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.
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.
8. Criteria or specific requirement (including statutory, regulatory, or other citation: Per the US Department of Education ESSER FAQ E-3.d: E-3.d. How long may ESSER or GEER-funded activities continue after the liquidation period? Generally, it is not good stewardship of Federal funds or prudent business practice to prepay for services that will extend many years into the future. However, under limited circumstances where a grantee or subgrantee timely obligates ESSER funds, ESSER-funded activities may continue for a reasonable time beyond the liquidation period. Factors impacting how long ESSER-funded activities may extend past the liquidation period include: (1) Whether the funds were properly obligated and liquidated in a timely manner; (2) Whether the activities would be allowed to extend beyond the liquidation period under applicable State and local procurement rules; (3) Whether the extended activities constitute a reasonable and necessary use of Federal funds; and (4) Whether prudent business practices and internal controls (which generally limit prepayment) would support the continued activities for the length of time proposed. Grantees and subgrantees must obligate funds by each program’s deadline, which means that if a grantee or subgrantee enters into a contract for activities that continue past the date of obligation and the contractor does not provide the services, the grantee or subgrantee may not enter into a new contract or obligate those funds for a different allowable use. Instead, those funds that were obligated for services that were not delivered will remain unused and will be returned to the U.S. Treasury. Because these are State-administered programs, the SEA or Governor determines whether activities extending past the liquidation period are allowable under the circumstances. For example, an SEA may determine that it is reasonable and necessary under 2 CFR §§ 200.403-200.404 for an LEA to enter into a multi-year software licensing contract with a vendor during the period of availability of ARP ESSER funds and to pay for the entirety of the software license within the liquidation period. However, under the contract, the vendor would continue to provide the services (i.e., software and technical support) for some time after the funds had been liquidated. Please note that the SEA, LEA, or subgrantee would be responsible for returning to the Federal government the cost of any services that were paid with Federal funds but not received. Under no circumstances may services extend beyond the date on which funds revert to the U.S. Department of Treasury (31 USC § 1552), which occurs four years after the obligation deadline. However, nothing prevents an SEA or LEA from continuing successful activities or services with non-ESSER/GEER funding. 9. Condition: ESSER III funds were expended for a 6-year math curriculum, beginning 9/30/24 and ending 9/30/30. Additionally, ESSER III funds were expended for the 2-year prepayment of cases of paper, to be delivered periodically from November 2024 through July 2026. The services extend beyond the dates noted above and include a prepayment. 10. Questioned Costs: For the math curriculum, questioned costs have been identified of $51,233 for the service period of 9/30/28-9/30/30. It is unclear if costs of $76,849 applicable to service period 9/3/25-9/30/28 are allowable, as this would be determined by the SEA. For the prepayment of paper, questioned costs have been identified of $27,320, applicable to service period March 2025-July 2026. 11. Context: N/A 12. Effect: A portion of the Federal funds received may need to be returned to the granting agency. Because the obligation date has passed, those funds may not be re-obligated to cover otherwise eligible costs. 13. Cause: In an effort to utilize available funding, the District overlooked these requirements. 14. Recommendation: We recommend that the District gain a thorough understanding of all applicable compliance requirements prior to expending Federal funds. 15. Management's response: See corrective action plan.
FINDING 2025-002 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants, COVID-19 - Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173, 84.173X Federal Award Numbers and Years (or Other Identifying Numbers): 22611-021-PN01, 22611-021-ARP, 22619-021-ARP, 23611-021-PN01, 23619-021-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Modified Opinion 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 is a member of the Greater Lafayette Area Special Services (GLASS) Cooperative (Cooperative). During fiscal year 2023-2024, the Cooperative operated the special education programs and spent the federal money on behalf of all its members. As the grant agreements were between the Indiana Department of Education (IDOE) and each member school, the School Corporation was responsible for ensuring and providing oversight of the Cooperative. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. 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 nonpublic school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure nonpublic school expenditures were appropriately identified and reported. The Non-Public Proportionate Share expenditures for the 22611-021-PN01, 22611-021-ARP, 22619-021-ARP, 23611-021-PN01, and 23619-021-PN01 grant awards could not be verified for the individual member schools. Total grant expenditures were posted as expended. The nonpublic proportionate share expenditures were determined by applying a percentage to the nonpublic school budgeted expenditures. As such, we were unable to identify if the minimum amount per the grant awards was expended and properly reported to the IDOE as required. The lack of internal controls and noncompliance were isolated to the 22611-021-PN01, 22611-021-ARP, 22619-021-ARP, 26311-021-PN01, and 23619-021-PN01 grant awards. INDIANA STATE BOARD OF ACCOUNTS 17 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 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." Cause A proper system of internal controls was not designed by management of the School Corporation. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As such, the School Corporation's nonpublic proportionate share expenditures could not be determined, and it could not be determined if the School Corporation met its minimum nonpublic proportionate share as required by the grant agreement. INDIANA STATE BOARD OF ACCOUNTS 18 LAFAYETTE SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to ensure nonpublic proportionate share funds are appropriately allocated to the member school based on expenses charged directly on behalf of the member school. Supporting documentation for these expenses should be retained for audit. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2025-002 Subject: COVID-19 - Education Stabilization Fund - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425U, 84.425D Federal Award Numbers and Years (or Other Identifying Numbers): S425U210013, S425D200013 Pass-Through Entity: Indiana Department of Education Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation did not have an effective system of internal controls over federal award requirements that would have ensured that expenses charged to the grant were for activities and costs that were allowable under the federal award. The School Corporation designed a process for vendor claims in which all purchase orders were approved by either the Superintendent of Schools or a member of his staff who was knowledgeable of the requirements of the federal program, with the associated claim vouchers, then reviewed by another employee who was also knowledgeable of the requirements of the federal program prior to submission to the School Board for final approval for payment and inclusion on the reimbursement requests submitted for the program. Out of a sample of 25 claims selected for internal control testing, the School Corporation was unable to provide 5 claim vouchers to show the aforementioned review and approval. We were therefore unable to verify that the stated internal control was properly implemented and operated effectively for those claims to ensure the expenditures were for activities and costs allowed under the federal award. INDIANA STATE BOARD OF ACCOUNTS 17 SOUTH SPENCER COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The School Corporation also designed a process for payroll claims where the Superintendent of Schools reviewed and approved the detailed payroll distribution reports which included employees with payroll expenses charged to the federal award. However, the internal control was not adequately designed and did not detect noncompliance with the allowable cost requirements of the award. During compliance testing of vendor and payroll claims, one payroll claim for a Certified Intervention Teacher was selected for testing. The School Corporation was unable to provide documentation to support the determination of the amount of the teacher's total salary that was allocated to the federal award. We then reviewed all payroll expenses associated with the Certified Intervention Teacher position paid out of the federal award during the audit period and determined that a total of $22,416 was charged to the federal award without proper documentation to support the amount of the teacher's salary allocated to the federal award. We consider the $22,416 to be questioned costs. The lack of effective vendor internal controls was systemic to both awards but was isolated to fiscal year 2023-2024 prior to the appointment of the current Treasurer. The lack of effective payroll internal controls was systemic to both awards, while the noncompliance was isolated to award number S425U210013. 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 200.302(b) states in part: "The financial management system of each non-Federal entity must provide for the following . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, asses, expenditures, income and interest and be supported by source documentation. . . ." 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. . . . INDIANA STATE BOARD OF ACCOUNTS 18 SOUTH SPENCER COUNTY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (g) Be adequately documented. . . ." Cause The School Corporation experienced turnover in a key position related to the internal controls over the federal award, resulting in issues with organization and retention of supporting documentation to verify the key internal control over vendor claims. In addition, the School Corporation's policies and procedures were not properly designed to show the determination of how employees' compensation would be allocated to multiple cost centers. As a result, the key internal control over payroll claims was unable to prevent, or detect and correct, noncompliance with the allowable costs requirement of the federal award. Effect Without proper implementation of an effectively designed system of internal controls, noncompliance that resulted in questioned costs remained undetected. 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 $22,416 in known questioned costs as noted in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls to ensure expenditures made from federal awards are for activities and costs allowed per the terms and conditions of the federal award and in compliance with the Activities Allowed or Unallowed and the Allowable Costs/Cost Principles compliance requirements. We also recommended that the School Corporation strengthen its policies and procedures to ensure that appropriate supporting documentation is retained and available for audit. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
8. Criteria or specific requirement: Per Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (2 CFR Part 200) Subpart E, Cost Principles Section 200.403(b), Factors affecting allowability of costs, costs must conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. Per 2 CFR Section 200.308(b), Deviations from approved budget, the recipient must report deviations from the approved budget, project, or program scope, or objectives. The recipient must request prior approvals from the Federal agency or pass-through entity for budget and program plan revisions in accordance with this section. '9. Condition: Nine (9) employee payroll expenditures were claimed at an hourly rate greater than that approved by ISBE. 10. Cause: The District's internal controls over compliance were not functioning effectively to ensure claims for payroll expenditures were made at the approved hourly rate. '11. Effect: The District was not in compliance with the allowable costs/cost principles compliance requirement. '12. Questioned Costs: Questioned costs of $28,651 were computed based on the difference between the payroll expenditures claimed and the allowable amount calculated using the hourly rate approved by ISBE. '13. Context: From the population of one hundred (100) employees claimed under this grant, a sample of ten (10) employees were selected for testing. We noted nine (9) employee payroll expenditures were claimed at a rate greater than the rate allowable per the ISBE approved budget. A statistically valid sample was not utilized. 14. Recommendation: We recommend that management review its policies and procedures and implement changes to strengthen internal control over compliance. 15. Management's response: The District agrees with the auditor's finding and recommendation.
Criteria 2 CFR section 200.403, Factors affecting allowability of costs. 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 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 recipient or subrecipient. (d) Be accorded consistent treatment. For example, a cost must 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 requirements of any other federally-financed 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). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the Federal agency. All other costs must be incurred during the approved budget period. At its discretion, the Federal agency is authorized to waive prior written approvals to carry forward unobligated balances to subsequent budget periods. See § 200.308(g)(3). 10th Edition Procurement Manual issued by the District in September 2023, Chapter 8 – What to Do When Item or Services Are Received A. Online Goods Receipts Prior to entering an online Goods Receipt (GR), schools and offices must have a copy of the vendor invoice and Purchase Order (PO). They are responsible for verifying the accuracy of the order and entering the “online receiver” into SAP immediately after delivery of materials. Partial receiving is acceptable to account only for materials actually received. Payments are processed based on materials that have been received online. F.1. Payment for Materials Accounts Payable will process payment when the following three items are matched in SAP: (1) Purchase Order, (2) Goods Receipt, and (3) vendor invoice. F.2.c. Contracted Professional Services Accounts Payable will process payments for contracted professional services when the following four items are matched: executed contract/amendment, Purchase Order, vendor invoice, and approved authorization for payment. F.3. Contract Close-Out Upon contract expiration or termination, the District must ensure all deliverables have been received, final invoices paid, indirect costs settled, and any unspent funds unencumbered and transferred to the appropriate District account. Condition As part of our review of cash disbursement expenditures, we selected a statistically valid sample of forty (40) cash disbursement transactions from each of the following programs: Title I, Title IV, and Perkins. We reviewed the supporting documentation for these transactions to determine whether the expenditures were allowable under program regulations, accurately charged to the programs, and appropriately supported in accordance with 2 CFR Section 200.403 and the District Procurement Manual. Title I: From the $3,265,728 sample tested (out of $48,286,535 total disbursements), we identified one (1) purchase order with a variance between the Goods Receipt (GR) and vendor invoice (IR) amounts. This discrepancy resulted in an overstatement of reported expenditures by $21,394. The District subsequently corrected this by reversing the amount to the expenditure accounts in FY 2026. Title IV: From the $560,572 sample tested (out of $9,999,536 total disbursements), we identified one (1) purchase order with a variance between the GR and IR amounts, resulting in an overstatement of reported expenditures by $94,500. The District subsequently corrected this by reversing the amount to the expenditure accounts in FY 2026. Perkins: Additionally, from a $329,432 sample (out of $5,738,606 total disbursements), we identified seven (7) disbursements totaling $868 that lacked adequate proof of delivery of materials. Supporting documentation, such as signed delivery receipts or equivalent evidence of goods received, was not available for these transactions. Cause and Effect These conditions occurred because adjustments were not made to the GR amounts to reflect changes in goods or services received after the initial recording. The unadjusted GR balances led to variances between the GR and IR amounts, resulting in overstatements of reported expenditures for the affected programs. In addition, the lack of adequate proof of delivery of materials occurred because GR were entered without supporting documentation to substantiate that the materials were received. This increased the risk of payment for goods not received, misstatement of expenditures, and noncompliance with federal cost documentation requirements under 2 CFR section 200.403(g). Questioned Costs • Title I (AL No. 84.010): $21,394 overstated due to GR-IR variance. • Title IV (AL No. 84.424A): $94,500 overstated due to GR-IR variance. • Perkins (AL No. 84.048): $868 lacked sufficient supporting documentation that the goods were received. Recommendation We recommend that the District: 1. Strengthen review and reconciliation procedures to ensure that adjustments to the Goods Receipt (GR) are made promptly to reflect actual goods or services received. 2. Enforce documentation controls to require that all Goods Receipts are supported by adequate proof of delivery (e.g., signed delivery receipts, receiving reports, or equivalent evidence) before processing payments. 3. Provide staff training on documentation and reconciliation requirements to ensure compliance with federal cost principles and the District Procurement Manual.
FINDING 2025-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to the States Assistance Listings Number: 84.027, 84.027X Federal Award Numbers and Years (or Other Identifying Numbers): 23611-161 PN01, 22611-161-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters Condition and Context The School Corporation did not have adequate procedures in place to ensure that the required level of expenditures for nonpublic school students with disabilities was met for each grant award. The School Corporation did not have effective internal controls in place to ensure that the required level of expenditures for private school and homeschooled students as nonpublic students were met. The School Corporation spent the entire portion of the required proportionate share amount during the audit period. Time and effort logs were not maintained to determine if the speech-language pathologists paid from these funds were performing duties for the nonpublic students; therefore, amounts charged to the grants were not based on actual time spent for the nonpublic students as required. The School Corporation required amount of proportionate share for grant awards 22611-161-ARP and 23611-161-PN01 was $1,256 and $1,156, respectively. The lack of internal controls and noncompliance was isolated to the 22611-161-ARP and the 23611-161-PN01 grant awards. INDIANA STATE BOARD OF ACCOUNTS 18 MITCHELL COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 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." Cause The School Corporation's management had not developed nor implemented a system of internal controls that would have ensured that time and effort logs were maintained and made available for audit, as it related to the grant agreement and the earmarking compliance requirement. Effect Without the proper implementation of an effectively designed system of internal controls, the School Corporation did not retain and provide appropriate supporting documentation to ensure compliance with earmarking requirements. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish an effective system of internal controls and develop policies and procedures to ensure the Non-Public Proportionate Share funds are appropriately documented using time and effort logs, which are to be maintained and made available for audit as related to the earmarking compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 19 MITCHELL COMMUNITY SCHOOLS SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2025-004 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2024, FY2025 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Condition and Context An effective internal control system was not in place at the School Corporation to ensure compliance with requirements related to the grant agreement and the Allowable Costs/Cost Principles compliance requirement. The School Corporation entered into a fixed price meal contract with a food service management company (FSMC). For each meal type, a fixed price was established and billed by the FSMC based on meal counts served. The School Corporation did not compare the invoices received from the FSMC to the School Corporation's software reports to ensure the number of meals invoiced agreed to the meals served. Two invoices totaling $213,049 from the FSMC were selected for testing but could not be supported with documentation for the amounts billed. The lack of internal controls and noncompliance were systemic issues throughout the audit period. INDIANA STATE BOARD OF ACCOUNTS 19 SOUTH PUTNAM COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 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. . . ." Cause Management had not developed a system of internal controls that would have ensured compliance with the grant agreement and the Allowable Costs/Cost Principles compliance requirement. Invoices from the FSMC were not thoroughly reviewed to ensure the number of meals invoiced agreed with meals served by the School Corporation. Effect The failure to establish an effective internal control system enabled material noncompliance to go undetected. Noncompliance with the grant agreement and the compliance requirement could have resulted in the loss of funds to the School Corporation. Questioned Costs We identified $213,049 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended that the School Corporation's management establish a system of internal controls, including segregation of duties, 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 2025-003 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Programs: Special Education Grants to States, COVID-19 - Special Education Grants to States, Special Education Preschool Grants Assistance Listings Numbers: 84.027, 84.027X, 84.173 Federal Award Numbers and Years (or Other Identifying Numbers): 22611-076-PN01, 22611-076-ARP, 23619-076-PN01 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Material Weakness, Other Matters 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. The 22611-076-PN01, 23611-076-PN01, 22611-076-ARP, 22619-076-ARP, and 23619-076-PN01 grant awards ended during the audit period. The School Corporation did not have internal controls in place to ensure that it fully spent the required nonpublic proportionate share amounts by the end of the grant award for three of the five grant awards tested. The following schedule shows the total nonpublic proportionate share approved by the Indiana Department of Education (IDOE) for the School Corporation for each grant award compared with the total expenditures posted to the ledger for nonpublic proportionate share. The School Corporation had not spent $25,100 of proportionate share funds by the end of the grant award for all awards ending during the audit period. Total Nonpublic Proportionate Grant Award/ IDOE Approved Nonpublic Share Spent by School Project No. Proportionate Share Corporation Difference 22611-076-PN01 $ 61,782 $ 45,609 $ 16,173 22611-076-ARP 14,833 6,553 8,280 23619-076-PN01 2,359 1,712 647 Totals $ 78,974 $ 53,874 $ 25,100 INDIANA STATE BOARD OF ACCOUNTS 19 SOUTH GIBSON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls and noncompliance were isolated to the 22611-076-PN01, 22611-076-ARP, and 23619-076-PN01 grant awards. 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." Cause The School Corporation had not developed or implemented an effective system of internal controls, including oversight and review procedures, to ensure that expenditures for the nonpublic proportionate share were monitored and fully utilized within the grant period. Management was aware of the ability to request a waiver for unspent funds but chose not to pursue that option, resulting in the funds remaining unspent. Effect The failure to establish and maintain an effective internal control system prevented the School Corporation from identifying and correcting the unspent balance of required earmarking funds in a timely manner. This resulted in noncompliance with the earmarking requirements for three of the five grant awards tested as the School Corporation failed to expend $25,100 of the required nonpublic proportionate share by the end of the grant awards. Noncompliance with federal program requirements and the lack of internal controls could jeopardize future federal funding and may require the School Corporation to repay the unspent portion to the pass-through agency. INDIANA STATE BOARD OF ACCOUNTS 20 SOUTH GIBSON SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the School Corporation establish a proper system of internal controls and develop policies and procedures to track total nonpublic proportionate share by approved grant amounts from the IDOE to ensure proportionate share is being spent by the end of the grant award. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
U.S. Department of Agriculture/Passed-through Texas Department of Agriculture Food Distribution Cluster Federal Assistance Listing Number 10.565 – Commodity Supplemental Food Program (Administrative Costs), 10.568 – Emergency Food Assistance Program (Administrative Costs) Award Number: 01576 Criteria or Specific Requirement: Activities Allowed or Unallowable and Allowable Costs/Cost Principles – Costs charged to Federal awards must be necessary, reasonable, consistently treated, adequately documented, and allocable to the program in proportion to the benefits received. (2 CFR §200.403 and §200.405) Condition: During testing of administrative cost allocations for the Food Distribution Cluster, we identified an error in the entity’s allocation spreadsheet used to distribute administrative costs among Texas Emergency Food Assistance Program (TEFAP), Commodity Credit Corp (CCC)-funded TEFAP operations, and Commodity Supplemental Food Program (CSFP). This error caused TEFAP's share of administrative costs to be overstated by $188,459. Reimbursement requests for these overstated amounts were submitted between October and January. Although TEFAP reimbursement caps prevented any actual overpayment for the nine-month period, the early over‑allocation exhausted TEFAP funds sooner, leaving later allowable costs unreimbursed. Cause: A formula error in the allocation spreadsheet double-counted CCC amounts in the TEFAP base, inflating TEFAP’s percentage of shared administrative costs. Effect or Potential Effect: The error caused TEFAP to be assigned more in shared administrative costs than warranted by program benefit. Although reimbursement caps prevented an actual overpayment for the fiscal year, the misallocation exhausted TEFAP funds earlier, leaving later allowable costs unreimbursed. Without correction, the entity could continue to recognize TEFAP administrative and operational reimbursements earlier than warranted in future periods. Questioned Costs: Assistance Listing Number 10.568 – $188,459. Calculated difference between TEFAP funds billed versus actual allocated cost that should have been billed between October and January. Context: The allocation spreadsheet design error caused CCC amounts to be doublecounted in the TEFAP base, inflating TEFAP’s share of pooled administrative costs. Repeat Finding: No Recommendation: Correct the allocation methodology to ensure CCC amounts are not double-counted in TEFAP bases and that each program bears costs in proportion to benefit per 2 CFR §200.405. Implement a documented secondary review of the monthly allocation spreadsheet before posting. Views of Responsible Officials and Planned Corrective Actions: Management concurs with the finding and recommendation. While the misallocation resulted in overstated TEFAP administrative costs by $188,459, the program’s reimbursement cap and the entity’s actual incurred costs prevented any overbilling or excess Federal draw. See further information on the corrective action plan provided by management.
Identification of the Federal Program: Federal Agency and Program Name Assistance Listing # COVID-19 – Disaster Grants – Public Assistance (Presidentially Declared Disasters) (FEMA) U.S. Department of Homeland Security Pass through grantor: Virginia Department of Emergency Management Pass through award number: 4512DR-VA Award Period: 1/21/2020 – 6/30/2022 97.036 Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): 2 CFR 200.303 requires that a non-Federal entity must “(a) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” issued by the comptroller General of the United States and the “Internal Control Integrated Framework”, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” 2 CFR 200.403(h) states: “Administrative closeout costs may be incurred until the due date of the final report(s). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the Federal agency. All other costs must be incurred during the approved budget period. At its discretion, the Federal agency is authorized to waive prior written approvals to carry forward unobligated balances to subsequent budget periods. See § 200.308(g)(3).” Condition: The Authority did not validate the accuracy of the cost incurred dates and identify expenditures that were incurred outside of the period of performance related to assistance listing 97.036 – COVID-19 – Disaster Grants – Public Assistances (Presidentially Declared Disasters) (FEMA) prior to submission of the non-federal entity’s project worksheet. Cause: The Authority did not have sufficient internal controls to ensure that accuracy of the cost incurred dates or expenditures were incurred within the period of performance prior to submission of the non-federal entity’s project worksheet. Effect or Potential Effect: The Authority may inappropriately obtain funding for unallowable expenses or costs incurred outside the period of performance as a result of the reporting and verification of the completeness and accuracy of the cost incurred dates and expenditures included within the submission was not sufficient. Questioned Costs: $104,434 – represents the total payroll expenditures incurred after the end of the period of performance. Context: We identified $104,434 of payroll expenditures included in the submission of two force labor FEMA projects, resulting in duplicate costs being submitted to FEMA. The $104,434 was incorrectly included in the project that ended June 30, 2022 and was appropriately included in the project that began July 1, 2022. The costs in question are the payroll expenses from the second week of the pay period (June 26, 2022 through July 9, 2022) incurred after the end of the period of performance. The total obligation of the project worksheet that had the duplicate costs was $2,278,390. Management corrected the duplicated amount of the federal expenditures reported on the Schedule, in which total FEMA expenditures are $31,901,782 for the year ended June 30, 2025. The duplicate costs represent 4.6% of the related project and approximately 0.3% of total FEMA expenditures for the fiscal year. Identification as a Repeat Finding: This is not a repeat finding. Recommendation: The Authority’s policy and procedures should be designed to strengthen the internal controls over the review of the submissions to ensure accurate reporting as required by the Uniform Guidance. Views of Responsible Officials: There is no disagreement with the audit finding and the Authority has developed a plan to correct the finding.
Inaccurate Amount Reported on Monthly Reimbursment Claim - Understatement of $31,277 (Material Weakness and Non-Compliance) ALN Title and Number: 10.553 and 10.555 - Child Nutrition Cluster: School Breakfast and School Lunch Name of Federal Agency: U.S. Department of Agriculture Name of Pass-through Entity: Tennessee Department of Agriculture Condition: During our audit, it was noted that the April claim for reimbursement submitted by the District did not reconcile to the daily totals reported by individual schools. The amounts reported on the claim differed from the supporting documentation maintained at the school level. Criteria: In accordance with 2 CFR section 200.403 and 7 CFR section 210.8, costs charged to federal programs must be accurately reported and supported by accounting records. Monthly claims for reimbursement under the USDA National School Lunch Program must reflect actual allowable costs and be based on accurate records of reimburseable meals served during the claiming period. Cause: The condition noted above occurred because reconciliation procedures were not properly performed prior to submission of the reimbursement claim. The District did not ensure that the totals compiled for the monthly report agreed to the underlying school records. Effect: As a result, the District's reimbursement amount was $31,277 less than it was entitled to receive. Failure to reconcile claims to supporting documentation may result in inaccurate reporting and the potential loss of reimbursement revenue. Questioned Cost: None Recommendation: The District should strengthen internal controls over the preparation and review of reimbursement claims. Specifically, reconciliation between school-level reports and the monthly reimbursement claim should be performed and documented prior to submission. Management should review and approve all claims to verify accuracy, completeness, and agreement with records. Response: Vickie Dunaway, School Nutrition Director, corrected and resubmitted the claim in question, as soon as the issue was revealed. USDA paid the difference owed on October 28, 2025. Once Vickie completes the monthly claim, Leanne Green, Finance Director, reviews the paperwork, verifying that all is correct before the claim is filed.
FINDING 2025-002 Subject: Special Education Cluster (IDEA) - Earmarking Federal Agency: Department of Education Federal Program: Special Education Grants to States, COVID-19 - Special Education Grants to States Assistance Listings Numbers: 84.027, 84.027x Federal Award Numbers and Years (or Other Identifying Numbers): 22611-043-PN01, 22611-043-ARP Pass-Through Entity: Indiana Department of Education Compliance Requirement: Matching, Level of Effort, Earmarking Audit Findings: Significant Deficiency, Other Matters Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2023-002. Condition and Context The School Corporation was a member of the Northwest Indiana Special Education Cooperative (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. However, there was inadequate oversight performed by the School Corporation in order to ensure compliance with the Matching, Level of Effort, Earmarking compliance requirement. INDIANA STATE BOARD OF ACCOUNTS 17 MERRILLVILLE COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) 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 nonpublic school students with disabilities was met for each member school. The Cooperative did not have effective internal controls to ensure nonpublic school expenditures were appropriately identified and reported. Due to the timing of the Cooperative's corrective action, the nonpublic expenditures spent did not meet the earmarking requirements for grant award numbers 22611-043-PN01 and 22611-043-ARP. From the beginning of the grant awards until September 2022, total grant expenditures were posted as expended. The nonpublic proportionate share expenditures were determined by applying a percentage to the nonpublic school budgeted expenditures. Beginning in September 2022, the Cooperative began tracking expenditures by member school for the nonpublic services. As such, we were unable to identify if the minimum amount per the grant award was expended and properly reported to the IDOE from the beginning of the grant awards through September 2022, as required. The lack of internal controls and noncompliance was isolated to the 22611-043-PN01 and 22611-043-ARP grant awards. 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 18 MERRILLVILLE COMMUNITY SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause Through inquiry of management, they were unaware of the requirements to track nonpublic proportionate share expenditures directly for each member school. While the Cooperative did implement new processes and procedures to ensure expenditures were tracked by each member school starting in September 2022, most of the grant awards had been allocated to the member schools based on a percentage of the budget. Effect Without the proper implementation of an effectively designed system of internal controls, the Cooperative was unable to track expenditures for nonpublic services for each member school. Consequently, the amounts requested for reimbursement were not supported by actual expenditures but rather a percentage based on the budget per member school. Because of this, expenditures were not accurately reported to the oversight agency. Questioned Costs There were no questioned costs identified. Recommendation We recommended that management of the Cooperative should develop written policies and procedures which would require tracking of actual nonpublic proportionate share expenditures by member school. 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.
Finding 2025-004 – Significant Deficiency – Internal Controls Over Allowable Costs Identification of Federal Program: AL Number: 11.611 Manufacturing Extension Partnership Condition – During the year ended June 30, 2025, a severance payment was issued to an employee that worked on more than one federal program. The payment was an allowable cost, but was not allocated across the other federal programs based on time and effort per their policy. Criteria – Per allowable costs 2 CFR section 200.431(i)(1), severance pay is allowed to be charged to federal grants only to the extent that it is required by law, employer-employee agreement, established policy, or circumstances of the particular employment. Per 2 CFR 200.403(c), costs should be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient, therefore severance pay must be allocated based on the activities performed by the associated employee. Context and Cause – While internal controls and procedures have been established for payroll expenses, the procedures were bypassed when processing the severance payment. It should be noted that the employee spent the majority of their time on the program the severance was allocated to, and the transaction was isolated. Effect of Condition – The failure to allocate all payroll expenses may result in wrongful use of federal funds and non-compliance with federal awards. Questioned Cost – None. Recommendation – The Organization should follow established written policies for allocation. Views of Responsible Officials and Planned Corrective Actions – Management concurs with the finding and has developed a corrective action plan. We analyzed the funds the employee charged to and did not identify another federal funding source available to charge the severance to. As a result, we did not complete the standard payroll allocation spreadsheet, as the severance was determined to be appropriately charged to the one fund. In the future, we will include this payroll allocation documentation. The finding does not impact the Organization’s ability to manage federal funds. Regardless, we place the utmost importance on the summary of auditors’ results and will work to increase the strength of our internal controls over compliance.
Federal Program - Research and Development Cluster Assistance Listing Numbers - Various Federal Agency - All Research and Development Sponsor Award Number - Various Award Period - Various Criteria or Specific Requirement – Period of Performance – Costs must be incurred during the approved budget period. (2 CFR 200.403(h)) Condition - Management reported instances where costs not incurred during the approved budget period were charged to the grant. Cause - Turnover of University personnel responsible. Questioned Costs – We identified $498 in questioned costs, calculated per vendor invoice, as a result of our audit procedures performed surrounding period of performance. The grant programs and amounts improperly charged identified during testing were: • Assistance Listing Number: 16.838 o Award Number: 15PBJA-21-GG-04493-COAP; Linkage to Hope Project - $479 • Assistance Listing Number: 12.800 o Award Number: FA8650-20-F-5234; Direct Integrated/Computational/Testing and Onsite Research (DICTATOR) - $19 Effect – While the University has established controls to detect costs recorded that had been incurred outside of the approved period, by not fully following these control guidelines, costs that would be unallowable under 2 CFR 200.403(h) may be applied incorrectly. Context - Management reported instances where costs not incurred during the approved budget period had been recorded. From a sample of 5 grants (population of 44 grants), two grants had expenditures recorded to the grant for costs that had not been incurred within the approved budget period. This sample was not, and was not intended to be, a statistically valid sample. Identification as a Repeat Finding - No. Recommendation - We recommend management consult with the grantor to discuss whether the questioned costs should be refunded and complete training with responsible individuals to ensure future compliance.
Federal Agency: U.S. Department of Housing and Urban Development Federal Program Name: Continuum of Care Program Assistance Listing Number: 14.267 Federal Award Identification Number: IL178L5T172302 - 2024 IL0315L5T142316 - 2024 IL1651L5Y142305 - 2024 IL1780LST172201 - 2023 IL1651L5Tl42204 - 2023 IL0315LST142215 – 2023 Award Periods: August 1, 2023 – July 31, 2024; August 1, 2024 – July 31, 2025; July 1, 2024 – June 30, 2025 Type of Finding: Significant Deficiency in Internal Control over Compliance and Other Matters Criteria: Per Uniform Guidance (2 CFR 200.403) costs charged to federal awards must be 1) adequately documented with supporting invoices and receipts and reviewed and approved by authorized personnel prior to payment. Condition: The Agency did not retain documentation supporting the disbursements as well as the control over those disbursements. Questioned Costs: None Context: The Agency did not retain documentation supporting the disbursements as well as the control over those disbursements and the propriety of the expenses charged to the grant cannot be verified due to the change in invoice management systems during the fiscal year for six items tested. Cause: Unknown Effect: Inability to maintain proper supporting documentation over expenses incurred could lead to unallowable costs being reimbursed under the grant. Repeat Finding: This finding is not a repeat finding. Recommendation: CLA recommends the Agency follow established policies to maintain supporting documentation for expenses incurred including their review and approval. Views of Responsible Officials: There is no disagreement with this audit finding.
Federal Agency: National Science Foundation Federal Program Name: Research and Development Cluster Assistance Listing Number: 47.076 Federal Award Identification Number and Year: R&D - 2025 Award Period: June 1, 2024 to May 31, 2025 Type of Finding: • Significant Deficiency in Internal Control over Compliance • Other Matters Criteria or specific requirement: The Code of Federal Regulations 2 CFR Part 200, Subpart E, requires that expenses be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principals (200.403(a)) and allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to the Federal award or cost objective in accordance with relative benefits received (200.405). Condition: We noted that one out of 8 items selected for period of performance was incorrectly coded to an R&D grant. Questioned costs: $100 Context: The University's review and internal controls over R&D grant charges did not identify an expense that had been incorrectly coded. Cause: The University’s processes and controls did not ensure that all expenses charged to R&D grants were valid R&D expenditures. Effect: An incorrect amount of R&D expenditures was drawn down. Repeat Finding: No Recommendation: We recommend that the University review its procedures around review and approval of R&D expenditures to ensure that only valid expenditures are reported. Views of responsible officials: There is no disagreement with the audit finding.
Finding 2025.003 – Period of Performance – Significant Deficiency and Noncompliance Assistance Listing Number 14.267 - Continuum of Care, U.S. Department of Housing and Urban Services, Pass-Through Entity: State of Connecticut Department of Housing, Award Number: 24DOH0901CX, Pass-Through Entity: United Way of Southeastern Connecticut, Award Number: 21DOH1001DA Criteria A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award's period of performance that was authorized by the federal awarding agency or pass-through entity (2 CFR sections, 200.308, 200.309 and 200.403(h)). Condition Certain expenses were charged to the grant that were not properly obligated prior to the end of the grant period. Purchase orders were issued without placing the actual order, or the item was ordered after the period of performance concluded. Cause The Council did not have adequate policies, procedures and controls in place to ensure compliance with the requirements regarding period of performance. Effect or Potential Effect Inadequate controls over period of performance led to expenses charged to the grant that were not incurred during the required period of performance. Questioned Costs $2,113 Context We selected 5 expenditures for testing over the period of performance requirement. Out of the 5 expenditures tested, we noted 2 instances where expenditures were not spent or obligated appropriately in the right grant period. Identification as a Repeat Finding This is not a repeat finding. Recommendation We recommend that management implement additional controls and policies over period of performance. Staff who purchase items with grant funds should have additional training on period of performance requirements. Views of Responsible Officials TVCCA recognizes the validity of this finding. TVCCA is strengthening its period-of-performance controls by training all staff with purchasing authority, and finance staff, on grant deadlines, obligation definitions, and allowable spend-down periods. Internal controls will be enhanced by incorporating quarterly cutoff testing into the month-end close checklist. Additionally, cutoff testing results will be monitored quarterly as part of the quarter-end review process.
2025-001 Misappropriation of Funds Material Weakness in Internal Control Condition: Subsequent to the close of the fiscal year, the Authority was notified by its banking institution of potentially fraudulent activity involving disbursements made to a company owned by an employee of the Authority. Upon investigation, management determined that the employee, who had access to the Authority’s check issuance process, directed $155,706 in payments to an entity they owned and controlled. These payments were not for legitimate goods or services. The disbursements were charged across multiple accounts, including both federal and non-federal program expenditures. The federal program expenditures were charged to the Public and Indian Housing program. Context: The fraudulent activity was identified by the Authority’s bank through transaction monitoring and reported to management. The employee was subsequently terminated, criminally charged, and has pled guilty. The Authority is seeking restitution; however, specific repayment terms have not yet been finalized as of the date of this report. Criteria: Under 2 CFR 200.303, the Authority must establish and maintain effective internal controls over federal awards that provide reasonable assurance of compliance with federal statutes, regulations, and the terms and conditions of the awards. 2 CFR 200.403 requires that costs charged to federal awards be necessary, reasonable, and allocable. Additionally, 24 CFR 990.108 limits Public Housing Operating Fund expenditures to eligible operating expenses necessary for the operation of public housing. Payments made to a company owned by an employee for which no goods or services were received do not meet these allowability requirements. Cause: The Authority did not maintain adequate segregation of duties or sufficient monitoring controls over the vendor setup, invoice processing, and check issuance functions. Specifically, one individual had authority to create vendors, approve invoices, and issue checks without independent review or secondary approval. At the time the fraud occurred, disbursement activity was not subject to an independent secondary review of the overall check run, including the listing of payees and amounts, which could have identified payments issued to an unauthorized or fictitious vendor. Effect: Unauthorized payments totaling $155,706 were made over the nineteen-month period, resulting in a misstatement of both federal and non-federal expenditures. As a result, certain federal program costs were unallowable under 2 CFR 200.403 and 24 CFR 990.108. These expenditures include $115,850 of questioned costs charged to the Public and Indian Housing program during the fiscal year. Auditor’s Recommendations: The Authority should strengthen internal controls over the accounts payable and disbursement process by segregating duties between vendor setup, invoice approval, and check issuance; implementing a dual-approval process for new vendors and all check disbursements; conduct independent reviews of payment reports; and review all expenditures charged to federal programs to identify and reimburse any unallowable costs. Management Response: See Corrective Action Plan.
2025-003 Period of Performance (repeat of finding 2024-005) Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.403(h) requires that costs be incurred in the approved budget period for the applicable awards and Title 2 CFR 200.403(e) requires that those costs be determined according to generally accepted accounting principles (GAAP). Condition The Organization’s federal expenditures include costs for goods and/or services outside of the approved budget periods for the awards. Cause The Organization’s internal controls over compliance did not include consideration of when the goods were received or services were performed compared to the budget periods for the awards. Lack of understanding of GAAP and the requirements of accrual basis accounting allowed expenditures outside of the applicable budget periods to be claimed as current federal expenditures. Effect The Organization may allocate unallowable costs to the federal awards. Questioned Costs $194,142 (of which $61,155 was previously reported in finding 2025-002 above). Context In a sample of forty transactions, we noted five included expenditures for goods or services that were not provided in the current period. $117,887 of expenditures charged to the program were for goods or services related to future periods. $76,255 of expenditures charged to the program were for goods or services related to previous periods. Recommendation We recommend management personnel authorized to approve expenditures of federal awards be limited to those who have a basic understanding of GAAP and the relationship between the accrual basis of accounting and the period of performance requirements. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2025-003 Period of Performance (repeat of finding 2024-005) Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.403(h) requires that costs be incurred in the approved budget period for the applicable awards and Title 2 CFR 200.403(e) requires that those costs be determined according to generally accepted accounting principles (GAAP). Condition The Organization’s federal expenditures include costs for goods and/or services outside of the approved budget periods for the awards. Cause The Organization’s internal controls over compliance did not include consideration of when the goods were received or services were performed compared to the budget periods for the awards. Lack of understanding of GAAP and the requirements of accrual basis accounting allowed expenditures outside of the applicable budget periods to be claimed as current federal expenditures. Effect The Organization may allocate unallowable costs to the federal awards. Questioned Costs $194,142 (of which $61,155 was previously reported in finding 2025-002 above). Context In a sample of forty transactions, we noted five included expenditures for goods or services that were not provided in the current period. $117,887 of expenditures charged to the program were for goods or services related to future periods. $76,255 of expenditures charged to the program were for goods or services related to previous periods. Recommendation We recommend management personnel authorized to approve expenditures of federal awards be limited to those who have a basic understanding of GAAP and the relationship between the accrual basis of accounting and the period of performance requirements. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-001 Federal Program: COVID-19 - Emergency Rental Assistance (ERA) Assistance Listing Number: 21.023 Federal Awarding Agency: United States Department of the Treasury Compliance Requirement: Allowable Costs Criteria: 2 CFR 200.403 establishes standards for determining costs allowable for federal awards. Management is responsible for ensuring that recipients of Emergency Rental Assistance funds are eligible, and that their benefit amounts are calculated accurately. Condition: For one payment selected for testing, the Authority calculated the eligible benefit amount incorrectly. Cause: A secondary review was performed of the benefit calculation, but the review did not detect the error. Effect: One beneficiary received more from ERA funds than they were eligible to receive. Questioned costs: The overpayment identified was $350. Context: We tested a sample of 40 individuals that received payments under the program totaling $170,416 of disbursements out of 15,335 total recipients, with total payments of $75,066,010 during 2024. In our testing we identified that one individual selected in our sample was paid $350 more than their documented eligible rent and utility expenses under the program, due to an error in the calculation of the eligible benefit amount. Our sampling methodology is not considered statistically valid. Recommendations: We recommend that the Authority implement additional procedures to ensure that errors in benefit calculations are detected and corrected in a timely manner. Authority’s Response: We agree that the amount paid was an error. As the ERA program ends in 2025, we are working to review all activity, identify errors, and recover amounts paid in error where possible.
Condition: During our audit of federal award expenditures for the fiscal year ended December 31, 2024, we identified certain instances where costs incurred in prior periods were improperly charged to the current year's federal awards. Criteria: 2 CFR 200.403(g) requires that costs must be "determined in accordance with generally accepted accounting principles (“GAAP”).” Additionally, 2 CFR 200.309 states that "a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance." Cause: Management indicated that year-end processing procedures did not adequately identify and properly allocate expenses to the appropriate period. Effect: Improper period allocation of costs resulted in inaccurate financial reporting of federal award expenditures and potential violation of period of performance requirements. Repeat Finding: No Recommendation: It is recommended that management implement enhanced review procedures for period-end expenses to ensure a proper cutoff, develop a monitoring system to track expenses by period of performance, and a establish a forma process for review and approval of payments made near the end of a reporting period. Views of responsible officials: Management of the Organization concurs with the finding and has implemented a corrective action plan to address the identified deficiency.
Condition: During our audit of federal award expenditures for the fiscal year ended December 31, 2024, we identified certain instances where costs incurred in prior periods were improperly charged to the current year's federal awards. Criteria: 2 CFR 200.403(g) requires that costs must be "determined in accordance with generally accepted accounting principles (“GAAP”).” Additionally, 2 CFR 200.309 states that "a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance." Cause: Management indicated that year-end processing procedures did not adequately identify and properly allocate expenses to the appropriate period. Effect: Improper period allocation of costs resulted in inaccurate financial reporting of federal award expenditures and potential violation of period of performance requirements. Repeat Finding: No Recommendation: It is recommended that management implement enhanced review procedures for period-end expenses to ensure a proper cutoff, develop a monitoring system to track expenses by period of performance, and a establish a forma process for review and approval of payments made near the end of a reporting period. Views of responsible officials: Management of the Organization concurs with the finding and has implemented a corrective action plan to address the identified deficiency.
Condition: During our audit of federal award expenditures for the fiscal year ended December 31, 2024, we identified certain instances where costs incurred in prior periods were improperly charged to the current year's federal awards. Criteria: 2 CFR 200.403(g) requires that costs must be "determined in accordance with generally accepted accounting principles (“GAAP”).” Additionally, 2 CFR 200.309 states that "a non-Federal entity may charge to the Federal award only allowable costs incurred during the period of performance." Cause: Management indicated that year-end processing procedures did not adequately identify and properly allocate expenses to the appropriate period. Effect: Improper period allocation of costs resulted in inaccurate financial reporting of federal award expenditures and potential violation of period of performance requirements. Repeat Finding: No Recommendation: It is recommended that management implement enhanced review procedures for period-end expenses to ensure a proper cutoff, develop a monitoring system to track expenses by period of performance, and a establish a forma process for review and approval of payments made near the end of a reporting period. Views of responsible officials: Management of the Organization concurs with the finding and has implemented a corrective action plan to address the identified deficiency.
Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state 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) state 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 testing we noted: Payroll transactions: Eleven instances of errors totaling a net amount of $2,009 (an absolute value amount of $2,009) where the incorrect percentages were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee’s pay, and Payroll transactions: Seven instances of errors totaling a net amount of $109 (an absolute value amount of $4,405) where an unsupported allocation percentage was used to allocate the employee's pay to the grant - typically, employee salaries are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Fringe-benefit transactions: Two instances of an error totaling $91 where an unsupported allocation percentage was used to allocate employer-paid employee insurance costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Fringe-benefit transactions: Two instances of errors totaling $275 where employer-paid employee insurance and HSA contribution deductions per the employee's pay stub were allocated to the grant at a rate of 100%. Non-payroll and fringe transactions: one instance of an error totaling $884 where an unsupported allocation percentage was used to allocate general costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Additionally, we noted inconsistency in the general fund (LSC and two other private grants) allocation basis used during the year - grant hours and projected revenue were both utilized at different times during the year. Additionally, we noted that allocations in the general fund are done using projected revenue. However as revenue was recognized as expenses were incurred for the general fund the allocation based on revenue approximated an allocation method based on costs. As such, the costs mentioned above were allocated in an inconsistent manner to other grant costs and were not fully representative of the employees’ time and effort. However, we noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. 2024 – 002: Cost Allocation of Expenses to LSC Grants (Continued) Questioned Costs: A net amount of $3,150 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060. Context: These 23 instances were noting during testing of 55 disbursements. Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC cost driver for the period divided by the total cost driver 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 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. Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2023-003 and 2023-004. 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 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. Additionally, the distribution of expenses in the general fund, which includes LSC and two other funding sources, represents a fair method and allocation. Regarding the questioned costs, CLS disagrees with the finding of material weakness given the extremely low total dollar value. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations state 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.
Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state 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) state 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 testing we noted: Payroll transactions: Eleven instances of errors totaling a net amount of $2,009 (an absolute value amount of $2,009) where the incorrect percentages were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee’s pay, and Payroll transactions: Seven instances of errors totaling a net amount of $109 (an absolute value amount of $4,405) where an unsupported allocation percentage was used to allocate the employee's pay to the grant - typically, employee salaries are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Fringe-benefit transactions: Two instances of an error totaling $91 where an unsupported allocation percentage was used to allocate employer-paid employee insurance costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Fringe-benefit transactions: Two instances of errors totaling $275 where employer-paid employee insurance and HSA contribution deductions per the employee's pay stub were allocated to the grant at a rate of 100%. Non-payroll and fringe transactions: one instance of an error totaling $884 where an unsupported allocation percentage was used to allocate general costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Additionally, we noted inconsistency in the general fund (LSC and two other private grants) allocation basis used during the year - grant hours and projected revenue were both utilized at different times during the year. Additionally, we noted that allocations in the general fund are done using projected revenue. However as revenue was recognized as expenses were incurred for the general fund the allocation based on revenue approximated an allocation method based on costs. As such, the costs mentioned above were allocated in an inconsistent manner to other grant costs and were not fully representative of the employees’ time and effort. However, we noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. 2024 – 002: Cost Allocation of Expenses to LSC Grants (Continued) Questioned Costs: A net amount of $3,150 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060. Context: These 23 instances were noting during testing of 55 disbursements. Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC cost driver for the period divided by the total cost driver 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 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. Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2023-003 and 2023-004. 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 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. Additionally, the distribution of expenses in the general fund, which includes LSC and two other funding sources, represents a fair method and allocation. Regarding the questioned costs, CLS disagrees with the finding of material weakness given the extremely low total dollar value. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations state 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.
Criteria or Specific Requirement: Federal regulations (45 CFR 1635.4(a) and 2 CFR 200.430), state 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) state 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 testing we noted: Payroll transactions: Eleven instances of errors totaling a net amount of $2,009 (an absolute value amount of $2,009) where the incorrect percentages were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee’s pay, and Payroll transactions: Seven instances of errors totaling a net amount of $109 (an absolute value amount of $4,405) where an unsupported allocation percentage was used to allocate the employee's pay to the grant - typically, employee salaries are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Fringe-benefit transactions: Two instances of an error totaling $91 where an unsupported allocation percentage was used to allocate employer-paid employee insurance costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Fringe-benefit transactions: Two instances of errors totaling $275 where employer-paid employee insurance and HSA contribution deductions per the employee's pay stub were allocated to the grant at a rate of 100%. Non-payroll and fringe transactions: one instance of an error totaling $884 where an unsupported allocation percentage was used to allocate general costs to the grant - typically, costs are allocated to LSC and two other private grants using an allocation base of a LSC cost driver for the period divided by the total cost driver coded to the Organization’s general fund. Additionally, we noted inconsistency in the general fund (LSC and two other private grants) allocation basis used during the year - grant hours and projected revenue were both utilized at different times during the year. Additionally, we noted that allocations in the general fund are done using projected revenue. However as revenue was recognized as expenses were incurred for the general fund the allocation based on revenue approximated an allocation method based on costs. As such, the costs mentioned above were allocated in an inconsistent manner to other grant costs and were not fully representative of the employees’ time and effort. However, we noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. 2024 – 002: Cost Allocation of Expenses to LSC Grants (Continued) Questioned Costs: A net amount of $3,150 of allocated salary expense described above, which is related to Assistance Listing Number 09.706060. Context: These 23 instances were noting during testing of 55 disbursements. Cause: The Organization’s cost allocation methodology is primarily based on time and effort records, and periodic calculations of a LSC cost driver for the period divided by the total cost driver 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 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. Repeat Finding: The finding is a repeat of findings in the immediately prior year. The prior year finding numbers were 2023-003 and 2023-004. 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 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. Additionally, the distribution of expenses in the general fund, which includes LSC and two other funding sources, represents a fair method and allocation. Regarding the questioned costs, CLS disagrees with the finding of material weakness given the extremely low total dollar value. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. Federal regulations state 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.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense 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 salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit 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 based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense 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 salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit 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 based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense 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 salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit 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 based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense 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 salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit 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 based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense 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 salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit 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 based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense 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 salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit 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 based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense 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 salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit 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 based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense 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 salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit 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 based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense 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 salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit 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 based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense 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 salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit 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 based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense 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 salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit 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 based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.
Criteria or Specific Requirement: Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Condition: During our testing, we noted four instances of errors totaling a net error of $906 (an absolute value error of $1,030) where the incorrect number of hours were utilized in the allocation of the employee's pay, the incorrect employee's time was used in the allocation of the employee's pay, or there were unsupported amounts added to the allocation of the employee's pay. As such, the salary costs mentioned above were allocated in an inconsistent manner to other grant payroll costs and were not fully representative of the employees' time and effort and benefit obtained by grant from the allocated cost. Management noted that it performed year-end grant reconciliations to ensure costs were properly allocated to each grant in total. We noted a lower frequency of differences in sample selections that occurred during the last several months of the year after management implemented a change to its allocation processes in response to the prior year audit. Questioned Costs: $906 of allocated salaries expense described above, which is related to Assistance Listing Number 93.044. Context: These five instances were noting during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s salary, wage and employee benefit cost allocation methodology is primarily based on time and effort records and a periodic calculation of specific grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual time records and expense 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 salaries, wages, and employee benefit cost allocation methodology could cause costs to be allocated to grants that are not reflective of the time and effort spent on grant activities nor compensation paid to employees during relevant work periods. It could also lead to challenges in maintaining sufficient supporting documentation of such cost allocations. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its salaries, wages, and employee benefit 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 based on employees’ time and effort records, effective compensation during work periods, and that are calculated in a consistent manner. We also recommend that the Organization maintain contemporaneous documentation supporting all cost allocations. Views of responsible officials: Management does not agree with this finding. LSC program letter 22-5 emphasizes the importance of reconciliations of timekeeping reports with labor costs, distribution report or alternative reports. CLS prioritizes this practice of reconciliation and used it during the last months of 2024 to improve internal controls and minimize potential errors. We do not believe that CLA fully and fairly considered CLS’s thorough and complete reconciliation. A “material weakness” is defined as a deficiency “such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis.” Given that reconciliation is part of our internal control process used to prevent and detect/correct any errors, it should have been fully considered and is unfairly excluded from the review. For this reason, CLS considers that this is not a material weakness as the reconciliation caught and corrected these errors. Finally, the total amount of this finding is very low and should not rise to the level of material weakness. Auditor’s Concluding Remarks: Management’s response did not persuade the auditor to revise the finding. The aging cluster is not an LSC program and so its relevance to this finding is unclear. Federal regulations (CFR 200.403), state that allowable costs must be consistent with policies and procedures of federal award recipients that apply uniformly to both federally-financed and other activities of the Organization. It also states that costs must be adequately documented. Such costs should be contemporaneously applied to grants as they are incurred using a system of processes and controls.