2023 – 005 – Allowable Costs/Cost Principles – Indirect Costs Federal Agency: U.S. Department of Education Federal Program Name: Education Stabilization Fund Assistance Listing Number: 84.425 Pass-Through Agency: Arizona Department of Education Pass-Through Number(s): All Pass-Though Numbers Present in the SEFA Award Period: March 2020 through September 2024 Statistically Valid Sample: No, and not intended to be a Statistically Valid Sample. Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria: In accordance with 2 CFR 200.334 Retention requirements for records, financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. Federal awarding agencies and pass-through entities must not impose any other record retention requirements upon non-Federal entities. Condition/Context: For one of the two samples selected the indirect cost was calculated incorrectly when compared to the supporting documentation. Questioned costs: None greater than the reportable amount. Cause: The District was not aware of the need to retain the original supporting documentation used for the indirect cost calculation. Effect: Failure to comply with 2 CFR 200 can lead to improper payment charged to the program. Repeat finding: No Recommendation: We recommend management to incorporate a management review control to ensure the calculation is complete and accurate and all supporting documents including the general ledger used for the calculation is retained in accordance with UG. Views of responsible officials: There is no disagreement with the audit finding. See corrective action plan.
2023 – 005 – Allowable Costs/Cost Principles – Indirect Costs Federal Agency: U.S. Department of Education Federal Program Name: Education Stabilization Fund Assistance Listing Number: 84.425 Pass-Through Agency: Arizona Department of Education Pass-Through Number(s): All Pass-Though Numbers Present in the SEFA Award Period: March 2020 through September 2024 Statistically Valid Sample: No, and not intended to be a Statistically Valid Sample. Type of Finding: Significant Deficiency in Internal Control over Compliance and Noncompliance Criteria: In accordance with 2 CFR 200.334 Retention requirements for records, financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. Federal awarding agencies and pass-through entities must not impose any other record retention requirements upon non-Federal entities. Condition/Context: For one of the two samples selected the indirect cost was calculated incorrectly when compared to the supporting documentation. Questioned costs: None greater than the reportable amount. Cause: The District was not aware of the need to retain the original supporting documentation used for the indirect cost calculation. Effect: Failure to comply with 2 CFR 200 can lead to improper payment charged to the program. Repeat finding: No Recommendation: We recommend management to incorporate a management review control to ensure the calculation is complete and accurate and all supporting documents including the general ledger used for the calculation is retained in accordance with UG. Views of responsible officials: There is no disagreement with the audit finding. See corrective action plan.
FINDING 2023-003 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Number and Year (or Other Identifying Number): FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals. Any child enrolled in a participating school who meets the applicable program's definition of "child," may receive meals under the applicable program. In the case of the National School Lunch Program and School Breakfast Program, children belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or at a reduced price. Children who have been determined ineligible for free or reduced-price school meals pay the full price, set by the School Food Authority, for their meals. As a general rule, a child's eligibility for free or reduced-price meals under a Child Nutrition Cluster program may be established by the submission of an annual application or statement which furnishes such information as family income and family size. Local educational agencies, institutions, and sponsors then determine eligibility by comparing the data reported by the child's household to published income eligibility guidelines. Additionally, a child may be direct certified. For a direct certification, annual eligibility determinations are based on the child's household receiving benefits under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most circumstances, the TANF program (ALN 93.558). A household may furnish documentation of its participation in one of these programs; or the school, institution, or sponsor may obtain the information directly from the state or local agency that administers these programs. Certain foster, runaway, homeless, and migrant children are categorically eligible for free school lunches and breakfasts. Direct certified households do not need to complete an application. The Food Service Director was responsible for generating and reviewing the direct certification report. The Food Service Director downloaded the direct certification report from the Indiana Department of Education in July and then bi-monthly thereafter in fiscal year 2022-2023. The July report was provided to the Information Technology (IT) department to upload into the School Corporation's software system; whereas the bi-monthly reports were sent to the IT with a list of students to be added. Students were not removed during the year. There was no review or approval process over the initial upload or any additional uploads of direct certifications completed by the IT. In addition, there was no review or approval of the direct certification data provided by the Food Service Director to the IT Department to ensure the student's information added during the year is complete and accurate. A sample of 40 students receiving free or reduced-priced lunches were selected for testing. Of the 40 students tested, the School Corporation could not provide documentation supporting the eligibility of the student for 10 students. Of the 30 remaining students, the School Corporation could not provide documentation that 1 student's benefits were calculated properly. Due to the lack of supporting documentation, we were unable to determine if student's receiving free and reduced-price meals were eligible to receive a free- or reduced-price meal. In addition, there was no documented internal control to ensure that the eligibility parameters entered into the School Corporation's computer software system were correct. Eligibility parameters were entered into the system by one employee without an oversight or review process to verify the information entered was accurate. The lack of internal controls and noncompliance was isolated to fiscal year 2022-2023. 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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 7 CFR 245.6(c)(4) states: "Calculating income. The local educational agency must use the income information provided by the household on the application to calculate the household's total current income. When a household submits an application containing complete documentation, as defined in § 245.2 and the household's total current income is at or below the eligibility limits specified in the Income Eligibility Guidelines as defined in § 245.2, the children in that household must be approved for free or reduced price benefits, as applicable." 7 CFR 245.6(e) states: "Recordkeeping. The local educational agency must maintain documentation substantiating eligibility determinations on file for 3 years after the date of the fiscal year to which they pertain, except that if audit findings have not been resolved, the documentation must be maintained as long as required for resolution of the issues raised by the audit." 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, student eligibility for free- or reduced-price meals could not be determined. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure student eligibility for free or reduced price meals is accurately determined and that all documentation is retained. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-003 Subject: Child Nutrition Cluster - Eligibility Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program Assistance Listings Numbers: 10.553, 10.555 Federal Award Number and Year (or Other Identifying Number): FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Eligibility Audit Findings: Material Weakness, Modified Opinion Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance related to the eligibility determination of a child receiving meals. Any child enrolled in a participating school who meets the applicable program's definition of "child," may receive meals under the applicable program. In the case of the National School Lunch Program and School Breakfast Program, children belonging to households meeting nationwide income eligibility requirements may receive meals at no charge or at a reduced price. Children who have been determined ineligible for free or reduced-price school meals pay the full price, set by the School Food Authority, for their meals. As a general rule, a child's eligibility for free or reduced-price meals under a Child Nutrition Cluster program may be established by the submission of an annual application or statement which furnishes such information as family income and family size. Local educational agencies, institutions, and sponsors then determine eligibility by comparing the data reported by the child's household to published income eligibility guidelines. Additionally, a child may be direct certified. For a direct certification, annual eligibility determinations are based on the child's household receiving benefits under SNAP, FDPIR, the Head Start Program (ALN 93.600), or, under most circumstances, the TANF program (ALN 93.558). A household may furnish documentation of its participation in one of these programs; or the school, institution, or sponsor may obtain the information directly from the state or local agency that administers these programs. Certain foster, runaway, homeless, and migrant children are categorically eligible for free school lunches and breakfasts. Direct certified households do not need to complete an application. The Food Service Director was responsible for generating and reviewing the direct certification report. The Food Service Director downloaded the direct certification report from the Indiana Department of Education in July and then bi-monthly thereafter in fiscal year 2022-2023. The July report was provided to the Information Technology (IT) department to upload into the School Corporation's software system; whereas the bi-monthly reports were sent to the IT with a list of students to be added. Students were not removed during the year. There was no review or approval process over the initial upload or any additional uploads of direct certifications completed by the IT. In addition, there was no review or approval of the direct certification data provided by the Food Service Director to the IT Department to ensure the student's information added during the year is complete and accurate. A sample of 40 students receiving free or reduced-priced lunches were selected for testing. Of the 40 students tested, the School Corporation could not provide documentation supporting the eligibility of the student for 10 students. Of the 30 remaining students, the School Corporation could not provide documentation that 1 student's benefits were calculated properly. Due to the lack of supporting documentation, we were unable to determine if student's receiving free and reduced-price meals were eligible to receive a free- or reduced-price meal. In addition, there was no documented internal control to ensure that the eligibility parameters entered into the School Corporation's computer software system were correct. Eligibility parameters were entered into the system by one employee without an oversight or review process to verify the information entered was accurate. The lack of internal controls and noncompliance was isolated to fiscal year 2022-2023. 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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 7 CFR 245.6(c)(4) states: "Calculating income. The local educational agency must use the income information provided by the household on the application to calculate the household's total current income. When a household submits an application containing complete documentation, as defined in § 245.2 and the household's total current income is at or below the eligibility limits specified in the Income Eligibility Guidelines as defined in § 245.2, the children in that household must be approved for free or reduced price benefits, as applicable." 7 CFR 245.6(e) states: "Recordkeeping. The local educational agency must maintain documentation substantiating eligibility determinations on file for 3 years after the date of the fiscal year to which they pertain, except that if audit findings have not been resolved, the documentation must be maintained as long as required for resolution of the issues raised by the audit." 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, student eligibility for free- or reduced-price meals could not be determined. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure student eligibility for free or reduced price meals is accurately determined and that all documentation is retained. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Assistance Listings number and name: 14.267 Continuum of Care Program Award number and year: AZ9999U9T002101, February 1, 2022 through June 30, 2023 Federal agency: U.S. Department of Housing and Urban Development Compliance requirement: Procurement Questioned costs: Unknown Condition—Contrary to federal regulations, the Department’s policies and procedures did not include provisions required by the federal regulations, and the Department did not retain documentation to support procurement actions for 2 vendors we tested. Specifically, the Department’s policies and procedures did not require procurement transactions to be documented or conducted in a manner providing full and open competition. Further, the Department did not include items required by federal regulations such as contracting with small and minority businesses, women’s business enterprises, veteran-owned businesses, and labor surplus area firms; domestic preferences for procurements; procurement of recovered materials; and required federal contract provisions. Further, the Department paid the 2 vendors we tested $257,165 for administrative support services during fiscal year 2023 without retaining procurement action documentation such as requests for proposals, contracts, or other documents demonstrating the Department’s compliance with federal procurement requirements. Effect—The Department’s policies and procedures not complying with federal regulations and not maintaining documentation of its procurement actions increased the Department’s risk of not: • Receiving the most advantageous prices for the goods and services purchased with federal monies. • Considering eligible small and minority businesses, women's business enterprises, veteran-owned businesses, and labor surplus area firms as potential vendors. • Giving preference to procure goods, products, and materials produced in the United States. • Considering purchasing products or services that can be reused, refurbished, or recycled. Finally, the Department is at risk that this finding applies to other federal programs it administers. Cause—The Department did not establish and maintain effective internal control over the program’s procurement requirements that provided reasonable assurance that it was managing the program’s awards in compliance with federal regulations. Department management reported that because the Department does not have to comply with State procurement requirements, they did not think about and consider federal regulations when developing written procurement policies and procedures and procuring program services for federal awards.1 Further, Department management reported they have no record of when the Department awarded the administrative service contracts because the contracts are at least 15 years old, and the records are either not accessible in storage or were destroyed. Criteria—Federal regulations require the Department to follow the same policies and procedures it uses for nonfederal procurements and to retain all records related to a federal program, including procurement action documentation, for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or pass-through grantor (2 CFR §§ 200.317 and 200.334). Federal regulations also require the Department to comply with procurement standards for contracting with small and minority businesses, women’s business enterprises, veteran-owned businesses, and labor surplus area firms; domestic preferences for procurements; and procurement of recovered materials; and ensure that every purchase order or contract includes required federal contract provisions (2 CFR §§200.321, 200.322, 200.323, and 200.327). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Department should: 1. Establish and maintain effective internal control over the program’s procurement requirements by updating its written policies and procedures to: a. Retain procurement action documentation for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency. b. Require full and open competition using requests for competitively bid proposals. Alternatively, document each sole source procurement only after conducting a good-faith search for available sources and concluding there is only a single source and include it in the contract file. c. Document compliance with procurement standards for contracting with small and minority businesses, women’s business enterprises, veteran-owned businesses, and labor surplus area firms; domestic preferences for procurements; and procurement of recovered materials. d. Ensure that every purchase order or contract includes required federal contract provisions. 2. Retain procurement action documentation when procuring property and services using federal funds in accordance with federal records retention requirements, ensuring compliance with federal procurement requirements. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The Department is exempt from following the State’s procurement code (Arizona Revised Statutes §41-3953[D]).
Assistance Listings number and name: 14.267 Continuum of Care Program Award number and year: AZ9999U9T002101, February 1, 2022 through June 30, 2023 Federal agency: U.S. Department of Housing and Urban Development Compliance requirement: Procurement Questioned costs: Unknown Condition—Contrary to federal regulations, the Department’s policies and procedures did not include provisions required by the federal regulations, and the Department did not retain documentation to support procurement actions for 2 vendors we tested. Specifically, the Department’s policies and procedures did not require procurement transactions to be documented or conducted in a manner providing full and open competition. Further, the Department did not include items required by federal regulations such as contracting with small and minority businesses, women’s business enterprises, veteran-owned businesses, and labor surplus area firms; domestic preferences for procurements; procurement of recovered materials; and required federal contract provisions. Further, the Department paid the 2 vendors we tested $257,165 for administrative support services during fiscal year 2023 without retaining procurement action documentation such as requests for proposals, contracts, or other documents demonstrating the Department’s compliance with federal procurement requirements. Effect—The Department’s policies and procedures not complying with federal regulations and not maintaining documentation of its procurement actions increased the Department’s risk of not: • Receiving the most advantageous prices for the goods and services purchased with federal monies. • Considering eligible small and minority businesses, women's business enterprises, veteran-owned businesses, and labor surplus area firms as potential vendors. • Giving preference to procure goods, products, and materials produced in the United States. • Considering purchasing products or services that can be reused, refurbished, or recycled. Finally, the Department is at risk that this finding applies to other federal programs it administers. Cause—The Department did not establish and maintain effective internal control over the program’s procurement requirements that provided reasonable assurance that it was managing the program’s awards in compliance with federal regulations. Department management reported that because the Department does not have to comply with State procurement requirements, they did not think about and consider federal regulations when developing written procurement policies and procedures and procuring program services for federal awards.1 Further, Department management reported they have no record of when the Department awarded the administrative service contracts because the contracts are at least 15 years old, and the records are either not accessible in storage or were destroyed. Criteria—Federal regulations require the Department to follow the same policies and procedures it uses for nonfederal procurements and to retain all records related to a federal program, including procurement action documentation, for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency or pass-through grantor (2 CFR §§ 200.317 and 200.334). Federal regulations also require the Department to comply with procurement standards for contracting with small and minority businesses, women’s business enterprises, veteran-owned businesses, and labor surplus area firms; domestic preferences for procurements; and procurement of recovered materials; and ensure that every purchase order or contract includes required federal contract provisions (2 CFR §§200.321, 200.322, 200.323, and 200.327). Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Department should: 1. Establish and maintain effective internal control over the program’s procurement requirements by updating its written policies and procedures to: a. Retain procurement action documentation for a period of 3 years from the date the program’s final report was submitted to the federal awarding agency. b. Require full and open competition using requests for competitively bid proposals. Alternatively, document each sole source procurement only after conducting a good-faith search for available sources and concluding there is only a single source and include it in the contract file. c. Document compliance with procurement standards for contracting with small and minority businesses, women’s business enterprises, veteran-owned businesses, and labor surplus area firms; domestic preferences for procurements; and procurement of recovered materials. d. Ensure that every purchase order or contract includes required federal contract provisions. 2. Retain procurement action documentation when procuring property and services using federal funds in accordance with federal records retention requirements, ensuring compliance with federal procurement requirements. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The Department is exempt from following the State’s procurement code (Arizona Revised Statutes §41-3953[D]).
Assistance Listings number and name: 17.225 Unemployment Insurance Award number and year: None Federal agency: U.S. Department of Labor Compliance requirement: Reporting Questioned costs: Not applicable Condition—Contrary to federal regulation, the Department of Economic Security (DES) did not retain documentation to support information it reported to the federal agency for its Unemployment Insurance (UI) federal program during fiscal year 2023. Specifically, for all 12 monthly 9050 – Time Lapse of All First Payments except Workshare reports, DES did not retain supporting documentation, like system reports, queries, or screenshots, for the key line item we tested, which consisted of the following data elements: • First payment time lapse 14/21 days. • Interstate and intrastate UI. • Unemployment compensation for federal employees (UCFE). • Unemployment compensation for ex-service members (UCX). • Full and partial weeks. Effect—DES’ failure to retain supporting documentation results in the federal agency being unable to rely on the reports to effectively monitor DES’s program administration, including its compliance with program requirements and the timeliness of benefits paid, and evaluate the program’s success. Cause—DES had not developed written policies and procedures to require employees to prepare and retain supporting documentation to support the program information it reports to the federal agency for the UI program. Further, the DES staff member responsible for compiling the reports reported to us that not retaining the documentation was an oversight, and she thought the supporting documentation was being retained. Criteria—Federal regulation and the UI Handbook require DES to retain financial records, supporting documents, statistical records, and all other nonfederal entity records pertinent to a federal award for a period of 3 years from the date of submission of the final report (2 CFR §200.334).1 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendation—DES should develop and implement written policies and procedures to ensure it prepares and retains detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for the UI program. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The UI Handbook outlines the criteria for compiling the 9050 – Time Lapse of All First Payments except Workshare report, including requirements to retain source data supporting reported information for at least 3 years (U.S. Department of the Labor. [2017]. “Section V: Benefits Time Lapse and Quality.” and “Section L: Record Retention.” Unemployment Insurance 401 Handbook, 5th ed., retrieved 7/22/24 from https://www.dol.gov/sites/dolgov/files/ETA/handbooks/2017/ETHand401_5th.pdf)
Assistance Listings number and name: 17.225 Unemployment Insurance Award number and year: None Federal agency: U.S. Department of Labor Compliance requirement: Reporting Questioned costs: Not applicable Condition—Contrary to federal regulation, the Department of Economic Security (DES) did not retain documentation to support information it reported to the federal agency for its Unemployment Insurance (UI) federal program during fiscal year 2023. Specifically, for all 12 monthly 9050 – Time Lapse of All First Payments except Workshare reports, DES did not retain supporting documentation, like system reports, queries, or screenshots, for the key line item we tested, which consisted of the following data elements: • First payment time lapse 14/21 days. • Interstate and intrastate UI. • Unemployment compensation for federal employees (UCFE). • Unemployment compensation for ex-service members (UCX). • Full and partial weeks. Effect—DES’ failure to retain supporting documentation results in the federal agency being unable to rely on the reports to effectively monitor DES’s program administration, including its compliance with program requirements and the timeliness of benefits paid, and evaluate the program’s success. Cause—DES had not developed written policies and procedures to require employees to prepare and retain supporting documentation to support the program information it reports to the federal agency for the UI program. Further, the DES staff member responsible for compiling the reports reported to us that not retaining the documentation was an oversight, and she thought the supporting documentation was being retained. Criteria—Federal regulation and the UI Handbook require DES to retain financial records, supporting documents, statistical records, and all other nonfederal entity records pertinent to a federal award for a period of 3 years from the date of submission of the final report (2 CFR §200.334).1 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendation—DES should develop and implement written policies and procedures to ensure it prepares and retains detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for the UI program. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The UI Handbook outlines the criteria for compiling the 9050 – Time Lapse of All First Payments except Workshare report, including requirements to retain source data supporting reported information for at least 3 years (U.S. Department of the Labor. [2017]. “Section V: Benefits Time Lapse and Quality.” and “Section L: Record Retention.” Unemployment Insurance 401 Handbook, 5th ed., retrieved 7/22/24 from https://www.dol.gov/sites/dolgov/files/ETA/handbooks/2017/ETHand401_5th.pdf)
Assistance Listings number and name: 17.225 Unemployment Insurance Award number and year: None Federal agency: U.S. Department of Labor Compliance requirement: Reporting Questioned costs: Not applicable Condition—Contrary to federal regulation, the Department of Economic Security (DES) did not retain documentation to support information it reported to the federal agency for its Unemployment Insurance (UI) federal program during fiscal year 2023. Specifically, for all 12 monthly 9050 – Time Lapse of All First Payments except Workshare reports, DES did not retain supporting documentation, like system reports, queries, or screenshots, for the key line item we tested, which consisted of the following data elements: • First payment time lapse 14/21 days. • Interstate and intrastate UI. • Unemployment compensation for federal employees (UCFE). • Unemployment compensation for ex-service members (UCX). • Full and partial weeks. Effect—DES’ failure to retain supporting documentation results in the federal agency being unable to rely on the reports to effectively monitor DES’s program administration, including its compliance with program requirements and the timeliness of benefits paid, and evaluate the program’s success. Cause—DES had not developed written policies and procedures to require employees to prepare and retain supporting documentation to support the program information it reports to the federal agency for the UI program. Further, the DES staff member responsible for compiling the reports reported to us that not retaining the documentation was an oversight, and she thought the supporting documentation was being retained. Criteria—Federal regulation and the UI Handbook require DES to retain financial records, supporting documents, statistical records, and all other nonfederal entity records pertinent to a federal award for a period of 3 years from the date of submission of the final report (2 CFR §200.334).1 Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendation—DES should develop and implement written policies and procedures to ensure it prepares and retains detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for the UI program. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The UI Handbook outlines the criteria for compiling the 9050 – Time Lapse of All First Payments except Workshare report, including requirements to retain source data supporting reported information for at least 3 years (U.S. Department of the Labor. [2017]. “Section V: Benefits Time Lapse and Quality.” and “Section L: Record Retention.” Unemployment Insurance 401 Handbook, 5th ed., retrieved 7/22/24 from https://www.dol.gov/sites/dolgov/files/ETA/handbooks/2017/ETHand401_5th.pdf)
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirement: Reporting Questioned costs: Not applicable Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance Program (ERAP) 1 and 2 awards, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report information and failed to report required elements.1 Specifically, for 3 reports we selected for test work, we found that the Division: • Did not retain documentation—The Division did not retain documentation, like the system reports, queries, or screenshots, to support the performance and financial reporting information it reported in its 3 reports as required. Specifically, we found that the Division did not retain full copies of 1 closeout report and 2 quarterly reports: the ERA 1 Closeout compliance report and the ERA 1 Q3 (September 2022) and ERA 2 Q1 (March 2023) compliance reports submitted to the grantor. The Division provided auditors incomplete copies of these reports they obtained from the grantor. • Did not accurately report information—The Division incorrectly reported comingled ERAP 1, ERAP 2, and/or Coronavirus State and Local Fiscal Recovery Funds (Assistance Listings number 21.027) program applicant expenditures in its 3 reports specified in the previous bullet instead of separately reporting the expenditures by award. See related Coronavirus State and Local Fiscal Recovery Funds reporting finding at 2023-103. 2 • Failed to report required elements—The Division did not report several key performance and financial reporting data points required by the federal agency in its 3 reports, thereby limiting the amount of data we could audit. Specifically, the Division: o Failed to report ERAP 1 expenditures in the ERAP 1 September 2022 quarterly report and ERAP 1 closeout report, including those made over the period of performance, during the closeout period, and cumulatively, even though we identified ERAP 1 expenditures recorded in the system as of the report dates. o Failed to report ERAP 2 project data and participants demographics, performance narrative, narrative on effective practices, and selective current quarter and cumulative obligations and expenditures in its ERAP 2 March 2023 quarterly report, even though we identified ERAP 2 expenditures recorded in the system as of the report date. Effect—The Division’s failure to report required elements and accurate program information in its reports, and to retain associated documentation for audit purposes resulted in us being unable to determine whether the expenditures were appropriate, and the reports were complete and accurate. Also, it results in the federal agency being unable to rely on the reports to monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success. Further, the Division is unable to resubmit reports because the federal agency does not allow grantees to revise reports after the reporting period has closed.3,4 Cause—The Division relied on a new benefits system’s federal reporting dashboard that produced inaccurate reports, and its personnel responsible for reviewing and approving ERAP reports did not verify the reported information to the underlying benefits and financial systems data or ensure all required report element sections were completed or accurate. Specifically, the Division reported that it contracted to use a new benefits system for ERAP in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports, which incorrectly included commingled records for ERAP 1, ERAP 2, and Coronavirus State and Local Fiscal Recovery Funds. The Division reported that in 2022 it notified the contractor of programming issues related to separately reporting each award’s expenditures, and that the contractor reported that it had corrected the error. However, when implementing the new system and after the contractor reportedly corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Despite this knowledge, the Division continued to use the inaccurate and incomplete dashboard as the data source for its reports. Finally, the Division continued to not follow its policies and procedures to retain documentation to support the information it included in its 3 reports. Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERAP award to the federal agency and prohibits commingling of funds, data, or records across awards (15 USC 9058a [g]).1 For quarterly financial and compliance reports, federal guidance requires the Division to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency can monitor performance and compliance, including funding needs and the spending of any reallocated monies. For closeout reports, federal guidance requires the Division to confirm that all reports previously submitted accurately reflect the aggregate financial and programmatic data throughout the award.3 Further, the Division’s policies and procedures require the Division to retain all records relating to a federal award for a period of at least 5 years after all funds allocated to the State have been expended, which generally exceeds the federal regulation requirement to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334).4 Lastly, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Prepare and retain detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERAP award. 2. Follow its policies and procedures to retain all records relating to a federal award for a period of 5 years after all funds are expended. 3. Develop and implement written policies and procedures to: a. Ensure the benefits system used to process ERAP claims and report program information produces summarized data on its federal reporting dashboard that is complete and accurate and complies with the federal agency’s reporting guidelines. b. Separately identify and segregate each ERAP award and other federal awards in the benefits and financial systems and ensure awards are separately reported and not commingled. 4. Require Division personnel responsible for reviewing and approving ERAP reports to verify the reported program information to the underlying benefits and financial systems data and to ensure all required report element sections are accurate and complete. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. This finding is similar to prior-year finding 2022-109 and was initially reported in fiscal year 2022. 1 The ERAP was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). 2 The federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), was administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 3 The U.S. Department of the Treasury published reporting guidance for the required monthly, quarterly, final reporting, and closeout reports (U.S. Department of the Treasury. [2022, December]. Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/5/2024 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf and U.S. Department of the Treasury. [2023, January]. Emergency Rental Assistance [ERA1]: Closeout Resource. Retrieved 10/9/2024 from https://home.treasury.gov/system/files/136/ERA-CloseoutResource_1-5-23.pdf). Further, both program guides indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. 4 On October 6, 2023, the U.S. Department of the Treasury published ERAP 2 Treasury Portal User Guide, which included a recommendation for ERAP recipients to take screenshots of portal screens as the downloadable PDF documents display only key components of the overall report. Further, the guide indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. (U.S. Department of the Treasury. [2023, October]. Emergency Rental Assistance Program [ERA2] Treasury Portal User Guide, Version 3.0. Retrieved 9/5/2024 fro
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirement: Reporting Questioned costs: Not applicable Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance Program (ERAP) 1 and 2 awards, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report information and failed to report required elements.1 Specifically, for 3 reports we selected for test work, we found that the Division: • Did not retain documentation—The Division did not retain documentation, like the system reports, queries, or screenshots, to support the performance and financial reporting information it reported in its 3 reports as required. Specifically, we found that the Division did not retain full copies of 1 closeout report and 2 quarterly reports: the ERA 1 Closeout compliance report and the ERA 1 Q3 (September 2022) and ERA 2 Q1 (March 2023) compliance reports submitted to the grantor. The Division provided auditors incomplete copies of these reports they obtained from the grantor. • Did not accurately report information—The Division incorrectly reported comingled ERAP 1, ERAP 2, and/or Coronavirus State and Local Fiscal Recovery Funds (Assistance Listings number 21.027) program applicant expenditures in its 3 reports specified in the previous bullet instead of separately reporting the expenditures by award. See related Coronavirus State and Local Fiscal Recovery Funds reporting finding at 2023-103. 2 • Failed to report required elements—The Division did not report several key performance and financial reporting data points required by the federal agency in its 3 reports, thereby limiting the amount of data we could audit. Specifically, the Division: o Failed to report ERAP 1 expenditures in the ERAP 1 September 2022 quarterly report and ERAP 1 closeout report, including those made over the period of performance, during the closeout period, and cumulatively, even though we identified ERAP 1 expenditures recorded in the system as of the report dates. o Failed to report ERAP 2 project data and participants demographics, performance narrative, narrative on effective practices, and selective current quarter and cumulative obligations and expenditures in its ERAP 2 March 2023 quarterly report, even though we identified ERAP 2 expenditures recorded in the system as of the report date. Effect—The Division’s failure to report required elements and accurate program information in its reports, and to retain associated documentation for audit purposes resulted in us being unable to determine whether the expenditures were appropriate, and the reports were complete and accurate. Also, it results in the federal agency being unable to rely on the reports to monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success. Further, the Division is unable to resubmit reports because the federal agency does not allow grantees to revise reports after the reporting period has closed.3,4 Cause—The Division relied on a new benefits system’s federal reporting dashboard that produced inaccurate reports, and its personnel responsible for reviewing and approving ERAP reports did not verify the reported information to the underlying benefits and financial systems data or ensure all required report element sections were completed or accurate. Specifically, the Division reported that it contracted to use a new benefits system for ERAP in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports, which incorrectly included commingled records for ERAP 1, ERAP 2, and Coronavirus State and Local Fiscal Recovery Funds. The Division reported that in 2022 it notified the contractor of programming issues related to separately reporting each award’s expenditures, and that the contractor reported that it had corrected the error. However, when implementing the new system and after the contractor reportedly corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Despite this knowledge, the Division continued to use the inaccurate and incomplete dashboard as the data source for its reports. Finally, the Division continued to not follow its policies and procedures to retain documentation to support the information it included in its 3 reports. Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERAP award to the federal agency and prohibits commingling of funds, data, or records across awards (15 USC 9058a [g]).1 For quarterly financial and compliance reports, federal guidance requires the Division to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency can monitor performance and compliance, including funding needs and the spending of any reallocated monies. For closeout reports, federal guidance requires the Division to confirm that all reports previously submitted accurately reflect the aggregate financial and programmatic data throughout the award.3 Further, the Division’s policies and procedures require the Division to retain all records relating to a federal award for a period of at least 5 years after all funds allocated to the State have been expended, which generally exceeds the federal regulation requirement to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334).4 Lastly, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Prepare and retain detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERAP award. 2. Follow its policies and procedures to retain all records relating to a federal award for a period of 5 years after all funds are expended. 3. Develop and implement written policies and procedures to: a. Ensure the benefits system used to process ERAP claims and report program information produces summarized data on its federal reporting dashboard that is complete and accurate and complies with the federal agency’s reporting guidelines. b. Separately identify and segregate each ERAP award and other federal awards in the benefits and financial systems and ensure awards are separately reported and not commingled. 4. Require Division personnel responsible for reviewing and approving ERAP reports to verify the reported program information to the underlying benefits and financial systems data and to ensure all required report element sections are accurate and complete. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. This finding is similar to prior-year finding 2022-109 and was initially reported in fiscal year 2022. 1 The ERAP was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). 2 The federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), was administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 3 The U.S. Department of the Treasury published reporting guidance for the required monthly, quarterly, final reporting, and closeout reports (U.S. Department of the Treasury. [2022, December]. Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/5/2024 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf and U.S. Department of the Treasury. [2023, January]. Emergency Rental Assistance [ERA1]: Closeout Resource. Retrieved 10/9/2024 from https://home.treasury.gov/system/files/136/ERA-CloseoutResource_1-5-23.pdf). Further, both program guides indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. 4 On October 6, 2023, the U.S. Department of the Treasury published ERAP 2 Treasury Portal User Guide, which included a recommendation for ERAP recipients to take screenshots of portal screens as the downloadable PDF documents display only key components of the overall report. Further, the guide indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. (U.S. Department of the Treasury. [2023, October]. Emergency Rental Assistance Program [ERA2] Treasury Portal User Guide, Version 3.0. Retrieved 9/5/2024 fro
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirement: Reporting Questioned costs: Not applicable Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance Program (ERAP) 1 and 2 awards, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report information and failed to report required elements.1 Specifically, for 3 reports we selected for test work, we found that the Division: • Did not retain documentation—The Division did not retain documentation, like the system reports, queries, or screenshots, to support the performance and financial reporting information it reported in its 3 reports as required. Specifically, we found that the Division did not retain full copies of 1 closeout report and 2 quarterly reports: the ERA 1 Closeout compliance report and the ERA 1 Q3 (September 2022) and ERA 2 Q1 (March 2023) compliance reports submitted to the grantor. The Division provided auditors incomplete copies of these reports they obtained from the grantor. • Did not accurately report information—The Division incorrectly reported comingled ERAP 1, ERAP 2, and/or Coronavirus State and Local Fiscal Recovery Funds (Assistance Listings number 21.027) program applicant expenditures in its 3 reports specified in the previous bullet instead of separately reporting the expenditures by award. See related Coronavirus State and Local Fiscal Recovery Funds reporting finding at 2023-103. 2 • Failed to report required elements—The Division did not report several key performance and financial reporting data points required by the federal agency in its 3 reports, thereby limiting the amount of data we could audit. Specifically, the Division: o Failed to report ERAP 1 expenditures in the ERAP 1 September 2022 quarterly report and ERAP 1 closeout report, including those made over the period of performance, during the closeout period, and cumulatively, even though we identified ERAP 1 expenditures recorded in the system as of the report dates. o Failed to report ERAP 2 project data and participants demographics, performance narrative, narrative on effective practices, and selective current quarter and cumulative obligations and expenditures in its ERAP 2 March 2023 quarterly report, even though we identified ERAP 2 expenditures recorded in the system as of the report date. Effect—The Division’s failure to report required elements and accurate program information in its reports, and to retain associated documentation for audit purposes resulted in us being unable to determine whether the expenditures were appropriate, and the reports were complete and accurate. Also, it results in the federal agency being unable to rely on the reports to monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success. Further, the Division is unable to resubmit reports because the federal agency does not allow grantees to revise reports after the reporting period has closed.3,4 Cause—The Division relied on a new benefits system’s federal reporting dashboard that produced inaccurate reports, and its personnel responsible for reviewing and approving ERAP reports did not verify the reported information to the underlying benefits and financial systems data or ensure all required report element sections were completed or accurate. Specifically, the Division reported that it contracted to use a new benefits system for ERAP in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports, which incorrectly included commingled records for ERAP 1, ERAP 2, and Coronavirus State and Local Fiscal Recovery Funds. The Division reported that in 2022 it notified the contractor of programming issues related to separately reporting each award’s expenditures, and that the contractor reported that it had corrected the error. However, when implementing the new system and after the contractor reportedly corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Despite this knowledge, the Division continued to use the inaccurate and incomplete dashboard as the data source for its reports. Finally, the Division continued to not follow its policies and procedures to retain documentation to support the information it included in its 3 reports. Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERAP award to the federal agency and prohibits commingling of funds, data, or records across awards (15 USC 9058a [g]).1 For quarterly financial and compliance reports, federal guidance requires the Division to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency can monitor performance and compliance, including funding needs and the spending of any reallocated monies. For closeout reports, federal guidance requires the Division to confirm that all reports previously submitted accurately reflect the aggregate financial and programmatic data throughout the award.3 Further, the Division’s policies and procedures require the Division to retain all records relating to a federal award for a period of at least 5 years after all funds allocated to the State have been expended, which generally exceeds the federal regulation requirement to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334).4 Lastly, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Prepare and retain detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERAP award. 2. Follow its policies and procedures to retain all records relating to a federal award for a period of 5 years after all funds are expended. 3. Develop and implement written policies and procedures to: a. Ensure the benefits system used to process ERAP claims and report program information produces summarized data on its federal reporting dashboard that is complete and accurate and complies with the federal agency’s reporting guidelines. b. Separately identify and segregate each ERAP award and other federal awards in the benefits and financial systems and ensure awards are separately reported and not commingled. 4. Require Division personnel responsible for reviewing and approving ERAP reports to verify the reported program information to the underlying benefits and financial systems data and to ensure all required report element sections are accurate and complete. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. This finding is similar to prior-year finding 2022-109 and was initially reported in fiscal year 2022. 1 The ERAP was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). 2 The federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), was administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 3 The U.S. Department of the Treasury published reporting guidance for the required monthly, quarterly, final reporting, and closeout reports (U.S. Department of the Treasury. [2022, December]. Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/5/2024 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf and U.S. Department of the Treasury. [2023, January]. Emergency Rental Assistance [ERA1]: Closeout Resource. Retrieved 10/9/2024 from https://home.treasury.gov/system/files/136/ERA-CloseoutResource_1-5-23.pdf). Further, both program guides indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. 4 On October 6, 2023, the U.S. Department of the Treasury published ERAP 2 Treasury Portal User Guide, which included a recommendation for ERAP recipients to take screenshots of portal screens as the downloadable PDF documents display only key components of the overall report. Further, the guide indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. (U.S. Department of the Treasury. [2023, October]. Emergency Rental Assistance Program [ERA2] Treasury Portal User Guide, Version 3.0. Retrieved 9/5/2024 fro
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirement: Reporting Questioned costs: Not applicable Condition—Contrary to federal law and guidance, for information it reported to the federal agency for its Emergency Rental Assistance Program (ERAP) 1 and 2 awards, the Department of Economic Security—Division of Community Assistance and Development (Division) did not retain documentation to support and/or accurately report information and failed to report required elements.1 Specifically, for 3 reports we selected for test work, we found that the Division: • Did not retain documentation—The Division did not retain documentation, like the system reports, queries, or screenshots, to support the performance and financial reporting information it reported in its 3 reports as required. Specifically, we found that the Division did not retain full copies of 1 closeout report and 2 quarterly reports: the ERA 1 Closeout compliance report and the ERA 1 Q3 (September 2022) and ERA 2 Q1 (March 2023) compliance reports submitted to the grantor. The Division provided auditors incomplete copies of these reports they obtained from the grantor. • Did not accurately report information—The Division incorrectly reported comingled ERAP 1, ERAP 2, and/or Coronavirus State and Local Fiscal Recovery Funds (Assistance Listings number 21.027) program applicant expenditures in its 3 reports specified in the previous bullet instead of separately reporting the expenditures by award. See related Coronavirus State and Local Fiscal Recovery Funds reporting finding at 2023-103. 2 • Failed to report required elements—The Division did not report several key performance and financial reporting data points required by the federal agency in its 3 reports, thereby limiting the amount of data we could audit. Specifically, the Division: o Failed to report ERAP 1 expenditures in the ERAP 1 September 2022 quarterly report and ERAP 1 closeout report, including those made over the period of performance, during the closeout period, and cumulatively, even though we identified ERAP 1 expenditures recorded in the system as of the report dates. o Failed to report ERAP 2 project data and participants demographics, performance narrative, narrative on effective practices, and selective current quarter and cumulative obligations and expenditures in its ERAP 2 March 2023 quarterly report, even though we identified ERAP 2 expenditures recorded in the system as of the report date. Effect—The Division’s failure to report required elements and accurate program information in its reports, and to retain associated documentation for audit purposes resulted in us being unable to determine whether the expenditures were appropriate, and the reports were complete and accurate. Also, it results in the federal agency being unable to rely on the reports to monitor the Division’s program administration, including its compliance with program requirements and ability to prevent and detect fraud, and to evaluate the program’s success. Further, the Division is unable to resubmit reports because the federal agency does not allow grantees to revise reports after the reporting period has closed.3,4 Cause—The Division relied on a new benefits system’s federal reporting dashboard that produced inaccurate reports, and its personnel responsible for reviewing and approving ERAP reports did not verify the reported information to the underlying benefits and financial systems data or ensure all required report element sections were completed or accurate. Specifically, the Division reported that it contracted to use a new benefits system for ERAP in March 2021 and relied on the system’s federal reporting dashboard screen for the summarized program information to compile its reports, which incorrectly included commingled records for ERAP 1, ERAP 2, and Coronavirus State and Local Fiscal Recovery Funds. The Division reported that in 2022 it notified the contractor of programming issues related to separately reporting each award’s expenditures, and that the contractor reported that it had corrected the error. However, when implementing the new system and after the contractor reportedly corrected the system programming error, the Division did not verify that the federal reporting dashboard reported complete program information and accurately summarized the underlying system data. Despite this knowledge, the Division continued to use the inaccurate and incomplete dashboard as the data source for its reports. Finally, the Division continued to not follow its policies and procedures to retain documentation to support the information it included in its 3 reports. Criteria—Federal law and guidance require the Division to separately report and certify accurate and complete program information for each ERAP award to the federal agency and prohibits commingling of funds, data, or records across awards (15 USC 9058a [g]).1 For quarterly financial and compliance reports, federal guidance requires the Division to report information, such as cash it disbursed, the federal share of expenditures, unliquidated obligations, and the cumulative amounts it obligated and expended so that the federal agency can monitor performance and compliance, including funding needs and the spending of any reallocated monies. For closeout reports, federal guidance requires the Division to confirm that all reports previously submitted accurately reflect the aggregate financial and programmatic data throughout the award.3 Further, the Division’s policies and procedures require the Division to retain all records relating to a federal award for a period of at least 5 years after all funds allocated to the State have been expended, which generally exceeds the federal regulation requirement to retain all records relating to a federal award for a period of 3 years from the date of its submission of the final expenditure report (2 CFR §200.334).4 Lastly, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that the federal program is being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Prepare and retain detailed documentation, such as system reports, queries, or screenshots, to support the program information it reports to the federal agency for each ERAP award. 2. Follow its policies and procedures to retain all records relating to a federal award for a period of 5 years after all funds are expended. 3. Develop and implement written policies and procedures to: a. Ensure the benefits system used to process ERAP claims and report program information produces summarized data on its federal reporting dashboard that is complete and accurate and complies with the federal agency’s reporting guidelines. b. Separately identify and segregate each ERAP award and other federal awards in the benefits and financial systems and ensure awards are separately reported and not commingled. 4. Require Division personnel responsible for reviewing and approving ERAP reports to verify the reported program information to the underlying benefits and financial systems data and to ensure all required report element sections are accurate and complete. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. This finding is similar to prior-year finding 2022-109 and was initially reported in fiscal year 2022. 1 The ERAP was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). 2 The federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), was administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 3 The U.S. Department of the Treasury published reporting guidance for the required monthly, quarterly, final reporting, and closeout reports (U.S. Department of the Treasury. [2022, December]. Reporting Guidance—Emergency Rental Assistance Program, Version 3.4. Monthly, Quarterly, and Final Reporting. Retrieved 9/5/2024 from https://home.treasury.gov/system/files/136/ERA-Reporting-Guidance-v2.pdf and U.S. Department of the Treasury. [2023, January]. Emergency Rental Assistance [ERA1]: Closeout Resource. Retrieved 10/9/2024 from https://home.treasury.gov/system/files/136/ERA-CloseoutResource_1-5-23.pdf). Further, both program guides indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. 4 On October 6, 2023, the U.S. Department of the Treasury published ERAP 2 Treasury Portal User Guide, which included a recommendation for ERAP recipients to take screenshots of portal screens as the downloadable PDF documents display only key components of the overall report. Further, the guide indicate that the grantee cannot resubmit a report once it’s submitted unless the U.S. Department of Treasury initiates resubmission of a revised report. (U.S. Department of the Treasury. [2023, October]. Emergency Rental Assistance Program [ERA2] Treasury Portal User Guide, Version 3.0. Retrieved 9/5/2024 fro
Inadequate Controls Over Expenditures Federal Program Name and Year: McKinney Education for Homeless Children Project Number: 2022-4920-RF and 2023-4920-RF Assistance Listing No.: 84.196 Passed Through: Illinois State Board of Education Federal Agency: U.S. Department of Education Criteria/Specific Requirements The Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) require that the Regional Office follow the standards set forth at 2 CFR 200.334 that requires “Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient.” The Uniform Guidance section 200.303 Internal Controls states the following: “The non Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” In addition, Regional Office of Education #56 practices require the stamping of invoices as “paid” when processed in order to avoid duplicate payments. Condition During our testing of a sample of 40 expenditures of McKinney Education for Homeless Children grant funds by the Regional Office of Education #56, we noted that six expenditures totaling $52,005 did not have any supporting documentation. In addition, for those expenditures with supporting documentation, none of the invoices were stamped “paid”. During our testing of an additional sample of 40 expenditure transactions of the Regional Office of Education #56 for purposes of testing controls over financial reporting, we noted the following: • No documentation was available for four expenditures • No supporting invoices, but only purchase orders, were available for three expenditures • One invoice was not stamped “paid”. Questioned Costs $52,005 Context The Regional Office of Education expended a total of $1,187,011 of federal awards in fiscal year 2023. Of the total number of transactions tested (both grant and non-grant), 12.5% lacked any type of documentation. The greater percentage of total exceptions related to grant expenditures. Effect Inadequate controls over expenditures increase the risk of unauthorized or inappropriate spending as well as duplicate payment of invoices. A lack of supporting documentation for expenditures also results in questioned costs. Cause Regional Office of Education #56 management indicated that they have gone through many personnel changes recently and the new personnel had some difficulty finding files from when their predecessors were employed. Also, the “paid” stamp should have been used but was not used by everyone. Recommendation We recommend the Regional Office of Education #56 establish procedures to ensure that documentation supporting expenditures of federal awards is maintained in accordance with the Uniform Guidance. In addition, we recommend that the Regional Office of Education #56’s practice of cancelling invoices upon payment be consistently followed. Management Response We agree with the finding. Expenditures of federal funds will be more closely monitored, more adequately supported, and paid invoices will be marked as paid. Uniform Guidance will be more closely followed.
Criteria: The Organization is required to establish and maintain effective internal controls over financial documentation to ensure compliance with federal regulations, as outlined in 2 CFR 200.303 and 2 CFR 200.334 of the Uniform Guidance. These controls are crucial for the accurate management and reporting of federal funds. Statement of Condition: During our audit, we found that eight out of 60 expenditures tested had incomplete documentation of the organization’s approval process in accordance with its internal controls. Additionally, one check stub could not be located. Cause: The existing internal control processes related to the organization and retrieval of financial documentation appear to be insufficient, a situation that was exacerbated by staffing shortages during the period under audit. Addressing these challenges through enhanced processes and adequate staffing could improve the Organization's ability to provide timely and complete documentation. Effect or Potential Effect: The inability to produce essential financial documentation may lead to compliance challenges with federal funding requirements. Additionally, this increases the risk of questioned costs, which could have financial implications for the Organization if not rectified. Recommendation: It is recommended that the Organization implement enhanced procedures for the systematic maintenance and retrieval of all financial records related to expenditures. This should include staff training on these protocols to ensure compliance and improve overall internal controls. Management’s Response: Management agrees with this finding. Please refer to the Corrective Action Plan for further details.
Block Grants for Prevention and Treatment of Substance Abuse ALN No. 93.959 U.S. Department of Health and Human Services Opioid STR ALN No. 93.788 U.S. Department of Health and Human Services Criteria or Specific Requirement – Activities Allowed and Unallowed and Cost Principles – 2 CFR Part 200, Subpart E, and Period of Performance – 2 CFR sections 200.308, 200.309, and 200.403(h) Condition – A sample of 80 expenditures were selected from each of the following populations: • ALN No. 93.959 – 1,631 items totaling $1,399,666 • ALN No. 93.788 – 1,728 items totaling $2,664,710 The samples were not, and are not intended to be, statistically valid. Of the 80 expenditures tested from each grant program, the following were determined to lack appropriate supporting documentation to support being charged to grant program: • ALN No. 93.959 - 47 items totaling $48,756, including projected errors over the total population totaling $582,093 • ALN No. 93.788 - 7 items totaling $30,061, including projected errors over the total population totaling $138,133 The Organization did not have adequate supporting documentation demonstrating actual time and effort reporting and lacked evidence of supporting invoices. Cause – The Organization charged budgeted percentages to the grant programs without a system in place to monitor and track that actual time and effort was consistent with budgeted percentages. In addition, the Organization charged expenditures to the grant programs without evidence of supporting invoices. Effect or potential effect – Costs charged to the grant programs could have varied from actual time and effort. In addition, costs charged to the grant could not be supported by actual invoices. Questioned costs – • ALN No. 93.959 - $48,756 • ALN No. 93.788 - $30,061 Context – The Organization did not have a reasonable methodology of allocating costs to these grant programs and did not maintain proper supporting invoices. Identification as a repeat finding, if applicable – Repeat finding (2022-003). Recommendation – Management should implement policies and procedures that strengthen internal control over compliance in relation to activities allowed and cost principles. The policy and procedure should be designed to ensure that a reasonable allocation methodology is implemented and followed or that time and effort is certified by the employee on a regular basis. In addition, management should implement a document retention policy consistent with 2 CFR 200.334.
Block Grants for Prevention and Treatment of Substance Abuse ALN No. 93.959 U.S. Department of Health and Human Services Opioid STR ALN No. 93.788 U.S. Department of Health and Human Services Criteria or Specific Requirement – Activities Allowed and Unallowed and Cost Principles – 2 CFR Part 200, Subpart E, and Period of Performance – 2 CFR sections 200.308, 200.309, and 200.403(h) Condition – A sample of 80 expenditures were selected from each of the following populations: • ALN No. 93.959 – 1,631 items totaling $1,399,666 • ALN No. 93.788 – 1,728 items totaling $2,664,710 The samples were not, and are not intended to be, statistically valid. Of the 80 expenditures tested from each grant program, the following were determined to lack appropriate supporting documentation to support being charged to grant program: • ALN No. 93.959 - 47 items totaling $48,756, including projected errors over the total population totaling $582,093 • ALN No. 93.788 - 7 items totaling $30,061, including projected errors over the total population totaling $138,133 The Organization did not have adequate supporting documentation demonstrating actual time and effort reporting and lacked evidence of supporting invoices. Cause – The Organization charged budgeted percentages to the grant programs without a system in place to monitor and track that actual time and effort was consistent with budgeted percentages. In addition, the Organization charged expenditures to the grant programs without evidence of supporting invoices. Effect or potential effect – Costs charged to the grant programs could have varied from actual time and effort. In addition, costs charged to the grant could not be supported by actual invoices. Questioned costs – • ALN No. 93.959 - $48,756 • ALN No. 93.788 - $30,061 Context – The Organization did not have a reasonable methodology of allocating costs to these grant programs and did not maintain proper supporting invoices. Identification as a repeat finding, if applicable – Repeat finding (2022-003). Recommendation – Management should implement policies and procedures that strengthen internal control over compliance in relation to activities allowed and cost principles. The policy and procedure should be designed to ensure that a reasonable allocation methodology is implemented and followed or that time and effort is certified by the employee on a regular basis. In addition, management should implement a document retention policy consistent with 2 CFR 200.334.
FINDING REFERENCE NUMBER 2023-029 (See Finding Reference Number 2023-001) FEDERAL PROGRAM (ALN – 10.542) PANDEMIC EBT FOOD BENEFITS (P-EBT) U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 221PR456S9032; 2301PR456S9032 (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our internal control procedures for the financial management system, allowable activities and reporting requirements, we found the following deficiencies: • Of ten (10) expenditure accounting transactions, three (3) were selected for documentation review. It was found that a transaction posted in August 2022 for $193,642,697.32 included $54,195,406.92, corresponding to benefit payrolls for May 2022, which had previously been claimed in June 2022. They subsequently adjusted the expenditure reported for this amount. • All expenditure transactions are coded under the ID number PANDEMICEBT-B22; although, in the SF-778 report for the quarter ended June 30, 2023, for the grant award period for 2023, expenditures in the amount of $29,606,939 were reported as incurred. This data does not agree with the accounting information of PRIFAS. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systematic deficiency. After conducting several interviews, we were able to identify the staff responsible for validating the benefit payrolls. This person told us these benefit payrolls were processed via email, which indicated that the information submitted was preliminary. However, the finance staff proceeded with the adjustment in the accounting system. We conducted interviews to determine if anything had been modified in the benefit payroll processing process. To prevent this situation from happening again, they told us it wasn't necessary because it hasn't happened again. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the federal awarding agency. STATEMENT OF CAUSE ADSEF has not established an adequate control procedure to identify duplicate claims before they are filed and recorded. During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the SF-425 reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT The failure to have an internal control procedure that identifies standard documentation or forms, personnel responsible for validating the information included, and controls payroll and benefit expenses and other previously claimed expenses allowed for the recognition and claim of an expense incurred twice. ADSEF is not ensuring that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statements. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish an adequate internal controls process that identifies documentation, personnel responsible, authorizations, and validations that can prevent this situation from recurring. In addition, we recommend management to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement.
FINDING REFERENCE NUMBER 2023-032 (See Finding Reference Number 2023-004) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) 2201PRLIEA; 2301PRLIEA (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we conducted an analysis of the process used to distribute administrative costs among the various programs administered by ADSEF. Administrative expenses are distributed based on a methodology called "Random Moment Sampling" (RMS). We identified the following deficiencies in the implementation and execution of this process: i. There is no written procedure that outlines the process for applying this formula for distributing administrative expenses. ii. There is no standardized monitoring or communication to ensure that employees who are required to complete this form are fully assigned to the roles subject to this process. In other words, the Human Resources Department or the Appointments Office do not communicate periodically or whenever a staff change occurs, in order to adjust the population subject to this questionnaire. iii. Among the options provided for responding to the RMS survey, three options are not assigned to a Federal program. These options include licenses; other types of work not directly tied to a Federal program function for which administrative expenses can be allocated. According to the State Plan, 3,300 questionnaires will be administered for functions performed by employees who are not at the central level, and 300 for employees who are at the central level. Two quarters of the Fiscal Year 2022-2023 were observed, in which these three options represented between 33% and 22% for local offices and 29% at the central level. Because these options are not tied to a Federal program function, they reduce the percentage to zero and redistribute the percentage among Federal programs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. This allocation of administrative expenses is made quarterly; however, the adjustment in the accounting system (PRIFAS) is not necessarily made in the same period. The administrative expenses of each program contain the redistribution of expenses not assigned to a Federal program. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for implementing and monitoring the execution of this methodology. Additionally, among the responses regarding functions performed, time may be allocated to functions not related to Federal programs. POSSIBLE ASSERTED EFFECT They lack a standardized process that ensures that the methodology used allocates reasonable administrative costs among Federal programs, ensures that the distribution base is complete, and is periodically monitored. Furthermore, by redistributing the percentage of responses not directly related to a Federal program function, administrative costs could be claimed from Federal programs that should likely be allocated to state funds. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish a written internal control procedure that provides certainty, monitoring frequency, data validation, and responsibilities for those responsible for executing this process. Additionally, it should be considered that there are functions performed by the personnel in charge of answering the RMS that are not directly linked to a Federal program and should be assigned to state funds.
FINDING REFERENCE NUMBER 2023-032 (See Finding Reference Number 2023-004) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) 2201PRLIEA; 2301PRLIEA (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we conducted an analysis of the process used to distribute administrative costs among the various programs administered by ADSEF. Administrative expenses are distributed based on a methodology called "Random Moment Sampling" (RMS). We identified the following deficiencies in the implementation and execution of this process: i. There is no written procedure that outlines the process for applying this formula for distributing administrative expenses. ii. There is no standardized monitoring or communication to ensure that employees who are required to complete this form are fully assigned to the roles subject to this process. In other words, the Human Resources Department or the Appointments Office do not communicate periodically or whenever a staff change occurs, in order to adjust the population subject to this questionnaire. iii. Among the options provided for responding to the RMS survey, three options are not assigned to a Federal program. These options include licenses; other types of work not directly tied to a Federal program function for which administrative expenses can be allocated. According to the State Plan, 3,300 questionnaires will be administered for functions performed by employees who are not at the central level, and 300 for employees who are at the central level. Two quarters of the Fiscal Year 2022-2023 were observed, in which these three options represented between 33% and 22% for local offices and 29% at the central level. Because these options are not tied to a Federal program function, they reduce the percentage to zero and redistribute the percentage among Federal programs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. This allocation of administrative expenses is made quarterly; however, the adjustment in the accounting system (PRIFAS) is not necessarily made in the same period. The administrative expenses of each program contain the redistribution of expenses not assigned to a Federal program. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for implementing and monitoring the execution of this methodology. Additionally, among the responses regarding functions performed, time may be allocated to functions not related to Federal programs. POSSIBLE ASSERTED EFFECT They lack a standardized process that ensures that the methodology used allocates reasonable administrative costs among Federal programs, ensures that the distribution base is complete, and is periodically monitored. Furthermore, by redistributing the percentage of responses not directly related to a Federal program function, administrative costs could be claimed from Federal programs that should likely be allocated to state funds. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish a written internal control procedure that provides certainty, monitoring frequency, data validation, and responsibilities for those responsible for executing this process. Additionally, it should be considered that there are functions performed by the personnel in charge of answering the RMS that are not directly linked to a Federal program and should be assigned to state funds.
FINDING REFERENCE NUMBER 2023-032 (See Finding Reference Number 2023-004) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) 2201PRLIEA; 2301PRLIEA (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we conducted an analysis of the process used to distribute administrative costs among the various programs administered by ADSEF. Administrative expenses are distributed based on a methodology called "Random Moment Sampling" (RMS). We identified the following deficiencies in the implementation and execution of this process: i. There is no written procedure that outlines the process for applying this formula for distributing administrative expenses. ii. There is no standardized monitoring or communication to ensure that employees who are required to complete this form are fully assigned to the roles subject to this process. In other words, the Human Resources Department or the Appointments Office do not communicate periodically or whenever a staff change occurs, in order to adjust the population subject to this questionnaire. iii. Among the options provided for responding to the RMS survey, three options are not assigned to a Federal program. These options include licenses; other types of work not directly tied to a Federal program function for which administrative expenses can be allocated. According to the State Plan, 3,300 questionnaires will be administered for functions performed by employees who are not at the central level, and 300 for employees who are at the central level. Two quarters of the Fiscal Year 2022-2023 were observed, in which these three options represented between 33% and 22% for local offices and 29% at the central level. Because these options are not tied to a Federal program function, they reduce the percentage to zero and redistribute the percentage among Federal programs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. This allocation of administrative expenses is made quarterly; however, the adjustment in the accounting system (PRIFAS) is not necessarily made in the same period. The administrative expenses of each program contain the redistribution of expenses not assigned to a Federal program. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for implementing and monitoring the execution of this methodology. Additionally, among the responses regarding functions performed, time may be allocated to functions not related to Federal programs. POSSIBLE ASSERTED EFFECT They lack a standardized process that ensures that the methodology used allocates reasonable administrative costs among Federal programs, ensures that the distribution base is complete, and is periodically monitored. Furthermore, by redistributing the percentage of responses not directly related to a Federal program function, administrative costs could be claimed from Federal programs that should likely be allocated to state funds. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish a written internal control procedure that provides certainty, monitoring frequency, data validation, and responsibilities for those responsible for executing this process. Additionally, it should be considered that there are functions performed by the personnel in charge of answering the RMS that are not directly linked to a Federal program and should be assigned to state funds.
FINDING REFERENCE NUMBER 2023-032 (See Finding Reference Number 2023-004) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) 2201PRLIEA; 2301PRLIEA (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. (5) Comparison of expenditures with budget amounts for each Federal award. (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we conducted an analysis of the process used to distribute administrative costs among the various programs administered by ADSEF. Administrative expenses are distributed based on a methodology called "Random Moment Sampling" (RMS). We identified the following deficiencies in the implementation and execution of this process: i. There is no written procedure that outlines the process for applying this formula for distributing administrative expenses. ii. There is no standardized monitoring or communication to ensure that employees who are required to complete this form are fully assigned to the roles subject to this process. In other words, the Human Resources Department or the Appointments Office do not communicate periodically or whenever a staff change occurs, in order to adjust the population subject to this questionnaire. iii. Among the options provided for responding to the RMS survey, three options are not assigned to a Federal program. These options include licenses; other types of work not directly tied to a Federal program function for which administrative expenses can be allocated. According to the State Plan, 3,300 questionnaires will be administered for functions performed by employees who are not at the central level, and 300 for employees who are at the central level. Two quarters of the Fiscal Year 2022-2023 were observed, in which these three options represented between 33% and 22% for local offices and 29% at the central level. Because these options are not tied to a Federal program function, they reduce the percentage to zero and redistribute the percentage among Federal programs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. This allocation of administrative expenses is made quarterly; however, the adjustment in the accounting system (PRIFAS) is not necessarily made in the same period. The administrative expenses of each program contain the redistribution of expenses not assigned to a Federal program. STATEMENT OF CAUSE ADSEF does not have a written procedure establishing the process for implementing and monitoring the execution of this methodology. Additionally, among the responses regarding functions performed, time may be allocated to functions not related to Federal programs. POSSIBLE ASSERTED EFFECT They lack a standardized process that ensures that the methodology used allocates reasonable administrative costs among Federal programs, ensures that the distribution base is complete, and is periodically monitored. Furthermore, by redistributing the percentage of responses not directly related to a Federal program function, administrative costs could be claimed from Federal programs that should likely be allocated to state funds. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish a written internal control procedure that provides certainty, monitoring frequency, data validation, and responsibilities for those responsible for executing this process. Additionally, it should be considered that there are functions performed by the personnel in charge of answering the RMS that are not directly linked to a Federal program and should be assigned to state funds.
FINDING REFERENCE NUMBER 2023-033 (See Finding Reference Number 2023-005) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 2021G990229 (TANF – COVID-19) (Federal Award Year: 2021) 2022G996117; 2023996117 (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” In addition, 45 CFR 260.31 (b)(1), defines what non-recurrent, short-term (NRST) benefits are. In relation to Pandemic Emergency Assistance Fund (PEAF), the regulation establishes that: “NRST benefits, like all NRSTs under TANF, must: be designed to deal with a specific crisis situation or episode of need; not be intended to meet on-going needs; and not extend beyond four months; and (as explained in the instructions for reporting on line 15 of the ACF-196R) NRSTs paid for with PEAF funds: must only include expenditures such as emergency assistance and diversion payments, emergency housing and short-term homelessness assistance, emergency food aid, short-term utilities payments, burial assistance, clothing allowances, and back-to-school payments; and may not include tax credits, child care, transportation, or short-term education and training.” STATEMENT OF CONDITION As part of our audit procedures over transactions related to emissions of benefits for the TANF program, we selected five (5) transactions, from a population of fifty-three (53) emissions made during the fiscal year. We noted the following deficiencies: i. An emission of benefits for $16,236,447.24 related to PEAF funding was made. We request evidence of an established manual or guide that defines or identifies the need that would be addressed with the issuance of these funds, and the subsequent monitoring of the usage. ii. An emission of benefits for $3,633,800 was made related to a bonus. The documentation for this issuance includes an authorization letter establishing a benefit of $800 per child between the ages of 5 and 17 years and 11 months, serving a population of 4,492 participants, for a total of $3,593,600. Later, another authorization letter added $37,000 but did not specify the number of children included in this amendment. The sum of both authorizations is $3,630,600; however, the amount reflected in PRIFAS is $3,633,800. According to the EBT document related to this issuance, the amount issued was $3,596,800 and indicates that the number of participants benefited was 4,974, giving an average benefit of $723.12. In this EBT document, beneficiaries are distributed by region; however, there are 5 beneficiaries who are not assigned to a region, for a total of $4,000. iii. An emission of $1,988,000 was made related to an incentive for some beneficiaries. In accordance with an authorization letter, the benefit included $3,500 per participants who worked or participated in an activity leading to employment for 3 months or more. In accordance with the State Plan, active recipients may receive a 6-months period Work Incentive Bonus payment. Per the authorization letter the benefit of $3,500 was issued to 522 participants, for a total of $1,827,000; another authorization letter increased $3,500 in funds. This amount does not agree with the PRIFAS amount of $1,988,000. ADSEF is allowed to claim 16.80% of indirect costs. As part of our audit procedures over the Nutrition Assistance for Puerto Rico and TANF program, we selected some transactions to evaluate the compliance with the indirect costs claims. The TANF program reported four (4) transactions related to indirect costs, and for the Nutrition Assistance for Puerto Rico five (5) transactions were reported. We requested evidence of two (2) transactions for the TANF program and one (1) for the Nutrition Assistance for Puerto Rico, no evidence of class object was provided in order to ascertain that only allowable expenditure transactions were considered in the calculation and claim of indirect costs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. There are no processes to reconcile PRIFAS information with emissions reported in EBT, nor to claim indirect costs. STATEMENT OF CAUSE ADSEF does not have a process for validating EBT issuances with PRIFAS, and this reconciliation is not performed periodically to detect any errors or missing information when accounting for transactions. POSSIBLE ASSERTED EFFECT The PRIFAS accounting system is not reconciled with EBT reports. This process is not stipulated as part of the internal controls required to ensure that the records used to prepare the financial statement, SEFA, and Federal reports are reconciled, and any discrepancies are identified. In addition, indirect costs calculation may include unallowable costs and not be detected timely. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish internal control processes to reconcile PRIFAS and the various sources of information used for reporting. Additionally, maintain clear records of indirect costs claimed and awarded.
FINDING REFERENCE NUMBER 2023-033 (See Finding Reference Number 2023-005) FEDERAL PROGRAMS (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 211PR426S7003/4; 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 2021G990229 (TANF – COVID-19) (Federal Award Year: 2021) 2022G996117; 2023996117 (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” In addition, 45 CFR 260.31 (b)(1), defines what non-recurrent, short-term (NRST) benefits are. In relation to Pandemic Emergency Assistance Fund (PEAF), the regulation establishes that: “NRST benefits, like all NRSTs under TANF, must: be designed to deal with a specific crisis situation or episode of need; not be intended to meet on-going needs; and not extend beyond four months; and (as explained in the instructions for reporting on line 15 of the ACF-196R) NRSTs paid for with PEAF funds: must only include expenditures such as emergency assistance and diversion payments, emergency housing and short-term homelessness assistance, emergency food aid, short-term utilities payments, burial assistance, clothing allowances, and back-to-school payments; and may not include tax credits, child care, transportation, or short-term education and training.” STATEMENT OF CONDITION As part of our audit procedures over transactions related to emissions of benefits for the TANF program, we selected five (5) transactions, from a population of fifty-three (53) emissions made during the fiscal year. We noted the following deficiencies: i. An emission of benefits for $16,236,447.24 related to PEAF funding was made. We request evidence of an established manual or guide that defines or identifies the need that would be addressed with the issuance of these funds, and the subsequent monitoring of the usage. ii. An emission of benefits for $3,633,800 was made related to a bonus. The documentation for this issuance includes an authorization letter establishing a benefit of $800 per child between the ages of 5 and 17 years and 11 months, serving a population of 4,492 participants, for a total of $3,593,600. Later, another authorization letter added $37,000 but did not specify the number of children included in this amendment. The sum of both authorizations is $3,630,600; however, the amount reflected in PRIFAS is $3,633,800. According to the EBT document related to this issuance, the amount issued was $3,596,800 and indicates that the number of participants benefited was 4,974, giving an average benefit of $723.12. In this EBT document, beneficiaries are distributed by region; however, there are 5 beneficiaries who are not assigned to a region, for a total of $4,000. iii. An emission of $1,988,000 was made related to an incentive for some beneficiaries. In accordance with an authorization letter, the benefit included $3,500 per participants who worked or participated in an activity leading to employment for 3 months or more. In accordance with the State Plan, active recipients may receive a 6-months period Work Incentive Bonus payment. Per the authorization letter the benefit of $3,500 was issued to 522 participants, for a total of $1,827,000; another authorization letter increased $3,500 in funds. This amount does not agree with the PRIFAS amount of $1,988,000. ADSEF is allowed to claim 16.80% of indirect costs. As part of our audit procedures over the Nutrition Assistance for Puerto Rico and TANF program, we selected some transactions to evaluate the compliance with the indirect costs claims. The TANF program reported four (4) transactions related to indirect costs, and for the Nutrition Assistance for Puerto Rico five (5) transactions were reported. We requested evidence of two (2) transactions for the TANF program and one (1) for the Nutrition Assistance for Puerto Rico, no evidence of class object was provided in order to ascertain that only allowable expenditure transactions were considered in the calculation and claim of indirect costs. QUESTIONED COSTS None. PERSPECTIVE INFORMATION We consider this deficiency a systemic problem. There are no processes to reconcile PRIFAS information with emissions reported in EBT, nor to claim indirect costs. STATEMENT OF CAUSE ADSEF does not have a process for validating EBT issuances with PRIFAS, and this reconciliation is not performed periodically to detect any errors or missing information when accounting for transactions. POSSIBLE ASSERTED EFFECT The PRIFAS accounting system is not reconciled with EBT reports. This process is not stipulated as part of the internal controls required to ensure that the records used to prepare the financial statement, SEFA, and Federal reports are reconciled, and any discrepancies are identified. In addition, indirect costs calculation may include unallowable costs and not be detected timely. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish internal control processes to reconcile PRIFAS and the various sources of information used for reporting. Additionally, maintain clear records of indirect costs claimed and awarded.
FINDING REFERENCE NUMBER 2023-034 (See Finding Reference Number 2023-006) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.556) COVID-19 – MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRFPSS; 2101PRFPSC; 2101PRFPCV; 2202PRFPCV; 2203PRFPSS (Federal Award Years: 2021 through 2023) 2111PRSOSR; 2211PRSOSR (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES // CASH MANAGEMENT TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we verified the requirements for the written procedures policies, and we didn’t obtain by ADFAN the required documentation. This represents a scope limitation. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to lack of proper training, segregation of duties and written policies and procedures. STATEMENT OF CAUSE ADFAN has not established a work plan to maintain the written procedures policies required by the Uniform Guidance. POSSIBLE ASSERTED EFFECT The absence of written procedures may lead to inconsistent program implementation, unclear assignment of responsibilities, and inadequate oversight. This increases the risk of noncompliance with applicable regulations, inefficiencies in operations, and reduced effectiveness in achieving program objectives. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADFAN develop, formalize, and implement comprehensive written procedures for the programs to comply with the Uniform Guidance. These procedures should clearly define roles and responsibilities, establish operational workflows, and include mechanisms for monitoring and compliance. Doing so will help ensure consistency in program execution, accountability, and alignment with regulatory and performance requirements.
FINDING REFERENCE NUMBER 2023-034 (See Finding Reference Number 2023-006) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.556) COVID-19 – MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRFPSS; 2101PRFPSC; 2101PRFPCV; 2202PRFPCV; 2203PRFPSS (Federal Award Years: 2021 through 2023) 2111PRSOSR; 2211PRSOSR (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES // CASH MANAGEMENT TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we verified the requirements for the written procedures policies, and we didn’t obtain by ADFAN the required documentation. This represents a scope limitation. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to lack of proper training, segregation of duties and written policies and procedures. STATEMENT OF CAUSE ADFAN has not established a work plan to maintain the written procedures policies required by the Uniform Guidance. POSSIBLE ASSERTED EFFECT The absence of written procedures may lead to inconsistent program implementation, unclear assignment of responsibilities, and inadequate oversight. This increases the risk of noncompliance with applicable regulations, inefficiencies in operations, and reduced effectiveness in achieving program objectives. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADFAN develop, formalize, and implement comprehensive written procedures for the programs to comply with the Uniform Guidance. These procedures should clearly define roles and responsibilities, establish operational workflows, and include mechanisms for monitoring and compliance. Doing so will help ensure consistency in program execution, accountability, and alignment with regulatory and performance requirements.
FINDING REFERENCE NUMBER 2023-034 (See Finding Reference Number 2023-006) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.556) COVID-19 – MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRFPSS; 2101PRFPSC; 2101PRFPCV; 2202PRFPCV; 2203PRFPSS (Federal Award Years: 2021 through 2023) 2111PRSOSR; 2211PRSOSR (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ALLOWABLE COSTS/COSTS PRINCIPLES // CASH MANAGEMENT TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450). (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) Written procedures to implement the requirements of § 200.305. (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award.” STATEMENT OF CONDITION As part of our audit procedures, we verified the requirements for the written procedures policies, and we didn’t obtain by ADFAN the required documentation. This represents a scope limitation. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is a systemic problem that is related to lack of proper training, segregation of duties and written policies and procedures. STATEMENT OF CAUSE ADFAN has not established a work plan to maintain the written procedures policies required by the Uniform Guidance. POSSIBLE ASSERTED EFFECT The absence of written procedures may lead to inconsistent program implementation, unclear assignment of responsibilities, and inadequate oversight. This increases the risk of noncompliance with applicable regulations, inefficiencies in operations, and reduced effectiveness in achieving program objectives. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADFAN develop, formalize, and implement comprehensive written procedures for the programs to comply with the Uniform Guidance. These procedures should clearly define roles and responsibilities, establish operational workflows, and include mechanisms for monitoring and compliance. Doing so will help ensure consistency in program execution, accountability, and alignment with regulatory and performance requirements.
FINDING REFERENCE NUMBER 2023-040 (See Finding Reference Number 2023-012) FEDERAL PROGRAMS (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE (ALN – 93.568) COVID-19 – LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRLIEA; 2201PRLIEA; 2301PRLIEA; 2001PRLIEA; 2001PRE5C3 (Federal Award Years: 2020 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY // REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200.334, Record retention requirements, establishes that: the recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. For awards that are renewed quarterly or annually, the recipient and subrecipient must retain records for three years from the date of submission of their quarterly or annual financial report, respectively. Records to be retained include but are not limited to financial records, supporting documentation, and statistical records. Further, in §200.337, Access to records, requires in (a) Records of recipients and subrecipients. The Federal agency or pass-through entity, Inspectors General, the Comptroller General of the United States, or any of their authorized representatives must have the right of access to any records of the recipient or subrecipient pertinent to the Federal award to perform audits, execute site visits, or for any other official use. This right also includes timely and reasonable access to the recipient's or subrecipient's personnel for the purpose of interviewing and discussion related to such documents or the Federal award in general. STATEMENT OF CONDITION As part of our audit procedures for eligibility requirements, we selected forty (40) participants from a population of 27,038 who were eligible for the crisis subsidy program. Of the sample of participants, only eight (8) files were submitted to us for evaluation. This represents a scope limitation. In relation to the requirement of Performance Reporting and Special reporting, we requested the applicable reports submitted during the fiscal year 2022-2023, the reports submitted for our review were applicable for the fiscal year 2023-2024. This represents a scope limitation. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systemic deficiency. ADSEF was unable to demonstrate compliance with these compliance requirements. STATEMENT OF CAUSE ADSEF does not have an adequate process to identify participants' files within a reasonable timeframe for auditing. In addition, ADSEF does not have adequate controls and safeguards over the reports submitted to the Federal government. POSSIBLE ASSERTED EFFECT We were unable to obtain evidence of compliance with the eligibility and reporting requirements because the information in the files and applicable reports was not available for review. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish an appropriate mechanism to identify participants' files within a reasonable time. In addition, improve its system for filing reports submitted to the Federal government.
FINDING REFERENCE NUMBER 2023-040 (See Finding Reference Number 2023-012) FEDERAL PROGRAMS (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE (ALN – 93.568) COVID-19 – LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRLIEA; 2201PRLIEA; 2301PRLIEA; 2001PRLIEA; 2001PRE5C3 (Federal Award Years: 2020 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ELIGIBILITY // REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR 200.334, Record retention requirements, establishes that: the recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. For awards that are renewed quarterly or annually, the recipient and subrecipient must retain records for three years from the date of submission of their quarterly or annual financial report, respectively. Records to be retained include but are not limited to financial records, supporting documentation, and statistical records. Further, in §200.337, Access to records, requires in (a) Records of recipients and subrecipients. The Federal agency or pass-through entity, Inspectors General, the Comptroller General of the United States, or any of their authorized representatives must have the right of access to any records of the recipient or subrecipient pertinent to the Federal award to perform audits, execute site visits, or for any other official use. This right also includes timely and reasonable access to the recipient's or subrecipient's personnel for the purpose of interviewing and discussion related to such documents or the Federal award in general. STATEMENT OF CONDITION As part of our audit procedures for eligibility requirements, we selected forty (40) participants from a population of 27,038 who were eligible for the crisis subsidy program. Of the sample of participants, only eight (8) files were submitted to us for evaluation. This represents a scope limitation. In relation to the requirement of Performance Reporting and Special reporting, we requested the applicable reports submitted during the fiscal year 2022-2023, the reports submitted for our review were applicable for the fiscal year 2023-2024. This represents a scope limitation. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systemic deficiency. ADSEF was unable to demonstrate compliance with these compliance requirements. STATEMENT OF CAUSE ADSEF does not have an adequate process to identify participants' files within a reasonable timeframe for auditing. In addition, ADSEF does not have adequate controls and safeguards over the reports submitted to the Federal government. POSSIBLE ASSERTED EFFECT We were unable to obtain evidence of compliance with the eligibility and reporting requirements because the information in the files and applicable reports was not available for review. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish an appropriate mechanism to identify participants' files within a reasonable time. In addition, improve its system for filing reports submitted to the Federal government.
FINDING REFERENCE NUMBER 2023-049 (See Finding Reference Number 2023-020) FEDERAL PROGRAM (ALN – 10.566) NUTRITION ASSISTANCE FOR PUERTO RICO U.S. DEPARTMENT OF AGRICULTURE AWARD NUMBERS 221PR426S7003/4; 231PR426S7003/4 (Federal Award Years: 2021 through 2023) 211PR476V1003/4 – ARPA (Federal Award Years: March 11, 2021 through September 30, 2025) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR § 200.302, Financial Management, establishes that (a) each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In section (b), the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): … (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for reporting requirements, we selected two reports that closed during our fiscal year audit. With respect with the Grant Award 221PR426S7003 and 221PR426S7004 we noted the following deficiency: • The auditee was unable to provide supporting documentation for the administrative expenditures that reconcile the figures reported with the PRIFAS accounting system. • In addition, for all the Federal awards mentioned above, based on internal control interviews, we found that there is no designated individual responsible for independently reviewing the reports prior to submission to ensure accuracy and consistency with source data. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statement and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the required reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF establish written internal controls and specific procedures to ensure that all reported amounts are fully supported and reconciled with the PRIFAS accounting system and to assign responsibility to a designated official to review and approve all reports prior to submission to the Federal agency. Implement internal controls to maintain adequate documentation supporting all financial data reported.
FINDING REFERENCE NUMBER 2023-051 (See Finding Reference Number 2023-021) FEDERAL PROGRAM (ALN – 93.568) LOW-INCOME HOME ENERGY ASSISTANCE U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRLIEA (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR § 200.302, Financial Management, establishes that: (a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. (See § 200.450.) (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. … (6) Written procedures to implement the requirements of § 200.305 and (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our audit procedures over the reporting requirement for LIHEAP program, we selected two reports submitted during our fiscal year. We noted that the administrative expenditures do not reconcile with the accounting information from PRIFAS. In addition, for the amount of encumbrances of $11,032,784.51, the amount of $9,943,769.52 was not supported by a detail. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the Federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the SF– 425 reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the Federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement.
FINDING REFERENCE NUMBER 2023-052 FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – PERFORMANCE TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA In accordance with 45 CFR, Subtitle B, Chapter II, Part 265.7, states that: (a) Each State's quarterly reports [the TANF Data Report, the TANF Financial Report (or Territorial Financial Report), the SSP-MOE Data Report, and the Work Outcomes of TANF Exciters Report] must be complete and accurate and filed by the due date. (b) For a disaggregated data report, “a complete and accurate report” means that: (1) The reported data accurately reflects information available to the State in case records, financial records, and automated data systems, and includes correction of the quarterly data by the end of the fiscal year reporting period; (2) The data are free from computational errors and are internally consistent (e.g., items that should add to totals do so); (3) The State reports data for all required elements (i.e., no data is missing); (4) (i) The State provides data on all families; or (ii) If the State opts to use sampling, the State reports data on all families selected in a sample that meets the specification and procedures in the TANF Sampling Manual (except for families listed in error); and (5) Where estimates are necessary (e.g., some types of assistance may require cost estimates), the State uses reasonable methods to develop these estimates. (c) For an aggregated data report, “a complete and accurate report” means that: (1) The reported data accurately reflects information available to the State in case records, financial records, and automated data systems; (2) The data are free from computational errors and are internally consistent (e.g., items that should add to totals do so); (3) The State reports data on all applicable elements; and (4) Monthly totals are unduplicated counts for all families (e.g., the number of families and the number of out-of-wedlock births are unduplicated counts). In addition, 2 CFR § 200.302 (a) establishes that each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In section (b) the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our procedures for understanding internal controls for the preparation of ACF-199 reports, we request a procedures manual on how these reports are processed and the personnel responsible for each process. ADSEF did not provide us with a manual describing the data collection process, how the information provided by the regions is validated, and the individuals responsible for submitting the reports. To evaluate compliance with the reported data, the quarter ending June 2023 was selected. From this period, forty (40) participants were selected. ADSEF was required to provide us with the corresponding participant worksheet appendix and the physical file to corroborate the information included in the report. ADSEF provided us with evidence of the hand-completed forms; however, we were not provided with the physical files to validate the information included in each document. This represents a scope limitation. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systemic deficiency. After sample selection, ADSEF did not demonstrate a control structure that would allow the files to be located within a reasonable period of time. STATEMENT OF CAUSE ADSEF does not maintain an internal control structure for participant files that allows each file to be located within a reasonable period of time. Additionally, they do not have internal control procedure manuals that allow for the validation of the process they carry out and the individuals responsible for compiling, validating, and submitting this report. POSSIBLE ASSERTED EFFECT ADSEF may be including data in this report that has not been corroborated with the participants' physical records. The lack of a uniform process for archiving participant records prevented them from providing us with evidence of the requested records. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish internal control procedures manuals that clearly outline the processes to be followed for data collection, recording, and reporting. Additionally, standardize the way documents related to participant files are filed.
FINDING REFERENCE NUMBER 2023-054 (See Finding Reference Number 2023-023) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRFPSS (Federal Award Years: 2021 through 2022) 2211PRSOSR (Federal Award Years: 2021 through 2022) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR § 200.302 (a) establishes that each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In addition, the SF-425 Federal Financial Report requires the reporting of financial activities related to Federal awards. The accounting basis used for reporting expenditures (whether cash or accrual) must align with the accounting system employed by the recipient organization. The 2 CFR § 200.302 (b), establish that the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. The 2 CFR section 200.328(c) establishes that the recipient or subrecipient must submit financial reports as required by the Federal award. Reports submitted annually by the recipient or subrecipient must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for reporting requirements, we selected the Grants Awards 2101PRFPSS and 2111PRSOSR, which closes in the audit period from July 2022 to June 2023, to validate the recorded amounts. Upon evaluating the report for the Grant Award 2101PRFPSS, we found the following deficiencies: (1) The total Federal expenditure reported on line (e) does not match the database provided by the PRDF. (2) The matching expenditure on line (j) does not match the database provided by the PRDF, and (3) The report was not submitted within the established deadline, and an extension was granted to settle and report the funds until March 31, 2023, and they submitted on August 10, 2023. For both Grants Awards we found the following deficiencies: (4) The accounting basis should be Cash Basis instead of Accrual Basis, according to the accounting system used. Additionally, they provided a Procedures Manual for the Finance and Budget Divisions, approved in 2009 and delivered in Word format, which states that the accounting basis is “accrual”, even though their current system operates on a cash basis. (5) During the internal control’s interviews, we found that there is no designated person responsible for reviewing the information entered by the preparer. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, training, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statement and SEFA. STATEMENT OF CAUSE ADFAN does not have internal controls to effectively review the process and comply with the reporting requirements. The absence of effective internal controls at ADFAN to review processes and ensure compliance with reporting requirements can be attributed to inadequate organizational structure and insufficiently defined roles and responsibilities. There is no designated individual or team responsible for overseeing the accuracy and completeness of financial data entered reports. As mentioned above in the statement of condition, this responsibility falls under one person and does not have segregation of duties. This gap in accountability stems from a lack of internal review and insufficient oversight mechanisms, which restrains the organization's ability to ensure that reports are fully aligned with the required compliance standards. Additionally, there is a lack of training or resources dedicated to maintaining and monitoring compliance which contributes to the failure in reporting requirements. POSSIBLE ASSERTED EFFECT ADFAN does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports for the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADFAN ensures the SF– 425 is completed using the appropriate accounting basis consistent with the organization’s financial system. Additionally, ADFAN should establish and implement internal control procedures that include formal review process to verify the accuracy and completeness of the reported information and designate responsible personnel for the review and approval of reports prior to submission to ensure compliance with Federal reporting requirements.
FINDING REFERENCE NUMBER 2023-054 (See Finding Reference Number 2023-023) FEDERAL PROGRAMS (ALN – 93.556) MARYLEE ALLEN PROMOTING SAFE AND STABLE FAMILIES (ALN – 93.667) SOCIAL SERVICES BLOCK GRANT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2101PRFPSS (Federal Award Years: 2021 through 2022) 2211PRSOSR (Federal Award Years: 2021 through 2022) ADMINISTRATION ADMINISTRATION FOR FAMILIES AND CHILDREN (ADFAN, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA Uniform Guidance at 2 CFR § 200.302 (a) establishes that each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. In addition, the SF-425 Federal Financial Report requires the reporting of financial activities related to Federal awards. The accounting basis used for reporting expenditures (whether cash or accrual) must align with the accounting system employed by the recipient organization. The 2 CFR § 200.302 (b), establish that the recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (6) written procedures to implement the requirements of § 200.305 and (7) written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. The 2 CFR section 200.328(c) establishes that the recipient or subrecipient must submit financial reports as required by the Federal award. Reports submitted annually by the recipient or subrecipient must be due no later than 90 calendar days after the reporting period. Reports submitted quarterly or semiannually must be due no later than 30 calendar days after the reporting period. The 2 CFR §200.303 (a) establishes that the recipient and subrecipient must: establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). STATEMENT OF CONDITION As part of our audit procedures over internal controls and compliance for reporting requirements, we selected the Grants Awards 2101PRFPSS and 2111PRSOSR, which closes in the audit period from July 2022 to June 2023, to validate the recorded amounts. Upon evaluating the report for the Grant Award 2101PRFPSS, we found the following deficiencies: (1) The total Federal expenditure reported on line (e) does not match the database provided by the PRDF. (2) The matching expenditure on line (j) does not match the database provided by the PRDF, and (3) The report was not submitted within the established deadline, and an extension was granted to settle and report the funds until March 31, 2023, and they submitted on August 10, 2023. For both Grants Awards we found the following deficiencies: (4) The accounting basis should be Cash Basis instead of Accrual Basis, according to the accounting system used. Additionally, they provided a Procedures Manual for the Finance and Budget Divisions, approved in 2009 and delivered in Word format, which states that the accounting basis is “accrual”, even though their current system operates on a cash basis. (5) During the internal control’s interviews, we found that there is no designated person responsible for reviewing the information entered by the preparer. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This deficiency is a systemic problem. Procedures and internal controls manuals should provide for and ensure the segregation of duties, training, and the reconciliation of financial information reported to Federal agencies against the accounting records used to prepare financial statement and SEFA. STATEMENT OF CAUSE ADFAN does not have internal controls to effectively review the process and comply with the reporting requirements. The absence of effective internal controls at ADFAN to review processes and ensure compliance with reporting requirements can be attributed to inadequate organizational structure and insufficiently defined roles and responsibilities. There is no designated individual or team responsible for overseeing the accuracy and completeness of financial data entered reports. As mentioned above in the statement of condition, this responsibility falls under one person and does not have segregation of duties. This gap in accountability stems from a lack of internal review and insufficient oversight mechanisms, which restrains the organization's ability to ensure that reports are fully aligned with the required compliance standards. Additionally, there is a lack of training or resources dedicated to maintaining and monitoring compliance which contributes to the failure in reporting requirements. POSSIBLE ASSERTED EFFECT ADFAN does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports for the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADFAN ensures the SF– 425 is completed using the appropriate accounting basis consistent with the organization’s financial system. Additionally, ADFAN should establish and implement internal control procedures that include formal review process to verify the accuracy and completeness of the reported information and designate responsible personnel for the review and approval of reports prior to submission to ensure compliance with Federal reporting requirements.
FINDING REFERENCE NUMBER 2023-056 (See Finding Reference Number 2023-025) FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – FINANCIAL TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA The 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. … (6) Written procedures to implement the requirements of § 200.305 and (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our audit procedures over the reporting requirement for TANF and Payment to Territories – Adult programs, we selected two reports submitted during our fiscal year. We found the following deficiencies: i. Administrative expenditures related to both programs are recorded under the same accounting account number, and the assistance listing number of TANF. That is, in PRIFAS, the administrative expenditures of both programs are not segregated by grant award and assistance listing number. ii. The ACF-196TR reports report expenditures under both programs that are not reconciled with the PRIFAS accounting system, specifically in administrative expenditures. We requested evidence of the expenditures incurred or details that were used to prepare the reports; this information was not available, and it was generated upon our request. iii. In both reports evaluated, the amounts reported on lines 2 and 3, related to the amounts that the TANF program transfers to two other federal programs, are recorded inconsistently. During the quarters from October to June, these lines report the amount of the budget that is allowed to be transferred, without validating whether the Federal programs incurred any expenditures. In the quarterly report of September, the expenditure for these lines is reported based on the amount of drawdowns incurred. This practice is inconsistent and does not reflect the actual expenditure incurred. iv. In the quarterly report of June 2023, an expenditure of $3,733,668 was reported on line 5(a). According to PRIFAS, the reported expenditure was $1,988,000. QUESTIONED COSTS Undetermined. PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA. In addition, the financial management system should provide to account separately the administrative expenditures incurred among all Federal programs administered. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the ACF-196TR reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. PRIFAS accounting data base as configured, does not provide for the administrative expenditures incurred from the TANF and Payment to Territories – Adult program to be segregated. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement. Additionally, work with the Puerto Rico Department of the Treasury to provide accounting records to segregate the administrative expenditures of both programs.
FINDING REFERENCE NUMBER 2023-056 (See Finding Reference Number 2023-025) FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) (ALN – 93.560) PAYMENT TO TERRITORIES – ADULT U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) 2022G9922PT; 2301PRTABD (Federal Award Years: 2022 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT REPORTING – FINANCIAL TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA The 2 CFR 200 §200.302, Financial Management, establishes that: “(a) Each State must expend and account for the Federal award in accordance with State laws and procedures for expending and accounting for the State's funds. All recipient and subrecipient financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by the terms and conditions; and tracking expenditures to establish that funds have been used in accordance with Federal statutes, regulations, and the terms and conditions of the Federal award. See § 200.450. (b) The recipient's and subrecipient's financial management system must provide for the following (see §§ 200.334, 200.335, 200.336, and 200.337): (1) Identification of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number, year the Federal award was issued, and name of the Federal agency or pass-through entity. (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements in §§ 200.328 and 200.329. When a Federal agency or pass-through entity requires reporting on an accrual basis from a recipient or subrecipient that maintains its records other than on an accrual basis, the recipient or subrecipient must not be required to establish an accrual accounting system. This recipient or subrecipient may develop accrual data for its reports based on an analysis of the documentation on hand. (3) Maintaining records that sufficiently identify the amount, source, and expenditure of Federal funds for Federal awards. These records must contain information necessary to identify Federal awards, authorizations, financial obligations, unobligated balances, as well as assets, expenditures, income, and interest. All records must be supported by source documentation. (4) Effective control over and accountability for all funds, property, and assets. The recipient or subrecipient must safeguard all assets and ensure they are used solely for authorized purposes. See § 200.303. … (6) Written procedures to implement the requirements of § 200.305 and (7) Written procedures for determining the allowability of costs in accordance with subpart E and the terms and conditions of the Federal award. STATEMENT OF CONDITION As part of our audit procedures over the reporting requirement for TANF and Payment to Territories – Adult programs, we selected two reports submitted during our fiscal year. We found the following deficiencies: i. Administrative expenditures related to both programs are recorded under the same accounting account number, and the assistance listing number of TANF. That is, in PRIFAS, the administrative expenditures of both programs are not segregated by grant award and assistance listing number. ii. The ACF-196TR reports report expenditures under both programs that are not reconciled with the PRIFAS accounting system, specifically in administrative expenditures. We requested evidence of the expenditures incurred or details that were used to prepare the reports; this information was not available, and it was generated upon our request. iii. In both reports evaluated, the amounts reported on lines 2 and 3, related to the amounts that the TANF program transfers to two other federal programs, are recorded inconsistently. During the quarters from October to June, these lines report the amount of the budget that is allowed to be transferred, without validating whether the Federal programs incurred any expenditures. In the quarterly report of September, the expenditure for these lines is reported based on the amount of drawdowns incurred. This practice is inconsistent and does not reflect the actual expenditure incurred. iv. In the quarterly report of June 2023, an expenditure of $3,733,668 was reported on line 5(a). According to PRIFAS, the reported expenditure was $1,988,000. QUESTIONED COSTS Undetermined. PERSPECTIVE INFORMATION This is a systematic deficiency. Procedures and internal controls manuals should provide for and ensure the segregation of duties, and the reconciliation of financial information reported to federal agencies against the accounting records used to prepare financial statements and SEFA. In addition, the financial management system should provide to account separately the administrative expenditures incurred among all Federal programs administered. ADSEF failure to support reported amounts with verifiable documentation and the absence of independent review increases the risk of inaccurate or misstated financial data being reported to the federal awarding agency. STATEMENT OF CAUSE During our interviews and understanding of the internal controls over financial reporting, we noted that only one person prepares, submits and certifies the ACF-196TR reports. No proper segregation of duties exists, that allows for validation of all accounting data before submitting the reports. In addition, the procedures manual for preparing reports does not establish a clear process for obtaining information, validating it, recording it, preparing it, and reporting it, as well as the responsibilities and segregation of duties to ensure that the reported information is consistent with ADSEF's accounting records. PRIFAS accounting data base as configured, does not provide for the administrative expenditures incurred from the TANF and Payment to Territories – Adult program to be segregated. ADSEF lacks internal controls that allow for the timely validation and reconciliation of financial information. Furthermore, they lack a written procedures manual detailing the processes to follow in obtaining accounting data and reporting it to the federal government, ensuring that the responsibility does not fall on a single individual. POSSIBLE ASSERTED EFFECT ADSEF does not ensure that the reports are accurate and traceable to the accounting database used to prepare their financial reports to the Federal Agencies and their financial statement. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend ADSEF to establish written procedures and internal controls manuals to provide and document the segregation of duties related to the reporting compliance requirement. Additionally, work with the Puerto Rico Department of the Treasury to provide accounting records to segregate the administrative expenditures of both programs.
FINDING REFERENCE NUMBER 2023-060 FEDERAL PROGRAMS (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2021G996117; 2022G996117; 2023996117 (Federal Award Years: 2021 through 2023) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT SPECIAL TESTS & PROVISIONS – PENALTY FOR REFUSAL TO WORK / LACK OF CHILD CARE FOR SINGLE CUSTODIAL PARENT OF CHILD UNDER AGE SIX / PENALTY FOR FAILURE TO COMPLY WITH WORK VERIFICATION PLAN TYPE OF FINDING MATERIAL NONCOMPLIANCE AND MATERIAL WEAKNESS CRITERIA 2 CFR 200.334, Record retention requirements, establishes that: the recipient and subrecipient must retain all Federal award records for three years from the date of submission of their final financial report. For awards that are renewed quarterly or annually, the recipient and subrecipient must retain records for three years from the date of submission of their quarterly or annual financial report, respectively. Records to be retained include but are not limited to financial records, supporting documentation, and statistical records. Further, in §200.337, Access to records, requires in (a) Records of recipients and subrecipients. The Federal agency or pass-through entity, Inspectors General, the Comptroller General of the United States, or any of their authorized representatives must have the right of access to any records of the recipient or subrecipient pertinent to the Federal award to perform audits, execute site visits, or for any other official use. This right also includes timely and reasonable access to the recipient's or subrecipient's personnel for the purpose of interviewing and discussion related to such documents or the Federal award in general. STATEMENT OF CONDITION As part of our audit procedures for special tests and provisions, we selected twenty-five (25) participants from a population of 475 who had been penalized for failing to meet the work requirement or complying with the work verification plan. Of the sample of participants, only ten (10) files were submitted to us for evaluation. Related to the Lack of Child Care requirement for single Custodial Parent of Child Under Age Six, from a population of seven (7) participants identified with this requirement, we requested three (3) files for evaluation, however, we were only given one (1) file. This is a scope limitation. QUESTIONED COSTS No questioned costs identified. PERSPECTIVE INFORMATION This is a systemic deficiency. ADSEF was unable to demonstrate compliance with this compliance requirement. STATEMENT OF CAUSE ADSEF does not have an adequate process to identify participants' files within a reasonable timeframe for auditing. POSSIBLE ASSERTED EFFECT We were unable to obtain evidence of compliance with these Special Tests and Provisions because the information in the files was not available for review. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that management establish an appropriate mechanism to identify participants' files within a reasonable time.
FINDING 2023-001 DOCUMENT RETENTION SIGNIFICANT DEFICIENCY Federal Program: Title I, Part A Assistance Listing Number: 84.010 Condition The Indiana Department of Education uses data on the poverty levels of students in determining funding amounts for the program. We selected a sample of forty students from the Real Time Data report used in making funding assessments for the year under audit. The School was unable to provide documentation to support the poverty levels of ten of those students. Criteria Per 7 CFR 200.334, “Financial records, supporting documents, statistical records, and all other non- Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient.” Cause The School did not maintain poverty level documentation for all students reported. Effect We were unable to determine if the poverty levels of all students were properly reported. Funding amounts could have been incorrectly determined. Recommendation We recommend the School develop internal controls requiring the maintenance of student poverty level documentation. Views of Responsible Officials The School’s Corrective Action Plan is included on page 24.
FINDING 2023-001 DOCUMENT RETENTION SIGNIFICANT DEFICIENCY Federal Program: Title I, Part A Assistance Listing Number: 84.010 Condition The Indiana Department of Education uses data on the poverty levels of students in determining funding amounts for the program. We selected a sample of forty students from the Real Time Data report used in making funding assessments for the year under audit. The School was unable to provide documentation to support the poverty levels of ten of those students. Criteria Per 7 CFR 200.334, “Financial records, supporting documents, statistical records, and all other non- Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient.” Cause The School did not maintain poverty level documentation for all students reported. Effect We were unable to determine if the poverty levels of all students were properly reported. Funding amounts could have been incorrectly determined. Recommendation We recommend the School develop internal controls requiring the maintenance of student poverty level documentation. Views of Responsible Officials The School’s Corrective Action Plan is included on page 24.
Assistance Listing Number(s): 10.553 and 10.555 Name of Federal Program or Cluster: Child Nutrition Cluster Name of Federal Agency: Department of Agriculture Name of Pass-through Entity: Wisconsin Department of Public Instruction Pass-through Entity Identifying Number(s): 2023-138142-DPI-SB-546, 2023-138005-DPI-SB-546, 2023-138005-DPI-NSL-547, and 2023-138005-DPI-SK_NSLAE-566 Award Period: July 1, 2022 through June 30, 2023 Criteria: According to 2 CFR, Part 200.334 of the Uniform Guidance, supporting documentation pertinent to a federal award must be retained for a period of three years from the date of submission of the expenditure. According to 2 CFR, Part 200.302(3) of the Uniform Guidance, records must be supported by source documentation. Condition: Supporting documentation for claims were not retained. Cause: Internal controls for funding claims have not been designed appropriately. Currently, there are no internal controls to ensure support for claims are retained in accordance with federal requirements. Questioned Costs: $344,674 Effect or Potential Effect: Incomplete or inaccurate information could be reported on funding claims. Context: A sample of 8 claims reports were selected from a population of 39. The testing found that supporting documentation for claims was not retained for any of the claims in the sample. Repeat Finding: No Recommendation: One City Schools, Inc. should design and implement appropriate internal controls for retaining support for claims in accordance with federal requirements. Views of Responsible Officials: One City Schools, Inc. agrees with the finding and are working on implementing internal controls for maintaining supporting documentation.
Assistance Listing Number(s): 10.553 and 10.555 Name of Federal Program or Cluster: Child Nutrition Cluster Name of Federal Agency: Department of Agriculture Name of Pass-through Entity: Wisconsin Department of Public Instruction Pass-through Entity Identifying Number(s): 2023-138142-DPI-SB-546, 2023-138005-DPI-SB-546, 2023-138005-DPI-NSL-547, and 2023-138005-DPI-SK_NSLAE-566 Award Period: July 1, 2022 through June 30, 2023 Criteria: According to 2 CFR, Part 200.334 of the Uniform Guidance, supporting documentation pertinent to a federal award must be retained for a period of three years from the date of submission of the expenditure. According to 2 CFR, Part 200.302(3) of the Uniform Guidance, records must be supported by source documentation. Condition: Supporting documentation for claims were not retained. Cause: Internal controls for funding claims have not been designed appropriately. Currently, there are no internal controls to ensure support for claims are retained in accordance with federal requirements. Questioned Costs: $344,674 Effect or Potential Effect: Incomplete or inaccurate information could be reported on funding claims. Context: A sample of 8 claims reports were selected from a population of 39. The testing found that supporting documentation for claims was not retained for any of the claims in the sample. Repeat Finding: No Recommendation: One City Schools, Inc. should design and implement appropriate internal controls for retaining support for claims in accordance with federal requirements. Views of Responsible Officials: One City Schools, Inc. agrees with the finding and are working on implementing internal controls for maintaining supporting documentation.
Assistance Listing Number(s): 10.553 and 10.555 Name of Federal Program or Cluster: Child Nutrition Cluster Name of Federal Agency: Department of Agriculture Name of Pass-through Entity: Wisconsin Department of Public Instruction Pass-through Entity Identifying Number(s): 2023-138142-DPI-SB-546, 2023-138005-DPI-SB-546, 2023-138005-DPI-NSL-547, and 2023-138005-DPI-SK_NSLAE-566 Award Period: July 1, 2022 through June 30, 2023 Criteria: According to 2 CFR, Part 200.334 of the Uniform Guidance, supporting documentation pertinent to a federal award must be retained for a period of three years from the date of submission of the expenditure. According to 2 CFR, Part 200.302(3) of the Uniform Guidance, records must be supported by source documentation. Condition: Supporting documentation for claims were not retained. Cause: Internal controls for funding claims have not been designed appropriately. Currently, there are no internal controls to ensure support for claims are retained in accordance with federal requirements. Questioned Costs: $344,674 Effect or Potential Effect: Incomplete or inaccurate information could be reported on funding claims. Context: A sample of 8 claims reports were selected from a population of 39. The testing found that supporting documentation for claims was not retained for any of the claims in the sample. Repeat Finding: No Recommendation: One City Schools, Inc. should design and implement appropriate internal controls for retaining support for claims in accordance with federal requirements. Views of Responsible Officials: One City Schools, Inc. agrees with the finding and are working on implementing internal controls for maintaining supporting documentation.
Assistance Listing Number(s): 10.553 and 10.555 Name of Federal Program or Cluster: Child Nutrition Cluster Name of Federal Agency: Department of Agriculture Name of Pass-through Entity: Wisconsin Department of Public Instruction Pass-through Entity Identifying Number(s): 2023-138142-DPI-SB-546, 2023-138005-DPI-SB-546, 2023-138005-DPI-NSL-547, and 2023-138005-DPI-SK_NSLAE-566 Award Period: July 1, 2022 through June 30, 2023 Criteria: According to 2 CFR, Part 200.334 of the Uniform Guidance, supporting documentation pertinent to a federal award must be retained for a period of three years from the date of submission of the expenditure. According to 2 CFR, Part 200.302(3) of the Uniform Guidance, records must be supported by source documentation. Condition: Supporting documentation for claims were not retained. Cause: Internal controls for funding claims have not been designed appropriately. Currently, there are no internal controls to ensure support for claims are retained in accordance with federal requirements. Questioned Costs: $344,674 Effect or Potential Effect: Incomplete or inaccurate information could be reported on funding claims. Context: A sample of 8 claims reports were selected from a population of 39. The testing found that supporting documentation for claims was not retained for any of the claims in the sample. Repeat Finding: No Recommendation: One City Schools, Inc. should design and implement appropriate internal controls for retaining support for claims in accordance with federal requirements. Views of Responsible Officials: One City Schools, Inc. agrees with the finding and are working on implementing internal controls for maintaining supporting documentation.
FINDING 2023-002 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425D Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period the School Corporation submitted two ESSER I reports, two ESSER II reports, and two ESSER III reports, for a total of six reports. The annual data reports were complied, prepared, and submitted by the Assistant Superintendent of Schools without an oversight or review process in place to prevent, or detect and correct, errors. Furthermore, the reported data on two of the reports, as noted below, could not be traced back to records that accumulate or summarize the data; therefore, the accuracy and completeness of the reports could not be verified. ESSER I, Year 3 Report The key line item, "Meeting Students' Academic, Social, Emotional, and Other Needs (Excluding Mental Health Supports) Uses - Personnel Services - Salaries," was not able to be verified to the School Corporation's records. Additionally, the key line item, "Meeting Students' Academic, Social, Emotional, and Other Needs (Excluding Mental Health Supports) Uses - Personnel Services - Benefits," was understated by $16. ESSER II, Year 2 Report The key line item, "Meeting Students' Academic, Social, Emotional, and Other Needs (Excluding Mental Health Supports) Uses - Personnel Services - Salaries," was understated by $288,199. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 17 MILL CREEK COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(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." Cause A proper system of internal controls was not designed by management of the School Corporation. 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, some data could not be traced back to the underlying records. INDIANA STATE BOARD OF ACCOUNTS 18 MILL CREEK COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all reports submitted on behalf of the COVID-19 - Education Stabilization Fund program funds are accurate and complete. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425D Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period the School Corporation submitted two ESSER I reports, two ESSER II reports, and two ESSER III reports, for a total of six reports. The annual data reports were complied, prepared, and submitted by the Assistant Superintendent of Schools without an oversight or review process in place to prevent, or detect and correct, errors. Furthermore, the reported data on two of the reports, as noted below, could not be traced back to records that accumulate or summarize the data; therefore, the accuracy and completeness of the reports could not be verified. ESSER I, Year 3 Report The key line item, "Meeting Students' Academic, Social, Emotional, and Other Needs (Excluding Mental Health Supports) Uses - Personnel Services - Salaries," was not able to be verified to the School Corporation's records. Additionally, the key line item, "Meeting Students' Academic, Social, Emotional, and Other Needs (Excluding Mental Health Supports) Uses - Personnel Services - Benefits," was understated by $16. ESSER II, Year 2 Report The key line item, "Meeting Students' Academic, Social, Emotional, and Other Needs (Excluding Mental Health Supports) Uses - Personnel Services - Salaries," was understated by $288,199. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 17 MILL CREEK COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(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." Cause A proper system of internal controls was not designed by management of the School Corporation. 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, some data could not be traced back to the underlying records. INDIANA STATE BOARD OF ACCOUNTS 18 MILL CREEK COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all reports submitted on behalf of the COVID-19 - Education Stabilization Fund program funds are accurate and complete. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425D Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period the School Corporation submitted two ESSER I reports, two ESSER II reports, and two ESSER III reports, for a total of six reports. The annual data reports were complied, prepared, and submitted by the Assistant Superintendent of Schools without an oversight or review process in place to prevent, or detect and correct, errors. Furthermore, the reported data on two of the reports, as noted below, could not be traced back to records that accumulate or summarize the data; therefore, the accuracy and completeness of the reports could not be verified. ESSER I, Year 3 Report The key line item, "Meeting Students' Academic, Social, Emotional, and Other Needs (Excluding Mental Health Supports) Uses - Personnel Services - Salaries," was not able to be verified to the School Corporation's records. Additionally, the key line item, "Meeting Students' Academic, Social, Emotional, and Other Needs (Excluding Mental Health Supports) Uses - Personnel Services - Benefits," was understated by $16. ESSER II, Year 2 Report The key line item, "Meeting Students' Academic, Social, Emotional, and Other Needs (Excluding Mental Health Supports) Uses - Personnel Services - Salaries," was understated by $288,199. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 17 MILL CREEK COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(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." Cause A proper system of internal controls was not designed by management of the School Corporation. 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, some data could not be traced back to the underlying records. INDIANA STATE BOARD OF ACCOUNTS 18 MILL CREEK COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all reports submitted on behalf of the COVID-19 - Education Stabilization Fund program funds are accurate and complete. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-002 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425D Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation was required to submit annual data reports to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period the School Corporation submitted two ESSER I reports, two ESSER II reports, and two ESSER III reports, for a total of six reports. The annual data reports were complied, prepared, and submitted by the Assistant Superintendent of Schools without an oversight or review process in place to prevent, or detect and correct, errors. Furthermore, the reported data on two of the reports, as noted below, could not be traced back to records that accumulate or summarize the data; therefore, the accuracy and completeness of the reports could not be verified. ESSER I, Year 3 Report The key line item, "Meeting Students' Academic, Social, Emotional, and Other Needs (Excluding Mental Health Supports) Uses - Personnel Services - Salaries," was not able to be verified to the School Corporation's records. Additionally, the key line item, "Meeting Students' Academic, Social, Emotional, and Other Needs (Excluding Mental Health Supports) Uses - Personnel Services - Benefits," was understated by $16. ESSER II, Year 2 Report The key line item, "Meeting Students' Academic, Social, Emotional, and Other Needs (Excluding Mental Health Supports) Uses - Personnel Services - Salaries," was understated by $288,199. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 17 MILL CREEK COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(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." Cause A proper system of internal controls was not designed by management of the School Corporation. 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, some data could not be traced back to the underlying records. INDIANA STATE BOARD OF ACCOUNTS 18 MILL CREEK COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure all reports submitted on behalf of the COVID-19 - Education Stabilization Fund program funds are accurate and complete. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-001 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425U Federal Award Number and Year (or Other Identifying Number): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 15 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The COVID-19 - Education Stabilization Fund established by the Coronavirus Aid, Relief, and Economic Security Act, and further funded by the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act, was for the purpose of preventing, preparing for, or responding to the novel coronavirus. A sample of 25 claims charged to the program was selected for testing to verify the expenditures were in conformance with the applicable cost principles. Of the 25 claims tested, 6 claims totaling $1,650, each of which paid an individual for work as a contracted security guard, were identified as not being in conformance with the applicable cost principles. Payment to the security guards was made based on an accounts payable voucher signed by the contractor; however, there was not an invoice, time sheet, or other supporting documentation that accompanied the accounts payable voucher. The ineffective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." INDIANA STATE BOARD OF ACCOUNTS 16 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation. 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, documentation could not be provided to support amounts charged to the grant. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure time charged to the grant is properly supported, recorded, and approved.
FINDING 2023-001 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Number: 84.425U Federal Award Number and Year (or Other Identifying Number): S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 15 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The COVID-19 - Education Stabilization Fund established by the Coronavirus Aid, Relief, and Economic Security Act, and further funded by the Coronavirus Response and Relief Supplemental Appropriations Act and the American Rescue Plan Act, was for the purpose of preventing, preparing for, or responding to the novel coronavirus. A sample of 25 claims charged to the program was selected for testing to verify the expenditures were in conformance with the applicable cost principles. Of the 25 claims tested, 6 claims totaling $1,650, each of which paid an individual for work as a contracted security guard, were identified as not being in conformance with the applicable cost principles. Payment to the security guards was made based on an accounts payable voucher signed by the contractor; however, there was not an invoice, time sheet, or other supporting documentation that accompanied the accounts payable voucher. The ineffective internal controls and noncompliance were systemic issues throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." INDIANA STATE BOARD OF ACCOUNTS 16 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation. 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, documentation could not be provided to support amounts charged to the grant. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure time charged to the grant is properly supported, recorded, and approved.
FINDING 2023-002 Subject: COVID-19 - Education Stabilization Fund - Reporting Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D200013, S425D210013, S425U210013 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Reporting Audit Findings: Material Weakness, Other Maters Condition and Context The School Corporation had not properly designed or implemented a system of internal controls, which would include appropriate segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance. The School Corporation was required to submit an annual data report to the Indiana Department of Education via JotForm, a form/report builder. Data to be submitted included, but was not limited to, current period expenditures, prior period expenditures, and expenditures per activity. During the audit period, the School Corporation submitted two ESSER I reports, two ESSER II reports, and two ESSER III reports, for a total of six reports; however, a single employee prepared and submitted the reports without evidence of a review, or oversight process in place to prevent, or detect and correct, errors. INDIANA STATE BOARD OF ACCOUNTS 17 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, for the ESSER I, Year 2 report, the "Total Mandatory Subgrant Amount Expended in Current Reporting Period" was not supported by the School Corporation's records. Actual expenditures from a report provided by the School Corporation did not tie to the amount submitted for the Annual Performance Reporting. The key line item was determined to be overstated by $80,342. The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to the ESSER I, Year 2 report. 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 200.334 states in part: "Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient. . . ." 2 CFR 200.302(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. . . . (3) Records that identify adequately the source and application of funds for federallyfunded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. . . ." 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." INDIANA STATE BOARD OF ACCOUNTS 18 METROPOLITAN SCHOOL DISTRICT OF MARTINSVILLE SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation. 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, the amounts reported were not supported by the School Corporation's records. Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure supporting documentation is used and retained for all required reports submitted on behalf of the COVID-19 - Education Stabilization Fund program. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.