Finding Number: 2024-004 Finding Title: Internal Controls and Compliance Over Federally Funded Equipment Compliance Requirement(s): Equipment and Real Property Management Classification: Significant Deficiency Programs: Port Security Grant Program ALN #: 97.056 Pass-through entity: N/A – Direct Award Federal Agency: Department of Homeland Security Federal Award Numbers: EMW-2021-PU-00463-S01 Federal Award Year: 2021 Criteria or specific requirement (including statutory, regulatory, or other citation § 200.313 Equipment. See also § 200.439. (a) Title. Title to equipment acquired under the Federal award will vest upon acquisition in the recipient or subrecipient subject to the conditions of this section. This title must be a conditional title unless a Federal statute specifically authorizes the Federal agency to vest title in the recipient or subrecipient without further responsibility to the Federal Government (and the Federal agency elects to do so). A conditional title means a clear title is withheld by the Federal agency until conditions and requirements specified in the terms and conditions of a Federal award have been fulfilled. Title for equipment vested in a recipient or subrecipient is subject to the following conditions: (1) Use the equipment for the authorized purposes of the project during the period of performance or until the property is no longer needed for the purposes of the project. (2) While the equipment is being used for the originally authorized purpose, the recipient or subrecipient must not dispose of or encumber its title or other interests without the approval of the Federal agency or pass-through entity. (3) Use and dispose of the property in accordance with paragraphs (b), (c), and (e) of this section. (b) General. A State must use, manage and dispose of equipment acquired under a Federal award in accordance with State laws and procedures. Indian Tribes must use, manage, and dispose of equipment acquired under a Federal award in accordance with tribal laws and procedures. If such laws and procedures do not exist, Indian Tribes must follow the guidance in this section. Other recipients and subrecipients, including subrecipients of a State or Indian Tribe, must follow paragraphs (c) through (e) of this section. (c) Use. (1) The recipient or subrecipient must use equipment for the project or program for which it was acquired and for as long as needed, whether or not the project or program continues to be supported by the Federal award. The recipient or subrecipient must not encumber the equipment without prior approval of the Federal agency or pass-through entity. The Federal agency may require the submission of the applicable common forms for reporting on equipment. When no longer needed for the original project or program, the equipment may be used in other activities in the following order of priority: (i) Activities under other Federal awards from the Federal agency that funded the original program or project; then (ii) Activities under Federal awards from other Federal agencies. These activities include consolidated equipment for information technology systems. (2) During the time that equipment is used on the project or program for which it was acquired, the recipient or subrecipient must also make the equipment available for use on other programs or projects supported by the Federal Government, provided that such use will not interfere with the purpose for which it was originally acquired. First preference for other use of the equipment must be given to other programs or projects supported by the Federal agency that financed the equipment. Second preference must be given to programs or projects under Federal awards from other Federal agencies. Use for non-federally funded projects is also permissible, provided such use will not interfere with the purpose for which it was originally acquired. The recipient or subrecipient should consider charging user fees as appropriate. (3) Notwithstanding the encouragement in § 200.307 to earn program income, the recipient or subrecipient must not use equipment acquired with the Federal award to provide services for a fee that is less than a private company would charge for similar services unless specifically authorized by Federal statute. This restriction is effective as long as the Federal Government retains an interest in the equipment. (4) When acquiring replacement equipment, the recipient or subrecipient may either trade-in or sell the equipment and use the proceeds to offset the cost of the replacement equipment. (d) Management requirements. Regardless of whether equipment is acquired in part or its entirety under the Federal award, the recipient or subrecipient must manage equipment (including replacement equipment) utilizing procedures that meet the following requirements: (1) Property records must include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date, the cost of the property, the percentage of the Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property. The recipient and subrecipient are responsible for maintaining and updating property records when there is a change in the status of the property. (2) A physical inventory of the property must be conducted, and the results must be reconciled with the property records at least once every two years. (3) A control system must be in place to ensure safeguards for preventing property loss, damage, or theft. Any loss, damage, or theft of equipment must be investigated. The recipient or subrecipient must notify the Federal agency or pass-through entity of any loss, damage, or theft of equipment that will have an impact on the program. (4) Regular maintenance procedures must be in place to ensure the property is in proper working condition. (5) If the recipient or subrecipient is authorized or required to sell the property, proper sales procedures must be in place to ensure the highest possible return. (e) Disposition. When equipment acquired under a Federal award is no longer needed for the original project, program, or for other activities currently or previously supported by a Federal agency, the recipient or subrecipient must request disposition instructions from the Federal agency or pass-through entity if required by the terms and conditions of the Federal award. Disposition of the equipment will be made as follows, in accordance with Federal agency or pass-through entity disposition instructions: (1) Equipment with a current fair market value of $10,000 or less (per unit) may be retained, sold, or otherwise disposed of with no further responsibility to the Federal agency or pass-through entity. (2) Except as provided in § 200.312(b), or if the Federal agency or pass-through entity fails to provide requested disposition instructions within 120 days, items of equipment with a current fair market value in excess of $10,000 (per-unit) may be retained or sold by the recipient or subrecipient. However, the Federal agency is entitled to an amount calculated by multiplying the percentage of the Federal agency's contribution towards the original purchase by the current market value or proceeds from the sale. If the equipment is sold, the Federal agency or pass-through entity may permit the recipient or subrecipient to retain, from the Federal share, $1,000 of the proceeds to cover expenses associated with the selling and handling of the equipment. (3) The recipient or subrecipient may transfer title to the property to the Federal Government or to an eligible third party provided that the recipient or subrecipient must be entitled to compensation for its attributable percentage of the current fair market value of the property. (4) In cases where a recipient or subrecipient fails to take appropriate disposition actions, the Federal agency or pass-through entity may direct the recipient or subrecipient to take disposition actions. Condition As part of our audit procedures, we reviewed internal controls over inventory and asset management, including physical inspection and disposition tracking of equipment. For the Fire Department, we determined that no physical inventory of federally funded equipment had been conducted during the required biennial period, and no reconciliation of equipment records to actual assets had been performed. While informal tracking logs and asset purchase records existed, they were incomplete and lacked standardized documentation of asset tag numbers, inspection dates, asset condition, and verification signatures. Moreover, there was no evidence of centralized or departmental oversight to ensure routine physical inventory and compliance with Federal property standards. In addition, we identified the Harbor department failed to properly record the disposition of a federally funded asset. The asset was still marked as “in service” within the equipment listing provided to us during the audit; however the item had in fact been disposed of during the audit period. Cause The Fire Department’s grants team oversees the compliance with required federal equipment procedures, the grants team indicated capacity issues were the main contributor towards the lack of a reconciliation or inventorying of the equipment. The Harbor Departments property related to a vehicle which was disposed of after an accident. This occurred between the departments inventory processes leading to the listing not being updated by mistake. Effect or potential effect The Departments were out of compliance with federal requirements surrounding equipment management, maintenance, and disposal. Questioned costs None Context The Harbor Department special vehicle which had an estimated book value of $0 that was involved in a collision before being disposed of. There were $0 in proceeds received related to the disposal. Identification as a repeat finding if applicable N/A Recommendation We recommend the departments enhance internal controls to ensure its property records include all the requirements under the Uniform Guidance and properly identify all property and equipment purchased with federal funds. We recommend the Fire Department implement a plan to address staffing needs and formalize procedures regarding the reconciliation, tracking, and maintenance of federally funded equipment. We recommend the Harbor Department enhance their procedures on equipment disposals. Views of responsible officials and planned corrective actions The Fire Department will ensure that all grant funds are expended in compliance with grant guidelines, including the completion of a biennial Equipment Inventory and the submission of a certification letter verifying its accuracy to the grantor every other year. Effective June 16, 2025, the Fire Department will conduct an Equipment Inventory and submit a verification letter to the grantor confirming its completion on a biennial basis. The current Equipment Inventory will be completed by the Support Services Bureau by September 30, 2025. The Fire Department will ensure the accompanying verification letter is sent to the grantor along with the updated inventory list. This biennial requirement will be integrated into the Department’s annual calendar. Following the FY2025 inventory, the next cycle will occur in FY2027 and continue in every odd-numbered fiscal year thereafter. The Harbor Department will enhance its written procedures on equipment disposals and provide training to appropriate Finance, Security, and Maintenance Division staff in FY 2025 to ensure compliance and timeliness in following equipment disposal procedures.
Finding Number: 2024-004 Finding Title: Internal Controls and Compliance Over Federally Funded Equipment Compliance Requirement(s): Equipment and Real Property Management Classification: Significant Deficiency Programs: Port Security Grant Program ALN #: 97.056 Pass-through entity: N/A – Direct Award Federal Agency: Department of Homeland Security Federal Award Numbers: EMW-2021-PU-00463-S01 Federal Award Year: 2021 Criteria or specific requirement (including statutory, regulatory, or other citation § 200.313 Equipment. See also § 200.439. (a) Title. Title to equipment acquired under the Federal award will vest upon acquisition in the recipient or subrecipient subject to the conditions of this section. This title must be a conditional title unless a Federal statute specifically authorizes the Federal agency to vest title in the recipient or subrecipient without further responsibility to the Federal Government (and the Federal agency elects to do so). A conditional title means a clear title is withheld by the Federal agency until conditions and requirements specified in the terms and conditions of a Federal award have been fulfilled. Title for equipment vested in a recipient or subrecipient is subject to the following conditions: (1) Use the equipment for the authorized purposes of the project during the period of performance or until the property is no longer needed for the purposes of the project. (2) While the equipment is being used for the originally authorized purpose, the recipient or subrecipient must not dispose of or encumber its title or other interests without the approval of the Federal agency or pass-through entity. (3) Use and dispose of the property in accordance with paragraphs (b), (c), and (e) of this section. (b) General. A State must use, manage and dispose of equipment acquired under a Federal award in accordance with State laws and procedures. Indian Tribes must use, manage, and dispose of equipment acquired under a Federal award in accordance with tribal laws and procedures. If such laws and procedures do not exist, Indian Tribes must follow the guidance in this section. Other recipients and subrecipients, including subrecipients of a State or Indian Tribe, must follow paragraphs (c) through (e) of this section. (c) Use. (1) The recipient or subrecipient must use equipment for the project or program for which it was acquired and for as long as needed, whether or not the project or program continues to be supported by the Federal award. The recipient or subrecipient must not encumber the equipment without prior approval of the Federal agency or pass-through entity. The Federal agency may require the submission of the applicable common forms for reporting on equipment. When no longer needed for the original project or program, the equipment may be used in other activities in the following order of priority: (i) Activities under other Federal awards from the Federal agency that funded the original program or project; then (ii) Activities under Federal awards from other Federal agencies. These activities include consolidated equipment for information technology systems. (2) During the time that equipment is used on the project or program for which it was acquired, the recipient or subrecipient must also make the equipment available for use on other programs or projects supported by the Federal Government, provided that such use will not interfere with the purpose for which it was originally acquired. First preference for other use of the equipment must be given to other programs or projects supported by the Federal agency that financed the equipment. Second preference must be given to programs or projects under Federal awards from other Federal agencies. Use for non-federally funded projects is also permissible, provided such use will not interfere with the purpose for which it was originally acquired. The recipient or subrecipient should consider charging user fees as appropriate. (3) Notwithstanding the encouragement in § 200.307 to earn program income, the recipient or subrecipient must not use equipment acquired with the Federal award to provide services for a fee that is less than a private company would charge for similar services unless specifically authorized by Federal statute. This restriction is effective as long as the Federal Government retains an interest in the equipment. (4) When acquiring replacement equipment, the recipient or subrecipient may either trade-in or sell the equipment and use the proceeds to offset the cost of the replacement equipment. (d) Management requirements. Regardless of whether equipment is acquired in part or its entirety under the Federal award, the recipient or subrecipient must manage equipment (including replacement equipment) utilizing procedures that meet the following requirements: (1) Property records must include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date, the cost of the property, the percentage of the Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property. The recipient and subrecipient are responsible for maintaining and updating property records when there is a change in the status of the property. (2) A physical inventory of the property must be conducted, and the results must be reconciled with the property records at least once every two years. (3) A control system must be in place to ensure safeguards for preventing property loss, damage, or theft. Any loss, damage, or theft of equipment must be investigated. The recipient or subrecipient must notify the Federal agency or pass-through entity of any loss, damage, or theft of equipment that will have an impact on the program. (4) Regular maintenance procedures must be in place to ensure the property is in proper working condition. (5) If the recipient or subrecipient is authorized or required to sell the property, proper sales procedures must be in place to ensure the highest possible return. (e) Disposition. When equipment acquired under a Federal award is no longer needed for the original project, program, or for other activities currently or previously supported by a Federal agency, the recipient or subrecipient must request disposition instructions from the Federal agency or pass-through entity if required by the terms and conditions of the Federal award. Disposition of the equipment will be made as follows, in accordance with Federal agency or pass-through entity disposition instructions: (1) Equipment with a current fair market value of $10,000 or less (per unit) may be retained, sold, or otherwise disposed of with no further responsibility to the Federal agency or pass-through entity. (2) Except as provided in § 200.312(b), or if the Federal agency or pass-through entity fails to provide requested disposition instructions within 120 days, items of equipment with a current fair market value in excess of $10,000 (per-unit) may be retained or sold by the recipient or subrecipient. However, the Federal agency is entitled to an amount calculated by multiplying the percentage of the Federal agency's contribution towards the original purchase by the current market value or proceeds from the sale. If the equipment is sold, the Federal agency or pass-through entity may permit the recipient or subrecipient to retain, from the Federal share, $1,000 of the proceeds to cover expenses associated with the selling and handling of the equipment. (3) The recipient or subrecipient may transfer title to the property to the Federal Government or to an eligible third party provided that the recipient or subrecipient must be entitled to compensation for its attributable percentage of the current fair market value of the property. (4) In cases where a recipient or subrecipient fails to take appropriate disposition actions, the Federal agency or pass-through entity may direct the recipient or subrecipient to take disposition actions. Condition As part of our audit procedures, we reviewed internal controls over inventory and asset management, including physical inspection and disposition tracking of equipment. For the Fire Department, we determined that no physical inventory of federally funded equipment had been conducted during the required biennial period, and no reconciliation of equipment records to actual assets had been performed. While informal tracking logs and asset purchase records existed, they were incomplete and lacked standardized documentation of asset tag numbers, inspection dates, asset condition, and verification signatures. Moreover, there was no evidence of centralized or departmental oversight to ensure routine physical inventory and compliance with Federal property standards. In addition, we identified the Harbor department failed to properly record the disposition of a federally funded asset. The asset was still marked as “in service” within the equipment listing provided to us during the audit; however the item had in fact been disposed of during the audit period. Cause The Fire Department’s grants team oversees the compliance with required federal equipment procedures, the grants team indicated capacity issues were the main contributor towards the lack of a reconciliation or inventorying of the equipment. The Harbor Departments property related to a vehicle which was disposed of after an accident. This occurred between the departments inventory processes leading to the listing not being updated by mistake. Effect or potential effect The Departments were out of compliance with federal requirements surrounding equipment management, maintenance, and disposal. Questioned costs None Context The Harbor Department special vehicle which had an estimated book value of $0 that was involved in a collision before being disposed of. There were $0 in proceeds received related to the disposal. Identification as a repeat finding if applicable N/A Recommendation We recommend the departments enhance internal controls to ensure its property records include all the requirements under the Uniform Guidance and properly identify all property and equipment purchased with federal funds. We recommend the Fire Department implement a plan to address staffing needs and formalize procedures regarding the reconciliation, tracking, and maintenance of federally funded equipment. We recommend the Harbor Department enhance their procedures on equipment disposals. Views of responsible officials and planned corrective actions The Fire Department will ensure that all grant funds are expended in compliance with grant guidelines, including the completion of a biennial Equipment Inventory and the submission of a certification letter verifying its accuracy to the grantor every other year. Effective June 16, 2025, the Fire Department will conduct an Equipment Inventory and submit a verification letter to the grantor confirming its completion on a biennial basis. The current Equipment Inventory will be completed by the Support Services Bureau by September 30, 2025. The Fire Department will ensure the accompanying verification letter is sent to the grantor along with the updated inventory list. This biennial requirement will be integrated into the Department’s annual calendar. Following the FY2025 inventory, the next cycle will occur in FY2027 and continue in every odd-numbered fiscal year thereafter. The Harbor Department will enhance its written procedures on equipment disposals and provide training to appropriate Finance, Security, and Maintenance Division staff in FY 2025 to ensure compliance and timeliness in following equipment disposal procedures.
Finding Number: 2024-004 Finding Title: Internal Controls and Compliance Over Federally Funded Equipment Compliance Requirement(s): Equipment and Real Property Management Classification: Significant Deficiency Programs: Port Security Grant Program ALN #: 97.056 Pass-through entity: N/A – Direct Award Federal Agency: Department of Homeland Security Federal Award Numbers: EMW-2021-PU-00463-S01 Federal Award Year: 2021 Criteria or specific requirement (including statutory, regulatory, or other citation § 200.313 Equipment. See also § 200.439. (a) Title. Title to equipment acquired under the Federal award will vest upon acquisition in the recipient or subrecipient subject to the conditions of this section. This title must be a conditional title unless a Federal statute specifically authorizes the Federal agency to vest title in the recipient or subrecipient without further responsibility to the Federal Government (and the Federal agency elects to do so). A conditional title means a clear title is withheld by the Federal agency until conditions and requirements specified in the terms and conditions of a Federal award have been fulfilled. Title for equipment vested in a recipient or subrecipient is subject to the following conditions: (1) Use the equipment for the authorized purposes of the project during the period of performance or until the property is no longer needed for the purposes of the project. (2) While the equipment is being used for the originally authorized purpose, the recipient or subrecipient must not dispose of or encumber its title or other interests without the approval of the Federal agency or pass-through entity. (3) Use and dispose of the property in accordance with paragraphs (b), (c), and (e) of this section. (b) General. A State must use, manage and dispose of equipment acquired under a Federal award in accordance with State laws and procedures. Indian Tribes must use, manage, and dispose of equipment acquired under a Federal award in accordance with tribal laws and procedures. If such laws and procedures do not exist, Indian Tribes must follow the guidance in this section. Other recipients and subrecipients, including subrecipients of a State or Indian Tribe, must follow paragraphs (c) through (e) of this section. (c) Use. (1) The recipient or subrecipient must use equipment for the project or program for which it was acquired and for as long as needed, whether or not the project or program continues to be supported by the Federal award. The recipient or subrecipient must not encumber the equipment without prior approval of the Federal agency or pass-through entity. The Federal agency may require the submission of the applicable common forms for reporting on equipment. When no longer needed for the original project or program, the equipment may be used in other activities in the following order of priority: (i) Activities under other Federal awards from the Federal agency that funded the original program or project; then (ii) Activities under Federal awards from other Federal agencies. These activities include consolidated equipment for information technology systems. (2) During the time that equipment is used on the project or program for which it was acquired, the recipient or subrecipient must also make the equipment available for use on other programs or projects supported by the Federal Government, provided that such use will not interfere with the purpose for which it was originally acquired. First preference for other use of the equipment must be given to other programs or projects supported by the Federal agency that financed the equipment. Second preference must be given to programs or projects under Federal awards from other Federal agencies. Use for non-federally funded projects is also permissible, provided such use will not interfere with the purpose for which it was originally acquired. The recipient or subrecipient should consider charging user fees as appropriate. (3) Notwithstanding the encouragement in § 200.307 to earn program income, the recipient or subrecipient must not use equipment acquired with the Federal award to provide services for a fee that is less than a private company would charge for similar services unless specifically authorized by Federal statute. This restriction is effective as long as the Federal Government retains an interest in the equipment. (4) When acquiring replacement equipment, the recipient or subrecipient may either trade-in or sell the equipment and use the proceeds to offset the cost of the replacement equipment. (d) Management requirements. Regardless of whether equipment is acquired in part or its entirety under the Federal award, the recipient or subrecipient must manage equipment (including replacement equipment) utilizing procedures that meet the following requirements: (1) Property records must include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date, the cost of the property, the percentage of the Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property. The recipient and subrecipient are responsible for maintaining and updating property records when there is a change in the status of the property. (2) A physical inventory of the property must be conducted, and the results must be reconciled with the property records at least once every two years. (3) A control system must be in place to ensure safeguards for preventing property loss, damage, or theft. Any loss, damage, or theft of equipment must be investigated. The recipient or subrecipient must notify the Federal agency or pass-through entity of any loss, damage, or theft of equipment that will have an impact on the program. (4) Regular maintenance procedures must be in place to ensure the property is in proper working condition. (5) If the recipient or subrecipient is authorized or required to sell the property, proper sales procedures must be in place to ensure the highest possible return. (e) Disposition. When equipment acquired under a Federal award is no longer needed for the original project, program, or for other activities currently or previously supported by a Federal agency, the recipient or subrecipient must request disposition instructions from the Federal agency or pass-through entity if required by the terms and conditions of the Federal award. Disposition of the equipment will be made as follows, in accordance with Federal agency or pass-through entity disposition instructions: (1) Equipment with a current fair market value of $10,000 or less (per unit) may be retained, sold, or otherwise disposed of with no further responsibility to the Federal agency or pass-through entity. (2) Except as provided in § 200.312(b), or if the Federal agency or pass-through entity fails to provide requested disposition instructions within 120 days, items of equipment with a current fair market value in excess of $10,000 (per-unit) may be retained or sold by the recipient or subrecipient. However, the Federal agency is entitled to an amount calculated by multiplying the percentage of the Federal agency's contribution towards the original purchase by the current market value or proceeds from the sale. If the equipment is sold, the Federal agency or pass-through entity may permit the recipient or subrecipient to retain, from the Federal share, $1,000 of the proceeds to cover expenses associated with the selling and handling of the equipment. (3) The recipient or subrecipient may transfer title to the property to the Federal Government or to an eligible third party provided that the recipient or subrecipient must be entitled to compensation for its attributable percentage of the current fair market value of the property. (4) In cases where a recipient or subrecipient fails to take appropriate disposition actions, the Federal agency or pass-through entity may direct the recipient or subrecipient to take disposition actions. Condition As part of our audit procedures, we reviewed internal controls over inventory and asset management, including physical inspection and disposition tracking of equipment. For the Fire Department, we determined that no physical inventory of federally funded equipment had been conducted during the required biennial period, and no reconciliation of equipment records to actual assets had been performed. While informal tracking logs and asset purchase records existed, they were incomplete and lacked standardized documentation of asset tag numbers, inspection dates, asset condition, and verification signatures. Moreover, there was no evidence of centralized or departmental oversight to ensure routine physical inventory and compliance with Federal property standards. In addition, we identified the Harbor department failed to properly record the disposition of a federally funded asset. The asset was still marked as “in service” within the equipment listing provided to us during the audit; however the item had in fact been disposed of during the audit period. Cause The Fire Department’s grants team oversees the compliance with required federal equipment procedures, the grants team indicated capacity issues were the main contributor towards the lack of a reconciliation or inventorying of the equipment. The Harbor Departments property related to a vehicle which was disposed of after an accident. This occurred between the departments inventory processes leading to the listing not being updated by mistake. Effect or potential effect The Departments were out of compliance with federal requirements surrounding equipment management, maintenance, and disposal. Questioned costs None Context The Harbor Department special vehicle which had an estimated book value of $0 that was involved in a collision before being disposed of. There were $0 in proceeds received related to the disposal. Identification as a repeat finding if applicable N/A Recommendation We recommend the departments enhance internal controls to ensure its property records include all the requirements under the Uniform Guidance and properly identify all property and equipment purchased with federal funds. We recommend the Fire Department implement a plan to address staffing needs and formalize procedures regarding the reconciliation, tracking, and maintenance of federally funded equipment. We recommend the Harbor Department enhance their procedures on equipment disposals. Views of responsible officials and planned corrective actions The Fire Department will ensure that all grant funds are expended in compliance with grant guidelines, including the completion of a biennial Equipment Inventory and the submission of a certification letter verifying its accuracy to the grantor every other year. Effective June 16, 2025, the Fire Department will conduct an Equipment Inventory and submit a verification letter to the grantor confirming its completion on a biennial basis. The current Equipment Inventory will be completed by the Support Services Bureau by September 30, 2025. The Fire Department will ensure the accompanying verification letter is sent to the grantor along with the updated inventory list. This biennial requirement will be integrated into the Department’s annual calendar. Following the FY2025 inventory, the next cycle will occur in FY2027 and continue in every odd-numbered fiscal year thereafter. The Harbor Department will enhance its written procedures on equipment disposals and provide training to appropriate Finance, Security, and Maintenance Division staff in FY 2025 to ensure compliance and timeliness in following equipment disposal procedures.
Finding Number: 2024-004 Finding Title: Internal Controls and Compliance Over Federally Funded Equipment Compliance Requirement(s): Equipment and Real Property Management Classification: Significant Deficiency Programs: Port Security Grant Program ALN #: 97.056 Pass-through entity: N/A – Direct Award Federal Agency: Department of Homeland Security Federal Award Numbers: EMW-2021-PU-00463-S01 Federal Award Year: 2021 Criteria or specific requirement (including statutory, regulatory, or other citation § 200.313 Equipment. See also § 200.439. (a) Title. Title to equipment acquired under the Federal award will vest upon acquisition in the recipient or subrecipient subject to the conditions of this section. This title must be a conditional title unless a Federal statute specifically authorizes the Federal agency to vest title in the recipient or subrecipient without further responsibility to the Federal Government (and the Federal agency elects to do so). A conditional title means a clear title is withheld by the Federal agency until conditions and requirements specified in the terms and conditions of a Federal award have been fulfilled. Title for equipment vested in a recipient or subrecipient is subject to the following conditions: (1) Use the equipment for the authorized purposes of the project during the period of performance or until the property is no longer needed for the purposes of the project. (2) While the equipment is being used for the originally authorized purpose, the recipient or subrecipient must not dispose of or encumber its title or other interests without the approval of the Federal agency or pass-through entity. (3) Use and dispose of the property in accordance with paragraphs (b), (c), and (e) of this section. (b) General. A State must use, manage and dispose of equipment acquired under a Federal award in accordance with State laws and procedures. Indian Tribes must use, manage, and dispose of equipment acquired under a Federal award in accordance with tribal laws and procedures. If such laws and procedures do not exist, Indian Tribes must follow the guidance in this section. Other recipients and subrecipients, including subrecipients of a State or Indian Tribe, must follow paragraphs (c) through (e) of this section. (c) Use. (1) The recipient or subrecipient must use equipment for the project or program for which it was acquired and for as long as needed, whether or not the project or program continues to be supported by the Federal award. The recipient or subrecipient must not encumber the equipment without prior approval of the Federal agency or pass-through entity. The Federal agency may require the submission of the applicable common forms for reporting on equipment. When no longer needed for the original project or program, the equipment may be used in other activities in the following order of priority: (i) Activities under other Federal awards from the Federal agency that funded the original program or project; then (ii) Activities under Federal awards from other Federal agencies. These activities include consolidated equipment for information technology systems. (2) During the time that equipment is used on the project or program for which it was acquired, the recipient or subrecipient must also make the equipment available for use on other programs or projects supported by the Federal Government, provided that such use will not interfere with the purpose for which it was originally acquired. First preference for other use of the equipment must be given to other programs or projects supported by the Federal agency that financed the equipment. Second preference must be given to programs or projects under Federal awards from other Federal agencies. Use for non-federally funded projects is also permissible, provided such use will not interfere with the purpose for which it was originally acquired. The recipient or subrecipient should consider charging user fees as appropriate. (3) Notwithstanding the encouragement in § 200.307 to earn program income, the recipient or subrecipient must not use equipment acquired with the Federal award to provide services for a fee that is less than a private company would charge for similar services unless specifically authorized by Federal statute. This restriction is effective as long as the Federal Government retains an interest in the equipment. (4) When acquiring replacement equipment, the recipient or subrecipient may either trade-in or sell the equipment and use the proceeds to offset the cost of the replacement equipment. (d) Management requirements. Regardless of whether equipment is acquired in part or its entirety under the Federal award, the recipient or subrecipient must manage equipment (including replacement equipment) utilizing procedures that meet the following requirements: (1) Property records must include a description of the property, a serial number or another identification number, the source of funding for the property (including the FAIN), the title holder, the acquisition date, the cost of the property, the percentage of the Federal agency contribution towards the original purchase, the location, use and condition of the property, and any disposition data including the date of disposal and sale price of the property. The recipient and subrecipient are responsible for maintaining and updating property records when there is a change in the status of the property. (2) A physical inventory of the property must be conducted, and the results must be reconciled with the property records at least once every two years. (3) A control system must be in place to ensure safeguards for preventing property loss, damage, or theft. Any loss, damage, or theft of equipment must be investigated. The recipient or subrecipient must notify the Federal agency or pass-through entity of any loss, damage, or theft of equipment that will have an impact on the program. (4) Regular maintenance procedures must be in place to ensure the property is in proper working condition. (5) If the recipient or subrecipient is authorized or required to sell the property, proper sales procedures must be in place to ensure the highest possible return. (e) Disposition. When equipment acquired under a Federal award is no longer needed for the original project, program, or for other activities currently or previously supported by a Federal agency, the recipient or subrecipient must request disposition instructions from the Federal agency or pass-through entity if required by the terms and conditions of the Federal award. Disposition of the equipment will be made as follows, in accordance with Federal agency or pass-through entity disposition instructions: (1) Equipment with a current fair market value of $10,000 or less (per unit) may be retained, sold, or otherwise disposed of with no further responsibility to the Federal agency or pass-through entity. (2) Except as provided in § 200.312(b), or if the Federal agency or pass-through entity fails to provide requested disposition instructions within 120 days, items of equipment with a current fair market value in excess of $10,000 (per-unit) may be retained or sold by the recipient or subrecipient. However, the Federal agency is entitled to an amount calculated by multiplying the percentage of the Federal agency's contribution towards the original purchase by the current market value or proceeds from the sale. If the equipment is sold, the Federal agency or pass-through entity may permit the recipient or subrecipient to retain, from the Federal share, $1,000 of the proceeds to cover expenses associated with the selling and handling of the equipment. (3) The recipient or subrecipient may transfer title to the property to the Federal Government or to an eligible third party provided that the recipient or subrecipient must be entitled to compensation for its attributable percentage of the current fair market value of the property. (4) In cases where a recipient or subrecipient fails to take appropriate disposition actions, the Federal agency or pass-through entity may direct the recipient or subrecipient to take disposition actions. Condition As part of our audit procedures, we reviewed internal controls over inventory and asset management, including physical inspection and disposition tracking of equipment. For the Fire Department, we determined that no physical inventory of federally funded equipment had been conducted during the required biennial period, and no reconciliation of equipment records to actual assets had been performed. While informal tracking logs and asset purchase records existed, they were incomplete and lacked standardized documentation of asset tag numbers, inspection dates, asset condition, and verification signatures. Moreover, there was no evidence of centralized or departmental oversight to ensure routine physical inventory and compliance with Federal property standards. In addition, we identified the Harbor department failed to properly record the disposition of a federally funded asset. The asset was still marked as “in service” within the equipment listing provided to us during the audit; however the item had in fact been disposed of during the audit period. Cause The Fire Department’s grants team oversees the compliance with required federal equipment procedures, the grants team indicated capacity issues were the main contributor towards the lack of a reconciliation or inventorying of the equipment. The Harbor Departments property related to a vehicle which was disposed of after an accident. This occurred between the departments inventory processes leading to the listing not being updated by mistake. Effect or potential effect The Departments were out of compliance with federal requirements surrounding equipment management, maintenance, and disposal. Questioned costs None Context The Harbor Department special vehicle which had an estimated book value of $0 that was involved in a collision before being disposed of. There were $0 in proceeds received related to the disposal. Identification as a repeat finding if applicable N/A Recommendation We recommend the departments enhance internal controls to ensure its property records include all the requirements under the Uniform Guidance and properly identify all property and equipment purchased with federal funds. We recommend the Fire Department implement a plan to address staffing needs and formalize procedures regarding the reconciliation, tracking, and maintenance of federally funded equipment. We recommend the Harbor Department enhance their procedures on equipment disposals. Views of responsible officials and planned corrective actions The Fire Department will ensure that all grant funds are expended in compliance with grant guidelines, including the completion of a biennial Equipment Inventory and the submission of a certification letter verifying its accuracy to the grantor every other year. Effective June 16, 2025, the Fire Department will conduct an Equipment Inventory and submit a verification letter to the grantor confirming its completion on a biennial basis. The current Equipment Inventory will be completed by the Support Services Bureau by September 30, 2025. The Fire Department will ensure the accompanying verification letter is sent to the grantor along with the updated inventory list. This biennial requirement will be integrated into the Department’s annual calendar. Following the FY2025 inventory, the next cycle will occur in FY2027 and continue in every odd-numbered fiscal year thereafter. The Harbor Department will enhance its written procedures on equipment disposals and provide training to appropriate Finance, Security, and Maintenance Division staff in FY 2025 to ensure compliance and timeliness in following equipment disposal procedures.
Finding Type. Immaterial Noncompliance; Significant Deficiency in Internal Controls over Compliance. (Program Income) Federal program(s). U.S. Department of Housing and Urban Development - Community Development Block Grants/Entitlement Grants Cluster; Assistance Listing Number 14.218; Direct award; All project numbers Criteria. In accordance with 2 CFR § 200.307, program income must be used in accordance with the terms and conditions of the federal award and must be accounted for and reported accurately. Recipients are required to reconcile program income received and expended during the grant period to ensure it is used for allowable purposes and properly reflected in financial reports. Failure to reconcile program income may result in noncompliance with federal grant regulations and could impact the allowability of costs charged to the award. Condition. During program income testing, it was noted that the County did not track, monitor and reconcile program income within HUD’s Integrated Disbursement and Information System (IDIS) and the general ledger on timely manner. Reconciliation was only prepared upon request of the auditor at year-end and immaterial variances were still present in the reconciliation even after it was completed by the department. Cause. The County does not have the internal controls in place to ensure that program income is properly tracked, monitored and reconciled within HUD’s IDIS and the general ledger on timely manner. Effect. The County has a risk of inaccurately reporting program income to HUD. The County is also exposed to an increased risk noncompliance could occur and not be prevented or detected by the County's internal controls. Questioned Costs. None. Recommendation. We recommend the County establishes controls are in place to track and report program income in a timely manner, in both the general ledger and IDIS. Reconciliations should be completed monthly and reviewed by an individual with knowledge and understanding of both grant and general ledger reporting. View of Responsible Officials. The County will create a monthly reconciliation of program income for the grant. This reconciliation will ensure that amounts reported in the IDIS system agree to those amounts reported in Workday. The reconciliation will be reviewed by the department and a copy provided to the Fiscal Services Supervisor Senior – Grant Accounting each month for review by Fiscal Services. Responsible Official. Chief Financial Officer and Chief, Neighborhood and Housing Development Expected Completion Date. December 2025
2024-001 – Program Income Identification of the Federal Program U.S. Department of Housing and Urban Development Name of Program: Continuum of Care Program pass-through from Prince George’s County Assistance Listing Number: 14.267 Grant Award Number: MD023L3G002012/MD0232L3G002013 Pass-through Identifying Number: 524.1-14267-2024 Grant Award Period: July 1, 2022 to June 30, 2024 Criteria or Specific Requirements – In accordance with 2 CFR 200.80, program income means, “gross income earned by the non-Federal entity that is directly generated by a supported activity or earned as a result of the Federal award during the period of performance except as provided in § 200.307 paragraph (f).” Paragraph (f) states, “There are no Federal requirements governing the disposition of income earned after the end of the period of performance for the Federal award, unless the Federal Awarding agency regulations or the terms and conditions of the Federal award provide otherwise.” There are three methods of applying program income: deduction; addition; and cost-sharing. The Federal agency should specify what program income method(s) will be used in the terms and conditions of the Federal award. The deduction method will be used if the Federal agency does not specify a method for applying program income. Unless specified in the agency’s regulations, program income treatment is usually handled in the grant agreement terms and conditions. The pass-through grant from Prince George’s County should follow the method for applying program income outlined in the manual issued by the Behavioral Health Authority (BHA). Per the manual, the Continuum of Care (CoC) grant funds is to be used to pay the difference between the contract rent for a unit and 30% of the participant’s or family’s income (program income). Condition – The Organization failed to comply with the program income compliance requirement of the U.S. Department of Housing and Urban Development (HUD) Continuum of Care Program by not netting the $41,762 of program income (contracted rent amount per tenant) generated from the pass-through grant to the amount to be reimbursed prior to submitting the reimbursement request to HUD, in accordance with the protocol outlined in the manual issued by BHA. Per the manual, BHA will utilize CoC funding to make affordable housing for program participants and families by using CoC grant funds to pay the difference between the contract rent for a unit and 30% of the participant’s or family’s income. We were informed by the Organization that they instead followed what was verbally communicated to them that they can use the program income to cover for utilities and maintenance costs of the properties being rented, which is also an acceptable use of the program income. We were also informed that BHA has not demanded that the Organization remit the program income collected during the fiscal year 2024 and BHA has not stopped the funding under this program since the Organization utilized the program income to cover program expenses. Cause - The Organization did not follow the protocol in the manual issued by BHA to net the program income from the pass-through grant with the contracted rent amount per tenant prior to submitting the reimbursement request to HUD. Instead, the Organization followed what was verbally communicated to them that they can use the program income to cover for utilities and maintenance costs of the properties being rented, which is also an acceptable use of the program income. Potential Effect - Charges to Federal awards for rent is more than what is allowed under the manual issued by BHA. Questioned costs – $41,762, this is the amount the Organization is allowed to collect from the tenants per the manual issued by BHA and represents 30% or less of the tenants’ annual income and should have been netted with the contracted rent amount per tenant prior to submitting the reimbursement request to HUD, in accordance with the protocol outlined in the manual issued by BHA. Context – The condition was identified during the fiscal year 2024 audit when we reviewed and tested the program income compliance requirement applicable for Assistance Listing Number 14.267. We noted that the program income generated from the pass-through grant during the fiscal year 2024 totaling $41,762 was not netted to the amount to be reimbursed prior to submitting the reimbursement request to HUD, in accordance with the protocol outlined in the manual issued by BHA. Recommendation - We recommend the Organization establish internal control and processes to properly account for program income in accordance with the protocol outlined in the manual issued by BHA, i.e., to net the program income to the contracted rent amount per tenant prior to submitting for reimbursement from HUD. Views of Responsible Officials - Management agrees with the federal award finding identified in the audit. Effective immediately, the Organization will comply with the program income compliance requirement of the U.S. Department of Housing and Urban Development (HUD) Continuum of Care Program by netting program income generated from the pass-through grant to the amount to be reimbursed prior to submitting the reimbursement request to HUD, in accordance with the protocol outlined in the manual issued by BHA.
Information on the federal program – Assistance Listing Number 93.918, Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease (Ryan White Part C), Federal Award No. H7631535 for project period January 1, 2022 through December 31, 2024 and Federal Award No. H7600531 for project period May 1, 2022 through April 30, 2025. Criteria or specific requirement – Recipients of funding under this federal program must comply with federal standards under 2 CFR section 200.307 for program income and 2 CFR section 200.328 for financial reporting. Condition – The Organization did not properly segregate or track the usage of program income in accordance with the terms of the Notice of Award. Additionally, the Organization improperly reported $0 program income on the Federal Financial Report for Federal Award H7631535 for reporting period ended December 31, 2023. Cause – Due to various turnovers within the finance department in 2024, there was a lack of appropriate knowledge surrounding program income requirements related to this program. Effect or potential effect – Federal standards were not appropriately followed for program income and financial reporting. Questioned costs – None Context – Per inquiry with management of the Organization, review of accounting records and testing of the Federal Financial Report, it was evident that program income was not being properly tracked or reported. Identification as a repeat finding, if applicable – not a repeat finding. Recommendation – We recommend the Organization implement additional internal controls surrounding the tracking and reporting of program income. We also recommend management perform a detailed review of all federal notices of award to ensure compliance with program income requirements. Views of responsible officials and planned corrective actions – See separate auditee document for planned corrective action.
Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease, ALN 93.918, U.S. Department of Health and Human Services Program Year 2023-2024 Type of Finding: Significant Deficiency in Internal Control Over Compliance, Other Matter Applicable Institution(s): University of Mississippi Medical Center (UMMC) Criteria or specific requirement – Program Income (2 CFR 200.1; 2 CFR 200.307(b); 2 CFR 200.307(e)(2); 45 CFR 75.302(b)(3)). Program income must be correctly determined, recorded, and used in accordance with applicable governing requirements. 2 CFR 200.302(b)(5) To the extent available, the non-federal entity must disburse funds available from program income before requesting additional cash draws. Condition – No process is put in place to support allocations of program income from 340B pharmacy revenue to specific Ryan White grants. No formal analysis is performed to determine how much program income to make available for expenditure within Ryan White grant activities. Cause – UMMC’s internal controls and processes did not require supported program income calculations and allocations to Ryan White grants in accordance with a defined, reasonable methodology. Effect or Potential Effect – Program income amounts recorded may be misstated and amounts of federal funds may have been drawn when program income should have been utilized and expended first. Questioned costs – Unknown. Context – UMMC operates a 340B pharmacy that is eligible for 340B status based on being a Ryan White grantee. UMMC participates in multiple Ryan White grant programs and did not develop a methodology for determining which grant(s) should have program income allocated to them. All program income was allocated to ALN 93.918. Identification as a Repeat Finding, if Applicable – N/A Recommendation – UMMC should put in place a reasonable allocation methodology of 340B program income to its Ryan White grants, develop a formal analysis for calculating total program income to be allocated, and put internal controls in place to ensure federal funds are not drawn while program income is available to spend. Views of Responsible Officials and Planned Corrective Actions – There is no disagreement with the audit finding. See corrective action plan.
Federal Program Title: Community Development Block Grants/Entitlements Grants Federal Catalog Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Category of Finding: Program Income Criteria: Office of Management and Budget (OMB) 2 CFR Part 200, Subpart D, Section 200.307(a), requires that Program income must be expended prior to requesting additional Federal funds. Program income exceeding amounts specified in the Federal award may be added to or deducted from the total allowable costs in accordance with the terms and conditions of the Federal award. Condition: During our audit, it was noted that the City recorded part of the program income as deferred revenue rather than recognizing the full amount upon receiving the gross income earned and generated by CDBG loan activity Cause: Lack of appropriate controls over program income. Effect or Potential Effect: Failure to properly report and manage program income could result in noncompliance with federal regulations, potential repayment of misused funds, and could jeopardize future funding opportunities. Furthermore, the mismanagement of program income could lead to inaccurate financial reporting and a lack of accountability in the program's financial operations. Questioned Cost: $152,065 Context: Program income is still in the process of being reconciled for prior and current year. It appears that the current personnel have a misunderstanding regarding the recording and use of program income. Repeat of a Prior-Year Finding: No. Recommendation: We recommend the City to implement a comprehensive program income tracking and reporting system that ensures compliance with federal regulations. The system should include detailed procedures for documenting income generated, ensuring the funds are allocated to the proper grant or project, and reporting the income accurately in accordance with grant terms. Regular training should also be provided to staff responsible for grant management to ensure adherence to federal guidelines and the organization’s internal controls. City's Response: The City is aware of the OMB 2 CFR Part 200 regulations that pertain to program income and will improve its internal controls to ensure compliance with federal regulations. Corrective Action Plan: The City will improve its internal controls by implementing a new policy and procedures that will require staff training and outline detailed procedures for complying with program income regulations. The policy will: (1) require staff to annually participate in HUD trainings related to program income, (2) require staff to immediately deposit and reconcile program income upon receipt, (3) require staff to prepare a monthly program income report and (4) require management to review the program income report to ensure program income is applied to eligible expenses prior to drawing down grant funds. Planned Implementation Date: March 25, 2025 Responsible Person(s): Albert Ramirez, Assistant Director; Denise Ledesma, Grants Coordinator; and Adrianne Sarreal, Analyst.
Federal Program Title: Community Development Block Grants/Entitlements Grants Federal Catalog Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Category of Finding: Program Income Criteria: Office of Management and Budget (OMB) 2 CFR Part 200, Subpart D, Section 200.307(a), requires that Program income must be expended prior to requesting additional Federal funds. Program income exceeding amounts specified in the Federal award may be added to or deducted from the total allowable costs in accordance with the terms and conditions of the Federal award. Condition: During our audit, it was noted that the City recorded part of the program income as deferred revenue rather than recognizing the full amount upon receiving the gross income earned and generated by CDBG loan activity Cause: Lack of appropriate controls over program income. Effect or Potential Effect: Failure to properly report and manage program income could result in noncompliance with federal regulations, potential repayment of misused funds, and could jeopardize future funding opportunities. Furthermore, the mismanagement of program income could lead to inaccurate financial reporting and a lack of accountability in the program's financial operations. Questioned Cost: $152,065 Context: Program income is still in the process of being reconciled for prior and current year. It appears that the current personnel have a misunderstanding regarding the recording and use of program income. Repeat of a Prior-Year Finding: No. Recommendation: We recommend the City to implement a comprehensive program income tracking and reporting system that ensures compliance with federal regulations. The system should include detailed procedures for documenting income generated, ensuring the funds are allocated to the proper grant or project, and reporting the income accurately in accordance with grant terms. Regular training should also be provided to staff responsible for grant management to ensure adherence to federal guidelines and the organization’s internal controls. City's Response: The City is aware of the OMB 2 CFR Part 200 regulations that pertain to program income and will improve its internal controls to ensure compliance with federal regulations. Corrective Action Plan: The City will improve its internal controls by implementing a new policy and procedures that will require staff training and outline detailed procedures for complying with program income regulations. The policy will: (1) require staff to annually participate in HUD trainings related to program income, (2) require staff to immediately deposit and reconcile program income upon receipt, (3) require staff to prepare a monthly program income report and (4) require management to review the program income report to ensure program income is applied to eligible expenses prior to drawing down grant funds. Planned Implementation Date: March 25, 2025 Responsible Person(s): Albert Ramirez, Assistant Director; Denise Ledesma, Grants Coordinator; and Adrianne Sarreal, Analyst.
2024-001 – Program Income Identification of the Federal Program U.S. Department of Housing and Urban Development Name of Program: Continuum of Care Program pass-through from Prince George’s County Assistance Listing Number: 14.267 Grant Award Number: MD023L3G002012/MD0232L3G002013 Pass-through Identifying Number: 524.1-14267-2024 Grant Award Period: July 1, 2022 to June 30, 2024 Criteria or Specific Requirements – In accordance with 2 CFR 200.80, program income means, “gross income earned by the non-Federal entity that is directly generated by a supported activity or earned as a result of the Federal award during the period of performance except as provided in § 200.307 paragraph (f).” Paragraph (f) states, “There are no Federal requirements governing the disposition of income earned after the end of the period of performance for the Federal award, unless the Federal Awarding agency regulations or the terms and conditions of the Federal award provide otherwise.” There are three methods of applying program income: deduction; addition; and cost-sharing. The Federal agency should specify what program income method(s) will be used in the terms and conditions of the Federal award. The deduction method will be used if the Federal agency does not specify a method for applying program income. Unless specified in the agency’s regulations, program income treatment is usually handled in the grant agreement terms and conditions. The pass-through grant from Prince George’s County should follow the method for applying program income outlined in the manual issued by the Behavioral Health Authority (BHA). Per the manual, the Continuum of Care (CoC) grant funds is to be used to pay the difference between the contract rent for a unit and 30% of the participant’s or family’s income (program income). Condition – The Organization failed to comply with the program income compliance requirement of the U.S. Department of Housing and Urban Development (HUD) Continuum of Care Program by not netting the $41,762 of program income (contracted rent amount per tenant) generated from the pass-through grant to the amount to be reimbursed prior to submitting the reimbursement request to HUD, in accordance with the protocol outlined in the manual issued by BHA. Per the manual, BHA will utilize CoC funding to make affordable housing for program participants and families by using CoC grant funds to pay the difference between the contract rent for a unit and 30% of the participant’s or family’s income. We were informed by the Organization that they instead followed what was verbally communicated to them that they can use the program income to cover for utilities and maintenance costs of the properties being rented, which is also an acceptable use of the program income. We were also informed that BHA has not demanded that the Organization remit the program income collected during the fiscal year 2024 and BHA has not stopped the funding under this program since the Organization utilized the program income to cover program expenses. Cause - The Organization did not follow the protocol in the manual issued by BHA to net the program income from the pass-through grant with the contracted rent amount per tenant prior to submitting the reimbursement request to HUD. Instead, the Organization followed what was verbally communicated to them that they can use the program income to cover for utilities and maintenance costs of the properties being rented, which is also an acceptable use of the program income. Potential Effect - Charges to Federal awards for rent is more than what is allowed under the manual issued by BHA. Questioned costs – $41,762, this is the amount the Organization is allowed to collect from the tenants per the manual issued by BHA and represents 30% or less of the tenants’ annual income and should have been netted with the contracted rent amount per tenant prior to submitting the reimbursement request to HUD, in accordance with the protocol outlined in the manual issued by BHA. Context – The condition was identified during the fiscal year 2024 audit when we reviewed and tested the program income compliance requirement applicable for Assistance Listing Number 14.267. We noted that the program income generated from the pass-through grant during the fiscal year 2024 totaling $41,762 was not netted to the amount to be reimbursed prior to submitting the reimbursement request to HUD, in accordance with the protocol outlined in the manual issued by BHA. Recommendation - We recommend the Organization establish internal control and processes to properly account for program income in accordance with the protocol outlined in the manual issued by BHA, i.e., to net the program income to the contracted rent amount per tenant prior to submitting for reimbursement from HUD. Views of Responsible Officials - Management agrees with the federal award finding identified in the audit. Effective immediately, the Organization will comply with the program income compliance requirement of the U.S. Department of Housing and Urban Development (HUD) Continuum of Care Program by netting program income generated from the pass-through grant to the amount to be reimbursed prior to submitting the reimbursement request to HUD, in accordance with the protocol outlined in the manual issued by BHA.
Information on the federal program – Assistance Listing Number 93.918, Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease (Ryan White Part C), Federal Award No. H7631535 for project period January 1, 2022 through December 31, 2024 and Federal Award No. H7600531 for project period May 1, 2022 through April 30, 2025. Criteria or specific requirement – Recipients of funding under this federal program must comply with federal standards under 2 CFR section 200.307 for program income and 2 CFR section 200.328 for financial reporting. Condition – The Organization did not properly segregate or track the usage of program income in accordance with the terms of the Notice of Award. Additionally, the Organization improperly reported $0 program income on the Federal Financial Report for Federal Award H7631535 for reporting period ended December 31, 2023. Cause – Due to various turnovers within the finance department in 2024, there was a lack of appropriate knowledge surrounding program income requirements related to this program. Effect or potential effect – Federal standards were not appropriately followed for program income and financial reporting. Questioned costs – None Context – Per inquiry with management of the Organization, review of accounting records and testing of the Federal Financial Report, it was evident that program income was not being properly tracked or reported. Identification as a repeat finding, if applicable – not a repeat finding. Recommendation – We recommend the Organization implement additional internal controls surrounding the tracking and reporting of program income. We also recommend management perform a detailed review of all federal notices of award to ensure compliance with program income requirements. Views of responsible officials and planned corrective actions – See separate auditee document for planned corrective action.
Grants to Provide Outpatient Early Intervention Services with Respect to HIV Disease, ALN 93.918, U.S. Department of Health and Human Services Program Year 2023-2024 Type of Finding: Significant Deficiency in Internal Control Over Compliance, Other Matter Applicable Institution(s): University of Mississippi Medical Center (UMMC) Criteria or specific requirement – Program Income (2 CFR 200.1; 2 CFR 200.307(b); 2 CFR 200.307(e)(2); 45 CFR 75.302(b)(3)). Program income must be correctly determined, recorded, and used in accordance with applicable governing requirements. 2 CFR 200.302(b)(5) To the extent available, the non-federal entity must disburse funds available from program income before requesting additional cash draws. Condition – No process is put in place to support allocations of program income from 340B pharmacy revenue to specific Ryan White grants. No formal analysis is performed to determine how much program income to make available for expenditure within Ryan White grant activities. Cause – UMMC’s internal controls and processes did not require supported program income calculations and allocations to Ryan White grants in accordance with a defined, reasonable methodology. Effect or Potential Effect – Program income amounts recorded may be misstated and amounts of federal funds may have been drawn when program income should have been utilized and expended first. Questioned costs – Unknown. Context – UMMC operates a 340B pharmacy that is eligible for 340B status based on being a Ryan White grantee. UMMC participates in multiple Ryan White grant programs and did not develop a methodology for determining which grant(s) should have program income allocated to them. All program income was allocated to ALN 93.918. Identification as a Repeat Finding, if Applicable – N/A Recommendation – UMMC should put in place a reasonable allocation methodology of 340B program income to its Ryan White grants, develop a formal analysis for calculating total program income to be allocated, and put internal controls in place to ensure federal funds are not drawn while program income is available to spend. Views of Responsible Officials and Planned Corrective Actions – There is no disagreement with the audit finding. See corrective action plan.
Federal Program Title: Community Development Block Grants/Entitlements Grants Federal Catalog Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Category of Finding: Program Income Criteria: Office of Management and Budget (OMB) 2 CFR Part 200, Subpart D, Section 200.307(a), requires that Program income must be expended prior to requesting additional Federal funds. Program income exceeding amounts specified in the Federal award may be added to or deducted from the total allowable costs in accordance with the terms and conditions of the Federal award. Condition: During our audit, it was noted that the City recorded part of the program income as deferred revenue rather than recognizing the full amount upon receiving the gross income earned and generated by CDBG loan activity Cause: Lack of appropriate controls over program income. Effect or Potential Effect: Failure to properly report and manage program income could result in noncompliance with federal regulations, potential repayment of misused funds, and could jeopardize future funding opportunities. Furthermore, the mismanagement of program income could lead to inaccurate financial reporting and a lack of accountability in the program's financial operations. Questioned Cost: $152,065 Context: Program income is still in the process of being reconciled for prior and current year. It appears that the current personnel have a misunderstanding regarding the recording and use of program income. Repeat of a Prior-Year Finding: No. Recommendation: We recommend the City to implement a comprehensive program income tracking and reporting system that ensures compliance with federal regulations. The system should include detailed procedures for documenting income generated, ensuring the funds are allocated to the proper grant or project, and reporting the income accurately in accordance with grant terms. Regular training should also be provided to staff responsible for grant management to ensure adherence to federal guidelines and the organization’s internal controls. City's Response: The City is aware of the OMB 2 CFR Part 200 regulations that pertain to program income and will improve its internal controls to ensure compliance with federal regulations. Corrective Action Plan: The City will improve its internal controls by implementing a new policy and procedures that will require staff training and outline detailed procedures for complying with program income regulations. The policy will: (1) require staff to annually participate in HUD trainings related to program income, (2) require staff to immediately deposit and reconcile program income upon receipt, (3) require staff to prepare a monthly program income report and (4) require management to review the program income report to ensure program income is applied to eligible expenses prior to drawing down grant funds. Planned Implementation Date: March 25, 2025 Responsible Person(s): Albert Ramirez, Assistant Director; Denise Ledesma, Grants Coordinator; and Adrianne Sarreal, Analyst.
Federal Program Title: Community Development Block Grants/Entitlements Grants Federal Catalog Number: 14.218 Federal Agency: U.S. Department of Housing and Urban Development Category of Finding: Program Income Criteria: Office of Management and Budget (OMB) 2 CFR Part 200, Subpart D, Section 200.307(a), requires that Program income must be expended prior to requesting additional Federal funds. Program income exceeding amounts specified in the Federal award may be added to or deducted from the total allowable costs in accordance with the terms and conditions of the Federal award. Condition: During our audit, it was noted that the City recorded part of the program income as deferred revenue rather than recognizing the full amount upon receiving the gross income earned and generated by CDBG loan activity Cause: Lack of appropriate controls over program income. Effect or Potential Effect: Failure to properly report and manage program income could result in noncompliance with federal regulations, potential repayment of misused funds, and could jeopardize future funding opportunities. Furthermore, the mismanagement of program income could lead to inaccurate financial reporting and a lack of accountability in the program's financial operations. Questioned Cost: $152,065 Context: Program income is still in the process of being reconciled for prior and current year. It appears that the current personnel have a misunderstanding regarding the recording and use of program income. Repeat of a Prior-Year Finding: No. Recommendation: We recommend the City to implement a comprehensive program income tracking and reporting system that ensures compliance with federal regulations. The system should include detailed procedures for documenting income generated, ensuring the funds are allocated to the proper grant or project, and reporting the income accurately in accordance with grant terms. Regular training should also be provided to staff responsible for grant management to ensure adherence to federal guidelines and the organization’s internal controls. City's Response: The City is aware of the OMB 2 CFR Part 200 regulations that pertain to program income and will improve its internal controls to ensure compliance with federal regulations. Corrective Action Plan: The City will improve its internal controls by implementing a new policy and procedures that will require staff training and outline detailed procedures for complying with program income regulations. The policy will: (1) require staff to annually participate in HUD trainings related to program income, (2) require staff to immediately deposit and reconcile program income upon receipt, (3) require staff to prepare a monthly program income report and (4) require management to review the program income report to ensure program income is applied to eligible expenses prior to drawing down grant funds. Planned Implementation Date: March 25, 2025 Responsible Person(s): Albert Ramirez, Assistant Director; Denise Ledesma, Grants Coordinator; and Adrianne Sarreal, Analyst.
FA 2023-001 Improve Controls over Expenditures Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Cash Management Program Income Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Number and Title: COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund Federal Award Number: S425U210012 Questioned Costs: $309,623 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it relates to the Elementary and Secondary School Emergency Relief Fund program. Background Information: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $18,867,709 were expended and reported on the Clarke County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” In addition, provisions included in the Uniform Guidance, Section 202.403 – Reasonable Costs state that “a cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound business practices; arm’s-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award… (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award’s cost.” Furthermore, provisions included in the Uniform Guidance, Section 200.305(b)(5) state that “To the extent available, the non-Federal entity must disburse funds available from program income… before requesting additional cash payments.” Lastly, provisions included in the Uniform Guidance, Section 200.307(e)(1) state that “ordinarily program income must be deducted from total allowable costs to determine the net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise…” Condition: Auditors performed a review of expenditure activity associated with the ESSER program to determine if appropriate internal controls were implemented and applicable compliance requirements were met. This testing revealed that ESSER funds were utilized to cover after-school program expenditures that exceeded net allowable costs. The School District incurred $1,765,203 in expenditures and received $913,744 in program income related to the after-school program. Based upon this activity, the net allowable costs that could have been funded by the ESSER program totaled $851,459; however, the School District received $1,161,082 in ESSER funding for this purpose during the period under review. Therefore, expenditures totaling $309,623 were deemed unallowable for the ESSER program, and it was noted that excessive cash drawdowns in this same amount were made. Questioned Costs: Known questioned costs of $309,623 identified for unallowable expenditures. These known questioned costs related to expenditures that were not tested as part of a sample, and therefore, should not be projected to a population to determine likely questioned costs. Cause: Per management personnel, schools experienced a significant shortfall in revenue with the closure of schools due to the pandemic. By covering the after-school program payroll with ESSER funds, the School District was attempting to reestablish a fund balance for their after-school program, which should be self-sustaining, and was unaware that they could not use ESSER funds to accomplish this. Effect: The School District is not in compliance with the Uniform Guidance, ED, or GaDOE guidance related to the ESSER program. Failure to ensure that appropriate policies and procedures are followed when expending federal funds may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to ESSER program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that expenditures are allowable and program income is expended prior to requesting additional cash payments from federal funds. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with applicable policies and procedures. Views of Responsible Officials: We concur with this finding.
2023-002 Program Income Program: 14.267 Continuum of Care Program Criteria: In accordance with 2 CFR 200.307, program income (in this case, tenant rent) must be correctly determined and properly recorded in the accounting records. Eligibility and rent determination evaluations are performed for new tenants before move-in and annually for existing tenants to determine their portion of rent to pay via the Tenant Income Certification or Re-certification of Permanent Supportive Housing – Eligibility and Rent Determination forms which are approved by the San Diego Housing Commission. Housing program tenants are required to pay up to 30% of their income for rent. Condition: For one out of 12 transactions tested, The Center collected $344.40 which could not be directly traced to an individual tenant. Because it could not be directly traced, the Tenant Income Certification or Re-certification of Permanent Supportive Housing – Eligibility and Rent Determination forms could not be identified and tested for accuracy or completeness and compliance with the tenant’s share of the rental payment could not be determined. Cause: There is no process to regularly review tenant rent payments to ensure that amounts received are matched with a specified tenant and that amounts collected are accurate and agree with the Eligibility and Rent Determination form. Effect: Rent payment was not attributed to an individual tenant. Rent was underpaid by one tenant for multiple months. Questioned Costs: The conditions did not result in questioned costs greater than $25,000. Context: After further investigation, it was determined that one tenant did not pay rent for certain months during fiscal year 2023. Based on a review of client payments and files, it was plausible that the payment received was back rent for this tenant. Repeat Finding: No. Recommendation: The Center should develop a policy for handling payment of tenant rent, including underpayments and overpayments. Rent collected should be compared to the amount determined on the Eligibility and Rent Determination form on a monthly basis to review for inconsistencies and, when differences arise, they should be timely investigated and followed-up on with the appropriate corrective action, per the established policy. Views of Responsible Officials: Management agrees with the finding and a response is included in the corrective action plan.
2023-008 U.S. Department of Housing and Urban Development, For the period July 1, 2022 through June 30, 2023, ALN # 14.218 – Internal Controls over Community Development Block Grant Entitlements Cluster Criteria: In accordance with 2 CFR 200.307(e), program income must be deducted from total allowable costs to determine net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Condition: In the first quarter of fiscal year 2023, the City requested $21,212 of CDBG grant funds even though sufficient program income was available to cover those costs. Cause: Internal controls over the CDBG grant program are insufficient to ensure grant funds are only drawn when program income is insufficient to cover program costs. Effect: Since program income exceeded allowable costs in the first quarter of fiscal year 2023, there were no eligible costs for grant reimbursement. As a result, Federal funds were drawn to reimburse unallowable costs. Recommendation: We recommend grant management staff review their grant drawdown procedures to ensure program income is reviewed prior to drawing new grant funds. Known Questioned Costs: $21,212.
2023-008 U.S. Department of Housing and Urban Development, For the period July 1, 2022 through June 30, 2023, ALN # 14.218 – Internal Controls over Community Development Block Grant Entitlements Cluster Criteria: In accordance with 2 CFR 200.307(e), program income must be deducted from total allowable costs to determine net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Condition: In the first quarter of fiscal year 2023, the City requested $21,212 of CDBG grant funds even though sufficient program income was available to cover those costs. Cause: Internal controls over the CDBG grant program are insufficient to ensure grant funds are only drawn when program income is insufficient to cover program costs. Effect: Since program income exceeded allowable costs in the first quarter of fiscal year 2023, there were no eligible costs for grant reimbursement. As a result, Federal funds were drawn to reimburse unallowable costs. Recommendation: We recommend grant management staff review their grant drawdown procedures to ensure program income is reviewed prior to drawing new grant funds. Known Questioned Costs: $21,212.
2023-008 U.S. Department of Housing and Urban Development, For the period July 1, 2022 through June 30, 2023, ALN # 14.218 – Internal Controls over Community Development Block Grant Entitlements Cluster Criteria: In accordance with 2 CFR 200.307(e), program income must be deducted from total allowable costs to determine net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Condition: In the first quarter of fiscal year 2023, the City requested $21,212 of CDBG grant funds even though sufficient program income was available to cover those costs. Cause: Internal controls over the CDBG grant program are insufficient to ensure grant funds are only drawn when program income is insufficient to cover program costs. Effect: Since program income exceeded allowable costs in the first quarter of fiscal year 2023, there were no eligible costs for grant reimbursement. As a result, Federal funds were drawn to reimburse unallowable costs. Recommendation: We recommend grant management staff review their grant drawdown procedures to ensure program income is reviewed prior to drawing new grant funds. Known Questioned Costs: $21,212.
2023-008 U.S. Department of Housing and Urban Development, For the period July 1, 2022 through June 30, 2023, ALN # 14.218 – Internal Controls over Community Development Block Grant Entitlements Cluster Criteria: In accordance with 2 CFR 200.307(e), program income must be deducted from total allowable costs to determine net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Condition: In the first quarter of fiscal year 2023, the City requested $21,212 of CDBG grant funds even though sufficient program income was available to cover those costs. Cause: Internal controls over the CDBG grant program are insufficient to ensure grant funds are only drawn when program income is insufficient to cover program costs. Effect: Since program income exceeded allowable costs in the first quarter of fiscal year 2023, there were no eligible costs for grant reimbursement. As a result, Federal funds were drawn to reimburse unallowable costs. Recommendation: We recommend grant management staff review their grant drawdown procedures to ensure program income is reviewed prior to drawing new grant funds. Known Questioned Costs: $21,212.
2023-008 U.S. Department of Housing and Urban Development, For the period July 1, 2022 through June 30, 2023, ALN # 14.218 – Internal Controls over Community Development Block Grant Entitlements Cluster Criteria: In accordance with 2 CFR 200.307(e), program income must be deducted from total allowable costs to determine net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Condition: In the first quarter of fiscal year 2023, the City requested $21,212 of CDBG grant funds even though sufficient program income was available to cover those costs. Cause: Internal controls over the CDBG grant program are insufficient to ensure grant funds are only drawn when program income is insufficient to cover program costs. Effect: Since program income exceeded allowable costs in the first quarter of fiscal year 2023, there were no eligible costs for grant reimbursement. As a result, Federal funds were drawn to reimburse unallowable costs. Recommendation: We recommend grant management staff review their grant drawdown procedures to ensure program income is reviewed prior to drawing new grant funds. Known Questioned Costs: $21,212.
2023-008 U.S. Department of Housing and Urban Development, For the period July 1, 2022 through June 30, 2023, ALN # 14.218 – Internal Controls over Community Development Block Grant Entitlements Cluster Criteria: In accordance with 2 CFR 200.307(e), program income must be deducted from total allowable costs to determine net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Condition: In the first quarter of fiscal year 2023, the City requested $21,212 of CDBG grant funds even though sufficient program income was available to cover those costs. Cause: Internal controls over the CDBG grant program are insufficient to ensure grant funds are only drawn when program income is insufficient to cover program costs. Effect: Since program income exceeded allowable costs in the first quarter of fiscal year 2023, there were no eligible costs for grant reimbursement. As a result, Federal funds were drawn to reimburse unallowable costs. Recommendation: We recommend grant management staff review their grant drawdown procedures to ensure program income is reviewed prior to drawing new grant funds. Known Questioned Costs: $21,212.
FINDING 2023-004 Subject: Twenty-First Century Community Learning Centers - Cash Management, Program Income and Reporting Federal Agency: Department of Education Federal Program: Twenty-First Century Community Learning Centers Assistance Listings Number: 84.287 Federal Award Numbers and Years (or Other Identifying Numbers): A58-1-21DL-0153, A58-1-21DL-5176, A58-2-22DL-0018, A58-3-23DL-0027 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Cash Management, Program Income, and Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation utilized grant funds to operate an After School Care Safe Harbor Program. As part of the programs, the students were charged monthly fees to help cover the related costs. Per the grant guidelines, families cannot be turned away for nonpayment of fees, and any fees collected are to be reinvested into the programs. Reimbursement requests are to deduct the program income received from allowable costs prior to claiming reimbursement. During the audit period, the School Corporation collected fees for the Before School Care Program and the After School Care Safe Harbor Program in the same manner. Fees collected for both programs were collected and receipted into the After School fund. For the years ended June 30, 2022, and June 30, 2023, the School Corporation receipted a total of $45,723 and $41,513, respectively, into the After School fund. Cash Management The School Corporation submitted 18 reimbursement requests in the audit period. Costs were paid prior to requesting reimbursement as required; however, due to the lack of adequate program income records the reimbursements were not reduced by the program income received. INDIANA STATE BOARD OF ACCOUNTS 26 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Program Income Although the School Corporation received approval from the grantor agency to collect program income, the School Corporation did not properly track students' attendance and payments, both if paid and how much paid; therefore, we were unable to determine the amount of program income related to each program. Additionally, the School Corporation did not maintain program income in a separate fund but comingled it with other nongrant funded program revenues. Finally, the School Corporation did not deduct program income from allowable costs prior to claiming reimbursement. Reporting Reimbursement Requests The School Corporation submitted 18 reimbursement requests in the audit period. Of those, 3 reimbursement requests were selected for testing. Of the 3 reimbursement requests inspected, none were reduced by program income received, and 1 was not properly supported by School Corporation records. The reimbursement was overstated by $14,700 when compared to the ledger. Based on additional procedures performed, the total requested reimbursements for the audit period were understated by $32,605 when compared to the ledger. Year End Reports End of Year reports are to be submitted within 60 days of the contract end date. A total of four End of Year Reports were submitted in the audit period and two were selected for testing. Of the two End of Year reports selected for testing, neither properly included program income received during the year due to inadequate tracking of program income. The lack of controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.305(b)(5) states in part: "To the extent available, the non-Federal entity must disburse funds available from program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, and interest earned on such funds before requesting additional cash payments." INDIANA STATE BOARD OF ACCOUNTS 27 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.307 states in part: "(a) General. Non-Federal entities are encouraged to earn income to defray program costs where appropriate. . . . (e) Use of program income. If the Federal awarding agency does not specify in its regulations or the terms and conditions of the Federal award, or give prior approval for how program income is to be used, paragraph (e)(1) of this section must apply. For Federal awards made to IHEs and nonprofit research institutions, if the Federal awarding agency does not specify in its regulations or the terms and conditions of the Federal award how program income is to be used, paragraph (e)(2) of this section must apply. In specifying alternatives to paragraphs (e)(1) and (2) of this section, the Federal awarding agency may distinguish between income earned by the recipient and income earned by subrecipients and between the sources, kinds, or amounts of income. When the Federal awarding agency authorizes the approaches in paragraphs (e)(2) and (3) of this section, program income in excess of any amounts specified must also be deducted from expenditures. (1) Deduction. Ordinarily program income must be deducted from total allowable costs to determine the net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Program income that the non- Federal entity did not anticipate at the time of the Federal award must be used to reduce the Federal award and non- Federal entity contributions rather than to increase the funds committed to the project. (2) Addition. With prior approval of the Federal awarding agency (except for IHEs and nonprofit research institutions, as described in this paragraph (e)) program income may be added to the Federal award by the Federal agency and the non-Federal entity. The program income must be used for the purposes and under the conditions of the Federal award. (3) Cost sharing or matching. With prior approval of the Federal awarding agency, program income may be used to meet the cost sharing or matching requirement of the Federal award. The amount of the Federal award remains the same. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." INDIANA STATE BOARD OF ACCOUNTS 28 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, program income was not properly documented resulting in noncompliance with the Cash Management, Program Income, and Reporting compliance requirements. 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 by the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and strengthen its policies and procedures to ensure proper tracking of program income to ensure all activity and reports submitted on behalf of the Twenty-First Century Community Learning Centers program funds are accurate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Twenty-First Century Community Learning Centers - Cash Management, Program Income and Reporting Federal Agency: Department of Education Federal Program: Twenty-First Century Community Learning Centers Assistance Listings Number: 84.287 Federal Award Numbers and Years (or Other Identifying Numbers): A58-1-21DL-0153, A58-1-21DL-5176, A58-2-22DL-0018, A58-3-23DL-0027 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Cash Management, Program Income, and Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation utilized grant funds to operate an After School Care Safe Harbor Program. As part of the programs, the students were charged monthly fees to help cover the related costs. Per the grant guidelines, families cannot be turned away for nonpayment of fees, and any fees collected are to be reinvested into the programs. Reimbursement requests are to deduct the program income received from allowable costs prior to claiming reimbursement. During the audit period, the School Corporation collected fees for the Before School Care Program and the After School Care Safe Harbor Program in the same manner. Fees collected for both programs were collected and receipted into the After School fund. For the years ended June 30, 2022, and June 30, 2023, the School Corporation receipted a total of $45,723 and $41,513, respectively, into the After School fund. Cash Management The School Corporation submitted 18 reimbursement requests in the audit period. Costs were paid prior to requesting reimbursement as required; however, due to the lack of adequate program income records the reimbursements were not reduced by the program income received. INDIANA STATE BOARD OF ACCOUNTS 26 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Program Income Although the School Corporation received approval from the grantor agency to collect program income, the School Corporation did not properly track students' attendance and payments, both if paid and how much paid; therefore, we were unable to determine the amount of program income related to each program. Additionally, the School Corporation did not maintain program income in a separate fund but comingled it with other nongrant funded program revenues. Finally, the School Corporation did not deduct program income from allowable costs prior to claiming reimbursement. Reporting Reimbursement Requests The School Corporation submitted 18 reimbursement requests in the audit period. Of those, 3 reimbursement requests were selected for testing. Of the 3 reimbursement requests inspected, none were reduced by program income received, and 1 was not properly supported by School Corporation records. The reimbursement was overstated by $14,700 when compared to the ledger. Based on additional procedures performed, the total requested reimbursements for the audit period were understated by $32,605 when compared to the ledger. Year End Reports End of Year reports are to be submitted within 60 days of the contract end date. A total of four End of Year Reports were submitted in the audit period and two were selected for testing. Of the two End of Year reports selected for testing, neither properly included program income received during the year due to inadequate tracking of program income. The lack of controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.305(b)(5) states in part: "To the extent available, the non-Federal entity must disburse funds available from program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, and interest earned on such funds before requesting additional cash payments." INDIANA STATE BOARD OF ACCOUNTS 27 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.307 states in part: "(a) General. Non-Federal entities are encouraged to earn income to defray program costs where appropriate. . . . (e) Use of program income. If the Federal awarding agency does not specify in its regulations or the terms and conditions of the Federal award, or give prior approval for how program income is to be used, paragraph (e)(1) of this section must apply. For Federal awards made to IHEs and nonprofit research institutions, if the Federal awarding agency does not specify in its regulations or the terms and conditions of the Federal award how program income is to be used, paragraph (e)(2) of this section must apply. In specifying alternatives to paragraphs (e)(1) and (2) of this section, the Federal awarding agency may distinguish between income earned by the recipient and income earned by subrecipients and between the sources, kinds, or amounts of income. When the Federal awarding agency authorizes the approaches in paragraphs (e)(2) and (3) of this section, program income in excess of any amounts specified must also be deducted from expenditures. (1) Deduction. Ordinarily program income must be deducted from total allowable costs to determine the net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Program income that the non- Federal entity did not anticipate at the time of the Federal award must be used to reduce the Federal award and non- Federal entity contributions rather than to increase the funds committed to the project. (2) Addition. With prior approval of the Federal awarding agency (except for IHEs and nonprofit research institutions, as described in this paragraph (e)) program income may be added to the Federal award by the Federal agency and the non-Federal entity. The program income must be used for the purposes and under the conditions of the Federal award. (3) Cost sharing or matching. With prior approval of the Federal awarding agency, program income may be used to meet the cost sharing or matching requirement of the Federal award. The amount of the Federal award remains the same. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." INDIANA STATE BOARD OF ACCOUNTS 28 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, program income was not properly documented resulting in noncompliance with the Cash Management, Program Income, and Reporting compliance requirements. 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 by the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and strengthen its policies and procedures to ensure proper tracking of program income to ensure all activity and reports submitted on behalf of the Twenty-First Century Community Learning Centers program funds are accurate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Financial Reporting and Review Processes Assistance Title: COVID-19 - Economic Adjustment Assistance - Coronavirus Aid, Relief, and Economic Security (CARES) Act Revolving Loan Fund Assistance Listing Number: 11.307 Federal Agency: U.S. Department of Commerce Type of Finding: Significant Deficiency and Noncompliance Category of Finding: Reporting Known Questioned Costs: $0 Likely Questioned Costs: $0 Criteria Per the Uniform Guidance (2 CFR Part 200.303), non-federal entities must establish and maintain effective internal control over the federal award to provide reasonable assurance that they are managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Per the Uniform Guidance (2 CFR Part 200.307), program income means gross income earned by the non-federal entity that is directly generated by a supported activity or earned as a result of the federal award during the period of performance. Additionally, the Form ED-209 Instructions specify that loan origination fee income and interest income must be included in the appropriate line items when completing the ED-209 report. Condition The Program Finance Director creates the financial report using information from the Senior Director of Finance. Once completed, the report is sent to directly to the Federal EDA without further review, except by their main contact at the Federal EDA. Additionally, the compliance test over the ED-209 report revealed that the Organization is consistently omitting loan origination fee income and interest income from federal program income calculations, with a discrepancy of $3,614 identified. Cause The lack of a secondary review process allowed errors and omissions to go undetected. There was a misunderstanding regarding what constitutes program income under federal guidelines, leading to the exclusion of certain income sources from reports. Effect Potential inaccuracies and errors in financial reporting could lead to misrepresentation of the Organization's financial position and noncompliance with federal regulations. This could result in financial penalties, increased scrutiny from federal agencies, or impacts on future funding eligibility. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Organization establish a formal review process for financial reports before submission to federal agencies. This should include verification of all income sources that qualify as program income under federal guidelines. Management’s Response Management concurs with this finding. See Management’s Response and Corrective Action plan section.
FA 2023-001 Improve Controls over Expenditures Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Cash Management Program Income Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Number and Title: COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund Federal Award Number: S425U210012 Questioned Costs: $309,623 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it relates to the Elementary and Secondary School Emergency Relief Fund program. Background Information: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $18,867,709 were expended and reported on the Clarke County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” In addition, provisions included in the Uniform Guidance, Section 202.403 – Reasonable Costs state that “a cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to: (a) Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound business practices; arm’s-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award… (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award’s cost.” Furthermore, provisions included in the Uniform Guidance, Section 200.305(b)(5) state that “To the extent available, the non-Federal entity must disburse funds available from program income… before requesting additional cash payments.” Lastly, provisions included in the Uniform Guidance, Section 200.307(e)(1) state that “ordinarily program income must be deducted from total allowable costs to determine the net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise…” Condition: Auditors performed a review of expenditure activity associated with the ESSER program to determine if appropriate internal controls were implemented and applicable compliance requirements were met. This testing revealed that ESSER funds were utilized to cover after-school program expenditures that exceeded net allowable costs. The School District incurred $1,765,203 in expenditures and received $913,744 in program income related to the after-school program. Based upon this activity, the net allowable costs that could have been funded by the ESSER program totaled $851,459; however, the School District received $1,161,082 in ESSER funding for this purpose during the period under review. Therefore, expenditures totaling $309,623 were deemed unallowable for the ESSER program, and it was noted that excessive cash drawdowns in this same amount were made. Questioned Costs: Known questioned costs of $309,623 identified for unallowable expenditures. These known questioned costs related to expenditures that were not tested as part of a sample, and therefore, should not be projected to a population to determine likely questioned costs. Cause: Per management personnel, schools experienced a significant shortfall in revenue with the closure of schools due to the pandemic. By covering the after-school program payroll with ESSER funds, the School District was attempting to reestablish a fund balance for their after-school program, which should be self-sustaining, and was unaware that they could not use ESSER funds to accomplish this. Effect: The School District is not in compliance with the Uniform Guidance, ED, or GaDOE guidance related to the ESSER program. Failure to ensure that appropriate policies and procedures are followed when expending federal funds may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to ESSER program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that expenditures are allowable and program income is expended prior to requesting additional cash payments from federal funds. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with applicable policies and procedures. Views of Responsible Officials: We concur with this finding.
2023-002 Program Income Program: 14.267 Continuum of Care Program Criteria: In accordance with 2 CFR 200.307, program income (in this case, tenant rent) must be correctly determined and properly recorded in the accounting records. Eligibility and rent determination evaluations are performed for new tenants before move-in and annually for existing tenants to determine their portion of rent to pay via the Tenant Income Certification or Re-certification of Permanent Supportive Housing – Eligibility and Rent Determination forms which are approved by the San Diego Housing Commission. Housing program tenants are required to pay up to 30% of their income for rent. Condition: For one out of 12 transactions tested, The Center collected $344.40 which could not be directly traced to an individual tenant. Because it could not be directly traced, the Tenant Income Certification or Re-certification of Permanent Supportive Housing – Eligibility and Rent Determination forms could not be identified and tested for accuracy or completeness and compliance with the tenant’s share of the rental payment could not be determined. Cause: There is no process to regularly review tenant rent payments to ensure that amounts received are matched with a specified tenant and that amounts collected are accurate and agree with the Eligibility and Rent Determination form. Effect: Rent payment was not attributed to an individual tenant. Rent was underpaid by one tenant for multiple months. Questioned Costs: The conditions did not result in questioned costs greater than $25,000. Context: After further investigation, it was determined that one tenant did not pay rent for certain months during fiscal year 2023. Based on a review of client payments and files, it was plausible that the payment received was back rent for this tenant. Repeat Finding: No. Recommendation: The Center should develop a policy for handling payment of tenant rent, including underpayments and overpayments. Rent collected should be compared to the amount determined on the Eligibility and Rent Determination form on a monthly basis to review for inconsistencies and, when differences arise, they should be timely investigated and followed-up on with the appropriate corrective action, per the established policy. Views of Responsible Officials: Management agrees with the finding and a response is included in the corrective action plan.
2023-008 U.S. Department of Housing and Urban Development, For the period July 1, 2022 through June 30, 2023, ALN # 14.218 – Internal Controls over Community Development Block Grant Entitlements Cluster Criteria: In accordance with 2 CFR 200.307(e), program income must be deducted from total allowable costs to determine net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Condition: In the first quarter of fiscal year 2023, the City requested $21,212 of CDBG grant funds even though sufficient program income was available to cover those costs. Cause: Internal controls over the CDBG grant program are insufficient to ensure grant funds are only drawn when program income is insufficient to cover program costs. Effect: Since program income exceeded allowable costs in the first quarter of fiscal year 2023, there were no eligible costs for grant reimbursement. As a result, Federal funds were drawn to reimburse unallowable costs. Recommendation: We recommend grant management staff review their grant drawdown procedures to ensure program income is reviewed prior to drawing new grant funds. Known Questioned Costs: $21,212.
2023-008 U.S. Department of Housing and Urban Development, For the period July 1, 2022 through June 30, 2023, ALN # 14.218 – Internal Controls over Community Development Block Grant Entitlements Cluster Criteria: In accordance with 2 CFR 200.307(e), program income must be deducted from total allowable costs to determine net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Condition: In the first quarter of fiscal year 2023, the City requested $21,212 of CDBG grant funds even though sufficient program income was available to cover those costs. Cause: Internal controls over the CDBG grant program are insufficient to ensure grant funds are only drawn when program income is insufficient to cover program costs. Effect: Since program income exceeded allowable costs in the first quarter of fiscal year 2023, there were no eligible costs for grant reimbursement. As a result, Federal funds were drawn to reimburse unallowable costs. Recommendation: We recommend grant management staff review their grant drawdown procedures to ensure program income is reviewed prior to drawing new grant funds. Known Questioned Costs: $21,212.
2023-008 U.S. Department of Housing and Urban Development, For the period July 1, 2022 through June 30, 2023, ALN # 14.218 – Internal Controls over Community Development Block Grant Entitlements Cluster Criteria: In accordance with 2 CFR 200.307(e), program income must be deducted from total allowable costs to determine net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Condition: In the first quarter of fiscal year 2023, the City requested $21,212 of CDBG grant funds even though sufficient program income was available to cover those costs. Cause: Internal controls over the CDBG grant program are insufficient to ensure grant funds are only drawn when program income is insufficient to cover program costs. Effect: Since program income exceeded allowable costs in the first quarter of fiscal year 2023, there were no eligible costs for grant reimbursement. As a result, Federal funds were drawn to reimburse unallowable costs. Recommendation: We recommend grant management staff review their grant drawdown procedures to ensure program income is reviewed prior to drawing new grant funds. Known Questioned Costs: $21,212.
2023-008 U.S. Department of Housing and Urban Development, For the period July 1, 2022 through June 30, 2023, ALN # 14.218 – Internal Controls over Community Development Block Grant Entitlements Cluster Criteria: In accordance with 2 CFR 200.307(e), program income must be deducted from total allowable costs to determine net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Condition: In the first quarter of fiscal year 2023, the City requested $21,212 of CDBG grant funds even though sufficient program income was available to cover those costs. Cause: Internal controls over the CDBG grant program are insufficient to ensure grant funds are only drawn when program income is insufficient to cover program costs. Effect: Since program income exceeded allowable costs in the first quarter of fiscal year 2023, there were no eligible costs for grant reimbursement. As a result, Federal funds were drawn to reimburse unallowable costs. Recommendation: We recommend grant management staff review their grant drawdown procedures to ensure program income is reviewed prior to drawing new grant funds. Known Questioned Costs: $21,212.
2023-008 U.S. Department of Housing and Urban Development, For the period July 1, 2022 through June 30, 2023, ALN # 14.218 – Internal Controls over Community Development Block Grant Entitlements Cluster Criteria: In accordance with 2 CFR 200.307(e), program income must be deducted from total allowable costs to determine net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Condition: In the first quarter of fiscal year 2023, the City requested $21,212 of CDBG grant funds even though sufficient program income was available to cover those costs. Cause: Internal controls over the CDBG grant program are insufficient to ensure grant funds are only drawn when program income is insufficient to cover program costs. Effect: Since program income exceeded allowable costs in the first quarter of fiscal year 2023, there were no eligible costs for grant reimbursement. As a result, Federal funds were drawn to reimburse unallowable costs. Recommendation: We recommend grant management staff review their grant drawdown procedures to ensure program income is reviewed prior to drawing new grant funds. Known Questioned Costs: $21,212.
2023-008 U.S. Department of Housing and Urban Development, For the period July 1, 2022 through June 30, 2023, ALN # 14.218 – Internal Controls over Community Development Block Grant Entitlements Cluster Criteria: In accordance with 2 CFR 200.307(e), program income must be deducted from total allowable costs to determine net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Condition: In the first quarter of fiscal year 2023, the City requested $21,212 of CDBG grant funds even though sufficient program income was available to cover those costs. Cause: Internal controls over the CDBG grant program are insufficient to ensure grant funds are only drawn when program income is insufficient to cover program costs. Effect: Since program income exceeded allowable costs in the first quarter of fiscal year 2023, there were no eligible costs for grant reimbursement. As a result, Federal funds were drawn to reimburse unallowable costs. Recommendation: We recommend grant management staff review their grant drawdown procedures to ensure program income is reviewed prior to drawing new grant funds. Known Questioned Costs: $21,212.
FINDING 2023-004 Subject: Twenty-First Century Community Learning Centers - Cash Management, Program Income and Reporting Federal Agency: Department of Education Federal Program: Twenty-First Century Community Learning Centers Assistance Listings Number: 84.287 Federal Award Numbers and Years (or Other Identifying Numbers): A58-1-21DL-0153, A58-1-21DL-5176, A58-2-22DL-0018, A58-3-23DL-0027 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Cash Management, Program Income, and Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation utilized grant funds to operate an After School Care Safe Harbor Program. As part of the programs, the students were charged monthly fees to help cover the related costs. Per the grant guidelines, families cannot be turned away for nonpayment of fees, and any fees collected are to be reinvested into the programs. Reimbursement requests are to deduct the program income received from allowable costs prior to claiming reimbursement. During the audit period, the School Corporation collected fees for the Before School Care Program and the After School Care Safe Harbor Program in the same manner. Fees collected for both programs were collected and receipted into the After School fund. For the years ended June 30, 2022, and June 30, 2023, the School Corporation receipted a total of $45,723 and $41,513, respectively, into the After School fund. Cash Management The School Corporation submitted 18 reimbursement requests in the audit period. Costs were paid prior to requesting reimbursement as required; however, due to the lack of adequate program income records the reimbursements were not reduced by the program income received. INDIANA STATE BOARD OF ACCOUNTS 26 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Program Income Although the School Corporation received approval from the grantor agency to collect program income, the School Corporation did not properly track students' attendance and payments, both if paid and how much paid; therefore, we were unable to determine the amount of program income related to each program. Additionally, the School Corporation did not maintain program income in a separate fund but comingled it with other nongrant funded program revenues. Finally, the School Corporation did not deduct program income from allowable costs prior to claiming reimbursement. Reporting Reimbursement Requests The School Corporation submitted 18 reimbursement requests in the audit period. Of those, 3 reimbursement requests were selected for testing. Of the 3 reimbursement requests inspected, none were reduced by program income received, and 1 was not properly supported by School Corporation records. The reimbursement was overstated by $14,700 when compared to the ledger. Based on additional procedures performed, the total requested reimbursements for the audit period were understated by $32,605 when compared to the ledger. Year End Reports End of Year reports are to be submitted within 60 days of the contract end date. A total of four End of Year Reports were submitted in the audit period and two were selected for testing. Of the two End of Year reports selected for testing, neither properly included program income received during the year due to inadequate tracking of program income. The lack of controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.305(b)(5) states in part: "To the extent available, the non-Federal entity must disburse funds available from program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, and interest earned on such funds before requesting additional cash payments." INDIANA STATE BOARD OF ACCOUNTS 27 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.307 states in part: "(a) General. Non-Federal entities are encouraged to earn income to defray program costs where appropriate. . . . (e) Use of program income. If the Federal awarding agency does not specify in its regulations or the terms and conditions of the Federal award, or give prior approval for how program income is to be used, paragraph (e)(1) of this section must apply. For Federal awards made to IHEs and nonprofit research institutions, if the Federal awarding agency does not specify in its regulations or the terms and conditions of the Federal award how program income is to be used, paragraph (e)(2) of this section must apply. In specifying alternatives to paragraphs (e)(1) and (2) of this section, the Federal awarding agency may distinguish between income earned by the recipient and income earned by subrecipients and between the sources, kinds, or amounts of income. When the Federal awarding agency authorizes the approaches in paragraphs (e)(2) and (3) of this section, program income in excess of any amounts specified must also be deducted from expenditures. (1) Deduction. Ordinarily program income must be deducted from total allowable costs to determine the net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Program income that the non- Federal entity did not anticipate at the time of the Federal award must be used to reduce the Federal award and non- Federal entity contributions rather than to increase the funds committed to the project. (2) Addition. With prior approval of the Federal awarding agency (except for IHEs and nonprofit research institutions, as described in this paragraph (e)) program income may be added to the Federal award by the Federal agency and the non-Federal entity. The program income must be used for the purposes and under the conditions of the Federal award. (3) Cost sharing or matching. With prior approval of the Federal awarding agency, program income may be used to meet the cost sharing or matching requirement of the Federal award. The amount of the Federal award remains the same. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." INDIANA STATE BOARD OF ACCOUNTS 28 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, program income was not properly documented resulting in noncompliance with the Cash Management, Program Income, and Reporting compliance requirements. 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 by the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and strengthen its policies and procedures to ensure proper tracking of program income to ensure all activity and reports submitted on behalf of the Twenty-First Century Community Learning Centers program funds are accurate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Twenty-First Century Community Learning Centers - Cash Management, Program Income and Reporting Federal Agency: Department of Education Federal Program: Twenty-First Century Community Learning Centers Assistance Listings Number: 84.287 Federal Award Numbers and Years (or Other Identifying Numbers): A58-1-21DL-0153, A58-1-21DL-5176, A58-2-22DL-0018, A58-3-23DL-0027 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Cash Management, Program Income, and Reporting Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation utilized grant funds to operate an After School Care Safe Harbor Program. As part of the programs, the students were charged monthly fees to help cover the related costs. Per the grant guidelines, families cannot be turned away for nonpayment of fees, and any fees collected are to be reinvested into the programs. Reimbursement requests are to deduct the program income received from allowable costs prior to claiming reimbursement. During the audit period, the School Corporation collected fees for the Before School Care Program and the After School Care Safe Harbor Program in the same manner. Fees collected for both programs were collected and receipted into the After School fund. For the years ended June 30, 2022, and June 30, 2023, the School Corporation receipted a total of $45,723 and $41,513, respectively, into the After School fund. Cash Management The School Corporation submitted 18 reimbursement requests in the audit period. Costs were paid prior to requesting reimbursement as required; however, due to the lack of adequate program income records the reimbursements were not reduced by the program income received. INDIANA STATE BOARD OF ACCOUNTS 26 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Program Income Although the School Corporation received approval from the grantor agency to collect program income, the School Corporation did not properly track students' attendance and payments, both if paid and how much paid; therefore, we were unable to determine the amount of program income related to each program. Additionally, the School Corporation did not maintain program income in a separate fund but comingled it with other nongrant funded program revenues. Finally, the School Corporation did not deduct program income from allowable costs prior to claiming reimbursement. Reporting Reimbursement Requests The School Corporation submitted 18 reimbursement requests in the audit period. Of those, 3 reimbursement requests were selected for testing. Of the 3 reimbursement requests inspected, none were reduced by program income received, and 1 was not properly supported by School Corporation records. The reimbursement was overstated by $14,700 when compared to the ledger. Based on additional procedures performed, the total requested reimbursements for the audit period were understated by $32,605 when compared to the ledger. Year End Reports End of Year reports are to be submitted within 60 days of the contract end date. A total of four End of Year Reports were submitted in the audit period and two were selected for testing. Of the two End of Year reports selected for testing, neither properly included program income received during the year due to inadequate tracking of program income. The lack of controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.305(b)(5) states in part: "To the extent available, the non-Federal entity must disburse funds available from program income (including repayments to a revolving fund), rebates, refunds, contract settlements, audit recoveries, and interest earned on such funds before requesting additional cash payments." INDIANA STATE BOARD OF ACCOUNTS 27 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 2 CFR 200.307 states in part: "(a) General. Non-Federal entities are encouraged to earn income to defray program costs where appropriate. . . . (e) Use of program income. If the Federal awarding agency does not specify in its regulations or the terms and conditions of the Federal award, or give prior approval for how program income is to be used, paragraph (e)(1) of this section must apply. For Federal awards made to IHEs and nonprofit research institutions, if the Federal awarding agency does not specify in its regulations or the terms and conditions of the Federal award how program income is to be used, paragraph (e)(2) of this section must apply. In specifying alternatives to paragraphs (e)(1) and (2) of this section, the Federal awarding agency may distinguish between income earned by the recipient and income earned by subrecipients and between the sources, kinds, or amounts of income. When the Federal awarding agency authorizes the approaches in paragraphs (e)(2) and (3) of this section, program income in excess of any amounts specified must also be deducted from expenditures. (1) Deduction. Ordinarily program income must be deducted from total allowable costs to determine the net allowable costs. Program income must be used for current costs unless the Federal awarding agency authorizes otherwise. Program income that the non- Federal entity did not anticipate at the time of the Federal award must be used to reduce the Federal award and non- Federal entity contributions rather than to increase the funds committed to the project. (2) Addition. With prior approval of the Federal awarding agency (except for IHEs and nonprofit research institutions, as described in this paragraph (e)) program income may be added to the Federal award by the Federal agency and the non-Federal entity. The program income must be used for the purposes and under the conditions of the Federal award. (3) Cost sharing or matching. With prior approval of the Federal awarding agency, program income may be used to meet the cost sharing or matching requirement of the Federal award. The amount of the Federal award remains the same. . . ." 2 CFR 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following: . . . (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . ." 34 CFR 76.722 states: "A State may require a subgrantee to submit reports in a manner and format that assists the State in complying with the requirements under 34 CFR 76.720 and in carrying out other responsibilities under the program." 34 CFR 76.731 states: "A State and a subgrantee shall keep records to show its compliance with program requirements." INDIANA STATE BOARD OF ACCOUNTS 28 MICHIGAN CITY AREA SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, program income was not properly documented resulting in noncompliance with the Cash Management, Program Income, and Reporting compliance requirements. 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 by the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and strengthen its policies and procedures to ensure proper tracking of program income to ensure all activity and reports submitted on behalf of the Twenty-First Century Community Learning Centers program funds are accurate. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Financial Reporting and Review Processes Assistance Title: COVID-19 - Economic Adjustment Assistance - Coronavirus Aid, Relief, and Economic Security (CARES) Act Revolving Loan Fund Assistance Listing Number: 11.307 Federal Agency: U.S. Department of Commerce Type of Finding: Significant Deficiency and Noncompliance Category of Finding: Reporting Known Questioned Costs: $0 Likely Questioned Costs: $0 Criteria Per the Uniform Guidance (2 CFR Part 200.303), non-federal entities must establish and maintain effective internal control over the federal award to provide reasonable assurance that they are managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Per the Uniform Guidance (2 CFR Part 200.307), program income means gross income earned by the non-federal entity that is directly generated by a supported activity or earned as a result of the federal award during the period of performance. Additionally, the Form ED-209 Instructions specify that loan origination fee income and interest income must be included in the appropriate line items when completing the ED-209 report. Condition The Program Finance Director creates the financial report using information from the Senior Director of Finance. Once completed, the report is sent to directly to the Federal EDA without further review, except by their main contact at the Federal EDA. Additionally, the compliance test over the ED-209 report revealed that the Organization is consistently omitting loan origination fee income and interest income from federal program income calculations, with a discrepancy of $3,614 identified. Cause The lack of a secondary review process allowed errors and omissions to go undetected. There was a misunderstanding regarding what constitutes program income under federal guidelines, leading to the exclusion of certain income sources from reports. Effect Potential inaccuracies and errors in financial reporting could lead to misrepresentation of the Organization's financial position and noncompliance with federal regulations. This could result in financial penalties, increased scrutiny from federal agencies, or impacts on future funding eligibility. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Organization establish a formal review process for financial reports before submission to federal agencies. This should include verification of all income sources that qualify as program income under federal guidelines. Management’s Response Management concurs with this finding. See Management’s Response and Corrective Action plan section.
FINDING 2022-001 Condition: The Organization had allocated expenditures, which supported an activity that generated program income, to a federal award that was not a major program. This program income was not deducted from total allowable costs or added to the award. The auditor discovered the expenditures during a scan of the expenditures allocated to federal awards and requested that the Organization analyze its charges to federal awards to determine if there were additional amounts. The total of such expenditures discovered was $3,655. Criteria: The Uniform Guidance (2 CFR section 200.307(e)(1)) requires that program income be deducted from total allowable costs in order to determine the net allowable costs, rather than to increase the funds committed to the project. This method must be used if the federal awarding agency has given no prior approval for how program income is to be used and its regulations and the terms and conditions of the federal award are silent on this matter. The Organization?s federal award contracts also address program income. Cause: The Organization had inadvertently misallocated the expenditures to the award. Effect: The Organization had other expenditures, which did not support an activity that generated program income, available to allocate to the award. Accordingly, no adjustment to the financial statements was required and there was no reportable noncompliance associated with program income. This did not directly affect the major program that was tested during the audit but is considered a significant deficiency in internal control over compliance, particularly compliance related to program income, for federal awards. Recommendation: The Organization should reevaluate its procedures and controls regarding the allocation of expenditures, which supported an activity that generated program income, to a federal award to ensure proper compliance. Views of Responsible Officials and Planned Corrective Actions: The Organization agrees with the finding and plans to carry out the noted recommendation.
PROGRAM INCOME - MATERIAL WEAKNESS Federal Program Community Development Block Grant/Entitlement Grant ALN 14.218; passed through the County of Berks HOME Investment Partnership Program ALN 14.239; passed through the County of Berks Criteria Per 2 CFR section 200.307(a), program income must be expended prior to requesting Federal Funds. The Authority receives program income under the above grants and must report the receipt and application of program income within the United States Department of Housing and Urban Development Integrated Disbursement and Information System (IDIS). Condition/Cause The Authority did not properly report program income in IDIS during the year, and therefore could not support that program income was applied prior to drawing down entitlement funding. In some instances, program income received was not reported in IDIS, and one receipt was entered into IDIS twice. When received, program income is reported in a separate general ledger account in the financial reporting software. The Fiscal Officer then enters the program income into IDIS on a regular basis. No control exists to ensure completeness or accuracy of information entered into IDIS related to program income. Effect The Authority cannot provide documentation of compliance with the program income requirements of the programs during 2022. Questioned Costs HOME Investment Partnership Program - $64,128 Community Development Block Grant/Entitlement Grant - Less than $25,000 Context For the HOME Investment Partnership Program, a receipt of $10,000 was entered twice into IDIS. Receipts of $74,128.05 were identified as program income on the general ledger but not entered into IDIS. For the Community Development Block Grant Program, program income identified on the general ledger was $24,221 higher than program income reported in IDIS. The difference could not be identified by management. Repeat Finding No. Recommendation We recommend the Authority develop a procedure/internal control to ensure program income is entered accurately and completely within IDIS. This will allow for documentation to support that program income is being utilized prior to drawing down entitlement funding. This will also ensure compliance with reporting requirements for reports generated within IDIS on an annual basis. Management Response See corrective action plan included in this report package.
PROGRAM INCOME - MATERIAL WEAKNESS Federal Program Community Development Block Grant/Entitlement Grant ALN 14.218; passed through the County of Berks HOME Investment Partnership Program ALN 14.239; passed through the County of Berks Criteria Per 2 CFR section 200.307(a), program income must be expended prior to requesting Federal Funds. The Authority receives program income under the above grants and must report the receipt and application of program income within the United States Department of Housing and Urban Development Integrated Disbursement and Information System (IDIS). Condition/Cause The Authority did not properly report program income in IDIS during the year, and therefore could not support that program income was applied prior to drawing down entitlement funding. In some instances, program income received was not reported in IDIS, and one receipt was entered into IDIS twice. When received, program income is reported in a separate general ledger account in the financial reporting software. The Fiscal Officer then enters the program income into IDIS on a regular basis. No control exists to ensure completeness or accuracy of information entered into IDIS related to program income. Effect The Authority cannot provide documentation of compliance with the program income requirements of the programs during 2022. Questioned Costs HOME Investment Partnership Program - $64,128 Community Development Block Grant/Entitlement Grant - Less than $25,000 Context For the HOME Investment Partnership Program, a receipt of $10,000 was entered twice into IDIS. Receipts of $74,128.05 were identified as program income on the general ledger but not entered into IDIS. For the Community Development Block Grant Program, program income identified on the general ledger was $24,221 higher than program income reported in IDIS. The difference could not be identified by management. Repeat Finding No. Recommendation We recommend the Authority develop a procedure/internal control to ensure program income is entered accurately and completely within IDIS. This will allow for documentation to support that program income is being utilized prior to drawing down entitlement funding. This will also ensure compliance with reporting requirements for reports generated within IDIS on an annual basis. Management Response See corrective action plan included in this report package.
PROGRAM INCOME - MATERIAL WEAKNESS Federal Program Community Development Block Grant/Entitlement Grant ALN 14.218; passed through the County of Berks HOME Investment Partnership Program ALN 14.239; passed through the County of Berks Criteria Per 2 CFR section 200.307(a), program income must be expended prior to requesting Federal Funds. The Authority receives program income under the above grants and must report the receipt and application of program income within the United States Department of Housing and Urban Development Integrated Disbursement and Information System (IDIS). Condition/Cause The Authority did not properly report program income in IDIS during the year, and therefore could not support that program income was applied prior to drawing down entitlement funding. In some instances, program income received was not reported in IDIS, and one receipt was entered into IDIS twice. When received, program income is reported in a separate general ledger account in the financial reporting software. The Fiscal Officer then enters the program income into IDIS on a regular basis. No control exists to ensure completeness or accuracy of information entered into IDIS related to program income. Effect The Authority cannot provide documentation of compliance with the program income requirements of the programs during 2022. Questioned Costs HOME Investment Partnership Program - $64,128 Community Development Block Grant/Entitlement Grant - Less than $25,000 Context For the HOME Investment Partnership Program, a receipt of $10,000 was entered twice into IDIS. Receipts of $74,128.05 were identified as program income on the general ledger but not entered into IDIS. For the Community Development Block Grant Program, program income identified on the general ledger was $24,221 higher than program income reported in IDIS. The difference could not be identified by management. Repeat Finding No. Recommendation We recommend the Authority develop a procedure/internal control to ensure program income is entered accurately and completely within IDIS. This will allow for documentation to support that program income is being utilized prior to drawing down entitlement funding. This will also ensure compliance with reporting requirements for reports generated within IDIS on an annual basis. Management Response See corrective action plan included in this report package.
PROGRAM INCOME - MATERIAL WEAKNESS Federal Program Community Development Block Grant/Entitlement Grant ALN 14.218; passed through the County of Berks HOME Investment Partnership Program ALN 14.239; passed through the County of Berks Criteria Per 2 CFR section 200.307(a), program income must be expended prior to requesting Federal Funds. The Authority receives program income under the above grants and must report the receipt and application of program income within the United States Department of Housing and Urban Development Integrated Disbursement and Information System (IDIS). Condition/Cause The Authority did not properly report program income in IDIS during the year, and therefore could not support that program income was applied prior to drawing down entitlement funding. In some instances, program income received was not reported in IDIS, and one receipt was entered into IDIS twice. When received, program income is reported in a separate general ledger account in the financial reporting software. The Fiscal Officer then enters the program income into IDIS on a regular basis. No control exists to ensure completeness or accuracy of information entered into IDIS related to program income. Effect The Authority cannot provide documentation of compliance with the program income requirements of the programs during 2022. Questioned Costs HOME Investment Partnership Program - $64,128 Community Development Block Grant/Entitlement Grant - Less than $25,000 Context For the HOME Investment Partnership Program, a receipt of $10,000 was entered twice into IDIS. Receipts of $74,128.05 were identified as program income on the general ledger but not entered into IDIS. For the Community Development Block Grant Program, program income identified on the general ledger was $24,221 higher than program income reported in IDIS. The difference could not be identified by management. Repeat Finding No. Recommendation We recommend the Authority develop a procedure/internal control to ensure program income is entered accurately and completely within IDIS. This will allow for documentation to support that program income is being utilized prior to drawing down entitlement funding. This will also ensure compliance with reporting requirements for reports generated within IDIS on an annual basis. Management Response See corrective action plan included in this report package.
Federal agency name: U.S. National Science Foundation Federal program title: Geosciences, Computer and Information Science and Engineering & Office of Cyber Infrastructure AL No.: 47.050, 47.070, 47.079 & 47.080 Federal Award Identification No. & Award Period: EAR-1849458 (06/01/2019 -05/31/2024), EAR-2012893 (10/01/2020 – 08/31/2025), OAC-1931278 (10/1/2019 – 09/30/2022), OAC- 1829744 (09/01/2018 – 08/31/2023), OAC-1835592 (01/01/2009 – 12/31/2022), OAC-1835818 (10/01/2018 – 09/30/2022), OAC-2103780 (10/01/2021 – 09/30/2026), OAC-2118329 (10/01/2021 – 09/30/2026),OISE-1855654 (05/15/2019 – 12/31/2023) & OAC-1664061 (10/01/17 – 09/30/2022) Pass Through Entity: Utah State University MW2022-008 PROGRAM INCOME Material Weakness Criteria Pursuant to 2 CFR 200 for award objectives and the regulations at 2 CFR 200.307, program income is defined as “Gross income earned by the recipient that is directly generated by a supported activity or earned as a result of the federal award during the period of performance” by 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards. Program income reporting is due forty five (45) days after the end of the federal fiscal year. NSF requires that all cumulative program income is reported for all open grants and agreements in the current year. Condition Program income consists of registration fees collected for training, meetings or workshops and the proceeds from the sale of publications as a result of the federal award during the period of performance. Program income is treated as an additive to the federal funds received by CUAHSI. During a drawdown, program income reduces the amount that is requested to cover reimbursable costs through the Flexible Billing module. This allows program income to be applied to the award before a reimbursement is requested from NSF adding the value of program income received to the awarded amount. Program income reporting is due forty five (45) days after the end of the federal fiscal year. NSF requires that all cumulative program income is reported for all open grants and agreements in the current year. CUAHSI program income totaled $12,605 for the year ended December 31, 2022.CUAHSI failed to submit the required Program Income Reporting Worksheet by the required deadline of forty five (45) days after the end of the federal fiscal year (November 15, 2022) to ensure with the program income policies in accordance with the UG for the year ended December 31, 2022. Cause & Context Lack of resources and detailed attention to the risks, along with circumvention of controls has resulted in weak internal controls, and conflicting or incomplete policies and procedures. Effect Non-compliance can lead to penalties, fines, or even termination of the contract. It may also damage CUAHSI’s future eligibility for federal funding and jeopardize CUAHSI’s ability to secure future grants or contracts from other funding agencies. Granting organizations typically prioritize funding recipients with a track record of compliance and accountability. Questioned Costs None Prior Year Audit Finding Yes, previously reported as MW2021-009. Recommendation The auditor recommends that CUAHSI develops and implements controls over policies consistent with 2 CFR 200.307.View of Responsible Official and Planned Corrective Action See accompanying Corrective Action Plan.
Federal agency name: U.S. National Science Foundation Federal program title: Geosciences, Computer and Information Science and Engineering & Office of Cyber Infrastructure AL No.: 47.050, 47.070, 47.079 & 47.080 Federal Award Identification No. & Award Period: EAR-1849458 (06/01/2019 -05/31/2024), EAR-2012893 (10/01/2020 – 08/31/2025), OAC-1931278 (10/1/2019 – 09/30/2022), OAC- 1829744 (09/01/2018 – 08/31/2023), OAC-1835592 (01/01/2009 – 12/31/2022), OAC-1835818 (10/01/2018 – 09/30/2022), OAC-2103780 (10/01/2021 – 09/30/2026), OAC-2118329 (10/01/2021 – 09/30/2026),OISE-1855654 (05/15/2019 – 12/31/2023) & OAC-1664061 (10/01/17 – 09/30/2022) Pass Through Entity: Utah State University MW2022-008 PROGRAM INCOME Material Weakness Criteria Pursuant to 2 CFR 200 for award objectives and the regulations at 2 CFR 200.307, program income is defined as “Gross income earned by the recipient that is directly generated by a supported activity or earned as a result of the federal award during the period of performance” by 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards. Program income reporting is due forty five (45) days after the end of the federal fiscal year. NSF requires that all cumulative program income is reported for all open grants and agreements in the current year. Condition Program income consists of registration fees collected for training, meetings or workshops and the proceeds from the sale of publications as a result of the federal award during the period of performance. Program income is treated as an additive to the federal funds received by CUAHSI. During a drawdown, program income reduces the amount that is requested to cover reimbursable costs through the Flexible Billing module. This allows program income to be applied to the award before a reimbursement is requested from NSF adding the value of program income received to the awarded amount. Program income reporting is due forty five (45) days after the end of the federal fiscal year. NSF requires that all cumulative program income is reported for all open grants and agreements in the current year. CUAHSI program income totaled $12,605 for the year ended December 31, 2022.CUAHSI failed to submit the required Program Income Reporting Worksheet by the required deadline of forty five (45) days after the end of the federal fiscal year (November 15, 2022) to ensure with the program income policies in accordance with the UG for the year ended December 31, 2022. Cause & Context Lack of resources and detailed attention to the risks, along with circumvention of controls has resulted in weak internal controls, and conflicting or incomplete policies and procedures. Effect Non-compliance can lead to penalties, fines, or even termination of the contract. It may also damage CUAHSI’s future eligibility for federal funding and jeopardize CUAHSI’s ability to secure future grants or contracts from other funding agencies. Granting organizations typically prioritize funding recipients with a track record of compliance and accountability. Questioned Costs None Prior Year Audit Finding Yes, previously reported as MW2021-009. Recommendation The auditor recommends that CUAHSI develops and implements controls over policies consistent with 2 CFR 200.307.View of Responsible Official and Planned Corrective Action See accompanying Corrective Action Plan.
Federal agency name: U.S. National Science Foundation Federal program title: Geosciences, Computer and Information Science and Engineering & Office of Cyber Infrastructure AL No.: 47.050, 47.070, 47.079 & 47.080 Federal Award Identification No. & Award Period: EAR-1849458 (06/01/2019 -05/31/2024), EAR-2012893 (10/01/2020 – 08/31/2025), OAC-1931278 (10/1/2019 – 09/30/2022), OAC- 1829744 (09/01/2018 – 08/31/2023), OAC-1835592 (01/01/2009 – 12/31/2022), OAC-1835818 (10/01/2018 – 09/30/2022), OAC-2103780 (10/01/2021 – 09/30/2026), OAC-2118329 (10/01/2021 – 09/30/2026),OISE-1855654 (05/15/2019 – 12/31/2023) & OAC-1664061 (10/01/17 – 09/30/2022) Pass Through Entity: Utah State University MW2022-008 PROGRAM INCOME Material Weakness Criteria Pursuant to 2 CFR 200 for award objectives and the regulations at 2 CFR 200.307, program income is defined as “Gross income earned by the recipient that is directly generated by a supported activity or earned as a result of the federal award during the period of performance” by 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards. Program income reporting is due forty five (45) days after the end of the federal fiscal year. NSF requires that all cumulative program income is reported for all open grants and agreements in the current year. Condition Program income consists of registration fees collected for training, meetings or workshops and the proceeds from the sale of publications as a result of the federal award during the period of performance. Program income is treated as an additive to the federal funds received by CUAHSI. During a drawdown, program income reduces the amount that is requested to cover reimbursable costs through the Flexible Billing module. This allows program income to be applied to the award before a reimbursement is requested from NSF adding the value of program income received to the awarded amount. Program income reporting is due forty five (45) days after the end of the federal fiscal year. NSF requires that all cumulative program income is reported for all open grants and agreements in the current year. CUAHSI program income totaled $12,605 for the year ended December 31, 2022.CUAHSI failed to submit the required Program Income Reporting Worksheet by the required deadline of forty five (45) days after the end of the federal fiscal year (November 15, 2022) to ensure with the program income policies in accordance with the UG for the year ended December 31, 2022. Cause & Context Lack of resources and detailed attention to the risks, along with circumvention of controls has resulted in weak internal controls, and conflicting or incomplete policies and procedures. Effect Non-compliance can lead to penalties, fines, or even termination of the contract. It may also damage CUAHSI’s future eligibility for federal funding and jeopardize CUAHSI’s ability to secure future grants or contracts from other funding agencies. Granting organizations typically prioritize funding recipients with a track record of compliance and accountability. Questioned Costs None Prior Year Audit Finding Yes, previously reported as MW2021-009. Recommendation The auditor recommends that CUAHSI develops and implements controls over policies consistent with 2 CFR 200.307.View of Responsible Official and Planned Corrective Action See accompanying Corrective Action Plan.
Federal agency name: U.S. National Science Foundation Federal program title: Geosciences, Computer and Information Science and Engineering & Office of Cyber Infrastructure AL No.: 47.050, 47.070, 47.079 & 47.080 Federal Award Identification No. & Award Period: EAR-1849458 (06/01/2019 -05/31/2024), EAR-2012893 (10/01/2020 – 08/31/2025), OAC-1931278 (10/1/2019 – 09/30/2022), OAC- 1829744 (09/01/2018 – 08/31/2023), OAC-1835592 (01/01/2009 – 12/31/2022), OAC-1835818 (10/01/2018 – 09/30/2022), OAC-2103780 (10/01/2021 – 09/30/2026), OAC-2118329 (10/01/2021 – 09/30/2026),OISE-1855654 (05/15/2019 – 12/31/2023) & OAC-1664061 (10/01/17 – 09/30/2022) Pass Through Entity: Utah State University MW2022-008 PROGRAM INCOME Material Weakness Criteria Pursuant to 2 CFR 200 for award objectives and the regulations at 2 CFR 200.307, program income is defined as “Gross income earned by the recipient that is directly generated by a supported activity or earned as a result of the federal award during the period of performance” by 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards. Program income reporting is due forty five (45) days after the end of the federal fiscal year. NSF requires that all cumulative program income is reported for all open grants and agreements in the current year. Condition Program income consists of registration fees collected for training, meetings or workshops and the proceeds from the sale of publications as a result of the federal award during the period of performance. Program income is treated as an additive to the federal funds received by CUAHSI. During a drawdown, program income reduces the amount that is requested to cover reimbursable costs through the Flexible Billing module. This allows program income to be applied to the award before a reimbursement is requested from NSF adding the value of program income received to the awarded amount. Program income reporting is due forty five (45) days after the end of the federal fiscal year. NSF requires that all cumulative program income is reported for all open grants and agreements in the current year. CUAHSI program income totaled $12,605 for the year ended December 31, 2022.CUAHSI failed to submit the required Program Income Reporting Worksheet by the required deadline of forty five (45) days after the end of the federal fiscal year (November 15, 2022) to ensure with the program income policies in accordance with the UG for the year ended December 31, 2022. Cause & Context Lack of resources and detailed attention to the risks, along with circumvention of controls has resulted in weak internal controls, and conflicting or incomplete policies and procedures. Effect Non-compliance can lead to penalties, fines, or even termination of the contract. It may also damage CUAHSI’s future eligibility for federal funding and jeopardize CUAHSI’s ability to secure future grants or contracts from other funding agencies. Granting organizations typically prioritize funding recipients with a track record of compliance and accountability. Questioned Costs None Prior Year Audit Finding Yes, previously reported as MW2021-009. Recommendation The auditor recommends that CUAHSI develops and implements controls over policies consistent with 2 CFR 200.307.View of Responsible Official and Planned Corrective Action See accompanying Corrective Action Plan.
FINDING 2022-001 Condition: The Organization had allocated expenditures, which supported an activity that generated program income, to a federal award that was not a major program. This program income was not deducted from total allowable costs or added to the award. The auditor discovered the expenditures during a scan of the expenditures allocated to federal awards and requested that the Organization analyze its charges to federal awards to determine if there were additional amounts. The total of such expenditures discovered was $3,655. Criteria: The Uniform Guidance (2 CFR section 200.307(e)(1)) requires that program income be deducted from total allowable costs in order to determine the net allowable costs, rather than to increase the funds committed to the project. This method must be used if the federal awarding agency has given no prior approval for how program income is to be used and its regulations and the terms and conditions of the federal award are silent on this matter. The Organization?s federal award contracts also address program income. Cause: The Organization had inadvertently misallocated the expenditures to the award. Effect: The Organization had other expenditures, which did not support an activity that generated program income, available to allocate to the award. Accordingly, no adjustment to the financial statements was required and there was no reportable noncompliance associated with program income. This did not directly affect the major program that was tested during the audit but is considered a significant deficiency in internal control over compliance, particularly compliance related to program income, for federal awards. Recommendation: The Organization should reevaluate its procedures and controls regarding the allocation of expenditures, which supported an activity that generated program income, to a federal award to ensure proper compliance. Views of Responsible Officials and Planned Corrective Actions: The Organization agrees with the finding and plans to carry out the noted recommendation.
PROGRAM INCOME - MATERIAL WEAKNESS Federal Program Community Development Block Grant/Entitlement Grant ALN 14.218; passed through the County of Berks HOME Investment Partnership Program ALN 14.239; passed through the County of Berks Criteria Per 2 CFR section 200.307(a), program income must be expended prior to requesting Federal Funds. The Authority receives program income under the above grants and must report the receipt and application of program income within the United States Department of Housing and Urban Development Integrated Disbursement and Information System (IDIS). Condition/Cause The Authority did not properly report program income in IDIS during the year, and therefore could not support that program income was applied prior to drawing down entitlement funding. In some instances, program income received was not reported in IDIS, and one receipt was entered into IDIS twice. When received, program income is reported in a separate general ledger account in the financial reporting software. The Fiscal Officer then enters the program income into IDIS on a regular basis. No control exists to ensure completeness or accuracy of information entered into IDIS related to program income. Effect The Authority cannot provide documentation of compliance with the program income requirements of the programs during 2022. Questioned Costs HOME Investment Partnership Program - $64,128 Community Development Block Grant/Entitlement Grant - Less than $25,000 Context For the HOME Investment Partnership Program, a receipt of $10,000 was entered twice into IDIS. Receipts of $74,128.05 were identified as program income on the general ledger but not entered into IDIS. For the Community Development Block Grant Program, program income identified on the general ledger was $24,221 higher than program income reported in IDIS. The difference could not be identified by management. Repeat Finding No. Recommendation We recommend the Authority develop a procedure/internal control to ensure program income is entered accurately and completely within IDIS. This will allow for documentation to support that program income is being utilized prior to drawing down entitlement funding. This will also ensure compliance with reporting requirements for reports generated within IDIS on an annual basis. Management Response See corrective action plan included in this report package.
PROGRAM INCOME - MATERIAL WEAKNESS Federal Program Community Development Block Grant/Entitlement Grant ALN 14.218; passed through the County of Berks HOME Investment Partnership Program ALN 14.239; passed through the County of Berks Criteria Per 2 CFR section 200.307(a), program income must be expended prior to requesting Federal Funds. The Authority receives program income under the above grants and must report the receipt and application of program income within the United States Department of Housing and Urban Development Integrated Disbursement and Information System (IDIS). Condition/Cause The Authority did not properly report program income in IDIS during the year, and therefore could not support that program income was applied prior to drawing down entitlement funding. In some instances, program income received was not reported in IDIS, and one receipt was entered into IDIS twice. When received, program income is reported in a separate general ledger account in the financial reporting software. The Fiscal Officer then enters the program income into IDIS on a regular basis. No control exists to ensure completeness or accuracy of information entered into IDIS related to program income. Effect The Authority cannot provide documentation of compliance with the program income requirements of the programs during 2022. Questioned Costs HOME Investment Partnership Program - $64,128 Community Development Block Grant/Entitlement Grant - Less than $25,000 Context For the HOME Investment Partnership Program, a receipt of $10,000 was entered twice into IDIS. Receipts of $74,128.05 were identified as program income on the general ledger but not entered into IDIS. For the Community Development Block Grant Program, program income identified on the general ledger was $24,221 higher than program income reported in IDIS. The difference could not be identified by management. Repeat Finding No. Recommendation We recommend the Authority develop a procedure/internal control to ensure program income is entered accurately and completely within IDIS. This will allow for documentation to support that program income is being utilized prior to drawing down entitlement funding. This will also ensure compliance with reporting requirements for reports generated within IDIS on an annual basis. Management Response See corrective action plan included in this report package.
PROGRAM INCOME - MATERIAL WEAKNESS Federal Program Community Development Block Grant/Entitlement Grant ALN 14.218; passed through the County of Berks HOME Investment Partnership Program ALN 14.239; passed through the County of Berks Criteria Per 2 CFR section 200.307(a), program income must be expended prior to requesting Federal Funds. The Authority receives program income under the above grants and must report the receipt and application of program income within the United States Department of Housing and Urban Development Integrated Disbursement and Information System (IDIS). Condition/Cause The Authority did not properly report program income in IDIS during the year, and therefore could not support that program income was applied prior to drawing down entitlement funding. In some instances, program income received was not reported in IDIS, and one receipt was entered into IDIS twice. When received, program income is reported in a separate general ledger account in the financial reporting software. The Fiscal Officer then enters the program income into IDIS on a regular basis. No control exists to ensure completeness or accuracy of information entered into IDIS related to program income. Effect The Authority cannot provide documentation of compliance with the program income requirements of the programs during 2022. Questioned Costs HOME Investment Partnership Program - $64,128 Community Development Block Grant/Entitlement Grant - Less than $25,000 Context For the HOME Investment Partnership Program, a receipt of $10,000 was entered twice into IDIS. Receipts of $74,128.05 were identified as program income on the general ledger but not entered into IDIS. For the Community Development Block Grant Program, program income identified on the general ledger was $24,221 higher than program income reported in IDIS. The difference could not be identified by management. Repeat Finding No. Recommendation We recommend the Authority develop a procedure/internal control to ensure program income is entered accurately and completely within IDIS. This will allow for documentation to support that program income is being utilized prior to drawing down entitlement funding. This will also ensure compliance with reporting requirements for reports generated within IDIS on an annual basis. Management Response See corrective action plan included in this report package.