Assistance Listing Number(s): 10.912 Name of Federal Program or Cluster: Environmental Quality Incentives Program Name of Federal Agency: Department of Agriculture Award Periods: September 3, 2019 through July 31, 2024 and September 30, 2020 through September 30, 2025 Assistance Listing Number(s): 10.924 Name of Federal Program or Cluster: Conservation Stewardship Program Name of Federal Agency: Department of Agriculture Award Periods: September 3, 2019 through July 31, 2024 and September 30, 2020 through September 30, 2025 Criteria or Specific Requirement: 2 CFR Section 200.403 states the factors that determine allowability of costs charged to federal awards and requires costs to be determined in accordance with generally accepted accounting principles. Condition: We identified costs incurred in 2022 that were incorrectly recorded as 2023 costs and charged to federal awards. Cause: Management has not designed and implemented sufficient internal controls to ensure costs are recorded in accordance with generally accepted accounting principles to be allowable for federal awards. Effect or Potential Effect: An unallowable cost could be charged to the federal program. Context and Questioned Costs: During our testing of grants for appropriate accounting period cutoff, we identified 2022 costs that were charged to grants in 2023. Thus, we selected all grant transactions charged to the major program that were recorded in January 2023, and grant transactions over $2,500 for the period February 1, 2023 through June 30, 2023 to test for recognition in the proper period. The amount tested totaled $243,311, which included $12,726 of costs recorded in the wrong period. Other than not being recorded in accordance with generally accepted accounting principles, these costs were otherwise allowable and recorded in the proper period of performance. Repeat Finding: No Recommendation: We recommend management design and implement sufficient internal controls to ensure costs are recorded in accordance with generally accepted accounting principles to be allowable for federal awards. Views of Responsible Officials: Management agrees with the finding and they will evaluate our findings to determine an appropriate corrective action.
2023-004 Allowable Costs (Material Weakness) U.S. Department of Treasury 21.027 Coronavirus State and Local Fiscal Recovery Funds Criteria: The Uniform Guidance sets forth factors affecting allowability of costs. Except where otherwise authorized by statute, costs must meet the certain criteria to be allowable under federal awards. CFR 200.403 (c) states that costs must be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. CFR200.403(g) states that the cost must be adequately documented Condition: There were multiple amounts paid for which the Organization was unable to supply appropriate documentation and invoices or receipts for which the Organization did not follow their policy for reviewing the invoices/receipts prior to payment. Cause: The Organization uses Bill.com to make most payments. The payments made directly via an ACH with the bank do not have appropriate documentation maintained. There were also other payments for which the client was unable to locate the documents. There were also invoices/receipts that were not signed off prior to payment. Effect: The Organization has policies in place for amounts paid through Bill.com, but these policies are not being used with other forms of payments. Questioned Costs: $342.34. Questioned costs are made up of the total of all invoices tested that did not have appropriate documentation. Recommendation: Organization should update policy and ensure that all payments made in any form have appropriate documentation. Also, the Organization should follow their stated policy on review of invoices prior to payment. Views of Responsible Officials and Planned Corrective Actions: The Organization will update policy to ensure that all payments made in any form have appropriate documentation. Additionally, policy on review of invoices prior to payment will be reviewed by Executive Director and Business Manager. Monique Johnson, Executive Director of Allen County Drug & Alcohol Consortium, is responsible for this corrective action. The anticipated completion date is May 31, 2025.
2 C.F.R. § 1000.10 gives regulatory effect to the Department of the Treasurer for 2 C.F.R. § 200.403(a), which requires that costs be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. 2 C.F.R. § 200.403(c) documents that costs must be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. State ex rel. McClure v. Hagerman, 155 Ohio St. 320 (1951) provides that expenditures made by a governmental unit should serve a public purpose. Typically, the determination of what constitutes a “proper public purpose” rests with the judgment of the governmental entity, unless such determination is arbitrary or unreasonable. Even if a purchase is reasonable, Ohio Attorney General Opinion 82-006 indicates that it must be memorialized by a duly enacted ordinance or resolution and may have a prospective effect only. Auditor of State Bulletin 2003-005 Expenditure of Public Funds/Proper “Public Purpose” states, in part, the Auditor of State’s Office will only question expenditures where the legislative determination of a public purpose is manifestly arbitrary and incorrect. The Sheriff's Department was awarded the American Rescue Plan Funding for the Community Violence Intervention program to offer employee incentive and retention funds of $72,159 on October 14, 2022. The Sheriff's department completed the request for proposal for the grant based on May 2022 wages with an original grant period being April 2022 through April 2024. However, funding wasn't received until April 2023 and the Sheriff's Department received a grant extension through October 2024. The Sheriff's Clerk prepared a spreadsheet to base the retention and incentive payments on 10% of the annual salaries for dispatchers and deputies using their pay rates as of May 2022. This 10% annual amount was then to be paid over 24 months. There were to be bi-monthly payments for the period May 2022 through April 2024 for employee retention of deputies and dispatchers. Due to the delay of the grant start date, the first payment was made in 2023 and was a single payment to cover missed payments from May to December 2022 using the 2022 pay rates noted in the initial grant award calculation. Payment 1 in 2023 was for the four bi-monthly payments missed in 2022 (8 months) and payment 2 was for two bi-monthly payments (4 months) for January to April 2023. After these two payments, the Clerk changed the amounts being paid as the 10% limit would also need to cover the related county paid benefits on these retention and incentive payments which were not previously considered in the 10% maximum calculation. The Clerk recalculated the totals to be paid as salary payments by subtracting the related benefit total from the salary maximum previously calculated and dividing that amount over the remaining payments. She started paying lesser amounts for the subsequent bi-monthly payments, but we could not agree those amounts to support as calculations were not retained. Additionally, when the grant was finally received in 2023, there were employees that had been used in the initial calculation as of May 2022 that were no longer employed by the County. Since those employees did not receive any payments, the Clerk used the funding that was freed up from those employees to add newly hired employees to the retention and incentive payments. There was no supporting documentation on file for how new employees were added to the grant or how the amount allocated for new employees was calculated. While these payments were allowable for the purpose of retention of employees there were not sufficient internal controls in place for the calculation of the payments made over the life of the grant as the calculations changed throughout the year as employees left and were replaced. For most new employees, a bi-monthly flat rate not related to a percentage of their salary was paid. These flat rates were not approved by the Sheriff to be used in place of the 10% annual max calculations. Due to the lack of supporting documentation on file to determine how the Sheriff's Clerk calculated the retention payments to employees, we calculated a maximum of 10% annual salary per employee using 2022 hourly rates for those employed in 2022 and 2023 hourly rates for new employees in 2023. We then divided that amount by 24 months as the one year annual amount was to be paid across two years to get a monthly incentive amount and then multiplied the monthly amount by the number of months actually employed during the grant period. We compared our recalculated amounts to amounts actually paid through the final payment in 2024 to determine if there were any over payments over the life of the grant. We noted two of the twenty-three employees receiving retention and incentive payments in 2023 exceeded the 10% maximum. These employees were overpaid $192.53 and $261.03, respectively including salaries and related benefits. Both of these employees left employment in 2023 so they did not receive any further payments in 2024. These overpayments do not represent a proper public purpose. We further noted that amounts paid to employees from Payment 3 through Payment 6 covering May through December 2023 were not adequately documented as we could not recalculate the bi-monthly payments totaling $15,284 in salaries and $2,773 in related benefits. The Sheriff's office should implement procedures to ensure all supporting documentation for grant payments are maintained. Actual amounts paid by grant funds to employees should be supported by calculations and changes to the calculations should be approved.
2 C.F.R. § 1000.10 gives regulatory effect to the Department of the Treasurer for 2 C.F.R. § 200.403(a), which requires that costs be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. 2 C.F.R. § 200.403(c) documents that costs must be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. State ex rel. McClure v. Hagerman, 155 Ohio St. 320 (1951) provides that expenditures made by a governmental unit should serve a public purpose. Typically, the determination of what constitutes a “proper public purpose” rests with the judgment of the governmental entity, unless such determination is arbitrary or unreasonable. Even if a purchase is reasonable, Ohio Attorney General Opinion 82-006 indicates that it must be memorialized by a duly enacted ordinance or resolution and may have a prospective effect only. Auditor of State Bulletin 2003-005 Expenditure of Public Funds/Proper “Public Purpose” states, in part, the Auditor of State’s Office will only question expenditures where the legislative determination of a public purpose is manifestly arbitrary and incorrect. The Sheriff's Department was awarded the American Rescue Plan Funding for the Community Violence Intervention program to offer employee incentive and retention funds of $72,159 on October 14, 2022. The Sheriff's department completed the request for proposal for the grant based on May 2022 wages with an original grant period being April 2022 through April 2024. However, funding wasn't received until April 2023 and the Sheriff's Department received a grant extension through October 2024. The Sheriff's Clerk prepared a spreadsheet to base the retention and incentive payments on 10% of the annual salaries for dispatchers and deputies using their pay rates as of May 2022. This 10% annual amount was then to be paid over 24 months. There were to be bi-monthly payments for the period May 2022 through April 2024 for employee retention of deputies and dispatchers. Due to the delay of the grant start date, the first payment was made in 2023 and was a single payment to cover missed payments from May to December 2022 using the 2022 pay rates noted in the initial grant award calculation. Payment 1 in 2023 was for the four bi-monthly payments missed in 2022 (8 months) and payment 2 was for two bi-monthly payments (4 months) for January to April 2023. After these two payments, the Clerk changed the amounts being paid as the 10% limit would also need to cover the related county paid benefits on these retention and incentive payments which were not previously considered in the 10% maximum calculation. The Clerk recalculated the totals to be paid as salary payments by subtracting the related benefit total from the salary maximum previously calculated and dividing that amount over the remaining payments. She started paying lesser amounts for the subsequent bi-monthly payments, but we could not agree those amounts to support as calculations were not retained. Additionally, when the grant was finally received in 2023, there were employees that had been used in the initial calculation as of May 2022 that were no longer employed by the County. Since those employees did not receive any payments, the Clerk used the funding that was freed up from those employees to add newly hired employees to the retention and incentive payments. There was no supporting documentation on file for how new employees were added to the grant or how the amount allocated for new employees was calculated. While these payments were allowable for the purpose of retention of employees there were not sufficient internal controls in place for the calculation of the payments made over the life of the grant as the calculations changed throughout the year as employees left and were replaced. For most new employees, a bi-monthly flat rate not related to a percentage of their salary was paid. These flat rates were not approved by the Sheriff to be used in place of the 10% annual max calculations. Due to the lack of supporting documentation on file to determine how the Sheriff's Clerk calculated the retention payments to employees, we calculated a maximum of 10% annual salary per employee using 2022 hourly rates for those employed in 2022 and 2023 hourly rates for new employees in 2023. We then divided that amount by 24 months as the one year annual amount was to be paid across two years to get a monthly incentive amount and then multiplied the monthly amount by the number of months actually employed during the grant period. We compared our recalculated amounts to amounts actually paid through the final payment in 2024 to determine if there were any over payments over the life of the grant. We noted two of the twenty-three employees receiving retention and incentive payments in 2023 exceeded the 10% maximum. These employees were overpaid $192.53 and $261.03, respectively including salaries and related benefits. Both of these employees left employment in 2023 so they did not receive any further payments in 2024. These overpayments do not represent a proper public purpose. We further noted that amounts paid to employees from Payment 3 through Payment 6 covering May through December 2023 were not adequately documented as we could not recalculate the bi-monthly payments totaling $15,284 in salaries and $2,773 in related benefits. The Sheriff's office should implement procedures to ensure all supporting documentation for grant payments are maintained. Actual amounts paid by grant funds to employees should be supported by calculations and changes to the calculations should be approved.
2 C.F.R. § 1000.10 gives regulatory effect to the Department of the Treasurer for 2 C.F.R. § 200.403(a), which requires that costs be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. 2 C.F.R. § 200.403(c) documents that costs must be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. State ex rel. McClure v. Hagerman, 155 Ohio St. 320 (1951) provides that expenditures made by a governmental unit should serve a public purpose. Typically, the determination of what constitutes a “proper public purpose” rests with the judgment of the governmental entity, unless such determination is arbitrary or unreasonable. Even if a purchase is reasonable, Ohio Attorney General Opinion 82-006 indicates that it must be memorialized by a duly enacted ordinance or resolution and may have a prospective effect only. Auditor of State Bulletin 2003-005 Expenditure of Public Funds/Proper “Public Purpose” states, in part, the Auditor of State’s Office will only question expenditures where the legislative determination of a public purpose is manifestly arbitrary and incorrect. The Sheriff's Department was awarded the American Rescue Plan Funding for the Community Violence Intervention program to offer employee incentive and retention funds of $72,159 on October 14, 2022. The Sheriff's department completed the request for proposal for the grant based on May 2022 wages with an original grant period being April 2022 through April 2024. However, funding wasn't received until April 2023 and the Sheriff's Department received a grant extension through October 2024. The Sheriff's Clerk prepared a spreadsheet to base the retention and incentive payments on 10% of the annual salaries for dispatchers and deputies using their pay rates as of May 2022. This 10% annual amount was then to be paid over 24 months. There were to be bi-monthly payments for the period May 2022 through April 2024 for employee retention of deputies and dispatchers. Due to the delay of the grant start date, the first payment was made in 2023 and was a single payment to cover missed payments from May to December 2022 using the 2022 pay rates noted in the initial grant award calculation. Payment 1 in 2023 was for the four bi-monthly payments missed in 2022 (8 months) and payment 2 was for two bi-monthly payments (4 months) for January to April 2023. After these two payments, the Clerk changed the amounts being paid as the 10% limit would also need to cover the related county paid benefits on these retention and incentive payments which were not previously considered in the 10% maximum calculation. The Clerk recalculated the totals to be paid as salary payments by subtracting the related benefit total from the salary maximum previously calculated and dividing that amount over the remaining payments. She started paying lesser amounts for the subsequent bi-monthly payments, but we could not agree those amounts to support as calculations were not retained. Additionally, when the grant was finally received in 2023, there were employees that had been used in the initial calculation as of May 2022 that were no longer employed by the County. Since those employees did not receive any payments, the Clerk used the funding that was freed up from those employees to add newly hired employees to the retention and incentive payments. There was no supporting documentation on file for how new employees were added to the grant or how the amount allocated for new employees was calculated. While these payments were allowable for the purpose of retention of employees there were not sufficient internal controls in place for the calculation of the payments made over the life of the grant as the calculations changed throughout the year as employees left and were replaced. For most new employees, a bi-monthly flat rate not related to a percentage of their salary was paid. These flat rates were not approved by the Sheriff to be used in place of the 10% annual max calculations. Due to the lack of supporting documentation on file to determine how the Sheriff's Clerk calculated the retention payments to employees, we calculated a maximum of 10% annual salary per employee using 2022 hourly rates for those employed in 2022 and 2023 hourly rates for new employees in 2023. We then divided that amount by 24 months as the one year annual amount was to be paid across two years to get a monthly incentive amount and then multiplied the monthly amount by the number of months actually employed during the grant period. We compared our recalculated amounts to amounts actually paid through the final payment in 2024 to determine if there were any over payments over the life of the grant. We noted two of the twenty-three employees receiving retention and incentive payments in 2023 exceeded the 10% maximum. These employees were overpaid $192.53 and $261.03, respectively including salaries and related benefits. Both of these employees left employment in 2023 so they did not receive any further payments in 2024. These overpayments do not represent a proper public purpose. We further noted that amounts paid to employees from Payment 3 through Payment 6 covering May through December 2023 were not adequately documented as we could not recalculate the bi-monthly payments totaling $15,284 in salaries and $2,773 in related benefits. The Sheriff's office should implement procedures to ensure all supporting documentation for grant payments are maintained. Actual amounts paid by grant funds to employees should be supported by calculations and changes to the calculations should be approved.
2 C.F.R. § 1000.10 gives regulatory effect to the Department of the Treasurer for 2 C.F.R. § 200.403(a), which requires that costs be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. 2 C.F.R. § 200.403(c) documents that costs must be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. State ex rel. McClure v. Hagerman, 155 Ohio St. 320 (1951) provides that expenditures made by a governmental unit should serve a public purpose. Typically, the determination of what constitutes a “proper public purpose” rests with the judgment of the governmental entity, unless such determination is arbitrary or unreasonable. Even if a purchase is reasonable, Ohio Attorney General Opinion 82-006 indicates that it must be memorialized by a duly enacted ordinance or resolution and may have a prospective effect only. Auditor of State Bulletin 2003-005 Expenditure of Public Funds/Proper “Public Purpose” states, in part, the Auditor of State’s Office will only question expenditures where the legislative determination of a public purpose is manifestly arbitrary and incorrect. The Sheriff's Department was awarded the American Rescue Plan Funding for the Community Violence Intervention program to offer employee incentive and retention funds of $72,159 on October 14, 2022. The Sheriff's department completed the request for proposal for the grant based on May 2022 wages with an original grant period being April 2022 through April 2024. However, funding wasn't received until April 2023 and the Sheriff's Department received a grant extension through October 2024. The Sheriff's Clerk prepared a spreadsheet to base the retention and incentive payments on 10% of the annual salaries for dispatchers and deputies using their pay rates as of May 2022. This 10% annual amount was then to be paid over 24 months. There were to be bi-monthly payments for the period May 2022 through April 2024 for employee retention of deputies and dispatchers. Due to the delay of the grant start date, the first payment was made in 2023 and was a single payment to cover missed payments from May to December 2022 using the 2022 pay rates noted in the initial grant award calculation. Payment 1 in 2023 was for the four bi-monthly payments missed in 2022 (8 months) and payment 2 was for two bi-monthly payments (4 months) for January to April 2023. After these two payments, the Clerk changed the amounts being paid as the 10% limit would also need to cover the related county paid benefits on these retention and incentive payments which were not previously considered in the 10% maximum calculation. The Clerk recalculated the totals to be paid as salary payments by subtracting the related benefit total from the salary maximum previously calculated and dividing that amount over the remaining payments. She started paying lesser amounts for the subsequent bi-monthly payments, but we could not agree those amounts to support as calculations were not retained. Additionally, when the grant was finally received in 2023, there were employees that had been used in the initial calculation as of May 2022 that were no longer employed by the County. Since those employees did not receive any payments, the Clerk used the funding that was freed up from those employees to add newly hired employees to the retention and incentive payments. There was no supporting documentation on file for how new employees were added to the grant or how the amount allocated for new employees was calculated. While these payments were allowable for the purpose of retention of employees there were not sufficient internal controls in place for the calculation of the payments made over the life of the grant as the calculations changed throughout the year as employees left and were replaced. For most new employees, a bi-monthly flat rate not related to a percentage of their salary was paid. These flat rates were not approved by the Sheriff to be used in place of the 10% annual max calculations. Due to the lack of supporting documentation on file to determine how the Sheriff's Clerk calculated the retention payments to employees, we calculated a maximum of 10% annual salary per employee using 2022 hourly rates for those employed in 2022 and 2023 hourly rates for new employees in 2023. We then divided that amount by 24 months as the one year annual amount was to be paid across two years to get a monthly incentive amount and then multiplied the monthly amount by the number of months actually employed during the grant period. We compared our recalculated amounts to amounts actually paid through the final payment in 2024 to determine if there were any over payments over the life of the grant. We noted two of the twenty-three employees receiving retention and incentive payments in 2023 exceeded the 10% maximum. These employees were overpaid $192.53 and $261.03, respectively including salaries and related benefits. Both of these employees left employment in 2023 so they did not receive any further payments in 2024. These overpayments do not represent a proper public purpose. We further noted that amounts paid to employees from Payment 3 through Payment 6 covering May through December 2023 were not adequately documented as we could not recalculate the bi-monthly payments totaling $15,284 in salaries and $2,773 in related benefits. The Sheriff's office should implement procedures to ensure all supporting documentation for grant payments are maintained. Actual amounts paid by grant funds to employees should be supported by calculations and changes to the calculations should be approved.
Questioned Costs: $44,046 - The overbilled amount has been reclassified to a liability to the funder but has not been repaid or settled. Criteria: In accordance with 2 CFR § 200.403 and 2 CFR § 200.405, costs charged to federal awards must be allowable, allocable, and necessary to the performance of the federal award. Under the terms of a cost-reimbursement federal contract, as governed by 2 CFR § 200.403, § 200.404, and § 200.405, all costs charged to a federal award must be: • Actually incurred, • Allocable to the program, • Allowable under federal cost principles, and • Supported by adequate documentation. Under 2 CFR § 200.414 indirect costs may only be charged based on an approved rate (e.g., NICRA or de minimis), applied to the proper base and only if such costs are actually incurred during the performance period. Billing the full invoice amount of shared costs without allocating based on an approved indirect cost rate is not compliant with Uniform Guidance. Condition: The Organization billed indirect costs totaling $45,096 to a federal cost-reimbursement contract, despite not having incurred qualifying indirect costs during the contract period. The Organization charged entire invoice amounts for shared indirect costs. The billed amounts were based solely on the approved indirect cost rate applied to direct cost invoices, however, there is a maximum of $1,050 in actual indirect expenses for administrative support, or other shared costs incurred or allocated. Cause: The Organization misinterpreted the cost allocation rules and did not have an adequate process for applying the approved indirect cost rate. Billing practices defaulted to charging the entire invoice amount to federal awards when costs benefitted multiple programs. The Organization lacked adequate controls over indirect cost invoicing and did not perform timely reconciliations between budgeted and actual costs incurred. The outside accountant relied on budgeted percentages rather than actual expenses, and there was no final adjustment process in place to reconcile at year-end. Effect: The Organization received $44,046 in federal funds that were not supported by actual indirect costs incurred. These funds represent unallowable costs and are considered questioned costs under the Uniform Guidance. Identification of Repeat Finding ☐ Yes ☑ No Recommendation: We recommend that the Organization: • Implement policies and procedures to reconcile indirect costs billed to actual costs incurred. • Implement a post-invoicing reconciliation process to compare actual indirect costs with amounts billed. • Ensure that all invoicing for federal awards complies with the approved indirect cost rate agreement. • Return the $44,046 of unexpended indirect cost reimbursements to the granting agency. • Provide additional training to accounting and grants management staff on the treatment of indirect costs under 2 CFR Part 200.
Questioned Costs: $88,135 Criteria: In accordance with 2 CFR § 200.403–.405, costs charged to federal awards must be allowable, allocable, and supported by valid documentation. Additionally, under 2 CFR § 200.318–.320, all contracts must be awarded with clear terms and timeframes and must be executed prior to the provision of goods or services. For subawards, 2 CFR § 200.331 requires that subrecipient agreements be in writing and include all legally required terms and conditions. Payments made outside the terms of a written, active contract — particularly beyond expiration dates — may be deemed unallowable due to lack of legal obligation and documentation. Condition: Of the ten contracts selected for testing, seven were expired at the time payments were made. In total, the Organization paid $88,135 for services rendered beyond the contract end dates, including payments to one subrecipient and multiple consultants or contractors. The Organization indicated that all payments were budgeted within the approved federal grant agreements; however, these payments were not supported by amendments, extensions, or new agreements authorizing continued work or compensation. Additionally, in four additional instances, one selected for testing, contracts specified hourly or deliverable rates and defined service periods but contained inaccurate or inconsistent total compensation amounts. One of four contracts made payments under these agreements that exceeded the stated contract total. Overall, the discrepancies created ambiguity about the authorized funding limit and raise concerns about enforceability and allowability of the costs under federal award terms. Cause: The Organization did not have sufficient procedures in place to monitor contract expiration dates or to ensure that updated agreements were executed before authorizing payments. In these cases, services continued based on verbal agreements or historical practice rather than a valid, enforceable contract. Effect: As a result, $88,135 in costs were incurred and charged to the federal grant without a valid contractual basis. Even though the costs were budgeted, the lack of a valid, active contract invalidates the legal obligation required for allowability under 2 CFR § 200.403 and § 200.405. Therefore, the costs are questioned pending resolution with the federal awarding agency. Furthermore, the absence of executed agreements represents a significant internal control deficiency and increases the risk of unauthorized or disputed expenditures. The inconsistencies in contractual rates expose the Organization to the risk of paying amounts not clearly authorized by written agreements and may result in questioned or disallowed costs, especially if contract limits are exceeded. Weaknesses in contract drafting and review also constitute a significant deficiency in internal control over compliance. Identification of Repeat Finding: ☐ Yes ☑ No Recommendation: We recommend that the Organization: • Develop and implement a contract tracking system to monitor start and end dates. • Require that all contracts, extensions, and amendments be executed before services are rendered or payments are issued. • Provide training to program and procurement staff on federal procurement standards and contract management. • Review existing contracts to ensure compliance and take corrective action for any others that may have expired. • Work with the awarding agency to determine whether any portion of the $88,135 must be refunded.
2023-004 Eligibility Prior Year Finding Number: 2022-006 Year of Finding Origination: 2022 Type of Finding: Internal Control Over Compliance and Compliance Severity of Deficiency: Material Weakness and Modified Opinion Federal Agency: U.S. Department of the Treasury Program: 21.023 COVID-19 – Emergency Rental Assistance Program Pass-Through Agency: N/A - Direct Criteria: Title 2 U.S. Code of Federal Regulations § 200.303 states that the auditee must establish and maintain effective internal control over the federal award that provides reasonable assurance that the auditee is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The U.S. Department of the Treasury Frequently Asked Questions for Emergency Rental Assistance (ERA), revised July 27, 2022, requires grantees to obtain a current lease that identifies the unit where the applicant resides, to have support that an applicant is at risk of experiencing homelessness with a written attestation from the applicant or evidence of risk as determined by the grantee, have a reasonable basis for determining and redetermining income, and have documentation of the cost of any hotel or motel charged to the grant and the cost of the hotel or motel stay not include expenses incidental to the charge for the room. Title 2 U.S. Code of Federal Regulations § 200.403(g) requires costs to be adequately documented. In addition, the County’s Federal Emergency Program Guide for Tenant Application requires the County to obtain a written attestation if the Household has no qualifying income, or does not have documentation of all current income, and requires the County to use the Homeless Management Information System (HMIS) record when eligibility is based on homelessness. Condition: In a sample of 16 participant’s eligibility documentation tested, the following exceptions were detected: • For one participant, the address indicated on the ERA Request Form did not agree to the address included in the lease agreement. • Three participants did not have documentation to support that they were at risk of experiencing homelessness. • Three participants did not have documentation to support a reasonable basis for determining income. • Two participants did not have documentation to support a redetermination of income. • Three participants had instances where one-time payments, such as security deposits and application fees, were duplicated. • Thirteen participants did not have documentation originating from the hotel or shelter supporting payment amount and that incidental expenses were not included. • Eight participants had inconsistencies in the payment data provided between the participant name noted as the payee and the participant name noted as being applicable to in the transaction description. Questioned Costs: $140,822. Questioned costs are calculated based on payments to sampled participants. The amounts relating to costs that were not supported by adequate documentation at the time of the audit are $138,844, and amounts relating to duplicate payments are $1,978. These questioned costs were provided to a subrecipient that made the direct payments on behalf of participants. Context: The County had 80 total participants for the COVID-19 – Emergency Rental Assistance Program in 2023. The sample size was based on guidance from chapter 11 of the AICPA Audit Guide, Government Auditing Standards and Single Audits. Effect: The County is not in compliance with requirements of the U.S. Department of the Treasury and the County’s Program Guide for Tenant Application. Cause: The County informed us that documentation could not be located, and that a number of staff who were involved in the program are no longer a part of the department. In addition, the County informed us that it had a contract in place with a consultant to assist the County in housing participants. However, no documentation was provided supporting detailed hotel expenses. Lastly, the County informed us that the inconsistencies in the payment data appears to have been clerical mistakes. Recommendation: We recommend the County maintain documentation supporting participant eligibility in a location accessible to County staff. In addition, we recommend the County obtain documentation originating from hotels or shelters in sufficient detail as to provide support for costs charged to the grant and verify incidental expenses are not included. View of Responsible Official: Concur
Finding 2023-002: Significant Deficiency – Activities Allowed or Unallowed Assistance Listing Number (ALN): 93.788 Federal Program: Opioid STR Federal Agency: U.S. Department of Health and Human Services Pass-Through Entity: Minnesota Department of Human Services Federal Award Number: HT79TI083289 and H79TI085729 Federal Award Year: December 31, 2023 Criteria: 2 CFR 200.403(e) and (f) state that charges to federal awards must be determined in accordance with generally accepted accounting principles (GAAP) and be adequately documented. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; and support the distribution of the or costs among specific activities or cost objectives if the expenses supported more than one federal award, or a federal award and non-federal award Condition/Context: Six of the forty non-payroll transactions that were tested did not have evidence of approval for the amount allocated to the federal program, one transaction was recorded in the incorrect period and one transaction did not have evidence of receipt. The Organization experienced an unusually elevated level of turn-over of key personnel in business operations during the period of time that the control procedures lapsed as the individuals replacing those responsible for attaining allocation authorizations were not yet hired or fully trained in their assignments. The sample was not a statistically valid sample. Cause: The Organization's control process for expenditure authorizations was not properly implemented. Effect: Inadequate controls over the allocation of costs could result in unallowable costs being improperly applied to the federal program. Questioned Costs: Not required Recommendation: The Organization should have formal written procedure to ensure that all relevant authorization and reviews have been completed before allocating costs to federal programs. Views of responsible officials: Management agrees with the auditors' finding and will take action to implement controlling procedures over federal programs.
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Finding number: 2023-005 Significant Deficiency in Internal Control Over Compliance: Allowable Costs and Activities Federal Program #1 HIV Emergency Relief Project Grants: CFDA Number 93.914 Federal Program #2 HIV Care Formula Grants: CFDA Number 93.917 Federal Program #3 HIV Prevention Activities: CFDA Number: 93.941 Name of federal agency: U.S. Department of Health and Human Services (HHS) Name of pass-through entity: Multiple Repeat finding: No AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Criteria: Under 2 CFR §200.303, recipients of federal funds must establish and maintain effective internal controls to ensure compliance with federal statutes, regulations, and the terms of grant agreements. 2 CFR §200.403 specifies that costs charged to federal programs must be allowable, necessary, reasonable, and allocable to the respective award. Additionally, 2 CFR §200.302 requires financial management systems to provide effective control and accountability over federal funds, including documented approval of expenditures. A best practice for grant compliance is to implement a documented approval process for expenditures charged to federal programs, ensuring that all costs are reviewed and supported by adequate documentation before reimbursement requests are submitted. Condition: The Organization did not have readily-available documented evidence of review and approval for expenditures charged to federal grants during the fiscal year. Specifically: The financial system did not capture or document approval of expenditures before they were charged to federal programs. No formalized system existed to retain evidence of grant-related expenditure reviews. While the prior Chief Financial Officer (CFO) manually reviewed each invoice, there was no indication of approval on the supporting documentation, making it impossible to verify that an appropriate review occurred before costs were charged to the grants. Cause: The issue arose due to the Organization's reliance on a manual review process conducted by the previous CFO, without requiring a formal approval signature or electronic system control to document review. This lack of a structured approval process resulted in insufficient evidence to support compliance with federal allowable cost requirements. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Possible effect: Without a documented approval process, the Organization cannot demonstrate that expenditures charged to the grants were properly reviewed for allowability, reasonableness, and allocability in accordance with federal regulations. This increases the risk that: Unallowable or misclassified expenditures could be charged to the grants without detection. Noncompliance with federal grant requirements could result in questioned costs or additional oversight from funding agencies. Financial statement and grant reporting inaccuracies may occur if expenditures are not properly reviewed and approved. Although no specific unallowable costs were identified during the audit, the lack of documented review represents a significant deficiency in internal control over compliance. Questioned cost: None identified at this time. Recommendation: We recommend that the Organization strengthen its internal controls over grant expenditures by implementing the following measures: 1. Implement a Formal Expenditure Review and Approval Policy – Establish a policy requiring that all expenditures charged to grants be reviewed and approved by an appropriate individual before being recorded in the system. 2. Require Documentation of Review and Approval – Ensure that invoices, payroll allocations, and other cost support documents include a signature, initials, or system-generated approval to confirm review. 3. Utilize System-Based Controls – If possible, configure the financial system to require electronic approval for all grant-related expenditures before costs are recorded. AIDS Arms, Inc. dba Prism Health North Texas and Subsidiary Schedule of Findings and Questioned Costs For the Year Ended December 31, 2023 SECTION III - SUMMARY OF FEDERAL AWARD FINDINGS AND QUESTIONED COSTS (continued) Views of responsible officials: Management partially agrees with the finding. While we acknowledge that documentation of expenditure approval was not always retrievable, we believe the expenditures reviewed were all appropriate. Finding 2023-005 refers to the auditors' assessment of expenditure review and approval processes that occurred in Calendar Year 2023. During Calendar Year 2023, Prism relied on email routing of expenditures for review and approval. As of this writing, Prism Health North Texas' expenditure review and approval processes already meet or exceed the recommendations above. Action Taken: Expenditure Review – All expenditures charged to grants are reviewed and approved by two qualified individuals. Documentation of Review and Approval – Such review and approval for non-payroll expenditures occur in and are documented in the SAP Concur software before the costs are recorded in the accounting system (Abila). Such review and approval for payroll-related expenditures occur via and are documented via a combination of methods, also before they are recorded in Abila. Employees report their time, including how much time was devoted to grant activities, in the ExponentHR payroll system, and their supervisors approve both the time and the allocation in that system. Programmatic measures that also support grant billing ("units") are calculated from activity documented in the athenaOne electronic health record (EHR). Payroll allocation is calculated by one person, based on the ExponentHR documentation and the units, then reviewed and imported into Abila by a second person. The unposted transactions are reviewed again before posting. Utilize System-Based Controls – In place as above. _________________________________________________________
Payroll Allocations and Contract Allocations Finding Number: 2023-005 Assistance Listing Number and Title: AL # 14.871 - Section 8 Housing Choice Vouchers/Housing Voucher Cluster Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Housing and Urban Development Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Pass-Through Entity: N/A Repeat Finding from Prior Audit? Yes Prior Audit Finding Number: 2022-007 Noncompliance and Material Weakness 2 CFR § 2400.101 gives regulatory effect to the Department of Housing and Urban Development for 2 CFR Part 200 Subpart E § 200.403 which provides that, except where otherwise authorized by statute, costs must meet certain general criteria in order to be allowable under Federal awards including being necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles and being adequately documented. 2 C.F.R. § 200.430 provides, in part, that costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities. The Authority utilizes a standard allocation of 85% to serve as a cost allocation plan for consultant contracts to the Housing Choice Voucher (HCV) Program. However, the percentages in the plan are not updated annually and the plan does not specify which expenses are subject to the allocation percentage. Further, the Authority was unable to provide supporting documentation for the allocation percentages in the plan. As such, during 2023, the Authority charged $9,068 to the Housing Voucher Cluster in excess of supported amounts. In addition, the Authority approved a standard allocation of 59% for employee benefits charged to the Housing Choice Voucher (HCV) Program. However, the Authority charged 85% of certain benefits for employees during 2023 resulting in $2,080 charged to the Housing Voucher Cluster in excess of supported amounts. The failure to update and support percentages used to allocate federal expenditures to ensure they are reasonable based on current activity could result in findings for adjustment or questioned costs in the federal programs. During 2023, the total unsupported charges totaled $11,148. The Authority should update the percentages used in its cost allocation plan. Further, the Authority should update its plan to identify which expenses are subject to allocation by this plan. In addition, the Authority should utilize only approved and supported percentages for allocation of federal expenditures.
Payroll Allocations and Contract Allocations Finding Number: 2023-005 Assistance Listing Number and Title: AL # 14.871 - Section 8 Housing Choice Vouchers/Housing Voucher Cluster Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Housing and Urban Development Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Pass-Through Entity: N/A Repeat Finding from Prior Audit? Yes Prior Audit Finding Number: 2022-007 Noncompliance and Material Weakness 2 CFR § 2400.101 gives regulatory effect to the Department of Housing and Urban Development for 2 CFR Part 200 Subpart E § 200.403 which provides that, except where otherwise authorized by statute, costs must meet certain general criteria in order to be allowable under Federal awards including being necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles and being adequately documented. 2 C.F.R. § 200.430 provides, in part, that costs of compensation are allowable to the extent that they satisfy the specific requirements of this part, and that the total compensation for individual employees is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities. The Authority utilizes a standard allocation of 85% to serve as a cost allocation plan for consultant contracts to the Housing Choice Voucher (HCV) Program. However, the percentages in the plan are not updated annually and the plan does not specify which expenses are subject to the allocation percentage. Further, the Authority was unable to provide supporting documentation for the allocation percentages in the plan. As such, during 2023, the Authority charged $9,068 to the Housing Voucher Cluster in excess of supported amounts. In addition, the Authority approved a standard allocation of 59% for employee benefits charged to the Housing Choice Voucher (HCV) Program. However, the Authority charged 85% of certain benefits for employees during 2023 resulting in $2,080 charged to the Housing Voucher Cluster in excess of supported amounts. The failure to update and support percentages used to allocate federal expenditures to ensure they are reasonable based on current activity could result in findings for adjustment or questioned costs in the federal programs. During 2023, the total unsupported charges totaled $11,148. The Authority should update the percentages used in its cost allocation plan. Further, the Authority should update its plan to identify which expenses are subject to allocation by this plan. In addition, the Authority should utilize only approved and supported percentages for allocation of federal expenditures.
2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness) U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end. Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance. Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing. Questioned Costs: $33,439 Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager. Repeat Finding: No Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness) U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end. Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance. Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing. Questioned Costs: $33,439 Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager. Repeat Finding: No Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness) U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end. Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance. Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing. Questioned Costs: $33,439 Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager. Repeat Finding: No Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness) U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end. Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance. Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing. Questioned Costs: $33,439 Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager. Repeat Finding: No Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness) U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end. Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance. Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing. Questioned Costs: $33,439 Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager. Repeat Finding: No Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness) U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end. Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance. Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing. Questioned Costs: $33,439 Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager. Repeat Finding: No Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
Finding No.2023-003: Improve Controls Over Expense Reporting and Payroll Charges Assistance Listing Number: 93.566 Assistance Listing Program Title: Refugee and Entrant Assistance – State - Administered Programs Federal Agency: Department of Health and Human Services (HHS) Passed Through Entity: 1. San Diego Refugee Communities Coalition/United Women of East Africa Support Team 2. California Department of Social Services (CDSS) Federal Award Number: 1. Not available in the contract 2. ACS22-05-CAIR-A1 Federal Award Year: 1. February 1, 2023 – March 31, 2024 2. November 1, 2022 – March 31, 2025 Compliance Requirement: Allowable Costs/Cost Principles Criteria or Specific Requirements: In accordance with 2 CFR 200.403 and 200.405, costs charged to a federal award must be necessary, reasonable, and allocable. In addition, 2 CFR 200.430 Compensation-personal services, provides that compensation for personal services must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our testing of 21 non-payroll expenses, we identified one instance wherein translation services amounting to $795, provided by a staff member, were charged under professional fees, even though the individual's salary was recorded and billed under salary expenses. Additionally, in our testing of 25 payroll expenses, we identified one instance of overbilling in the amount $622. This occurred because the payroll charge was based on budgeted Full Time Equivalents (FTEs) rather than the actual time worked. Cause: CAIR-CA's current internal controls for reviewing billings under the federal program were not sufficient to consistently prevent or detect duplicate or inaccurate charges. Furthermore, CAIR-CA lacked adequate internal controls to ensure that payroll allocations were based on actual time worked on the federal program. Effect: These control deficiencies resulted in the overbilling of federal funds. Questioned Cost: $1,417 Recommendation: To ensure compliance with the Uniform Guidance, we recommend that CAIR-CA strengthen its internal controls over expense reporting by implementing enhanced review procedures to verify the allowability of costs charged to federal awards. Additionally, CAIR-CA should establish formal procedures to ensure that payroll charges to federal programs are based on actual time and effort records. Management should conduct regular reviews and make necessary adjustments to payroll allocations to accurately reflect the work performed on federally funded activities. Views of Responsible Officials and Corrective Action Plan: Management concurs with the finding and has already initiated enhancements to its review process to ensure that expense reports are consistently reviewed and approved by both supervisors and finance personnel prior to being charged to federal awards. These steps are designed to further strengthen internal controls and support compliance with federal requirements. In addition, Finance staff are formalizing procedures to reconcile payroll charges on a regular basis to ensure compliance with federal requirements and to confirm that all charges to federal programs are supported by actual time and effort records. Responsible person: Jackie Ramirez, Operations & Finance Associate Director Expected Implementation date: October 31, 2025
Finding No.2023-003: Improve Controls Over Expense Reporting and Payroll Charges Assistance Listing Number: 93.566 Assistance Listing Program Title: Refugee and Entrant Assistance – State - Administered Programs Federal Agency: Department of Health and Human Services (HHS) Passed Through Entity: 1. San Diego Refugee Communities Coalition/United Women of East Africa Support Team 2. California Department of Social Services (CDSS) Federal Award Number: 1. Not available in the contract 2. ACS22-05-CAIR-A1 Federal Award Year: 1. February 1, 2023 – March 31, 2024 2. November 1, 2022 – March 31, 2025 Compliance Requirement: Allowable Costs/Cost Principles Criteria or Specific Requirements: In accordance with 2 CFR 200.403 and 200.405, costs charged to a federal award must be necessary, reasonable, and allocable. In addition, 2 CFR 200.430 Compensation-personal services, provides that compensation for personal services must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our testing of 21 non-payroll expenses, we identified one instance wherein translation services amounting to $795, provided by a staff member, were charged under professional fees, even though the individual's salary was recorded and billed under salary expenses. Additionally, in our testing of 25 payroll expenses, we identified one instance of overbilling in the amount $622. This occurred because the payroll charge was based on budgeted Full Time Equivalents (FTEs) rather than the actual time worked. Cause: CAIR-CA's current internal controls for reviewing billings under the federal program were not sufficient to consistently prevent or detect duplicate or inaccurate charges. Furthermore, CAIR-CA lacked adequate internal controls to ensure that payroll allocations were based on actual time worked on the federal program. Effect: These control deficiencies resulted in the overbilling of federal funds. Questioned Cost: $1,417 Recommendation: To ensure compliance with the Uniform Guidance, we recommend that CAIR-CA strengthen its internal controls over expense reporting by implementing enhanced review procedures to verify the allowability of costs charged to federal awards. Additionally, CAIR-CA should establish formal procedures to ensure that payroll charges to federal programs are based on actual time and effort records. Management should conduct regular reviews and make necessary adjustments to payroll allocations to accurately reflect the work performed on federally funded activities. Views of Responsible Officials and Corrective Action Plan: Management concurs with the finding and has already initiated enhancements to its review process to ensure that expense reports are consistently reviewed and approved by both supervisors and finance personnel prior to being charged to federal awards. These steps are designed to further strengthen internal controls and support compliance with federal requirements. In addition, Finance staff are formalizing procedures to reconcile payroll charges on a regular basis to ensure compliance with federal requirements and to confirm that all charges to federal programs are supported by actual time and effort records. Responsible person: Jackie Ramirez, Operations & Finance Associate Director Expected Implementation date: October 31, 2025
Condition: We identified unallowable costs totaling $11,454, comprised of $2,275 of employee meals and $9,179 of investment advisory fees. Criteria: Title 2, CFR, Part 200, Subpart E-Cost Principles, Basic Considerations, section 200.403, Factors Affecting Allowability of Costs, states, in part, that “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, b) be properly documented showing the business nature of the charge. Cause: Internal controls over reporting compliance requirements were not properly designed and were not placed in operation. Management is responsible for compliance with the requirements of allowable/unallowable costs and for the design, implementation, and maintenance of effective internal controls over compliance with the requirements of laws, statutes, regulations, rules, and provisions of grant agreements applicable to its federal program. Effect: The lack of internal controls and procedures over compliance increases the risk of using federal funds for unallowable costs. Recommendation: We recommend the Agency develop a written policies and procedures manual for allowable/unallowable costs compliance, which should include a checklist detailing all the necessary steps to ensure a proper review of all costs charged to the federal program.
Eligibility and Allowable Costs Material Weakness U.S. DEPARTMENT OF HOMELAND SECURITY – FEMA Passed through from United Way Worldwide ALN #: 97.024 Federal Award Identification #: LRO #782600077 Condition: Documentation was not retained to prove eligibility and allowable costs to the program for both rental assistance and utility assistance participants. Criteria: 2 CFR Part 200.403 Questioned Costs: $28,604 Context: Out of 26 tested for eligibility, 11 recipients did not have adequate support to prove eligibility for both rental assistance and utility assistance. Harmony could not locate documentation to support certain participants including the participant's lease and did not maintain proper participant identification on file. Additionally, within the sample selected, there were individuals who received utility assistance; however, Harmony could not locate the utility bill to support the amounts paid on behalf of the participant. Therefore, there was not a way to verify that the utility assistance met the various utility assistance eligibility requirements as outlined in the grant agreement. Lastly, for one rental assistance recipient, the amount of support provided was greater than three months of assistance as limited by the program. Cause: Lack of supporting documentation or not properly retaining documentation to support the eligibility of recipients. Effect: Lack of supporting documentation or not retaining the documentation to support the eligibility causes the funds to become questioned costs. Identification as repeat finding, if applicable: Not applicable. Recommendation: We recommend the Organization periodically review supporting documentation for completed applications to ensure all support is retained. We also recommend implementing enhanced internal controls to verify all support is properly retained. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding. See corrective action plan.
Eligibility and Allowable Costs Material Weakness U.S. DEPARTMENT OF HOMELAND SECURITY – FEMA Passed through from United Way Worldwide ALN #: 97.024 Federal Award Identification #: LRO #782600077 Condition: Documentation was not retained to prove eligibility and allowable costs to the program for both rental assistance and utility assistance participants. Criteria: 2 CFR Part 200.403 Questioned Costs: $28,604 Context: Out of 26 tested for eligibility, 11 recipients did not have adequate support to prove eligibility for both rental assistance and utility assistance. Harmony could not locate documentation to support certain participants including the participant's lease and did not maintain proper participant identification on file. Additionally, within the sample selected, there were individuals who received utility assistance; however, Harmony could not locate the utility bill to support the amounts paid on behalf of the participant. Therefore, there was not a way to verify that the utility assistance met the various utility assistance eligibility requirements as outlined in the grant agreement. Lastly, for one rental assistance recipient, the amount of support provided was greater than three months of assistance as limited by the program. Cause: Lack of supporting documentation or not properly retaining documentation to support the eligibility of recipients. Effect: Lack of supporting documentation or not retaining the documentation to support the eligibility causes the funds to become questioned costs. Identification as repeat finding, if applicable: Not applicable. Recommendation: We recommend the Organization periodically review supporting documentation for completed applications to ensure all support is retained. We also recommend implementing enhanced internal controls to verify all support is properly retained. Views of Responsible Officials and Planned Corrective Action: Management agrees with the finding. See corrective action plan.
2023 001 Activities Allowed or Unallowed and Allowable Costs/ Cost Principles U.S. Department of Homeland Security: Passed through the State of New Jersey, Department of Law and Public Safety: Disaster Grants – Public Assistance (Presidentially Declared Disasters) – ALN 97.036 Federal Grant Numbers and Years State of New Jersey pass-through number: UH1WX Project Worksheet #1822 – October 5, 2021 to March 5, 2022 (Application 553330) Statistically Valid Sample: The sample was not intended to be, and was not, a statistically valid sample. Prior Year Findings: None Criteria Compliance – Program Specific The Federal Emergency Management Agency (FEMA), as part of the U.S. Department of Homeland Security, evaluates the eligibility of all costs claimed by the applicant. Not all costs incurred as a result of the incident are eligible. (PAPPG v4) Chapter 4, page(s) 51-54; Chapter 6, page(s) 65 & 93-95. Cost must be: • Directly tied to the performance of eligible work; • Adequately documented (2 CFR section 200.403(g)); • Reduced by all applicable credits, such as insurance proceeds and salvage values (Stafford Act section 312, 42 USC section 5155, and 2 CFR section 200.406); • Authorized and not prohibited under federal, state, territorial, tribal, or local government laws or regulations; • Consistent with applicant’s internal policies, regulations, and procedures that apply uniformly to both federal awards and other activities of the applicant; and • Necessary and reasonable to accomplish the work properly and efficiently (2 CFR section 200.403). 1. Applicant (Force Account) Labor FEMA refers to the applicant’s personnel as “force account.” FEMA reimburses force account labor based on actual hourly rates plus the cost of the employee’s actual fringe benefits. FEMA calculates the fringe benefit cost based on a percentage of the hourly pay rate. Because certain items in a benefit package are not dependent on hours worked (e.g., health insurance), the percentage for overtime is usually different than the percentage for straight-time. Compliance – General Per 2 CFR Section 200.430, charges to federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non-federal entity, not exceeding 100% of compensated activities; (iv) Encompass federally assisted and all other activities compensated by the non-federal entity on an integrated basis, but may include the use of subsidiary records as defined in the non-federal entity's written policy; (v) Comply with the established accounting policies and practices of the non-federal entity. Internal Control Per 2 CFR section 200.303(a), a non-federal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should 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). Condition and Context The New Jersey Turnpike Authority (the “Authority”), through the State of New Jersey, Department of Homeland Security (the State), administers the federal Disaster Grants – Public Assistance (Presidentially Declared Disasters) program and is reimbursed for eligible expenditures when a presidentially declared disaster occurs. For the Authority’s force account labor costs, the Authority utilizes manual Daily Worksheets (timesheets) as the official records for time and effort worked during an event by the Authority’s personnel. These timesheets are then entered into the Authority’s information system (PeopleSoft) for review and approval, reconciling back to the information entered on the respective timesheet. For two of forty timesheets selected for testwork, the Authority was unable to provide the timesheets as the official record for the time and effort charged to the federal program. However, the Authority successfully demonstrated through PeopleSoft system that the time and effort charged to the federal program was properly reviewed and approved and reconciled to the amounts of reimbursement requested from the State. Cause The Authority did not maintain and make readily available certain timesheets used as the official record for the time and effort charged to the federal program in accordance with the Uniform Guidance. Effect The Authority did not comply with 2 CFR Section 200.430 related to incorporating the physical timesheets into the official records of the Authority. Questioned Costs None as the time and effort amounts charged were determined to be allowable. Recommendation We recommend that the Authority strengthen its processes to ensure that all timesheets for disaster related events that are federally funded are maintained and are made readily available if subject to audit or other inspection in accordance with the Uniform Guidance. Views of Responsible Officials Management agrees with the finding. We are committed to strengthening our processes to ensure that all physical timesheets related to FEMA-declared disaster events are properly maintained and readily accessible. To achieve this, we will implement enhanced procedures and controls to ensure full compliance with the Uniform Guidance requirements.
2023-001- Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs and Cost Principles Information on the Major Federal Program U.S. Department of Health and Human Services Center for Disease Control and Prevention Assistance Listing Number: 93.988 Assistance Listing Name: Cooperative Agreements for State-Based Diabetes Control Programs and Evaluation of Surveillance Systems Grant Award Number(s): 1 NU58DP007372-01-00 Award Period: June 30, 2023 to June 29, 2028 Criteria or Specific Requirement – The Uniform Guidance 2 CFR Section 200.303 requires non-Federal entities receiving Federal awards establish and maintain internal control to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally- financed program in either the current or a prior period. g) Be adequately documented. h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3).” Furthermore, according to the Uniform Guidance (2 CFR Part 200), specifically §200.430(i), “charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated”. The records must also be supported by the approval of an individual with firsthand knowledge of the work performed. Condition - During our audit, within the tested sample of seven timesheets out of a population of twenty-six, three timesheets for employees charged to the federal program did not have proper approval in the system. The lack of signed approval indicates that the timesheets were not reviewed and approved by an individual with knowledge of the work performed, as required under the Uniform Guidance. ADA has documented expenditure policies and procedures. However, the review and approval process did not operate as designed. Cause – ADA did not adhere to its internal policies and procedures to ensure timesheets were properly reviewed and approved. Effect or Potential Effect – Without adequate internal controls in place to ensure costs are properly verified and approved, ADA could unallowably and inaccurately charge salary and wages expenditures to the federal program. Questioned Costs – None Context - This is a condition based on testing of ADA’s compliance. Based on tested samples, we noted four out of seven sampled timesheets were not properly approved in the system. The samples were selected using a non-statistical method. Repeat Finding - This finding is not a repeat finding. Recommendation - BDO recommends that ADA adhere to its documented policies and procedures to ensure all timesheets are reviewed and approved by authorized personnel with knowledge of the work performed. ADA should also provide training to all employees involved in the timesheet preparation and approval process to ensure compliance with the Uniform Guidance requirements. Views of Responsible Officials: The findings were primarily related to a change that ADA made to the Human Resources Information System. Going forward, ADA will adhere to our documented policies and procedures to ensure all timesheets are reviewed and approved by authorized personnel with knowledge of the work performed. Additionally, we will provide training to all employees involved in the timesheet preparation and approval process to ensure compliance with the Uniform Guidance requirements.
Federal agency: All agencies in the SEFA Assistance Listing Number: See SEFA Award Period: 01/01/2023 to 12/31/2023 Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria or Specific Requirement: The compliance requirements for Federal Assistance Number 93.558 – Temporary Assistance for Needy Families (TANF) State Programs includes a Period of Performance element. The compliance requirement related to period of performance is that a non-federal entity may charge only allowable costs incurred during the approved budget period (also identified as the grant period) of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). Condition: Allocations of indirect costs are performed once during the year-end closing process based on time study data for the entire year, and when program attendance data for programs that are ran for various increments throughout the year is available. The TANF grant period that was tested as a major program was December 2022 – August 2023. As the grant period ended in September, no costs incurred after that date should be considered major program expenditures. Questioned Costs: Indeterminable. The questioned costs could be considered those indirect costs considered TANF expenditures that were incurred after August 2023. In addition, because the program attendance is used to allocate costs between programs, program attendance after August 2023 may be inappropriate to be considered when allocating those indirect costs to specific programs. Context: Indirect cost allocations are performed once during the year-end closing process by the auditee. Time studies are performed to allocate indirect costs between supporting and program functions. The indirect costs allocated to the program functions are then allocated between individual programs, including federally funded programs, based on the number of participant hours in each program. The time study and program hours used to allocate indirect costs are based on the entire year and not just the major program grant period. In addition, indirect costs that are allocated are incurred during the entire year and not just the major program grant period. Cause: Time and program participation data used to allocate costs are not consistent with the grant period. In addition, the costs that are allocated are not consistent with the grant period. Effect: The single annual allocation of costs means that costs incurred outside the major program grant/budget period are being allocated to the major program. In addition, allocation base data from outside the grant/budget period is being used as a base for the indirect cost allocation. Repeat Finding: No Auditor’s Recommendation: We recommend the auditee perform indirect cost allocations so that the costs and allocation base align with the grant/budget period. Performing the allocation of indirect costs annually may not create an equitable allocation at the individual program level. Views of Responsible Officials and Planned Corrective Actions: We agree that the allocation being performed once annually does not create the most equitable allocation of costs between our individual programs. We will perform our indirect cost allocations more periodically during the course of the fiscal year to ensure that more appropriate times studies and applicable participant hours are being utilized to limit the potential of allocating unrelated indirect costs from the year to individual programs, including the federally funded programs.
Federal agency: All agencies in the SEFA Assistance Listing Number: See SEFA Award Period: 01/01/2023 to 12/31/2023 Type of Finding: Significant Deficiency in Internal Control Over Compliance Criteria or Specific Requirement: The compliance requirements for Federal Assistance Number 93.558 – Temporary Assistance for Needy Families (TANF) State Programs includes a Period of Performance element. The compliance requirement related to period of performance is that a non-federal entity may charge only allowable costs incurred during the approved budget period (also identified as the grant period) of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). Condition: Allocations of indirect costs are performed once during the year-end closing process based on time study data for the entire year, and when program attendance data for programs that are ran for various increments throughout the year is available. The TANF grant period that was tested as a major program was December 2022 – August 2023. As the grant period ended in September, no costs incurred after that date should be considered major program expenditures. Questioned Costs: Indeterminable. The questioned costs could be considered those indirect costs considered TANF expenditures that were incurred after August 2023. In addition, because the program attendance is used to allocate costs between programs, program attendance after August 2023 may be inappropriate to be considered when allocating those indirect costs to specific programs. Context: Indirect cost allocations are performed once during the year-end closing process by the auditee. Time studies are performed to allocate indirect costs between supporting and program functions. The indirect costs allocated to the program functions are then allocated between individual programs, including federally funded programs, based on the number of participant hours in each program. The time study and program hours used to allocate indirect costs are based on the entire year and not just the major program grant period. In addition, indirect costs that are allocated are incurred during the entire year and not just the major program grant period. Cause: Time and program participation data used to allocate costs are not consistent with the grant period. In addition, the costs that are allocated are not consistent with the grant period. Effect: The single annual allocation of costs means that costs incurred outside the major program grant/budget period are being allocated to the major program. In addition, allocation base data from outside the grant/budget period is being used as a base for the indirect cost allocation. Repeat Finding: No Auditor’s Recommendation: We recommend the auditee perform indirect cost allocations so that the costs and allocation base align with the grant/budget period. Performing the allocation of indirect costs annually may not create an equitable allocation at the individual program level. Views of Responsible Officials and Planned Corrective Actions: We agree that the allocation being performed once annually does not create the most equitable allocation of costs between our individual programs. We will perform our indirect cost allocations more periodically during the course of the fiscal year to ensure that more appropriate times studies and applicable participant hours are being utilized to limit the potential of allocating unrelated indirect costs from the year to individual programs, including the federally funded programs.
2023 – 004: Cost Allocation of Fringe Benefits to LSC Grants Federal Agency: Legal Services Corporation (LSC) Federal Program Name: LSC Native American Grant Assistance Listing Number: 09.706060 Federal Award Identification Number and Year: 09-706060 - 2023 Award Period: January 1, 2023 – December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance Other Matters Criteria or specific requirement: 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 that 100% of medical insurance for a specific location was allocated to the grant. However, we noted that medical insurance for other pay periods and locations were allocated on a trimester basis using an allocation base of total grant hours for the period divided by total general fund hours. As such, the fringe benefit cost mentioned above was allocated in an inconsistent manner to other grant fringe benefit costs was not fully representative of the employees’ time and effort. However, management noted that these costs were allocated in a manner to comply with 45 CFR 1630.5(g) which allows LSC award recipients to allocate proportional share of another funding source’s share of an indirect cost to LSC funds. Questioned costs: None. Context: This single instance was noted during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s employee benefit cost allocation methodology is primarily based on a periodic calculation of grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual 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 in the Organization’s employee benefit cost allocation methodology could cause costs to be allocated to grants in a manner where costs are not applied uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of 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. Views of responsible officials: There is no disagreement with the audit finding
2023 – 004: Cost Allocation of Fringe Benefits to LSC Grants Federal Agency: Legal Services Corporation (LSC) Federal Program Name: LSC Native American Grant Assistance Listing Number: 09.706060 Federal Award Identification Number and Year: 09-706060 - 2023 Award Period: January 1, 2023 – December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance Other Matters Criteria or specific requirement: 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 that 100% of medical insurance for a specific location was allocated to the grant. However, we noted that medical insurance for other pay periods and locations were allocated on a trimester basis using an allocation base of total grant hours for the period divided by total general fund hours. As such, the fringe benefit cost mentioned above was allocated in an inconsistent manner to other grant fringe benefit costs was not fully representative of the employees’ time and effort. However, management noted that these costs were allocated in a manner to comply with 45 CFR 1630.5(g) which allows LSC award recipients to allocate proportional share of another funding source’s share of an indirect cost to LSC funds. Questioned costs: None. Context: This single instance was noted during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s employee benefit cost allocation methodology is primarily based on a periodic calculation of grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual 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 in the Organization’s employee benefit cost allocation methodology could cause costs to be allocated to grants in a manner where costs are not applied uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of 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. Views of responsible officials: There is no disagreement with the audit finding
2023 – 004: Cost Allocation of Fringe Benefits to LSC Grants Federal Agency: Legal Services Corporation (LSC) Federal Program Name: LSC Native American Grant Assistance Listing Number: 09.706060 Federal Award Identification Number and Year: 09-706060 - 2023 Award Period: January 1, 2023 – December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance Other Matters Criteria or specific requirement: 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 that 100% of medical insurance for a specific location was allocated to the grant. However, we noted that medical insurance for other pay periods and locations were allocated on a trimester basis using an allocation base of total grant hours for the period divided by total general fund hours. As such, the fringe benefit cost mentioned above was allocated in an inconsistent manner to other grant fringe benefit costs was not fully representative of the employees’ time and effort. However, management noted that these costs were allocated in a manner to comply with 45 CFR 1630.5(g) which allows LSC award recipients to allocate proportional share of another funding source’s share of an indirect cost to LSC funds. Questioned costs: None. Context: This single instance was noted during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s employee benefit cost allocation methodology is primarily based on a periodic calculation of grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual 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 in the Organization’s employee benefit cost allocation methodology could cause costs to be allocated to grants in a manner where costs are not applied uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of 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. Views of responsible officials: There is no disagreement with the audit finding
2023 – 004: Cost Allocation of Fringe Benefits to LSC Grants Federal Agency: Legal Services Corporation (LSC) Federal Program Name: LSC Native American Grant Assistance Listing Number: 09.706060 Federal Award Identification Number and Year: 09-706060 - 2023 Award Period: January 1, 2023 – December 31, 2023 Type of Finding: Significant Deficiency in Internal Control over Compliance Other Matters Criteria or specific requirement: 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 that 100% of medical insurance for a specific location was allocated to the grant. However, we noted that medical insurance for other pay periods and locations were allocated on a trimester basis using an allocation base of total grant hours for the period divided by total general fund hours. As such, the fringe benefit cost mentioned above was allocated in an inconsistent manner to other grant fringe benefit costs was not fully representative of the employees’ time and effort. However, management noted that these costs were allocated in a manner to comply with 45 CFR 1630.5(g) which allows LSC award recipients to allocate proportional share of another funding source’s share of an indirect cost to LSC funds. Questioned costs: None. Context: This single instance was noted during testing of 26 payroll and payroll-related disbursements. Cause: The Organization’s employee benefit cost allocation methodology is primarily based on a periodic calculation of grant hours versus general fund hours multiplied by period costs, but it often includes manual adjustments based on review of individual 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 in the Organization’s employee benefit cost allocation methodology could cause costs to be allocated to grants in a manner where costs are not applied uniformly to both LSC (or, federal)-funded and non-LSC (of, federal) -funded activities. Repeat Finding: This is not a repeat finding. Recommendation: We recommend that the Organization consider updating its employee benefit cost allocation methodology and process to reduce the frequency of manual adjustments based on review of 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. Views of responsible officials: There is no disagreement with the audit finding
2023 – 009: Cost Allocation of Compensation to Coronavirus State and Local Fiscal Recovery Grants Federal Agency: Department of Treasury Federal Program Name: COVID-19: Coronavirus State and Local Fiscal Recovery, Various – See SEFA Assistance Listing Number: 21.027 Federal Award Identification Number and Year: Various – See SEFA Pass-Through Agency: Various – See SEFA Pass-Through Numbers: Various – See SEFA Award Period: Various – see SEFA Type of Finding: Material Weakness in Internal Control over Compliance Other Matters 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 that: We were unable to view evidence for one allocation of $23 of medical insurance expenses for one employee related to one month. Three allocations of medical and dental insurance expenses totaling $1,903 were allocated using the percentage of total grant hours of the period instead of the percentage of total grant salary expense, which was the base used for other similar benefit expense allocations. We were unable to view support of the allocation based on total grant hours for the period. These amounts appeared to be under allocated by $549. One salary allocation of $848 appeared to be under allocated by $1,689 when compared to time and effort records and compensation information. We were unable to see evidence that supported the allocation. As such, the salary costs and fringe mentioned above were allocated in an inconsistent manner to other grant payroll costs were not fully representative of the employees’ time and effort and benefit obtained by grant from the allocated cost. Questioned costs: $23 of allocated medical insurance expense described above, which is related to Assistance Listing Number 21.027 and the Eviction Clinic grant passed through from Arapahoe County. Context: These six instances were noting during testing of 47 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 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. Management also sometimes allocates employee benefit expense using a base of total grant salary expense for a period when compared to total salary expense for the same period. 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 would 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: There is no disagreement with the audit finding
2023 – 009: Cost Allocation of Compensation to Coronavirus State and Local Fiscal Recovery Grants Federal Agency: Department of Treasury Federal Program Name: COVID-19: Coronavirus State and Local Fiscal Recovery, Various – See SEFA Assistance Listing Number: 21.027 Federal Award Identification Number and Year: Various – See SEFA Pass-Through Agency: Various – See SEFA Pass-Through Numbers: Various – See SEFA Award Period: Various – see SEFA Type of Finding: Material Weakness in Internal Control over Compliance Other Matters 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 that: We were unable to view evidence for one allocation of $23 of medical insurance expenses for one employee related to one month. Three allocations of medical and dental insurance expenses totaling $1,903 were allocated using the percentage of total grant hours of the period instead of the percentage of total grant salary expense, which was the base used for other similar benefit expense allocations. We were unable to view support of the allocation based on total grant hours for the period. These amounts appeared to be under allocated by $549. One salary allocation of $848 appeared to be under allocated by $1,689 when compared to time and effort records and compensation information. We were unable to see evidence that supported the allocation. As such, the salary costs and fringe mentioned above were allocated in an inconsistent manner to other grant payroll costs were not fully representative of the employees’ time and effort and benefit obtained by grant from the allocated cost. Questioned costs: $23 of allocated medical insurance expense described above, which is related to Assistance Listing Number 21.027 and the Eviction Clinic grant passed through from Arapahoe County. Context: These six instances were noting during testing of 47 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 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. Management also sometimes allocates employee benefit expense using a base of total grant salary expense for a period when compared to total salary expense for the same period. 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 would 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: There is no disagreement with the audit finding
2023 – 009: Cost Allocation of Compensation to Coronavirus State and Local Fiscal Recovery Grants Federal Agency: Department of Treasury Federal Program Name: COVID-19: Coronavirus State and Local Fiscal Recovery, Various – See SEFA Assistance Listing Number: 21.027 Federal Award Identification Number and Year: Various – See SEFA Pass-Through Agency: Various – See SEFA Pass-Through Numbers: Various – See SEFA Award Period: Various – see SEFA Type of Finding: Material Weakness in Internal Control over Compliance Other Matters 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 that: We were unable to view evidence for one allocation of $23 of medical insurance expenses for one employee related to one month. Three allocations of medical and dental insurance expenses totaling $1,903 were allocated using the percentage of total grant hours of the period instead of the percentage of total grant salary expense, which was the base used for other similar benefit expense allocations. We were unable to view support of the allocation based on total grant hours for the period. These amounts appeared to be under allocated by $549. One salary allocation of $848 appeared to be under allocated by $1,689 when compared to time and effort records and compensation information. We were unable to see evidence that supported the allocation. As such, the salary costs and fringe mentioned above were allocated in an inconsistent manner to other grant payroll costs were not fully representative of the employees’ time and effort and benefit obtained by grant from the allocated cost. Questioned costs: $23 of allocated medical insurance expense described above, which is related to Assistance Listing Number 21.027 and the Eviction Clinic grant passed through from Arapahoe County. Context: These six instances were noting during testing of 47 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 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. Management also sometimes allocates employee benefit expense using a base of total grant salary expense for a period when compared to total salary expense for the same period. 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 would 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: There is no disagreement with the audit finding
ACTIVITIES ALLOWED OR UNALLOWED AND ALLOWABLE COSTS/COST PRINCIPLES Significant Deficiency in Internal Control Over Compliance and Noncompliance ALN 93.391 – Activities to Support State, Tribal, Local and Territorial (STLT) Health Department Response to Public Health or Healthcare Crises Department of Health and Human Services Award Number: NH75OT0000010 Award Year: 2021 Criteria or Specific Requirement: The Uniform Guidance in 2 CFR Section 200.303, Internal Controls, requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal controls designed to reasonably ensure compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. The Uniform Guidance in 2 CFR Section 200.403(g) states that for costs to be allowable under Federal awards, they must be adequately documented. Condition: Controls in place at the City’s Department of Public Health and Environment (DDPHE) were not effective in preventing incorrect expenditures from being charged to the grant. There was one instance where the existence of a control failed to detect an error within an invoice selected, which resulted in an overpayment to the subrecipient. Cause: Personnel reviewing expenditures did not adequately review to ensure invoices were correct prior to payment. Effect or Potential Effect: An invoice to a subrecipient was overpaid. Questioned Costs: $431 Context: BDO selected a sample of 20 expenditures totaling to $216,560 from a population of 162 expenditures totaling to $625,782. There was one expenditure in the amount of $4,101 that was overpaid. The compliance sample was expanded, and another 12 expenditures were selected totaling to $29,975. There were no additional compliance deviations noted. This is a condition identified per review of the City’s compliance with specified requirements using a sample that was not statistically valid. Identification as a Repeat Finding: N/A Recommendation: DDPHE should improve existing review controls to ensure the mathematical accuracy of invoices has been checked, especially with respect to payments to subrecipients. Payroll and other costs reported on the face of the invoice should agree to supporting payroll documentation received. Views of Responsible Officials: The City agrees with the finding. DDPHE will implement additional trainings and is encouraging a standard template in Excel to avoid calculation errors. For additional information, see the City’s separate report for planned corrective actions.
Section II – Financial Statement FindingsFinding 2023-001 Significant Deficiency in Internal Controls and Compliance with major program AIL Number: 93.658 Description: Approval of Credit Card Expenditures Criteria: Title 2, CFR, Part 200, Subpart D – Post Federal Award Requirements, section 200.303, Internal controls. states, in part, that “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…” Title 2, CFR, Part 200, Subpart E - Cost Principles, Basic Considerations, section 200.403, Factors affecting allowability of costs. states, in part, that “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.” Condition: In our testing we were unable to verify that credit card transactions were tied out to source documents and approval to ensure allowable costs under Uniform Guidance. Cause: Management is not following their policies to reconciling credit card charges to underlying source documents and document approval prior to payments made. Effect: By not reviewing and approving credit card transactions there is a heightened risk of unallowable costs and fraudulent charges. Recommendation: We recommend that management improve internal controls around credit card expenditures by reviewing credit card transactions and underlying receipts and approving prior to payment. Management’s Response: Management’s response to the finding is discussed in the attached Corrective Action Plan. Section III – Federal Award Findings and Questioned Costs Finding 2023-001 Significant deficiency in internal control over compliance with major program AIL Number: 93.658 Program Name: Foster Care Title IV-E Federal Agency: Department of Health and Human Services Pass-through Agency: California Department of Social Services Questioned Costs: None Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs, Cost Principles See Finding 2023-01 in Section II above.
FINDING 2023-003 Subject: COVID-19: Coronavirus State and Local Fiscal Recovery Funds - Body Camera - Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance Federal Agency: Department of the Treasury Federal Program: COVID-19: Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): 71391 Pass-Through Entity: Indiana Department of Homeland Security Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/ Cost Principles, Period of Performance Audit Findings: Material Weakness, Other Matters INDIANA STATE BOARD OF ACCOUNTS 17 CITY OF MICHIGAN CITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The City's Police Department applied for and was awarded a body camera grant from the Indiana Department of Homeland Security (IDHS). The City's Police Department sought reimbursement from the IDHS in October of 2023. An invoice from Utility, dated October 28, 2022, in the amount of $600,000 for body cameras was submitted for the reimbursement. The invoice was originally paid by the City with American Rescue Plan Act (ARPA) funds on April 3, 2023. The City received reimbursement of $61,740 from the IDHS on December 5, 2023, which was receipted into the City's Grant Fund along with the City's local match in the amount of $30,870. The Controller's Office did an adjustment on December 31, 2023, in the amount of $92,610, to reimburse the ARP Coronavirus LF Recovery Fund and decrease the Grant Fund, for the reimbursement of $61,740 and the local share of $30,870. However, per the grant agreement with the IDHS, "If the subrecipient incurs a financial obligation prior to approval of the State, then the subrecipient will be required to reimburse the State for the amount of funds that were not approved." As such, the expenditure was not an allowable activity or allowable cost and was outside of the period of performance due to the City incurring the expense prior to signing the grant agreement with the IDHS on March 3, 2023. The lack of internal controls and noncompliance were isolated to the purchase noted above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: . . . (c) Be consistent with policies and procedures that apply uniformly to both federallyfinanced and other activities of the non-Federal entity. . . . (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. . . ." 2 CFR 200.306(b) states: "For all Federal awards, any shared costs or matching funds and all contributions, including cash and third-party in-kind contributions, must be accepted as part of the non-Federal entity's cost sharing or matching when such contributions meet all of the following criteria: (1) Are verifiable from the non-Federal entity's records; INDIANA STATE BOARD OF ACCOUNTS 18 CITY OF MICHIGAN CITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (2) Are not included as contributions for any other Federal award; (3) Are necessary and reasonable for accomplishment of project or program objectives; (4) Are allowable under subpart E of this part; (5) Are not paid by the Federal Government under another Federal award, except where the Federal statute authorizing a program specifically provides that Federal funds made available for such program can be applied to matching or cost sharing requirements of other Federal programs; (6) Are provided for in the approved budget when required by the Federal awarding agency; and (7) Conform to other provisions of this part, as applicable." The Grant Agreement states in part: "Any purchases made by the Subrecipient that are not authorized by the U.S. Department of the Treasury allowability guidelines, the Subrecipient's Project or State, will not be reimbursed under this grant." "Pre-award costs, as defined in 2 CFR 200.458, may not be paid with funding from this award." 2 CFR 200.458 states: "Pre-award costs are those incurred prior to the effective date of the Federal award or subaward directly pursuant to the negotiation and in anticipation of the Federal award where such costs are necessary for efficient and timely performance of the scope of work. Such costs are allowable only to the extent that they would have been allowable if incurred after the date of the Federal award and only with the written approval of the Federal awarding agency. If charged to the award, these costs must be charged to the initial budget period of the award, unless otherwise specified by the Federal awarding agency or pass-through entity." Cause Management had not developed a system of internal controls that would have prevented or detected material noncompliance. The City did not ensure that the policies and procedures in place related to allowable or unallowable activities, allowable costs and cost principles, and period of performance were complied with at the acceptance of the grant from the IDHS. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, an invoice that was previously paid with other federal award funds was submitted for reimbursement to another agency. The original invoice was outside of the period of performance and unallowable as related to the award from the IDHS. Furthermore, noncompliance with the provisions of federal statutes, regulations, and the terms and conditions of the federal award could result in the loss of future federal funding to the City. Questioned Costs We identified $61,740 in questioned costs as noted above in the Condition and Context. INDIANA STATE BOARD OF ACCOUNTS 19 CITY OF MICHIGAN CITY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Recommendation We recommended that management of the City establish a proper system of internal controls, including strengthening its policies and procedures to ensure all costs submitted for reimbursement are not already reimbursed by another federal award and are within the period of performance. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Criteria As noted throughout the Uniform Guidance, including Part 2, CFR Part 200.403 notes “Cost must be incurred during the approved budget period.” Condition While performing tests of the Garden’s internal controls over compliance, we noted multiple transactions had occurred after the respective period of performance for the Federal Award had expired. Cause of Condition The Garden has not implemented proper internal control policies to adhere to the requirements of the Uniform Guidance. Effect of Condition Noncompliance may impact future funding from Federal awards. Recommendation We recommend the Garden implement proper internal control procedures to track the period of performance for each Federal Award, and ensure costs are only charged to programs during the proper period.
Criteria As noted throughout the Uniform Guidance, including Part 2, CFR Part 200.403 notes “Cost must be incurred during the approved budget period.” Condition While performing tests of the Garden’s internal controls over compliance, we noted multiple transactions had occurred after the respective period of performance for the Federal Award had expired. Cause of Condition The Garden has not implemented proper internal control policies to adhere to the requirements of the Uniform Guidance. Effect of Condition Noncompliance may impact future funding from Federal awards. Recommendation We recommend the Garden implement proper internal control procedures to track the period of performance for each Federal Award, and ensure costs are only charged to programs during the proper period.
Federal Program Information: Funding Agency: U.S Department of Health and Human Services FALN: 93.926 Federal Award Identification Number: H49MC00119‐19‐00 Pass Through Entity: State of Georgia Department of Human Services Award Year: 2018‐2020 Criteria: Under 2 CFR Section 200.303(a), non‐federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR sections 200.308 200.309 and 200.403(h)), the Organization may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass‐through entity made the federal award that were authorized by the federal awarding agency or pass‐through entity. Condition: The Organization lacked supporting documentation for non‐payroll expenses. Due to lack of supporting documentation, period of performance could not be verified. Of the sixty (60) nonpayroll transactions examined, ten (10) lacked supporting documentation for review, and 1 expense was for services performed in a prior period. Effect: Management possibly did not expend funds in accordance with the approved detailed lineitem budget and grant agreement and possibly expended funds in the incorrect period of performance. Cause: Expenses including approved invoices and/or supporting documentation were not properly maintained in part due to several changes in personnel within the accounting area and overall limited number of personnel for certain functions and lack of board oversight. Questioned costs: Known questioned costs of $7,674 and likely questioned costs of $34,117 for Healthy Start. Recommendation: We recommend that internal controls be strengthened and processes implemented to ensure all expenses include supporting documentation/invoice indicating period of performance.
Federal Program Information: Funding Agency: U.S Department of Health and Human Services FALN: 93.926 Federal Award Identification Number: H49MC00119‐19‐00 Pass Through Entity: State of Georgia Department of Human Services Award Year: 2018‐2020 Criteria: Under 2 CFR Section 200.303(a), non‐federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR sections 200.308 200.309 and 200.403(h)), the Organization may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass‐through entity made the federal award that were authorized by the federal awarding agency or pass‐through entity. Condition: The Organization lacked supporting documentation for non‐payroll expenses. Due to lack of supporting documentation, period of performance could not be verified. Of the sixty (60) nonpayroll transactions examined, ten (10) lacked supporting documentation for review, and 1 expense was for services performed in a prior period. Effect: Management possibly did not expend funds in accordance with the approved detailed lineitem budget and grant agreement and possibly expended funds in the incorrect period of performance. Cause: Expenses including approved invoices and/or supporting documentation were not properly maintained in part due to several changes in personnel within the accounting area and overall limited number of personnel for certain functions and lack of board oversight. Questioned costs: Known questioned costs of $7,674 and likely questioned costs of $34,117 for Healthy Start. Recommendation: We recommend that internal controls be strengthened and processes implemented to ensure all expenses include supporting documentation/invoice indicating period of performance.