchase procurements to ensure price or rate quotations were obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals were obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management did not maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Procurements were not supported by internal controls and could potentially include unreasonable prices or rates. Questioned costs: $1,306,305 – Assistance Listing Number 21.027 – Federal award identification number – Not Applicable Questioned costs were computed by taking the total small purchase and formal procurement samples not in compliance with the compliance requirements as stated in the criteria or specific requirement section above. Questioned costs means an amount, expended or received from a Federal award, that (1) is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award or (2) at the time of the audit, lacked adequate documentation to support compliance. Context: During our testing over procurements, we obtained a listing of 12 small purchase procurements and 1 formal procurement. We selected a sample of 5 small purchase procurements and 1 formal procurement. There were 4 ($131,790) out of 5 ($170,634) small purchase procurements and 1 ($1,174,515) out of 1 ($1,174,515) formal procurements where we observed management did not have internal controls in place to ensure the compliance requirements as stated in the criteria or specific requirement section above were performed. Identification as a repeat finding, if applicable: No. Recommendation: Management should create documented procurement procedures that conform to the procurement standards identified in 2 CFR section 200.318 through 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management should develop and implement internal controls over small purchase procurements to ensure price or rate quotations are obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals are obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management should maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Management should review the procurements identified as questioned costs to identify if any improper payments were made to the entity. Views of responsible officials: We agree with the finding that internal controls were not sufficient to maintain compliance with federal procurement standards under Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 to 200.327 for a non-federal entity. However, the funds were expended for the intended purpose of the federal award. The Health System is committed to implementing internal controls to ensure procurement related to federal awards follow 2 CFR section 200.318 to 200.327. The Health System will create a procurement policy to ensure it complies with the requirements of 2 CFR section 200.318 through 200.327, that includes the written standards of conduct covering conflicts of interest, governing the actions of its employees who select, award and administer procurement contracts. This policy will include procedures to ensure proper procurement for small purchases to ensure sufficient price quotations are obtained from the required number of qualified sources, proper sealed bids or proposals are obtained through public advertising, an appropriate cost or price analysis is performed for procurement actions exceeding the simplified acquisition threshold, documentation is retained, and proper oversight is exercised to demonstrate compliance with 2 CFR section 200.318 through 200.327.
Internal control deficiency and noncompliance over procurement. Identification of the federal program: Assistance Listing Number 21.027: • COVID-19 – Coronavirus State and Local Fiscal Recovery Funds • U.S. Department of the Treasury • Federal award identification number – Not Applicable • Federal award year – March 3, 2021 to December 31, 2024 • Pass-through entity – State of Colorado Department of Human Services Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (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; (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders; (c) (1) the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (i) the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.319 Competition (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and 200.320. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. 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) (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; (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate – (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price; (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold; (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.324 Contract cost and price. (a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals. Condition: During our testing over procurement, we observed management did not have documented procurement procedures that conformed to the procurement standards identified in 2 CFR section 200.318 to 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management did not have internal controls in place over small purchase procurements to ensure price or rate quotations were obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals were obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management did not maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Procurements were not supported by internal controls and could potentially include unreasonable prices or rates. Questioned costs: $1,306,305 – Assistance Listing Number 21.027 – Federal award identification number – Not Applicable Questioned costs were computed by taking the total small purchase and formal procurement samples not in compliance with the compliance requirements as stated in the criteria or specific requirement section above. Questioned costs means an amount, expended or received from a Federal award, that (1) is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award or (2) at the time of the audit, lacked adequate documentation to support compliance. Context: During our testing over procurements, we obtained a listing of 12 small purchase procurements and 1 formal procurement. We selected a sample of 5 small purchase procurements and 1 formal procurement. There were 4 ($131,790) out of 5 ($170,634) small purchase procurements and 1 ($1,174,515) out of 1 ($1,174,515) formal procurements where we observed management did not have internal controls in place to ensure the compliance requirements as stated in the criteria or specific requirement section above were performed. Identification as a repeat finding, if applicable: No. Recommendation: Management should create documented procurement procedures that conform to the procurement standards identified in 2 CFR section 200.318 through 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management should develop and implement internal controls over small purchase procurements to ensure price or rate quotations are obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals are obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management should maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Management should review the procurements identified as questioned costs to identify if any improper payments were made to the entity. Views of responsible officials: We agree with the finding that internal controls were not sufficient to maintain compliance with federal procurement standards under Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 to 200.327 for a non-federal entity. However, the funds were expended for the intended purpose of the federal award. The Health System is committed to implementing internal controls to ensure procurement related to federal awards follow 2 CFR section 200.318 to 200.327. The Health System will create a procurement policy to ensure it complies with the requirements of 2 CFR section 200.318 through 200.327, that includes the written standards of conduct covering conflicts of interest, governing the actions of its employees who select, award and administer procurement contracts. This policy will include procedures to ensure proper procurement for small purchases to ensure sufficient price quotations are obtained from the required number of qualified sources, proper sealed bids or proposals are obtained through public advertising, an appropriate cost or price analysis is performed for procurement actions exceeding the simplified acquisition threshold, documentation is retained, and proper oversight is exercised to demonstrate compliance with 2 CFR section 200.318 through 200.327.
Internal control deficiency and noncompliance over procurement. Identification of the federal program: Assistance Listing Number 21.027: • COVID-19 – Coronavirus State and Local Fiscal Recovery Funds • U.S. Department of the Treasury • Federal award identification number – Not Applicable • Federal award year – March 3, 2021 to December 31, 2024 • Pass-through entity – State of Colorado Department of Human Services Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (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; (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders; (c) (1) the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (i) the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.319 Competition (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and 200.320. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. 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) (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; (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate – (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price; (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold; (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.324 Contract cost and price. (a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals. Condition: During our testing over procurement, we observed management did not have documented procurement procedures that conformed to the procurement standards identified in 2 CFR section 200.318 to 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management did not have internal controls in place over small purchase procurements to ensure price or rate quotations were obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals were obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management did not maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Procurements were not supported by internal controls and could potentially include unreasonable prices or rates. Questioned costs: $1,306,305 – Assistance Listing Number 21.027 – Federal award identification number – Not Applicable Questioned costs were computed by taking the total small purchase and formal procurement samples not in compliance with the compliance requirements as stated in the criteria or specific requirement section above. Questioned costs means an amount, expended or received from a Federal award, that (1) is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award or (2) at the time of the audit, lacked adequate documentation to support compliance. Context: During our testing over procurements, we obtained a listing of 12 small purchase procurements and 1 formal procurement. We selected a sample of 5 small purchase procurements and 1 formal procurement. There were 4 ($131,790) out of 5 ($170,634) small purchase procurements and 1 ($1,174,515) out of 1 ($1,174,515) formal procurements where we observed management did not have internal controls in place to ensure the compliance requirements as stated in the criteria or specific requirement section above were performed. Identification as a repeat finding, if applicable: No. Recommendation: Management should create documented procurement procedures that conform to the procurement standards identified in 2 CFR section 200.318 through 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management should develop and implement internal controls over small purchase procurements to ensure price or rate quotations are obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals are obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management should maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Management should review the procurements identified as questioned costs to identify if any improper payments were made to the entity. Views of responsible officials: We agree with the finding that internal controls were not sufficient to maintain compliance with federal procurement standards under Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 to 200.327 for a non-federal entity. However, the funds were expended for the intended purpose of the federal award. The Health System is committed to implementing internal controls to ensure procurement related to federal awards follow 2 CFR section 200.318 to 200.327. The Health System will create a procurement policy to ensure it complies with the requirements of 2 CFR section 200.318 through 200.327, that includes the written standards of conduct covering conflicts of interest, governing the actions of its employees who select, award and administer procurement contracts. This policy will include procedures to ensure proper procurement for small purchases to ensure sufficient price quotations are obtained from the required number of qualified sources, proper sealed bids or proposals are obtained through public advertising, an appropriate cost or price analysis is performed for procurement actions exceeding the simplified acquisition threshold, documentation is retained, and proper oversight is exercised to demonstrate compliance with 2 CFR section 200.318 through 200.327.
Internal control deficiency and noncompliance over procurement. Identification of the federal program: Assistance Listing Number 21.027: • COVID-19 – Coronavirus State and Local Fiscal Recovery Funds • U.S. Department of the Treasury • Federal award identification number – Not Applicable • Federal award year – March 3, 2021 to December 31, 2024 • Pass-through entity – State of Colorado Department of Human Services Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (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; (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders; (c) (1) the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (i) the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.319 Competition (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and 200.320. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. 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) (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; (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate – (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price; (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold; (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.324 Contract cost and price. (a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals. Condition: During our testing over procurement, we observed management did not have documented procurement procedures that conformed to the procurement standards identified in 2 CFR section 200.318 to 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management did not have internal controls in place over small purchase procurements to ensure price or rate quotations were obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals were obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management did not maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Procurements were not supported by internal controls and could potentially include unreasonable prices or rates. Questioned costs: $1,306,305 – Assistance Listing Number 21.027 – Federal award identification number – Not Applicable Questioned costs were computed by taking the total small purchase and formal procurement samples not in compliance with the compliance requirements as stated in the criteria or specific requirement section above. Questioned costs means an amount, expended or received from a Federal award, that (1) is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award or (2) at the time of the audit, lacked adequate documentation to support compliance. Context: During our testing over procurements, we obtained a listing of 12 small purchase procurements and 1 formal procurement. We selected a sample of 5 small purchase procurements and 1 formal procurement. There were 4 ($131,790) out of 5 ($170,634) small purchase procurements and 1 ($1,174,515) out of 1 ($1,174,515) formal procurements where we observed management did not have internal controls in place to ensure the compliance requirements as stated in the criteria or specific requirement section above were performed. Identification as a repeat finding, if applicable: No. Recommendation: Management should create documented procurement procedures that conform to the procurement standards identified in 2 CFR section 200.318 through 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management should develop and implement internal controls over small purchase procurements to ensure price or rate quotations are obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals are obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management should maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Management should review the procurements identified as questioned costs to identify if any improper payments were made to the entity. Views of responsible officials: We agree with the finding that internal controls were not sufficient to maintain compliance with federal procurement standards under Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 to 200.327 for a non-federal entity. However, the funds were expended for the intended purpose of the federal award. The Health System is committed to implementing internal controls to ensure procurement related to federal awards follow 2 CFR section 200.318 to 200.327. The Health System will create a procurement policy to ensure it complies with the requirements of 2 CFR section 200.318 through 200.327, that includes the written standards of conduct covering conflicts of interest, governing the actions of its employees who select, award and administer procurement contracts. This policy will include procedures to ensure proper procurement for small purchases to ensure sufficient price quotations are obtained from the required number of qualified sources, proper sealed bids or proposals are obtained through public advertising, an appropriate cost or price analysis is performed for procurement actions exceeding the simplified acquisition threshold, documentation is retained, and proper oversight is exercised to demonstrate compliance with 2 CFR section 200.318 through 200.327.
Internal control deficiency and noncompliance over procurement. Identification of the federal program: Assistance Listing Number 21.027: • COVID-19 – Coronavirus State and Local Fiscal Recovery Funds • U.S. Department of the Treasury • Federal award identification number – Not Applicable • Federal award year – March 3, 2021 to December 31, 2024 • Pass-through entity – State of Colorado Department of Human Services Criteria or specific requirement (including statutory, regulatory or other citation): Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.303 Internal controls. The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (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; (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders; (c) (1) the non-Federal entity must maintain written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 General procurement standards (i) the non-Federal entity must maintain records sufficient to detail the history of procurement. These records will include, but are not necessarily limited to, the following: Rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.319 Competition (a) All procurement transactions for the acquisition of property or services required under a Federal award must be conducted in a manner providing full and open competition consistent with the standards of this section and 200.320. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. 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) (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; (b) Formal procurement methods. When the value of the procurement for property or services under a Federal financial assistance award exceeds the simplified acquisition threshold, or a lower threshold established by a non-Federal entity, formal procurement methods are required. Formal procurement methods require following documented procedures. Formal procurement methods also require public advertising unless a non-competitive procurement can be used in accordance with 200.319 or paragraph (c) of this section. The following formal methods of procurement are used for procurement of property or services above the simplified acquisition threshold or a value below the simplified acquisition threshold the non-Federal entity determines to be appropriate – (1) Sealed bids. A procurement method in which bids are publicly solicited and a firm fixed-price contract (lump sum or unit price) is awarded to the responsible bidder whose bid, conforming with all the material terms and conditions of the invitation for bids, is the lowest in price; (2) Proposals. A procurement method in which either a fixed price or cost-reimbursement type contract is awarded. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.320 Methods of procurement to be followed. (c) Noncompetitive procurement. There are specific circumstances in which noncompetitive procurement can be used. Noncompetitive procurement can only be awarded if one or more of the following circumstances apply: (1) The acquisition of property or services, the aggregate dollar amount of which does not exceed the micro-purchase threshold; (2) The item is available only from a single source; (3) The public exigency or emergency for the requirement will not permit a delay resulting from publicizing a competitive solicitation; (4) The Federal awarding agency or pass-through entity expressly authorizes a noncompetitive procurement in response to a written request from the non-Federal entity; or (5) After solicitation of a number of sources, competition is determined inadequate. Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.324 Contract cost and price. (a) The non-Federal entity must perform a cost or price analysis in connection with every procurement action in excess of the Simplified Acquisition Threshold including contract modifications. The method and degree of analysis is dependent on the facts surrounding the particular procurement situation, but as a starting point, the non-Federal entity must make independent estimates before receiving bids or proposals. Condition: During our testing over procurement, we observed management did not have documented procurement procedures that conformed to the procurement standards identified in 2 CFR section 200.318 to 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management did not have internal controls in place over small purchase procurements to ensure price or rate quotations were obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals were obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management did not maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Cause: Management did not have effective internal controls in place over the compliance requirements as stated in the criteria or specific requirement section above. Effect or potential effect: Procurements were not supported by internal controls and could potentially include unreasonable prices or rates. Questioned costs: $1,306,305 – Assistance Listing Number 21.027 – Federal award identification number – Not Applicable Questioned costs were computed by taking the total small purchase and formal procurement samples not in compliance with the compliance requirements as stated in the criteria or specific requirement section above. Questioned costs means an amount, expended or received from a Federal award, that (1) is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award or (2) at the time of the audit, lacked adequate documentation to support compliance. Context: During our testing over procurements, we obtained a listing of 12 small purchase procurements and 1 formal procurement. We selected a sample of 5 small purchase procurements and 1 formal procurement. There were 4 ($131,790) out of 5 ($170,634) small purchase procurements and 1 ($1,174,515) out of 1 ($1,174,515) formal procurements where we observed management did not have internal controls in place to ensure the compliance requirements as stated in the criteria or specific requirement section above were performed. Identification as a repeat finding, if applicable: No. Recommendation: Management should create documented procurement procedures that conform to the procurement standards identified in 2 CFR section 200.318 through 200.327 and written standards of conduct covering conflicts of interest and governing the actions of its employees engaged in the selection, award and administration of contracts. Management should develop and implement internal controls over small purchase procurements to ensure price or rate quotations are obtained from an adequate number of qualified sources, formal procurements to ensure sealed bids or proposals are obtained through public advertising, and completion of a cost or price analysis in connection with all procurement actions exceeding the simplified acquisition threshold. Management should maintain records for procurements to document the history of procurement, including the rationale for the method of procurement, selection of contract type, contractor selection or rejection, and the basis for the contract price. Management should review the procurements identified as questioned costs to identify if any improper payments were made to the entity. Views of responsible officials: We agree with the finding that internal controls were not sufficient to maintain compliance with federal procurement standards under Title 2, Subtitle A, Chapter II, Part 200, Subpart D, 200.318 to 200.327 for a non-federal entity. However, the funds were expended for the intended purpose of the federal award. The Health System is committed to implementing internal controls to ensure procurement related to federal awards follow 2 CFR section 200.318 to 200.327. The Health System will create a procurement policy to ensure it complies with the requirements of 2 CFR section 200.318 through 200.327, that includes the written standards of conduct covering conflicts of interest, governing the actions of its employees who select, award and administer procurement contracts. This policy will include procedures to ensure proper procurement for small purchases to ensure sufficient price quotations are obtained from the required number of qualified sources, proper sealed bids or proposals are obtained through public advertising, an appropriate cost or price analysis is performed for procurement actions exceeding the simplified acquisition threshold, documentation is retained, and proper oversight is exercised to demonstrate compliance with 2 CFR section 200.318 through 200.327.
Federal Award Number and Award Year RW1 17, award year 3/1/2023 – 2/29/2024 for AL No. 93.914 Criteria The 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. Condition and Context BayCare included expenditures related to 2023 dates of service on the Schedule of Expenditures of Federal Awards (SEFA). An adjustment to the final SEFA of $155,429 was required and resulted in identification of an additional major program. Possible Cause and Effect In preparing the SEFA, BayCare utilized the 2024 claim payments received as the basis of the amount on the SEFA rather than expenditures incurred during 2024. Thus, this resulted in 2023 expenditures being included on the SEFA. Questioned Costs None Statistically Valid Sample Not applicable Repeat of Prior Finding Yes Recommendations Management should enhance its process to include a supervisory review of the SEFA, ensuring its completeness and accuracy. View of Responsible Official Management agrees with the noted finding.
Finding 2024-003 Subject: Water and Waste Disposal Systems for Rural Communities - Procurement and Suspension and Debarment 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): 15-048-349178652 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-003. Condition and Context An effective internal control system was not in place at the Town in order to ensure compliance with requirements related to the grant agreement and the following compliance requirement: Procurement and Suspension and Debarment Procurement - Policy The Town did not have an approved procurement policy that reflected applicable state laws and regulations including procedures to avoid acquisition of unnecessary or duplicative items and procedures to ensure that all solicitations incorporate a clear and accurate description of the technical requirements for the material, product, or service to be procured. The Town is required to have and use documented procurement procedures, which are 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. Suspension and Debarment Prior to entering into subawards and covered transactions with the Water and Waste Disposal Systems for Rural Communities award funds, recipients are required to verify that such contracts and subrecipients are not suspended, debarred, or otherwise excluded. "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, collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. Upon the inquiry of the Town to determine its policies and procedures related to suspension and debarment requirements, the Town stated that a suspension and debarment clause is included in contracts. Contracts are reviewed by the President of the Town Council. Three covered transactions, totaling $4,902,201, were identified and tested. The Town could not provide documentation that procedures were performed to verify that one of the three vendors paid from the Water and Waste Disposal Systems for Rural Communities award funds with contracts over $25,000 were not excluded or disqualified from participation in federal programs. Additionally, the Town had two agreements subject to the Buy America Build America (BABA) provisions. The Town could not provide documentation for one of the two vendors that procedures were performed to ensure the Buy America domestic preference provisions were included in either agreement or a BABA waiver was obtained. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.318(a) states: "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." 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." 2 CFR 184.4 states in part: "(a) Applicability of Buy America Preference to infrastructure projects. The Buy America Preference applies to Federal awards where funds are appropriated or otherwise made available for infrastructure projects in the United States, regardless of whether infrastructure is the primary purpose of the Federal award. (b) Including the Buy America Preference in Federal awards. All Federal awards with infrastructure projects must include the Buy America Preference in the terms and conditions. The Buy America Preference must be included in all subawards, contracts, and purchase orders for the work performed, or products supplied under the Federal award. . . ." Cause A proper system of internal controls was not designed by the management of the Town. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Town's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. The Town had a newly elected official as of January 1, 2024, who was not familiar with the requirements. The Town contracted with outside engineers to manage the compliance requirement, and there was no documentation that BABA provisions or a waiver were obtained for the contracts nor that they included a suspension or debarment clause. 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, there was no procurement policy and vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. In addition, the BABA provisions were not appropriately included in infrastructure projects. Any program funds the Town used to pay vendors that have been suspended or debarred could be unallowable, and the funding agency could potentially recover them. Additionally, 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 the Town establish documented procurement procedures consistent with state and local laws for the acquisition of property or services required under a federal award or subaward as outlined in the code of federal regulations. In addition, we recommended that the Town strengthen its system of internal controls to ensure that all 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. We recommended that the Town ensure all applicable contracts contain the required BABA provisions. We also recommended that the current official gain a thorough understanding of the grant requirement to ensure compliance. 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 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): 15-048-349178652 Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context Recipients of the Water and the Waste Disposal Systems for Rural Communities award funds are required to submit the RD 442-2 (Statement of Budget, Income and Equity) and the RD 442-3 (Balance Sheet) or the annual audit may be submitted in lieu of those forms. There was no documented oversight, review, or approval process to ensure the required RD 442-2 or an annual report were completed and submitted timely and accurately to the U.S. Department of Agriculture (USDA). The Town submitted the RD 442-3 but did not submit the RD 442-2 or an annual report. The RD 442-3 that was submitted was not accurate and overstated current assets by $252,427. 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 A proper system of internal controls was not designed by the management of the Town. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Town's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. The Town had a newly elected official as of January 1, 2024, who was not familiar with the required reports and resulted in one report being inaccurate and another report not being filed. 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. 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. Management should develop policies and procedures to ensure that all required reports are filed timely and accurately. We also recommended that the current official gain a thorough understanding of the grant requirements to ensure compliance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-002 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 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Modified Opinion Condition and Context The Town elected to receive the standard revenue loss allowance, allowing the Town to claim its total direct COVID-19 - State and Local Fiscal Recovery Funds (SLFRF) allocation as revenue loss to use for government services. As such, all SLFRF program funds to date were expended under the revenue loss eligible use category. The U.S. Department of the Treasury (Treasury) determined that there are no subawards under this eligible use category, and that recipients' use of revenue loss funds would not give rise to subrecipient relationships as there is no federal program or purpose to carry out in the case of the revenue loss portion of the award. Prior to entering into subawards and covered transactions with SLFRF award funds, recipients are required to verify that such contracts and subrecipients are not suspended, debarred, or otherwise excluded. "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 the Excluded Parties List System (EPLS), collecting a certification from that person or adding a clause or condition to the covered transaction with that person. Due to the Treasury's determination that the revenue loss eligible use category does not give rise to subawards, the Town was only required to comply with suspension and debarment requirements related to covered transactions for revenue replacement. Upon inquiry of the Town to determine its policies and procedures related to suspension and debarment requirements, the Town stated that it did not have policies or procedures in place for verifying that an entity with which it plans to enter into a covered transaction is not suspended, debarred, or otherwise excluded or disqualified from participating in federal assistance programs or activities. We identified 42 transactions, totaling $2,125,091, to 16 different vendors for goods or services that equaled or exceeded $25,000, were paid from SLFRF funds. A sample of 5 vendors was examined to determine whether the Town verified the suspension and debarment status prior to payment. The Town had not verified the vendor's suspension and debarment status for any of the 5 vendors prior to issuing payment. The lack of internal controls and noncompliance were systematic 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). . . ." 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 intend to do business is not excluded or disqualified. You do this by: (a) Checking the EPLS; or (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." 2 CFR 200.214 states: "Non-Federal entities are subject to the non-procurement debarment and suspension regulations implementing Executive Orders 12549 and 12689, 2 CFR part 180. The regulations in 2 CFR part 180 restrict awards, subawards, and contracts with certain parties that are debarred, suspended, or otherwise excluded from or ineligible for participating in Federal assistance programs or activities." Cause A proper system of internal controls was not designed by the management of the Town. The Director of Finance and Records was new to the position as of January 24, 2023. The former Chief Financial Officer was not knowledgeable on the compliance requirements of the federal award. Lastly, documentation that vendors were not suspended or debarred was not provided for review. Effect Without the proper implementation of an effectively designed system of internal controls, the system was incapable of effectively preventing, or detecting and correcting, material noncompliance. As a result, vendors to whom payments equal to or in excess of $25,000 were not verified to be not suspended, debarred, or otherwise excluded. 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. Additionally, 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 the Town strengthen its system of internal controls to ensure that all 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 2024-003 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 Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): FY2024 Compliance Requirement: Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context Recipients of COVID-19 - State and Local Fiscal Recovery Funds (SLFRF) grants are required to submit quarterly or annually 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. The Town was classified as a Tier 5 auditee - a metropolitan city with a population below 250,000 residents which received less than $10 million in SLFRF funding. Tier 5 auditees are required to submit an annual P&E report due in April of each year. The Town was required to file an annual P&E report on April 30, 2024. The report was to cover the period of April 1, 2023 to March 31, 2024. The Town presented this report for audit; however, there were no documented internal controls in place over the Reporting compliance requirement. The report was prepared and submitted by the Director of Finance and Records without documented oversight or review. The lack of internal controls resulted in material errors made on the report, including an overstatement in Cumulative Expenditures and Cumulative Obligations. 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). . . ." Coronavirus State and Local Fiscal Recovery Funds Compliance and Reporting Guidance, page 10, states in part: ". . . 10. Reporting. All recipients of federal funds must complete financial, performance, and compliance reporting as required and outlined in Part 2 of this guidance. Expenditures may be reported on a cash or accrual basis, as long as the methodology is disclosed and consistently applied. Reporting must be consistent with the definition of expenditures pursuant to 2 CFR 200.1. Your organization should appropriately maintain accounting records for compiling and reporting accurate, compliant financial data, in accordance with appropriate accounting standards and principles. . . ." 31 CFR 35.4(c) states: "Reporting and requests for other information. During the period of performance, recipients shall provide to the Secretary or her delegate, as applicable, periodic reports providing detailed accounting of the uses of funds, modifications to a State or Territory's tax revenue sources, and such other information as the Secretary or her delegate, as applicable, may require for the administration of this section. In addition to regular reporting requirements, the Secretary may request other additional information as may be necessary or appropriate, including as may be necessary to prevent evasions of the requirements of this subpart. False statements or claims made to the Secretary may result in criminal, civil, or administrative sanctions, including fines, imprisonment, civil damages and penalties, debarment from participating in Federal awards or contracts, and/or any other remedy available by law." Cause A proper system of internal controls over the P&E reports was not designed by management of the Town. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the Town's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. The Town had a systemic lack of internal controls, which resulted in the lack of internal controls over the annual P&E report. 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. 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 the Town's management design and implement a proper system of internal controls, including policies and procedures to ensure that the Town provides the Treasury with complete and accurate information for the P&E report. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2024-002 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): FY 2021 Compliance Requirement: Procurement and Suspension and Debarment Audit Findings: Material Weakness, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-003. INDIANA STATE BOARD OF ACCOUNTS 16 CITY OF RICHMOND SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context Prior to entering into subawards and covered transactions with the COVID-19 - Coronavirus State and Local Fiscal Recovery Funds (SLFRF), recipients are required to verify that such contractors and subrecipients are not suspended, debarred, or otherwise excluded. "Covered transactions" include, but are not limited to, contracts for goods and services awarded under a nonprocurement transaction (i.e., grant agreement) that are expected to equal or exceed $25,000. The verification is to be done by checking the Excluded Parties List System (EPLS), collecting a certification from that person, or adding a clause or condition to the covered transaction with that person. The City had a process in place to determine if vendors were suspended or debarred; however, internal controls were not sufficient to ensure that all vendors with covered transactions exceeding $25,000 were verified to not be suspended or debarred from receiving federal funds. A sample of five covered transactions totaling $667,753 that equaled or exceeded $25,000 paid from SLFRF funds was selected for testing. For one of the transactions tested in the amount of $98,583, the City did not retain documentation showing that it verified that the vendor was not suspended or debarred from receiving federal funds prior to issuing the payment. 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 City had not designed or implemented effective policies and procedures to verify that contractors were not suspended or debarred or otherwise excluded from participating in federal programs prior to entering into covered transactions using SLFRF funds. While an internal control process was in place, it did not ensure that all vendors were not suspended or debarred from receipt of federal grant funds for goods and services. Effect Without the proper implementation of an effectively designed system of internal controls, the City could not ensure that all contractors paid with federal funds were eligible to participate in federal programs. Any program funds the City used to pay contractors that have been suspended or debarred would be unallowable, and the funding agency could potentially recover the funds. Questioned Costs There were no questioned costs identified. INDIANA STATE BOARD OF ACCOUNTS 17 CITY OF RICHMOND SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the City establish a proper system of internal controls and develop policies and procedures to ensure contractors that are paid $25,000 or more, all or in part with federal funds, are not suspended, debarred, or otherwise excluded prior to entering into any contracts. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
2024-002 Eligibility - METS Prior Year Finding Number: 2023-002 Year of Finding Origination: 2023 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 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 and income limits. Minnesota Statutes, section 256B.05 requires county agencies to administer Medical Assistance. Condition: The Minnesota Department of Human Services maintains the computer systems, METS, which is used by Clay County to support the eligibility determination process. In the case files reviewed for eligibility, not all documentation to support participant eligibility was available or input correctly. The following exceptions were noted in a sample of 40 case files: • One case file lacked citizenship documentation. • One case file did not document the participant’s income correctly. Questioned Costs: Not applicable. Clay County administers the program, but the State of Minnesota pays benefits to participants in this program. Context: The State of Minnesota and Clay County split the eligibility determination process. Generally, Clay County resolves eligibility issues when prompted by the system, while the State performs the initial review of the case files, including determining the information in METS is verified. Participants receive benefits from the State. The population consisted of 17,456 active METS case files in the Medical Assistance Program in 2024; the sample size was 40 case files. The sample size was based on the guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The improper input or updating of information in METS and lack of verification of key eligibility-determining factors increase the risk that program participants will receive benefits when they are not eligible. Cause: Program personnel responsible for resolving eligibility issues in METS did not ensure all required information was input or updated correctly or verified. Recommendation: We recommend Clay County implement additional procedures to provide reasonable assurance that all documentation needed to resolve eligibility issues exists and program personnel properly input, update, or verify the documentation in METS. In addition, Clay County should consider providing further training to program personnel. View of Responsible Official: Concur
2024-003 Eligibility - MAXIS Prior Year Finding Number: 2023-002 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 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. The manual includes specific eligibility requirements for participants’ citizenship verification, income limits, and asset verification, as well as requirements of agencies to process applications within 45 days for most applicants, and up to 60 days for certain applicants. Minnesota Statutes § 256B.05 requires county agencies to administer Medical Assistance. Condition: The Minnesota Department of Human Services maintains the computer systems, MAXIS, which is used by Clay County to support the eligibility determination process. In the case files reviewed for eligibility, not all documentation to support participant eligibility was available, updated, or input correctly into MAXIS. The following exceptions were noted in the sample of 40 case files tested: • One applicant’s application was processed 107 days after receipt. • Six participants’ citizenship verification method did not match the documentation in the file. • One case file did not document the participant’s income correctly. • Three case files did not document the participants’ assets correctly. 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 the County split the eligibility determination process. Pursuant to Minnesota statutes, Clay County performs the "intake function" needed for this program, while the state maintains the MAXIS systems, which supports the eligibility determination process. Participants receive benefit payments from the State. The population consisted of 3,484 active MAXIS cases enrolled in the Medical Assistance Program in 2024; the sample size was 40 case files. The sample size was based on the guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The lack of updated information in MAXIS and lack of verification of key eligibility-determining factors increase the risk that program participants will receive benefits when they are not eligible. Cause: Program personnel entering case data into MAXIS did not obtain and update the information in the system. Recommendation: We recommend Clay County implement additional procedures to provide reasonable assurance that all documentation needed to support eligibility determinations exists, the program personnel properly input or update the documentation in MAXIS, and the program personnel follow up on issues in a timely manner. In addition, Clay County should consider providing further training to program personnel. View of Responsible Official: Concur
2024-001 Finding – Federal Award Type: Federal Financial Reporting –SF-425 –Significant Deficiency in Internal Control Over Compliance Identification of Federal Program: AL Number: 93.600 Head Start Cluster Criteria / Requirement: The 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. Condition / Context: During the audit, one out of two Federal Financial Reports (SF-425) tested did not have sufficient internal controls, as the report was created by one individual and did not have documented oversight from another individual. No non-compliance was noted, as the financial information report was supported with direct reports from the general ledger. Cause: Due to turnover in the accounting department, an individual who is not normally part of the established procedure performed oversight over federal financial reporting, however evidence of this review could not be produced as it was not documented. Effect: Failure to maintain sufficient internal controls over federal reporting may result in non‐compliance and or inaccurate reporting. Questioned Costs: None. Recommendation: The Organization should reevaluate the establish organizational controls regarding financial reporting to ensure that such policies and procedures are being followed. Management’s Response: Management concurs with the audit finding and will work to implement changes to ensure internal controls are in place over federal reporting requirements.
Allowable Costs U. S. Department of Health and Human Services U. S. Department of Agriculture Research and Development Cluster Significant Deficiency Criteria: 2 CFR 200.303 requires that a 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. Condition: During our testing of internal controls over allowability of costs, it was determined that internal controls over allowable costs are not designed to prevent and detect errors in employee reimbursed expenditures being reported on certain Group 1 benefited employees’ expense reports for amounts charged to research and development programs. Cause: Lack of effectively designed and implemented internal controls over allowability of expenditures. Effect: Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be relied upon to effectively prevent or detect noncompliance. Questioned costs: None reported Context: Our testing noted five transactions out of a total of 60 transactions that did not have documentation of appropriate approval. Our sample was not intended to be statistically valid. Repeat Finding from Prior Year: Yes. Finding 2023-002. Recommendation: Effective supervisory review and approval internal controls over employee expense reimbursements should be implemented to ensure expenditures charged to federal or state awards meet the criteria established in the terms and conditions. Furthermore, the review and approval should be formally documented.
Preparation of the Schedule of Expenditures of Federal Awards U. S. Department of Health and Human Services U. S. Department of Agriculture Research and Development (R&D) Cluster Material Weakness Criteria: Title 2 Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) requires the System to prepare a schedule of expenditures of federal awards (Schedule). 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award in compliance with federal statutes, regulations, and conditions of the federal award. Condition: Inadequate controls exist over the preparation of the Schedule specific to R&D cluster awards to allow for the timely completion of a complete and accurate Schedule. Consequently, certain R&D cluster expenditures were inadvertently omitted from the preliminary Schedule. Cause: The System did not have adequate controls over identifying all R&D cost reimbursement Federal Acquisition Regulation (FAR) contract related expenditures that should be reported on the SEFA. Effect: Management identified additional reportable R&D cost reimbursement FAR contract related expenditures that were added to the Schedule late in the audit process. Questioned costs: None reported. Context: Approximately $2,600,000 of additional R&D expenditures under cost reimbursement FAR contracts in relation to total expenditures of approximately $14,395,000 under the R&D cluster for the year-ended December 31, 2024, were originally omitted from the preliminary Schedule. These changes were not identified in a timely manner resulting in delays in completing the System Single Audit. Repeat Finding from Prior Year: No Recommendation: We recommend that management enhance its controls over the Schedule to ensure they include similar R&D expenditures to facilitate timely accurate completion of the Schedule.
Finding 2024-001 – ReportingInformation of the federal program:Federal Grantor: Department of Health and Human Services (HHS)Assistance Listing No.: 93.391, COVID-19 Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare CrisisPass-Through Grantor: Chicago Department of Public HealthFederal Grantor: Department of Health and Human Services (HHS)Assistance Listing No.: 93.323, COVID-19 Epidemiology and Laboratory Capacity for Infectious DiseasesPass-Through Grantor: Chicago Department of Public HealthCriteria or specific requirement (including statutory, regulatory, or other citation):Section 200.303 of the Uniform Guidance states the following regarding internal control: “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).”The Uniform Guidance 2 CFR section 200.510 states, “(b) Schedule of expenditures of Federal awards. The auditee must also prepare a schedule of expenditures of federal awards (SEFA) for the period covered by the auditee’s financial statements which must include the total Federal awards expended as determined in accordance with §200.502 Basis for determining Federal awards expended.”Condition:Certain expenditures related to the COVID-19 Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crisis and the COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases were overstated by $347,352 and $164,120, respectively, on the preliminary schedule of expenditures of federal awards (the Schedule) provided by management due to the inappropriate classification of costs within the general ledger; the final Schedule was corrected.Cause:Endeavor’s internal controls over the preparation of the Schedule were not sufficient to properly accumulate and accurately report all expenditures of federal awards.Effect or Potential Effect:Inaccurate or improper reporting of expenditures results in a misstated Schedule and can also potentially result in insufficient testing of the major programs or improper identification of major programs for audit purposes.Questioned costs:None.Context:Endeavor reported expenditures of $872,758 on the preliminary SEFA, but on the final SEFA reported $525,406 related to the COVID-19 Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crisis. Endeavor reported expenditures of $1,233,464 on the preliminary SEFA, but on the final SEFA reported $1,069,344 related to the COVID-19 Epidemiology and Laboratory Capacity for Infectious Diseases.Identification as a repeat finding, if applicable:This is a repeat finding of 2023-001.Recommendation:Management should implement internal controls to ensure amounts are appropriately accumulated and reported on the Schedule and all federal expenditures are appropriately identified and reported on the Schedule.Views of responsible officials:Management acknowledges the findings related to SEFA reporting. The issue arose from miscommunication in determining which expenditures should be reported for the programs in question. We recognize the importance of accurate and complete reporting. We will enhance our review and communication processes to ensure clarity between program managers and the finance team when identifying reportable expenditures. We have already taken steps to address this issue by:• Creating a new policy and procedure for SEFA reporting and establishing clear guidance and documentation for expenses that should be included in the SEFA.• Implementing an expanded review process to ensure accuracy prior to submission.
Finding 2024-003 – Subrecipient Cash ManagementIdentification of the federal program:Federal Grantor: Department of Health and Human Services (HHS)Assistance Listing No.: 12.420, Military Medical Research and DevelopmentGrant Award: W81XWH2010210Federal Grantor: Department of Health and Human Services (HHS)Assistance Listing No.: 93.395, Cancer Treatment ResearchGrant Award: R01CA248574Federal Grantor: Department of Health and Human Services (HHS)Assistance Listing No.: 93.847, Diabetes, Digestive, and Kidney Diseases Extramural ResearchGrant Award: R01DK133328Criteria or specific requirement (including statutory, regulatory or other citation):Section 200.303 of the Uniform Guidance states the following regarding internal control: “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 200.305 (c) states, “…the Federal agency or pass-through entity must make payment within 30 calendar days after receipt of the payment request unless the Federal agency or pass-through entity reasonably believes the request to be improper.”Condition:Management did not have sufficiently designed internal controls to ensure all payments made to subrecipients were made within the required time frames.Cause:Management did not ensure that all subrecipient cash payments were made within the required time frame.Effect or potential effect:Subrecipients are not paid within the time frame established in the Uniform Guidance.Questioned costs:None.Context:We tested a sample of 10 subrecipient payments, and identified 4 payments that were not paid within 30 days of receipt. Total expenditures for the Research and Development Cluster were $13,427,764 at December 31, 2024. Total subrecipient expenditures for the year ended December 31, 2024, were $2,133,172.Identification as a repeat finding, if applicable:This finding is not a repeat finding from the prior year.Recommendation:Management should ensure subrecipient payments are made within the required time frames included in the Uniform Guidance.Views of responsible officials:Management concurs with the finding and will increase the priority around the 30-day processing deadline mandated by the Uniform Guidance 2 FR 200.305 (b)(3), including review of current processes, policies, and procedures to minimize the time between invoice receipt and the transfer of federal funds to the subrecipient.
Assistance Listing Number: 93.224 and 93.527 Name of Federal Agency: Department of Health and Human Services, HRSA Program Title: Health Center Program Compliance Requirement: Special Tests and Provisions – Sliding Fee Discounts Pass-through Entity: N/A Federal Grant/Contract Number and Grant Year: 5 H80C00097-23-00 (2024), 6 H80CS00097-23-14 (2024), 1 H8GCS47591-01-00 (2022 and 2023), 1 H8LCS50961-01-00 (2023 and 2024) Finding Type: Noncompliance and Significant Deficiency in Internal Control Known Questioned Costs: $279 Condition: The Organization did not follow the correct processes of review and approval of the application of the sliding fee scale. - Failure to provide approval of one of the sliding fee scale applications. - One patient listed in the sliding fee scale population did not have an application. - One sliding fee scale claim was incorrectly applied to the slide as the patient had insurance. Criteria: 2 CFR section 200.303 requires that nonfederal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the nonfederal entity is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Health centers must prepare and apply a sliding fee discount schedule, so that the amounts owed for health center services by eligible patients are adjusted based on the patient’s ability to pay (42 U.S.C 254b(k)(3)(G)(i)). The patient’s ability to pay is based on the official poverty guidelines, as revised annually by the U.S. Department of Health and Human Services (42 U.S.C 9902(2). Cause: Failure to apply the sliding fee correctly, as noted in the encounters above, was due to improper staff training or failure to properly monitor the process. Perspective: Out of the forty items sampled, 2 instances contained exceptions resulting in noncompliance. The total dollar value of the exceptions in the sample was $279 out of a total dollar amount of $8,454 sampled. Extrapolated over the population dollar value of $11,803,872, the projected error was $389,549 likely questioned costs. The sample was not statistically valid. Effect: The Organization could be incorrectly billing for services Recommendation: Staff should be consistently trained in how patients should complete the intake forms, including the sliding fee scale application, and require patients complete the form appropriately, including refusal to provide information, if applicable. Staff should also be consistently trained in what documentation is considered sufficient to support income identified as well as verify the application is consistent with the documentation and, when needed, clearly document the reasons for inconsistency. Staff should make every effort to obtain documentation of patient income in accordance with internal policies and procedures. Views of Responsible Officials and Planned Corrective Actions: See Corrective Action Plan
2024-002 – Review of Grant Reimbursement Requests and Grant Reporting Federal Program AL 10.382 Meat and Poultry Intermediary Lending Program Criteria 2 CFR 200.303, Internal Controls, requires that recipients establish and maintain effective internal control over Federal awards that provides reasonable assurance that the recipient is managing Federal awards in compliance with Federal status, regulations and the terms and conditions of the Federal award. Condition There is a lack of review and approval over grant reimbursement requests and grant reporting prior to submission. Cause The Organization is new to receiving federal grant funding and therefore does not have all of the appropriate internal controls in place. Effect Noncompliance will not be prevented or detected and corrected in a timely manner. Recommendation We recommend the Organization review their internal controls over grant reimbursement requests and grant reporting to determine if additional procedures can be implemented. Compensating controls that mitigate the related risks could be provided through appropriate oversight of the performance of these functions. Views of Responsible Officials and Planned Corrective Actions See corrective action plan for response.
2024-003 Corporation for National and Community Service Federal Financial Assistance Listing #94.012, 22BIICA001 10/1/2022 – 9/30/2025, 23BIACA001 10/1/2023 – 9/30/2026, 23BIFNY001 10/1/2023 – 9/30/2026 Americorps September 11th National Day of Service and Remembrance Grants Procurement, Suspension and Debarment Material Weakness in Internal Controls over Compliance and 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 non-Federal entity’s documented procurement procedures must conform to the procurement standards identified in 2 CFR 200.318 through 200.327 which also requires documentation to be retained to detail the history of procurements. Condition: The organization’s procurement policy is missing required provisions in accordance with 2 CFR 200.318. For each of the 4 vendors selected for testing there was no documentation retained to support the rationale for the method of procurement. Additionally, the Organization did not retain supporting documentation to substantiate whether consideration was taken whether the vendor was suspended or debarred from doing business with the federal government prior to entering the covered transaction for each of the 4 vendors selected for testing. Cause: There was a lapse in oversight of the internal control process ensuring documentation was retained supporting the organization’s procurement, suspension and debarment process. Additionally, the organization did not cross reference procurement policy with 2 CFR 200.318 through 200.327 ensuring minimum required provisions were included within. Effect: Without retaining documentation to support procurement, suspension and debarment rationale, demonstrating that the program complies with laws, regulations, and other compliance requirements is difficult. Questioned Costs: None reported based on assessment of comparative pricing readily available. Context/Sampling: A nonstatistical sample of 4 vendors out of 8 vendors were selected for testing. Repeat Finding from Prior Year: Yes, prior year finding 2023-004. Recommendation: We recommend management to review internal control procedures ensuring support is retained to substantiate procurement, suspension and debarment was considered prior to entering the transaction. We recommend management review 2 CFR 200.318 through 200.327 and revise the organization’s procurement policy to include all minimum required provisions. Views of Responsible Officials: Management is in agreement.