Federal Program: U.S. Department of Homeland Security – FEMA Assistance Listing Number: 97.036 - Disaster Grants - Public Assistance Passthrough Entity - Arkansas Department of Emergency Management Program Year: 2025 Criteria - Under 2 CFR 200.403 and 2 CFR 200.404, costs charged to federal awards must be necessary, reasonable, and adequately documented. In addition, FEMA Public Assistance guidance requires that force account labor costs be based on actual hours worked and actual compensation paid, and that such costs not be duplicated or otherwise unallowable. Condition – An employee payroll payment was reported twice as an eligible expenditure, resulting in a duplicate payment being charged to the grant. Cause - The duplicate payment resulted from human error, as accounting personnel inadvertently entered the same payment into the grant reporting system twice. Although controls exist, they were not sufficient in this instance to detect or prevent the duplicate reporting. Effect or potential effect - As a result of the duplicate request, unallowable payroll costs were charged to the FEMA grant. If not identified and corrected, such errors could lead to FEMA reimbursement of costs that do not represent actual, allowable labor expenditures and could result in repayment demands or reduced future reimbursement. Questioned Costs – Known error: $5,072; Total estimated error $57,703 Context - We selected a sample of 29 out of a population of 187 employee payroll expenditures charged to the grant. We noted 1 employee payroll expenditure was duplicated resulting in an error of $5,072. The sample value was $45,597 out of a population value of $518,914. The sampling methodology used is not, and is not intended to be, statistically valid. Recommendation - We recommend management strengthen payroll review and reconciliation procedures to ensure that payroll payments charged to federal grants are reviewed for accuracy and completeness prior to submission for reimbursement. Additional supervisory review or system based duplicate payment controls should be implemented to reduce the risk of similar errors in the future. Views of Responsible Officials and Planned Corrective Action: Management concurs with this finding. The duplicate request for reimbursement of a single payroll payment was an isolated clerical oversight. This specific error was not caught during the final review process prior to submission. Management recognizes the importance of accurate reporting and has already taken steps to ensure all future reimbursement requests are reconciled against previous submissions to prevent recurrence.
Federal Agency: Legal Services Corporation (LSC) U.S. Department of Health and Human Services Federal Program Name: LSC Grants Aging Cluster - Special Programs for the Aging, Title III, Part B Assistance Listing Number: 09.706060 93.044 Federal Award Identification Number and Year: 09-706060 - 2025 Various – Aging Cluster Pass-Through Agency: Various – Aging Cluster, see SEFA Pass-Through Numbers: Various – Aging Cluster, see SEFA Award Period: Various – see SEFA Type of Finding: • Significant Deficiency in Internal Control over Compliance Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), indicate that federal award recipients must base allocations of salaries and wages costs to grants on records that accurately reflect the work performed. Federal regulations (45 CFR 1630.5 and 2 CFR 200.403) indicate that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities. It also states that costs must be adequately documented. The LSC financial guide also articulates that a cost allocation base must be cost-driven and that budgeted numbers or percentage of revenue are not allowable allocation bases. Condition: During our testing we noted: • LSC Payroll Transactions: Fourteen instances of errors totaling a net under allocation amount of $2,657. The under allocation was due to various over allocations of costs to other grants that were not based on employees’ time charged to the respective other grants in their timesheets. We also noted that the Organization allocated costs from the general fund (which consists of two unrestricted grants and the LSC grants) to LSC grants using allocation bases of percentage of revenue and projected revenue of the grants that make up the general fund. However, as revenue was recognized as expenses were incurred for the general fund, the allocations based on revenue approximated an allocation method based on a cost driver. • LSC Native American Grant Payroll Transactions: Three instances where a total of $4,383 was charged to payroll costs via an estimated fixed percentage allocation of employee time spent on the LSC Native American grant. The Organization was not able to provide supporting documentation for the fixed percentage. • Aging Cluster Payroll Transactions: Seven instances of errors totaling a net overallocation of payroll costs of $144 where an unsupported allocation percentage was used to allocate the employee's pay to the grant. The Organization used an allocation base of monthly hours coded to the grant per timesheets divided by 150 hours for the monthly pay period instead of total monthly hours listed in the employees’ timesheets. • Aging Cluster Fringe-benefit Transactions: Five instances where $2,797 of additional medical insurance costs were allocated to grants based on reconciliations of budgeted grant revenue to period-to-date actual grant expenses that showed revenue exceeding expenses. Based on discussions with management and subsequent recalculations, it appears that the allocated costs (and more) could have been allocated via an allowable cost driver method (grant salaries compared to total organization salaries for the year). Questioned Costs: None. Context: These 29 instances were noting during testing of 120 transactions. Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC allocation base (based on revenue or projected revenue) for the period divided by the total allocation base (based on revenue or projected revenue) coded to the Organization’s general fund, but it often includes manual adjustments based on review of individual time records, expense and other data. Therefore, the methodology is challenging to apply consistently, document contemporaneously, and apply in accordance with federal regulations. Effect: The inclusion of frequent manual adjustments and varying allocation bases in the Organization’s cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities and in a manner where costs are not applied uniformly to both LSC (or, federally)-funded and non-LSC (of, federally) -funded activities. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2024-002 and 2024-004. Recommendation: We recommend that the Organization consider updating its cost allocation methodology and process to reduce the frequency of manual adjustments based on review of individual time records and expense data and maximize the use of automated allocations that are calculated in a consistent manner that ensure costs are applied uniformly to respective benefited activities, and that are reflective on employees’ time and effort records. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Lastly, the Organization could consider removing LSC from the general fund into its own fund, and using fringe benefit rate and indirect cost rate allocation methods to simplify its cost allocation process. Views of responsible officials: Management partially agrees with this finding. First, 45 CFR Part 1635 codifies the timekeeping requirement. CLS keeps track of every case and time dedicated by staff in strict compliance with this requirement. Manual adjustments primarily result from planned internal reconciliations and reviews designed to ensure the accuracy of CLS allocations. These reconciliations are conducted on a monthly basis and form an integral part of the Organization’s internal control framework. Additionally, with respect to the Native American grant transactions, CLS implemented the necessary correction to the referenced percentage effective beginning in 2026. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations specify that expenditures are allowable under an LSC (or federal) grant or contract only if the recipient can demonstrate that the cost was consistent with accounting policies and procedures that apply uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities.
Condition: During our audit procedures over expenditures charged to the federal program, we tested a nonstatistical sample of 40 transactions. Audit procedures identified one expenditure that was not allowable, as the cost was incurred prior to the start date of the grant period, but was charged to the federal award. Criteria: Under 2 CFR §200.403, costs charged to federal awards must be allowable, allocable, reasonable, and incurred during the approved period of performance of the award. Cause: The cause of the finding was insufficient review procedures to ensure that expenditures charged to the federal award were incurred within the approved grant period. Transaction dates were not consistently verified against grant start dates prior to charging costs to the award. Effect: Charging costs incurred outside the grant period results in noncompliance with federal cost principles and increases the risk that additional unallowable costs could be charged to federal programs. This resulted in questioned costs of $455 related to the transaction tested. Questioned Costs: $455 Recommendation: We recommend that management enhance procedures over the review and approval of grant expenditures to ensure that costs are incurred within the approved grant period prior to being charged to the federal award. This may include verifying invoice or expenditure dates against grant start and end dates as part of the approval process.
Finding 2025 – 001 Subject: Apprenticeship USA Grants – internal controls Federal Agency: U.S. Department of Labor Federal Programs: Apprenticeship USA Grants Assistance Listing Number (ALN): 17.285 Direct Agency: Department of Labor Compliance Requirements: Allowable Costs/Cost Principles Audit finding: Significant Deficiency Condition and Context An effective internal control system was not designed or implemented at the Organization related to payroll and incentives/subscriptions to ensure compliance with requirements related to the grant agreements and Allowable Costs/Cost Principles compliance requirements. Payroll The Organization did not design an effective system of internal controls to ensure that actual payroll costs were charged to the grant based on each employee’s time and effort for the time period January through June 2025. The Organization charged amounts that did not reflect the actual amounts paid which created costs charged to the grant over and above those allowable. The total payroll costs found to be unallowable totaled $23,228 and were computed as the difference between the amount charged to the grant and the time and effort allocations of actual payroll costs. Incentives/Subscriptions The Organization did not design an effective system of internal controls to ensure that incentive/subscription costs for the individuals shops were charged to the grant based on amounts agreed upon with the grantor. The total incentive/subscription costs found to be unallowable totaled $7,688 and were computed as the difference between the amount charged to the grant and a capped amount of $1,500 per shop for subscriptions and $8,500 per shop for incentives. Criteria ‘The auditee shall: . . . (b) Maintain internal control over Federal programs that provides reasonable assurance that the auditee is managing Federal awards in compliance with laws, regulations, and the provisions of contracts or grant agreements that could have a material effect on each of its Federal programs. . . ." 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items… (g) Be adequately documented… 2 CFR 200.430(i) states in part: “Standards for documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-Federal entity, not exceeding 100% of compensated activities; (iv) Support the distribution of the employee’s salary or wages among specific activities or cost objectives if the employee works on more than one Federal award, a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using difference allocation bases; or an unallowable activity and a direct or indirect cost activity…” Cause The Organization’s management had not developed or implemented a system of internal controls to ensure compliance with the grant agreement, internal policy and the compliance requirements listed above. Effect Noncompliance with the grant agreement and the compliance requirement resulted in questioned costs that could result in the repayment of federal funds. Questioned Costs Known questioned costs of $30,916 were identified as detailed in Condition and Context. Recommendation We recommend that the Inter-Industry Organization’s management establish controls to ensure compliance with the grant agreement and the Allowable Costs/Cost Principles compliance requirement. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Finding #2025-005 – Material Weakness and Other Noncompliance. Applicable federal programs: U. S. Department of Health and Human Services, 93.566, Refugee and Entrant Assistance State/Replacement Designee Administered Programs, Passed through Texas Office for Refugees: 10/01/24 – 09/30/25, FFY2025-27946V-ASA RSS, 10/01/24 – 09/30/25, FFY2025-27946V-AUSAA-RSS, 10/01/24 – 09/30/25, FFY2025-27946V-CMA, 10/01/24 – 09/30/25, FFY2025-27946V-RSS, Passed through United States Conference of Catholic Bishops: 10/01/24 – 09/30/25, 25RSI13A, Passed through U. S. Committee for Refugees: 10/01/24 – 09/30/25, RHP-2025-YMCA-Houston TX-03, 93.567, Refugee and Entrant Assistance Voluntary Agency Programs, Passed through U. S. Committee for Refugees and Immigrants: 10/01/24 – 09/30/25, 2502VARVMG, 10/01/23 – 09/30/24, 2402VARVMG, 93.676, Unaccompanied Alien Children Program, Passed through U. S. Committee for Refugees and Immigrants: 01/01/25 – 12/31/25, 90ZU0630-02. Criteria: 2 CFR Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) section 200.303 requires recipients and subrecipients of federal funds to establish, document, and maintain effective internal control over federal awards that provides reasonable assurance that the recipient is managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards. Additionally, section 200.403 indicates that costs charged to federal awards must be necessary and reasonable for the performance of the program and be adequately documented. Condition and context: Same as finding #2025-001. Cause: Same as finding #2025-001. Effect: Same as finding #2025-001. Questioned costs: $1,275. Recommendation: Same as finding #2025-001. View of responsible officials: Management agrees with the finding. See Corrective Action Plan.
United States Environmental Protection Agency – 66.958 – Water Infrastructure Finance and Innovation Act (WIFIA) Agreement No(s): WIFIA – N19137LA Criteria: Under 2 CFR § 200.403, costs charged to a federal award must be necessary, reasonable, and allocable to the federal award and must conform to any limitations or exclusions set forth in the terms and conditions of the award. The WIFIA loan agreement further limits eligible costs to those incurred for EPA-approved projects. Condition: During testing of WIFIA loan draws for the year ended December 31, 2025, we noted that $3,167,614 million of project costs were funded through WIFIA loan draws for a project that had not yet received approval from the EPA at the time the costs were incurred and drawn. Context/Population: The exception was identified during testing of WIFIA loan draws, which totaled $93,409,714 million for the year ended December 31, 2025. The questioned costs totaling $3,167,614 relate to one project that had not yet received EPA approval at the time of the draw. Cause: The Board’s processes for reviewing and approving project eligibility prior to requesting WIFIA loan draws did not include sufficient controls to ensure that projects had received formal EPA approval in accordance with the WIFIA loan agreement before costs were submitted for reimbursement. Effect: As a result, federal funds were used to finance costs that were not associated with an EPA-approved project at the time of draw, resulting in questioned costs of $3,167,614. This represents noncompliance with federal requirements and the terms and conditions of the WIFIA loan agreement and could result in potential disallowance or repayment to the federal agency. Identification of a repeat finding: This is not a repeat finding. Recommendation: We recommend that the Board strengthen its controls over WIFIA draw requests to ensure that: • All projects included in a draw request have received formal EPA approval in accordance with the loan agreement; • A documented review process is performed prior to submission of each draw request to confirm project eligibility; and • A timely reconciliation or crosswalk is maintained linking project costs to approved WIFIA project designations. View of Responsible Officials: Management acknowledges the finding relative to formal documentation for eligible project costs and will enhance review procedures for monthly WIFIA loans draws to have written contemporaneous evidence from the lender in addition to preliminary approval received for project transfers or changes (i.e. renaming of subprojects listed in the loan closing documents within the same scope approved in the loan). The project changes materialized due to a change in expected timing of Sewer Utility work included in joint projects with the City’s Department of Public Works. As a result, standalone projects were executed to complete the required work by the October 2025 deadline mandated in the Sewer Consent Decree. The changes were discussed with the lender upon notification from the Department of Public Works and included in WIFIA quarterly reporting while the formal project approvals are in process. The Utility’s Project Delivery Unit Director is responsible for ensuring that this corrective action is accomplished with an estimated timeline for completion by September 30, 2026. The WIFIA project scope is defined as: I. Water Line Replacement via the Joint Infrastructure (JIRR) Program; II. Sewer Line Replacement via the Joint Infrastructure Recovery Roads (JIRR) Program; III. Sewer System Evaluation and Rehabilitation Program (SSERP); and IV. Sewer Force Main Replacement and Improvement. The eligible activities include, restoration and replacement of damaged gravity sanitary sewer mains, manhole rehabilitation and repair, CIPP lining and point repairs, Water line replacement and repair, Roadway restoration and ADA curb ramp improvements associated with the utility work.
2025-001 – Payroll Costs Charged to Federal Awards Not Consistently Supported Type of Finding: (F) Significant Deficiency in Internal Control over Compliance (G) Instance of Noncompliance Related to Federal Awards Funding Agency: U.S. Small Business Administration Title: Microloan Program Assistance Listing #: 59.046 Award #s: SBAOCAML250818-01-00 and SBAOCAML240615-01-00 Award Periods: 7/1/2025-6/30/2026 and 7/1/2024-6/30/2025 Compliance Requirement: Allowable Costs/Cost Principles Known Questioned Costs: $15,401 Likely Questioned Costs: Approximately $25,940, inclusive of known and projected questioned costs Statement of Condition During our review of payroll disbursements charged to the Microloan Program, we identified inconsistencies between payroll charges recorded in the general ledger and the underlying support for those charges during two periods of the fiscal year. From January through April 2025, payroll was intended to be allocated based on actual hours recorded by employees in WebClock. Of 13 paychecks tested, 4 had hours recorded to the OFA grant in WebClock but were charged to the MBDA award in the general ledger, resulting in $1,819 misallocated away from OFA. An additional 3 paychecks included $333 charged to OFA for employees who had recorded no OFA hours in WebClock for those pay periods. WESST did not maintain documentation supporting the reason for or approval of these allocation changes. Beginning in May 2025, WESST adopted a fixed-percentage allocation method based on past time studies, grant budgets, and OFA approval. Of 15 paychecks tested from May through September 2025, none were allocated at the approved percentage. Seven paychecks had less charged to OFA than the approved amount, with a cumulative difference of $77, and 8 paychecks had more charged to OFA than the approved amount, with a cumulative difference of $15,068. No exceptions were noted for the 11 paychecks tested from October through December 2025. Criteria Federal award costs must be allowable, allocable, reasonable, consistently treated, and adequately documented in accordance with 2 CFR 200.403. Under 2 CFR 200.405, a cost allocable to one federal award may not be charged to another federal award to overcome funding deficiencies, avoid restrictions, or for other reasons of convenience. Payroll costs charged to federal awards must be supported by records that accurately reflect the work performed and by a system of internal control that provides reasonable assurance the charges are accurate, allowable, and properly allocated. Budget estimates or fixed percentages may be used for interim accounting only if they produce reasonable approximations and are subject to periodic after-the-fact review and necessary adjustment. Effect Known questioned costs charged to the Microloan Program totaled $15,401. This amount consists of $333 charged to OFA during January through April without supporting OFA time records and $15,068 charged to OFA during May through September in excess of the approved allocation percentage. Based on audit projection, total likely questioned costs are estimated at approximately $25,940, including projected questioned costs related to payroll costs charged above the approved allocation percentage during May through September. The condition increases the risk that payroll costs may be charged to incorrect federal awards, reimbursement requests may be inaccurate, and federal expenditures reported on the Schedule of Expenditures of Federal Awards may be misstated. Cause WESST did not have an effective review process in place to ensure payroll charges recorded in the general ledger agreed to employee time records or approved allocation percentages before costs were charged to federal awards. During January through April 2025, certain payroll allocations were changed without documentation of the reason for the change or formal approval. During May through September 2025, the fixed-percentage allocation method was implemented but was not applied correctly, and no reconciliation process was in place to identify and correct variances. Recommendation We recommend WESST strengthen its review procedures over payroll costs charged to federal awards. Specifically, WESST should implement a reconciliation of general ledger payroll charges to employee time records or approved allocation percentages before submitting reimbursement requests. Any changes to payroll allocations should be formally documented, reviewed, and approved, including the reason for the change and the federal award benefited. If fixed percentages are used for interim billing, WESST should establish a routine reconciliation to actual activity and make timely adjustments, as needed. WESST should also perform periodic reviews of payroll allocations to identify and correct errors on a timely basis.
Assistance Listing: 66.957 Greenhouse Gas Reduction Fund: National Clean Investment Fund and 66.959 Greenhouse Gas Reduction Fund: Solar for All Finding No. 2025-003: Significant Deficiency in Controls over Nonpayroll Expense Approvals Condition: During testing of nonpayroll transactions for the SFA and GGRF programs, controls related to review, approval, and segregation of duties were not consistently performed or documented. For instance, under the Solar for All program, of the nine (9) transactions tested, two (2) transactions totaling $179,268 reflected inadequate segregation of duties, as the same individual responsible for contract management also approved the related invoices without evidence of an independent review. One transaction totaling $39,936 lacked documentation identifying the requestor, and five transactions totaling $233,370 did not include evidence of documented invoice approval. Under the GGRF NCIF program, four (4) of eight (8) transactions tested ($58,864.59) did not include evidence of an independent review separate from the requestor and/or individual responsible for payment processing. Criteria: In accordance with Uniform Guidance (2 CFR 200.303 and 200.403), entities are required to maintain effective internal controls over federal awards to ensure that costs charged to programs are allowable, properly authorized, and adequately supported. Transactions should be subject to appropriate review and approval, and responsibilities should be sufficiently segregated to reduce the risk of errors or irregularities. Cause: These conditions appear to result from inconsistent implementation of established internal controls, including the absence of standardized procedures for documenting approvals and insufficient enforcement of segregation of duties. Additionally, reliance on informal or manual processes contributed to incomplete documentation and audit trails supporting transaction review and authorization. Effect or Potential Effect: Weaknesses in review, approval, and segregation of duties increase the risk that improper, unsupported, or unauthorized expenditures may occur and not be identified in a timely manner. As a result, there is an elevated risk of noncompliance with applicable federal requirements and potential misstatement of program expenditures. Questioned Costs: None Perspective Information: While the exceptions identified relate primarily to documentation and consistency in the execution of control activities, they do not necessarily indicate that all review and approval procedures were absent. Management indicated that certain reviews may have been performed; however, documentation to evidence these controls was not consistently retained. Strengthening documentation practices and formalizing review and approval processes would enhance the organization’s control environment, improve transparency, and support compliance with federal requirements. Addressing these matters will also position management to more effectively demonstrate that internal controls over nonpayroll expenditures are designed and operating as intended. Identification of Repeat Finding: Not applicable since this is a new finding. Recommendation: We recommend that management strengthen controls over nonpayroll expenditures by implementing consistent and well-documented review and approval processes. This should include requiring documented approval of all invoices and payments prior to disbursement and ensuring clear segregation of duties among individuals responsible for initiating, approving, and processing transactions. Management may also consider implementing standardized, system-based approval workflows to enhance control enforcement and maintain complete audit trails. Additionally, all supporting documentation, including evidence of request, review, approval, and payment authorization, should be retained in accordance with established policies. Views of responsible Officials: Management agrees with the finding. Documentation supporting review, approval, and segregation of duties for nonpayroll transactions was not consistently maintained. Management has implemented corrective actions, including formalizing procedures that require clear separation between the requestor and approver, documented approval of all invoices prior to payment, and retention of supporting documentation. A standardized approval workflow has been implemented through Bill.com to enforce control requirements and maintain a complete audit trail. Management will incorporate these procedures into formal policies and monitor compliance to ensure controls are consistently applied across programs.
Finding 2025-001: Allowable Costs - Significant Deficiency Federal Program: 93.103 - Research and Development Cluster - Education and Training Program for Outsourcing Facility Industry Award Number: 5UE5FD008142-02 Award Year: January 1, 2025 to December 31, 2025 Federal Agency: U.S. Food and Drug Administration (FDA) Pass-Through Entity: Not applicable Criteria: According to the requirements of Title 2 U.S. Code of Federal Regulations Part 200.403(e), Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), allowable costs must be determined in accordance with generally accepted accounting principles (GAAP). Condition/Context: For 2 of the 40 items selected for testing, even though the expenditures were for costs that were necessary and reasonable for the performance of the program, the expense amount benefitted periods beyond the period under audit and did not meet the allowability criteria under the Uniform Guidance. The sample was not statistically valid. Cause: Management determined allowability for certain costs based on the full period of performance covered by the grant and did not account for the period over which the costs provided benefits to the program. Effect: Certain costs allowed by the grant were recognized prior to the period in which the costs provided benefit to the program. Questioned Costs: $35,262 Recommendation: To ensure compliance with Uniform Guidance, the Organization should review its policies and procedures to ensure that the costs are reported in the proper fiscal year for financial reporting purposes, and any costs that benefit future periods are appropriately amortized and reported in the period in which the program derives benefits from the costs. Management Response: Management acknowledges the improper treatment of the expenditure for the specific period. The expenditure in question was for a one-year marketing services agreement supporting activities under the FDA 503B award. The vendor required payment in advance as a condition of service delivery, and the cost was incurred for legitimate grant-related purposes within the approved scope of work and period of performance. The expenditure was fully documented, allocable to the award, reasonable in nature, and directly connected to approved programmatic objectives. Management acknowledges that the transaction involved payment for services extending across a future service period. Specifically, 2 CFR 200 does not prohibit recipients from entering into prepaid contractual arrangements for allowable services necessary to support award implementation, particularly where such arrangements reflect standard vendor business practices and operational necessity. Further, the organization’s actions must be evaluated in the context of significant federal payment administration changes that began in February 2025. Historically, the organization received advance funding under the award consistent with the cash management principles contemplated under 2 CFR 200.305. Beginning in 2025, however, the organization was required to operate under a reimbursement-based process requiring submission of supporting documentation prior to payment release. This materially altered the organization’s working capital position and limited its ability to independently finance operational expenditures for extended periods pending reimbursement. As a result, management was required to make operational decisions necessary to ensure continuity of approved grant activities while balancing vendor requirements, cash flow limitations, and evolving federal reimbursement practices. The organization did not receive excess federal cash, improperly retain federal funds, incur unallowable costs, or use award funds outside the approved project scope. The questioned transaction reflects a timing and payment structure issue rather than a violation of fundamental federal compliance requirements. Management also notes that 2 CFR 200.305 expressly contemplates advance payment methodologies and recognizes that reimbursement-only environments may create operational hardships for recipients lacking sufficient working capital. The organization’s actions were undertaken in good faith to maintain uninterrupted program operations under materially changed federal payment conditions. Importantly, the expenditure was allowable, the services supported approved award objectives, the costs were incurred during the award period, supporting documentation exists, no misuse or diversion of federal funds occurred, and no financial harm to the federal government resulted. Note also that going forward, PDA will record future services and subscriptions to prepaid and amortize based on the periods stipulated on the vendor invoices.
Criteria: The Program requires that costs charged to the Federal award shall be allowable and supportable in accordance with 2 CFR 200.403. Adequate source documentation must be retained to support reimbursed costs, Condition: Support for expenditures and evidence of timely and proper review was not properly retained for all federal expenditures. Context: Supporting documentation for six of eighteen expenditures tested was not retained. No evidence was retained that itemized Instacart invoices were properly reviewed by management to ensure that costs were allowable under federal grant guidelines. Effect: The lack of retained invoices limits the ability to verify that reimbursed expenses were allowable, properly supported, and in compliance with federal requirements. This condition increases the risk of questioned costs, noncompliance with federal requirements, and potential repayment of unsupported expenditures. Questioned Costs: None. Cause: The condition occurred due to inadequate procedures for ensuring that invoices and supporting documentation were retained and reviewed by the organization prior to reimbursement. Specifically, reliance on staff to maintain original receipts without obtaining and retaining copies resulted in incomplete documentation being available for audit purposes. Recommendation: Management should implement and enforce procedures to ensure that all invoices and supporting documentation are obtained and retained prior to requesting reimbursement. Additionally, management should provide guidance to staff regarding documentation requirements and periodically review reimbursement files to confirm compliance with federal record retention requirements. Identification as a Repeat Finding. This is not a repeat finding. View of Responsible Officials and Corrective Actions: We agree with the auditor's recommendation. Although the referenced invoices were reviewed by the CEO from the vendor for eligibility and reasonableness upon receipt of the automatic e-mailed invoice, there was no procedure to print and retain this documentation in the accounting files for Instacart invoices. Effective June 1, 2026, each month the Director of Finance will compare a checklist of all credit charges to the physical copies prior to filing and obtain any missing invoices as part of the monthly closing process.
#2025-003 - Lack of Authorization for Expenses Criteria: Uniform Guidance 2 CFR 200.403 requires costs to be necessary, reasonable, and adequately documented to be allowable under Federal awards. Additionally, the Organization’s internal policies mandate written prior approval before incurring federal expenditures. Cause: Program staff bypassed standard procurement workflows to expedite payments. Additionally, the finance department processed the grant reimbursement requests without verifying that the supporting packages contained the required signatures. Condition: We identified federal grant expenditures that were charged to the program without documented evidence of prior review, approval, or formal authorization by the designated individual. We tested a sample of 20 non-payroll disbursements charged to the federal program. Of these, 2 transactions lacked documented approval. The total population of non-payroll disbursements for this award was $487,816. Effect: The Organization is out of compliance with federal documentation standards. Failure to approve costs pre-disbursement can result in unallowable expenses being charged to the federal award, leading to potential claw backs of funds by the granting agency. Recommendation: Management should reinforce existing policies and require documentation for all approvals. Management’s Response: The Organization is implementing a new approval process.
Finding: 2025-001 Federal Agency: U.S. Department of Agriculture, Forest Service Federal Program: Infrastructure Investment and Jobs Act Prescribed Fire/Fire Recovery Assistance Listing No.: 10.716 Federal Award No.: 22-CS-11132400-309 Federal Award Year: Multiple Finding Type: Significant deficiency in internal control over compliance, other matters Compliance Requirement: Allowable Cost/Cost Principle Criteria: Per 2 CFR §200.403 and §200.405, costs charged to federal awards must be allowable, allocable, and consistently treated. Additionally, sound accounting practices under generally accepted accounting principles (GAAP) require that expenses be recognized in the period in which they are incurred. Costs that provide benefits to future periods should be recorded as prepaid expenses and allocated to the appropriate period benefiting from the expenditure. Condition: During our testing of disbursements within the major program, we identified a $1,000 invoice that was charged to the federal award in the current fiscal year. However, the expense pertained to services or benefits applicable to the subsequent fiscal year and, therefore, should have been recorded as a prepaid expense rather than an expense of the current period. Context and Effect: This error was noted on one of the 42 samples of disbursements tested for the major programs. While the dollar amount identified was not material to the financial statements as a whole, it represents noncompliance with federal cost principles and GAAP related to proper period recognition of expenses. If this error were to occur for several different invoices or significantly larger invoices, it may have a material effect on the financial statements. Cause: The Society has established and generally effective internal controls over expense recognition, including procedures for cutoff and classification. This instance appears to be an isolated occurrence rather than an indication of a systemic control deficiency. The misclassification was primarily due to ambiguity in the vendor’s invoicing, including multiple invoices from the same vendor for similar events in different periods and limited documentation on the invoices of the applicable service period. This created confusion at the time of recording, resulting in the expense being recognized in the incorrect period. The transaction was not in proximity to year-end. Identification as a Repeat Finding, if Applicable: No. Questioned Costs: $1,000.Recommendation: While the Society’s existing controls over expense recognition appear to be appropriately designed and generally operating effectively, we recommend minor enhancements to further reduce the likelihood of similar isolated occurrences. Specifically, management may consider: • Requesting more detailed invoices from vendors, including clearly defined service periods. • Implementing an additional review step for invoices from vendors with recurring or overlapping billing arrangements. • Reinforcing existing review procedures to ensure that the period of benefit is clearly evidenced, particularly near year-end. These enhancements are intended to strengthen an already effective control environment and help ensure consistent and accurate expense recognition in accordance with federal requirements and GAAP. Responsible Official: CFO of the Society Views of Responsible Official and Planned Corrective Action: Management concurs with the audit finding. See the accompanying management’s corrective action plan for planned corrective action.
Finding Number: 2025-004 Federal Program: Airport Improvement Program Federal Award Identification Number and Year: All Airport Improvement Program awards, 2024, 2023 Assistance Listing Number (ALN): 20.106 Federal Awarding Agency: U.S. Department of Transportation Pass-through Entity: None Repeat Finding: No Material Weakness and Noncompliance – Allowability Criteria: Under 2 CFR 200.403, costs charged to federal awards must be allowable, meaning they are necessary, reasonable, allocable, adequately documented, and comply with the terms and conditions of the federal award. Additionally, 2 CFR 200.302(b)(7) requires financial management systems to include effective internal controls over accountability of expenditures, including proper review and approval. Per 2 CFR 200.303, the Entity must establish and maintain effective internal control over federal awards to provide reasonable assurance that expenditures are allowable and in compliance. Condition: During testing of expenditures charged to the Airport Improvement Program, we identified that the Airport did not consistently follow its established invoice approval procedures. Specially, two of five checks tested, invoices totaling $1,469,973, lacked documented evidence of CEO and Vice President of Landside, Planning & Infrastructure’s approval prior to payment. The invoices were approved for payment by the Vice President of Finance and Administration. Questioned Costs: None. Identification of How Questioned Costs Were Computed: N/A Cause and Effect: The CEO and Vice President of Landside, Planning & Infrastructure did not sign off on invoices for Airport Improvement Program expenditures as an indication of their approval and allowability. There is an increased risk of expenditures not being allowable if the control process is not properly followed. Recommendation: The Airport should ensure that all purchasing controls are followed when incurring expenditures of federal funds and that purchases are properly approved prior to payment. Views of Responsible Officials and Corrective Action Plan: See Corrective Action Plan.
Finding: 2025-004 – Allowable Costs ALN and Title: 21.027 – COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Agency: U.S. Department of Treasury Passthrough Entity: State of Nevada Governor’s Finance Office Budget Division Type of Finding: Significant Deficiency Criteria: Per 2 CFR §200.403, costs charged to federal awards must be allowable and represent actual net expenditures incurred by the non-federal entity. Additionally, 2 CFR §200.406 requires applicable credits, including refunds and reimbursements, to be applied to reduce expenditures charged to federal awards. Condition: During testing of expenditures charged to the federal program, it was noted that the Foundation requested and received reimbursement of approximately $25,000 for legal expenditures under the federal award. Subsequent to reimbursement from the federal program, the Foundation also received reimbursement for the same expenditures from the vendor providing the legal services. The duplicate recovery of costs was not identified by management controls and remained unresolved as of year-end. Cause: The Foundation did not maintain effective controls to identify subsequent refunds, reimbursements, or applicable credits associated with expenditures charged to federal awards Effect: As a result, expenditures charged to the federal program were overstated by approximately $25,000 and did not represent actual net allowable costs incurred by the Foundation. Failure to identify and apply applicable credits increases the risk of unallowable costs being charged to federal awards. Questioned Costs: Known questioned costs of $25,000. Identification of a repeat finding: Not applicable. Context: 1 out of 37 invoices tested was not allowable. Recommendation: We recommend the Foundation strengthen its existing controls over grant reimbursement requests and the monitoring of subsequent vendor refunds, reimbursements, or credits to ensure costs charged to federal awards represent actual net allowable expenditures. Specifically, the Foundation should enhance its documented review procedures to verify that any refunds, reimbursements, or credits received after reimbursement requests are appropriately identified, evaluated, and, when applicable, credited back to the applicable federal award. View of Responsible Officials: Management agrees with this recommendation. See prepared corrective action plan for details.
Material Noncompliance - Allowable Costs/Cost Principles - Compensation Questioned Costs: $ 43,500 New or Repeat: New. Criteria: Uniform Guidance, 2 CFR § 200.430, requires that charges to federal awards for salaries and wages be based on records that accurately reflect the work performed and that such records be supported by a system of internal control providing reasonable assurance that the charges are accurate, allowable, and properly allocated. Records must reasonably reflect the total activity for which the employee is compensated and support distribution of salary and wages among specific activities or cost objectives when the employee works on more than one federal award, non-federal award, or other activity. In addition, 2 CFR § 200.403 requires that costs charged to federal awards be necessary and reasonable for the performance of the federal award and be adequately documented, among other allowability factors. Condition: During our testing of payroll/personnel costs charged to the Community Development Financial Institutions Program award, Assistance Listing No. 21.020, we noted that the Organization approved employee wages and maintained payroll records (for example, payroll registers, pay rates, and evidence of payment); however, the Organization did not maintain timesheets, time-and-effort records, personnel activity reports, periodic certifications, or other equivalent records sufficient to accurately reflect the work performed and support the allocation of wages and related fringe benefits to the CDFI Program award. The Organization was unable to provide documentation evidencing the employees’ actual work performed that supported the allocation of compensation costs to the Community Development Financial Institutions Program award and, where applicable, between Community Development Financial Institutions Program-eligible activities and other activities/cost objectives. Cause: The condition appears to have occurred because the Organization did not have a sufficiently designed or consistently implemented process to ensure personnel activity documentation (or other equivalent recorded evidence) was prepared, reviewed, and retained to support allocations of payroll and related fringe benefits charged to the federal award. Context and Effect: We selected 10 employees and/or payroll transactions charged to the federal award, for the year ended December 31, 2025. The sample included compensation charges (wages and fringes) totaling $43,500 which was the total population allocated to this federal award. Of the items tested, 10 employees and/or payroll transactions totaling $43,500 did not include sufficient documentation (such as timesheets, periodic certifications, or other equivalent records) to support that the charges accurately reflected work performed and were properly allocated to the Community Development Financial Institutions Program -eligible activities/cost objectives. As a result of the condition, the Organization did not demonstrate that salary, wage, and related fringe benefit charges to the federal award were supported by records that accurately reflect the work performed and that the amounts charged were properly allocated among cost objectives. This increases the risk that compensation costs charged to the federal award may be unsupported, unallowable, or not properly allocated and could result in repayment, disallowances, or additional monitoring by the federal agency or pass-through entity. Questioned Costs: Questioned costs are $43,500 (wages and fringe benefits). This amount represents the portion of costs determined to be unsupported. Recommendation: We recommend that the Organization strengthen its policies, procedures, and internal controls over compensation costs charged to the federal award to ensure compliance with 2 CFR § 200.430 and 2 CFR § 200.403. Specifically, management should: 1. Establish written procedures requiring recorded evidence to support salary, wage, and fringe benefit charges to the federal award and to support allocation among cost objectives. 2. Implement a documented process for personnel activity reporting and/or periodic certifications (or other equivalent documentation) that reasonably reflects actual work performed and supports the allocation of compensation costs to eligible activities. 3. Require supervisory review and approval of personnel activity documentation/certifications on a periodic basis and retain documentation in the grant file and/or payroll file. 4. Perform periodic reconciliation and after-the-fact review of payroll and fringe benefit allocations, including timely adjustments when actual activity differs from budget estimates or planned allocations. 5. Provide training to program and finance personnel on the documentation standards in 2 CFR § 200.430 and allowability factors in 2 CFR § 200.403. 6. Enhance management review controls to ensure compensation costs are supported prior to posting to the general ledger and/or requesting reimbursement. Views of Responsible Officials: Management concurs with this finding. During the audit period, the Organization maintained payroll records, compensation documentation, and payroll allocation schedules; however, it did not maintain personnel activity reports, periodic certifications, or other after-the-fact documentation sufficient to support compensation costs charged to the Community Development Financial Institutions Program in accordance with 2 CFR § 200.430. The Organization's methodology relied on management-established allocation percentages based on employee responsibilities and anticipated level of effort supporting CDFI Fund activities. While management believes the costs charged to the award were incurred in support of eligible program activities, the Organization recognizes that documentation supporting the allocation methodology did not meet the standards required under Uniform Guidance. By December 31, 2026: 1. The CFO will establish a cost allocation plan which includes a methodology to support salary, wage, and fringe benefit charges, and other applicable costs, to the federal award and to support allocation among cost objectives. 2. The CFO will implement a documented process for personnel activity reporting and/or periodic certifications (or other equivalent documentation) that reasonably reflects actual work performed and supports the allocation of compensation costs to eligible activities. 3. The CFO will reconfigure the current workforce management system to ensure projects, departments, and contextual details are logged at the source. 4. The COO will review the existing timesheet submission and review policy to ensure compliance with federal requirements. The policy will require supervisory review and approval of personnel activity documentation/certifications consistent with the payroll cadence and retain documentation in the grant file and/or payroll file. The CFO will review and enforce compliance with timesheet submission requirements. 5. The CFO will implement a dynamic allocations module within Sage Intacct to facilitate automated allocation of time and fringe benefits to federal and other programs. 6. The CFO will ensure that the systems established perform periodic reconciliations and after-the-fact review of payroll and fringe benefit allocations. The CFO will make timely adjustments when actual activity differs from budget estimates or planned allocations. 7. The CFO, COO, and other personnel working on federal programs will receive training on the documentation standards in 2 CFR § 200.430 and allowability factors in 2 CFR § 200.403. 8. The CFO and COO will provide training to program and finance personnel on the documentation standards in 2 CFR § 200.430 and allowability factors in 2 CFR § 200.403. 9. The CFO will, as part of the monthly close process, review compensation charged to federal awards to ensure all costs are appropriate and supported prior to requesting reimbursement.
Federal Agencies: Department of Housing and Urban Development Federal Assistance Listing Numbers: 14.267 Program: Continuum of Care Program Award/Pass-Through Entity Identifying Numbers: DA-202407-02980, DA-202407-02967, 00002098 Criteria: The Uniform Guidance in 2 CFR §200.403 states that for costs to be allowable under federal awards, they must be adequately documented and there must be sufficient documentation. “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: a)Be necessary and reasonable for the performance of the federal award and be allocablethereto under these principles. b)Conform to any limitations or exclusions set forth in these principles or in the Federal awardas to types or amount of cost items. c)Be consistent with policies and procedures that apply uniformly to both federally financedand other activities of the recipient or subrecipient. d)Be accorded consistent treatment. For example, a cost must not be assigned to a Federalaward as a direct cost if any other cost incurred for the same purpose in like circumstanceshas been allocated to the Federal award as an indirect cost. e)Be determined in accordance with generally accepted accounting principles (GAAP), except,for State and local governments and Indian Tribes only, as otherwise provided for in thispart. f)Not be included as a cost or used to meet cost sharing requirements of any other federallyfinanced program in either the current or a prior period. See § 200.306(b). g)Be adequately documented. See §200.300 through §200.309. h)Administrative closeout costs may be incurred until the due date of the final report(s). Ifincurred, these costs must be liquidated prior to the due date of the final report(s) andcharged to the final budget period of the award unless otherwise specified by the Federalagency. All other costs must be incurred during the approved budget period. At itsdiscretion, the Federal agency is authorized to waive prior written approvals to carryforward unobligated balances to subsequent budget periods. See §200.308(g)(3).” Condition: During our testing of direct costs (excluding salaries and related benefits), we noted in accordance with §200.403(g) that 2 of 43 transactions lacked underlying documentation to support the underlying expense for some, or all, of the expense. Cause: LifeWire did not have sufficient controls within the program services department to adequately document the nature of, and provide reconciling information, for the expenses prior to submission to the accounting department for payment. Effect or Potential Effect: Without adequate controls in place to ensure documentation is adequately maintained for costs, LifeWire could incorrectly charge expenditures to the federal programs. Questioned Costs: Below reporting threshold. Context: This is a condition identified per review of LifeWire’s compliance with specified requirements not using a statistically valid sample. Nonpayroll costs in 2025 were $1,053,085. The samples tested consisted of 43 transactions totaling $53,885. Questioned costs consist of amounts in excess of maintained documentation and totaled $1,931. For one transaction, only payment confirmation was retained, which did not include documentation of the nature of the expense. For the second transaction, LifeWire charged an amount in excess of the monthly lease payment and did not retain documentation to support the additional amount or nature of those costs. Identification as a Repeat Finding: Not a repeat finding. Recommendation: We recommend that policies and procedures be updated to ensure underlying support is appropriately maintained as required by §200.403 for all transactions. Views of Responsible Officials: Management agrees with the finding that documentation was not sufficiently maintained to support underlying expenditures. LifeWire has updated its policies and procedures to explicitly require that underlying documentation supporting the nature and amount of each expenditure be retained.
Finding 2025-002 – Allowable Costs and Period of Performance (Significant Deficiency and Noncompliance)- (Partial repeat finding) Information on the Federal Program: U.S. Department of Education, Higher Education – Institutional Aid (Title III), Assistance Listing No. 84.031 Criteria: 2 CFR Part 200 Subpart E establishes cost principles to apply in determining costs under federal awards. Non-federal entities are also required to establish controls over the disbursement process to ensure compliance with allowable cost requirements. In addition, a non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and non-federal entities are also required to establish controls over the disbursement process to ensure compliance with period of performance requirements. [2 CFR sections 200.308, 200.309, and 200.403(h)]. Condition: We selected a sample of 25 non-payroll disbursements and 25 payroll disbursements charged to the grant. There were 44 pay checks tested in the sample of 25; of those 44, nine exceptions were noted. In four instances, there was no documented approved pay rate and in five instances, there was no approval for salary to be charged to the grant number and documentation showed unrestricted, a different account or offer letter had no Title III documentation. Cause: The College did not obtain proper approval by the Director of the program, expenses did not fit into the grant budget line items, approved pay rates were not properly documented as approved Title III expenses for the proper grant period. Effect: The College’s grant disbursements were not properly approved. Questioned Costs: $14,731 Recommendation: We recommend the College strengthen its policies and procedures surrounding payroll and non-payroll grant disbursements to ensure controls are functioning and compliant withfederal regulations. Views of Responsible Officials: See Management’s View and Corrective Action Plan included at the end of the report.
Finding 2025-001: Reportable Finding Considered a Significant Deficiency - Eligibility Program name: Supportive Housing for Elderly Assistance Listing: 14.157 Federal award Identification number: 121-EE015 Federal award year: 2025 Federal awarding agency: U.S. Department of Housing and Urban Development (HUD) Criteria: The Project Rental Assistance Contract requires that rental subsidy claims be based on the HUD-approved contract rent for each unit. Under 2 CFR 200.403(a), costs must be “necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.” Condition: Two of seven units tested were billed at rates exceeding the HUD-approved contract rent, resulting in overcharges to the Federal program. Cause: Internal controls over compliance with program compliance requirements are not operating effectively. Effect or Potential Effect: Overbilling resulted in unallowable costs charged to the Federal award, which may require repayment and could affect future funding. Known Questioned Costs Known questioned costs total $52,780, calculated as the difference between the approved contract rent and the billed amount for all units overcharged. Repeat finding: This is not a repeat finding. Perspective: Our sample included 7 units out of a population of 50 units; 2 errors were noted, indicating a potential systemic issue. Recommendation: We recommend the Owner/Agent: 1) Implement a review process to verify billed subsidy amounts against the approved contract rent schedule; 2) Train staff on compliance with the Project Rental Assistance Contract and 2 CFR 200 cost principles; and 3) Reimburse the Federal program for identified overcharges. Management’s response and corrective action plan (unaudited): Management at SAHA PM notes its responsibility to establish and maintain effective internal control over financial reporting to provide reasonable assurance that transactions are properly recorded, processed, and summarized to permit the preparation of reliable financial statements in accordance with generally accepted accounting principles (“GAAP”). We plan to establish a checklist for the property accounting team that includes a comparison of gross rent potential to the HUD approved rent schedule.
2025 001 Activities Allowed or Unallowed and Allowable Costs/Cost Principles Beneficiary Payments U.S. Department of State: Bureau of Population and Refugees and Migration: U.S. Refugee Admissions Program: FY24 MRA Capacity Development Funds (ALN 19.510, award number SPRMCO23CA0361) FY2023 25 Year 3 Reception and Placement Program Affiliate MRA DA+Admin (ALN 19.510, award number SPRMCO24CA0356) FY2023 25 Year 3 Reception and Placement Program Affiliate ERMA DA+Admin (ALN 19.510, award number SPRMCO24CA0357) Statistically valid sample: No, and it was not intended to be. Repeat finding: Not a repeat finding. Finding Type: Significant Deficiency and noncompliance Criteria: 2 CFR section 200.303 requires that non federal entities receiving federal awards establish and maintain internal control over the federal awards that provides reasonable assurance that the non federal entity is managing the federal awards in compliance with federal statues, regulations, and the terms and conditions of federal awards. The specific requirements for activities allowed or unallowed are unique to each federal program and are found in the federal statutes, regulations, and the terms and conditions of the federal award pertaining to the program. 2 CFR Part 200 establishes cost principles for determining costs applicable to federal awards with nonprofit organizations. The Uniform Guidance (2 CFR 200.403) requires that costs charged to federal awards be necessary, reasonable, allocable, adequately documented, and in compliance with the terms and conditions of the federal award. Costs that do not provide a direct programmatic benefit, or where the benefit cannot be reasonably demonstrated or allocated, and are incurred outside the approved scope of the award are not allowable as direct charges. Condition and context: On February 13, 2025, IRC’s Ethics & Compliance Unit (ECU) received a whistleblower report alleging that an IRC Housing Coordinator located in an office in Northern California submitted unauthorized and fraudulent requests for funds, which were uploaded onto USIO bank debit cards, claiming they were expenses for newly resettled IRC clients, and instead using the funds for personal benefit. These USIO cards are intended to be used to cover expenses for newly arrived refugees during the initial 90 day period, including rent, food and other miscellaneous expenses. An internal investigation was initiated in February 2025 which found that the Housing Coordinator had loaded funds onto USIO bank debit cards between May 8, 2023 and February 11, 2025 which were for purposes other than refugees. The investigation concluded that there were unauthorized and fraudulent requests for funds in the amount of $215,639, plus the related indirect costs that were applied on these direct costs of $33,920, for a total of $249,559 related to federal funds expended in 2025 and charged to the grants identified in this finding. The total expenditures in this program included on the 2025 schedule of expenditures of federal awards amount to $42,671,438. This unauthorized and fraudulent requests for funds noted of $249,559 is not included in the total expenditures in this program on the 2025 schedule of expenditures of federal awards as the amounts were recoded to unrestricted funds. IRC communicated this matter to the federal agency in February 2025 when the investigation began and again in September 2025 when the investigation was completed. The expenditures were reallocated to IRC’s unrestricted funds so that the federal grants were not charged. Cause: The internal investigation completed by ECU concluded that the unauthorized and fraudulent requests for funds resulted from the Housing Coordinator’s ability to request the transactions and approve the transactions because he obtained his direct report’s general ledger log in credentials. Additionally, there were several control gaps in the Northern California office, including the following: • There was a lack of safekeeping of blank USIO Cards – this office was not following the established control to keep the blank cards in a locked safe. • USIO cards were not tracked or recorded properly – this office was not always following the established control to have the refugees sign a log book upon receipt of a USIO card. • A lack of oversight from the heads of programs and finance in this office regarding reconciliations between budgeted and actual amounts with irregular transactions being flagged (excessive housing expenses). Effect: The auditee charged certain costs directly to the program that did not meet the requirements noted above, and were therefore, not allowable. Questioned Costs: Questioned costs were $249,559, however, IRC reallocated these costs to IRC’s unrestricted funds, so that the grants were not charged. Recommendation: IRC should design and implement enhanced internal control procedures over the authorization and disbursement of funds to IRC refugee clients through USIO cards to ensure that funding provided is allowable. Additionally, IRC should provide training to employees about sharing their personal credentials to access IRC’s general ledger. Views of Responsible Officials: Management agrees with this finding, which was identified by IRC in February 2025 and raised to KPMG prior to the single audit. Corrective actions related to USIO portal access, office leadership and structure, training and policies, and spot checking have been implemented and will continue through June 2026.
Payroll Federal Agency: Department of Housing and Urban Development Federal Program Name: Community Development Block Grants Cluster Entitlements/Special Purpose Assistance Listing Number: 14.218 Federal Award Identification Number and Year: B-23-UN-12-0002 and B-25-UU-12-0003 Award Period: November 11, 2023 – November 20, 2029 and January 16, 2025 – June 6, 2031 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matters Criteria: 2 CFR 200.302(b)(3) states that the recipient must maintain records that sufficiently identify the amount, source, and expenditure of funds for federally-funded activities. These records must contain information pertaining to federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. 2CFR 200.403 states that costs must be adequately documented. 2 CFR section 200.303(a) states a non-Federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-Federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should comply 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). Condition: There were two conditions present: • One employee had duplicate hours for three pay periods. • Two employees had incorrect pay rates used for the calculation of allowable payroll costs for seven pay periods. Questioned costs: • $3,974 - B-23-UN-12-0002 • $81 - B-25-UU-12-0003 Context: Forty employee pay periods were selected for testing. • One employee had a total of twenty-four hours duplicated over four pay periods. • Two employees had incorrect pay rates across seven pay periods. Cause: Allowable payroll costs are performed using a manual process. While the calculation was reviewed and approved, a cross check between the KRONOS report and the allowable cost calculation was not performed. Allowable payroll costs are calculated using pay rates at end of the quarter. When there are no changes during the quarter, this methodology results in an accurate calculation. However, if a pay rate changes during the quarter, this methodology results in a misstatement for the calculation of allowable payroll costs. Effect: Using incorrect hours or pay rates to calculate wages recorded quarterly can result in overcharging grant and submitting inaccurate expenditures to the grant which may lead to non-compliance with grant requirements. Repeat Finding: No Recommendation: It is recommended the County modify its procedure to include: • Improve reconciliation procedures to verify hours per pay period recorded in quarterly spreadsheet agrees to hours recorded in the KRONOS system. • Record grant wages using the pay rate at the beginning of the quarter if recorded on a quarterly basis or use pay rates for each pay period if recorded on a pay period basis. Views of responsible official and planned corrective actions: Management concurs with the auditor’s recommendations. Action taken in response to finding: • Document the audit process in a formalized SOP and cross train all reviewers from SRGA Admin, Budget, and Fiscal. • Create a checklist to accompany each personnel draw to ensure that after rates are verified that SRGA Admin certifies that no RPAs or pay adjustments were approved during the pay periods reported and if there were, a second pay rate is entered for that draw and hours are split according to accurate rates/dates. • Document the cure process in the SOP to ensure that any errors found after the fact will be corrected with HUD to remain compliant and to ensure that no funds drawn in error are retained. • Include a date verification process prior to submission of the draw to ensure that staff did not duplicate any dates. This verification will be an audit of the Time Tracking Review completed by Admin staff. Ongoing training and coaching will be administered should duplicate entries be found on final draw reports. • Audit of all personnel draws for both allocations of CDBG-DR grants will be completed using the new SOP and verification tools before the end of fiscal year 2026.
FINDING 2025‐003— ALLOWABLE COSTS/COST PRINCIPLES AND ACTIVITIES ALLOWED AND UNALLOWED—SIGNIFICANT DEFICIENCY IN INTERNAL CONTROLS OVER COMPLIANCE AND NONCOMPLIANCE FEDERAL PROGRAM: Coronavirus State and Local Fiscal Recovery Funds ASSISTANCE LISTING NUMBER: 21.027 YEAR(S): 2025 FEDERAL AGENCY: Department Of Treasury PASS‐THROUGH AGENCIES: State of Oregon and Multnomah County Criteria – Allowability of costs should be adequately documented in accordance with 2 CFR 200.403bullet point (g) Condition/Context – From an allowable cost sample of 60 selections, 2 selections were duplicated. Upon further investigation to quantify the error we noted expenses totaling $74,808 of non-payroll expenses were duplicated and improperly submitted for reimbursement. The associated indirect cost of $19,076 was also duplicated. Accordingly, total expenses that were subjected to the duplication error for the grant program was $93,884. Cause – When accumulating expenses for reimbursement management did not realize that they captured the same expense twice across the adjacent months. Effect - Unallowed or duplicate costs may be charged to the federal award without being identified by management. Questioned Cost - $93,884 Recommendation - Management should design and implement a control that prevents the duplication of expenses from being submitted for reimbursement. View of Responsible Officials - See Corrective Action Plan.
2025-006 – Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles Requirement (Significant Deficiency) Information on the Major Federal Program - Federal Agency: United States Agency for International Development (USAID) Program Name: USAID Foreign Assistance for Program Overseas Assistance Listing Number: 98.001 Award Number: 72052122CA00007 Award Period: June 13, 2022 – February 26, 2025 Criteria – The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR Section 200.403, “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. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. (g) Be adequately documented.” Condition – During our testing of expenses charged to the federal program, we identified three (3) out of 43 sampled transactions where full supporting documentation, including evidence of transaction approval, were not available for our review. Based on discussions with management, the source documentation was shipped from the Haiti program location and was lost in transit. As a result, complete records to support the three expenses and evidence of approval of expenses were not readily available. Cause – This appears to have resulted from insufficient controls over the transfer, retention, and tracking of project documentation during closeout, particularly for records originating from Haiti, where significant security and logistical challenges increase the risk associated with transporting original hard-copy files. Effect - Without adequate internal controls in place to ensure costs are properly reviewed for allowability and documentation, Corus could be noncompliant with the allowability requirement and could request funds for costs that are unallowed. Questioned Costs – Below reportable threshold. Context – This is a condition identified per review of Corus’ compliance with the specified requirements. Repeat Finding - This is not a repeat finding. Recommendation – We recommend that management strengthen controls over the transfer, retention, and accessibility of project documentation during closeout, particularly for records originating from Haiti, which is currently operating in a distressed location with significant security and logistical challenges. Given the heightened risk of loss, delay, or inaccessibility of hard-copy records in a war zone–like environment, management should implement procedures to scan and retain electronic copies of all critical financial, contractual, and approval documentation, including signed journal vouchers, before shipment; maintain a detailed shipping manifest of all files transferred; and track shipments through receipt and inventory confirmation at headquarters. These steps would help mitigate the elevated risk associated with transporting original records from a high-risk environment and support timely access to documentation for accounting, audit, and compliance purposes. Views of Responsible Officials - Corus management agrees with the findings and recommendations. The planned corrective actions are presented in Corus management’s corrective action plan attached as Appendix B to the Single Audit Report.
Noncompliance and Material Weakness in Internal Control Systems Over Allowable Costs and Cash Management Resulting in a Modified (Adverse) Opinion Federal Agency: U.S. Department of Health and Human Services (HHS) Federal Program: Developmental Disabilities Basic Support and Advocacy Grant (PADD) Assistance Listing Number: 93.630 Award Number/Year: 2501NVPADD-01/October 1, 2024 to September 30, 2026 Pass-Through Entity: N/A (Direct Award) Questioned Costs: • $32,328.38 Program Income + • $ 3,559.20 Prepaid Rent • = $35,887.58 (Total Known Questioned Costs) Criteria: Program Income: In accordance with 45 CFR 75.303 and 2 CFR 200.403(c), factors affecting allowability of costs require that expenditures be net of all applicable credits, to include program income earned. These applicable credits serve to offset or reduce the allowable expense items allocable to the federal award as direct or indirect costs. Prepaid Rent: Per 45 CFR 75.305(b)(1): The non-federal entity must be paid in advance, provided it maintains or demonstrates the willingness to maintain both written procedures that minimize the time elapsing between the transfer of funds and disbursement by the non-federal entity, and financial management systems that meet the standards for fund control and accountability as established in this part. Advance payments to a non-federal entity must be limited to the minimum amounts needed and be timed with actual, immediate cash requirements of the non-federal entity in carrying out the purpose of the approved program or project. The timing and amount of advance payments must be as close as is administratively feasible to the actual disbursements by the non-federal entity for direct program or project costs and the proportionate share of any allowable indirect costs. The non-federal entity must make timely payments to contractors in accordance with the contract provisions. Payroll Expense: In accordance with 45 CFR 75.403, an allowable cost must be allocable (assignable) to a specific federal award in accordance with the relative benefits received. Furthermore, per 45 CFR75.430(i), charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed and must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Advance Funds: In accordance with 45 CFR 75.305(b)(1) [refer to “Prepaid Rent” above]. Condition: Program Income: During our testing of allowable costs, we noted that the Organization requested and received federal reimbursement for expenditures that had already been offset and funded by program income generated by the PADD federal award program. Specifically, the Organization failed to apply approximately $16,164.19 of program income as an applicable credit against gross expenditures prior to submitting its monthly request for reimbursement. Further, the Organization duplicated this improper reimbursement submission as the series of journal entries made in the general ledger system by the now-former accounting personnel were misinterpreted by current management resulting in this duplication of error. As a result of this series of transactions, the Organization was reimbursed three times for the same operating costs – once via program income and twice via the federal grant draws – resulting in unallowable expenditures being charges to the federal award. Prepaid Rent: During our testing of allowable costs, and per our review of the minutes of the board of directors, we discovered that federal funds requested and received were used to prepay rent during the year. In the March 2025 board minutes, 2 months of prepaid rent had been disbursed through June 2025. In the May 2025 board minutes, discussion occurred related to being over budget due to prepaid rent. As of September 30, 2025, a total of 14 months of rent payments were recognized in the general ledger and had been drawn from the PADD program. Total questioned costs related to these prepaid transactions, prepaid at year end, totaled $3,559.20. Payroll Expense: During our testing of allowable costs, 2 of the 20 time sheets selected did not contain approval signatures. Advance Funds: In accordance with 45 CFR 75.305(b)(1) [refer to “Prepaid Rent” above]. Of the 24 cash advances received, one advance was held for six working days, which is in excess of “immediate cash needs” as outlined in the Uniform Guidance and the policy historically observed by the Organization of 72 working hours. Cause: Program Income: The deficiency was caused by turnover in the finance department during the fiscal year. Accounting personnel were not sufficiently trained on HHS regulations regarding applicable credits (45 CFR 75.403) and the required deduction method for reporting program income. Further, the Organization lacks an established policy and internal control procedure to track program income separately within the general ledger and reconcile it against monthly federal drawdowns. Consequently, accounting staff processed reimbursement requests based on gross general ledger expenditures without adjusting for the applicable credits generated by program income. Prepaid Rent: The deficiency was caused by turnover in the financial department during the year, as well as accounting personnel not sufficiently trained on HHS regulations regarding allowable costs. Payroll Expense: The deficiency was caused by a lapse in the system of internal controls over this process due to key personnel being out of the office on vacation. Advance Funds: The deficiency was caused by turnover in the financial department during the year, as well as accounting personnel not sufficiently trained on HHS regulations regarding cash management. Effect: Program Income: The Organization is not in compliance with Uniform Guidance and HHS cost principles regarding applicable credits and program income. Requesting reimbursement for costs already recovered via program income results in over-clearing federal funds. Total identified questioned costs are $32,328.38, representing the federal reimbursements received for expenditures that should have been reduced by the program income credit and the erroneous request for reimbursement in the duplicated amount. Prepaid Rent: The Organization is not in compliance with Uniform Guidance and HHS cost principles outlined in 45 CFR 75.305. Requesting advance funds for prepaid rent resulted in questioned costs of $3,559.20. Payroll Expense: The Organization is not in compliance with Uniform Guidance and HHS cost principles outlined in 45 CFR 75.430. Failure to obtain supervisory approval on timesheets results in a lack of internal controls to verify that payroll costs charged to the grant reflect actual hours worked on the program. Advance Funds: The Organization is not in compliance with Uniform Guidance and HHS cash management principles outlined in 45 CFR 75.305. Context: Program Income: Our testing of allowable costs under the PADD grant identified two specific transactions where expenditures were fully reimbursed by federal funds despite being offset by program income and/or being erroneously drawn. Because these transactions relate to the same journal entry recognized in the general ledger, these are considered isolated instances. Prepaid Rent: Our testing of allowable costs under the PADD grant identified two specific instances where advanced funds were requested and used to prepay rent. Payroll Expense: Our testing of allowable costs under the PADD grant identified two instances where time sheets did not contain appropriate evidence of approval. Advance Funds: Our testing of cash management under the PAIMI grant identified one instance of 24 where cash advances received were disbursed outside the timeframe which would reasonably be considered “immediate”. Prior Year Finding: No Recommendation: Program Income: We recommend that management design and implement formal, written internal control procedures to identify, track, and account for all program income generated by PADD grant activities within the general ledger. Specifically, management should establish a mandatory pre-draw reconciliation process. Before any monthly or periodic reimbursement request is submitted via the Payment Management System (PMS), the finance department must calculate the total program income that should be applied as a reduction (applicable credit) to the gross expenditures. Only the remaining net allowable expenditures should be submitted for federal reimbursement. Prepaid Rent: We recommend that management design and implement formal, written internal control procedures to ensure compliance with cash management requirements. Specifically, management should implement a supervisory review of all general ledger disbursements against grant draws to ensure federal funds are limited to minimum amounts needed for immediate cash requirements. Payroll Expense: We recommend that management update its internal control policies to establish formal backup/interim approval authorities. When primary supervisors are out of the office on vacation or leave, a designated alternative official must be authorized to review and approve timesheets timely to ensure the continuity of internal controls. Advance Funds: We recommend that management design and implement formal, written internal control procedures to ensure compliance with cash management requirements. Specifically, management should implement a supervisory to ensure federal funds are limited to minimum amounts needed for immediate cash requirements as indicated in the Uniform Guidance. Views of Responsible Officials and Planned Corrective Actions: Program Income: We received confirmation from the federal partners that we should spend the $16,165 legal fees from 2023, in April 2026. Those funds were not drawn down during PPE April 30, 2026 and May 15, 2026. Prepaid Rent: We received permission and were encouraged by our federal funders to pre-pay rent. We will not be pre-paying rent going forward. The Executive Director meets weekly with both PADD and PAIMI program managers to review processes. Payroll Expense: Payroll packets are reviewed during and after the payroll process to ensure all timesheets are approved and signed off by both the Executive Director and Board of Directors when appropriate. Executive Director’s timesheets and authorizations are presented to the Board of Directors when signing checks for review and approval. Procedures have been updated to include a secondary review of the timesheets at the end of each payroll cycle. Advance Funds: Internal controls have been updated and there is an additional level for reviewing requests. The Executive Director is provided a list of all funds available after each draw down and the amounts drawn down are matched to the GL and GFR. This responsibility will be transferred to the Deputy Director once the new Fiscal Manager is in place. There is a schedule for the date the funds are allowed to be requested that fall within the 72-hour window posted in the Finance office and the Executive Director is notified before any requests are processed. The current Finance officer is meeting every two weeks for training with NDRN and policies, Uniform Guidance, MIP processes, and federal grants are reviewed in these meetings.
The Uniform Guidance, 2 CFR 200.403, stipulates except where otherwise authorized by statute, costs must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. We tested twenty-five (25) expenditure transactions and identified 17 instances where the Alabama Law Enforcement Agency charged unallowable costs to the Homeland Security Grant program. Costs for another federal program were incorrectly charged to the Homeland Security Grant program resulting in questioned costs of $127,028.15. The Alabama Law Enforcement Agency did not have adequate procedures in place to ensure costs were charged to the correct program. As a result, costs were incorrectly charged to the Homeland Security Grant program.
BETH ISRAEL LAHEY HEALTH, INC. AND AFFILIATES Schedule of Findings and Questioned Costs Year ended September 30, 2025 Criteria: Title 2 U.S. Code of Federal Regulations Part 200 (2 CFR 200) Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, Section 200.430(a) states that compensation for personal services includes all remuneration, paid currently or accrued, for services of employees rendered during the period of performance under the Federal award, including but not necessarily limited to wages and salaries. Costs of compensation are allowable to the extent the compensation is reasonable for the services rendered and conforms to the established written policy of the recipient or subrecipient consistently applied to both Federal and non-Federal activities; follows an appointment made in accordance with the recipient's or subrecipient's laws, rules, or written policies and meets the requirements of Federal statute, where applicable; and is determined and supported by records that accurately reflect the work performed. 2 CFR 200.403(b) further states costs must meet the criteria of conforming to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items to be allowable under Federal awards. This includes the auditor to determine if the awards contain any negotiated wage or salary rates, or contain any restrictions on salaries and wages, such as the NIH restriction on the amount that may be charged for individual salaries (https://grants.nih.gov/grants/policy/salcap_summary.htm). Additionally, 2 CFR 200.400(d) requires the accounting practices of the recipient and subrecipient to be consistent with the cost principles and support the accumulation of costs as required by the cost principles, including maintaining adequate documentation to support costs charged to the Federal award. Furthermore, 2 CFR 200.403 states the factors affecting allowability of costs. These factors include the cost to (a) be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principes and (g) be adequately documented to meet the criteria to be allowable under Federal awards. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Condition: During our testing of payroll for Beth Israel Deaconess Medical Center (BIDMC), an affiliate of Beth Israel Lahey Health, Inc., management did not consistently adhere to the specific award conditions set forth in the Notice of Award (NOA) related to salary limitations for 1 out of 12 of our samples related to our testing. The control operator applied an erroneous National Institutes of Health (NIH) Salary Cap limit when calculating the payroll allocation for an individual’s time allocated to a specific NIH grant selected for testing. As a result, the portion of the individual’s salary charged to the federal grant exceeded the maximum allowable NIH Salary Cap, resulting in an unallowable cost of $41 charged to the award. Furthermore, Joslin Diabetes Center (the Center), an affiliate of Beth Israel Lahey Health, Inc., manually matches purchase orders to the corresponding invoice once received. During our testing for 1 out of 25, we identified an invoice that was incorrectly matched to the purchase order for the Federal award selected for testing. This invoice was processed for payment and subsequently included in the monthly reimbursement draw. At the time of testing, the correct invoice corresponding to the valid purchase order for the selected grant had not yet been received by the Center. This resulted in the expenditure in the amount of $14 being BETH ISRAEL LAHEY HEALTH, INC. AND AFFILIATES Schedule of Findings and Questioned Costs Year ended September 30, 2025 allocated to the incorrect Federal award as well as the Federal award charged not being supported by adequate documentation. Cause: The conditions results from a lack of effective operation of internal controls over the allowability of costs related to Federal awards; specifically, ensuring the cost conforms to any limitations set forth in the Federal award as to the amount of cost items at BIDMC as well as ensuring the cost is allocable to the Federal grant and is adequately documented at the Center. Possible Asserted Effect: Failure to maintain sufficient internal controls to ensure a cost is allowable to a Federal award may result in unallowable costs being charged to Federal awards. Questioned Costs: None. Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Identification of Whether the Audit Finding was a Repeat Finding: This is not a repeat finding. Recommendation: We recommend that BILH enhance its internal controls over Federal award expenditures to ensure, where applicable, all costs charged to Federal awards conform to any limitations or salary caps set forth in the Federal award agreement, are accurately allocated to the correct grant and are adequately documented.
Finding 2025-002 Agency: U.S. Department of Health and Human Services (CSBG) Program: Community Service Block Grant (AL No. 93.569) Significant Deficiency and Noncompliance over Eligibility Repeat Finding: No Condition: During our testing of participant eligibility for the CSBG program, we noted the following exceptions out of a sample size of 40: (1) for one participant, the CSBG eligibility form was not signed by the case manager; and (2) for two participants, we were unable to obtain documentation to support proof of residence. Criteria: As provided in 2 CFR section 200.303: An entity must establish internal controls to ensure compliance with federal statutes and program requirements, including eligibility. Additionally, 2 CFR section 200.403 requires that costs must be adequately documented to be allowable. Cause: The Organization did not follow its policies and procedures to ensure all eligibility documents are properly completed, authorized, and retained. Effect: The Organization was unable to provide adequate documentation that eligibility criteria were met prior to providing services. Questioned Costs: Unknown Recommendation: We recommend that management strengthen internal controls over eligibility determination and documentation to ensure compliance with federal program requirements. Management should establish procedures to require complete and signed eligibility forms prior to approving or providing program benefits and consider implementing a standardized eligibility checklist to ensure all required supporting documentation (e.g., income verification, residency, other criteria) is obtained and retained. Auditee Response and Corrective Action Plan: Management agrees with the finding. Refer to the schedule of corrective action plans.
Finding Number: 2025-006 Prior Year Finding Number: 2024-009 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Program: U.S. Department of the Treasury COVID-19 – Coronavirus Capital Projects Fund ALN: 21.029 Award #: CPFFN0167 Award Year: 02/09/2022 – 12/31/2026 Government Department/Agency: Office of the Deputy Mayor for Planning and Economic Development (DMPED) Criteria - The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per 2 CFR Section 200.403, “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. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. (g) Be adequately documented.” In addition, the U.S. Department of Treasury, Guidance for the Coronavirus Capital Projects Fund For States, Territories & Freely Associated States (CPF), Section D. Eligible and Ineligible Cost: states that “Allowable costs are determined in accordance with the cost principles identified in 2 CFR Part 200, Subpart E. Federal funds committed to an award may only be used to cover allowable costs incurred during the period of performance and for allowable closeout costs incurred during the grant closeout process. Cost sharing is not a requirement for the use of these funds” Section C. Project Eligibility: also states the following, “Capital Project or Project means the construction, purchase, and installation of, and/or improvements to capital assets where the costs of such assets are capitalized or depreciated, including ancillary costs necessary to put the capital asset to use. Examples of capital assets include buildings, towers, digital devices and equipment, fiber-optic lines, and broadband networks. Examples of ancillary costs include project costs related to project planning and feasibility, broadband installation, and community engagement, broadband adoption, digital literacy, and training associated with a planned or completed Project funded by the Capital Projects Fund program.” Condition – During our examination of Activities Allowed or Unallowed and Allowable Costs/Cost Principles, we observed that the agency used federal funds to reimburse their subrecipient for $4,100,000 in improvement allowances paid to subtenants at the Max Robinson Center facility in connection with their leases of the space. The subtenant improvement allowances do not appear to align with the definition of ancillary costs as outlined by the CPF guidance mentioned earlier, which describes ancillary costs as project costs related to project planning and feasibility, community engagement, and training associated with a planned or completed Project. BDO deemed this a recurrence of the same substantive issue identified in prior year Finding 2024-009 where the agency charged rent payments to the program reported as ancillary costs, which was identified as questioned cost and was later on disallowed by Treasury in its management decision letter dated December 22, 2025. The prior-year rent payments and the current-year subtenant improvement allowances are both lease and occupancy-related costs charged to the program intended to fund capital project costs, both of which do not appear to meet the definition of ancillary cost. Additionally, the U.S. Department of the Treasury issued an Information Document Request (IDR) that included a request for a detailed explanation of the $4,100,000 in ancillary costs charged to the program. On May 28, 2026, Treasury notified the agency that the IDR was closed based on the agency’s response, however, did not include an affirmative determination that the $4,100,000 in subtenant improvement allowances are allowable as charged under the program. Further response from Treasury on June 1, 2026, noted “no additional questions or concerns about these issues” with regards the Agency asking for Treasury to approve the $4,100,000 to be used as ancillary costs. This further response from Treasury does not give an affirmative determination regarding the allowability of the subtenant improvement allowances charged to the program. Based on the procedures performed and review of relevant guidance, BDO notes that these costs do not meet the requirements to be considered allowable under the program. Questioned Costs – Known amount $4,100,000. Context – This is a condition identified per review of DMPED’s compliance with specified requirements using a statistically valid sample. Total subrecipient expenditures reported as allowable costs were $8,100,000. Effect – DMPED was unable to demonstrate that the subtenant improvement allowance charged was approved by the Department of Treasury and was an allowable cost under the guidance. Cause – DMPED did not have proper internal controls and policies and procedures in place to identify allowable costs and activities. Recommendation – We recommend that DMPED evaluate its procedures to ensure only allowable expenses are charged to the program as required under 2 CFR Section 200.403. Related Noncompliance – Material noncompliance. Views of Responsible Officials and Planned Corrective Actions – DMPED does not concur with the auditor’s finding regarding the allowability of subtenant improvement allowance per the CPF guidance. The District’s corrective action is described in the Management’s Corrective Action Plan included as Appendix B of the attached Management’s Section. BDO’s Response – We have reviewed management’s response, and our finding remains as indicated.
Finding Number: 2025-014 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Program: U.S. Department of Health and Human Services Immunization Cooperative Agreements ALN: 93.268 Award #: Various Award Year: 10/01/2024 – 09/30/2025 Government Department/Agency: Department of Health (DC Health) Criteria - The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per 2 CFR Section 200.403, “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. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. (g) Be adequately documented.” Condition – During our testwork over nonpayroll transactions for the Activities Allowed or Unallowed and Allowable Costs/Cost Principles, we noted that for one (1) out of forty-two (42) samples, the transaction was charged twice to the program. Total amount of nonpayroll transactions is $11,925,998, and the amount of exception is $95,827. Questioned Costs – Known amount is $95,827. Context – This is a condition identified per review of DC Health’s compliance with specified requirements using a statistically valid sample. Total amount of samples selected for testing amounted to $6,817,550. Effect – Lack of proper review of expenditures could result to unallowable costs charged to the program. Cause – DC Health does not have adequate controls in place to ensure that only allowable costs are charged to the program. Recommendation – We recommend that DC Health strengthen internal control procedures to ensure that expenditures are allowable, and that sufficient documentation is retained to support that allowability. Related Noncompliance – Noncompliance. Views of Responsible Officials and Planned Corrective Actions – DC Health concurs with the finding. The expenditure in question was an allowable cost journalized to the grant. The error occurred when the journal was duplicated. To correct the issue, other allowable expenditures were journalized from the grant to local and therefore prevented a duplicate drawdown in PMS. Also note that the vendor did not receive duplicate payment. The District’s corrective action is described in the Management’s Corrective Action Plan included as Appendix B of the attached Management’s Section.
Finding Number: 2025-020 Prior Year Finding Number: 2024-023 Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Program: U.S. Department of Health and Human Services Foster Care – Title IV-E ALN: 93.658 Award #: Various Award Year: 10/01/2024 – 09/30/2025 Government Department/Agency: Child and Family Services Agency (CFSA) Criteria - The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Per 2 CFR Section 200.405, a cost is allocable to a Federal award if it is assignable to that award in accordance with the relative benefits received. In addition, under 2 CFR Section 200.403, allowable costs must be adequately documented. Per 2 CFR Section 200.430, charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated, and must be incorporated into the official records of the recipient or subrecipient. The regulation also allows certain alternative approaches when properly documented and approved by the appropriate Federal agency or cognizant agency, as applicable. Based on CFSA’s Human Resources Administration Issuance: HR-06-1 dated May 12, 2006, staff must seek and receive advance written approval prior to working overtime. It also indicates that in emergency situations requiring an immediate response, the employee shall make every reasonable attempt to obtain advance approval by an appropriate manager or supervisor. Per District Personnel Issuance No. 2018-00 (Annual Leave) effective April 21, 2018 “Using Annual Leave” - An employee may use accrued annual leave at any time during the leave year if they receive approval from their immediate supervisor or the agency head responsible for the employee’s timesheet. If an employee wishes to use their accrued annual leave, they must: 1. Submit a request in advance to use annual leave to their manager or supervisor. 2. Receive approval from the manager or supervisor; and 3. Record the approved leave taken on their timesheet in PeopleSoft. Per CFSA’s guidelines dated May 15, 2021, employees must file a written request within agency’s prescribed time limits to use sick leave. Employees should consult their agency for specific guidelines on how to request sick leave. If no specific guidelines exist, employees should submit their leave requests through PeopleSoft. For doctor’s appointment, employees must make sick leave requests at least 24 hours in advance for medical, dental, or eye examinations or treatments. Employees should also be prepared to submit supporting evidence of the appointment according to their agency’s policy. CFSA uses a Random Moment Study (RMS) to allocate the administrative costs to the Foster Care program. The study entails selecting a sample of social workers on a quarterly basis to participate in the RMS study where the social workers are required to notate what they were doing at the sample moment. Subsequently, the supervisors of these social workers review and validate their responses. Validation of the responses adds an extra layer of reliability to the data collected. It ensures that the information provided by social workers is accurate and reflective of their actual activities. This validation process helps maintain the integrity of the study and ensures that the results are trustworthy in making decisions when determining the RMS percentage utilization in the allocation of the administrative costs. Condition – The following issues were observed: 1. During our review of the Activities Allowed or Unallowed and Allowable Costs/Cost Principles, we noted that CFSA was unable to provide sufficient supporting documentation to substantiate the allocation methodology for three (3) of the sixty (60) non-payroll expenditure samples selected for testing. 2. During our review of the payroll process regarding the review and approval of time and attendance, we noted the following in our sample of sixty (60) payroll items: • For two (2) samples, CFSA failed to provide documentation evidencing the approval of overtime paid. • For thirteen (13) samples, CFSA failed to provide documentation evidencing the approval of scheduled sick leave and annual leave taken. In addition one (1) of the thirteen (13) samples was coded as scheduled sick leave; however, per documentation provided, it was indicated that the timesheet should have coded the time as military leave. BDO did not receive documentation showing approval for either military leave or scheduled sick leave. • For two (2) samples, the employee's response to the RMS moment sample was not validated by the supervisor. Questioned Costs – Not determinable. Context – This is a condition identified per review of CFSA’s compliance with specified requirements using a statistically valid sample. Effect – Without sufficient documentation to support the cost allocation methodology, CFSA cannot demonstrate that costs charged to the Foster Care program were allowable and properly allocated, increasing the risk of unallowable costs being charged to the federal award. Additionally, without adequate internal controls and procedures for record maintenance, there is a risk of disputes between the agency and its employees regarding the accuracy of pay, leave and overtime. Furthermore, supervisor validation was not completed and documented for two of the moments selected for testing. Although CFSA’s control of over-assigning moments mitigates the risk of not meeting the aggregate 10% validation requirement, the two deviations noted reduce assurance that the 10% validation requirement was met. Cause – CFSA did not have proper internal controls and policies and procedures in place to ensure that documentation supporting the cost allocation methodology was retained and readily available for review. Additionally, CFSA did not have proper internal controls and policies and procedures in place to ensure that authorization forms evidencing the preapproval of overtime, scheduled sick leave and annual leave were maintained. Furthermore, although CFSA maintains an established validation process, supervisor validation was not completed for two of the moments selected for testing. Recommendation - We recommend that CFSA strengthen its policies, procedures, and controls to ensure that costs are accurately reported and claimed, and that documentation supporting the cost allocation methodology is maintained and readily available to substantiate the amounts allocated to the Foster Care program. We also recommend that pre-authorization of overtime, scheduled sick leave and annual leave is maintained. Furthermore, we recommend that CFSA ensure that the validation control is consistently performed for all moments selected for validation. Related Noncompliance – Material noncompliance. Views of Responsible Officials and Planned Corrective Actions – CFSA concurs with the findings of Condition 1 and Condition 2. For Condition 1, although CFSA provided documents (including invoices) requested by and provided by the Office of the Chief Information Officer (OCTO) for the sampled items referenced, OCTO was unable to provide the specific documentation requested by the auditors documenting the allocation methodology of the expenditures assigned to CFSA and used for Title IV-E claiming purposes. For Condition 2, bullet 3, CFSA would simply note that, as is denoted in our federally approved cost allocation plan, CFSA adheres to HHS’ requirements for statistical significance in its entire RMS operation. The standard for supervisor validation of random moments is 10% of all accepted moments. CFSA’s internal controls involve oversampling moments requiring validation, and it consistently hits the 10% validation requirement in the aggregate. The District’s corrective action is described in the Management’s Corrective Action Plan included as Appendix B of the attached Management’s Section.
Finding No.: 2025-001 Criteria Pursuant to 2 CFR §200.302(b)(3), nonfederal entities must maintain financial management systems that provide for the identification of all federal awards received and expended, including accurate, current, and complete disclosure of expenditures by federal award. Further, 2 CFR §200.403 requires that costs charged to federal awards be allowable, allocable, and adequately documented. Costs must be directly associated with the benefiting program. Government Auditing Standards require that entities design and implement internal controls to provide reasonable assurance that transactions are properly recorded and compliance with applicable requirements is achieved. Conditions Found The Organization did not record expenditures directly to specific federal awards or grant programs at the time costs were incurred. Instead, expenditures were recorded in classes of accounts and subsequently allocated to funding sources in aggregate based on available revenue. This methodology does not ensure that expenditures are accurately identified with the benefiting federal award. Cause The condition appears to be the result of inadequate internal controls over grant accounting, including: • Lack of a formalized process for tracking expenditures by individual grant • Limitations in the accounting system and heavily reliance on supporting schedules outside of the accounting function • Insufficient training and oversight related to grant compliance requirements Effect As a result, the Organization is at risk of: • Noncompliance with Uniform Guidance cost principles and reporting requirements • Misstatement of expenditures by grant program • Inability to demonstrate that costs charged to federal awards are allowable, allocable, and properly supported • Potential questioned costs or repayment of federal funds • Inaccuracy of federal reporting Context This issue was identified through testing of expenditures across multiple federal programs and was determined to be pervasive in nature. The control deficiency impacts all major federal programs and financial reporting processes related to grant activity. Repeat Finding No Questioned Costs The Organization’s expenditures are similar amongst all programs and grants. At the onset of the audit, expenditures were not coded and reconciled to each grant individually; however, the Organization was able to identify, code and update the general ledger to properly identify the major program expenditures. We were able to determine there are no questioned costs. Recommendation We recommend that the Organization strengthen its internal controls over grant accounting by: • Implementing procedures to code expenditures directly to specific grants at the time of entry • Enhancing the chart of accounts to allow for tracking by funding source • Reducing the use of manual spreadsheets that allow for human error • Proper review and approval of grant allocations to ensure proper grant reporting • Providing training to accounting personnel on Uniform Guidance requirements for cost allowability and allocability Views of Responsible Officials See attached corrective action plan.
Finding No.: 2025-003 Federal Agency: Aging Cluster (93.044, 93.045, 93.053) and Medicaid Cluster (93.778) Criteria Pursuant to 2 CFR §200.302(b)(3), nonfederal entities must maintain financial management systems that provide for the identification of all federal awards received and expended, including accurate, current, and complete disclosure of expenditures by federal award. Further, 2 CFR §200.403 requires that costs charged to federal awards be allowable, allocable, and adequately documented. Costs must be directly associated with the benefiting program. Government Auditing Standards require that entities design and implement internal controls to provide reasonable assurance that transactions are properly recorded and compliance with applicable requirements is achieved. Conditions Found The Organization did not consistently record expenditures directly to specific federal awards or grant revenue at the time costs were incurred. Instead, expenditures were recorded in general accounts and subsequently allocated to funding sources in aggregate based on available grant revenue. This methodology does not ensure that expenditures are accurately identified with the benefiting federal award. Cause The condition appears to be the result of inadequate internal controls over grant accounting, including: • Lack of a formalized process for tracking expenditures by individual grant • Limitations in the accounting system and heavily reliance on supporting schedules outside of the accounting function • Insufficient training and oversight related to grant compliance requirements Effect As a result, the Organization is at risk of: • Noncompliance with Uniform Guidance cost principles and reporting requirements • Misstatement of expenditures by grant program • Inability to demonstrate that costs charged to federal awards are allowable, allocable, and properly supported • Potential questioned costs or repayment of federal funds • Inaccuracy of federal reporting Questioned Costs The lack of coding by invoice level to each grant raises concern that expenditures listed on the SEFA may not meet stated grant allowability and allocable requirements. The Organization’s expenditures are similar amongst all programs and grants. At the onset of the audit, expenditures were not coded and reconciled to each grant individually; however, the Organization was able to identify, code and update the general ledger to properly identify the major program expenditures. We were able to determine there are no questioned costs. Context This issue was identified through testing of expenditures across multiple federal programs and was determined to be pervasive in nature. The control deficiency impacts all major federal programs and financial reporting processes related to grant activity. Repeat Finding No Recommendation We recommend that the Organization strengthen its internal controls over grant accounting by: • Implementing procedures to code expenditures directly to specific grants at the time of entry • Enhancing the chart of accounts to allow for tracking by funding source • Reducing the use of manual spreadsheets that allow for human error • Proper review and approval of grant allocations to ensure proper grant reporting • Providing training to accounting personnel on Uniform Guidance requirements for cost allowability and allocability Views of Responsible Officials See attached corrective action plan.
Finding 2025-002 SIGNIFICANT DEFICIENCY IN IN INTERNAL CONTROLS OVER COMPLIANCE, NONCOMPLIANCE – Allowable Costs and Cost Principles and Activities Allowed and Unallowed Federal Program: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Agency: US Department of Treasury Pass- Through Agencies: Various Assistance Listing Number: 21.027 Criteria: Allowability of costs should be adequately documented in accordance with 2 CFR 200.403 (g). Condition/Perspective: From an allowable cost sample of 40, 5 selections could not be agreed to the underlying support. In 4 instances the amount charged to the federal award was less than the amount per the provided payroll support and in 1 instance the amount charged to the federal award was greater than the amount per the provided payroll support. This resulted in a total of $1,982.85 (understatement) in unsubstantiated payroll expenses allocated to the federal award. Cause: Documentation pertaining to the calculation of allocating payroll expenses to the federal award was unavailable as it was not retained. Effect: Without retention of the appropriate support there is a risk that the Division could charge costs that are not allowed by the federal award. Noncompliance with allowability criteria could result in the Division having to refund the granting agency or a loss of funding. Questioned Cost: $1,982.85 Recommendation: Management should design and implement a control that prevents unsubstantiated expenses from being charged to the federal award; and, retain all documentation supporting such charges. View of Responsible Officials: See Corrective Action Plan.
Finding 2025-001 – Allowable Costs Requirement – Time and Effort Reporting for Salaries Federal Program: Crime Victim Assistance - ALN 16.575 Consolidated And Technical Assistance Grant Program to Address Children and Youth Experiencing Domestic and Sexual Violence and Engage Men and Boys as Allies – ALN 16.888 Federal Grantor: U.S. Department of Justice Pass-Through Entity / Award: NYS Office of Victim Services (OVS), Contract OVS01-C11248GG – ALN 16.575 Criteria – 2 CFR 200.430(g) requires that charges to a federal award for salaries and wages be based on records that accurately reflect the work performed, supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated, and that the records reasonably reflect the total activity for which the employee is compensated. Under 2 CFR 200.403, costs must be adequately documented to be allowable, and under 2 CFR 200.405 costs must be allocable to the award based on the relative benefit received. 2 CFR 200.328 requires that financial reports submitted to the pass-through entity be supported by the entity's records. Condition – During the year under audit, the Organization did not consistently apply time and effort reporting that met the requirements of the federal cost principles for all grants. Cause – The Organization did not have an effective internal control system in place for monitoring and documenting wages and salaries charged to federal awards. Effect – Without an effective process to document, review, and reconcile time and effort, the Organization may not have sufficient support that payroll costs charged to federal awards reflect the work actually performed. This increases the risk that personnel costs are allocated incorrectly, unsupported costs are included in federal award expenditures, and federal programs are not charged in accordance with Uniform Guidance allowability and documentation requirements. Questioned Costs – None. After year-end, the Executive Director reviewed salaries and asserted that the amounts charged were reported correctly. Context – ALN 16.575 – In 21 out of 40 tested transactions, timesheets and underlying allocation support did not match to amounts charged to the program. ALN 16.888 – In 17 out of 40 tested transactions, timesheets and underlying allocation support did not match amounts charged to the program. Repeat Finding – No Recommendation – We recommend the Organization formalize the after the fact time and effort process. Views of Responsible Officials – See Corrective Action Plan.
2025-005 Allowability - Interprogram Activity Public Housing Operating Fund ALN 14.850 (non-major program) Significant Deficiency in Internal Control Other matter required to be reported in accordance with Uniform Guidance Condition: The Authority maintains a material interprogram receivable balance in the asset management program (“AMP”), which is due from other programs of the Authority. This interprogram receivable increased by $373,091 from the September 30, 2024 balance of $433,981, for a total receivable balance of $807,072 as of September 30, 2025. Context: The auditor reviewed the interprogram activity for the current year and noted that the Authority continued to fund other programs of the Authority with restricted public housing operating funds. Criteria: Per 2 CFR 200.403 and the line definition guide issued by HUD for the Financial Data Schedule, funds in the AMP can only be transferred to other programs of the Authority for pre-approved HUD exceptions. The Authority is cautioned that funds are normally not fungible between different federal programs regardless of the nature of the transfer or receivable. Inappropriate use of funds, even a temporary loan, are considered ineligible costs resulting in noncompliance. Cause: The Authority experienced staff turnover in the finance department as well as difficulty replacing personnel that were knowledgeable with HUD and grant allowability requirements. Effect: The Authority is not in compliance with HUD requirements regarding eligible and allowable use of federal funds. Questioned Costs: $807,072. Auditor Recommendations: We recommend that the Authority immediately discontinue using Public Housing Operating Fund resources to fund costs or cash shortfalls of other programs or component units. The Authority should prepare a detailed reconciliation of all interprogram receivable and payable balances by program and implement a repayment plan to restore the Public Housing Operating Fund. We further recommend that the Authority implement written cash management and interprogram accounting procedures to prevent future unauthorized advances. These procedures should include monthly reconciliation of all interprogram balances, supervisory review, and approval of interprogram activity. Management Response: See Corrective Action Plan.
Material Weakness in Internal Control over Compliance and Material Instance of Noncompliance (Scope Limitation) Federal Agency: U.S. Department of Health and Human Services Federal Program: Centers for Independent Living Assistance Listing Number: 93.432 Direct Award Numbers: 2322CAILCL-00 and 2338CAILCL-00 Pass-Through Entity: California Department of Rehabilitation Grant Identifying Number: 32594 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles and Period of Performance – Payroll Expenditures, Cash Management and Reporting Criteria: Pursuant to 2 CFR §200.303, the Organization is required to establish and maintain effective internal control over the federal award that provides reasonable assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Under 2 CFR §200.403 and 2 CFR §200.405, costs charged to the Federal award must be allowable, allocable, reasonable, and adequately documented. Under 2 CFR §200.403(h) and 2 CFR §200.309, costs must be incurred within the approved period of performance. Under 2 CFR §200.305, for cash management using the reimbursement method, the Organization must maintain records sufficient to support amounts requested for reimbursement and demonstrate that reimbursement requests are based on allowable program expenditures. Under 2 CFR §200.328 (financial reporting) and §200.329 (performance reporting) recipients are responsible for monitoring activities under federal awards and must submit required performance and financial reports at the intervals required by the federal award, which may be no more frequent than quarterly and no less frequent than annually. Condition and Context: The Organization did not have adequately designed internal controls over the review and approval of allowable payroll activities and payroll expenditures, cash management activities and federal reporting requirements. Specifically, there were no documented review and approval procedures or supervisory controls in place to ensure the accuracy and completeness of time and effort tracking of payroll expenditures, reimbursement requests or financial reports under the federal program. Additionally, sufficient appropriate audit evidence was not available to support compliance with the Activities Allowed or Unallowed and Allowable Costs/Cost Principles-Payroll Expenditures, Cash Management and Reporting compliance requirements. The lack of documentation and supporting records resulted in a scope limitation that prevented the auditors from performing necessary procedures to determine whether the Organization complied with applicable federal requirements related to allowed or unallowed payroll activities and allowable costs/cost principles for payroll expenditures, cash management transactions and financial reporting submissions for the population selected for testing. The condition affected the administration of the Centers for Independent Living federal program for the fiscal year ended September 30, 2025.Cause: Management did not design and implement documented internal controls requiring supervisory review and approval of allowable payroll activities and payroll expenditures, cash management activities and federal financial reporting. In addition, management did not maintain adequate supporting documentation to demonstrate compliance with federal requirements. Effect: The lack of effective internal controls increased the risk that errors, omissions, or noncompliance related to allowed or unallowed payroll activities and allowable costs/cost principles for payroll expenditures, cash management and reporting could occur and not be detected in a timely manner. Furthermore, because sufficient appropriate audit evidence was unavailable, the auditors were unable to determine whether the auditee complied with applicable federal compliance requirements related to - allowable payroll activities and payroll expenditures, cash management and reporting. Questioned Costs: Questioned costs could not be determined due to the scope limitation. Repeat Finding: No Recommendation: We recommend that management design and implement formal internal controls over - allowable payroll activities and payroll expenditures, cash management and reporting activities, including documented supervisory review and approval procedures for all time and effort tracking of payroll expenditures, federal reimbursement requests and financial reports. Management should also establish policies and procedures to ensure adequate supporting documentation is retained and readily available to support compliance with federal program requirements and facilitate audit testing. This should include comprehensive training for staff involved in federal program administration, regular monitoring to ensure controls are consistently applied, and periodic internal audits to assess the effectiveness of compliance systems. Views of Responsible Officials: Management Position: Management agrees with this finding. Adequate internal controls over payroll, cash management, and federal reporting were not in place during FY2025 as a direct result of inconsistencies in procedures and internal controls.Corrective Actions: Accountability & Role Clarity: The Executive Director and Program Manager have mapped compliance requirements for each federal award—including expenditure review, reporting, receivables, and deliverables—and assigned clear ownership across management positions to eliminate single points of failure and reinforce segregation of duties. Training & Ongoing Monitoring: All management staff will receive annual training on federal grant requirements (allowable/unallowable costs, period of performance, cash management, and reporting) at the start of each fiscal year. Monthly monitoring meetings among the Executive Director, Program Manager, and Accountant will precede Finance Committee meetings to review grant spending. Periodic internal reviews and a final year-end reconciliation will be conducted. Documentation & Continuity: All grant-related records will be maintained on a shared organizational drive accessible to all responsible staff. Formal onboarding and off boarding procedures for federal grant management will be developed to ensure continuity regardless of personnel changes. The Finance Manual will be updated to reflect all procedures. Hood & Strong has been retained suggests proper internal controls necessary to achieve full federal compliance. All federal award information will be regularly reported to the Board of Directors.
Material Weakness in Internal Control Over Compliance and Instance of Noncompliance - Missing Supporting Documentation for Tested Expenditures Federal Agency: U.S. Department of Health and Human Services Federal Program: Centers for Independent Living Assistance Listing Number: 93.432 Direct Award Numbers: 2322CAILCL-00 and 2338CAILCL-00 Pass-Through Entity: California Department of Rehabilitation Grant Identifying Number: 32594 Compliance Requirements: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance – Nonpayroll Expenditures Criteria: Pursuant to 2 CFR §200.303, the Organization is required to establish and maintain effective internal control over the federal award that provides reasonable assurance that the Organization is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Under 2 CFR §200.403 and 2 CFR §200.405, costs charged to the Federal award must be allowable, allocable, reasonable, and adequately documented. Under 2 CFR §200.403(h) and 2 CFR §200.309, costs must be incurred within the approved period of performance. Condition and Context: The Organization lacked documented review and approval controls over activities allowed or unallowed, allowable costs/cost principles, and period of performance for nonpayroll expenditures. In addition, 3 of 40 nonpayroll expenditure transactions tested were not supported by adequate documentation to demonstrate the costs were allowable and incurred within the approved period of performance. Cause: Management did not design and implement documented review and approval controls over the applicable compliance requirements or procedures to ensure supporting documentation was obtained and retained for Federal expenditures. Effect: The lack of effective internal controls increased the risk that errors, omissions, or noncompliance related to activities allowed or unallowed, allowable costs/cost principles, and period of performance for nonpayroll expenditures could occur and not be detected in a timely manner, resulting in questioned costs and potential repayment of Federal funds. Questioned Costs: Undetermined. Repeat Finding: Yes. Reference number 2024-002. Recommendation: We recommend management design and implement documented review and approval controls over the applicable compliance requirements and require supporting documentation for Federal expenditures before costs are charged to the Federal award. This should include comprehensive training for staff involved in federal program administration, regular monitoring to ensure controls are consistently applied, and periodic internal audits to assess the effectiveness of compliance systems. Views of Responsible Officials: Management Position: Management agrees with this finding and acknowledges it as a repeat of Finding 2024-002. Systemic gaps in documentation practices under prior financial management resulted in insufficient supporting documentation for three of forty transactions tested. Corrective Actions: Immediate Control Reinforcement & Training: The Executive Director and Program Manager reviewed each federal award to identify allowable cost categories, applicable periods of performance, and required documentation standards. Funders were engaged directly to clarify documentation requirements; at the April 14 all-staff meeting, a funder provided comprehensive training on reporting and compliance. Additional funder-led training sessions for management and all staff are underway. Monitoring & Internal Audit: Monthly meetings among the Executive Director, Program Manager, and Accountant review grant spending and federal compliance. Written corrective action plans are developed for each identified noncompliance area. The Accountant will maintain current budget tracking with immediate notification to the Executive Director of discrepancies. All findings are reported to the Board monthly or by special session. Federal grant compliance is incorporated into relevant staff performance evaluations. Documentation & Formalization: CID will implement a dual-storage documentation methodology combining a shared drive and a document management system (DMS) to ensure that all grantrelated expenditures are fully supported and readily retrievable. All financial files will be organized within a confidential folder structure using a standardized naming convention that includes vendor name, date, and grant code, with subfolders categorized by expense type. Copies of all supporting documentation including invoices, receipts, timesheets, and allocation records will be maintained in both the shared drive and the DMS to ensure redundancy and accessibility. The Executive Director, Accountant, and Program Manager will share responsibility for filing grant documentation in accordance with each grant's reporting deadline, with no costs posted to a grant prior to confirmation that adequate support has been filed and is retrievable. This structured methodology will ensure that CID can readily produce complete documentation for any audited expenditure and that unsupported costs are not charged against any grant funding source. Finance documentation processes have been reviewed with the Accountant; Hood & Strong is providing Executive Director training on the FundEZ cloud platform. All updated procedures will be reflected in the Finance Manual.
2025-003 ACTIVITIES ALLOWED/ALLOWABLE COST PRINCIPLES Type: Significant deficiency in internal control over compliance/noncompliance Program: ALN 93.696 Certified Community Behavioral Health Clinics Expansion Grants (CCBHC) Criteria: Per 2 CFR section 200.403(b), costs charged to the grant must, “Confirm to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items.” Condition: During testing, it was noted that the CMHSP charged to the grant an amount of indirect costs that were in excess of amounts allowed per the established budget for this grant. Cause/Effect: Management oversight. Questioned Cost: $35,242. Recommendation: We recommend that the CMHSP review/update policies and procedures to ensure that the calculation for indirect costs charged to the grant follow the requirements and limitations of the grant document. Management’s Resp: Management is in agreement with this recommendation.
C. Findings and Questioned Costs – Major Federal Award Program Audit 2025-001: Significant Deficiency in Internal Control over Activities Allowed or Unallowed and Allowable Costs/Cost Principles Federal Agency: U.S. Department of Education Assistance Listing Number: 84.287 Federal Program Name: Twenty-First Century Community Learning Centers Pass-through Entity: Office of Superintendent of Public Instruction Pass-through Award Number: S287C240048, S287C230048 Criteria: Under 2 CFR 200.303(a), the non-federal entity must establish and maintain effective internal control over compliance with the requirements of federal awards. Additionally, in accordance with 2 CFR 200.403, costs must “be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles” and “be adequately documented.” Condition: In our testing of compliance with the requirements for activities allowed or unallowed and allowable costs/cost principles, we identified one exception where estimated costs were charged to the major program for allowable programmatic activities; however, this estimate included costs that were not ultimately incurred by Washington Alliance for Better Schools (WABS). Cause: Internal controls over the review and reconciliation of actual costs incurred by WABS and amounts charged to the major program did not detect certain unallowable costs. Effect: Reimbursements in excess of actual costs incurred were requested through the major program. Questioned Costs: Known questioned costs arising from this finding total $30,102. Context: No similar estimated costs were charged to the major program, nor were any other unallowable costs identified in our testing of a statistically valid sample of forty payroll and general cash disbursement transactions. As such, we believe this finding represents an isolated incidence and not a systemic problem. Management is currently proceeding with corrective action at the pass-through agency’s direction and has adjusted the reported amounts in the financial statements and schedule of expenditures of federal awards accordingly. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that management performs a periodic reconciliation of expenditures charged to federal awards to actual costs incurred. Views of Responsible Officials: There is no disagreement with the finding.
Finding 2025-001– Allowable Costs – Significant Deficiency in Internal Control Over Compliance and Instance of Noncompliance Federal Program: COVID-19 – Disaster Grants – Public Assistance (Presidentially Declared Disasters) (Assistance Listing #97.036) Federal Agency: U.S. Department of Homeland Security Award Year: 2025 Criteria – Pursuant to 2 CFR §200.403 and 2 CFR §200.430, costs charged to federal awards must be accurate, allowable, properly supported, and based on records that accurately reflect the work performed. Payroll costs charged to a federal award must be based on the actual compensation rates applicable during the period in which the services were performed. Condition – During our testing of the allowable costs compliance requirements of the COVID-19 – Disaster Grants – Public Assistance (Presidentially Declared Disasters) Program, we noted LAJH used subsequent employee pay rates when calculating payroll reimbursement requests submitted under the grant rather than the contemporaneous pay rates in effect during the applicable period of performance. In addition, there were duplicate entries included in this population, leading to an overstatement of allowable costs. Cause – LAJH did not have adequate internal controls in place to ensure payroll reimbursement calculations were based on accurate payroll records and pay rates applicable to the period during which grant-related services were performed. Effect – As a result, payroll expenditures charged to the federal program were overstated, resulting in questioned costs totaling $79,825. In addition, LAJH was not in compliance with federal allowable cost requirements. Questioned costs – $79,825 Context – The exception was identified through testing of payroll expenditures charged to the federal program. The error related to the methodology used to calculate reimbursable payroll costs for employees whose compensation rates changed after the grant performance period as well as a lack of overall review of the expenditures included in this grant. Identification as a repeat finding, if applicable – This is not a repeat finding. Recommendation – We recommend that LAJH strengthen its internal controls over payroll reimbursement calculations to ensure that amounts charged to federal awards are supported by contemporaneous payroll records and the actual pay rates in effect during the applicable service period. In addition, LAJH should implement a comprehensive review process to verify that all expenditures included in reimbursement requests are appropriate, complete, and free of duplicate entries. Management should also review all payroll-related reimbursement requests submitted under the program and adjust previously claimed amounts, as necessary. Views of responsible officials – Management agrees with the finding. During the preparation of payroll reimbursement calculations for the FEMA Public Assistance Program, subsequent employee pay rates were inadvertently used rather than the contemporaneous pay rates applicable during the grant performance period. Management has reviewed the calculation methodology and acknowledges that this resulted in questioned costs of $79,825.
Federal Agency: United States Department of Housing and Urban Development Pass-Through Entity: Texas Department of Housing and Community Affairs Assistance Listing Number: 14.231 Federal Program Name: Emergency Solutions Grants Program (“ESG”) Subrecipient Contract Number: 42246070038 Award Number: E24-DC-48-0001 Type of Finding: Allowable Costs/Cost Principles – Significant Deficiency in Internal Control over Compliance Criteria In accordance with 2 CFR §200.403 and §200.430, costs charged to federal awards must be allowable, allocable, and properly documented. Compensation for personnel services must be supported by records that accurately reflect the work performed and must be allocated to benefiting programs based on actual activity. In addition, the ESG contract requires that personnel costs charged to the grant be supported by accurate time distribution records that reflect actual time worked and allocate costs by specific program and funding source. Condition During testing of transactions charged to the ESG program, we noted that employee timesheets were not properly allocated by program. Payroll and related benefits charged to the program were not supported by documentation reflecting actual time spent on grant activities. While the Center maintains budget-based allocations in its accounting system, such allocations do not replace the requirement to allocate payroll costs based on actual time worked by program. Cause The payroll processing company used by the Center does not have the functionality to allocate employee time by program, and management did not implement compensating controls to ensure compliance with federal time-and-effort requirements. Effect As a result, payroll and related benefit costs charged to the ESG program were not properly supported or allocable in accordance with 2 CFR Part 200, resulting in questioned costs. These costs are subject to potential disallowance by the awarding agency and possible repayment from the Center. Questioned Costs and Likely Questioned Costs Based on the specific exceptions identified in our sample, known questioned costs totaled $4,662 for the period tested. Using the results of the sample and projecting the errors to the applicable population of transactions, we estimate likely questioned costs of $234,582 for the program. Recommendation We recommend that management strengthen internal controls over payroll and timekeeping allocation, including requiring detailed time tracking by program, enhanced supervisory review, and periodic internal monitoring. Management should also implement a review and approval process to ensure personnel costs charged to the program comply with contract terms and federal cost principles prior to reimbursement.
Federal Agency: United States Department of Justice Pass-Through Entity: Texas Office of the Governor Assistance Listing Number: 16.575 Federal Program Name: Victims of Crime Act (“VOCA”) Contract Number: 285706 and 285707 Federal Award Number: 15POVC-23-GG-00468-ASSI Type of Finding: Allowable Costs/Cost Principles – Significant Deficiency in Internal Control over Compliance Criteria In accordance with 2 CFR §200.403 and §200.430, costs charged to federal awards must be allowable, allocable, and properly documented. Compensation for personnel services must be supported by records that accurately reflect the work performed and must be allocated to benefiting programs based on actual activity. Condition During testing of transactions charged to the VOCA program, we noted that employee timesheets were not properly allocated by program. Payroll and related benefits charged to the program were not supported by documentation reflecting actual time spent on grant activities. While the Center maintains budget-based allocations in its accounting system, such allocations do not replace the requirement to allocate payroll costs based on actual time worked by program. Cause The payroll processing company used by the Center does not have the functionality to allocate employee time by program, and management did not implement compensating controls to ensure compliance with federal time-and-effort requirements. Effect As a result, payroll and related benefit costs charged to the VOCA program were not properly supported or allocable in accordance with 2 CFR Part 200, resulting in questioned costs. These costs are subject to potential disallowance by the awarding agency and possible repayment from the Center. Questioned Costs and Likely Questioned Costs Based on the specific exceptions identified in our sample, known questioned costs totaled $2,406 for the period tested. Using the results of the sample and projecting the errors to the applicable population of transactions, we estimate likely questioned costs of $178,546 for the program. Recommendation We recommend that management strengthen internal controls over payroll and timekeeping allocation, including requiring detailed time tracking by program, enhanced supervisory review, and periodic internal monitoring. Management should also implement a review and approval process to ensure personnel costs cha
Program Name: 93.778 Medicaid Cluster Description: Unallowable Costs and Reporting Condition and Criteria: The District charged payroll costs to the Medicaid program that were also charged to another federal program (IDEA Flow-Through), resulting in duplicate federal reimbursement for the same expenditures (“double-dipping”). Under 2 CFR 200.403 and 2 CFR 200.405, costs must be allocable to a single federal award and must not be charged to multiple programs. During audit testing of payroll charges, we identified employees whose salaries were allocated to both the Medicaid and IDEA Flow-Through programs for overlapping pay periods. Effect: The District’s internal controls failed to prevent or detect duplicate charges of federal payroll costs, resulting in noncompliance with federal cost principles and inaccurate Medicaid claiming. Cause: The condition resulted from control deficiencies in the District’s implementation of the new Skyward “Qmlative” accounting system. Specifically, the District did not select a configuration setting (“cross-reference other federal codes”) necessary to prevent duplicate allocations when importing payroll data for Medicaid claiming. Additionally, the District’s quarterly payroll review procedures focused on verifying employee totals rather than reconciling detailed payroll allocations across federal programs, which contributed to the oversight. Questioned Costs: $345,925 (projected) Auditors’ Recommendation: We recommend that the District strengthen internal controls over payroll cost allocation and Medicaid claiming to ensure that costs are charged to only one federal program. Specifically, the District should review and update the Skyward Qmlative configuration to properly identify and exclude payroll costs already charged to other federal projects, and implement detailed quarterly review procedures to verify that payroll data reconciles across all federal program codes. Views of Responsible Officials and Corrective Action Plan: See attachment for District’s corrective action plan.
ALN 84.010 - Title I - Grant # 241530 2324 - Grant Ending September 30, 2024 Condition and Criteria: 2 CFR 200.403 of the Uniform Guidance mandates that only necessary, and allowable costs be drawn down off of federal grants. During the audit, we found that the prior fiscal year’s accrued payroll, which was drawn off of the grant in the previous fiscal year, was drawn off of the grant a second time in the current fiscal year. Effect: The District unintentionally drew payroll expenses off of the Title I grant a second time. Cause: The prior year accrued payroll related to Title I was not reversed out of the current year expenses prior to the Final Expenditure Report being prepared. Context: Management believed that all accrued payroll had been reversed out of the current fiscal year prior to preparing the Final Expenditure Report and did not intend to draw those expenses a second time. Questioned Costs: $53,509 Auditors' Recommendation: We recommend that management implement procedures to ensure that all accruals charged to federal grants are properly reversed in the subsequent fiscal year to ensure that duplicate draws on those same expenses are not made. Views of Responsible Officials and Planned Corrective Actions: The District understands the issue and will ensure that all payroll accruals are fully reversed at the start of the new fiscal year, to ensure that expenses are not drawn a second time. Please see the attached Corrective Action Plan prepared by the District.
Allowable Costs Information on Federal Program: U.S. Department of Education, Education Stabilization Funds - American Rescue Plan (Elementary and Secondary School Emergency Relief Fund, and Homeless Youth and Children, Assistance Listing numbers 84.425U and 84.425W) passed through the New York State Education Department. Criteria: 2 CFR Section 200.402 stipulates the total cost of a federal award is the sum of the allowable direct and allocable indirect costs minus any applicable credits. In addition, 2 CFR Section 200.403(e) stipulates that costs must be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian Tribes only, as otherwise provided for in that part.Statement of Condition: During our review of the final cost reporting related to Education Stabilization Funding, it was noted that amounts reported did not agree to the underlying accounting records and financial statements. Statement of Cause: The District did not have appropriate internal controls over compliance to reconcile the expenditures reported and claimed under each grant within the Education Stabilization Funds with the underlying accounting records. Statement of Effect: The District is not in compliance with 2 CFR Section 2004.02 and 2 CFR Section 200.403(e). The District has submitted final claims related to expenditure of federal awards that do not agree to the underlying accounting records. For program 84.425U, total expenditures recorded in the general ledger were $9,449,986, however, the expenditures claimed on the final cost report were $9,857,389. The District was paid $9,857,389 under this grant. For program 84.425D, total expenditures recorded in the general ledger were $4,813,366, however, the expenditures claimed on the final cost report were $4,413,838. The budget approved for the costs under this program was $4,773,034. The District was paid $4,773,034 under this grant. In the District financial statements, the District has a liability recorded in the amount of $407,403 which represents the difference between the actual expenditures and expenditures claimed under 84.425U. For 84.425D, as the District expended more than the approved budget amount, there is no receivable recorded related to the amount expended in excess of the approved budget and funds received. Questioned Costs: None Perspective Information: As part of our testing, we review final cost reports in comparison to the underlying accounting records. The expenditures recorded in the general ledger agree to the cumulative amounts that have been reported on the schedule of expenditures of federal awards for each year within the grant period. Expenditures under these programs have been tested throughout the grant period on a test basis to determine compliance with allowability of costs. Repeat Finding: No Recommendation: We recommend that all cost reporting for federal grants be reconciled to the underlying accounting records and reviewed prior to submission. Additionally, we recommend reaching out to the oversight agency to correct the errors. Views of the Responsible Officials: The District will work to determine where the discrepancy derives from and will correct claim reports and resubmit as necessary.
CONDITION: During testing of disbursements charged to the Head Start program, two instances were identified where duplicate payments were made to the same vendor for the same invoice. The payments were charged to the Head Start program. CONTEXT: A sample of 40 disbursements totaling $124,950 was selected from a population of 1,385 disbursements totaling $811,622. The test found two disbursements that were not in compliance with questioned costs totaling $2,824. CRITERIA: 2 CFR § 200.303(a) requires that the School Board 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. Additionally 2 CFR§200.403(a) states that costs must “be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.” CAUSE: The School Board relies on its accounting software’s automated controls to prevent the processing of duplicate invoices. However, the duplicate payments occurred because slightly different invoice numbers were entered into the system, allowing the software to recognize the transactions as unique and process both payments. EFFECT: The federal program may have been overcharged. RECOMMENDATION: The School Board should evaluate their internal controls and review expenses being charged to the Head Start program to ensure they are allowable.
FINDING 2025-001 Information on the federal program: Subject: Special Education Cluster (IDEA) – Internal Controls Federal Agency: Department of Education Federal Program: Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-046-PN01, 22611-046-ARP, 22619-046-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Earmarking Audit Findings: Significant Deficiency Criteria: 2 CFR section 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal awards in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO)...." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards:… (g) Be adequately documented. . . ." 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." Condition: An effective internal control system was not in place at the School Corporation in order to ensure compliance with requirements related to the grant agreement and earmarking compliance requirement. Cause: The School Corporation's management had not developed a system of internal controls to ensure compliance with the earmarking requirements. Effect: The failure to establish an effective internal control system placed the School Corporation at risk of noncompliance with the grant agreement and the compliance requirements. A lack of segregation of duties within an internal control system could have also allowed noncompliance with the compliance requirements and allowed the misuse and mismanagement of federal funds and assets by not having proper oversight, reviews, and approvals over the activities of the programs. Questioned Costs: There were no questioned costs identified. Context: The School Corporation is a member of the Porter County Education Services (Cooperative). During fiscal year 2023-2024, the Cooperative operated the special education program and spent the federal money on behalf of all its members. As the grant agreement was between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. The School Corporation did not have internal controls in place to ensure that the Cooperative complied with the earmarking requirements. The Cooperative did not have adequate procedures in place to ensure that the required level of expenditures for non-public school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure non-public school expenditures were appropriately identified and reported. The Non-Public Proportionate Share expenditures for the 22611-046-PN01, 22611-046-ARP, and 22619- 046-ARP grant awards could not be verified for the individual member schools. Total grant expenditures were posted as expended. The non-public proportionate share expenditures were determined by applying a percentage to the non-public school budgeted expenditures. As such, we were unable to identify if the minimum amount per each applicable member schools’ grant award was expended and properly reported to IDOE, as required. The lack of internal controls was isolated to the 22611-046-PN01, 22611-046-ARP, and 22619-046-ARP grant awards which were fully expended during fiscal year 2024. These three grant awards had minimum earmarking requirements for the Non-Public Proportionate Share of $39,016, $9,471, and $533, respectively. Identification as a repeat finding, if applicable: No. Recommendation: We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to monitor the Cooperative and ensure non-public proportionate share funds are appropriately allocated to the member school based on expenditures charged directly on behalf of the member school. Supporting documentation for these expenditures should be retained for audit. Views of Responsible Officials and Planned Corrective Actions: Management agrees with the finding and has prepared a corrective action plan.
Assistance Listing, Federal Agency, and Program Name - 97.036, U.S. Department of Homeland Security, Disaster Grants - Public Assistance (Presidentially Declared Disasters) Federal Award Identification Number and Year - 752894 and 752895; 2025 Pass through Entity - Michigan State Police (MSP) Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - According to 2 CFR § 200.403(f), which outlines factors affecting the allowability of costs under federal awards, costs must not be included as a cost or used to meet cost-sharing or matching requirements of any other federally financed program in either the current or a prior period. This provision is intended to prevent duplication of federal funding and ensure that each program bears only its fair share of costs. Condition - Costs charged to ALN 97.036 - Disaster Grants - Public Assistance were also charged to ALN 84.425 - Education Stabilization Fund (Elementary and Secondary School Emergency Relief - ESSER) in prior fiscal years, indicating potential duplication of expenditures across federal programs. Questioned Costs - $70,015,657 If questioned costs are not determinable, description of why known questioned costs were undetermined or otherwise could not be reported - N/A - questioned costs were determinable. Identification of How Questioned Costs Were Computed - Questioned costs represent all of the expenditures reported on the SEFA for the year ended June 30, 2025. Refer to the Context section below for additional details. Context -In April 2022, FEMA issued an advisory regarding its funding support for the in-person operation of schools and school districts. The advisory clarified that schools and districts could utilize ESSER funds under ALN 84.425, administered by the U.S. Department of Education, to cover upfront costs for health and safety measures. These costs could later be submitted for reimbursement through FEMA’s Public Assistance program. However, the advisory emphasized that once FEMA reimbursement is received, the district must return the corresponding amount to the ESSER grant. The School District was awarded two grants under ALN 97.036 in December 2024 and January 2025. These grants were used to cover costs associated with COVID-19 diagnostic and screening testing. The ESSER grant period concluded on September 30, 2024. On October 16, 2025, the School District received reimbursement from MSP. Cause and Effect - The obligation dates for the FEMA awards occurred after the end of the ESSER grant period under ALN 84.425. Although FEMA’s advisory permitted districts to use ESSER funds for eligible upfront costs, the School District was unable to reimburse the ESSER grant prior to the expiration of its period of availability. As a result, approximately $70 million in expenditures are considered questioned costs. Recommendation - Because the obligation dates for the FEMA awards occurred after the conclusion of the ESSER grant period, we recommend that the School District coordinate with the Michigan Department of Education as the pass-through entity for ESSER funding and the Michigan State Police as the pass-through entity for FEMA funding. This collaboration is essential to address the timing misalignment, which prevented reimbursement to the ESSER grant prior to its period of availability. Views of Responsible Officials and Corrective Action Plan - The School District applied for reimbursement of potentially eligible COVID-19 expenditures in 2022. Per an April 5, 2022 FEMA memo, "FEMA Continues Funding to Support the Safe Operations of Schools," school districts could apply for reimbursement for ESSER-funded expenditures and then, upon approval of application, shift the funds to general fund. “Schools and school districts may utilize FEMA Public Assistance to receive full reimbursement for costs for the purposes above. Schools and districts may also use Elementary and Secondary School Emergency Relief (ESSER) funding from the U.S. Department of Education as a way to provide the up-front cost for the above health and safety measures, and later seek reimbursement through the FEMA Public Assistance process. For example, a local education agency (LEA) may use ESSER funds for costs that may ultimately be covered by FEMA; however, once it receives funds from FEMA for those costs, it must reimburse the ESSER grant account.” FEMA provided district award notification for COVID-19 testing in December 2024 and January 2025. By this time, the ESSER grant had closed on September 30, 2024 and the final expenditure reports for ESSER had been submitted to MDE in November 2024. Therefore, the School District could not complete the allowable general fund swaps. The School District notified Michigan Department of Education and Michigan State Police of the timing issue. Upon request from Michigan State Police, the School District provided documentation that general funds were available to conduct the swaps if the FEMA approval had been received in a timely manner.
2025-001 Costs Incurred Beyond the Period of Performance Program Name/Assistance Listing Number: 93.788 Opioid STR Federal Agency: Department of Health and Human Services Type of Finding: Significant Deficiency Compliance Requirement: Period of Performance Criteria: According to 2 CFR §§200.1, 200.308, 200.309, 200.344, and 200.403(h), a non-Federal entity may only charge allowable costs incurred during the approved budget period of the Federal award’s period of performance, and any costs incurred before the Federal award was made that were authorized by the Federal awarding agency or pass-through entity. All financial obligations incurred under the Federal award must be liquidated within the required time period. Costs incurred outside the approved period of performance are unallowable and constitute questioned costs. Condition: During cash disbursement testing, it was identified that costs totaling $56,017.62 were incurred after the end of the period of performance (which ended on September 30, 2024; grant ID 2401119 SOR 3.0 – SOS). Although the expenditures were allowable in nature, they were outside the approved period and therefore did not comply with the grant terms. Cause of Condition: The expenditures were incurred after the period of performance, possibly due to timing of invoicing. There was insufficient monitoring or review to ensure that all expenses were properly charged within the approved period. Potential Effect of Condition: The following are the potential effect based on the findings noted above: a. Non-Compliance: The Organization is at risk of non-compliance with the funding agreement, which may lead to questioned costs or repayment obligations. b. Financial Oversight Risk: Continued occurrence may indicate a lack of internal controls ensuring compliance with grant period requirements. Questioned Cost: $56,017.62 Recommendation: We recommend the following: a. Implement a monitoring process to ensure that all costs are incurred within the approved period of performance. b. Document and maintain a checklist of allowable expenses by period to prevent future occurrences of similar issues. Description of the Nature and Extent of Issues Reported: All expenditures outside the period of performance were identified during testing. The total known questioned cost is $56,017.62, which exceeds the $25,000 threshold for reporting under 2 CFR §200.516(a)(3). Management Response: Management concurred with the finding. During the current fiscal year, the Organization has implemented additional controls to ensure that all grant funding is expended within the timeframe allotted
Grant Cash Management - Community Development Block Grants ALN 14.228 - Community Development Block Grants - Grant # MSC-221005-WRI - Grant Ending December 31, 2025 Condition and Criteria: 2 CFR 200.403 of the Uniform Guidance mandates that only necessary, and allowable costs be drawn down off of federal grants. During the audit, we found that the Water Plant Construction project had construction invoices being drawn down from two grant sources which occasionally had draw requests that totaled more than the invoice. Effect: The City received reimbursements in excess of the amounts expended during the current year. The grants are budgeted to cover the total cost of the overall project, therefore, the total amount drawn will not exceed the total expenditures in the long run, however, this is a cash management issue, as some grant funds were then received in advance. Cause: The grant funded by the Economic Development Administration (EDA) and the grant funded by the Michigan Economic Development Corporation (MEDC) jointly cover the costs of the Water Plant Construction project. During the year, the EDA grant reimbursed construction invoices based on a set percentage, while the MEDC grant then had draw requests that exceeded the remaining percentage for those same invoices. Context: The EDA grant reimburses the City for a set percentage of construction invoices, with the remaining balance intended to be covered by the MEDC grant, However, during the current year, there were situations where the EDA grant reimbursed construction invoices for the set percentage, with the requests made on the MEDC grant exceedin the percentage not covered by the EDA grant. Questioned Costs: $230,444. As a result of the grants being budgeted to cover the total cost of the overall project, the total amount drawn will not exceed the total expenditures in the long term. These questioned costs are entirely due to advanced draws on the grant, causing a timing issue. Auditor's Recommendation: We recommend that management view these two grant sources as one and take additional care when drawing down funds to ensure that invoices are not being drawn in excess of the amount expended. Views of Responsible Officials and Planned Corrective Actions: The City Manager understands the issue has will work on devoloping and implementing procedures to ensure that all invoices are not drawn beyond the amount expended.
FINDING 2025-001 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Program: Special Education Grants to States Assistance Listings Number: 84.027 Federal Award Number and Year (or Other Identifying Number): 24611-009-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 15 PIKE COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-004. Condition and Context The School Corporation did not have an effective internal control system in place to ensure compliance with the earmarking requirements and to ensure that the required level of expenditures for nonpublic school students with disabilities was met. Specifically, internal controls were not designed to ensure expenditures for nonpublic school students with disabilities were appropriately identified, tracked in the accounting records, and accurately reported. The School Corporation did not meet the earmarking requirements for grant award number 24611-009-PN01. The required expenditures for nonpublic proportionate share was $4,330; however, the School Corporation could only provide documentation of expenditures totaling $2,250. This resulted in an underexpenditure of $2,080 relative to the required set-aside amount for the grant. In addition, the School Corporation did not track the expenditures in a separate line item within the ledger to specifically identify services provided for nonpublic school students. The lack of internal controls and noncompliance was isolated to 24611-009-PN01 grant award. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: . . . (g) Be adequately documented. . . ." 2 CFR 200.208(b) states in part: "The Federal awarding agency or pass-through entity may adjust specific Federal award conditions as needed, . . ." 511 IAC 7-34-7(b) states: "The public agency, in providing special education and related services to students in nonpublic schools must expend at least an amount that is the same proportion of the public agency total subgrant under 20 U.S.C. 1411(f) as the number of nonpublic school students with disabilities, who are enrolled by their parents in nonpublic schools within its boundaries, is to the total number of students with disabilities of the same age range." INDIANA STATE BOARD OF ACCOUNTS 16 PIKE COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause The School Corporation had a lack of documented internal controls and oversight regarding specific grant compliance requirements. The School Corporation Treasurer was unaware of the mandate to separately track and ensure full expenditure of nonpublic proportionate share funds. This lack of knowledge led to an unverified assumption that the Special Education Cooperative was performing this tracking function on the School Corporation's behalf, which was not the case. Effect The School Corporation's lack of internal controls resulted in noncompliance with federal earmarking requirements and the terms of the grant award. The outcome was an underexpenditure of $2,080, representing funds intended for eligible nonpublic students. This amount constitutes questioned costs and may be subject to repayment to the granting agency. 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 We identified $2,080 in known questioned costs as noted above in the Condition and Context. Recommendation Management of the School Corporation should develop written policies and procedures which would require tracking of actual nonpublic proportionate share expenditures. Documentation should be maintained to show how these expenditures are being tracked to ensure compliance with the earmarking requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.