Finding 2023-002 Significant deficiency in internal controls over compliance related to allowable costs and period of performance. Federal Agency: U.S. Department of Commerce Program Title: Pacific Fisheries Data Program Assistance Listing Number: 11.437 Award Numbers: NOAA-NMFS-AK-2023-2007663 Award Period: October 1, 2022 to September 30, 2027 Criteria 2 U.S. CFR Part 200.403, 404, and 405 of Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards require that costs must be necessary and reasonable for the performance of the Federal Award, that costs be determined in accordance with GAAP, and that costs be adequately documented including the allocation of those costs. Condition/Context for Evaluation IPHC’s internal controls over non-payroll charges to the Federal Award did not include review for allowability, accrual in the proper period, or that adequate documentation existed to support the amounts charged or allocated. Three out of 25 non-payroll disbursements tested did not include evidence supporting one or more of these controls. Questioned Costs $2,674 Cause IPHC’s operation of internal controls were not sufficient to ensure allowable costs were charged in accordance with 2 U.S. CFR Part 200.403, 404, and 405 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Effect or Potential Effect As a result, charges were made to Federal awards that were not allowable or allocable to the award. Repeat Finding Not applicable. Recommendation We recommend that IPHC ensure internal controls include reviewing costs charged to the Federal Award for conformity with 2 U.S. CFR Part 200.403, 404, and 405 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards for allowability, allocability, and reasonableness. Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying corrective action plan.
Federal Program Information: COVID-19 Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027) Transitional Living for Homeless Youth (ALN 93.550) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): B. Allowable Costs: In accordance with 2 CFR § 200.403(e), costs must be determined in accordance with generally accepted accounting principles. Additionally, costs must be adequately documented (2 CFR 200.403(g)). Condition: For 3 out of the 26 transactions selected for the COVID-19 Coronavirus State and Local Fiscal Recovery Funds program, the expenditures were recorded for an inaccurate amount. For 1 out of 25 transactions selected for the Transitional Living for Homeless Youth program, the expenditure was not accrued in the appropriate fiscal year in accordance with U.S. GAAP. Cause: Administrative oversight in expenditure review caused inaccurate recording of expenditures. Additionally, the Organization did not have policies in place to review year-end grant expenditures for proper cutoff below a certain threshold. Effect or Potential Effect: The Organization was not in compliance with allowable cost requirements. Questioned Costs: Below reportable threshold. Context: Federal expenditures must meet allowable cost requirements in accordance with 2 CFR 200. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the Organization enhance its procedures over allowable costs. Views of Responsible Officials and Planned Corrective Actions: An additional level of review by Director of Finance and Business will be added to ensure accuracy of expenditures. Management will add additional controls to year end check list to identify and accrue any expenses incurred on or prior to year end.
Federal Program Information: COVID-19 Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027) Transitional Living for Homeless Youth (ALN 93.550) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): B. Allowable Costs: In accordance with 2 CFR § 200.403(e), costs must be determined in accordance with generally accepted accounting principles. Additionally, costs must be adequately documented (2 CFR 200.403(g)). Condition: For 3 out of the 26 transactions selected for the COVID-19 Coronavirus State and Local Fiscal Recovery Funds program, the expenditures were recorded for an inaccurate amount. For 1 out of 25 transactions selected for the Transitional Living for Homeless Youth program, the expenditure was not accrued in the appropriate fiscal year in accordance with U.S. GAAP. Cause: Administrative oversight in expenditure review caused inaccurate recording of expenditures. Additionally, the Organization did not have policies in place to review year-end grant expenditures for proper cutoff below a certain threshold. Effect or Potential Effect: The Organization was not in compliance with allowable cost requirements. Questioned Costs: Below reportable threshold. Context: Federal expenditures must meet allowable cost requirements in accordance with 2 CFR 200. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the Organization enhance its procedures over allowable costs. Views of Responsible Officials and Planned Corrective Actions: An additional level of review by Director of Finance and Business will be added to ensure accuracy of expenditures. Management will add additional controls to year end check list to identify and accrue any expenses incurred on or prior to year end.
Federal Program Information: COVID-19 Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027) Transitional Living for Homeless Youth (ALN 93.550) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): B. Allowable Costs: In accordance with 2 CFR § 200.403(e), costs must be determined in accordance with generally accepted accounting principles. Additionally, costs must be adequately documented (2 CFR 200.403(g)). Condition: For 3 out of the 26 transactions selected for the COVID-19 Coronavirus State and Local Fiscal Recovery Funds program, the expenditures were recorded for an inaccurate amount. For 1 out of 25 transactions selected for the Transitional Living for Homeless Youth program, the expenditure was not accrued in the appropriate fiscal year in accordance with U.S. GAAP. Cause: Administrative oversight in expenditure review caused inaccurate recording of expenditures. Additionally, the Organization did not have policies in place to review year-end grant expenditures for proper cutoff below a certain threshold. Effect or Potential Effect: The Organization was not in compliance with allowable cost requirements. Questioned Costs: Below reportable threshold. Context: Federal expenditures must meet allowable cost requirements in accordance with 2 CFR 200. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the Organization enhance its procedures over allowable costs. Views of Responsible Officials and Planned Corrective Actions: An additional level of review by Director of Finance and Business will be added to ensure accuracy of expenditures. Management will add additional controls to year end check list to identify and accrue any expenses incurred on or prior to year end.
Finding 2023-002 Significant deficiency in internal controls over compliance related to allowable costs and period of performance. Federal Agency: U.S. Department of Commerce Program Title: Pacific Fisheries Data Program Assistance Listing Number: 11.437 Award Numbers: NOAA-NMFS-AK-2023-2007663 Award Period: October 1, 2022 to September 30, 2027 Criteria 2 U.S. CFR Part 200.403, 404, and 405 of Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards require that costs must be necessary and reasonable for the performance of the Federal Award, that costs be determined in accordance with GAAP, and that costs be adequately documented including the allocation of those costs. Condition/Context for Evaluation IPHC’s internal controls over non-payroll charges to the Federal Award did not include review for allowability, accrual in the proper period, or that adequate documentation existed to support the amounts charged or allocated. Three out of 25 non-payroll disbursements tested did not include evidence supporting one or more of these controls. Questioned Costs $2,674 Cause IPHC’s operation of internal controls were not sufficient to ensure allowable costs were charged in accordance with 2 U.S. CFR Part 200.403, 404, and 405 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Effect or Potential Effect As a result, charges were made to Federal awards that were not allowable or allocable to the award. Repeat Finding Not applicable. Recommendation We recommend that IPHC ensure internal controls include reviewing costs charged to the Federal Award for conformity with 2 U.S. CFR Part 200.403, 404, and 405 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards for allowability, allocability, and reasonableness. Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying corrective action plan.
2023-002 Grant Payroll Documentation and Recordkeeping Federal Agency: U.S Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: SLFRP3404 - 2021 Award Period: March 3, 2021 through December 31, 2024 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matter Criteria: Compliance: 2 CFR 200.302(b)(3) states that records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. 2 CFR 200.403 states that costs must be adequately documented. Controls: 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 comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the ”Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The County did not maintain documentation supporting certain payroll expenditures charged to the grant. Questioned Costs: Under $25,000. Context: For four of the sixty employee pays selected for testing the underlying payroll records did not support the amount charged to the grant. Cause: Payroll documentation supporting the wage amounts charged to the grant program was not properly maintained by the County. Effect: Failure to maintain supporting documentation to the employee payroll charged to grant programs may result in unallowed cost and activities being charged to the grant, causing noncompliance with the Federal compliance requirements. Repeat Finding: No Recommendation: We recommend the County establish internal control procedures to ensure that all amounts charged to grant programs for employee payroll costs be reconciled to the specific employee payroll records and that supporting documentation be maintained throughout the grant award period and beyond.
Questioned Cost $ 5,174 Finding No. 2023 002: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Federal Agency: U.S. Department of State Assistance Listing Number and Title: 19.015 – Cultural, Technical and Educational Centers Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Cultural, Technical and Educational Centers program for 2 out of 26 individuals selected for testing. Furthermore, at the end of the fiscal year, management recorded an adjustment in an attempt to correct the error, however, the amounts calculated in the adjustment were inaccurate. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. Code of Federal Regulations (“CFR”) Part 200, states “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… (g) Be adequately documented.” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles We were informed by management that the inaccurate allocation of amounts to the Cultural, Technical and Educational Centers program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment may be attributed to general management oversight. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of amounts included in the correcting adjustment resulted in the following: • An overstatement of $5,174 in expenditures allocated to the Cultural, Technical and Educational Centers grant. • An overstatement of $5,032 in expenditures allocated to a non Federal grant. • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant. • An understatement of $10,229 in expenditures allocated to the U.S. Department of State – Public Diplomacy Programs grant. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 26 salaries and wages related expenditures totaling approximately $117,000 were selected for audit from a population of approximately $14,020,000 in salaries and wages related expenditures. Our test found two instances in which salaries and wages were erroneously recorded under the Cultural, Technical and Educational Centers program. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles Ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated in an accurate manner. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “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… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “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… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “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… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “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… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “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… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
Finding Number: 2023-033 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Program: Government Department/Agency: U.S. Department of Health and Human Services Opioid STR ALN: 93.788 Award #: Various Award Year: 09/30/2020 – 09/29/2024 Department of Behavioral Health (DBH) Criteria - The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR Section 200.403, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. (g) Be adequately documented.” Condition – During our testwork for the Activities Allowed or Unallowed and Allowable Costs/Cost Principles, we noted the following in our sample of sixty-four (64) items: • For one (1) out of the 64 samples, DBH did not provide adequate supporting documentation for year-end accrual for subrecipient expenditures amounting to $238,548. Questioned Costs – Known amount is $238,548. Context – This is a condition identified per review of DBH’s compliance with specified requirements using a statistically valid sample. Total amount of samples selected for testing amounted to $7,294,191. Effect – Lack of supporting documentation could result in disallowances of costs and DBH may have drawn down federal monies in excess of the expenditures incurred. Cause – DBH did not have adequate controls in place to ensure that expenditures accrued were actually incurred by the subrecipient. Recommendation – We recommend that DBH strengthen internal control procedures to ensure that expenditures are allowable, and that sufficient documentation is retained to support that allowability. Related Noncompliance – Noncompliance. Views of Responsible Officials and Planned Corrective Actions – DBH concurs with the finding. The District’s corrective action is described in the Management’s Corrective Action Plan included as Appendix B of the attached Management’s Section.
Criteria: Per section 3401(a) of the American Rescue Plan (ARP) Act of 2021, ARP funds shall be available for reimbursement for: (a) payroll of public transportation entities, (b) operating costs to maintain service due to lost revenue due as a result of the coronavirus public health emergency, and (c) paying administrative leave of operations or contractor personnel due to reductions of service. In addition, Title 2 CFR § 200.303 requires the recipient of federal funds 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. Moreover, Title 2 CFR 200.403 (a) and (b) state 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 and be allocable thereto under 2 CFR part 200, subpart E, and (b) conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E or in the Federal award as to types or amount of cost items. Condition: As part of audit procedures over a sample of 25 non-payroll transactions we identified one transaction for $8,510 relating to legislative consulting services which was not an allowable activity under the grant agreement. As a result of further review of the general ledger account in which the above item was recorded, we identified 13 additional transactions for similar unallowable activities representing $581,987. We did not identify any indirect costs that were associated with these unallowable costs. Total questioned cost identified through the audit procedures performed was approximately $590,403. Total expenditures for the Federal Transit Cluster were approximately $243,258,597. Cause: Historically, grants received by METRO have generally been specific to specified projects, which allowed METRO to establish projects in advance for tracking, accumulating, and approving/monitoring costs incurred. As such, METRO’s internal controls are designed with this project-based focus in mind. In the current year METRO received this grant which allows them to seek reimbursement for certain prior year costs not already reimbursed by the Federal government. Given the broad nature of costs allowed under this grant and the ability to seek reimbursement for prior year costs, management identified costs which were included in general ledger accounts not typically subject to detailed allowability assessments in accordance with federal requirements, and as a result METRO inadvertently placed an increased reliance on the knowledge of grants department personnel to understand the nature of general ledger accounts and transactions, as well as an increased reliance on reviewers identifying unallowable costs in the summary of expenditures submitted for reimbursement. Effect: Certain of the costs incurred and submitted for reimbursement by METRO were unallowable. Auditor’s Recommendation: METRO should establish appropriate processes and controls to guide grant personnel in the aggregation of grant costs. In particular, management should focus on the processes and controls associated with grants for which predefined projects are not established in advance of incurring grant related expenditures.
Criteria: Per section 3401(a) of the American Rescue Plan (ARP) Act of 2021, ARP funds shall be available for reimbursement for: (a) payroll of public transportation entities, (b) operating costs to maintain service due to lost revenue due as a result of the coronavirus public health emergency, and (c) paying administrative leave of operations or contractor personnel due to reductions of service. In addition, Title 2 CFR § 200.303 requires the recipient of federal funds 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. Moreover, Title 2 CFR 200.403 (a) and (b) state 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 and be allocable thereto under 2 CFR part 200, subpart E, and (b) conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E or in the Federal award as to types or amount of cost items. Condition: As part of audit procedures over a sample of 25 non-payroll transactions we identified one transaction for $8,510 relating to legislative consulting services which was not an allowable activity under the grant agreement. As a result of further review of the general ledger account in which the above item was recorded, we identified 13 additional transactions for similar unallowable activities representing $581,987. We did not identify any indirect costs that were associated with these unallowable costs. Total questioned cost identified through the audit procedures performed was approximately $590,403. Total expenditures for the Federal Transit Cluster were approximately $243,258,597. Cause: Historically, grants received by METRO have generally been specific to specified projects, which allowed METRO to establish projects in advance for tracking, accumulating, and approving/monitoring costs incurred. As such, METRO’s internal controls are designed with this project-based focus in mind. In the current year METRO received this grant which allows them to seek reimbursement for certain prior year costs not already reimbursed by the Federal government. Given the broad nature of costs allowed under this grant and the ability to seek reimbursement for prior year costs, management identified costs which were included in general ledger accounts not typically subject to detailed allowability assessments in accordance with federal requirements, and as a result METRO inadvertently placed an increased reliance on the knowledge of grants department personnel to understand the nature of general ledger accounts and transactions, as well as an increased reliance on reviewers identifying unallowable costs in the summary of expenditures submitted for reimbursement. Effect: Certain of the costs incurred and submitted for reimbursement by METRO were unallowable. Auditor’s Recommendation: METRO should establish appropriate processes and controls to guide grant personnel in the aggregation of grant costs. In particular, management should focus on the processes and controls associated with grants for which predefined projects are not established in advance of incurring grant related expenditures.
Criteria: Per section 3401(a) of the American Rescue Plan (ARP) Act of 2021, ARP funds shall be available for reimbursement for: (a) payroll of public transportation entities, (b) operating costs to maintain service due to lost revenue due as a result of the coronavirus public health emergency, and (c) paying administrative leave of operations or contractor personnel due to reductions of service. In addition, Title 2 CFR § 200.303 requires the recipient of federal funds 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. Moreover, Title 2 CFR 200.403 (a) and (b) state 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 and be allocable thereto under 2 CFR part 200, subpart E, and (b) conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E or in the Federal award as to types or amount of cost items. Condition: As part of audit procedures over a sample of 25 non-payroll transactions we identified one transaction for $8,510 relating to legislative consulting services which was not an allowable activity under the grant agreement. As a result of further review of the general ledger account in which the above item was recorded, we identified 13 additional transactions for similar unallowable activities representing $581,987. We did not identify any indirect costs that were associated with these unallowable costs. Total questioned cost identified through the audit procedures performed was approximately $590,403. Total expenditures for the Federal Transit Cluster were approximately $243,258,597. Cause: Historically, grants received by METRO have generally been specific to specified projects, which allowed METRO to establish projects in advance for tracking, accumulating, and approving/monitoring costs incurred. As such, METRO’s internal controls are designed with this project-based focus in mind. In the current year METRO received this grant which allows them to seek reimbursement for certain prior year costs not already reimbursed by the Federal government. Given the broad nature of costs allowed under this grant and the ability to seek reimbursement for prior year costs, management identified costs which were included in general ledger accounts not typically subject to detailed allowability assessments in accordance with federal requirements, and as a result METRO inadvertently placed an increased reliance on the knowledge of grants department personnel to understand the nature of general ledger accounts and transactions, as well as an increased reliance on reviewers identifying unallowable costs in the summary of expenditures submitted for reimbursement. Effect: Certain of the costs incurred and submitted for reimbursement by METRO were unallowable. Auditor’s Recommendation: METRO should establish appropriate processes and controls to guide grant personnel in the aggregation of grant costs. In particular, management should focus on the processes and controls associated with grants for which predefined projects are not established in advance of incurring grant related expenditures.
Criteria: Per section 3401(a) of the American Rescue Plan (ARP) Act of 2021, ARP funds shall be available for reimbursement for: (a) payroll of public transportation entities, (b) operating costs to maintain service due to lost revenue due as a result of the coronavirus public health emergency, and (c) paying administrative leave of operations or contractor personnel due to reductions of service. In addition, Title 2 CFR § 200.303 requires the recipient of federal funds 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. Moreover, Title 2 CFR 200.403 (a) and (b) state 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 and be allocable thereto under 2 CFR part 200, subpart E, and (b) conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E or in the Federal award as to types or amount of cost items. Condition: As part of audit procedures over a sample of 25 non-payroll transactions we identified one transaction for $8,510 relating to legislative consulting services which was not an allowable activity under the grant agreement. As a result of further review of the general ledger account in which the above item was recorded, we identified 13 additional transactions for similar unallowable activities representing $581,987. We did not identify any indirect costs that were associated with these unallowable costs. Total questioned cost identified through the audit procedures performed was approximately $590,403. Total expenditures for the Federal Transit Cluster were approximately $243,258,597. Cause: Historically, grants received by METRO have generally been specific to specified projects, which allowed METRO to establish projects in advance for tracking, accumulating, and approving/monitoring costs incurred. As such, METRO’s internal controls are designed with this project-based focus in mind. In the current year METRO received this grant which allows them to seek reimbursement for certain prior year costs not already reimbursed by the Federal government. Given the broad nature of costs allowed under this grant and the ability to seek reimbursement for prior year costs, management identified costs which were included in general ledger accounts not typically subject to detailed allowability assessments in accordance with federal requirements, and as a result METRO inadvertently placed an increased reliance on the knowledge of grants department personnel to understand the nature of general ledger accounts and transactions, as well as an increased reliance on reviewers identifying unallowable costs in the summary of expenditures submitted for reimbursement. Effect: Certain of the costs incurred and submitted for reimbursement by METRO were unallowable. Auditor’s Recommendation: METRO should establish appropriate processes and controls to guide grant personnel in the aggregation of grant costs. In particular, management should focus on the processes and controls associated with grants for which predefined projects are not established in advance of incurring grant related expenditures.
Section III – Federal Award Findings and Questioned Costs Finding 2023-002: Overdrawn Federal Funding Compliance Requirement: Allowable Costs/Costs Principles and Cash Management Type: Material Noncompliance and Material Weakness over Internal Control Federal Agency: U.S. Department of Health and Human Services AL Numbers and Titles: 93.809 – National Center for Chronic Disease Prevention and Health Promotion Federal Award Number: NU58DP006510 Questioned Costs: $380,644 Repeat Finding: No Criteria: NACDD requests funds from the U.S. Department of Health and Human Services under the advance payment method. In accordance with 45 CFR 74.22, cash advances to a recipient organization shall be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the recipient organization in carrying out the purpose of the approved program or project. The timing and amount of cash advances shall be as close as is administratively feasible to the actual disbursements by the recipient organization for direct program or project costs and the proportionate share of any allowable indirect costs. According to 2 CFR §200.403 - §200.405 (Allowable Costs/Cost Principles), costs must be necessary, reasonable, and allocable to the federal award. Additionally, Section 200.303 of the Uniform Guidance indicates that the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Uniform Guidance also indicates that these internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” (Green Book) issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by COSO. The Office of Management and Budget (OMB) has clarified that the references to the Green Book and COSO were only provided as best practices and not requirements. Condition: During our testing, we identified duplicated federal award expenditures amounting to $380,644, resulting in overdrawn federal funds by $380,644. The excess cash on hand was not returned to the funding source in a timely manner. Cause: This issue occurred due to inadequate controls over the recording of expenses and the drawdown of federal funds. 28 ASSOCIATION OF STATE AND TERRITORIAL CHRONIC DISEASE PROGRAM DIRECTORS D/B/A THE NATIONAL ASSOCIATION OF CHRONIC DISEASE DIRECTORS SCHEDULE OF FINDINGS AND QUESTIONED COSTS - Continued Section III – Federal Award Findings and Questioned Costs – continued Finding 2023-002: Overdrawn Federal Funding - continued Effect: NACDD is not in compliance with federal regulations concerning allowable costs, disbursement of federal funds and excess cash. In addition, a lack of adequate controls over allowable costs and cash management could result in a reasonable possibility that NACDD would not detect errors in the normal course of performing duties and correct them in a timely manner. Recommendation: We recommend that management conduct regular reconciliations of grant expenses to identify and correct duplicate entries promptly and review cash management practices to prevent overdraws on federal funds. Views of Responsible Officials Corrective Actions: Management agrees with this finding. Please refer to the Corrective Action Plan.
2023-005: Written Policies and Procedures Assistance Listing Number, Federal Agency, and Program Name: Assistance Listing Number 93.696, Certified Community Behavioral Health Clinic Expansion Grant Federal Award Identification Number and Year: 1H79SM086680-01, Program Grant Period 09/29/2022-09/29/2023 Pass-through Entity: N/A Type: Material weakness in internal control and noncompliance with laws and regulations Repeat Finding: No Criteria: As a precondition to receive federal awards, prospective recipients must have effective internal controls over the federal award. As described in 2 CFR, Part 200.303, nonfederal entities must have certain written policies and procedures surrounding the management of their federal awards. Such policies should include procedures for collecting payments of federal funds per 2 CRF 200.305, cash management (i.e., minimizing the time between draws and actual disbursing of federal awards) per 2 CFR 200.302(b)(6), allowable cost per 2 CFR 200.403, and conflict of interest per 2 CFR 200.318. Per 2 CFR 200.319(d), the non-Federal entity must have written procedures for procurement transactions. Condition: The Authority did not have written procedures for cash management and allowable cost. Identification of How Likely Questioned Costs Were Computed: N/A Known Questioned Costs: None Context: N/A Cause/Effect: Although the Authority is aware that they were required to have written policies and procedures for the items noted above, they were using the grant agreement guidelines that provide grantees with guidance for ensuring the existing accounting and personnel policies and procedures include the necessary controls. These guidelines address the compliance areas required by the Uniform Guidance. Recommendation: We recommend the Authority adopt written policies and procedures over cash management and allowable costs required under the Uniform Guidance. View of Responsible Officials and Planned Corrective Action Plan: See attached corrective action plan.
Title 2 U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance), 2 CFR 200.403(g) outlines the factors affecting allowability of costs charged to a federal award, specifically that costs should be adequately documented. The documentation for disbursements is to be maintained in order to provide a basis for amounts recorded in the Schedule of Expenditures of Federal Awards, to demonstrate compliance with legal requirements, and to substantiate the allowability of purchases. In a test of 40 expenditures charged to the Education Stabilization Fund, nine expenditures were not adequately documented, and in some cases, no documentation was provided. Internal control procedures were not in place to ensure costs charged to the Education Stabilization Fund were adequately documented. As a result, the Barbour County Board of Education did not comply with the Uniform Guidance as it pertains to documentation of costs charged to the Education Stabilization Fund. Recommendation The Board should implement internal control procedures to ensure costs charged to the COVID-19 Education Stabilization Fund are adequately documented.
Title 2 U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance), 2 CFR 200.403(g) outlines the factors affecting allowability of costs charged to a federal award, specifically that costs should be adequately documented. The documentation for disbursements is to be maintained in order to provide a basis for amounts recorded in the Schedule of Expenditures of Federal Awards, to demonstrate compliance with legal requirements, and to substantiate the allowability of purchases. In a test of 40 expenditures charged to the Education Stabilization Fund, nine expenditures were not adequately documented, and in some cases, no documentation was provided. Internal control procedures were not in place to ensure costs charged to the Education Stabilization Fund were adequately documented. As a result, the Barbour County Board of Education did not comply with the Uniform Guidance as it pertains to documentation of costs charged to the Education Stabilization Fund. Recommendation The Board should implement internal control procedures to ensure costs charged to the COVID-19 Education Stabilization Fund are adequately documented.
Federal Programs Affected: • 11.302 – Economic Development Administration (EDA) • 93.041 – Preventive Health and Health Services – Ombudsman • 93.043 – Prevention and Public Health – Evidence-Based Health Promotion (Title III-D) • 93.071 – Medicare Enrollment Assistance (MIPPA) • 93.324 – State Primary Care Offices (HICAP) • 93.499 – ACA – LIHWAP Cluster • 93.791 – Money Follows the Person – ADRC • 93.917 – HIV Care Formula Grants – Ryan White Service Delivery • 97.067 – Homeland Security Grant Program – SHSP Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E) Type of Finding: Compliance and Internal Control Deficiency Condition: During our review of administrative expenditures, we identified a utility payment to NRG Business that included sales tax, which is unallowable under federal cost principles for tax-exempt entities. Specifically, the utility invoice dated June 30, 2023, in the amount of $713.43 included $51.47 in sales tax. Although the vendor later issued a credit for the sales tax amount, the original charge—including the unallowable portion—was allocated to various federal grants through the administrative cost pool. It is not clear whether the vendor credit was properly reallocated to reverse the original federal charges. The table below summarizes the impacted programs and amounts: Federal Program ALN Check No. Amount Charged Economic Development Administration 11.302 #70335 $66.99 Preventive Health & Health Services – Ombudsman 93.041 #70076 $56.16 Evidence-Based Health – Title III-D 93.043 #70335 $66.99 Medicare Enrollment Assistance – MIPPA 93.071 #70583 $75.50 State Primary Care Offices – HICAP 93.324 #71046 $80.00 ACA – LIHWAP Cluster 93.499 #69835 $43.14 Money Follows the Person – ADRC 93.791 #70335 $66.99 HIV Care Formula Grants – Ryan White 93.917 #70460 $35.63 Homeland Security Grant Program – SHSP 97.067 #69835 $43.14 Criteria: In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and allowable under the cost principles. As a tax-exempt entity, sales taxes paid in error are considered unallowable unless excluded from reimbursement or properly credited. Additionally, per §200.302(b)(2), recipients must maintain effective control over and accountability for all funds and ensure proper allocation of costs. Cause: STDC’s internal controls did not identify the inclusion of sales tax in the vendor invoice prior to payment. Furthermore, no mechanism was in place to ensure that vendor credits—once received—were retroactively applied to reverse the original allocations made to federal grants. Effect: Although the vendor issued a credit for the unallowable sales tax, the original amount was temporarily charged to multiple federal programs. The lack of documented reallocation creates a risk that federal programs may have absorbed unallowable costs or that cost allocations remain inaccurate. Recommendation: We recommend that STDC: • Strengthen internal controls to ensure that invoices are reviewed for unallowable costs (such as sales tax) prior to payment and allocation; • Establish procedures to track vendor credits and ensure that corresponding cost reallocations are applied to the correct funding sources; • Enhance documentation and reconciliation processes to demonstrate that post-payment adjustments are handled properly; • Train fiscal and grant staff on exempt status implications and cost allowability under Uniform Guidance. Questioned Costs: None (vendor credit issued); however, audit adjustments or reallocations may be necessary to ensure grant charges are corrected.
Federal Program: Ryan White HIV/AIDS Program – Part B (ALN 93.917) Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E) Type of Finding: Compliance and Internal Control Deficiency Condition: During our testing of the Ryan White Service Delivery program (grant period ending March 31, 2023), we noted that STDC initially submitted a final financial report to the Texas Department of State Health Services (DSHS) – Ryan White Division, reporting $491,993 in contractual expenditures and $69,458 in administrative expenditures. Subsequently, STDC submitted an additional reimbursement request via Form B-13, which included $162,433 in additional contractual costs and $12,153 in administrative costs. Upon review of the supporting documentation for this supplemental submission, we were unable to obtain sufficient appropriate evidence that the additional $12,153 in administrative expenditures were actually incurred. Despite the lack of adequate supporting documentation, the full amount was reimbursed by DSHS. Criteria: In accordance with 2 CFR §200.403(g), to be allowable under a federal award, costs must be adequately documented. Furthermore, §200.302(b)(3) requires recipients of federal funds to maintain records that identify adequately the source and application of funds, and §200.338(a) authorizes federal agencies to disallow costs that are not properly supported or allocable. Cause: STDC did not maintain contemporaneous or sufficient documentation to support administrative costs included in the post-period reimbursement request. Additionally, internal controls over the review and approval of financial reports and supplemental claims (e.g., Form B-13 submissions) were not operating effectively to prevent or detect the inclusion of unsupported expenditures. Effect: As a result, STDC received federal reimbursement for $12,153 in administrative costs without appropriate documentation, constituting noncompliance with federal cost principles. This condition may result in the disallowance of costs and repayment obligations to the funding agency. Recommendation: We recommend that STDC strengthen internal controls related to post-award financial reporting and reimbursement procedures by: • Ensuring that all costs claimed are supported by contemporaneous documentation clearly demonstrating that costs were incurred and allocable; • Establishing a formal review protocol for post-period adjustments, including documentation validation and supervisory sign-off; • Performing reconciliations of claimed expenditures before submission of final or supplemental reports to granting agencies; and • Consulting with DSHS to determine whether corrective action or repayment is necessary regarding the unsupported amount. Questioned Costs: $12,153
Federal Programs Affected: • 11.302 – Economic Development Administration (EDA) • 93.041 – Preventive Health and Health Services – Ombudsman • 93.043 – Prevention and Public Health – Evidence-Based Health Promotion (Title III-D) • 93.071 – Medicare Enrollment Assistance (MIPPA) • 93.324 – State Primary Care Offices (HICAP) • 93.499 – ACA – LIHWAP Cluster • 93.791 – Money Follows the Person – ADRC • 93.917 – HIV Care Formula Grants – Ryan White Service Delivery • 97.067 – Homeland Security Grant Program – SHSP Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E) Type of Finding: Compliance and Internal Control Deficiency Condition: During our review of administrative expenditures, we identified a utility payment to NRG Business that included sales tax, which is unallowable under federal cost principles for tax-exempt entities. Specifically, the utility invoice dated June 30, 2023, in the amount of $713.43 included $51.47 in sales tax. Although the vendor later issued a credit for the sales tax amount, the original charge—including the unallowable portion—was allocated to various federal grants through the administrative cost pool. It is not clear whether the vendor credit was properly reallocated to reverse the original federal charges. The table below summarizes the impacted programs and amounts: Federal Program ALN Check No. Amount Charged Economic Development Administration 11.302 #70335 $66.99 Preventive Health & Health Services – Ombudsman 93.041 #70076 $56.16 Evidence-Based Health – Title III-D 93.043 #70335 $66.99 Medicare Enrollment Assistance – MIPPA 93.071 #70583 $75.50 State Primary Care Offices – HICAP 93.324 #71046 $80.00 ACA – LIHWAP Cluster 93.499 #69835 $43.14 Money Follows the Person – ADRC 93.791 #70335 $66.99 HIV Care Formula Grants – Ryan White 93.917 #70460 $35.63 Homeland Security Grant Program – SHSP 97.067 #69835 $43.14 Criteria: In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and allowable under the cost principles. As a tax-exempt entity, sales taxes paid in error are considered unallowable unless excluded from reimbursement or properly credited. Additionally, per §200.302(b)(2), recipients must maintain effective control over and accountability for all funds and ensure proper allocation of costs. Cause: STDC’s internal controls did not identify the inclusion of sales tax in the vendor invoice prior to payment. Furthermore, no mechanism was in place to ensure that vendor credits—once received—were retroactively applied to reverse the original allocations made to federal grants. Effect: Although the vendor issued a credit for the unallowable sales tax, the original amount was temporarily charged to multiple federal programs. The lack of documented reallocation creates a risk that federal programs may have absorbed unallowable costs or that cost allocations remain inaccurate. Recommendation: We recommend that STDC: • Strengthen internal controls to ensure that invoices are reviewed for unallowable costs (such as sales tax) prior to payment and allocation; • Establish procedures to track vendor credits and ensure that corresponding cost reallocations are applied to the correct funding sources; • Enhance documentation and reconciliation processes to demonstrate that post-payment adjustments are handled properly; • Train fiscal and grant staff on exempt status implications and cost allowability under Uniform Guidance. Questioned Costs: None (vendor credit issued); however, audit adjustments or reallocations may be necessary to ensure grant charges are corrected.
Federal Programs Affected: • 11.302 – Economic Development Administration (EDA) • 93.041 – Preventive Health and Health Services – Ombudsman • 93.043 – Prevention and Public Health – Evidence-Based Health Promotion (Title III-D) • 93.071 – Medicare Enrollment Assistance (MIPPA) • 93.324 – State Primary Care Offices (HICAP) • 93.499 – ACA – LIHWAP Cluster • 93.791 – Money Follows the Person – ADRC • 93.917 – HIV Care Formula Grants – Ryan White Service Delivery • 97.067 – Homeland Security Grant Program – SHSP Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E) Type of Finding: Compliance and Internal Control Deficiency Condition: During our review of administrative expenditures, we identified a utility payment to NRG Business that included sales tax, which is unallowable under federal cost principles for tax-exempt entities. Specifically, the utility invoice dated June 30, 2023, in the amount of $713.43 included $51.47 in sales tax. Although the vendor later issued a credit for the sales tax amount, the original charge—including the unallowable portion—was allocated to various federal grants through the administrative cost pool. It is not clear whether the vendor credit was properly reallocated to reverse the original federal charges. The table below summarizes the impacted programs and amounts: Federal Program ALN Check No. Amount Charged Economic Development Administration 11.302 #70335 $66.99 Preventive Health & Health Services – Ombudsman 93.041 #70076 $56.16 Evidence-Based Health – Title III-D 93.043 #70335 $66.99 Medicare Enrollment Assistance – MIPPA 93.071 #70583 $75.50 State Primary Care Offices – HICAP 93.324 #71046 $80.00 ACA – LIHWAP Cluster 93.499 #69835 $43.14 Money Follows the Person – ADRC 93.791 #70335 $66.99 HIV Care Formula Grants – Ryan White 93.917 #70460 $35.63 Homeland Security Grant Program – SHSP 97.067 #69835 $43.14 Criteria: In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and allowable under the cost principles. As a tax-exempt entity, sales taxes paid in error are considered unallowable unless excluded from reimbursement or properly credited. Additionally, per §200.302(b)(2), recipients must maintain effective control over and accountability for all funds and ensure proper allocation of costs. Cause: STDC’s internal controls did not identify the inclusion of sales tax in the vendor invoice prior to payment. Furthermore, no mechanism was in place to ensure that vendor credits—once received—were retroactively applied to reverse the original allocations made to federal grants. Effect: Although the vendor issued a credit for the unallowable sales tax, the original amount was temporarily charged to multiple federal programs. The lack of documented reallocation creates a risk that federal programs may have absorbed unallowable costs or that cost allocations remain inaccurate. Recommendation: We recommend that STDC: • Strengthen internal controls to ensure that invoices are reviewed for unallowable costs (such as sales tax) prior to payment and allocation; • Establish procedures to track vendor credits and ensure that corresponding cost reallocations are applied to the correct funding sources; • Enhance documentation and reconciliation processes to demonstrate that post-payment adjustments are handled properly; • Train fiscal and grant staff on exempt status implications and cost allowability under Uniform Guidance. Questioned Costs: None (vendor credit issued); however, audit adjustments or reallocations may be necessary to ensure grant charges are corrected.
Federal Programs Affected: • 11.302 – Economic Development Administration (EDA) • 93.041 – Preventive Health and Health Services – Ombudsman • 93.043 – Prevention and Public Health – Evidence-Based Health Promotion (Title III-D) • 93.071 – Medicare Enrollment Assistance (MIPPA) • 93.324 – State Primary Care Offices (HICAP) • 93.499 – ACA – LIHWAP Cluster • 93.791 – Money Follows the Person – ADRC • 93.917 – HIV Care Formula Grants – Ryan White Service Delivery • 97.067 – Homeland Security Grant Program – SHSP Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E) Type of Finding: Compliance and Internal Control Deficiency Condition: During our review of administrative expenditures, we identified a utility payment to NRG Business that included sales tax, which is unallowable under federal cost principles for tax-exempt entities. Specifically, the utility invoice dated June 30, 2023, in the amount of $713.43 included $51.47 in sales tax. Although the vendor later issued a credit for the sales tax amount, the original charge—including the unallowable portion—was allocated to various federal grants through the administrative cost pool. It is not clear whether the vendor credit was properly reallocated to reverse the original federal charges. The table below summarizes the impacted programs and amounts: Federal Program ALN Check No. Amount Charged Economic Development Administration 11.302 #70335 $66.99 Preventive Health & Health Services – Ombudsman 93.041 #70076 $56.16 Evidence-Based Health – Title III-D 93.043 #70335 $66.99 Medicare Enrollment Assistance – MIPPA 93.071 #70583 $75.50 State Primary Care Offices – HICAP 93.324 #71046 $80.00 ACA – LIHWAP Cluster 93.499 #69835 $43.14 Money Follows the Person – ADRC 93.791 #70335 $66.99 HIV Care Formula Grants – Ryan White 93.917 #70460 $35.63 Homeland Security Grant Program – SHSP 97.067 #69835 $43.14 Criteria: In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and allowable under the cost principles. As a tax-exempt entity, sales taxes paid in error are considered unallowable unless excluded from reimbursement or properly credited. Additionally, per §200.302(b)(2), recipients must maintain effective control over and accountability for all funds and ensure proper allocation of costs. Cause: STDC’s internal controls did not identify the inclusion of sales tax in the vendor invoice prior to payment. Furthermore, no mechanism was in place to ensure that vendor credits—once received—were retroactively applied to reverse the original allocations made to federal grants. Effect: Although the vendor issued a credit for the unallowable sales tax, the original amount was temporarily charged to multiple federal programs. The lack of documented reallocation creates a risk that federal programs may have absorbed unallowable costs or that cost allocations remain inaccurate. Recommendation: We recommend that STDC: • Strengthen internal controls to ensure that invoices are reviewed for unallowable costs (such as sales tax) prior to payment and allocation; • Establish procedures to track vendor credits and ensure that corresponding cost reallocations are applied to the correct funding sources; • Enhance documentation and reconciliation processes to demonstrate that post-payment adjustments are handled properly; • Train fiscal and grant staff on exempt status implications and cost allowability under Uniform Guidance. Questioned Costs: None (vendor credit issued); however, audit adjustments or reallocations may be necessary to ensure grant charges are corrected.
Federal Programs Affected: • 11.302 – Economic Development Administration (EDA) • 93.041 – Preventive Health and Health Services – Ombudsman • 93.043 – Prevention and Public Health – Evidence-Based Health Promotion (Title III-D) • 93.071 – Medicare Enrollment Assistance (MIPPA) • 93.324 – State Primary Care Offices (HICAP) • 93.499 – ACA – LIHWAP Cluster • 93.791 – Money Follows the Person – ADRC • 93.917 – HIV Care Formula Grants – Ryan White Service Delivery • 97.067 – Homeland Security Grant Program – SHSP Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E) Type of Finding: Compliance and Internal Control Deficiency Condition: During our review of administrative expenditures, we identified a utility payment to NRG Business that included sales tax, which is unallowable under federal cost principles for tax-exempt entities. Specifically, the utility invoice dated June 30, 2023, in the amount of $713.43 included $51.47 in sales tax. Although the vendor later issued a credit for the sales tax amount, the original charge—including the unallowable portion—was allocated to various federal grants through the administrative cost pool. It is not clear whether the vendor credit was properly reallocated to reverse the original federal charges. The table below summarizes the impacted programs and amounts: Federal Program ALN Check No. Amount Charged Economic Development Administration 11.302 #70335 $66.99 Preventive Health & Health Services – Ombudsman 93.041 #70076 $56.16 Evidence-Based Health – Title III-D 93.043 #70335 $66.99 Medicare Enrollment Assistance – MIPPA 93.071 #70583 $75.50 State Primary Care Offices – HICAP 93.324 #71046 $80.00 ACA – LIHWAP Cluster 93.499 #69835 $43.14 Money Follows the Person – ADRC 93.791 #70335 $66.99 HIV Care Formula Grants – Ryan White 93.917 #70460 $35.63 Homeland Security Grant Program – SHSP 97.067 #69835 $43.14 Criteria: In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and allowable under the cost principles. As a tax-exempt entity, sales taxes paid in error are considered unallowable unless excluded from reimbursement or properly credited. Additionally, per §200.302(b)(2), recipients must maintain effective control over and accountability for all funds and ensure proper allocation of costs. Cause: STDC’s internal controls did not identify the inclusion of sales tax in the vendor invoice prior to payment. Furthermore, no mechanism was in place to ensure that vendor credits—once received—were retroactively applied to reverse the original allocations made to federal grants. Effect: Although the vendor issued a credit for the unallowable sales tax, the original amount was temporarily charged to multiple federal programs. The lack of documented reallocation creates a risk that federal programs may have absorbed unallowable costs or that cost allocations remain inaccurate. Recommendation: We recommend that STDC: • Strengthen internal controls to ensure that invoices are reviewed for unallowable costs (such as sales tax) prior to payment and allocation; • Establish procedures to track vendor credits and ensure that corresponding cost reallocations are applied to the correct funding sources; • Enhance documentation and reconciliation processes to demonstrate that post-payment adjustments are handled properly; • Train fiscal and grant staff on exempt status implications and cost allowability under Uniform Guidance. Questioned Costs: None (vendor credit issued); however, audit adjustments or reallocations may be necessary to ensure grant charges are corrected.
Federal Programs Affected: • 11.302 – Economic Development Administration (EDA) • 93.041 – Preventive Health and Health Services – Ombudsman • 93.043 – Prevention and Public Health – Evidence-Based Health Promotion (Title III-D) • 93.071 – Medicare Enrollment Assistance (MIPPA) • 93.324 – State Primary Care Offices (HICAP) • 93.499 – ACA – LIHWAP Cluster • 93.791 – Money Follows the Person – ADRC • 93.917 – HIV Care Formula Grants – Ryan White Service Delivery • 97.067 – Homeland Security Grant Program – SHSP Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E) Type of Finding: Compliance and Internal Control Deficiency Condition: During our review of administrative expenditures, we identified a utility payment to NRG Business that included sales tax, which is unallowable under federal cost principles for tax-exempt entities. Specifically, the utility invoice dated June 30, 2023, in the amount of $713.43 included $51.47 in sales tax. Although the vendor later issued a credit for the sales tax amount, the original charge—including the unallowable portion—was allocated to various federal grants through the administrative cost pool. It is not clear whether the vendor credit was properly reallocated to reverse the original federal charges. The table below summarizes the impacted programs and amounts: Federal Program ALN Check No. Amount Charged Economic Development Administration 11.302 #70335 $66.99 Preventive Health & Health Services – Ombudsman 93.041 #70076 $56.16 Evidence-Based Health – Title III-D 93.043 #70335 $66.99 Medicare Enrollment Assistance – MIPPA 93.071 #70583 $75.50 State Primary Care Offices – HICAP 93.324 #71046 $80.00 ACA – LIHWAP Cluster 93.499 #69835 $43.14 Money Follows the Person – ADRC 93.791 #70335 $66.99 HIV Care Formula Grants – Ryan White 93.917 #70460 $35.63 Homeland Security Grant Program – SHSP 97.067 #69835 $43.14 Criteria: In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and allowable under the cost principles. As a tax-exempt entity, sales taxes paid in error are considered unallowable unless excluded from reimbursement or properly credited. Additionally, per §200.302(b)(2), recipients must maintain effective control over and accountability for all funds and ensure proper allocation of costs. Cause: STDC’s internal controls did not identify the inclusion of sales tax in the vendor invoice prior to payment. Furthermore, no mechanism was in place to ensure that vendor credits—once received—were retroactively applied to reverse the original allocations made to federal grants. Effect: Although the vendor issued a credit for the unallowable sales tax, the original amount was temporarily charged to multiple federal programs. The lack of documented reallocation creates a risk that federal programs may have absorbed unallowable costs or that cost allocations remain inaccurate. Recommendation: We recommend that STDC: • Strengthen internal controls to ensure that invoices are reviewed for unallowable costs (such as sales tax) prior to payment and allocation; • Establish procedures to track vendor credits and ensure that corresponding cost reallocations are applied to the correct funding sources; • Enhance documentation and reconciliation processes to demonstrate that post-payment adjustments are handled properly; • Train fiscal and grant staff on exempt status implications and cost allowability under Uniform Guidance. Questioned Costs: None (vendor credit issued); however, audit adjustments or reallocations may be necessary to ensure grant charges are corrected.
Federal Programs Affected: • 11.302 – Economic Development Administration (EDA) • 93.041 – Preventive Health and Health Services – Ombudsman • 93.043 – Prevention and Public Health – Evidence-Based Health Promotion (Title III-D) • 93.071 – Medicare Enrollment Assistance (MIPPA) • 93.324 – State Primary Care Offices (HICAP) • 93.499 – ACA – LIHWAP Cluster • 93.791 – Money Follows the Person – ADRC • 93.917 – HIV Care Formula Grants – Ryan White Service Delivery • 97.067 – Homeland Security Grant Program – SHSP Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E) Type of Finding: Compliance and Internal Control Deficiency Condition: During our review of administrative expenditures, we identified a utility payment to NRG Business that included sales tax, which is unallowable under federal cost principles for tax-exempt entities. Specifically, the utility invoice dated June 30, 2023, in the amount of $713.43 included $51.47 in sales tax. Although the vendor later issued a credit for the sales tax amount, the original charge—including the unallowable portion—was allocated to various federal grants through the administrative cost pool. It is not clear whether the vendor credit was properly reallocated to reverse the original federal charges. The table below summarizes the impacted programs and amounts: Federal Program ALN Check No. Amount Charged Economic Development Administration 11.302 #70335 $66.99 Preventive Health & Health Services – Ombudsman 93.041 #70076 $56.16 Evidence-Based Health – Title III-D 93.043 #70335 $66.99 Medicare Enrollment Assistance – MIPPA 93.071 #70583 $75.50 State Primary Care Offices – HICAP 93.324 #71046 $80.00 ACA – LIHWAP Cluster 93.499 #69835 $43.14 Money Follows the Person – ADRC 93.791 #70335 $66.99 HIV Care Formula Grants – Ryan White 93.917 #70460 $35.63 Homeland Security Grant Program – SHSP 97.067 #69835 $43.14 Criteria: In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and allowable under the cost principles. As a tax-exempt entity, sales taxes paid in error are considered unallowable unless excluded from reimbursement or properly credited. Additionally, per §200.302(b)(2), recipients must maintain effective control over and accountability for all funds and ensure proper allocation of costs. Cause: STDC’s internal controls did not identify the inclusion of sales tax in the vendor invoice prior to payment. Furthermore, no mechanism was in place to ensure that vendor credits—once received—were retroactively applied to reverse the original allocations made to federal grants. Effect: Although the vendor issued a credit for the unallowable sales tax, the original amount was temporarily charged to multiple federal programs. The lack of documented reallocation creates a risk that federal programs may have absorbed unallowable costs or that cost allocations remain inaccurate. Recommendation: We recommend that STDC: • Strengthen internal controls to ensure that invoices are reviewed for unallowable costs (such as sales tax) prior to payment and allocation; • Establish procedures to track vendor credits and ensure that corresponding cost reallocations are applied to the correct funding sources; • Enhance documentation and reconciliation processes to demonstrate that post-payment adjustments are handled properly; • Train fiscal and grant staff on exempt status implications and cost allowability under Uniform Guidance. Questioned Costs: None (vendor credit issued); however, audit adjustments or reallocations may be necessary to ensure grant charges are corrected.
Federal Programs Affected: • 11.302 – Economic Development Administration (EDA) • 93.041 – Preventive Health and Health Services – Ombudsman • 93.043 – Prevention and Public Health – Evidence-Based Health Promotion (Title III-D) • 93.071 – Medicare Enrollment Assistance (MIPPA) • 93.324 – State Primary Care Offices (HICAP) • 93.499 – ACA – LIHWAP Cluster • 93.791 – Money Follows the Person – ADRC • 93.917 – HIV Care Formula Grants – Ryan White Service Delivery • 97.067 – Homeland Security Grant Program – SHSP Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E) Type of Finding: Compliance and Internal Control Deficiency Condition: During our review of administrative expenditures, we identified a utility payment to NRG Business that included sales tax, which is unallowable under federal cost principles for tax-exempt entities. Specifically, the utility invoice dated June 30, 2023, in the amount of $713.43 included $51.47 in sales tax. Although the vendor later issued a credit for the sales tax amount, the original charge—including the unallowable portion—was allocated to various federal grants through the administrative cost pool. It is not clear whether the vendor credit was properly reallocated to reverse the original federal charges. The table below summarizes the impacted programs and amounts: Federal Program ALN Check No. Amount Charged Economic Development Administration 11.302 #70335 $66.99 Preventive Health & Health Services – Ombudsman 93.041 #70076 $56.16 Evidence-Based Health – Title III-D 93.043 #70335 $66.99 Medicare Enrollment Assistance – MIPPA 93.071 #70583 $75.50 State Primary Care Offices – HICAP 93.324 #71046 $80.00 ACA – LIHWAP Cluster 93.499 #69835 $43.14 Money Follows the Person – ADRC 93.791 #70335 $66.99 HIV Care Formula Grants – Ryan White 93.917 #70460 $35.63 Homeland Security Grant Program – SHSP 97.067 #69835 $43.14 Criteria: In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and allowable under the cost principles. As a tax-exempt entity, sales taxes paid in error are considered unallowable unless excluded from reimbursement or properly credited. Additionally, per §200.302(b)(2), recipients must maintain effective control over and accountability for all funds and ensure proper allocation of costs. Cause: STDC’s internal controls did not identify the inclusion of sales tax in the vendor invoice prior to payment. Furthermore, no mechanism was in place to ensure that vendor credits—once received—were retroactively applied to reverse the original allocations made to federal grants. Effect: Although the vendor issued a credit for the unallowable sales tax, the original amount was temporarily charged to multiple federal programs. The lack of documented reallocation creates a risk that federal programs may have absorbed unallowable costs or that cost allocations remain inaccurate. Recommendation: We recommend that STDC: • Strengthen internal controls to ensure that invoices are reviewed for unallowable costs (such as sales tax) prior to payment and allocation; • Establish procedures to track vendor credits and ensure that corresponding cost reallocations are applied to the correct funding sources; • Enhance documentation and reconciliation processes to demonstrate that post-payment adjustments are handled properly; • Train fiscal and grant staff on exempt status implications and cost allowability under Uniform Guidance. Questioned Costs: None (vendor credit issued); however, audit adjustments or reallocations may be necessary to ensure grant charges are corrected.
Federal Programs Affected: • 11.302 – Economic Development Administration (EDA) • 93.041 – Preventive Health and Health Services – Ombudsman • 93.043 – Prevention and Public Health – Evidence-Based Health Promotion (Title III-D) • 93.071 – Medicare Enrollment Assistance (MIPPA) • 93.324 – State Primary Care Offices (HICAP) • 93.499 – ACA – LIHWAP Cluster • 93.791 – Money Follows the Person – ADRC • 93.917 – HIV Care Formula Grants – Ryan White Service Delivery • 97.067 – Homeland Security Grant Program – SHSP Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E) Type of Finding: Compliance and Internal Control Deficiency Condition: During our review of administrative expenditures, we identified a utility payment to NRG Business that included sales tax, which is unallowable under federal cost principles for tax-exempt entities. Specifically, the utility invoice dated June 30, 2023, in the amount of $713.43 included $51.47 in sales tax. Although the vendor later issued a credit for the sales tax amount, the original charge—including the unallowable portion—was allocated to various federal grants through the administrative cost pool. It is not clear whether the vendor credit was properly reallocated to reverse the original federal charges. The table below summarizes the impacted programs and amounts: Federal Program ALN Check No. Amount Charged Economic Development Administration 11.302 #70335 $66.99 Preventive Health & Health Services – Ombudsman 93.041 #70076 $56.16 Evidence-Based Health – Title III-D 93.043 #70335 $66.99 Medicare Enrollment Assistance – MIPPA 93.071 #70583 $75.50 State Primary Care Offices – HICAP 93.324 #71046 $80.00 ACA – LIHWAP Cluster 93.499 #69835 $43.14 Money Follows the Person – ADRC 93.791 #70335 $66.99 HIV Care Formula Grants – Ryan White 93.917 #70460 $35.63 Homeland Security Grant Program – SHSP 97.067 #69835 $43.14 Criteria: In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and allowable under the cost principles. As a tax-exempt entity, sales taxes paid in error are considered unallowable unless excluded from reimbursement or properly credited. Additionally, per §200.302(b)(2), recipients must maintain effective control over and accountability for all funds and ensure proper allocation of costs. Cause: STDC’s internal controls did not identify the inclusion of sales tax in the vendor invoice prior to payment. Furthermore, no mechanism was in place to ensure that vendor credits—once received—were retroactively applied to reverse the original allocations made to federal grants. Effect: Although the vendor issued a credit for the unallowable sales tax, the original amount was temporarily charged to multiple federal programs. The lack of documented reallocation creates a risk that federal programs may have absorbed unallowable costs or that cost allocations remain inaccurate. Recommendation: We recommend that STDC: • Strengthen internal controls to ensure that invoices are reviewed for unallowable costs (such as sales tax) prior to payment and allocation; • Establish procedures to track vendor credits and ensure that corresponding cost reallocations are applied to the correct funding sources; • Enhance documentation and reconciliation processes to demonstrate that post-payment adjustments are handled properly; • Train fiscal and grant staff on exempt status implications and cost allowability under Uniform Guidance. Questioned Costs: None (vendor credit issued); however, audit adjustments or reallocations may be necessary to ensure grant charges are corrected.
Federal Programs Affected: • 11.302 – Economic Development Administration (EDA) • 93.041 – Preventive Health and Health Services – Ombudsman • 93.043 – Prevention and Public Health – Evidence-Based Health Promotion (Title III-D) • 93.071 – Medicare Enrollment Assistance (MIPPA) • 93.324 – State Primary Care Offices (HICAP) • 93.499 – ACA – LIHWAP Cluster • 93.791 – Money Follows the Person – ADRC • 93.917 – HIV Care Formula Grants – Ryan White Service Delivery • 97.067 – Homeland Security Grant Program – SHSP Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E) Type of Finding: Compliance and Internal Control Deficiency Condition: During our review of administrative expenditures, we identified a utility payment to NRG Business that included sales tax, which is unallowable under federal cost principles for tax-exempt entities. Specifically, the utility invoice dated June 30, 2023, in the amount of $713.43 included $51.47 in sales tax. Although the vendor later issued a credit for the sales tax amount, the original charge—including the unallowable portion—was allocated to various federal grants through the administrative cost pool. It is not clear whether the vendor credit was properly reallocated to reverse the original federal charges. The table below summarizes the impacted programs and amounts: Federal Program ALN Check No. Amount Charged Economic Development Administration 11.302 #70335 $66.99 Preventive Health & Health Services – Ombudsman 93.041 #70076 $56.16 Evidence-Based Health – Title III-D 93.043 #70335 $66.99 Medicare Enrollment Assistance – MIPPA 93.071 #70583 $75.50 State Primary Care Offices – HICAP 93.324 #71046 $80.00 ACA – LIHWAP Cluster 93.499 #69835 $43.14 Money Follows the Person – ADRC 93.791 #70335 $66.99 HIV Care Formula Grants – Ryan White 93.917 #70460 $35.63 Homeland Security Grant Program – SHSP 97.067 #69835 $43.14 Criteria: In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and allowable under the cost principles. As a tax-exempt entity, sales taxes paid in error are considered unallowable unless excluded from reimbursement or properly credited. Additionally, per §200.302(b)(2), recipients must maintain effective control over and accountability for all funds and ensure proper allocation of costs. Cause: STDC’s internal controls did not identify the inclusion of sales tax in the vendor invoice prior to payment. Furthermore, no mechanism was in place to ensure that vendor credits—once received—were retroactively applied to reverse the original allocations made to federal grants. Effect: Although the vendor issued a credit for the unallowable sales tax, the original amount was temporarily charged to multiple federal programs. The lack of documented reallocation creates a risk that federal programs may have absorbed unallowable costs or that cost allocations remain inaccurate. Recommendation: We recommend that STDC: • Strengthen internal controls to ensure that invoices are reviewed for unallowable costs (such as sales tax) prior to payment and allocation; • Establish procedures to track vendor credits and ensure that corresponding cost reallocations are applied to the correct funding sources; • Enhance documentation and reconciliation processes to demonstrate that post-payment adjustments are handled properly; • Train fiscal and grant staff on exempt status implications and cost allowability under Uniform Guidance. Questioned Costs: None (vendor credit issued); however, audit adjustments or reallocations may be necessary to ensure grant charges are corrected.
Federal Programs Affected: • 11.302 – Economic Development Administration (EDA) • 93.041 – Preventive Health and Health Services – Ombudsman • 93.043 – Prevention and Public Health – Evidence-Based Health Promotion (Title III-D) • 93.071 – Medicare Enrollment Assistance (MIPPA) • 93.324 – State Primary Care Offices (HICAP) • 93.499 – ACA – LIHWAP Cluster • 93.791 – Money Follows the Person – ADRC • 93.917 – HIV Care Formula Grants – Ryan White Service Delivery • 97.067 – Homeland Security Grant Program – SHSP Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E) Type of Finding: Compliance and Internal Control Deficiency Condition: During our review of administrative expenditures, we identified a utility payment to NRG Business that included sales tax, which is unallowable under federal cost principles for tax-exempt entities. Specifically, the utility invoice dated June 30, 2023, in the amount of $713.43 included $51.47 in sales tax. Although the vendor later issued a credit for the sales tax amount, the original charge—including the unallowable portion—was allocated to various federal grants through the administrative cost pool. It is not clear whether the vendor credit was properly reallocated to reverse the original federal charges. The table below summarizes the impacted programs and amounts: Federal Program ALN Check No. Amount Charged Economic Development Administration 11.302 #70335 $66.99 Preventive Health & Health Services – Ombudsman 93.041 #70076 $56.16 Evidence-Based Health – Title III-D 93.043 #70335 $66.99 Medicare Enrollment Assistance – MIPPA 93.071 #70583 $75.50 State Primary Care Offices – HICAP 93.324 #71046 $80.00 ACA – LIHWAP Cluster 93.499 #69835 $43.14 Money Follows the Person – ADRC 93.791 #70335 $66.99 HIV Care Formula Grants – Ryan White 93.917 #70460 $35.63 Homeland Security Grant Program – SHSP 97.067 #69835 $43.14 Criteria: In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and allowable under the cost principles. As a tax-exempt entity, sales taxes paid in error are considered unallowable unless excluded from reimbursement or properly credited. Additionally, per §200.302(b)(2), recipients must maintain effective control over and accountability for all funds and ensure proper allocation of costs. Cause: STDC’s internal controls did not identify the inclusion of sales tax in the vendor invoice prior to payment. Furthermore, no mechanism was in place to ensure that vendor credits—once received—were retroactively applied to reverse the original allocations made to federal grants. Effect: Although the vendor issued a credit for the unallowable sales tax, the original amount was temporarily charged to multiple federal programs. The lack of documented reallocation creates a risk that federal programs may have absorbed unallowable costs or that cost allocations remain inaccurate. Recommendation: We recommend that STDC: • Strengthen internal controls to ensure that invoices are reviewed for unallowable costs (such as sales tax) prior to payment and allocation; • Establish procedures to track vendor credits and ensure that corresponding cost reallocations are applied to the correct funding sources; • Enhance documentation and reconciliation processes to demonstrate that post-payment adjustments are handled properly; • Train fiscal and grant staff on exempt status implications and cost allowability under Uniform Guidance. Questioned Costs: None (vendor credit issued); however, audit adjustments or reallocations may be necessary to ensure grant charges are corrected.
Federal Programs Affected: • 11.302 – Economic Development Administration (EDA) • 93.041 – Preventive Health and Health Services – Ombudsman • 93.043 – Prevention and Public Health – Evidence-Based Health Promotion (Title III-D) • 93.071 – Medicare Enrollment Assistance (MIPPA) • 93.324 – State Primary Care Offices (HICAP) • 93.499 – ACA – LIHWAP Cluster • 93.791 – Money Follows the Person – ADRC • 93.917 – HIV Care Formula Grants – Ryan White Service Delivery • 97.067 – Homeland Security Grant Program – SHSP Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E) Type of Finding: Compliance and Internal Control Deficiency Condition: During our review of administrative expenditures, we identified a utility payment to NRG Business that included sales tax, which is unallowable under federal cost principles for tax-exempt entities. Specifically, the utility invoice dated June 30, 2023, in the amount of $713.43 included $51.47 in sales tax. Although the vendor later issued a credit for the sales tax amount, the original charge—including the unallowable portion—was allocated to various federal grants through the administrative cost pool. It is not clear whether the vendor credit was properly reallocated to reverse the original federal charges. The table below summarizes the impacted programs and amounts: Federal Program ALN Check No. Amount Charged Economic Development Administration 11.302 #70335 $66.99 Preventive Health & Health Services – Ombudsman 93.041 #70076 $56.16 Evidence-Based Health – Title III-D 93.043 #70335 $66.99 Medicare Enrollment Assistance – MIPPA 93.071 #70583 $75.50 State Primary Care Offices – HICAP 93.324 #71046 $80.00 ACA – LIHWAP Cluster 93.499 #69835 $43.14 Money Follows the Person – ADRC 93.791 #70335 $66.99 HIV Care Formula Grants – Ryan White 93.917 #70460 $35.63 Homeland Security Grant Program – SHSP 97.067 #69835 $43.14 Criteria: In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and allowable under the cost principles. As a tax-exempt entity, sales taxes paid in error are considered unallowable unless excluded from reimbursement or properly credited. Additionally, per §200.302(b)(2), recipients must maintain effective control over and accountability for all funds and ensure proper allocation of costs. Cause: STDC’s internal controls did not identify the inclusion of sales tax in the vendor invoice prior to payment. Furthermore, no mechanism was in place to ensure that vendor credits—once received—were retroactively applied to reverse the original allocations made to federal grants. Effect: Although the vendor issued a credit for the unallowable sales tax, the original amount was temporarily charged to multiple federal programs. The lack of documented reallocation creates a risk that federal programs may have absorbed unallowable costs or that cost allocations remain inaccurate. Recommendation: We recommend that STDC: • Strengthen internal controls to ensure that invoices are reviewed for unallowable costs (such as sales tax) prior to payment and allocation; • Establish procedures to track vendor credits and ensure that corresponding cost reallocations are applied to the correct funding sources; • Enhance documentation and reconciliation processes to demonstrate that post-payment adjustments are handled properly; • Train fiscal and grant staff on exempt status implications and cost allowability under Uniform Guidance. Questioned Costs: None (vendor credit issued); however, audit adjustments or reallocations may be necessary to ensure grant charges are corrected.
Federal Programs Affected: • 11.302 – Economic Development Administration (EDA) • 93.041 – Preventive Health and Health Services – Ombudsman • 93.043 – Prevention and Public Health – Evidence-Based Health Promotion (Title III-D) • 93.071 – Medicare Enrollment Assistance (MIPPA) • 93.324 – State Primary Care Offices (HICAP) • 93.499 – ACA – LIHWAP Cluster • 93.791 – Money Follows the Person – ADRC • 93.917 – HIV Care Formula Grants – Ryan White Service Delivery • 97.067 – Homeland Security Grant Program – SHSP Compliance Requirement: Allowable Costs/Cost Principles (2 CFR Part 200, Subpart E) Type of Finding: Compliance and Internal Control Deficiency Condition: During our review of administrative expenditures, we identified a utility payment to NRG Business that included sales tax, which is unallowable under federal cost principles for tax-exempt entities. Specifically, the utility invoice dated June 30, 2023, in the amount of $713.43 included $51.47 in sales tax. Although the vendor later issued a credit for the sales tax amount, the original charge—including the unallowable portion—was allocated to various federal grants through the administrative cost pool. It is not clear whether the vendor credit was properly reallocated to reverse the original federal charges. The table below summarizes the impacted programs and amounts: Federal Program ALN Check No. Amount Charged Economic Development Administration 11.302 #70335 $66.99 Preventive Health & Health Services – Ombudsman 93.041 #70076 $56.16 Evidence-Based Health – Title III-D 93.043 #70335 $66.99 Medicare Enrollment Assistance – MIPPA 93.071 #70583 $75.50 State Primary Care Offices – HICAP 93.324 #71046 $80.00 ACA – LIHWAP Cluster 93.499 #69835 $43.14 Money Follows the Person – ADRC 93.791 #70335 $66.99 HIV Care Formula Grants – Ryan White 93.917 #70460 $35.63 Homeland Security Grant Program – SHSP 97.067 #69835 $43.14 Criteria: In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be necessary, reasonable, allocable, and allowable under the cost principles. As a tax-exempt entity, sales taxes paid in error are considered unallowable unless excluded from reimbursement or properly credited. Additionally, per §200.302(b)(2), recipients must maintain effective control over and accountability for all funds and ensure proper allocation of costs. Cause: STDC’s internal controls did not identify the inclusion of sales tax in the vendor invoice prior to payment. Furthermore, no mechanism was in place to ensure that vendor credits—once received—were retroactively applied to reverse the original allocations made to federal grants. Effect: Although the vendor issued a credit for the unallowable sales tax, the original amount was temporarily charged to multiple federal programs. The lack of documented reallocation creates a risk that federal programs may have absorbed unallowable costs or that cost allocations remain inaccurate. Recommendation: We recommend that STDC: • Strengthen internal controls to ensure that invoices are reviewed for unallowable costs (such as sales tax) prior to payment and allocation; • Establish procedures to track vendor credits and ensure that corresponding cost reallocations are applied to the correct funding sources; • Enhance documentation and reconciliation processes to demonstrate that post-payment adjustments are handled properly; • Train fiscal and grant staff on exempt status implications and cost allowability under Uniform Guidance. Questioned Costs: None (vendor credit issued); however, audit adjustments or reallocations may be necessary to ensure grant charges are corrected.
Finding 2023-002 Significant deficiency in internal controls over compliance related to allowable costs and period of performance. Federal Agency: U.S. Department of Commerce Program Title: Pacific Fisheries Data Program Assistance Listing Number: 11.437 Award Numbers: NOAA-NMFS-AK-2023-2007663 Award Period: October 1, 2022 to September 30, 2027 Criteria 2 U.S. CFR Part 200.403, 404, and 405 of Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards require that costs must be necessary and reasonable for the performance of the Federal Award, that costs be determined in accordance with GAAP, and that costs be adequately documented including the allocation of those costs. Condition/Context for Evaluation IPHC’s internal controls over non-payroll charges to the Federal Award did not include review for allowability, accrual in the proper period, or that adequate documentation existed to support the amounts charged or allocated. Three out of 25 non-payroll disbursements tested did not include evidence supporting one or more of these controls. Questioned Costs $2,674 Cause IPHC’s operation of internal controls were not sufficient to ensure allowable costs were charged in accordance with 2 U.S. CFR Part 200.403, 404, and 405 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Effect or Potential Effect As a result, charges were made to Federal awards that were not allowable or allocable to the award. Repeat Finding Not applicable. Recommendation We recommend that IPHC ensure internal controls include reviewing costs charged to the Federal Award for conformity with 2 U.S. CFR Part 200.403, 404, and 405 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards for allowability, allocability, and reasonableness. Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying corrective action plan.
Federal Program Information: COVID-19 Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027) Transitional Living for Homeless Youth (ALN 93.550) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): B. Allowable Costs: In accordance with 2 CFR § 200.403(e), costs must be determined in accordance with generally accepted accounting principles. Additionally, costs must be adequately documented (2 CFR 200.403(g)). Condition: For 3 out of the 26 transactions selected for the COVID-19 Coronavirus State and Local Fiscal Recovery Funds program, the expenditures were recorded for an inaccurate amount. For 1 out of 25 transactions selected for the Transitional Living for Homeless Youth program, the expenditure was not accrued in the appropriate fiscal year in accordance with U.S. GAAP. Cause: Administrative oversight in expenditure review caused inaccurate recording of expenditures. Additionally, the Organization did not have policies in place to review year-end grant expenditures for proper cutoff below a certain threshold. Effect or Potential Effect: The Organization was not in compliance with allowable cost requirements. Questioned Costs: Below reportable threshold. Context: Federal expenditures must meet allowable cost requirements in accordance with 2 CFR 200. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the Organization enhance its procedures over allowable costs. Views of Responsible Officials and Planned Corrective Actions: An additional level of review by Director of Finance and Business will be added to ensure accuracy of expenditures. Management will add additional controls to year end check list to identify and accrue any expenses incurred on or prior to year end.
Federal Program Information: COVID-19 Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027) Transitional Living for Homeless Youth (ALN 93.550) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): B. Allowable Costs: In accordance with 2 CFR § 200.403(e), costs must be determined in accordance with generally accepted accounting principles. Additionally, costs must be adequately documented (2 CFR 200.403(g)). Condition: For 3 out of the 26 transactions selected for the COVID-19 Coronavirus State and Local Fiscal Recovery Funds program, the expenditures were recorded for an inaccurate amount. For 1 out of 25 transactions selected for the Transitional Living for Homeless Youth program, the expenditure was not accrued in the appropriate fiscal year in accordance with U.S. GAAP. Cause: Administrative oversight in expenditure review caused inaccurate recording of expenditures. Additionally, the Organization did not have policies in place to review year-end grant expenditures for proper cutoff below a certain threshold. Effect or Potential Effect: The Organization was not in compliance with allowable cost requirements. Questioned Costs: Below reportable threshold. Context: Federal expenditures must meet allowable cost requirements in accordance with 2 CFR 200. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the Organization enhance its procedures over allowable costs. Views of Responsible Officials and Planned Corrective Actions: An additional level of review by Director of Finance and Business will be added to ensure accuracy of expenditures. Management will add additional controls to year end check list to identify and accrue any expenses incurred on or prior to year end.
Federal Program Information: COVID-19 Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027) Transitional Living for Homeless Youth (ALN 93.550) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): B. Allowable Costs: In accordance with 2 CFR § 200.403(e), costs must be determined in accordance with generally accepted accounting principles. Additionally, costs must be adequately documented (2 CFR 200.403(g)). Condition: For 3 out of the 26 transactions selected for the COVID-19 Coronavirus State and Local Fiscal Recovery Funds program, the expenditures were recorded for an inaccurate amount. For 1 out of 25 transactions selected for the Transitional Living for Homeless Youth program, the expenditure was not accrued in the appropriate fiscal year in accordance with U.S. GAAP. Cause: Administrative oversight in expenditure review caused inaccurate recording of expenditures. Additionally, the Organization did not have policies in place to review year-end grant expenditures for proper cutoff below a certain threshold. Effect or Potential Effect: The Organization was not in compliance with allowable cost requirements. Questioned Costs: Below reportable threshold. Context: Federal expenditures must meet allowable cost requirements in accordance with 2 CFR 200. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the Organization enhance its procedures over allowable costs. Views of Responsible Officials and Planned Corrective Actions: An additional level of review by Director of Finance and Business will be added to ensure accuracy of expenditures. Management will add additional controls to year end check list to identify and accrue any expenses incurred on or prior to year end.
Finding 2023-002 Significant deficiency in internal controls over compliance related to allowable costs and period of performance. Federal Agency: U.S. Department of Commerce Program Title: Pacific Fisheries Data Program Assistance Listing Number: 11.437 Award Numbers: NOAA-NMFS-AK-2023-2007663 Award Period: October 1, 2022 to September 30, 2027 Criteria 2 U.S. CFR Part 200.403, 404, and 405 of Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards require that costs must be necessary and reasonable for the performance of the Federal Award, that costs be determined in accordance with GAAP, and that costs be adequately documented including the allocation of those costs. Condition/Context for Evaluation IPHC’s internal controls over non-payroll charges to the Federal Award did not include review for allowability, accrual in the proper period, or that adequate documentation existed to support the amounts charged or allocated. Three out of 25 non-payroll disbursements tested did not include evidence supporting one or more of these controls. Questioned Costs $2,674 Cause IPHC’s operation of internal controls were not sufficient to ensure allowable costs were charged in accordance with 2 U.S. CFR Part 200.403, 404, and 405 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Effect or Potential Effect As a result, charges were made to Federal awards that were not allowable or allocable to the award. Repeat Finding Not applicable. Recommendation We recommend that IPHC ensure internal controls include reviewing costs charged to the Federal Award for conformity with 2 U.S. CFR Part 200.403, 404, and 405 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards for allowability, allocability, and reasonableness. Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying corrective action plan.
2023-002 Grant Payroll Documentation and Recordkeeping Federal Agency: U.S Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: SLFRP3404 - 2021 Award Period: March 3, 2021 through December 31, 2024 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matter Criteria: Compliance: 2 CFR 200.302(b)(3) states that records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. 2 CFR 200.403 states that costs must be adequately documented. Controls: 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 comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the ”Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The County did not maintain documentation supporting certain payroll expenditures charged to the grant. Questioned Costs: Under $25,000. Context: For four of the sixty employee pays selected for testing the underlying payroll records did not support the amount charged to the grant. Cause: Payroll documentation supporting the wage amounts charged to the grant program was not properly maintained by the County. Effect: Failure to maintain supporting documentation to the employee payroll charged to grant programs may result in unallowed cost and activities being charged to the grant, causing noncompliance with the Federal compliance requirements. Repeat Finding: No Recommendation: We recommend the County establish internal control procedures to ensure that all amounts charged to grant programs for employee payroll costs be reconciled to the specific employee payroll records and that supporting documentation be maintained throughout the grant award period and beyond.
Questioned Cost $ 5,174 Finding No. 2023 002: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Federal Agency: U.S. Department of State Assistance Listing Number and Title: 19.015 – Cultural, Technical and Educational Centers Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Cultural, Technical and Educational Centers program for 2 out of 26 individuals selected for testing. Furthermore, at the end of the fiscal year, management recorded an adjustment in an attempt to correct the error, however, the amounts calculated in the adjustment were inaccurate. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. Code of Federal Regulations (“CFR”) Part 200, states “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… (g) Be adequately documented.” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles We were informed by management that the inaccurate allocation of amounts to the Cultural, Technical and Educational Centers program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment may be attributed to general management oversight. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of amounts included in the correcting adjustment resulted in the following: • An overstatement of $5,174 in expenditures allocated to the Cultural, Technical and Educational Centers grant. • An overstatement of $5,032 in expenditures allocated to a non Federal grant. • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant. • An understatement of $10,229 in expenditures allocated to the U.S. Department of State – Public Diplomacy Programs grant. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 26 salaries and wages related expenditures totaling approximately $117,000 were selected for audit from a population of approximately $14,020,000 in salaries and wages related expenditures. Our test found two instances in which salaries and wages were erroneously recorded under the Cultural, Technical and Educational Centers program. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles Ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated in an accurate manner. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “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… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “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… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “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… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “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… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “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… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
Finding Number: 2023-033 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Program: Government Department/Agency: U.S. Department of Health and Human Services Opioid STR ALN: 93.788 Award #: Various Award Year: 09/30/2020 – 09/29/2024 Department of Behavioral Health (DBH) Criteria - The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR Section 200.403, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. (g) Be adequately documented.” Condition – During our testwork for the Activities Allowed or Unallowed and Allowable Costs/Cost Principles, we noted the following in our sample of sixty-four (64) items: • For one (1) out of the 64 samples, DBH did not provide adequate supporting documentation for year-end accrual for subrecipient expenditures amounting to $238,548. Questioned Costs – Known amount is $238,548. Context – This is a condition identified per review of DBH’s compliance with specified requirements using a statistically valid sample. Total amount of samples selected for testing amounted to $7,294,191. Effect – Lack of supporting documentation could result in disallowances of costs and DBH may have drawn down federal monies in excess of the expenditures incurred. Cause – DBH did not have adequate controls in place to ensure that expenditures accrued were actually incurred by the subrecipient. Recommendation – We recommend that DBH strengthen internal control procedures to ensure that expenditures are allowable, and that sufficient documentation is retained to support that allowability. Related Noncompliance – Noncompliance. Views of Responsible Officials and Planned Corrective Actions – DBH concurs with the finding. The District’s corrective action is described in the Management’s Corrective Action Plan included as Appendix B of the attached Management’s Section.
Criteria: Per section 3401(a) of the American Rescue Plan (ARP) Act of 2021, ARP funds shall be available for reimbursement for: (a) payroll of public transportation entities, (b) operating costs to maintain service due to lost revenue due as a result of the coronavirus public health emergency, and (c) paying administrative leave of operations or contractor personnel due to reductions of service. In addition, Title 2 CFR § 200.303 requires the recipient of federal funds 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. Moreover, Title 2 CFR 200.403 (a) and (b) state 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 and be allocable thereto under 2 CFR part 200, subpart E, and (b) conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E or in the Federal award as to types or amount of cost items. Condition: As part of audit procedures over a sample of 25 non-payroll transactions we identified one transaction for $8,510 relating to legislative consulting services which was not an allowable activity under the grant agreement. As a result of further review of the general ledger account in which the above item was recorded, we identified 13 additional transactions for similar unallowable activities representing $581,987. We did not identify any indirect costs that were associated with these unallowable costs. Total questioned cost identified through the audit procedures performed was approximately $590,403. Total expenditures for the Federal Transit Cluster were approximately $243,258,597. Cause: Historically, grants received by METRO have generally been specific to specified projects, which allowed METRO to establish projects in advance for tracking, accumulating, and approving/monitoring costs incurred. As such, METRO’s internal controls are designed with this project-based focus in mind. In the current year METRO received this grant which allows them to seek reimbursement for certain prior year costs not already reimbursed by the Federal government. Given the broad nature of costs allowed under this grant and the ability to seek reimbursement for prior year costs, management identified costs which were included in general ledger accounts not typically subject to detailed allowability assessments in accordance with federal requirements, and as a result METRO inadvertently placed an increased reliance on the knowledge of grants department personnel to understand the nature of general ledger accounts and transactions, as well as an increased reliance on reviewers identifying unallowable costs in the summary of expenditures submitted for reimbursement. Effect: Certain of the costs incurred and submitted for reimbursement by METRO were unallowable. Auditor’s Recommendation: METRO should establish appropriate processes and controls to guide grant personnel in the aggregation of grant costs. In particular, management should focus on the processes and controls associated with grants for which predefined projects are not established in advance of incurring grant related expenditures.
Criteria: Per section 3401(a) of the American Rescue Plan (ARP) Act of 2021, ARP funds shall be available for reimbursement for: (a) payroll of public transportation entities, (b) operating costs to maintain service due to lost revenue due as a result of the coronavirus public health emergency, and (c) paying administrative leave of operations or contractor personnel due to reductions of service. In addition, Title 2 CFR § 200.303 requires the recipient of federal funds 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. Moreover, Title 2 CFR 200.403 (a) and (b) state 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 and be allocable thereto under 2 CFR part 200, subpart E, and (b) conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E or in the Federal award as to types or amount of cost items. Condition: As part of audit procedures over a sample of 25 non-payroll transactions we identified one transaction for $8,510 relating to legislative consulting services which was not an allowable activity under the grant agreement. As a result of further review of the general ledger account in which the above item was recorded, we identified 13 additional transactions for similar unallowable activities representing $581,987. We did not identify any indirect costs that were associated with these unallowable costs. Total questioned cost identified through the audit procedures performed was approximately $590,403. Total expenditures for the Federal Transit Cluster were approximately $243,258,597. Cause: Historically, grants received by METRO have generally been specific to specified projects, which allowed METRO to establish projects in advance for tracking, accumulating, and approving/monitoring costs incurred. As such, METRO’s internal controls are designed with this project-based focus in mind. In the current year METRO received this grant which allows them to seek reimbursement for certain prior year costs not already reimbursed by the Federal government. Given the broad nature of costs allowed under this grant and the ability to seek reimbursement for prior year costs, management identified costs which were included in general ledger accounts not typically subject to detailed allowability assessments in accordance with federal requirements, and as a result METRO inadvertently placed an increased reliance on the knowledge of grants department personnel to understand the nature of general ledger accounts and transactions, as well as an increased reliance on reviewers identifying unallowable costs in the summary of expenditures submitted for reimbursement. Effect: Certain of the costs incurred and submitted for reimbursement by METRO were unallowable. Auditor’s Recommendation: METRO should establish appropriate processes and controls to guide grant personnel in the aggregation of grant costs. In particular, management should focus on the processes and controls associated with grants for which predefined projects are not established in advance of incurring grant related expenditures.