FA 2024-001 Improve Controls over Expenditures Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Reporting Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: COVID-19 – 84.425D – Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund Federal Award Numbers: S425D210012 (Year: 2021), S425U210012 (Year: 2021) Questioned Costs: $819,799.49 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it relates to the Elementary and Secondary School Emergency Relief Fund program. Background: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan (ARP) Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $3,951,662.00 were expended and reported on the Hancock County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “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… (g) Be adequately documented…” In addition, to assist school districts in improving their financial management systems and associated compliance over federal programs, GaDOE published the Financial Management for Georgia Local Units of Administration (FMGLUA) manual. The FMGLUA manual requires that LEAs submit a budget as part of each federal program’s Consolidated Application process. The program budget reflects details regarding the manner in which each school district intends to expend the program funds. The Consolidated Application, including the budget, for each program must be reviewed and approved by GaDOE personnel before the LEA is authorized to expend program funds. Amendments to the budget are to be submitted to and approved by GaDOE when a school district intends to spend funds in a manner not initially reported. LEA personnel must also provide program-specific assurances related to the ESSER program within the Consolidated Application system. These assurances are reflected in the Uniform Guidance, Section 200.415 – Required Certifications, and include provisions that require LEAs “to assure that expenditures are proper and in accordance with the terms and conditions of the Federal award and approved project budgets...” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation- Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) … Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity…” Lastly, provisions included in the Uniform Guidance, Section 200.302(a) state in part that “the non- Federal entity’s financial management systems must… be sufficient to permit the preparation of reports required by general and program-specific terms and conditions.” In addition, provisions included in the Uniform Guidance, Section 200.302(b)(2) state in part that the non-federal entity’s financial management system must provide for “accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements.” Condition: A review of the School District’s accounting records and approved expenditures reflected within the ESSER program Consolidated Application reviewed the following deficiencies: • A sample of 13 nonpersonal services expenditures was randomly selected for testing using a non-statistical sampling approach. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. It was noted that prior approval was not obtained from GaDOE for two expenditures totaling $505,229.40 as these expenditures were not reflected in the approved budget or subsequent amendment within the Consolidated Application system as required. • A sample of 37 employees was randomly selected for testing using a non-statistical sampling approach. These employees were reviewed to determine if internal controls were implemented and applicable compliance requirements were met. It was noted that prior approval was not obtained from GaDOE for 29 expenditures totaling $181,761.00 as these expenditures were not reflected in the approved budget or subsequent amendment within the Consolidated Application system as required. • A review of indirect cost amounts charged to the ESSER program revealed that the total indirect cost amount budgeted by the School District, which totaled $600,000.00, was recorded as indirect cost expenditures during the period under review. However, the School District should have applied the indirect cost rate approved by the GaDOE to actual expenditures incurred during the fiscal year to calculate a maximum indirect cost amount of $467,190.96. Therefore, unallowable indirect costs totaling $132,809.04 were recorded within the ESSER fund. • Expenditures reported on the ARP ESSER completion report for the period July 1, 2023 through September 30, 2024 were not supported by the general ledger for several functions and objects reflected in the amended consolidated application. Questioned Costs: Upon testing a sample of $690,319.93 in nonpersonal services expenditures, known questioned costs of $505,229.40 were identified for expenditures not properly approved through the Consolidated Application process. Using the total nonpersonal services expenditures population of $2,507,902.88, we project the likely questioned costs to be approximately $1,835,476.87 In addition, upon testing a sample of $418,831.17 in personal services expenditures, known questioned costs of $181,761.05 were identified for expenditures not approved in the consolidated application. Using the total personal services expenditures population of $1,303,995.07 (excluding benefits payments), we project the likely questioned costs to be approximately $565,897.50. Furthermore, known questioned costs $132,809.04 were identified for unallowable indirect costs charged to the ESSER program. Therefore, the known and likely questioned costs identified for all unallowable payments totaled $819,799.49 and $2,534,183.41, respectively. The following Assistance Listing Numbers were affected by known and likely questioned costs: 84.425D & 84.425U. Cause: In discussing this deficiency with the School District, they stated that they did not consider the expenditure purchases unallowable and recorded them in the wrong account number due to oversight. Indirect costs were charged according to the budget without regard of the appropriate indirect cost rate. Effect: The School District is not in compliance with the Uniform Guidance or GaDOE guidance related to the ESSER Program. Failure to accurately develop and amend budget information through the Consolidated Application process and verify compliance with applicable policies and regulations prior to the expenditure of federal program funds may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unapproved and unallowable expenditures. Recommendation: The School District should evaluate current internal control procedures related to the ESSER Program. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that potential expenditures are approved through the Consolidated Application process and deemed to be allowable before spending federal funds. In addition, management should develop and implement a monitoring process to ensure that control procedures are being followed. Views of Responsible Officials: We concur with this finding.
Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Period of Performance Procurement and Suspension and Debarment Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Number and Title: 84.371C – Comprehensive Literacy Development Federal Award Number: S371C190016-19A (Years: 2017-21) Questioned Costs: $12,921.61 Repeat of Prior Year Findings: FA 2022-002, FA 2023-001 Description: A review of expenditures and journal entries charged to the Comprehensive Literacy Development program revealed that the School District’s internal control procedures were not operating to ensure that appropriate reviews and approvals occurred and the School District’s procurement procedures were followed. Background Information: The Comprehensive Literacy Development Program (CLD) was authorized under Sections 2222-2225 of the Elementary and Secondary Education Act of 1965 to create a comprehensive literacy program to advance literacy skills, including pre-literacy skills, reading, and writing, for children from birth to grade 12, with an emphasis on disadvantaged children, including children living in poverty, English learners, and children with disabilities. CLD funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to local educational agencies (LEAs) and overseeing the expenditure of funds by LEAs. CLD funds totaling $454,278.20 were expended and reported on the Burke County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “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… (g) Be adequately documented, (h) Cost must be incurred during the approved budget period…” Lastly, provisions included in the Uniform Guidance, Section 200.318 – General Procurement Standards state in part that “(a) the non-Federal entity must use its own documented procurement procedures which reflect applicable State, local, and tribal laws and regulations and… (b) non-Federal entities must maintain oversight to ensure that contractors perform in accordance with the terms, conditions, and specifications of their contracts or purchase orders.” In addition, provisions included in the Uniform Guidance, Section 200.320 – Methods of Procurement to Be Followed provide guidance for procurement through small purchase procedures and state “If small purchase procedures are used, price or rate quotations must be obtained from an adequate number of qualified sources.” Condition: Auditors performed a review of various expenditure activity associated with the CLD program to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were identified: • A sample of 60 expenditures was randomly selected for testing using a non-statistical sampling approach. Evidence of review and approval was not reflected for 17 expenditures, and adequate evidence of receipt was not maintained for 20 expenditures. • A sample of two journal entries was randomly selected for testing using a non-statistical sampling approach. Evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for either journal entry tested. • A sample of 45 procurement transactions was randomly selected for testing using a non-statistical sampling approach. Four procurement transactions did not reflect evidence of supervisory review and approval, and the School District could not provide evidence that an adequate number of rate or price quotations were obtained from qualified sources for 13 small purchase procurements reviewed. Questioned Costs: Upon testing a sample of $45,625.42 in procurement transactions, known questioned costs of $12,921.61 were identified for expenditures that did not follow the School District’s procurement procedures. Using the total population of $327,567.83 in procurement transactions, we project the likely questioned costs to be approximately $92,770.73. Cause: The School District did not maintain evidence of review and approval of expenditures, journal entries, and procurement transactions as a result of oversight. Small purchase procurement transactions did not follow the School District’s procurement policy because the Federal Programs Director was unaware that it was necessary to follow these procedures for the purchase of instructional materials. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to review expenditures for allowability and journal entries for allowability and period of performance compliance exposes the School District to unnecessary risk of error and misuse of federal funds. In addition, failure to appropriately follow applicable procurement procedures exposes the School District to unnecessary risk of error and misuse of federal funds. Lastly, this deficiency could lead to the return of grant funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to the CLD program. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures, journal entries, and procurement transactions reflect evidence of review for associated compliance requirements. In addition, expenditure voucher packages should contain all required components. Furthermore, the School District should evaluate and improve internal control procedures to ensure that required procurement methods are properly identified and followed and required procurement documentation is properly identified, safeguarded, and retained. Management should develop a monitoring process to ensure that these procedures are operating appropriately. Views of Responsible Officials: The finding states evidence of review and approval was not reflected for 17 expenditures. While 3 invoices were not approved, 14 were approved by multiple levels including the building level Principal, Central Office Director, including the Director in charge of the grant, and/or the Superintendent. Additionally, all expenditures charged to the grant were submitted to the Georgia Department of Education for review and approval for reimbursement of expenditures. All expenditures were approved and reimbursed. The finding states adequate evidence of receipt was not maintained for 20 expenditures; however, 10 of the expenditures were not for tangible items. Instead, the expenditures were for dues and fees and travel. Dues and fees and travel expenditures do not have packing slips due to the nature of the activity. Of the remaining 10, all but 1 were approved by multiple levels including the building level Principal, Central Office Director, including the Director in charge of the grant, and/or the Superintendent. Approval for payment isn’t granted unless items are received. The finding states evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for 2 journal entries. Both of the journal entries were usual in nature and occurred in the normal course of business including a journal entry to reverse accounts receivable from the prior year and a journal entry to record accounts receivable in the current year. Both journal entries are annual, standard journal entries that are required under Generally Accepted Accounting Principles. While not approved by the Director in charge of the grant, the journal entry was appropriate, allowable, and necessary to ensure revenues were accurately recorded in the proper accounting period. The finding states 4 procurement transactions did not reflect evidence of supervisory review and approval. While 4 transactions included invoices that were not approved by the Director in charge of the grant, 2 invoices were approved by the building level Principal and the Superintendent, and 1 was approved by the Superintendent. Three of the transactions included purchase orders that were properly approved by the Director in charge of the grant. Auditor’s Concluding Remarks: Under the Uniform Guidance, auditees are required to implement internal controls over federal awards. Upon completing procedures over internal controls associated with the Activities Allowed or Unallowed, Allowable Costs/Cost Principles, Period of Performance, and Procurement and Suspension and Debarment compliance requirements, auditors obtained an understanding of internal controls put in place and subsequently tested those controls. Auditors noted that the internal controls described by the School District were not in place for the transactions identified. Based on this information, we reaffirm our finding and will review the status of the finding during our next audit.
Compliance Requirements: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: COVID-19 – 84.425D – Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund Federal Award Numbers: S425D200012 (Year: 2021), S425U2100012 (Year: 2021) Questioned Costs: $328.00 Description: A review of expenditures related to the Elementary and Secondary School Emergency Relief program revealed that the School District’s internal control procedures were not operating appropriately to ensure that appropriate reviews and approvals occurred. Background Information: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $4,167,690.48 were expended and reported on the Burke County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Additionally, provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “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… (g) Be adequately documented…” Furthermore, to assist school districts in improving their financial management systems and associated compliance over federal programs, GaDOE published the Financial Management for Georgia Local Units of Administration (FMGLUA) manual. The FMGLUA manual requires that LEAs submit a budget as part of each federal program’s Consolidated Application process. The program budget reflects details regarding the manner in which each school district intends to expend the program funds. The Consolidated Application, including the budget, for each program must be reviewed and approved by GaDOE personnel before the LEA is authorized to expend program funds. Amendments to the budget are to be submitted to and approved by GaDOE when a school district intends to spend funds in a manner not initially reported. Lastly, LEA personnel must also provide program-specific assurances related to the ESSER programs within the Consolidated Application system. These assurances are reflected in the Uniform Guidance, Section 200.415 – Required Certifications, and include provisions that require LEAs “to assure that expenditures are proper and in accordance with the terms and conditions of the Federal award and approved project budgets...” Condition: A sample of 60 expenditures was randomly selected for testing using a non-statistical sampling approach. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • For four expenditures, evidence of review and approval was not reflected within the voucher package. • Prior approval was not appropriately obtained from GaDOE for one expenditure totaling $328.00 as this expenditure was not reflected in the approved budget or subsequent amendment within the Consolidated Application system, as required. Questioned Costs: Upon testing a sample of $552,789.52 in nonpersonal expenditures, known questioned costs of $328.00 were identified for expenditures not properly approved through the Consolidated Application process. Using the total nonpersonal services expenditures population of $3,601,591.01, we project the likely questioned costs to be approximately $2,137.02. Cause: The School District did not maintain evidence of review and approval of expenditures as a result of oversight. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to review expenditures for allowability exposes the School District to unnecessary risk of error and misuse of federal funds. Recommendation: The School District should review current internal control procedures related to the ESSER program. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures reflect evidence of review for associated compliance requirements and potential expenditures are approved through the Consolidated Application process and deemed to be allowable before spending federal funds. Management should develop a monitoring process to ensure that control procedures are being followed. Views of Responsible Officials: We concur with this finding.
Compliance Requirement: Period of Performance Internal Control Impact: Material Weakness Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Numbers and Titles: 84.027 – Special Education Grants to States COVID-19 – 84.027 – Special Education Grants to States 84.173 – Special Education Preschool Grants Federal Award Numbers: H027A220073 (Year: 2023), H027230073 (Year: 2024) H027X210073 (Year: 2022), H027A230081 (Year: 2024) Questioned Costs: None Identified Repeat of Prior Year Finding: FA 2023-003 Description: A review of journal entries charged to the Special Education Cluster revealed that the School District’s internal control procedures were not operating to ensure that appropriate reviews and approvals occurred, as required. Background Information: The Special Education Cluster (SEC), which is comprised of the Special Education Grants to States (IDEA, Part B) and Special Education Preschool Grants (IDEA Preschool) programs, was authorized under the Individuals with Disabilities Education Act (IDEA). Special Education Cluster funding is available to ensure that all children with disabilities have available to them a free appropriate public education that emphasizes special education and related services designed to meet their unique needs and prepares them for further education, employment, and independent living; ensure that the rights of children with disabilities and their parents are protected; assist states, localities, educational service agencies, and federal agencies to provide for the education of all children with disabilities; and assess and ensure the effectiveness of efforts to educate children with disabilities. SEC funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. SEC funds totaling $1,323,542.89 were expended and reported on the Burke County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2024. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “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… (g) Be adequately documented, (h) Cost must be incurred during the approved budget period…” Condition: A sample of two journal entries was randomly selected for testing using a non-statistical sampling approach to determine if appropriate internal controls were implemented and applicable compliance requirements were met. Evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for those journal entries. Cause: The School District did not maintain evidence of review and approval of journal entries as a result of oversight. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance and GaDOE guidance. Failure to review journal entries for allowability and period of performance compliance exposes the School District to unnecessary risk of error and misuse of federal funds. In addition, this deficiency could lead to the return of grant funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to the Special Education Cluster. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all journal entries reflect evidence of review for associated compliance requirements. In addition, management should develop a monitoring process to ensure that these procedures are operating appropriately. Views of Responsible Officials: The finding states evidence of review to ensure that the activity was allowable and occurred during the period of performance was not reflected for 2 journal entries. While not approved by the Director in charge of the grant, both journal entries were reclassifications of expenditures that were allowable and occurred during the period of performance. Both of the journal entries were usual in nature and occurred in the normal course of business. Auditor’s Concluding Remarks: Under the Uniform Guidance, auditees are required to implement internal controls over federal awards. Upon completing procedures over internal controls associated with the Period of Performance compliance requirement, auditors obtained an understanding of internal controls put in place and subsequently tested those controls. Auditors noted that the internal controls described by the School District were not in place for the journal entries identified. Based on this information, we reaffirm our finding and will review the status of the finding during our next audit.
2024-001 – Allowable Costs – Internal Control over Payroll and Non-Payroll Costs Federal Agency: U.S. Department of Veterans Affairs Federal Programs: Veteran Affairs Homeless Providers Grant and Per Diem Program (GPD) – Assistance Listing No. 64.024, Grant Period – October 1, 2023 through September 30, 2025.Staff Sergeant Parker Gordon Fox Suicide Prevention Grant Program (SSPG) – Assistance Listing No. 64.055, Grant Period – September 30, 2023 through September 30, 2024. Condition:Montachusett Veterans Outreach Center, Inc. (MVOC) did not follow its internal control policies and procedures for payroll and non-payroll costs charged to the federal awards. The allocation methodology used to charge payroll and non-payroll transactions to the Federal Award programs was not properly supported for multiple sampled transactions. Criteria: In accordance with Department of Veteran Affairs program guides for each program (the Guide), allowable expenses must meet all the requirements in 2 C.F.R. § 200 which requires expenses charged to the grants to be allocated consistently with a sound methodology and be clearly documented. Additionally, the Guide indicates allowable expenses must meet all the requirements in 2 C.F.R. § 200.403 part (d) and (g), except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (d) be accorded consistent treatment and (g) be adequately documented when charged to a federal award. Cause: A formal cost allocation plan was not followed for expensed transactions. Additionally, multiple employee’s bi-weekly timesheets were not properly signed or approved. Effect: Costs charged to the grants may not be allowable for reimbursement by MVOC’s federal funding sources Context: Twelve out of twenty three non-payroll charges lacked supporting documentation for the amount allocated to the grant. Twenty seven out of fifty seven payroll transactions sampled lacked supporting documentation for the amount allocated to the grant. Additionally, those transactions lacked evidence of review by employee or supervisor. Our sample was not a statistically valid sample. Questioned Costs: GPD - $18,440 SSPG - $30,121 Recommendation: We recommend that MVOC, update its policies and procedures to help ensure effective internal controls are in place and implemented to adequately support allocations, and amounts charged to the Federal Awards. Management Response: Management agrees with the finding. See management’s attached corrective action plan.
Finding Number: 2024-004 Internal control weakness over activities allowed/allowable costs Federal Program: 84.027 & 84.173 Special Education Cluster (IDEA) Federal Program: 84.425D/84.425U Education Stabilization Fund Criteria: 2 CFR §200.302(b)(7) requires non-federal entities to establish and maintain effective internal control over federal awards that provides reasonable assurance that the entity is managing the federal award in compliance with Federal statutes, regulations, and the terms and conditions of the federal award. 2 CFR §200.403 requires that costs charged to a federal award be allowable, reasonable, and allocable to the federal program. 2 CFR §§200.302(b)(3) and 200.302(b)(4) require financial management systems to maintain records that adequately identify the source and application of funds for federally funded activities and support the allowability of costs charged to federal programs. Condition: The District did not maintain adequate internal controls to ensure that expenditures charged to Education Stabilization Fund grants were for activities allowed and allowable under Uniform Guidance. Specifically, the District lacked documented procedures and control activities to review and approve expenditures for allowability prior to charging costs to the federal program. Cause: The deficiencies resulted from the absence of formally documented procedures and internal control activities addressing the review and approval of expenditures for allowability under Uniform Guidance. As a result, management did not establish controls to ensure that costs charged to Education Stabilization Fund grants were evaluated for allowability in accordance with federal requirements. Effect: This condition increases the risk that unallowable or improperly supported costs could be charged to Education Stabilization Fund grants and not be identified or corrected in a timely manner, resulting in noncompliance with Uniform Guidance requirements. Identification of Questioned Costs: None identified. Context: The absence of documented internal control procedures over activities allowed and allowable costs limited the District’s ability to readily demonstrate compliance with Uniform Guidance. Repeat Finding: This is a repeat finding of 2023-04. Views of Responsible Officials and Corrective Action Plan: Please see the Corrective Action Plan issued by the entity.
Criteria: In accordance with 2 CFR Part 200.403 of the Uniform Guidance, charges to Federal awards must be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. Condition: For the year ended June 30, 2024, the Agency did not maintain individual support for the allocation of allocable salaries. These were charged based on a flat rate. Furthermore, there are instances where an independent approved pay rate was not maintained by the human resources department. Cause: The allocable salaries and wages are not charged based on actual work performed. The approved pay rate was not properly documented by the human resources department. Effect: The Agency is not in compliance with 2 CFR Part 200.403 of the Uniform Guidance. Questioned Costs: None reported. Context: A random sampling of the federal expenditures. Repeat Finding: Not applicable. Recommendation: We recommend that the Agency establish a system to determine and document the time spent and amount charged to their programs. We also recommend the Agency ensure the staff’s approved salary is properly documented. View of Responsible Officials: See management’s corrective action plan.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Community Service Block Grant Assistance Listing Number: 93.569 Pass-through Agency: Pennsylvania Department of Community and Economic Development Pass-Through Number: Contract #C000082084 Award Period: January 1, 2022 – December 31, 2027 Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria: 3 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of period of performance. The Organization should have procedures and controls in place to ensure expenses are charged to a federal program within the approved period of performance. In addition, in accordance with 2 CFR Part 200.403, allowable costs should be determined in accordance with generally accepted accounting principles (GAAP), therefore payroll accruals should be appropriately reflected when recording program expenditures. Condition: During our testing, we noted there were several salary expenditures charged to the grant based on the payroll period ending date, however the costs were incurred for the period 12/23/23 - 1/5/24, which the first nine days were prior to the start of the period of performance. Questioned Costs: There were known questioned costs identified in the amount of $6,868. Context: During our testing of community service block grant costs recorded during the beginning of the approved period of performance (January 2024), we noted there were thirty five transactions tested charged to the federal program in January 2024 for salary and related payroll taxes which are portion was incurred prior to the start of the contract period. Based on the review of the supporting documentation, it was noted that the payroll period was 12/23/23 - 1/5/24, which the first nine days were prior to the start of the period of performance. The total amount of the transactions was $6,868. Cause: The Organization recorded the transactions into the general ledger based on the payroll period ending date and invoice date rather than the date the transactions were incurred by the Organization. Effect: If the organization includes expenses either incurred before the start date or after the end date of the approved period of performance, it could result in funds being required to be returned to the funding agency. Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2023- 006. Recommendation: The Organization should work with the federal agency to provide additional documentation or justification for the expenses, or to adjust the budget or funding limits to ensure that all expenses are within the approved period of performance. It is important to address any period of performance findings as soon as possible to avoid potential penalties or repayment obligations. The Organization should also review its process of entering invoices and payroll related expenses into the accounting software to ensure the correct period is used for federal expenditures. View of Responsible Officials and Planned Corrective Action: Please refer to Community Action Committee of the Lehigh Valley, Inc. and Subsidiaries’ Corrective Action Plan.
U.S. Department of Environmental Protection Agency Passed through State Department of Natural Resources and Conservation FFAL# 21.027 COVID-19 Coronavirus State and Local Fiscal Recovery Funds Activities Allowed/Unallowed and Allowable Costs/Cost Principles Material Non-compliance Material Weakness in Internal Control Criteria: Per 2 CFR §200.303, non-federal entities must establish and maintain effective internal control over federal awards to provide reasonable assurance that the entity is managing the award in compliance with federal statutes, regulations, and the terms and conditions of the award. Per 2 CFR §200.403, costs must be adequately documented to be allowable under federal awards Condition: During our testing of allowable costs under Uniform Guidance, we noted that the client did not provide evidence of internal controls over the review and approval of costs charged to the federal program. Additionally, for 3 out of 4 sampled transactions, the client was unable to provide supporting documentation (invoices) for the expenditures tested. Cause: The client has not implemented sufficient procedures to ensure documentation is retained and controls are evidenced for allowable costs. Effect: Without evidence of internal controls and supporting documentation, there is an increased risk of noncompliance with Uniform Guidance requirements and potential questioned costs. Questioned Costs: $1,124,156 Context/Sampling: A nonstatistical sample of four invoices were selected for testing. Repeat Finding from Prior Years: No. Recommendation: We recommend the client implement and document internal control procedures over allowable costs, including maintaining invoice support for all expenditures charged to federal programs. Controls should include documented review and approval processes to ensure compliance with Uniform Guidance. Views of Responsible Officials: Agree.
Retain Supporting Documentation for Journal Entries (Material Weakness, Compliance Finding) Federal Agency: Department of Agriculture/Department of Education Cluster/Program: Child Nutrition Cluster/Education Stabilization Fund Assistance Listing Number(s): 10.553/10.555/10.559/84.425D Award Year: 2024 Compliance Requirement: Allowable Costs/Cost Principles Criteria Per 2 CFR 200.302 (Financial Management) and 2 CFR 200.403 (Factors Affecting Allowability of Costs) of the Uniform Guidance, recipients of federal awards must maintain records that identify adequately the source and application of funds. All accounting records, including journal entries affecting federal programs, must be supported by sufficient documentation to ensure costs are allowable, allocable, and properly authorized. Condition During our audit of federal grant programs, we identified several journal entries affecting federal grant expenditures that lacked adequate supporting documentation. Specifically, these entries did not include invoices, detailed calculations, approval signatures, or written explanations substantiating the nature and purpose of the transactions. Cause The District does not have a formalized policy or consistent procedure requiring that all journal entries be accompanied by adequate supporting documentation and maintained for audit and review purposes. Effect Without adequate supporting documentation, there is an increased risk that unallowable, inaccurate, or unauthorized costs could be charged to federal programs. This deficiency also impedes the ability to demonstrate compliance with federal requirements. Context Supporting documentation for journal entries was not maintained in fiscal year 2024. This was a recurring issue throughout the year. This issue was not present in previous fiscal years. Questioned Costs As a result of this finding, we have identified $54,856 in Child Nutrition Cluster federal expenditures and $523,315 in Education Stabilization Fund federal grant expenditures as questioned costs. These costs represent journal entries for which sufficient supporting documentation was not provided to substantiate allowability and compliance with federal requirements. Recommendation To rectify this material weakness, we recommend the District implement and enforce policies requiring that all journal entries be accompanied by appropriate supporting documentation and reviewed and approved by supervisory personnel prior to posting. View of Responsible Officials and Planned Corrective Actions The District’s corrective action plan is included at the end of this report.
State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Temporary Assistance for Needy Families ALN and Program Expenditures: 93.558 ($583,126,272) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: $78,162 Compliance Requirement: Eligibility Finding 2024-010: Improper TANF Beneficiary Payments Condition Found: IDHS made improper payments to beneficiaries of the Temporary Assistance for Needy Families (TANF) program. During our testing of 50 TANF program beneficiary payments (with total payments sampled of $19,049), we noted one beneficiary (with a sampled payment of $262) received supplemental payments that were improperly calculated using amounts inconsistent with information contained in the beneficiary’s case file. As a result of the calculation error, the beneficiary was not eligible to receive the monthly supplemental payment. Total supplemental payments made to this beneficiary under the TANF program totaled $2,358 during the year ended June 30, 2024. We also noted two TANF beneficiary payments sampled (totaling $581) that were improperly calculated due to a diverted income system error. Diverted income occurs in dependent eligible only TANF cases where an ineligible working adult in the household has income which is allocated to the eligible members of the household to determine the overall TANF program benefit payment. The State’s benefit system was erroneously excluding the ineligible working adult in the diverted income calculation potentially resulting in an overpayment of TANF benefits on cases with diverted income. As a result of this error, the monthly payments made to these two beneficiaries were overstated by $244. Total payments made to these two beneficiaries under the TANF program were $5,130 for the year ended June 30, 2024. In response to the error identified in our testing, IDHS identified benefit payments paid during the year ended June 30, 2024 for 1,956 beneficiaries (totaling $7,238,104) were calculated using diverted income. The system calculation error related to these benefit payments resulted in total TANF overpayments of $75,804 during the year ended June 30, 2024. The payment errors identified above had not been corrected by IDHS or refunded to USDHHS (if required) as of the date we communicated our findings to IDHS (December 22, 2025). We further noted IDHS did not establish control procedures at an adequate level of precision to ensure TANF program benefits were accurately calculated based on the beneficiary’s case file supporting documentation. Payments made to beneficiaries of the TANF cash assistance program totaled $45,021,831 during the year ended June 30, 2024. Criteria or Requirement: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable under federal awards, costs must meet certain general criteria. Those criteria require, among other things, that each expenditure must be necessary, reasonable, and supported by adequate documentation.In accordance with the OMB Compliance Supplement, dated May 2024, IDHS is required to determine eligibility in accordance with eligibility requirements defined in the approved State Plan. The current State Plan requires payments to be made to eligible beneficiaries in accordance with payment levels established within the State Plan. Further, the State Plan requires an excluded or ineligible individual’s income to be considered in the calculation of the payment level of the TANF unit. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include establishing internal control at an appropriate level of precision to identify benefit payment errors in a timely manner. Cause: In discussing these conditions with IDHS officials, management stated the exceptions noted were due to an oversight to secure or upload supporting documentation adequately and case actions not being thoroughly reviewed. Possible Asserted Effect: Failure to properly calculate benefit payments may result in unallowable costs being charged to the TANF program. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-016. (Finding Code 2024-010, 2023-016) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS review its current process for calculating beneficiary payments and consider changes necessary to ensure payments are properly calculated and paid. Views of IDHS Officials: The Department accepts the recommendation. IDHS will review its current process for calculating beneficiary payments and make changes to ensure payments are properly calculated and paid.
State Agency: Illinois Department of Human Services (IDHS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Temporary Assistance for Needy Families, Child Care and Development Fund (CCDF) Cluster ALN and Program Expenditures: 93.558 ($583,126,272), 93.575/93.596 ($747,612,292) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: $1,317 (TANF Federal), $1,527 (TANF MOE), $1,174 (CCDF Federal), $372 (CCDF MOE) Compliance Requirement: Activities Allowed/Unallowed, Allowable Costs/Cost Principles Finding 2024-011: Unallowable Costs Charged to the TANF and CCDF Cluster Programs Condition Found: IDHS could not provide documentation to support payments made on behalf of beneficiaries of the Temporary Assistance for Needy Families (TANF) and Child Care and Development Fund (CCDF) Cluster programs. The State of Illinois operates the Child Care Assistance Program (CCAP) which provides eligible families child care services at approved, licensed providers. Payments are made by IDHS directly to the child care provider on behalf of an eligible family. Providers submit billings to IDHS detailing the name of the recipient of the services and the number of days for which services were received. IDHS performs monitoring reviews of childcare providers on a rotational basis. During these monitoring reviews, IDHS reviews provider records to ensure services billed are adequately documented. During our testing of CCAP beneficiary payments claimed under the TANF program (40 payments totaling $8,555 in federal claim and $34,968 in MOE claim) and CCDF (40 payments totaling $108,666 in federal claim and $3,882 in MOE claim), we noted four TANF payments and three CCDF payments for which IDHS could not provide documentation supporting the services provided to eligible beneficiaries which are unallowable costs. These unallowable expenditures were reported and claimed to federal programs as follows: "See Table in the Audit Report" Additionally, we noted IDHS has not performed a monitoring review in 2024 or either of the previous two fiscal years to ensure billing information provided by the child care providers is accurate for 50 of the 62 unique providers sampled. As a result, IDHS does not have adequate controls in place to ensure information provided by providers is accurate and the related child care payments made were appropriate. Criteria or Requirement: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable under federal awards, costs must meet certain general criteria. Those criteria require, among other things, that each expenditure must be necessary, reasonable, and supported by adequate documentation. Additionally, 45 CFR 98.67 requires lead agencies to expend and account for CCDF funds in accordance with their own laws and procedures, and for fiscal control and accounting procedures to be sufficient to permit the tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of those laws and procedures. IDHS CCAP Policy Memo 07.10.01 requires the agency to perform monitoring reviews over all Child Care Resource and Referrals (CCR&Rs), site administered, and non-contracted child care providers who participate in the IDHS Child Care Assistance Program. These reviews are conducted to ensure that services billed to the Department are adequately documented and contractual obligations are fulfilled. 2 CFR 200.303 requires non-Federal entities receiving Federal awards to establish and maintain internal control designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Effective internal controls should be designed to ensure that supporting documentation for CCAP payments is obtained and maintained. Additionally, effective internal controls should be designed to ensure that billing information provided by providers is complete and accurate. Cause: In discussing these conditions with IDHS officials, management stated that submission of billing certificates to IDHS or its contracted agencies is not a condition of payment. Additionally, CCAP payments cited were entered by the providers through the IDHS Child Care Telephone Billing System - Integrated Voice Response (IVR) and IDHS did not have established procedures for monitoring these recipients. Possible Asserted Effect: Failure to maintain documentation that supports payments to TANF and CCDF beneficiaries of the Child Care Assistance Program and adequately monitor these beneficiaries results in noncompliance and unallowable costs. Repeat Finding: A similar finding was reported in the prior year audit as finding number 2023-014. (Finding Code 2024-011, 2023-014) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend IDHS review the process and procedures in place for collecting and maintaining documentation to support amounts paid to beneficiaries of the CCAP. Further, we recommend IDHS ensure monitoring reviews are performed for CCAP beneficiaries under the CCDF and TANF programs in accordance with established policies and procedures. Views of IDHS Officials: The Department accepts the recommendation. IDHS will review the processes and develop procedures for collecting and maintaining documentation supporting payments to CCAP beneficiaries. Additionally, IDHS will establish, review, and revise policies and procedures to ensure monitoring reviews are conducted with appropriate management oversight.
State Agency: Illinois Department of Children and Family Services (DCFS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Foster Care – Title IV-E ALN and Program Expenditures: 93.658 ($157,279,978) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Activities Allowed/Unallowed and Allowable Costs/Cost Principles Finding 2024-022: Inadequate Process for Foster Care Daycare Maintenance Assistance Payments Condition Found: DCFS does not have an adequate process in place to ensure Foster Care daycare maintenance assistance payments are accurately paid based on its approved rate schedule. The foster care program provides funds to States for maintenance assistance payments to deliver substitute care for children who are under the jurisdiction of a Title IV-E agency and who need temporary placement or care outside their homes. Maintenance payments are made on behalf of eligible Title IV-E beneficiaries to individuals serving as foster family homes, to childcare institutions, or public or private child-placement or child-care agencies in accordance with the Title IV-E agency’s maintenance rate schedule. During our testing of foster care maintenance assistance payments, we reviewed 50 case files and related beneficiary payments (totaling $55,816) charged to the Foster Care program during the year ended June 30, 2024 for compliance with eligibility requirements and allowability of related benefits. We noted in our testing DCFS has not established adequate internal controls to ensure the daycare rates paid for Foster Care maintenance payments are consistent with the approved rate schedule. Specifically, we identified two day care maintenance assistance payments sampled (totaling $1,668) were not calculated using rates consistent with the approved DCFS day care rate schedule. The daily provider rates used to calculate the sampled payments were $40 and $44 respectively; whereas the rate that should have been used for both of these payments according to the approved DCFS day care rate schedule was $46. Accordingly, the payments calculated by DCFS were $172 less than what the payments should have been using the approved rate schedule. In response to the errors identified in our testing, we requested DCFS evaluate the population of daycare maintenance assistance payments made during the year ended June 30, 2024 to determine the cause of the errors in the payment rates used. Rather than evaluating the full population of daycare maintenance assistance payments, DCFS sampled 59 payments and identified 10 additional payments which were paid rates inconsistent with the approved rate schedule, but were not able to determine the extent of errors in the population. Accordingly, we were not able to quantify the magnitude of any noncompliance in the population to determine if material noncompliance occurred during the year ended June 30, 2024. Daycare maintenance assistance payments made on behalf of Foster Care beneficiaries totaled $2,055,171 during the year ended June 30, 2024. Payments made on behalf of beneficiaries of the Foster Care program totaled $33,332,268 during the year ended June 30, 2024. Criteria or Requirement: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable under federal awards, costs must meet certain general criteria. Those criteria require, among other things, that the expenditure be adequately documented. According to 42 USC 671(a)(11), which is implemented by 45 CFR 1356.21, the amount of payments made as foster care maintenance payments must be periodically reviewed to assure their appropriateness. Funds may be expended for foster care maintenance payments on behalf of eligible children, in accordance with the Title IV-E agency’s foster care maintenance payment rate schedule and in accordance with 45 CFR section 1356.21, to individuals serving as foster family homes, to childcare institutions, or public or private child-placement or child-care agencies. Such payments may include the cost of (and the cost of providing, including certain associated administrative and operating costs of a child care institution) food, clothing, shelter, daily supervision, school supplies, personal incidentals, liability insurance with respect to a child, and reasonable travel to the child’s home for visitation, as well as reasonable travel for the child to remain in the same school he or she was attending before placement in foster care (42 USC 672(b)(1) and (2), (c)(2), and 675(4)). In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure payments are made at the approved rates. Cause: In discussing these conditions with DCFS officials, they stated the issue was due to the certification rate forms that were filled out by childcare providers. Providers would sometimes fill out the forms using lower rates than they were entitled to charge. Possible Asserted Effect: Failure to ensure payment calculations are properly performed and approved provider rates are accurately entered in the system may result in unallowable costs. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding code 2024-022) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DCFS implement procedures to ensure foster care maintenance payments are properly calculated and consistent with the approved DCFS payment rate schedules. Views of DCFS Officials: The Department agrees and has implemented corrective action. In July 2025, the daycare eligibility program discontinued the use of certification rate forms. As a result, all childcare providers now receive the State established reimbursement rate, regardless of the rate they charge private-paying families. This change ensures that all childcare providers receive the funding that they are entitled to.
State Agency: Illinois Department of Children and Family Services (DCFS) Federal Agency: U.S. Department of Health and Human Services (USDHHS) Program Name: Foster Care – Title IV-E Adoption Assistance, Temporary Assistance for Needy Families ALN and Program Expenditures: 93.658 ($157,279,978) 93.659 ($103,674,138), 93.558 ($583,126,272) Award Numbers: Various – see table of award numbers Federal Award Year: Various – see table of award numbers Questioned Costs: Cannot be determined Compliance Requirement: Activities Allowed/Unallowed and Allowable Costs/Cost Principles Finding 2024-023: Failure to Provide Supporting Documentation for Payroll and Related Costs Condition Found: DCFS could not provide adequate supporting documentation to substantiate payroll and related costs claimed for federal reimbursement under the Foster Care – Title IV-E (Foster Care), Adoption Assistance, and Temporary Assistance for Needy Families (TANF) programs. On a weekly basis, DCFS employees complete and sign timesheets to report and certify their time. These timesheets are then reviewed and approved by the employee’s immediate supervisor. The supervisor approves the timesheets based on their knowledge of the employee’s hours worked during the pay period. Timesheets are scanned for archiving once a month by the payroll department. Timesheets are manually entered into the time reporting system (Employee Monthly Time Report) which is used to accumulate the costs related to each cost center. Cost pool data from the time reporting system is used to identify personal service expenditures attributable to DCFS’s State and federal programs and to calculate and allocate the related fringe benefit charges and indirect costs. During our testing of 25 direct payroll expenditures charged to the cost pools allocated to the Foster Care, Adoption Assistance, and TANF programs (totaling $127,344) during the year ended June 30, 2024, we noted the following: • The timesheet for one employee (supporting cost pool payroll expenditures sampled of $3,735) could not be provided for testing. DCFS personnel stated they were unable to locate the timesheet for this employee for the sampled period. Upon further review, DCFS personnel noted timesheets were unable to be located for this employee and all employees within the same department (totaling four additional employees) for the entire fiscal year, resulting in approximately 120 missing timesheets (related to payroll, fringe benefits, and indirect costs included in the cost pool totaling $497,277, $399,834, and $194,253, respectively). As a result, the personal service (payroll and fringe benefit) expenditures, as well as related indirect costs, were not appropriately supported in accordance with the requirements of the applicable cost principles. Accordingly, the personal service expenditures and indirect costs were not allowable. • The hours reported for three employees (with sampled personal services expenditures from the cost pool of $15,727) in the timekeeping system used to allocate personal services expenditures to Foster Care, Adoption Assistance, TANF, and other programs operated by the agency exceeded the hours reported on manual timesheets prepared by the employees and approved by supervisors. The unsupported hours reported in the timekeeping system ranged from half an hour to 13.2 hours resulting in unsupported personal service expenditures from the cost pool of $783. Additionally, we noted the controls to ensure required documentation is obtained to support payroll and related costs and maintained to evidence management approval of payroll information were not operating effectively. We also noted adequate internal controls have not been established to ensure the data included in the timekeeping system and used to allocate personal services expenditures to Foster Care, Adoption Assistance, TANF, and other programs operated by DCFS is consistent with the hours reported on manual timesheets prepared by the employees and approved by supervisor. Personal service (payroll and fringe benefit) expenditures and related indirect costs charged to the Foster Care, Adoption Assistance, and TANF programs for the year ended June 30, 2024, were as follows: "See Table in the Audit Report" Criteria or Requirement: 2 CFR 200.403 establishes principles and standards for determining costs for federal awards carried out through grants, cost reimbursement contracts, and other agreements with state and local governments. To be allowable under federal awards, costs must meet certain general criteria. Those criteria require, among other things, that the expenditure be adequately documented. According to 2 CFR 200.430(g), charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must be, among other things, supported by a system of internal control, comply with the established accounting policies and practices of the non-Federal entity, and support the distribution of the employee’s salary or wages amount across specific activities or cost objectives if the employee works on more than one federal award; an indirect cost activity and a direct cost activity; two or more indirect activities allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. In addition, 2 CFR 200.303 requires nonfederal entities to, among other things, establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effective internal controls should include procedures to ensure required documentation is obtained to support payroll and related costs and to maintain documentation evidencing management approval of payroll information. Cause: In discussing these conditions with DCFS officials, they stated these exceptions were due to human error and the limitations of keeping a complete file record for the paper-based overtime approval and timesheet process. Possible Asserted Effect: Failure to accurately document and maintain required timesheets results in noncompliance with federal regulations and unallowable costs. Repeat Finding: A similar finding was not reported in the prior year audit. (Finding code 2024-023) Statistical Sampling: The sample was not intended to be, and was not, a statistically valid sample. Recommendation: We recommend DCFS review its current procedures and consider any changes necessary to ensure supporting documentation for payroll and related costs is maintained and accurately reflects work performed in accordance with the applicable federal regulations. Views of DCFS Officials: The Department has improved communication with and the training of its timekeepers to ensure accurate and consistent timekeeping standards. The Department has also instituted new quality control procedures to identify and correct errors. All timesheets are digitally archived to ensure proper record retention. The Department is also actively pursuing modernization efforts for both payroll and timekeeping, whether it is e-Time and CMS Payroll or the statewide ERP solutions.
The Department of Economic Security made unallowable benefits payments totaling $64,131, increasing the risk that the program applicants received utility and rental payments for which they were not entitled Assistance Listings number(s) and name(s): 21.023 COVID-19 – Emergency Rental Assistance Program Award number(s) and year(s): ERA2-0165 May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirement(s): Activities allowed or unallowed, allowable costs/cost principles, and eligibility Questioned costs: $37,901 Assistance Listings number(s) and name(s): 21.027 COVID-19 – Coronavirus State and Local Fiscal Recovery Funds Award number(s) and year(s): None Federal agency: U.S. Department of the Treasury Compliance requirement(s): Activities allowed or unallowed, allowable costs/cost principles Questioned costs: $26,230 Total questioned costs: $64,131 Condition Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Child and Community Services Division (Division) made unallowable benefits payments totaling $64,131 during fiscal year 2024 to rental assistance program applicants for the Emergency Rental Assistance Program (ERAP) and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) federal programs.1 1 The Arizona Department of Economic Security’s ERAP was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). Further, the Arizona Department of Economic Security’s ERAP was extended through the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Arizona Governor’s Office. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security Interagency Service Agreement No. ISA-DES-ARPA-021623-01). Specifically, for 14 of 60 ERAP and 7 of 60 CSLFRF benefit payments tested, we found that the Division made unallowable benefits payments of $37,901 for ERAP and $26,230 for CSLFRF to or on behalf of ineligible program applicants or those who lacked required eligibility documentation and for other inappropriate costs, as follows: X The Division inappropriately paid $43,607 of benefit payments to or on behalf of 9 ineligible program applicants, including: y $36,622 paid to or on behalf of 7 program applicants who did not reside in an eligible Maricopa County service area at the time of application ($29,647 for 6 ERAP program applicants and $6,975 for 1 CSLFRF applicant). y $6,300 paid to or on behalf of 1 CSLFRF applicant who previously received ERAP payments and was thus ineligible. y $685 paid to or on behalf of 1 ERAP program applicant whose income exceeded allowable program limits. X The Division inappropriately paid $14,815 of benefit payments to or on behalf of 10 program applicants, including: y $8,640 paid to or on behalf of 1 CSLFRF applicant for a lease buyout, which is an unallowed activity under Division policies. y $3,959 paid to or on behalf of 5 program applicants for rental arrears—rent not paid by the date specified in the lease agreement—payments exceeding the allowable 1-time, lump sum payments ($3,121 for 3 ERAP applicants and $838 for 2 CSLFRF applicants). y $2,216 paid to or on behalf of 4 program applicants for rental assistance exceeding the amount documented on the lease ($2,210 for 3 ERAP applicants and $6 for 1 CSLFRF applicant). X The Division inappropriately paid $5,709 of benefit payments to or on behalf of 2 program applicants without obtaining required documentation to support they were eligible to receive them, including: y $5,709 paid to or on behalf of 2 program applicants without required proof of income, a lease agreement, and other documentation supporting household size and the reimbursement of late penalties and fees related to rent and/or utility account bills ($2,238 for 1 ERAP program applicant and $3,471 for 1 CSLFRF applicant). Effect The Division’s making unallowable benefits payments to ineligible program applicants or without required documentation increases the risk that the program applicants received utility and rental payments for which they were not entitled. Also, the Division’s paying for inappropriate costs spent inconsistent with program requirements increases the risk that those who were intended to benefit from the program may not receive all the benefits they otherwise would have received. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.2 During fiscal year 2024, the Division paid $44.2 million in benefit payments to or on behalf of program applicants requesting emergency rental and utility assistance for these 2 federal programs, as illustrated in Table 1 below, and is at risk that more of its benefit payment expenditures are inappropriate than those identified in our sample. Cause Division management reported that personnel responsible for evaluating program applications and determining program applicants’ eligibility and allowability of related costs fell behind on reviewing applications and did not have time to perform thorough evaluations, including making appropriate eligibility determinations, obtaining required documentation, or ensuring costs were allowable, because of the large quantity of program applications and staffing shortages due to employee turnover. Further, Division management reported that it did not detect and correct inaccurate eligibility determinations because its policies and procedures did not require 2 Federal Uniform Guidance audit requirements require its federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Department, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). adjudicators to perform a postreview of the benefits subsystem’s automated review of eligibility requirements, such as verifying the income thresholds and geographical location aligned with the Division’s written policies and procedures and were supported by required documentation. Criteria Federal regulations require costs to be reasonable and adequately documented to be allowable under federal awards, and the Division’s written policies and procedures require certain documentation to support eligibility requirements related to where the applicant lives and their income.3,4,5 Specifically, Division policy requires a program application evaluation to ensure complete and reasonable documentation is obtained, including lease agreements; any bills related to utility accounts; and proof of income, household size, eligible service area residency, and risk of homelessness or housing instability. Also, the Division’s policies prohibit benefit payments for lease buy-offs and prohibit incomplete applications to be acted upon until applicants provide the required information and documentation to complete their applications. Finally, the Division also must establish and maintain effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations to the Division 1. Ensure benefit payments are for allowable costs paid to or on behalf of eligible program applicants. 2. Update existing policies and procedures to include a postreview of the benefits subsystem’s automated review of eligibility requirements, such as verifying the income thresholds and geographic location aligned with the Division’s written policies and procedures and were supported by required documentation. The Division should correct any inaccurate eligibility determinations identified during the postreview. 3. Allocate sufficient staffing resources to perform a thorough evaluation of program benefits applications and provide training on eligibility requirements and allowable benefit payments. 3 Federal Uniform Guidance cost principles require costs to be adequately documented (2 CFR 200.403[g]) and reasonable (2 CFR 200.404). In determining the reasonableness of a given cost, consideration must be given to several factors including requirements imposed by federal laws and regulations and the terms and conditions of the federal award (2 CFR 200.404[b]). 4 U.S. Department of the Treasury published guidance to assist grantees in ERAP administration, including a requirement for ERAP grantees to establish policies and procedures to govern the implementation of their ERAP programs consistent with the ERAP statutes and U.S. Department of the Treasury FAQs (U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions, Revised March 5, 2024. Retrieved 10/16/2025 from https://home.treasury.gov/system/files?file=136/ERA-FAQs03052024.pdf). 5 To be eligible for program benefits, individuals had to have filed, received, and been deemed eligible in accordance with the Division’s written policies and procedures. The benefit payments consisted of rent and/or utility payments for past due amounts (a 1-time lump sum payment) and for 3 months of payments on each reapplication up to a total of 18 months. Applicants must provide proof of income or self-attestation of no income and cannot earn an income that is above the area median income as determined by the HUD income limits (Section 8) set at 80% AMI (Area Median Income). These limits are updated annually and can be viewed at https://www.huduser.gov/portal/datasets/il. html#year2024. Further, applicants who live in Maricopa County must reside in Phoenix or Mesa. Rental applications must include a housing agreement with the applicant’s name and current rental address. Utility assistance applications must include bills or invoices or outstanding payments. Applications are reviewed by adjudicators who ensure the documentation for proof of residence, proof of income, housing agreement, any bills related to utility accounts, and proof of risk of homelessness or housing instability are complete and reasonable. Any decisions made contrary to policy must include a rationale for the decision in the supporting documentation for the application (Department of Economic Security Emergency Rental Assistance Program Policy, Rev 8 [7/1/2022] and Rev 9 [4/1/2023]). 4. Work with the federal agencies to resolve the $64,131 of program monies that were spent in violation of federal regulations and its policies and procedures and that may need to be returned to the federal agencies. This finding is similar to prior-year finding 2023-105 and was initially reported in fiscal year 2023. Views of responsible officials State management concurs with this finding. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials regarding these recommendations. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy.
Federal Agency: U.S. Department of Justice Program Name: Office for Victims of Crime Federal Program: Crime Victim Assistance Program (ALN 16.575) Non-Material Non-Compliance – Allowable Cost and Activities Finding 2024-001 Criteria or Specific Requirement: 2 CFR §200.302(b)(3) and §200.403(g) require that recipients maintain records sufficient to substantiate expenditures of federal awards and ensure that costs are adequately documented. Condition: During testing of expenditures for the Crime Victim Assistance Program, we noted that supporting documentation (e.g., invoices or payroll detail) for a number of transactions was incomplete or unavailable. Context: We tested a sample of 24 expenses out of 228 expenses during the year. Questioned Costs: No known or likely questioned costs exceed $25,000 Effect: Although alternative audit procedures were performed to verify the reasonableness and allowability of the costs, incomplete documentation indicates a weakness in recordkeeping controls. However, the number and dollar value of affected transactions were not material to the Crime Victim Assistance Program as a whole, and no questioned costs were identified. Cause: The organization experienced turnover in financial management positions and converted accounting systems multiple times during the audit period. During these transitions, some historical documentation was not migrated to the current system or retained in accessible form. Recommendation: We recommend that Safe Harbor Crisis Center strengthen its document retention policies and ensure that all grant-related supporting documentation is archived in a centralized electronic system accessible to both management and auditors, particularly during staff transitions or system conversions. Views of Responsible Officials: Management agrees with the finding and is implementing procedures to correct his which is further discussed in the corrective action plan.
Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Community Service Block Grant Assistance Listing Number: 93.569 Federal Award Identification Numbers and Year: 2301MDCOSR 2401MDCOSR Pass-Through Agency: Maryland Department of Housing and Community Development Pass-Through Number(s): CSBG-ND-2023-NSCI CSBG-ND-2024-NSCI Award Period: 10/1/2022 - 9/30/2024 10/1/2023 - 9/30/2025 Compliance Requirement: Allowable Costs Type of Finding: Material Weakness in Internal Control over Compliance, Other Matters Criteria or specific requirement: Compliance: Per 2 CFR Section 200.403 Factors Affecting Allowability of Costs states that: Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. For example, a cost must not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost of used to meet cost sharing requirements of any other federally financed program in either the current or a prior period. (g) Be adequately documented. (h) Administrative closeout costs may be incurred until the due date of the final report(s). If incurred, these costs must be liquidated prior to the due date of the final report(s) and charged to the final budget period of the award unless otherwise specified by the Federal agency. All other costs must be incurred during the approved budget period. At its discretion, the Federal agency is authorized to waive prior written approval to carry forward unobligated balances to subsequent budget periods. Control: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. These internal controls should comply with the guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control-Integrated Framework," issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition/Context: The Neighborhood Service Center, Inc. was unable to provide documentation to substantiate that authorized signers reviewed and approved expenditures related to the federal program. Neighborhood Service Center, Inc. did not have effective controls in place for review and approval of expenditures charged to the federal program. Questioned costs: Undetermined Cause: Authorized signers pre-signed checks and did not review and approve support for cash disbursements. Effect: There is an increased risk of charging unallowed costs to the program. Repeat Finding: No. Recommendation: We recommend the Neighborhood Service Center, Inc. require both check signers to evidence review and approval of supporting documentation for each federal program cash disbursement prior to signing the check. Documentation of that review and approval should be readily available for audit. Views of responsible officials: In response to the recommendations, effective for immediate implementation, all checks presented for signatures have supporting documentation attached. Authorized check signers are instructed to review all documentation for appropriate authorization, payee name, and amounts prior to signing checks. No checks are to be signed without supporting documentation. The agency will require check signers to initial the check request page or other supporting documentation when signing checks for expenditures. The Neighborhood Service Center, Inc. is implementing a procedure to provide the Finance Committee of the Board with a listing of all checks issued between Board meetings for their review/reference. The Finance Director keeps all check stock locked in their office to avoid any potential misuse of the check stock.
Finding 2024-014 – Noncompliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles Over Major Federal Program – Coronavirus State and Local Fiscal Recovery Funds PASS-THROUGH GRANTOR: Direct Grant FEDERAL AGENCY: U.S. Department of Treasury ASSISTANE LISTING: 21.027 FEDERAL PROGRAM NAME: Coronavirus State and Local Fiscal Recovery Funds FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles QUESTIONED COSTS: $46,935 Condition: During the test of 100% of expenditures for the Coronavirus State and Local Fiscal Recovery Funds, totaling $1,152,068, two expenditures totaling $46,935 reflected the following: The County used funds to pay the subrecipients that were dedicated for another project/purpose for Highway District's 1 and 2. Cause of Condition: Policies and procedures have not been designed and implemented to ensure federal expenditures are made in accordance with compliance requirements. Effect of Condition: This condition resulted in noncompliance with federal grant requirements. Recommendation: OSAI recommends the County gain an understanding of the requirements for this program and implement internal controls to ensure compliance with these requirements. Management Response: Chairman of the Board of County Commissioners: The Board of County Commissioners will take measures to ensure future compliance with all requirements of federal grants. Criteria: 2 CFR § 200.403 - Factors affecting allowability costs states in relevant part, Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (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.
Finding Number: 2024-008 Assistance Listing Number and Title: AL # 84.425 Education Stabilization Fund Federal Award Identification Number / Year: 2024 Federal Agency: U.S. Department of Education Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Pass-Through Entity: Ohio Department of Education and Workforce Repeat Finding from Prior Audit? Yes Prior Audit Finding Number: 2023-006 Noncompliance and Material Weakness- Schedule of Expenditures of Federal Awards 2 C.F.R. § 3474.1 gives regulatory effect to the Department of Education for 2 CFR 200.403(b) which requires, in part, except where otherwise authorized by statute, costs must 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 in order to be allowable under Federal awards. Further, Section 313(3) of the Coronavirus Response and Relief Supplemental Appropriations Act, 2021, includes additional allowable uses of funds under ESSER II. The District was awarded $1,448,106 in COVID-19 Elementary and Secondary School Emergency Relief Fund (ESSER II) grant funding (AL #84.425D) in 2022 and 2023 by the Ohio Department of Education and Workforce. Section 2001 of the American Rescue Plan (ARP) Act, includes additional allowable uses of funds under ARP ESSER. The District was awarded $3,254,550 of COVID-19 American Rescue Plan Elementary and Secondary School Emergency Relief Fund (ARP ESSER) grant funding (AL #84.425U) in 2022 through 2024 by the Ohio Department of Education and Workforce. The District maintained Education Stabilization Fund (AL# 84.425) activity in a separate fund to allow for accountability of federal expenditures. However, the District posted expenditures to this fund in excess of available Education Stabilization Fund funding of $798,317 pertaining to ARP ESSER and $78,861 pertaining to Esser II. As such, the internal controls relating to monitoring the fund and transactions to ensure reasonable assurance that the charges were accurate were not operating effectively. The lack of effective controls resulted in overspending of the grant and overstatement of expenditures on the Schedule of Expenditures of Federal Awards. Noncompliance with grant requirements could have an adverse effect on future grant awards by the awarding agency in addition to an inaccurate assessment of major federal programs that would be subjected to audit. District management should review all grant and loan award documents in order to execute policies and procedures which help ensure compliance with grant requirements. The District should implement a system to track all federal expenditures and related information separately from other expenditures and report federal expenditures with proper support including, but not limited to, grant agreements, calculation of the expenditures, and any federal reporting requirements. This will help ensure the District is in compliance with grant requirements and major federal programs are accurately identified for audit. The District spending more grant funding than was awarded also resulted in adjustments to the financial statements to move the expenditures in excess of the grant award to the General Fund as reported in Finding 2024-007. See Finding 2024-007 in Section 2 above. The District spending more grant funding than was awarded also contributed to errors in the Final Expenditure reports submitted to the grantor. See Finding 2024-010 below.
Criteria: Uniform Guidance (2 CFR 200.403) requires that costs charged to federal awards be allowable and consistent with the terms and conditions of the award, including any prior approval requirements for capital expenditures or significant property improvements. Condition: Testing identified that the Organization charged $4,074 to the federal program for an HVAC replacement that was not approved by the granting agency per the grant and did not appear to meet allowability requirements. Cause: The condition appears to result from inadequate controls over reviewing expenditures for compliance with grant terms and federal allowability requirements prior to charging costs to the program. Effect: As a result, the Organization charged an unallowable cost to the federal program, resulting in noncompliance with Uniform Guidance and grant requirements. Recommendation: We recommend that the Organization implement procedures to review all non-routine or capital-related expenditures for allowability and compliance with grant terms prior to charging such costs to federal awards, including obtaining required approvals where applicable. Management’s Response: Management agrees with the finding and indicates that it will implement additional review procedures to ensure that all expenditures charged to federal programs are evaluated for allowability and properly approved prior to being incurred.
Criteria: Uniform Guidance (2 CFR 200.403 and 2 CFR 200.430) requires that costs charged to federal awards be properly classified, allowable, and reflect the nature of the expenditure. Compensation for personal services must be accurately categorized and charged to appropriate cost objectives. Condition: During testing, it was identified that the Organization recorded $2,143 of employee compensation, paid through its payroll process as a bonus or stipend, to a travel and development line item rather than classifying the cost as payroll-related expense. Cause: This condition appears to result from inadequate controls over the classification and coding of expenditures, as well as a lack of review procedures to ensure payroll-related costs are recorded in the appropriate accounts. Effect: As a result, $2,143 compensation costs were misclassified in the accounting records and improperly charged to the federal program under an incorrect cost category. This increases the risk that financial reports submitted for federal awards may be inaccurate and that costs may not be evaluated appropriately for allowability. Recommendation: We recommend that the Organization implement procedures to ensure that all payroll-related costs, including bonuses and stipends, are properly classified within the accounting system. Management should also establish review controls over coding of expenditures to ensure consistency with Uniform Guidance and grant reporting requirements. Management’s Response: Management agrees with the finding and indicates that it will strengthen review procedures over expense classification and ensure that compensation costs are properly recorded within payroll-related accounts going forward.
FINDING REFERENCE NUMBER 2024-020 (See Finding Reference Number 2024-001) FEDERAL PROGRAM (ALN – 93.558) TEMPORARY ASSISTANCE FOR NEEDY FAMILIES (TANF) U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES AWARD NUMBERS 2022G996117; 2023996117 (Federal Award Years: 10/1/2021 through 9/30/2023) 2401PRTANF1 (Federal Award Years: 10/1/2023 through 9/30/2026) ADMINISTRATION ADMINISTRATION FOR SOCIOECONOMIC DEVELOPMENT OF THE FAMILY (ADSEF, BY ITS SPANISH ACRONYM) COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INTERNAL CONTROL AND COMPLIANCE – MATERIAL WEAKNESS AND MATERIAL NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200 Subpart E §200.403, Factor affecting allowability of costs, establishes that: “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. For example, a cost must not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally financed program in either the current or a prior period. See § 200.306(b). (g) Be adequately documented. See §§ 200.300 through 200.309.” STATEMENT OF CONDITION As part of our payroll audit procedures for TANF, we selected a sample of twenty-five (25) employees to evaluate internal controls and compliance with payroll transactions. ADSEF was unable to identify the personnel files of one (1) employee. This employee was certified by ADSEF as not being assigned to ADSEF. The employee was included in GL200 (payroll register). Additionally, we found discrepancies between the change report and the information from the last payroll of June 2024 for one (1) employee. QUESTIONED COSTS The salary paid to the employee during the fiscal year that were charged to the TANF program totalized $77,517.29. PERSPECTIVE INFORMATION This deficiency is systemic. The failure to maintain copies of employee files violates state and Federal regulations and prevents the validation of wages paid with Federal funds. The sampling was a statistically valid sample. STATEMENT OF CAUSE ADSEF does not maintain appropriate internal controls over employee records, as required by state and Federal regulations. If an employee was transferred to another agency, a copy of their personnel file must be retained for audit purposes and other requests from either the Federal or state government. POSSIBLE ASSERTED EFFECT Because we cannot review employee records, we cannot verify that the employee actually worked for the program for which their salary was assigned. This results in questionable costs. Deficiencies in employee record control prevent effective monitoring of salaries charged to Federal programs and compliance with state and Federal regulations. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS We recommend that ADSEF investigate why one employees were assigned to the Agency through RUM without a corresponding personnel file to support their payroll. Regarding the deceased employee, they should identify and locate their file. Additionally, we recommend establishing internal control processes that require verifying each payroll against the updated employee roster and monitoring employee files against payroll and employee rosters.
FINDING REFERENCE NUMBER 2024-021 (See Finding Reference Number 2024-002) FEDERAL PROGRAM (ALN – 96.001) SOCIAL SECURITY – DISABILITY INSURANCE U.S. SOCIAL SECURITY ADMINISTRATION AWARD NUMBERS 1804RQD100 (Federal Award Year: 10/1/2017 – 9/30/2018) 1904RQD100 (Federal Award Year: 10/1/2018 – 9/30/2019) 2004RQD100 (Federal Award Year: 10/1/2019 – 9/30/2020) 2104RQD100 (Federal Award Year: 10/1/2020 – 9/30/2021) 2204RQD100 (Federal Award Year: 10/1/2021 – 9/30/2022) 2304RQD100 (Federal Award Year: 10/1/2022 – 9/30/2023) 2404RQD100 (Federal Award Year: 10/1/2023 – 9/30/2024) ADMINISTRATION OFFICE OF THE SECRETARIAT COMPLIANCE REQUIREMENT ACTIVITIES ALLOWED OR UNALLOWED // ALLOWABLE COSTS/COSTS PRINCIPLES TYPE OF FINDING INERNAL CONTROL AND COMPLIANCE – SIGNIFICANT DEFICIENCY AND NONCOMPLIANCE CRITERIA Uniform Guidance at 2 CFR 200 Subpart E §200.403, Factor affecting allowability of costs, establishes that: “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the recipient or subrecipient. (d) Be accorded consistent treatment. For example, a cost must not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for State and local governments and Indian Tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing requirements of any other federally financed program in either the current or a prior period. See § 200.306(b). (g) Be adequately documented. See §§ 200.300 through 200.309.” STATEMENT OF CONDITION As part of our audit procedures over payroll transactions, we requested 25 employee files. The inspection of personnel files we noted the following deficiencies: 1. Evidence of the current wage was not observed in nine (9) files. 2. Evidence of the job description was not observed in ten (10) files. 3. We were unable to validate the accounting distribution of the salary in ten (10) files. 4. Evidence regarding documentation related to employment applications, certificates of no penal records, social security, and others were not available in the twenty-five (25) files requested. QUESTIONED COSTS None. PERSPECTIVE INFORMATION This deficiency is systemic. The failure to maintain copies of employee files violates state and federal regulations and prevents the validation of wages paid with federal funds. The sample was a statistically valid sample. STATEMENT OF CAUSE According to state and Federal standards, the Secretariat does not keep the proper internal controls over personnel records in order to make the files available for inspection. POSSIBLE ASSERTED EFFECT The absence of required documentation, may result in noncompliance with applicable laws, regulations, and the Agency established requirements. Additionally, it may increase exposure to operational and legal risks and restricts the Agency ability to prove that workers are allowed to work and fulfill minimal qualifications. IDENTIFICATION OF REPEAT FINDING No reported as prior audit finding. RECOMMENDATIONS In order to guarantee that all necessary documentation is correct, comprehensive, and appropriately stored in compliance with established criteria, we recommend that the Agency tighten controls over the upkeep of personnel files. This should entail conducting regular checks of personnel files, using established procedures to confirm completeness, and making sure that any missing paperwork is quickly acquired and filed.
Assistance Listing Number: 93.558 Name of Federal Program or Cluster: Temporary Assistance for Needy Families (TANF) Name of Federal Agency: Department of Health and Human Services Name of Pass-Through Entity: Virginia Department of Social Services Pass-Through Entity Identifying Number: BEN-21-029 Award Period: July 1, 2023 through June 30, 2024 Criteria or Specific Requirement: 2 CFR 200.403–200.405 requires costs charged to a federal award must be allowable, allocable, and adequately supported. Condition: UCM did not maintain effective internal controls to ensure that non-payroll-related disbursements charged to the federal award were allowable. During planning, auditor identified material noncompliance of the non-payroll-related disbursements, and no further testing was performed. Specific issues included: Other direct costs o Disbursements lacked sufficient documentation to support allowability for costs charged based on budget. o Prepaid expenses for a database license and gift card inventories did not have adequate controls or supporting records. Cause: UCM lacked formal written policies and procedures governing allowability and documentation standards. Significant management personnel turnover resulted in inadequate federal grant knowledge and inconsistent application of Uniform Guidance requirements. Family Achievement supervisors can select any supervisor name to sign off/approve costs for allowability and payment. Effect or Potential Effect: Unallowable, unsupported, or inaccurately allocated costs were charged to the federal award. UCM may be required to repay federal funds and implement corrective actions. Questioned Costs: Include identified prepaids and costs in excess of actual: 2025 Database licensing: $40,000 Gift cards held in inventory: 12,853 Budgeted costs charged in excess of actual: 30,770 De minimis indirect cost rate applied to above costs: 8,362 Total known questioned costs: $91,985 Recommendation: UCM should develop and implement comprehensive written policies and procedures addressing allowability and documentation standards. Controls should ensure only actual costs are charged. Electronic signatures should have IT controls in place to allow for only the individual signing off to select their own name. Staff responsible for grant accounting should receive Uniform Guidance training. Views of Responsible Officials: Management acknowledges the finding and will work to implement appropriate corrective actions to address the deficiency and improve compliance going forward.
2024-009 – TITLE I –INADEQUATE SUPPORTING DOCUMENTATION – ALN 84.010 - MATERIAL WEAKNESS & MATERIAL NONCOMPLIANCE FINDING TYPE: MATERIAL WEAKNESS & MATERIAL NONCOMPLIANCE Finding 2024-009 Federal Program: Title I – Grants to LEA’s ALN: 84.010 Federal Award Number(s) and Year(s): S010A240034, 2024 Federal Agency: U.S. Department of Education Pass Through Agency: North Dakota Department of Public Instruction Questioned Cost: $136,372 Condition Williston Basin Public School District No. 7 was unable to provide supporting documentation for expenses charged to the Title I program. 54 of the 60 expenditures we sampled did not have any support, leaving them with known questioned costs of $136,372. Effect Williston Basin Public School District No. 7 may have charged unallowable expenditures to the grant program. Cause Williston Basin Public School District No. 7 did not maintain support documentation for all expenditures charged to the Title I grant. In addition, there was no evidence of approval for these transactions. Criteria Uniform Guidance 2 CFR 200.303(a) states “The non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control Integrated Framework", issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Uniform Guidance 2 CFR 200.403(g) requires costs to be adequately documented. "Standards for Internal Control in the Federal Government" (Green Book) requires management to design, implement, and operate internal controls to achieve its objectives related to operations, reporting, and compliance. Management is to design appropriate types of control activities for the entity's internal control system. Control activities help management fulfill responsibilities and address identified risk responses in the internal control system. Context Williston Basin Public School District No. 7 had total Title I expenditures of $1,527,887 in fiscal year 2024. Projected questioned costs identified during testing totaled $1,463,906. Repeat Finding Yes. See finding 2023-014. Finding 2022-007 was reported in previous years. Recommendation We recommend that Williston Basin Public School District No. 7 establishes proper internal controls and policies to ensure they are maintaining proper support documentation for all federal grants. Williston Basin Public School District No. 7’s Response
2024-010 – EDUCATION STABILIZATION FUND - LACK OF SUPPORT OVER ESSER FUNDS – ALN 84.425 - MATERIAL WEAKNESS & MATERIAL NONCOMPLIANCE FINDING TYPE: MATERIAL WEAKNESS & MATERIAL NONCOMPLIANCE Finding 2024-010 Federal Program: Education Stabilization Fund ALN: 84.425 Federal Award Number(s) and Year(s): S425U210007, 2024 Federal Agency: U.S. Department of Education Pass Through Agency: North Dakota Department of Public Instruction Questioned Cost: $171,408 Condition Williston Basin Public School District No. 7 was unable to provide supporting documentation for expenses charged to the Education Stabilization Fund. 13 of the 60 we sampled did not have any support, leaving them with known questioned costs of $171,408. Effect By not having the correct supporting documentation, the School District may be subject to an increased risk of error, fraudulent financial reporting, asset misappropriation, and corruption. Cause Williston Basin Public School District No. 7 does not have sufficient procedures in place to ensure that support documentation for federal grants is maintained. Criteria Uniform Guidance 2 CFR 200.403(g) requires costs to be adequately documented. "Standards for Internal Control in the Federal Government" (Green Book) requires management to design, implement, and operate internal controls to achieve its objectives related to operations, reporting, and compliance. Management is to design appropriate types of control activities for the entity's internal control system. Control activities help management fulfill responsibilities and address identified risk responses in the internal control system. Uniform Guidance 2 CFR 200.303(a) states “The non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in "Standards for Internal Control in the Federal Government" issued by the Comptroller General of the United States or the "Internal Control Integrated Framework", issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Context Williston Basin Public School District No. 7 had total Education Stabilization Fund expenditures of $1,613,557 in fiscal year 2024. Projected questioned costs identified during testing totaled $257,784. Repeat Finding Yes. See finding 2023-013. Recommendation We recommend that Williston Basin Public School District No. 7 establishes proper internal controls and policies to ensure they are maintaining proper support documentation for all federal grants. Williston Basin Public School District No. 7’s Response See Corrective Action Plan.
Finding 2024-005 – Duplicate Reimbursement Request for Federal Award Expenditures (Material Weak-ness) Federal Program: 21.027 American Rescue Plan - ARPA Name of Federal Agency: U.S. Department of Treasury Compliance/Internal Control over Compliance: Auditee Responsibilities Criteria: CFR §200.403 and related provisions, costs charged to federal awards must be accurate, allowable, and not charged or reimbursed more than once. Additionally, reimbursement requests must be supported by complete and accurate records to ensure compliance with federal requirements and prevent improper payments. Condition: During our testing of expenditures and reimbursement requests for the above-referenced federal pro-gram, we identified that certain expenditures were submitted for reimbursement twice across two-separate fiscal years. While the underlying expenditures were incurred only once, and not paid twice by the entity, they were in-cluded in reimbursement requests in two different periods, resulting in The Town receiving duplicate reimburse-ments for the same costs Cause: The duplication likely occurred due to changes in financial staffing for The Town. Specifically: • Turnover in personnel resulted in a loss of institutional knowledge regarding prior reimbursement and submissions. • Inadequate review controls allowed previously reimbursed expenditures to be re-submitted in a subsequent period. • Initial reimbursement requests appear to have used an alternate methodology for reimbursement requests. Effect: As a result, the entity received duplicate reimbursement for certain expenditures, creating a potential liabil-ity to the federal awarding agency. This increases the risk of: • Noncompliance with federal cost principles. • Overstatement of allowable program expenditures. • Required repayment of funds and possible additional scrutiny from oversight agencies. Questioned Cost: Yes, $189,468 received more than allowable amounts due to duplicate submission of expendi-tures. Context: The Town administers multiple federal awards and is responsible for preparing and submitting reim-bursement requests based on incurred allowable expenditures. During the audit period, The Town experienced staff turnover and changes in key financial and grant management roles. These changes affected the continuity of over-sight and the tracking of cumulative expenditures and prior reimbursement requests. As a result, controls over the review and reconciliation of reimbursement submissions were not consistently applied, contributing to the resub-mission of previously reimbursed expenditures in a subsequent year. Repeat of a Prior-Year Finding: No, prior year did not require a Single Audit. Recommendation: We recommend that the entity: • Reconcile all reimbursement requests to the underlying expenditures and prior submissions to identify and quantify any additional duplication. • Re-pay any overpayments to the federal awarding agency in a timely manner. • Strengthen internal controls by: o Implementing a centralized tracking system for all reimbursement requests and cumulative ex-penditures. o Establishing a formal review and approval process to verify that costs have not been previously re-imbursed. o Clearly document roles and responsibilities, especially during staffing transitions. • Provide training to staff involved in grant management to ensure compliance with federal requirements. Client's Response: The Town of Lakeview concurs with the recommendation and will work through the Correc-tive Action Plan to improve or solve the deficiency. Corrective Action Plan: __________________To be developed by Town of Lakeview. Planned Implementation Date: In progress. Responsible Person: Town of Lakeview Mayor.
Finding: 2024-005: Payroll Allocation. Federal Programs - Continuum of Care. Federal Financial Assistance Listing - 14.267. Federal Award Numbers - OK0024L6I021111, OK0024L6I022113, OK0024L6I022212, OK0024L6I022213, OK0024L6I022214, OK0024L6I022215, OK0024L6I022316. Federal Agencies - Department of Housing and Urban Development. Pass-through Entities - City of Oklahoma City and the City of Norman. Allowable Activities or Unallowed, Allowable Costs/Cost Principles. Material Weakness in Internal Control over Compliance and Material Noncompliance. Criteria: Per Uniform Guidance (2 CFR 200.403) as it relates to federal grants: 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 nonfederal entity; d) Be accorded consistent treatment. A cost may not be assigned to a federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the federal award as an indirect cost; e) Be determined in accordance with generally accepted accounting principles (GAAP) , except, for state and local governments and Indian tribes only, as otherwise provided for in this part; (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally financed program in either the current or a prior period; g) Be adequately documented; h) Cost must be incurred during the approved budget period. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: Hope could not readily provide the appropriate documentation to support the allocations of compensation applicable to the referenced programs for actual time worked, or to support the drawdown from grant funding. Cause: Management did not have procedures and controls in place to ensure allocated payroll was for time-and-effort applied to the award and ensure time was not allocated across multiple awards. Effect or Potential Effect: We were unable to determine whether the payroll costs allocated to the federal awards were allowable due to the lack of systematic application of payroll allocations to time and effort of the employees. Questioned Costs: 262,125. Context: Total allocated salaries and fringe benefits equal 262,125. None of the amounts were able to be supported by records that accurately reflect the work performed. Repeat Finding from Prior Year: No. Recommendation: Controls should be put in place to ensure that expenditures of program funds for payroll expense are reviewed and approved by program management and are properly allocated based on time and activities worked consistent with the grant requirements. Additionally, level of effort requirements as made known in grant contracts should be substantiated by payroll allocation or other records. Views of Responsible Officials: Management's response is included in the corrective action plan.
Finding: 2024-006 Voided Rental Payments. Federal Programs - Continuum of Care. Federal Financial Assistance Listing - 14.267. Federal Award Numbers - OK0024L6I021111, OK0024L6I022113, OK0024L6I022212, OK0024L6I022213, OK0024L6I022214, OK0024L6I022215, OK0024L6I022316. Federal Agency - Department of Housing and Urban Development. Pass-through Entities - City of Oklahoma City and the City of Norman. Allowable Activities or Unallowed, Allowable Costs/Cost Principles. Significant deficiency in Internal Control over Compliance. Criteria: Uniform Guidance (2 CFR 200.302(b) ) requires recipients and subrecipients to maintain financial management systems that provide accurate, current, and complete disclosure of financial results. In addition, 2 CFR 200.403 requires costs charged to federal awards to be allowable and adequately supported. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: Hope received reimbursement for rental expenditures that were later voided due to tenants no longer being current residents. Cause: Management did not maintain controls to ensure that expenditures claimed for reimbursement were supported by actual costs incurred. Backdated and adjusting entries were recorded without reconciliation to underlying expense documentation or budget tracking schedules and ultimately claimed to the granting pass-through agency. Effect or Potential Effect: Expenditures claimed for reimbursement exceed actual expenditures incurred. As a result, a portion of grant expenditures recorded is unsupported and may be unallowable. Questioned Costs: 1,305 questioned and 9,675 of likely questioned costs. Context: A nonstatistical sampling of 54 out of over 3,000 transactions were selected for testing of Activities Allowed and Unallowed, and Allowable Costs/Cost Principles. Two transactions totaling 1,305 were selected for testing that were voided after invoicing. The expenditure detail included 9,675 of other expenditures with the description "voided." Repeat Finding from Prior Year: No. Recommendation: Management may consider a subsequent review or an additional review when adjusting and removing costs after drawdowns to ensure any claimed expenses that subsequently become voided are adjusted in future drawdowns. Views of Responsible Officials: Management's response is included in the corrective action plan.
Finding: 2024-007 Late Fees. Federal Programs - Continuum of Care. Federal Financial Assistance Listing - 14.267. Federal Award Number - OK0024L6I021111, OK0024L6I022113, OK0024L6I022212, OK0024L6I022213, OK0024L6I022214, OK0024L6I022215, OK0024L6I022316. Federal Agency - Department of Housing and Urban Development. Pass-through Entity - City of Oklahoma City and the City of Norman. Allowable Activities or Unallowed, Allowable Costs/Cost Principles. Significant deficiency in Internal Control over Compliance. Criteria: Uniform Guidance (2 CFR 200.302(b) ) requires recipients and subrecipients to maintain financial management systems that provide accurate, current, and complete disclosure of financial results. In addition, 2 CFR 200.403 requires costs charged to federal awards to be allowable and adequately supported. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: Hope incurred rental late fees related to housing units of participants in the program. These late fees resulted from rent payments remitted after the contractual due date and were claimed as part of rental costs. Late fees represent penalties and are not an allowable cost under the program. The tenant-caused damage exception permitted under 24 CFR Part 578 does not extend to late fees. Cause: Hope did not establish internal controls to identify and exclude unallowable late fees from rent charged to the program. Additionally, reimbursement requests were not reviewed to ensure penalties were segregated from allowable rental costs. Effect or Potential Effect: Hope incurred unallowable costs. Questioned Costs: 500. Context: A nonstatistical sampling of 54 out of over 3,000 transactions were selected for testing of Activities Allowed and Unallowed, and Allowable Costs/Cost Principles. Four transactions included rental late fees in the rent expense claimed. Repeat Finding from Prior Year: No. Recommendation: Management may consider reviewing both the approval of rental expenses prior to issuing rental assistance checks as well as reimbursement processing of rental costs to ensure late fees are not included. Views of Responsible Officials: Management's response is included in the corrective action plan.
FINDING NO: 2024-040 (Repeat 2023-005) Strengthen Internal Controls over Program Fund Expenditures STATE AGENCY: State of Oklahoma FEDERAL AGENCY: U.S. Department of the Treasury ALN: 21.027 FEDERAL PROGRAM NAME: Coronavirus State And Local Fiscal Recovery Funds (CSLFRF) FEDERAL AWARD NUMBER: N/A FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles QUESTIONED COSTS: $88,768 Condition and Context: During our cash basis reconciliation of the Office of Management and Enterprise Services (OMES) Schedule of Expenditures of Federal Awards (SEFA) for SFY 2024 to the State of Oklahoma - Statewide Accounting System, we reconciled the agency’s cash basis expenditures of $968,168 for AL #21.027. We noted $88,768 of OMES CSLFRF expenditures from class fund 488 (ARPA Advance Grants) for administrative costs to run the grant were expended on AL #84.825C - Governor's Emergency Education Relief (GEER) and AL #21.023 - Emergency Rental Assistance (ERA). Cause: The State of Oklahoma/Office of Management and Enterprise Services (OMES) did not have adequate controls in place to ensure CSLFRF class fund 488 were used only for the CSLFEF program. Effect: Unallowable costs totaling $88,768 were charged to CSLFRF grant for SFY 2024. Recommendation: We recommend OMES develop and implement procedures to ensure CSLFRF funds (class fund 488) are not expended on other federal programs. Criteria: 2 CFR § 200.303 – Internal Controls states in part, “The Non-Federal entity must; (a) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” 2 CFR § 200.403 states in part, “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: … (f) Not be included as a cost or used to meet cost sharing requirements of any other federally-financed program in either the current or a prior period. See § 200.306(b).” Management Response Contact Person: Elizabeth Base Anticipated Completion Date: September 1, 2026 Corrective Action Planned: The Office of Management Enterprise Services – Grants Management Office agrees with the finding. Please see the corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2024-043 Strengthen Controls Over Planning and Development of Construction Projects and Noncompliance With State Encumbrance Requirements STATE AGENCY: State of Oklahoma FEDERAL AGENCY: U.S. Department of the Treasury ALN: 21.027 FEDERAL PROGRAM NAME: Coronavirus State And Local Fiscal Recovery Funds (CSLFRF) FEDERAL AWARD NUMBER: N/A FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance; Procurement and Suspension and Debarment QUESTIONED COSTS: $6,218,295 Condition and Context: During SFY 2024, the Oklahoma Department of Mental Health and Substance Abuse Services (ODMHSAS) received CSLFRF funds for planning and development activities for the proposed Donahue Behavioral Health Campus, a project originally intended to replace the existing Griffin Memorial Hospital. The Oklahoma Legislature appropriated $87 million to the project on October 5, 2022, through House Bill 1013. Additional CSLFRF funds were contributed by Oklahoma City ($1 million) and Oklahoma County ($1.5 million), with future funding anticipated from the eventual sale of the Griffin Memorial Hospital property. During SFY 2024, ODMHSAS incurred expenditures totaling $6,218,295 associated with planning, design, and initial development for the Donahue Behavioral Health Campus in Oklahoma City. However, the project became financially infeasible due to escalating construction costs and budget shortfalls. By May 2025, ODMHSAS abandoned the original construction plan and restructured the project to instead acquire and renovate the vacant former SSM Health facility in southwest Oklahoma City. Expenditures associated with the original Donahue project did not result in a completed capital asset or usable project deliverable. The prior project activities did not transfer to, or provide value toward, the revised Oklahoma City Behavioral Health Campus (OKCBHC) renovation project. As a result, planning and development expenditures for the original Donahue project represent wasted costs. In addition, during our review of the expenditures related to the project, the State incurred an obligation prior to encumbering the necessary funds for claim 629685, totaling $50,000. Because the obligation occurred before the encumbrance was established, the payment required a subsequent ratification to be processed. Cause: The State did not adequately evaluate the project’s feasibility or long-term funding requirements before committing significant planning and development costs, including failing to account for the rising construction expenses typically associated with a project of this scale. Rising construction costs and insufficient appropriated resources caused ODMHSAS to discontinue the original project, rendering prior expenditures ineffective and providing no benefit to the Federal program. In addition, an obligation was initiated without first completing the required encumbrance process, indicating a lapse in adherence to procurement procedures, review processes, and internal controls over commitment of funds. Effect: CSLFRF funds totaling $6,218,295 were used for activities that did not result in a functional capital project and provided no measurable benefit to the Federal program. Failure to encumber funds prior to incurring obligations increases the risk of unauthorized expenditures, budget overruns, and noncompliance with State procurement regulations. The need for ratification indicates that normal procurement controls were bypassed. However, the claim 629685 for $50,000 was not questioned since the agency made a correcting entry to pay for the costs with state funds. Recommendation: The State should strengthen project planning and feasibility evaluations before obligating Federal funds for large-scale capital projects. The State should ensure that sufficient funding, cost estimates, and contingency plans are verified prior to expenditure. The State should strengthen internal controls to ensure that all obligations are properly encumbered before commitments are made. Staff responsible for initiating purchases or contracts should receive periodic training on procurement and encumbrance requirements. The State should also implement review procedures to detect and prevent obligations from being incurred without an existing encumbrance. Criteria: 2 CFR § 200.303 – Internal Controls states in part, “The Non-Federal entity must; (a) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” 2 CFR § 200.403, states in part, “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: …(a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (g) Be adequately documented. See also §§ 200.300 through 200.309 of this part.” 2 CFR § 200.405(a) states, “A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart.” 2 CFR § 200.317, - Procurements by States, states, “When procuring property and services under a Federal award, a State must follow the same policies and procedures it uses for procurements from its non-Federal funds. Applicable State Rules and Regulations Okla. Const. art. X, § 23 - Balanced budget - Procedures. “The state shall never create or authorize the creation of any debt or obligation, or fund or pay any deficit, against the state, or any department, institution or agency thereof, regardless of its form or the source of money from which it is to be paid.” 62 O.S. § 34.62 - Encumbrance Requirements for Payments from Funds of State, “Encumbrance requirements for payments from funds of the state shall include the following: 1. Whenever agencies of this state enter into contracts for, or on behalf of the state for the purchase of tangible or intangible property, or for services or labor, such agreement shall be evidenced by written contracts or purchase orders, and must be transmitted to the Director of the Office of Management and Enterprise Services within a reasonable time from the date of the awarding of the contract or purchase order.” Management Response Contact Person: OMES: Elizabeth Base 452: Chad Carden Anticipated Completion Date: ODMHSAS anticipates completing updated procedures, review checklists, and targeted written guidance by June 30, 2027. Because the Donahue review requires analysis of historical project expenditures, related accounting and reporting records, multiple funding sources, and coordination with OMES-GMO, ODMHSAS anticipates completing the riskbased transaction review and related follow-up by December 31, 2027. Corrective Action Planned: The Office of Management Enterprise Services – Grants Management Office agrees and Mental Health partially agrees with the finding. Please see the corrective action plan located in the corrective action plan section of this report. Auditor Response: Based on current documentation the costs do not demonstrate a benefit to the CSLFRF award or show value carried forward to the successor project; therefore, the questioned costs remain unchanged.
FINDING NO: 2024-069 Strengthen Internal Controls Over Federal Expenditures Charged To Other Grants and Excessive Defined Contributions (Pathfinder) Being Charged To Federal Grants STATE AGENCY: State of Oklahoma FEDERAL AGENCY: U.S. Department of the Treasury ALN: 21.027 FEDERAL PROGRAM NAME: Coronavirus State And Local Fiscal Recovery Funds (CSLFRF) FEDERAL AWARD NUMBER: N/A FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance QUESTIONED COSTS: $80,370 Condition and Context: While reconciling the Oklahoma Broadband Office (OBO) SEFA to the statewide accounting system we noted OBO used class fund 497 (CSLFRF designated class fund) for ALN 11.035 (Broadband Equity, Access, and Deployment (BEAD) Program) and ALN 11.032 (State Digital Equity Planning and Capacity Grant Program) payroll expenditures totaling $322,387. The BEAD program is designated to class fund 410. The Digital Equity Planning and Capacity Grant Program is designated to class fund 400. This resulted in a payroll fund correcting entry in the same amount; therefore, we will not question the costs. For employees in Oklahoma’s Pathfinder Defined Contribution retirement plan, the employer pays a defined contribution match on the employee’s pay. That match can be charged to CSLFRF (class fund 497) or other grants, as long as the employee’s work benefits the grant. The employer also must send an extra amount to the retirement system so total employer contributions equal the standard rate, and that extra amount cannot be charged to grants and must be paid with state funds. We noted $80,370 [$84,986 (total CF 497 Pathfinder) - $4,616 (Payroll Fund Corrections)] was charged to class fund 497 account 513300 for Pathfinder. The remaining uncorrected charges for Pathfinder will result in questioned costs. Cause: The State does not have a process or control to ensure program expenditures are charged only to the respective class fund for that program. Effect: The $80,370 in excess Pathfinder contributions overcharged to the CSLFRF program are required be reimbursed to the Federal agency. Recommendation: We recommend the State develop and implement controls to ensure agencies can only charge federal grant payroll expenditures to the respective class fund for each program. In addition, ensure Pathfinder excess contributions (account 513300) are not charged to the CSLFRF program. Criteria: 2 CFR 200.405 (d) Allocable costs states, “Direct cost allocation principles. If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then, …, the costs may be allocated or transferred to benefitted projects on any reasonable documented basis.” 2 CFR §200.62, “Internal control over compliance requirements for Federal awards means a process implemented by a non-Federal entity designed to provide reasonable assurance regarding the achievement of the following objectives for Federal awards: (a) Transactions are properly recorded and accounted for, in order to: …. (3) Demonstrate compliance with Federal statutes, regulations, and the terms and conditions of the Federal award and (b) Transactions are executed in compliance with: (1) Federal statutes, regulations, and the terms and conditions of the Federal award that could have a direct and material effect on a Federal program. …. .” 2 CFR 200.403 (a) Factors affecting allowability of costs states, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.” 2 CFR 200.431 (c) Compensation – fringe benefits states, . . . “Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices.” A basic objective of Generally Accepted Accounting Principles is to provide accurate, reliable, and timely information. Management Response Contact Person: OMES: Elizabeth Base; 085: Beverlee Harbuck Anticipated Completion Date: December 31, 2026. Corrective Action Planned: The Office of Management Enterprise Services – Grants Management Office agrees with the finding. Please see the corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2024-074 (Repeat 2023-101) Obtain Adequate Invoice Documentation to Support Administrative Cost Reimbursements. STATE AGENCY: State of Oklahoma FEDERAL AGENCY: U.S. Department of the Treasury ALN: 21.027 FEDERAL PROGRAM NAME: Coronavirus State And Local Fiscal Recovery Funds (CSLFRF) FEDERAL AWARD NUMBER: N/A FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance QUESTIONED COSTS: $67,998 Condition and Context: The State of Oklahoma had twenty-two (22) state agencies report CSLFRF expenditures on the Schedule of Expenditures of Federal Awards (SEFA) for SFY 2024. For the nine (9) state agencies selected for cash basis non-subrecipient testing, we sampled 72 of 489 transactions totaling $9,447,954 from a population of $14,688,540, and noted only one exception for lack of adequate documentation on the invoice to support the administrative costs (see additional exceptions from sample on finding 2024-075): • Department of Human Services (DHS) processed reimbursement claim #1960613 totaling $13,320 for administrative costs related to services provided by Jill Geiger Consulting (JGC). The associated JGC invoice lacked sufficient detail to substantiate the allowability and allocability of the charges to the CSLFRF award. The invoice for claim #1960613 provided only a general description for program management services for the project included in SB1186 for June 2023 and listed quantity, rate, and amount, with no project-level or staff-level detail. SB1186 designated funds for only one project. The invoice did not document the progress of work performed for the project (e.g., staff assigned, hours by staff, cumulative hours/amounts, or cumulative percent of contract billed). For the nine (9) state agencies selected for current-year accounts payable testing, we sampled 35 of 113 current-year accounts payable transactions totaling $11,282,131 from a population of $16,177,841, and noted only one exception for lack of adequate documentation on the invoice to support the administrative costs (see additional exceptions from sample on finding 2024-075): • Department of Human Services (DHS) processed reimbursement claim #2013148 totaling $54,678 for administrative costs related to services provided by Jill Geiger Consulting (JGC). The associated JGC invoice lacked sufficient detail to substantiate the allowability and allocability of the charges to the CSLFRF award. The invoice for claim #2013148 provided only a general description for program management services for projects included in HB2884 for June 2024 and listed quantity, rate, and amount, with no project-level or staff-level detail. HB2884 designated funds for nine projects. The invoice did not document the progress of work performed for each project (e.g., staff assigned, hours by staff, cumulative hours/amounts, or cumulative percent of contract billed). Cause: The State did not require JGC to submit invoices with sufficient detail to support the administrative costs billed to each project. Existing invoice review procedures did not ensure that key documentation elements were provided prior to reimbursement. Effect: Without detailed invoices supporting the nature and extent of work performed for each project, the State cannot demonstrate that the administrative costs billed were reasonable, allocable, and allowable under Federal requirements. This deficiency increases the risk of unallowable or unsupported charges, misallocation across projects, inaccurate financial reporting, and potential repayment or recovery of questioned costs. Recommendation: The State and DHS should ensure JGC provides invoices with the following details: • Staff assigned to each project and hours billed by each staff • Total current hours billed for each project • Total current amount billed for each project • Cumulative hours billed for each project • Cumulative amount billed for each project • Cumulative amount billed as a percentage of total contract value • Detailed description of work performed. Criteria: 2 CFR § 200.303 – Internal Controls states in part, “The Non-Federal entity must; (a) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” 2 CFR § 200.403 - Factors affecting allowability of costs states in part, “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (g) Be adequately documented.” 2 CFR § 200.404 Reasonable costs, states in part, “A cost is reasonable if, in its nature and amount, it does not exceed that which would be incurred by a prudent person under the circumstances prevailing at the time the decision was made to incur the cost. The question of reasonableness is particularly important when the non-Federal entity is predominantly federally-funded. In determining reasonableness of a given cost, consideration must be given to … : (a)Whether the cost is of a type generally recognized as ordinary and necessary for the operation of the non-Federal entity or the proper and efficient performance of the Federal award. (b) The restraints or requirements imposed by such factors as: sound business practices; arm's-length bargaining; Federal, state, local, tribal, and other laws and regulations; and terms and conditions of the Federal award. (c) Market prices for comparable goods or services for the geographic area. (d) Whether the individuals concerned acted with prudence in the circumstances considering their responsibilities to the non-Federal entity, its employees, where applicable its students or membership, the public at large, and the Federal Government. (e) Whether the non-Federal entity significantly deviates from its established practices and policies regarding the incurrence of costs, which may unjustifiably increase the Federal award's cost.” 2 CFR §200.405 (d) Allocable costs states, “Direct cost allocation principles. If a cost benefits two or more projects or activities in proportions that can be determined without undue effort or cost, the cost must be allocated to the projects based on the proportional benefit. If a cost benefits two or more projects or activities in proportions that cannot be determined because of the interrelationship of the work involved, then, …, the costs may be allocated or transferred to benefitted projects on any reasonable documented basis.” Management Response Contact Person: OMES: Elizabeth Base DHS: Lindsey Kanaly Anticipated Completion Date: Completed Corrective Action Planned: The Office of Management Enterprise Services – Grants Management Office disagrees with the finding. Please see the corrective action plan located in the corrective action plan section of this report. Auditor Response: The invoices lacked the minimum detail needed to substantiate the nature and extent of work and cumulative progress. Agreement of total hours between invoices and timekeeping does not establish allocability to each project. The requirement is that hours charged to a project on the invoice match and be traceable to the actual staff reported hours for that project.
FINDING NO: 2024-075 Strengthen documentation and project scope reviews, enforce procurement, confirm receipt, and recover or reclassify unallowable CSLFRF costs STATE AGENCY: State of Oklahoma FEDERAL AGENCY: U.S. Department of the Treasury ALN: 21.027 FEDERAL PROGRAM NAME: Coronavirus State And Local Fiscal Recovery Funds (CSLFRF) FEDERAL AWARD NUMBER: N/A FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Period of Performance, Procurement and Suspension and Debarment, Subrecipient Monitoring QUESTIONED COSTS: $630,505 Condition and Context: The Office of Management and Enterprise Services - Grants Management Office (OMESGMO) is the central administering entity of CSLFRF funds for the State of Oklahoma (primary recipient). Although OMES-GMO has the authority to transfer funds, the transfer to state agencies does not create a subrecipient relationship since both entities are part of the same auditee (State of Oklahoma Single Audit). CSLFRF funds were transferred by the State of Oklahoma to twenty-two (22) state agencies, each of which reported CSLFRF expenditures on the Schedule of Expenditures of Federal Awards (SEFA) for SFY 2024. We selected nine (9) state agencies for Non-Subrecipient, Subrecipient, and Accounts Payable Testing. For the nine (9) state agencies selected for cash basis testing, we randomly sampled 72 of 489 non-subrecipient transactions totaling $9,447,954 from a population of $14,688,540 (64.3%), and noted the following exceptions: o For five claims reviewed at agency (025), we noted the agency chose to follow the controlled advance policy; therefore, OMES-GMO only reviewed supporting documentation provided during quarterly reporting to U.S Treasury, based on what the agency submitted. It does not appear OMES-GMO would have had sufficient support to determine the costs were allowable since the documentation provided was the same as what is available in the Statewide Accounting System. The claims in Statewide Accounting System were supported with only an OMD Design Build Invoice or professional services invoice. Therefore, it does not appear the claims were properly reviewed since there was not enough support provided by the vendor at the time of payment. Based on our review of additional support and contracts requested through the vendor, the costs were allowable; therefore, we will not question the costs. o For four claims reviewed at agency (085), it appears the expenditures were for the federal Broadband Equity, Access, and Deployment (ALN 11.035 - BEAD) and Digital Equity Act (ALN 11.032 - DEA) State Planning Grant programs. We obtained the scope of work associated with the purchase order for the claims from the Statewide Accounting System and noted it appears CSLFRF funds were used to supplement BEAD and DEA planning and implementation expenditures. Therefore, the expenses are outside the scope of the Broadband Mapping project for CSLFRF. As a result, it appears $309,250 of unallowable costs were reviewed and approved. o For one claim reviewed at agency (085), we noted the claim was for legislative consulting services in April, May, and June 2023. Each month of service was a charge of $6,000 for a total of $18,000. No purchase order was created for the April 2023 services. Therefore, the agency completed the Agency Business Services (ABS) – Form 009 Ratification Agreement. The claim was then processed by ABS and services were paid on 9/18/23. The state incurred an obligation before encumbering funds; therefore, violating procurement policies. o For three claims reviewed at agency (452), we noted it does not appear OMES-GMO would have had sufficient support to determine if the costs were allowable. The invoice only states "work completed" or "progress billing" for a period; therefore, we are unable to determine what services were performed. It does not appear the claim was properly reviewed by OMES-GMO. In addition, we noted the claim was reversed as a result of a correcting voucher included in the current year accounts payable to move the class funding from CF 497 (Federal CSLFRF) to CF 194 (state). Therefore, we will not question the costs. o For one claim reviewed at agency (452), we noted the claim required a ratification for payment. The state incurred an obligation before encumbering funds; therefore, violating procurement policies. In addition, we noted the claim was reversed as a result of a correcting voucher included in the current year accounts payable to move the class funding from CF 497 (Federal CSLFRF) to CF 194 (state). Therefore, we will not question the costs. Additional exceptions noted during non-subrecipient testing can be found at findings 2024-043, 2024-069, & 2024- 074. Questioned costs for non-subrecipient transactions totaled $309,250. For the nine (9) state agencies selected for cash basis testing, we randomly sampled 52 of 443 subrecipient transactions totaling $18,059,149 from a population of $49,407,554 (36.6%), and noted the following exceptions: o For two claims reviewed at agency (400), we noted the agency chose to follow the controlled advanced policy; therefore, OMES-GMO only reviewed supporting documentation provided during quarterly reporting to U.S Treasury, based on what the agency submitted. The costs do not appear to be within the CSLFRF project description. Therefore, $257 of unallowable costs were reviewed and approved. o For one claim reviewed at agency (619), we noted it does not appear OMES-GMO would have had $10,915 of $74,472 in supporting documentation to ensure a proper review and approval. Based on our review of the missing support we obtained from the agency the costs were allowable; therefore, we will not question the costs. o For one claim reviewed at agency (830), we noted it appears $331 of unallowable costs (incentive gift cards, travel costs and mileage for training) were reviewed and approved. o For two claims reviewed at agency (830), we noted there was no receiving documentation such as a packing slip or bill of lading to indicate the goods had been received by the intended recipient. We obtained the missing support from the agency; therefore, we will not question the costs. Questioned costs for subrecipient transactions totaled $588. For the nine (9) state agencies selected for current-year accounts payable testing, we randomly sampled 35 of 113 current-year accounts payable transactions totaling $11,282,131 from a population of $16,177,841 (69.7%), and noted the following exceptions: o For three claims reviewed at agency (025), we noted the agency chose to follow the controlled advance policy; therefore, OMES-GMO only reviewed supporting documentation provided during quarterly reporting to U.S Treasury, based on what the agency submitted. It does not appear OMES-GMO would have had sufficient support to determine the costs were allowable since the documentation provided was the same as what is available in the Statewide Accounting System. The claims in Statewide Accounting System were supported with only an OMD Design Build Invoice or professional services invoice. Therefore, it does not appear the claims were properly reviewed since there was not enough support provided by the vendor at the time of payment. Based on review of additional support and contracts requested through the vendor, the costs were allowable; therefore, we will not question the costs. o For three claims reviewed at agency (085), it appears the expenditures were for the federal Broadband Equity, Access, and Deployment (ALN 11.035 - BEAD) and Digital Equity Act (ALN 11.032 - DEA) State Planning Grant programs. We obtained the scope of work associated with the purchase order for the claims from the Statewide Accounting System and noted it appears CSLFRF funds were used to supplement BEAD and DEA planning and implementation expenditures; therefore, outside the intent or scope of the CSLFRF Broadband Mapping project. As a result, it appears $320,667 of unallowable costs were reviewed and approved. Additional exceptions noted during current-year accounts payable testing can be found at findings 2024-043 and 2024-074. Questioned costs for current-year accounts payable transactions totaled $320,667. Cause: The controlled advance review performed by OMES‑GMO relied on summary documentation at the time of quarterly reporting to U.S. Treasury, which does not consistently provide the detailed evidence necessary to determine allowability. Preventive procurement controls were not consistently followed, as evidenced by obligations incurred prior to encumbrance and subsequent ratifications. Also, controls to ensure expenditures were for the intended project were insufficient to prevent CSLFRF charges that supplemented other federal programs. Lastly, receiving evidence was not consistently retained or reviewed for subrecipient expenditures. Effect: The conditions noted above increase the risk that unallowable costs are charged to CSLFRF and that the State of Oklahoma is not in compliance with Uniform Guidance and U.S. Treasury program requirements. The deficiencies also elevate the risk of SEFA misstatement at an agency and state level, and potential repayment to the federal government. Recommendation: We recommend the State of Oklahoma strengthen controls for claims review procedures by requiring detailed invoices, deliverable‑level descriptions, and receiving evidence to be presented at the time of review. Further, the State of Oklahoma should strengthen controls to ensure project expenditures are within the scope of the project. The State of Oklahoma should strengthen controls to ensure that all obligations are properly encumbered before commitments are made. Also, the State of Oklahoma should implement review procedures to detect and prevent obligations from being incurred without an existing encumbrance. Subrecipient monitoring should include consistent verification of supporting documentation and perform follow‑up for any missing support. Lastly, a retrospective review should be performed for high‑risk agencies and transactions to identify, recover, or reclassify any additional unallowable charges. Criteria: 2 CFR § 200.303 – Internal Controls states in part: “The Non-Federal entity must; (a) establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” 2 CFR § 200.334 – Retention requirements for records states in part: “Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient.” 2 CFR § 200.403 states in part: “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: … (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. … (g) Be adequately documented. See also §§ 200.300 through 200.309 of this part.” 2 CFR § 200.405(a) states: “A cost is allocable to a particular Federal award or other cost objective if the goods or services involved are chargeable or assignable to that Federal award or cost objective in accordance with relative benefits received. This standard is met if the cost: (1) Is incurred specifically for the Federal award; (2) Benefits both the Federal award and other work of the non-Federal entity and can be distributed in proportions that may be approximated using reasonable methods; and (3) Is necessary to the overall operation of the non-Federal entity and is assignable in part to the Federal award in accordance with the principles in this subpart.” 2 CFR § 200.317, - Procurements by States states: “When procuring property and services under a Federal award, a State must follow the same policies and procedures it uses for procurements from its non-Federal funds.” Applicable State Rules and Regulations Okla. Const. art. X, § 23 - Balanced budget – Procedures states: “The state shall never create or authorize the creation of any debt or obligation, or fund or pay any deficit, against the state, or any department, institution or agency thereof, regardless of its form or the source of money from which it is to be paid.” 62 O.S. § 34.62 - Encumbrance Requirements for Payments from Funds of State states: “Encumbrance requirements for payments from funds of the state shall include the following: 1. Whenever agencies of this state enter into contracts for, or on behalf of the state for the purchase of tangible or intangible property, or for services or labor, such agreement shall be evidenced by written contracts or purchase orders, and must be transmitted to the Director of the Office of Management and Enterprise Services within a reasonable time from the date of the awarding of the contract or purchase order.” Management Response Contact Person: Elizabeth Base Anticipated Completion Date: December 31, 2026 Corrective Action Planned: The Office of Management Enterprise Services – Grants Management Office disagrees with the finding. Please see the corrective action plan located in the corrective action plan section of this report. Auditor Response: OMES-GMO’s reliance on 62 O.S. § 255.1 to label agencies “subrecipients” cannot override Federal audit classification. State-mandated grant agreements may be useful internal oversight instruments, but they do not convert intra-State transfers into Federal subawards for Single Audit purposes. Both the State’s central oversight (OMESGMO) and the state agency share responsibility for ensuring the award complies. Failures at the agency level can create noncompliance for the State’s Single Audit. The State is externally accountable to the Federal awarding agency. In Single Audit terms, they act as one non-federal entity, so compliance, controls, and reporting are consolidated across them. Relevant state agencies were contacted to obtain information and supporting documentation and were provided with an opportunity to submit additional support, clarifications, or evidence responding to the finding. Despite this outreach and the extended window for response, no further support was provided. Agency 025 It is the agency’s responsibility to perform and document a concurrent allowability review at the time of payment and to retain sufficient support in OMD’s own grant/finance records. The Uniform Guidance requires that costs be adequately documented and that the non-Federal entity maintain records that identify the source and application of funds and support its internal control over compliance. Agency 085 Supporting records indicate work that principally benefits BEAD/DEA planning and implementation. Absent a documented allocation basis that ties the charged amounts to CSLFRF mapping deliverables, the charges are not allocable to CSLFRF. Processing payments “together” for convenience does not relieve OBO of its obligation to segregate costs by funding source and retain sufficient documentation in OBO’s files that demonstrates allowability under CSLFRF. Agency 400 Based on our review of the subrecipient contract description for how the funds will be utilized, we maintain our position that the Keurig holder and portable heaters appear to be outside the scope of the project. Agency 830 The agency’s response describes programmatic rationale for $100 completion-based incentives but does not address the specific transaction tested which were four $25 gift cards purchased on October 25, 2023. The agency did not provide documentation identifying recipients, issuance dates, or purposes for the gift cards. The support provided pertains to a different period (January – March 2024) and different amounts ($100).
FINDING NO: 2024-015 (Partial Repeat # 2023-061) Strengthen Internal Controls Over Review and Approval or Claims STATE AGENCY: Oklahoma State Department of Education (OSDE) FEDERAL AGENCY: United States Department of Education (USDE) ALN: 10.558; 84.010; 84.425 - 84.425U FEDERAL PROGRAM NAME: Child and Adult Care Food Program (CACFP); Title I, Part A – Grants to Local Educational Agencies; Education Stabilization Fund (ESF): Elementary and Secondary School Emergency Relief Fund (ESSER); American Rescue Plan – Elementary and Secondary Schools Emergency Relief Fund (ARP ESSER) FEDERAL AWARD NUMBER: 6OK300330, 6OK300349; S010A230036; S425U210024 FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Activities Allowed or Unallowed & Allowable Costs/Cost Principles QUESTIONED COSTS: ALN 84.425U - $1,549 Condition and Context: OSDE has policies and procedures in place to review and approve claims. In addition, the Comptroller’s Office has policies and procedures in place to determine which claims are to be included in accounts payable We tested a sample of 35 of 745 (4.7%) Education Stabilization Fund (ESF) accounts payable claims totaling $57,843,297, and identified: • One of 35 (2.86%) ESF claims lacked supporting invoices which were not obtained by OSDE until after our inquiry, indicating inadequate review and approval. We subsequently received supporting documentation and were able to verify the invoices were for allowable costs. • One of 35 (2.86%) ESF claims had invoiced amounts less than the expenditure within the claim, resulting in an overclaim of $1,549. We tested a sample of 23 of 456 (5.04%) Title I, Part A accounts payable claims totaling $34,218,534 and identified: • One of 23 (4.35%) Title I, Part A claims lacked supporting invoices which were not obtained until after our inquiry, indicating an inadequate review and approval. We subsequently received supporting documentation and were able to verify the invoices for allowable costs. We tested a sample of 6 of 1,491 (.40%) CACFP accounts payable claims totaling $16,763, reported on the state fiscal year (SFY) 2024 Schedule of Federal Awards (SEFA) dated July 1, 2024 to August 15, 2024, and identified: • Four of six (66.67%) CACFP claims totaling $6,268 with claim months after June 30, 2024 should not have been included in the SFY 2024 CACFP accounts payable population. Cause: OSDE’s claims review and approval process lacked the necessary strength and consistency to adequately review Title I and CACFP claims to ensure proper supporting documentation, including invoices, agrees with the expenditures submitted on the claim to ensure the amounts claimed were accurate and for allowable costs. In addition, OSDE’s accounts payable determination lacked necessary strength and consistency to accurately review and account for accounts payable transactions for goods and services received after June 30, 2024. Effect: Inadequate review of claims with proper supporting documentation increases the risk of reimbursement of unallowable expenses resulting in noncompliance. Furthermore, noncompliance increases the risk of Federal claw backs, which impacts state dollars. Noncompliance during the audit period resulted in $1,549 of state funds owed to the USDE. Additionally, inaccurate reporting of goods and services received during the period increases the risk of accounts payable in the CACFP SEFA accrual amount to be overstated. The exception rate in our testwork indicates a significant overstatement of accounts payable is likely. Recommendation: We recommend OSDE strengthen its claims review and approval process to ensure accurate supporting documentation for claims is included and only allowable costs are reimbursed. We also recommend OSDE strengthen its accounts payable determination process to accurately account for claims identified as accounts payable for the audit period. Criteria: 2 CFR § 200.403 states in part: “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. … (g) Be adequately documented.” 2 CFR Part 200 §200.1 states in part: “Improper payment means a payment that should not have been made or that was made in an incorrect amount under statutory, contractual, administrative, or other legally applicable requirements. The term improper payment includes: any payment to an ineligible recipient; any payment for an ineligible good or service; any duplicate payment; any payment for a good or service not received, except for those payments where authorized by law; any payment that is not authorized by law; and any payment that does not account for credit for applicable discounts.” 2 CFR § 200.303(a) states in part: “The non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” Management Response Contact Person: Tammy Smith | Senior Director of Federal Programs Anticipated Completion Date: July 31, 2026 Corrective Action Planned: The Oklahoma State Department of Education agrees with the finding. See corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2024-031 (Repeat 2023-104) Strengthen Internal Controls over Monitoring for Desert Grant Awards STATE AGENCY: Oklahoma Department of Human Services (OKDHS) FEDERAL AGENCY: Department of Health and Human Services ALN: 93.575 FEDERAL PROGRAM NAME: CCDF Cluster FEDERAL AWARD NUMBER: 2101OKCDC6 FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility QUESTIONED COSTS: $12,616,296 Condition and Context: OKDHS begam implementing a new Childcare Desert Grant (DG) program starting in August 2022 in order to help increase accessibility to quality childcare for working families living in a county where there is not enough licensed childcare to support the needs of the residents. The grants were available for new or existing daycare homes or centers seeking to increase licensed capacity. Funds awarded under this program were intended to be used for minor construction, program materials, or technology and software for business development necessary to meet licensing requirements. For new daycares, applicants could receive a total of $10,000 per child with an initial advance of $5,000 per child payment made at the time of approval based on the licensed capacity, and a second $5,000 payment made at 12 months based on the enrollment and attendance. For expansion/ existing daycares, applicants could receive a total of $10,000 per child with an initial advance of $5,000 per child payment made at the time of approval based on the number of expanded slots, and a second $5,000 per child payment made at 12 months based on the number of children enrolled and attending in the expanded slots. We tested a sample of 71 (55 new and 14 existing sites) Child Care Centers (CCC) or Family Daycare Homes (FDCH) that received American Rescue Plan (ARP) Desert grant supplemental funds during SFY 2024 (July 1, 2023 – June 30, 2024). The universe included 253 Child Care providers with $24,050,000 in total awards. Tested awards for sampled providers totaled $13,295,000. We noted the following Desert grant Eligibility or Activities Allowed expenditure exceptions: ACTIVITIES ALLOWED and ELIGIBILITY • The 2nd round DG payment was based on both the attendance records and the enrollment records for the recertification month. However, OKDHS did not obtain the attendance records and ensure enrollment records agreed to attendance records for 10 of 71 (14.08%) facilities. Questioned costs totaled $1,956,582. We also noted that OKDHS did not obtain the attendance records for any of the facilities that had their 2nd round recertification performed in October of 2023. Total award amount paid by OKDHS without verifying attendance records is $3,450,000, of which nine facilities are already included in the questioned costs of $1,956,582 and an additional 22 facilities not in our sample were paid the remaining $1,493,418. • For 30 of 71 (42.25%) awards paid, the Desert grant award amount per CCC/FDCH was not calculated correctly based on the attendance and enrollment records submitted: overpayments totaled $1,340,000. We questioned these costs. • Eligibility criteria per the 2nd round Desert Grant Application was not met prior to the application approval date for the following: o For 4 of 71 (5.63%) new facilities, the CCC had a change in ownership or change in license number without a break in operations. Questioned costs totaled $1,080,000 for the 2nd round award. In addition, the CCC’s should not have received the 1st round of awards totaling $1,765,000 as the facilities did not meet the DG requirements for a new facility. o For 1 of 71 (1.41%) the amount of the 2nd round payment exceeds the amount of the 1st round payment. Questioned costs totaled $10,000. • The new/expanded CCC's/FDCH's did not comply with all post application approval eligibility criteria applicable to the SFY24 time period as follows: o For eight of 71 (11.27%) of facilities, the facility closed prior to two years from the date of the 1st round award payment; overpayments totaled $575,000 We questioned these costs. We also noted that six of 71 (8.45%) facilities closed prior to two years from the date the facility first started offering childcare, and another 11 of 71 (15.49%) had closed as of 11/6/2025 per OKDHS. The total amount of DG funds (1st and 2nd rounds) paid to facilities that are no longer operating is $8,190,000. o For 24 of 71 (33.80%) awardees paid a totaling total $2,091,582 (15.73% of total award amount of $13,295,000), the CCC/FDCH did not provide program expenditure records as required o For the 47 of 71 (66.20%) of Desert Grant awardees that reported expenditures for the 2nd round of Desert Grant awards, $10,534,714 (79.24% of the total award amount of $13,295,000), was spent on activities not designated as allowable per the Desert Grant application and OKDHS program objectives. We questioned these costs Inadequate Desert Grant program design and administration resulted in mismanagement of funds by OKDHS per the following: • For 55 of 71 (77.46%) Desert Grant awardees, OKDHS awarded STARS under the OKDHS Quality Rating Improvement System (QRIS) without any monitoring visits to verify the program met the requirements for the STAR level awarded. • For 32 of 71 (45.07%) Desert Grant awardees, the number of children present during monitoring visits does not reasonably support the number of children claimed in attendance and/ or enrollment in the documentation submitted by the facilities and used by OKDHS to calculate the 2nd round DG award amount. Fifteen of the 32 facilities had closed as of 11/6/2025. Eleven of the 32 facilities did not provide any expenditure records to SAI. Twenty-five of the 32 facilities received an increased STAR level without any monitoring visits to verify the program met the requirements for the STAR level awarded. While reviewing monitoring activities, we identified one recipient of the 1st round DG award who applied as a new childcare center and received $600,0000 in DG funds. However, the facility was already an existing childcare center. We determined the total number of facilities awarded DG funds in rounds 1 and 2 that closed as of 11/6/2025 is 128 (36.78 % of 348 total awarded the DG) with total desert grant payments for closed facilities totaling $19,865,000 or 29.31% of $67,775,000 in total DG payments made. Note: Because a tested provider may have questioned costs for one type of exception that overlaps with other types of exceptions, we are providing the following information: • Total non-compliance for exceptions related to issues with attendance/ enrollment support, facility closures, non-compliance with eligibility requirements and failure to provide records are $ 4,841,582 and projected non-compliance is $8,057,287 • Total non-compliance for exceptions related to issues with reported expenditures for activities not designated as allowable per the Desert Grant application and DHS program objectives are $7,774,714 and projected noncompliance is $15,028,104. • Total combined questioned costs for all exceptions (netted to ensure amounts do not exceed 2nd round award payment) are $12,616,296 and projected non-compliance is $23,085,391. Cause: The Department did not design the Desert grant program to ensure ARP Act CCDF funds were only used to expand access to childcare assistance to more income eligible families and improve the quality and availability of childcare. • The Department did not award funds based on the actual costs necessary for each individual CCC or FDCH to meet licensing requirements, which resulted in many providers that had large amounts of cash at their disposal even after meeting licensing requirements. • The Department advanced Desert grant funds to awardees in two lump sums instead of on an incremental basis ensuring planned remodeling work and program equipment and materials were being completed and/or acquired appropriately and were reasonable and necessary to meet program requirements. • The Department awarded Desert Grant funds based first on potential capacity and then enrollment and attendance but did not consider any other significant factors (i.e., business experience, number of children likely to be enrolled, ability to hire, train and retain qualified staff, etc.) essential to the operational sustainability of the new CCC or FDCH at the capacity level awarded. This contributed to many instances in which the CCC/ FDCH has already closed or is currently operating at an enrollment level significantly below the awarded capacity. • The Desert Grant Application included language that was insufficient to adequately inform the Desert grant awardees of all unallowable uses of the funds, including remodeling funding limits, limitations for sectarian organizations, and expenditures that were only allowable under other ARP CCDF stabilization grants. • The Department did not have adequate safeguards in place to ensure Desert Grant funds were appropriately awarded only to awardees that met the requirements to be considered a ‘new’ daycare center. • The Department allowed programs with the least restrictive licensing requirements (i.e., out of school, after school, summer programs) to receive the same amount per child as a program offering full time infant to school age childcare. The Department has not established adequate policies and procedures to monitor Desert Grant funds expended by childcare providers. The Desert Grant program may not effectively increase and/or sustain the increase in total capacity of childcare centers in low-income areas as intended. OKDHS CCDF did not normally create or administer new grant programs other than CCDF regular childcare subsidy program. In addition, the ARP CCDF Discretionary and supplemental funds had to be obligated by September 30, 2023, and liquidated by September 30, 2024, which reduced the timeline available to develop the new grant programs. However, OKDHS CCDF did have extensive experience with childcare licensing requirements and associated costs of operating the various types of childcare programs. Effect: The Desert Grant program may not effectively increase and/or sustain the increase in total capacity of childcare centers in low-income areas as intended. The combined effects of making advanced payments for all Desert Grant awards and the failure to monitor the use of Desert grant funds may lead to the Departments inability to recover grant funds not used in accordance with the grant requirements and/or used for non-childcare expenditures or misappropriated for other uses. Desert grant funds were not used by majority of CCC and FDCH to expand daycare attendance within desert regions; there were no repercussions to not meeting the licensing capacity they were paid on. Recommendation: We recommend the Department enhance its program design and planning processes to ensure that key elements—such as funding mechanisms and implementation workflows—are fully developed prior to launch. Strengthening the upfront design phase will help prevent challenges like those experienced with this grant and support more effective program execution in the future. We recommend the Department develop policies and procedures to ensure providers are adequately monitored to ensure Desert grant funds are expended properly to meet the objective of the grant. We recommend the Department perform a review of all Desert grant funds awarded and expended, identify all funds not used for the Desert grants intended purposes, and ensure remaining funds are expended appropriately or returned. We also recommend the Department recoup all funds for the following: o Funds awarded based on incorrect capacity counts and enrollment and attendance counts o Funds awarded to facilities that did not meet the requirements to be considered a new CCC/FDCH. o Expenditures for non-childcare purposes o Expenditures that benefited entities other than the facility awarded the desert grant o Excessive or unreasonable expenditures o Unexpended funds not needed to meet program requirements o Unaccounted for funds (i.e., funds transferred out or comingled with investment accounts, personal accounts, or other business/non-profit accounts) We recommend the Department improve their monitoring procedures to ensure significant discrepancies between the number of children claimed in attendance and the number of children present during monitoring visits are appropriately follow-up on. We also recommend that monitoring visits are performed during non-traditional hours and during before and after care hours for all providers offering these services at these times. Criteria: 2 CFR § 200.303(a) – Internal Controls states in part, “The Non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” 2 CFR § 200.403 Factors affecting allowability of costs states in part, “Costs must…(a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, and (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, and (g) Be adequately documented.” The Desert grant FAQs state in part, …“How much are the Child Care Desert grants? For New Programs: Applicants may receive a total of $10,000 per child with an initial payment made at the time of approval based on license capacity, and a second $5,000 per child payment made at 12 months based on enrollment. The second payment cannot exceed the amount of the first payment. For Expansion Programs: Applicants may receive a total of $10,000 per child with an initial payment made at the time of approval based on the number of expanded slots, and a second $5,000 per child payment made at 12 months based on the number of children enrolled in the expansion slots. … What are the Qualifications for grant eligibility? … • Must accept subsidy payments • Must participate in the Quality Rating Improvement System (QRIS/STARS) • Must operate for a minimum of two years after date of initial award. • Be located in an identified child care desert. (A list of Child Care Desert counties can be reviewed at the end of this document.) • Make services available to families regardless of race, color, creed, religion, national origin, sex, marital status, disability, age, sexual orientation, or familial status. • Complete grant participation agreement, located at the end of the application. • Complete and return questionnaire that will be provided to you via email after you submit the grant application. • Be determined eligible by Oklahoma Human Services staff who review the applications. NOTE: Programs that have recently closed and reopen without an increase in capacity do not qualify OR Programs that have recently had a change in ownership without a break in operation do not qualify. … Childcare providers must NOT use the funds for any of the following purposes: • Purchase of land or property • Major construction or renovations. Major renovation means: (1) structural changes to the foundation, roof, floor, exterior or load-bearing walls of a facility or the extension of a facility to increase its floor area; or (2) extensive alteration of a facility such as to significantly change its function and purpose, even if such renovation does not include any structural change. • Consumable supplies (diapers, wipes, soap, paper products) or office supplies (paper, staples, pens) • One-time field trips for children • Child care tuition (scholarships) • Items prohibited by licensing • Used items • Non-childcare expenses … How long do I have to start operating my program after I receive the initial award? Childcare programs will have 90 days from receipt of the awarded grant funds to complete the application process and be placed on a six-month permit. Once you have a permit, you can begin serving children. If you are not on permit within 90 days, you may be required to return the initial award amount. … You must be approved for a 2-star level or higher within 12 months of receipt of initial award. If you do not meet this requirement, you may be required to return the initial award and will not qualify for a second award. You must be approved for a subsidy contract within 12 months of receipt of initial award. If you do not meet this requirement, you may be required to return the initial award and will not qualify for a second award. Childcare programs must participate in QRIS at two star or higher in order to receive a subsidy contract. The Desert Grant application states in part, “By signing this application, I understand that it is my responsibility to maintain records and other documentation to support the use of funds I receive, as well as to document my compliance with the requirements. I understand I must provide these documents to Oklahoma Human Services if requested. … Allowable uses of Grant Funds: Grant funds can be used to cover minor construction projects or program materials per application. All materials must be new, and must be purchased from a retail store, not a private party. In the event the grant recipient wishes to have the cost of assembly and/or installation covered by a grant, the labor must be performed by a licensed and bonded contractor. The grant may be used for technology and software to create and maintain business management systems. Provider Affirmation The following signature affirms that I will adhere to the qualifications listed above and will only spend the funds on allowable uses. I understand that I may be required to re-pay grant funds if I do not adhere to all the terms of this agreement. 42 U.S. Code § 9858 c(c)(2)(I) states in part, “In the case of a sectarian agency or organization, no funds made available under this subchapter may be used for the purposes described in paragraph (1) except to the extent that renovation or repair is necessary to bring the facility of such agency or organization into compliance with health and safety requirements…” 42 U.S. Code § 9858k(a) states, “No financial assistance provided under this subchapter, pursuant to the choice of a parent under section 9858c(c)(2)(A)(i)(I) of this title or through any other grant or contract under the State plan, shall be expended for any sectarian purpose or activity, including sectarian worship or instruction.” 42 U.S. Code § 9858k(b) states in part, “With regard to services provided to students enrolled in grades 1 through 12, no financial assistance provided under this subchapter shall be expended for— (1) any services provided to such students during the regular school day; (2) any services for which such students receive academic credit toward graduation.” 42 U.S. Code § 9858d(b) states in part, “…no funds shall be expended for the purchase or improvement of land, or for the purchase, construction, or permanent improvement (other than minor remodeling) of any building or facility. 45 CFR § 98.2, states in part, Definitions states in part, “Major renovation means any renovation that has a cost equal to or exceeding $350,000 in CCDF funds for child care centers and $50,000 in CCDF funds for family child care homes, which amount shall be adjusted annually for inflation and published on the Office of Child Care website. If renovation costs exceed these thresholds and do not include: (1) Structural changes to the foundation, roof, floor, exterior or load-bearing walls of a facility, or the extension of a facility to increase its floor area; or (2) Extensive alteration of a facility such as to significantly change its function and purpose for direct child care services, even if such renovation does not include any structural change; and improve the health, safety, and/or quality of child care, then it shall not be considered major renovation;” Views of Responsible Official(s) Contact Person: Kayla Urtz Anticipated Completion Date: N/A Corrective Action Planned: The Department of Human Services partially agrees with the finding. Please see the corrective action plan located in the corrective action plan section of this report. Auditor Response: Per OKDHS disagreement with SAI’s characterization of questioned costs, the treatment of unsupported expenditures as unallowable expenditures: For Single Audits, SAI is required to comply with 2 C.F.R. § 200.1 which states in part “(1) Questioned cost means an amount, expended or received from a Federal award, that in the auditor's judgment: (i) Is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award; (ii) At the time of the audit, lacked adequate documentation to support compliance; or (iii) Appeared unreasonable and did not reflect the actions a prudent person would take in the circumstances. (2) The questioned cost amount under (1)(ii) is calculated as if the portion of a transaction that lacked adequate documentation were confirmed noncompliant. We are required to report as questioned costs the $2,091,582 in Desert Grant funds, for which 24 providers did not submit any records. These providers were required to maintain these records and agreed to this per their Desert Grant application agreement which states in part, “Child Care Desert Grant Agreement - By signing this application, I understand that it is my responsibility to maintain records and other documentation to support the use of funds I receive, as well as to document my compliance with the requirements. I understand I must provide these documents to Oklahoma Human Services if requested.” Of note, 21 of the 24 providers that refused to provide records for the Desert Grant award also had other questioned costs related to enrollment and/or attendance records that did not support the award amount paid, the facility closed prior to the 2 year minimum an/or the facility was not a new daycare but received Desert Grant funds for being a new daycare. We also identified numerous other exceptions for these daycares that did not result in questioned costs due to the nature of the exception. SAI has also noted that investigations carried out by the OKDHS OIG unit also treat unsupported costs as questioned costs. With regard to sampling methodology and the extrapolation of questioned costs, SAI follows the AICPA Government Auditing Standards and Single Audits audit guide. All questioned costs identified in individually selected items (ISI’s) (not part of the sampled population) are not extrapolated, only the questioned costs identified in the sample. The sampling methodology we used for testing Desert Grant payments is appropriate for the attributes tested in this population and reflects the separate requirements for the daycare centers and family daycare homes related to the Desert Grant. The types and amounts of questioned costs identified in our audit are presented separately in the ‘Condition’ of the finding and the extrapolation methodology used does not duplicate any overlapping exception amounts. Please see the paragraph right above the ‘Cause’ section which breaks out the exception types between 1) expenditures reported by providers that did not align with the allowable uses of funds stated in the Desert grant application and 2) all other non-compliance issues that resulted in questioned costs. Also, there are not any questioned costs identified that are associated with “retrospective assessments regarding how the program could have been structured differently”. The Department of Human Services advanced all Supplemental Desert grant funds without having proper controls in place to ensure the funds were spent on allowable CCDF costs. Federal regulations state the lead agency (i.e., DHS) is responsible for fiscal controls and accounting procedures sufficient to permit the tracing of funds to a level adequate to establish that CCDF funds have not been used in violation of this grant.
FINDING NO: 2024-033 (Repeat 2023-099) Strengthen Internal Controls over Monitoring for Stabilization Awards STATE AGENCY: Oklahoma Department of Human Services (OKDHS) FEDERAL AGENCY: Department of Health and Human Services ALN: 93.575 FEDERAL PROGRAM NAME: CCDF Cluster FEDERAL AWARD NUMBER: 2101OKCSC6 FEDERAL AWARD YEAR: 2021 CONTROL CATEGORY: Activities Allowed or Unallowed; Allowable Costs/Cost Principles; Eligibility QUESTIONED COSTS: $698,608 Condition and Context: OKDHS began implementing a new Quality Rating and Improvement System (QRIS), also known as Stars, that became effective January 1, 2023. Under the new system, the State of Oklahoma has five levels (1-5) of quality ratings for all licensed childcare programs. All licensed programs immediately qualify as a 1 Star. In preparation of the new system, all daycares were asked to submit an updated Stars application (also called reapplication period). A Stars resource booklet, applicable to the daycare type, facility, small home, or large home, and a cover letter was e-mailed to each daycare on June 1, 2022, to provide guidance when requesting a Stars level. OKDHS offered a financial incentive to those daycares who submitted an application on or before November 30, 2022. The application asked each daycare to provide Stars Level Requested; the higher the Stars level approved the greater the grant funding and subsidy payments. For example, if you were a 1 Star facility for cycles 5 & 6 and you requested and were approved to become a 5 Star facility for cycles 7 & 8, you would receive approximately 3 times more funding for those cycles. Daycares were informed that Stars criteria reviews would not be performed during the reapplication period unless a serious non-compliance was observed during a regular monitoring visit. Also, the Stars yearly monitoring visit, and two partial visits, were waived by OKDHS for calendar year 2023. OKDHS provided Childcare ARP Act Stabilization grant funding to daycare homes and centers for SFY 2024 (July 1, 2023 to June 30, 2024) based on an approved grant application per cycle. Stabilization grant funding for cycle 9 (July 2023 – September 2023) were awarded based on licensed capacity and Stars rating. When attempting to obtain the supporting documentation for discretionary stabilization benefit payments, we were informed by OKDHS that no financial documentation was requested from the homes or centers for the funding provided in SFY 2024 and no monitoring of these payments to ensure the funds were used appropriately was performed. As a result, we requested the documentation directly from the homes and centers in order to determine if grant funds were spent in accordance with the objectives of the DHS child-care stabilization program. We tested a total of 84 daycare homes and centers that received ARP Act Discretionary stabilization funds during SFY 2024 (July 1, 2023 – June 30, 2024). The universe included 2,488 providers with $86,335,000 in total awards. Tested awards for daycare homes and centers totaled $3,419,000. We noted the following issues for the 84 grant recipients tested: • For 4 (4.76%) of 84 daycare providers tested, stabilization funds were not expended on allowable activities. Expenditures for unallowable activities totaled $20,014. • For 25 (33.33%) of 84 daycare providers tested, stabilization funds could not be supported with adequate documentation; therefore, we could not determine whether the stabilization funds were expended on allowable activities. Expenditures for unsupported activities totaled $678,595. • For 42 (50%) of 84 daycare providers tested, the Stars rating increased by at least 2 from cycles 5-6 to cycles 7-8. This greatly increased the amount of child-care subsidy payments these providers received, often doubling the amount. For example, a childcare center provider with a 2 Star rating would receive $22.80 per day for an infant aged 0 to 12 months. By increasing the star rating to 5, the daily rate is increased to $50.60. Other COVID-19 exceptions also increased the subsidy amounts by $5 per day per child and decreased the number of days a child must attend the day care from (14 to 11) before receiving subsidy payments for all absent days as well. SAI noted a large number of childcare centers received increased star ratings during the period DHS did not review the Stars requirements that later were not able to qualify for Star rating they received. Cause: OKDHS had no process or internal controls in place to adequately monitor stabilization funds awarded to childcare providers to ensure the grant funds were actually spent on the approved activities per the application. Also, OKDHS did not have adequate controls in place to support the increase in Stars rating for homes and centers since there were no reviews and/or monitoring performed on which to quantify their assessments. Effect: Stabilization funds were not expended in compliance with Section 2202(e)(1) of the ARP Act of 2021. Further, allowing daycares to request their own Star level increase dramatically increased the amount of funding most daycare homes or centers received, and the increased Star level may not have been appropriate based on the actual performance, or quality and safety level, of the daycare. Lastly, without OKDHS monitoring stabilization funds expended by providers, grant funds could continue to be expended on unallowable activities that did not align with the objectives of the DHS child-care stabilization program. Recommendation: We recommend OKDHS continue to strengthen its internal controls over monitoring daycares to ensure stabilization funds are expended in accordance with the objectives of the DHS child-care stabilization program. Further, we recommend OKDHS ensure adequate Stars reviews and/or monitoring have been performed prior to increasing grant funding and subsidy payments. Lastly, we recommend OKDHS develop an appropriate process to ensure daycare homes and centers are adequately documenting and supporting grant expenditures and that the records are available for review. Criteria: 45 CFR 98.67 states: “Fiscal Requirements. (a) Lead Agencies shall expend and account for CCDF funds in accordance with their own laws and procedures for expending and accounting for their own funds. (b) Unless otherwise specified in this part, contracts that entail the expenditure of CCDF funds shall comply with the laws and procedures generally applicable to expenditures by the contracting agency of its own funds. (c) Fiscal control and accounting procedures shall be sufficient to permit: (1) Preparation of reports required by the Secretary under this subpart and under subpart H; and (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part.” 2 CFR § 200.303(a) states in part, “The Non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” 2 CFR § 200.403 states in part, “Costs must…(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, … and (g) Be adequately documented.” American Rescue Plan Act of 2021 (ARP) § 2202(e)(1) states in part, USES OF FUNDS-, ”In GENERAL - A qualified child care provider that receives funds through such a subgrant shall use the funds for at least one of the following: (A) Personnel costs, including payroll and salaries or similar compensation for an employee (including any sole proprietor or independent contractor), employee benefits, premium pay, or costs for employee recruitment and retention. (B) Rent (including rent under a lease agreement) or payment on any mortgage obligation, utilities, facility maintenance or improvements, or insurance. (C) Personal protective equipment, cleaning and sanitization supplies and services, or training and professional development related to health and safety practices. (D) Purchases of or updates to equipment and supplies to respond to the COVID–19 public health emergency. (E) Goods and services necessary to maintain or resume childcare services. (F) Mental health supports for children and employees.” Views of Responsible Official(s) Point of Contact: Kayla Urtz, Director of Internal Audit Anticipated Completion Date: N/A Corrective Action Planned: The Department of Human Services partially agrees with the finding. Please see the corrective action plan located in the corrective action plan section of this report. Auditor Response: SAI would like to clarify our position with regard to OKDHS responsibility to ensure funds awarded under any COVID-19 program are expended for the purposes for which they were awarded. The term ‘monitoring’ in this finding refers to OKDHS oversight and review of how the Stabilization funds were expended. While there are portions of the CCDF regulations that the Stabilization funds are exempted from, including formal subrecipient monitoring under Uniform Guidance (45 CFR Part 75), the following regulations do apply: Per the Notice of Grant Award for Child Care Stabilization Funds American Rescue Plan (Arp) Act: “APPLICABLE LEGISLATION, STATUTE, REGULATIONS 1. The administration of this program is subject to: … Child Care and Development Block Grant (CCDBG) Act and related regulations a. The CCDBG Act is codified at 42 U.S.C. §9857 et seq., b. Implementing program regulations are located at 45 CFR Part 98 and 99 … Financial Reporting and Requirements 10. Federal funds awarded under this grant must be expended for the purposes for which they were awarded. 11. Each grantee's fiscal and accounting procedures must be sufficient to permit the preparation of required reports and the tracing of expenditures to a level necessary to establish that Federal funds have not been used in violation of the terms and conditions.” The applicable regulations include the following: 45 CFR 98.67 states: “Fiscal Requirements. (a) Lead Agencies shall expend and account for CCDF funds in accordance with their own laws and procedures for expending and accounting for their own funds. (b) Unless otherwise specified in this part, contracts that entail the expenditure of CCDF funds shall comply with the laws and procedures generally applicable to expenditures by the contracting agency of its own funds. (c) Fiscal control and accounting procedures shall be sufficient to permit: (1) Preparation of reports required by the Secretary under this subpart and under subpart H; and (2) The tracing of funds to a level of expenditure adequate to establish that such funds have not been used in violation of the provisions of this part.” The Stabilization program award application includes the following attestation: “To receive a stabilization grant, I agree to use the funds only for the categories and purposes indicated on this application and have marked above which categories I plan to fund. I also understand that it is my responsibility to maintain records and other documentation to support the use of funds I receive, as well as to document my compliance with the requirements described in A, B, and C. By signing this application, I am certifying that I will meet requirements throughout the period of the subgrant, including the following: 1. When open and providing services, I will implement policies in line with guidance and orders from corresponding state, territorial, Tribal, and local authorities and, to the greatest extent possible, implement policies in line with guidance from the U.S. Centers for Disease Control and Prevention (CDC). I will remain open during the grant periods. 2. For each employee (including lead teachers, aides, and any other staff who are employed by the child care provider to work in transportation, food preparation, or other type of service), I must continue paying at least the same amount of weekly wages and maintain the same benefits (such as health insurance and retirement) for the duration of the subgrant. I understand that I may not furlough employees from the date of application submission through the duration of the subgrant period. 3. I will provide relief from copayments and tuition payments for the families enrolled in the child care program, to the extent possible, and prioritize such relief for families struggling to make either type of payment. Note: Child care providers must agree to use the funds for one or more of the following purposes: 1. Personnel costs, benefits, premium pay, and employee recruitment and retention for an employee (someone who owns their own business, like a sole proprietor or an independent contractor, can count themselves as an employee) 2. Rent or mortgage payments, utilities, facilities maintenance and improvements, or insurance 3. Personal protective equipment, cleaning and sanitation supplies and services, or training Provider Affirmation The following signature affirms that I will adhere to the items noted in A, B, and C. It also affirms I will only use the funds in the areas noted in section 5 of this application.” It is the position of SAI that OKDHS cannot adequately ensure the funds were expended appropriately without implementing procedures for oversight and review of amounts actually expended. This would require OKDHS to have procedures to obtain and review the records and other documentation the provider has to determine whether the provider complied with the required use of funds per the Stabilization agreement for at least a sample (or other selected number) of providers receiving the award. SAI would also like to clarify our position with regard to questioned costs related to providers that failed to submit any records requested which the providers are required to maintain and provide for audit purposes. For Single Audits, SAI is required to comply with 2 C.F.R. § 200.1 which states in part “(1) Questioned cost means an amount, expended or received from a Federal award, that in the auditor's judgment: (i) Is noncompliant or suspected noncompliant with Federal statutes, regulations, or the terms and conditions of the Federal award; (ii) At the time of the audit, lacked adequate documentation to support compliance; or (iii) Appeared unreasonable and did not reflect the actions a prudent person would take in the circumstances. (2) The questioned cost amount under (1)(ii) is calculated as if the portion of a transaction that lacked adequate documentation were confirmed noncompliant. We are required to report as questioned costs the $678,595 in Stabilization funds for which 23 providers did not submit any records. These providers were required to maintain these records and agreed to this per their application attestation. Of note, eight of the providers that refused to provide records for the Stabilization award also received the Desert grant award for which they also did not provide any records among other exceptions noted. SAI has also noted that investigations carried out by the OKDHS OIG unit also treat unsupported costs as questioned costs. Lastly, with regard to sampling methodology and the extrapolation of questioned costs, SAI follows the AICPA Government Auditing Standards and Single Audits audit guide. All questioned costs identified in individually selected items (ISI’s) (not part of the sampled population) are not extrapolated, only the questioned costs identified in the sample. The sampling methodology we used for testing Stabilization payments is appropriate for the attributes tested in this population. Questioned Costs Projected Questioned Costs Noncompliance noted in ISI's for records not provided by Provider $146,750 N/A Noncompliance noted in sample for unallowable uses of funds $20,014 $15,624,863 Noncompliance noted in sample for records not provided by Provider $531,845 Total noncompliance noted in sample $551,858 Total Questioned Costs $698,608 Total Projected Questioned Costs $15,771,613
FINDING NO: 2024-098 Strengthen Internal Controls over Excessive Defined Contributions (Pathfinder) Charged to Federal Grant STATE AGENCY: Oklahoma Department of Emergency Management (OEM) FEDERAL AGENCY: Federal Emergency Management Agency (FEMA) ALN: 97.036 FEDERAL PROGRAM NAME: Disaster Grants – Public Assistance (Presidentially Declared Disasters) FEDERAL AWARD NUMBER: 4222-PA, 4299-PA, 4315-PA, 4438-PA, 4453-PA, 4530-PA, 4575-PA, 4587-PA, 4706-PA, 4721-PA, 4776-PA FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Activities Allowed or Unallowed; and Allowable Costs/Cost Principles QUESTIONED COSTS: $14,242 Condition and Context: For employees in Oklahoma’s Pathfinder Defined Contribution (DC) retirement plan, the employer provides a defined contribution match based on the employee’s pay. When the employee’s work benefits Public Assistance or other grants, that portion of the employer match may appropriately be charged to the grant. Additionally, the employer is required to remit an extra amount to the retirement system so total employer contributions meet the standard rate. This extra amount cannot be charged to the grant and must be paid with state funds. During our review, we noted $146,777 was charged to account 513300 for Pathfinder DC costs. Of this amount, the agency recorded $132,535 in payroll corrections. The remaining $14,242 for Pathfinder was not corrected. Consequently, these costs are unallowable and will be reported as questioned costs. Cause: The OEM adjusted for all excess Pathfinder costs charged to employees on regular payroll; however, OEM did not have controls to detect and correct payroll entries for supplemental payroll employees. Effect: Unallowable personnel costs totaling $14,242 were charged to the Public Assistance grant, resulting in improper use of federal funds which are required to be refunded to the Federal agency. Recommendation: We recommend OEM strengthen its internal control system over payroll and cost allocation to ensure only allowable employer DC contributions are charged to federal grants. This should include: • Implementing clear procedures to identify and remove excess DC/Pathfinder charges from federal cost pools. • Reviewing account classifications (including Account 513300) to confirm compliance with federal requirements. • Training payroll and accounting staff on allowable personnel cost rules under 2 CFR Part 200. • Performing periodic reconciliations to verify DC charges billed to federal programs do not exceed the permitted employer contribution rate. Criteria: 2 CFR 200.403 (a) Factors affecting allowability of costs states, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.” 2 CFR 200.431 (c) Compensation – fringe benefits states, . . . “Such benefits, must be allocated to Federal awards and all other activities in a manner consistent with the pattern of benefits attributable to the individuals or group(s) of employees whose salaries and wages are chargeable to such Federal awards and other activities, and charged as direct or indirect costs in accordance with the non-Federal entity's accounting practices.” A basic objective of Generally Accepted Accounting Principles is to provide accurate, reliable, and timely information. Management Response: The agency concurs with the finding. Please see the corrective action plan located in the corrective action plan section of this report.
FINDING NO: 2024-024 (Repeat 2023-088; 2022-085) Strengthen Internal Controls Over Reviewing Administrative Claims STATE AGENCY: State of Oklahoma, Office of Management and Enterprise Services FEDERAL AGENCY: US Department of Treasury ALN: 21.023 FEDERAL PROGRAM NAME: Emergency Rental Assistance (ERA 1 and ERA 2) FEDERAL AWARD NUMBER: ERA028 and ERAE0259 FEDERAL AWARD YEAR: 2024 CONTROL CATEGORY: Activities Allowed/Unallowed and Allowable Costs/Cost Principles QUESTIONED COSTS: $1,080,309 Condition and Context: Administrative costs charged to the ERA 1 and ERA 2 grants must be attributable to providing financial assistance and housing stability services to eligible households and must be necessary and reasonable for the performance of the ERA 1 and ERA 2 Federal award and be allocable to the ERA 1 and ERA 2 Federal award. Also, any direct and indirect administrative costs in ERA1 or ERA2 must be allocated by the grantee to either the provision of financial assistance or the provision of housing stability services. To the extent administrative costs are not readily allocable to the provision of financial assistance or the provision of housing stability services, the grantee may assume an allocation of the relevant costs of 90 percent to financial assistance and 10 percent to housing stability services. In order to determine if the subrecipient Communities Foundation of Oklahoma (CFO)/Communities Cares Partners (CCP), only charged administrative costs to the ERA 1 and ERA 2 grants in compliance with the grant requirements described above, we performed the following procedures: Analysis of Program Expenditures and Administrative Cost Charged over the Period of Performance: We obtained the SFY24 transaction data for the ERA 1 and ERA 2 grants from CFO/CCP and identified the transactions coded to the ERA 1 and ERA 2 grant by 1) awardee (i.e., State of Oklahoma, Cleveland County, Oklahoma County, Oklahoma City); and 2) type of expenditure (i.e., rent and utility assistance payments, rent and utility assistance administrative expenditures, housing stability payments, housing stability administrative expenditures). We noted that the subrecipient had zero expenditures during SFY24 for actual rent and utility assistance, however, $1,845,942 (ERA 2) and $137 (ERA 1) in rent and utility assistance administrative costs were charged to the State of Oklahoma ERA awards. We also noted that the subrecipient had $6,908,183 (ERA 2) in housing stability payments during SFY24 and charged $155,252 in housing stability administrative expenditures to the State of Oklahoma ERA2 award. We also reviewed a timeline provided by CFO/CCP that outlined the activities the subrecipient was engaged in related to the ERA awards over the period of performance. Of note, CFO/CCP stopped accepting rent and utility assistance applications at the end of August 2022 and, by the end of December 2022, CFO/CCP stopped paying virtually all rent and utility assistance applicants and marked all remaining qualified applications in the Neighborly system as Unpaid - Funds Exhausted with the exception of a few Office of Refugee Resettlement (ORR) applications that were processed through the end of June, 2023. In December of 2022, CFO/CCP closed social media channels and platforms and disbanded the Qualifications Team, Client Relations Team, Communications Team, and Processing Team with several contractors held over to continue to address remaining issues. In January of 2023, CFO/CCP created a Clean-up Team to identify and resolve remaining issues and organize files to ensure any staff at the Communities Foundation of Oklahoma could quickly find information they may need upon the closure of CCP. CFO/CCP also began funding 13 ERA-2 Housing Stability Partners. The following table shows the percentage of administrative expenditures (not including the 16 million in unallowable management fees) for the State of Oklahoma ERA 1 and ERA 2 programs administered by CFO/CCP from SFY 21 to SFY 24. CCP/CFO Administrative Expenditures for the State of Oklahoma ERA 1 and ERA 2 Programs Compared to Rent & Utility (RU) Assistance Payments and Housing Stability Expenditures SFY23 ERA 1 & ERA 2 SFY 21 & SFY 22 As of December 31, 2022 As of June 30, 2023 SFY 24 RU Assistance Payments $188,753,605.17 $72,779,085.51 $2,030,717.31 -$334,805.10 RU Assistance Admin Payments $9,113,762.73 $7,099,473.23 $1,524,364.43 $1,846,079.25 Admin % of Assistance Payments 4.83% 9.75% 75.07% -551.39% Housing Stability Payments $17,773,884.27 $1,906,561.94 $4,551,171.62 $6,908,182.87 Housing Stability Admin Payments $274,224.14 $935,236.26 $0.00 $155,252.45 Admin % of Assistance Payments 1.54% 49.05% 0.00% 2.25% Total RU Assistance & HS Payments $206,527,489.44 $74,685,647.45 $6,581,888.93 $6,573,377.77 Total RU Assistance & HS Admin Payments $9,387,986.87 $8,034,709.49 $1,524,364.43 $2,001,331.70 Total Admin % of Program Expenses 4.55% 10.76% 23.16% 30.45% Of note, the 10 % and 15% limit means that administrative costs must not exceed these limits, however, the costs still have to be attributable to providing financial assistance and housing stability services to eligible households and must be necessary and reasonable for the performance of the ERA 1 and ERA 2 Federal award and be allocable to the ERA 1 and ERA 2 Federal award. We identified several issues with CFO/CCP in relation to the amount of administrative expenditures charged to the federal awards in comparison to the actual activities that were performed and/or would have been reasonable and necessary to perform given the type of program expenditures the subrecipient was incurring at the time. Based on our analysis, it appears that CFO/CCP significant increase in administrative costs coincided with the increase to a 15% administrative limit for the ERA 2 grant award instead of the 10% limit under the ERA 1 grant award. We noted that, during this period, (mainly SFY 2023) CFO/CCP made large increases to contractor rates, paid out unallowable bonus payments of approximately 38% of the total contractor payroll (an over 470% increase over the prior period) and increased other administrative costs as well. Almost all rent and utility assistance applications were processed and paid as of the end of December 2022. Administrative costs relevant to processing and paying rent and utility assistance applications far exceed any costs relevant to administering the housing stability activities related to the relatively small number of HS contracts paid in SFY23 and SFY24; however, CFO/CCP’s administrative costs were rising in comparison to the assistance payments. Also, CFO/CCP had 6 months in SFY23 in which very little assistance applications were processed and paid, yet CFO/CCP charged over $500,000 more in SFY24 for admin costs than it did during the last 6 months of SFY23 when the majority of the closeout activities would have been completed. We also noted that CFO/CCP stopped funding qualified applications when they had expended the required 80% of the ERA I award and 75% of the ERA 2 award and not because the funds available to the subrecipient to pay the assistance applications were exhausted. At that time, CFO/CCP had already retained millions in unallowable management fees, earned millions in interest as a result of OMES advancing ERA funds far in advance of when the funds were being expended, and had set aside millions in ERA funds they intended to use for future administrative costs and management fees even though the amount retained was far in excess of what was actually needed to close out the program and administer the remaining housing stability contracts. While performing an analysis on FY21-FY24 payroll expenditures from the ERA program for the subrecipient Communities Foundation of Oklahoma (CFO)/Communities Cares Partners (CCP), we obtained the ERA data and noted the following related to payroll and bonus payments for each year: Bonuses Payroll Total Bonus % FY21 131,500 2,337,034 2,468,534 5.63% FY22 546,826 8,185,607 8,732,433 6.68% FY23 2,407,500 6,318,905 8,726,405 38.10% FY24 139,500 1,182,889 1,322,389 11.79% 3,225,326 18,024,434 21,249,760 17.89% The bonus payments are 17.89% of total payroll expenditures and 11.79% of the total for FY24. We were informed that CFO/CCP management arbitrarily distributed bonuses that were not based on specific criteria, did not adhere to CCP Bonus Policies and Procedures, and were approved after the payments were made. It appears that all bonus payments did not adhere to 2 CFR 200.430 and are unallowable. For FY24, this results in $113,963 (State of Oklahoma federal share) of questioned costs. (Note: $113,963 represents 81.6% of total bonuses of $139,500 for FY24, which is the percentage of State of Oklahoma admin to total admin which includes all other jurisdictions of ERA program funds). In addition, we tested a sample of 48 of 980 (4.90%) payroll administrative expenditures, and identified: • 48 of 48 (100%) claims are not supported with timesheets to reflect the distribution of the employee’s wages among specific activities or cost objectives for the Federal award and do not accurately reflect the work performed specifically for the State of Oklahoma ERA award. CFO also administers the ERA awards for Oklahoma County, The City of Oklahoma and Cleveland County. Also, CFO created four different non-profits internally (Sidexside, Shelterwell, Afghan Legal Network and Latitude Legal) with significant crossover in CCP staff and resources. In addition, CCP appears to have significant private funding attributed to the CCP division, but there is no indication of what projects this money is being used for or which staff members worked on privately funded projects. This results in $56,972.74 in questioned costs (excluding bonus payments). • Nine of 48 (18.75%) claims included unallowable bonus payments totaling $85,000; however, those questioned costs are already included in the SFY24 total amount of $139,500 above. Because CCP confirmed that no time and effort distribution records were kept for the State of Oklahoma ERA programs, and the timesheets did not include the number of hours worked by program, all payroll expenditures are unsupported; therefore, all payroll expenditures are questioned, totaling $966,346 (State of Oklahoma federal share). (Note: $966,346 represents 81.6% of total payroll of $1,182,889 for FY24, which is the percentage of State of Oklahoma admin to total admin which includes all other jurisdictions of ERA program funds) We also observed through CCP’s timeline that the application portal was closed as of August 31, 2022, and, as of December 2022, CCP disbanded the following teams Qualifications, Client Relations, Communications, and Processing; however, we noted that five employees in these divisions were still being paid. In addition, two employees from the fraud department were paid over $100,000 each; however, CCP has been unable to provide a list of applicants, landlords, or payments that were sent to this department for review. Cause: OMES did not timely take corrective action to address prior year findings from the SFY 21 to SFY 23 audits. OMES did not timely take corrective action to require OMES personnel to obtain, review, approve, or maintain adequate supporting documentation for housing stability program costs and housing stability administrative costs. The required corrective action would have included transferring administration of the ERA grant to the GMO office or other personnel with the experience and expertise to administer Federal grant funds before the majority of the ERA funds were expended by the subrecipient. OMES did not establish and maintain effective internal control over its claims process to provide reasonable assurance the Federal award was administered in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Additionally, OMES’s subrecipient monitoring process lacked the strength and consistency to ensure subrecipients established and maintained effective internal control over the Federal award to provide reasonable assurance that the non-Federal entity was managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. Effect: Inadequate review of claims and approving claims without proper supporting documentation increases the risk of unallowable expenses resulting in noncompliance. Furthermore, noncompliance increases the risk of Federal claw backs, which impacts state dollars. Payroll costs totaling $966,346 were not supported by time distribution records. Unallowable bonus payments of $113,963, were charged to the ERA program as payroll administrative expenditures, which could have been used toward Oklahoma applicants in need of ERA funding. OMES’s decision to delay proper oversight of the ERA program and to postpone needed corrective actions until after the majority of grant funds had been expended by a subrecipient, significantly increases the risk that excess funds cannot be recovered. This also greatly increases the risk that the state taxpayers will have to repay more than $23 million in unallowable costs. Recommendation: SAI acknowledges that beginning in FY25, oversight of the ERA program was transferred to the Grants Management Office (GMO). The GMO has two staff members on the team with 20+ years of combined federal grant specific experience. The GMO entered into a subrecipient agreement that does not expire to monitor CFO’s duties and processes. GMO also required CFO to return the remaining ERA 2 program funds to ensure that proper oversight and review of ERA expenditures is performed. The GMO has implemented a multi-level system of internal controls for grant management and oversight that includes routine monitoring, desk review, and site visits for all projects and associated project/administrative expenditures to ensure allowability, accuracy, and to assist in the detection of fraud. For the ERA Program, OMES-GMO conducts bi-weekly monitoring meetings with CFO and is currently reviewing documentation provided by CFO to ensure all current ERA projects are eligible under the ERA guidelines and that CFO is exercising the proper oversight over their subrecipients; therefore, we recommend that the OMES GMO continue implementing the corrective action plan established in FY 2025 to provide proper oversight and monitoring of ERA program expenditures. Criteria: U.S. Department of the Treasury Emergency Rental Assistance Grantee Award Form (8) (a-b) Compliance with Applicable Law and Regulations, states in part, “a. Recipient agrees to comply with the requirements of Section 501 and Treasury interpretive guidance regarding such requirements. Recipient also agrees to comply with all other applicable federal statutes, regulations, and executive orders, and Recipient shall provide for such compliance in any agreements it enters into with other parties relating to this award. b. Federal regulations applicable to this award include, without limitation, the following: i. Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 2 C.F.R. Part 200, other than such provisions as Treasury may determine are inapplicable to this Award and subject to such exceptions as may be otherwise provided by Treasury.” 2 CFR § 200.303(a) – Internal Controls states in part, “The Non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.” For ERA 1, the Consolidated Appropriations Act § Section 501 (c)(5) Use of Funds - Administrative Costs states in part, “A. IN GENERAL.- Not more than 10 percent of the amount paid to an eligible grantee under this section may be used for administrative costs attributable to providing financial assistance and housing stability services under paragraphs (2) and (3), respectively, including for data collection and reporting requirements related to such funds. B. No OTHER ADMINISTRATIVE COSTS.- Amounts paid under this section shall not be used for any administrative costs other than to the extent allowed under subparagraph (A)” For ERA 2, the American Rescue Plan Act of 2021 § Section 3201(C) Administrative Costs states, “Not more than 15 percent of the total amount paid to an eligible grantee under this section may be used for administrative costs attributable to providing financial assistance, housing stability services, and other affordable rental housing and eviction prevention activities, including for data collection and reporting requirements related to such funds.” 2 CFR § 200.334 – Retention requirements for records state in part, “Financial records, supporting documents, statistical records, and all other non-Federal entity records pertinent to a Federal award must be retained for a period of three years from the date of submission of the final expenditure report or, for Federal awards that are renewed quarterly or annually, from the date of the submission of the quarterly or annual financial report, respectively, as reported to the Federal awarding agency or pass-through entity in the case of a subrecipient.” 2 CFR § 200.337 – Access to records states in part, “(a) Records of non-Federal entities. The Federal awarding agency, Inspectors General, the Comptroller General of the United States, and the pass-through entity, or any of their authorized representatives, must have the right of access to any documents, papers, or other records of the non-Federal entity which are pertinent to the Federal award, in order to make audits, examinations, excerpts, and transcripts. The right also includes timely and reasonable access to the non-Federal entity's personnel for the purpose of interview and discussion related to such documents.” 2 CFR § 200.403 – Factors affecting allowability of costs states in part, “Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles.” 2 CFR § 200.430 – Compensation – personal services states in part, “(f) Incentive compensation. Incentive compensation to employees based on cost reduction, efficient performance, suggestion awards, or safety awards is allowable to the extent that the overall compensation is determined to be reasonable and such costs are paid or accrued according to an agreement entered into in good faith between the recipient or subrecipient and the employees before the services were rendered, or according to an established plan followed by the recipient or subrecipient so consistently as to imply, in effect, an agreement to make such payment. (g) (i and iv) Standards for Documentation of Personnel Expenses. (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (iv) Encompass federally-assisted and all other activities compensated by the recipient or subrecipient on an integrated basis but may include the use of subsidiary records as defined in the recipient's or subrecipient's written policy.” For ERA 1, the Consolidated Appropriations Act § Section 501 (c)(5) Use of Funds (c) USE OF FUNDS.— (1) IN GENERAL.—"An eligible grantee shall only use the funds provided from a payment made under this section to provide financial assistance and housing stability services to eligible households. (2) FINANCIAL ASSISTANCE.— (A) IN GENERAL.—Not less than 90 percent of the funds received by an eligible grantee from a payment made under this section shall be used to provide financial assistance to eligible households, including the payment of (i) rent; (ii) rental arrears; (iii) utilities and home energy costs; (iv) utilities and home energy costs arrears; and (v) other expenses related to housing incurred due, directly or indirectly, to the novel coronavirus disease (COVID-19) outbreak, as defined by the Secretary.” For ERA 2, the American Rescue Plan Act of 2021 § Section 3201(C) Administrative Costs states, (D) OTHER AFFORDABLE RENTAL HOUSING AND EVICTION PREVENTION ACTIVITIES.-“An eligible grantee may use any funds from payments made under this section that are unobligated on October 1, 2022, for purposes in addition to those specified in this paragraph, provided that – (i) such other purposes are affordable rental housing and eviction prevention purposes, as defined by the Secretary, serving very low-income families (as such term is defined in section 3(b) of the United States Housing Act of 1937 (42 U.S.C. 1437a(b))); and (ii) prior to obligating any funds for such purposes, the eligible grantee has obligated not less than 75 percent of the total funds allocated to such eligible grantee in accordance with this section.” Management Response Contact Person: Brandy Manek, OMES Director of Budget, Policy and Gaming Compliance Anticipated Completion Date: Completed Corrective Action Planned: The Oklahoma Office of Management and Enterprise Services (OMES) concurs with the finding. See corrective action plan located in the corrective action plan section of this report. Auditor’s Response: With regard to the assertion that the State did not have “sufficient and timely notice to make full corrective actions prior to this FY2024 audit, we respectfully disagree per the following reasons: As a recipient of the Federal ERA award, the State of Oklahoma is responsible for understanding the terms and conditions of the award and to ensure the ERA award is administered in accordance with federal regulations, which includes the cost principles per 2 CFR § 200 included in the ‘Criteria’ section of this finding. In May of 2021, the State first received Coronavirus Relief Fund (CRF) Audit Finding # 2020-083 related to the State’s lack of subrecipient monitoring activities and Audit Finding # 2020-081 related to the State’s failure to obtain adequate supporting documentation for subrecipient expenditures prior to paying for goods and services. The same individual served as the State’s audit contact for both the CRF award and the ERA award and, therefore, the State could have begun implementing required subrecipient monitoring activities and ensuring adequate supporting documentation was obtained from the subrecipient in May of 2021. Although the SFY 2021 Single Audit Report was not actually released until June 2023, the SFY 2021 Single Audit Report was originally scheduled for publication near the end of September of 2022, and, on September 6, 2022, SA & I provided OMES Audit Finding # 2021-081 and Audit Finding # 2021-080 which included the following issues applicable to this finding which SA & I had identified as of that date: From Audit Finding # 2021-081: “OMES entered into agreements with two non-profit entities to administer the ERA program for the State of Oklahoma: Communities Foundation of Oklahoma (CFO) and Restore Hope Ministries (RHM). SAI reviewed the agreements for these two entities and determined that both agreements constituted a subrecipient relationship that would be subject to Part M Subrecipient Monitoring requirements. We noted that OMES failed to perform any required subrecipient monitoring activities, specifically: • OMES did not perform any during the award monitoring activities with regard to the rental and utility applications, housing stability and payments approved and paid by the subrecipients, or the administrative expenditures actually incurred by the subrecipients. OMES provided subrecipients advance payments based off expected program rental and utility expenditures for the month and then paid administrative costs on a set percentage of program funds advanced. OMES did not review any supporting documentation related to actual program expenditures for rental and utility assistance, housing stability activities, or administrative expenditures actually incurred by the subrecipients. While OMES did obtain summary information related to rental and utility payments and housing stability payments made for reporting purposes, OMES did not review any actual administrative expenditures to ensure that the administrative costs were attributable to providing financial assistance and housing stability services to eligible households. • OMES did not obtain any financial records and supporting documents from the subrecipients that would support the actual expenditures incurred by the subrecipients.” From Audit Finding # 2021-080: “While documenting controls over subrecipient program and administrative expenditures for the ERA program, we noted that OMES did not review any supporting documentation related to actual program expenditures for rental and utility assistance or housing stability activities or, administrative expenditures actually incurred by the subrecipients and, did not require that subrecipients submit supporting documentation for actual program and administrative expenditures incurred.” “While reviewing ERA administrative expenditures, we noted the following: One subrecipient charged the ERA grant $2,000,000 in unallowable management fees that were not attributable to providing financial assistance and housing stability services under the ERA program. We questioned $1,563,028 of these costs that were allocated to the State of Oklahoma ERA1 grant.” Given the State first received similar findings for the SFY 2020 CRF award in May of 2021 (12 months before the start of SFY 2023 and 24 months before the start of SFY 2024), the State did have sufficient and timely notice to make full corrective actions prior to this SFY 2024 audit and even prior to the SFY 2023 audit. It is the position of our office that the State could have greatly reduced the amount of ERA questioned costs incurred over the past few years if the State had not waited about three and a half years (May 2021 to January 2025) from when SA & I first provided applicable findings to start implementing corrective action.
Finding No. 2024-004: Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Cost Allocation Plan) – Significant Deficiency in Internal Control over Compliance Federal Program Name: All Pass-through Entity: All Federal Assistance Listing Number: All Criteria In accordance with 2 CFR §200.403 and §200.405, costs charged to federal awards must be adequately documented, allowable, and allocated to programs based on relative benefits received. Organizations allocating shared or indirect costs among multiple funding sources are required to maintain a reasonable, consistently applied, and current cost allocation methodology. Condition The Coalition has not established a formal cost allocation plan (“CAP”) to support the allocation of shared or indirect costs among multiple funding sources and programs. As a result, the Coalition could not demonstrate that costs charged to federal awards were consistently allocated in accordance with a current, formally approved methodology. Questioned Costs Unknown. Context The Coalition allocated shared costs among multiple funding sources during the audit period without a formally documented cost allocation plan. Effect Without a formal cost allocation plan, there is an increased risk that costs charged to federal awards may not be properly allocated, may not reflect relative benefits received, or may not be applied consistently. In addition, the absence of a documented methodology limits the ability to demonstrate that allocations are reasonable and compliant with federal requirements. Cause Procedures were not established to develop, document, and maintain a formal cost allocation methodology for allocating shared or indirect costs. Repeat Finding No Recommendation We recommend that the Coalition develop and formally document a CAP to support the allocation of shared and indirect costs among funding sources. The CAP should clearly define the methodology used to allocate costs, be consistently applied, and be based on relative benefits received. In addition, management should establish procedures for periodic review and update of the CAP to ensure it remains aligned with current operations and funding sources. The CAP should be formally approved by governance and retained as support for cost allocations. Management’s Response/View of Responsible Officials Management agrees with this finding, see the Corrective Action Plan.
MW-2024-010 Lack of Proper Controls Over Compliance for Purchases and Approvals Federal Program Information Federal Agency: U.S. Department of Education Award Name: COVID-19 – Education Stabilization Fund Assistance Listing Number: 84.425D, 84.425U Award Year: 2021 Compliance Requirement: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Type of Finding Compliance Internal Control Over Compliance – Material Weakness Criteria or Specific Requirement Per 2 CFR 200.403, costs charged to federal awards must be necessary, reasonable, allocable, and adequately documented. Additionally, financial management systems are required to provide effective internal controls over federal awards, which requires the City to establish and maintain internal controls that provide reasonable assurance of compliance. Sound internal control practices require proper review and approval of expenditures and purchase orders, and adequate segregation of duties (SOD) to prevent and detect errors or misuse of funds. The City’s internal policies require the Business Administrator to approve purchase orders. Condition and Context During testing of 33 vendor transactions, the City was unable to provide approved purchase orders for 16 transactions. In addition, 4 purchase orders were approved by an individual different from the Business Administrator. The City was also unable to provide approved invoices for 7 transactions. Further, 9 invoices were approved by the same individual responsible for the purchase order, indicating a lack of segregation of duties. These issues indicate that key controls over authorization and segregation of duties were not operating effectively. Cause The City did not maintain or enforce adequate internal controls to ensure allowability of costs. Specifically, established approval controls were not consistently performed or documented, segregation of duties was not appropriately designed or implemented, and oversight procedures were insufficient to ensure compliance with internal policies. Effect or Potential Effect Without proper documentation and adherence to the review and approval process, there is an increased risk of unauthorized or inappropriate expenditures. This could lead to financial mismanagement and non-compliance with funding agency requirements, potentially resulting in funding disallowances. Questioned Costs Although the control deficiencies were significant, no questioned costs are reported, as we were able to obtain sufficient supporting documentation to conclude that the tested expenditures were allowable, reasonable, and allocable. Identification as a Repeat Finding This is a repeat of finding MW-2023-03 as it relates to purchase order approvals. Recommendation We recommend that the City reinforces the importance of following established internal control procedures for reviewing and approving all expenditures. This can be achieved through regular training for staff involved in the procurement process and periodic audits to ensure compliance. Additionally, implementing a centralized document retention system for purchase orders, invoices and related documents will help in maintaining proper records and facilitating easier retrieval during audits. Views of Responsible Official Management’s views and corrective action plan is included at the end of this report.
Health Center Program Cluster – Assistance Listing Nos. 93.224 and 93.527 U.S. Department of Health and Human Services Award No. 6 H80CS00751-22-03, April 1, 2023 – March 31, 2024 Award No. 6 H8FCS41089‐01‐03, April 1, 2021 – March 31, 2024 Community Health Center Program – State Identifying No. 435.151301 Wisconsin Department of Health Agreement No. 435100-G24-3919588107-90, July 1, 2023 – June 30, 2024 Agreement No. 435100-G23-3919588107-390, July 1, 2022 – June 30, 2023 Criteria or Specific Requirement – Allowable Costs/Cost Principles – Federal: 45 CFR 75.403. State: Wisconsin Department of Health Services Allowable Cost Policy Manual (ACPM) and 2 CFR 200.403. Condition – Costs were included as a cost on more than one federal and/or state award program in the current period. Questioned Costs – Federal: $88,199. State: $4,792. Questioned costs were determined by identifying all employees who appeared on more than one grant expenditure listing and reviewing the specific payroll periods charged to each award for duplicates. Questioned costs by federal award identification number are: • Assistance Listing No. 93.224 Award No. 6 H8FCS41089 and Agreement No. 435100-G24-3919588107-390 - $2,056 • Assistance Listing No. 93.527 Award No. 6 H80CS00751 and Agreement No. 435100-G24-3919588107-90 – $2,736 • Assistance Listing No. 93.527 Award No. 6H80CS00751 and Assistance Listing No. 93.224 Award No. 6 H8FCS41089 – $83,407 Context – Salaries and wages for two employees of the Organization were identified as being charged to both Award No. 6 H80CS00751 and 6 H8FCS41089 within the Health Center Program Cluster (HCP) for five to seven months during the fiscal year. For two other employees, salaries and wages were identified as being charged to both the Wisconsin Department of Health Community Health Center Program (CHCG) and one of the awards in the HCP, but instances were limited to only certain payroll periods. Effect – The Organization charged payroll expenditures to more than one funding stream within the HCP and CHCG grant awards. Cause – Salaries and wages are charged to federal and state awards through separate manual tracking spreadsheets, which link back to payroll supporting documentation summarized monthly based on pay date. The Organization’s internal controls intended to prevent charging amounts to more than one award includes a separate spreadsheet listing all employees and identifying the budgeted percentage of salaries and wages associated with each federal and state awards. The system was not accurately updated to reflect changes throughout the year or monitored when the Organization prepared “catch-up” drawdowns after-the-fact to justify use of remaining available grant funds. Identification as a repeat finding, if applicable – Not a repeat finding Recommendation – The Organization should consolidate tracking of salaries and wages charged to federal and state awards into a single listing for each payroll period rather than separate spreadsheets based on summarized monthly payroll data. The Organization should support the distribution of employees’ salaries and wages amongst federal and state awards to accurately reflect the work performed through the timekeeping system and payroll records. Views of responsible officials and planned corrective actions – Upon identification of costs allocated to more than one grant, the Organization identified allowable costs previously charged to program income and reallocated the duplicated expenditures without creating other instances of noncompliance (such as cash management or period of performance). Although the initial support provided to auditors contained instances of expenditures charged to more than one grant, expenditure justification has been updated to reflect corrections and all subsequent grant expenditure detail has been reviewed to ensure no recurrence in the subsequent period. The Organization has also reviewed our internal processes to capture all salaries supported by grants accurately and timely. Additional internal controls such as limiting the number of grants an employee can be on at one time and the reduction of more catch-up drawdowns to account for staffing changes within the organization were implemented. We are also working with our accounting software vendor and payroll vendor to automate the allocation of grant salaries based on time and effort of each individual rather than after-the-fact allocations to grants. This will reduce the need to maintain manual spreadsheets to track staff and essentially eliminate the risk of charging expenditures to more than one grant. Further, relevant staff participated in a training focused on CHC grants management matters in December 2024 and will continue to look for learning opportunities to support and challenge compliance matters.
Health Center Program Cluster – Assistance Listing Nos. 93.224 and 93.527 U.S. Department of Health and Human Services Award No. 6 H80CS00751-22-03, April 1, 2023 – March 31, 2024 Award No. 6 H8FCS41089‐01‐03, April 1, 2021 – March 31, 2024 Community Health Center Program – State Identifying No. 435.151301 Wisconsin Department of Health Agreement No. 435100-G24-3919588107-90, July 1, 2023 – June 30, 2024 Agreement No. 435100-G23-3919588107-390, July 1, 2022 – June 30, 2023 Criteria or Specific Requirement – Allowable Costs/Cost Principles – Federal: 45 CFR 75.403. State: Wisconsin Department of Health Services Allowable Cost Policy Manual (ACPM) and 2 CFR 200.403. Condition – Costs were included as a cost on more than one federal and/or state award program in the current period. Questioned Costs – Federal: $88,199. State: $4,792. Questioned costs were determined by identifying all employees who appeared on more than one grant expenditure listing and reviewing the specific payroll periods charged to each award for duplicates. Questioned costs by federal award identification number are: • Assistance Listing No. 93.224 Award No. 6 H8FCS41089 and Agreement No. 435100-G24-3919588107-390 - $2,056 • Assistance Listing No. 93.527 Award No. 6 H80CS00751 and Agreement No. 435100-G24-3919588107-90 – $2,736 • Assistance Listing No. 93.527 Award No. 6H80CS00751 and Assistance Listing No. 93.224 Award No. 6 H8FCS41089 – $83,407 Context – Salaries and wages for two employees of the Organization were identified as being charged to both Award No. 6 H80CS00751 and 6 H8FCS41089 within the Health Center Program Cluster (HCP) for five to seven months during the fiscal year. For two other employees, salaries and wages were identified as being charged to both the Wisconsin Department of Health Community Health Center Program (CHCG) and one of the awards in the HCP, but instances were limited to only certain payroll periods. Effect – The Organization charged payroll expenditures to more than one funding stream within the HCP and CHCG grant awards. Cause – Salaries and wages are charged to federal and state awards through separate manual tracking spreadsheets, which link back to payroll supporting documentation summarized monthly based on pay date. The Organization’s internal controls intended to prevent charging amounts to more than one award includes a separate spreadsheet listing all employees and identifying the budgeted percentage of salaries and wages associated with each federal and state awards. The system was not accurately updated to reflect changes throughout the year or monitored when the Organization prepared “catch-up” drawdowns after-the-fact to justify use of remaining available grant funds. Identification as a repeat finding, if applicable – Not a repeat finding Recommendation – The Organization should consolidate tracking of salaries and wages charged to federal and state awards into a single listing for each payroll period rather than separate spreadsheets based on summarized monthly payroll data. The Organization should support the distribution of employees’ salaries and wages amongst federal and state awards to accurately reflect the work performed through the timekeeping system and payroll records. Views of responsible officials and planned corrective actions – Upon identification of costs allocated to more than one grant, the Organization identified allowable costs previously charged to program income and reallocated the duplicated expenditures without creating other instances of noncompliance (such as cash management or period of performance). Although the initial support provided to auditors contained instances of expenditures charged to more than one grant, expenditure justification has been updated to reflect corrections and all subsequent grant expenditure detail has been reviewed to ensure no recurrence in the subsequent period. The Organization has also reviewed our internal processes to capture all salaries supported by grants accurately and timely. Additional internal controls such as limiting the number of grants an employee can be on at one time and the reduction of more catch-up drawdowns to account for staffing changes within the organization were implemented. We are also working with our accounting software vendor and payroll vendor to automate the allocation of grant salaries based on time and effort of each individual rather than after-the-fact allocations to grants. This will reduce the need to maintain manual spreadsheets to track staff and essentially eliminate the risk of charging expenditures to more than one grant. Further, relevant staff participated in a training focused on CHC grants management matters in December 2024 and will continue to look for learning opportunities to support and challenge compliance matters.
Health Center Program Cluster – Assistance Listing Nos. 93.224 and 93.527 U.S. Department of Health and Human Services Award No. 6 H80CS00751-22-03, April 1, 2023 – March 31, 2024 Award No. 6 H8FCS41089‐01‐03, April 1, 2021 – March 31, 2024 Community Health Center Program – State Identifying No. 435.151301 Wisconsin Department of Health Agreement No. 435100-G24-3919588107-90, July 1, 2023 – June 30, 2024 Agreement No. 435100-G23-3919588107-390, July 1, 2022 – June 30, 2023 Criteria or Specific Requirement – Allowable Costs/Cost Principles – Federal: 45 CFR 75.403. State: Wisconsin Department of Health Services Allowable Cost Policy Manual (ACPM) and 2 CFR 200.403. Condition – Costs were included as a cost on more than one federal and/or state award program in the current period. Questioned Costs – Federal: $88,199. State: $4,792. Questioned costs were determined by identifying all employees who appeared on more than one grant expenditure listing and reviewing the specific payroll periods charged to each award for duplicates. Questioned costs by federal award identification number are: • Assistance Listing No. 93.224 Award No. 6 H8FCS41089 and Agreement No. 435100-G24-3919588107-390 - $2,056 • Assistance Listing No. 93.527 Award No. 6 H80CS00751 and Agreement No. 435100-G24-3919588107-90 – $2,736 • Assistance Listing No. 93.527 Award No. 6H80CS00751 and Assistance Listing No. 93.224 Award No. 6 H8FCS41089 – $83,407 Context – Salaries and wages for two employees of the Organization were identified as being charged to both Award No. 6 H80CS00751 and 6 H8FCS41089 within the Health Center Program Cluster (HCP) for five to seven months during the fiscal year. For two other employees, salaries and wages were identified as being charged to both the Wisconsin Department of Health Community Health Center Program (CHCG) and one of the awards in the HCP, but instances were limited to only certain payroll periods. Effect – The Organization charged payroll expenditures to more than one funding stream within the HCP and CHCG grant awards. Cause – Salaries and wages are charged to federal and state awards through separate manual tracking spreadsheets, which link back to payroll supporting documentation summarized monthly based on pay date. The Organization’s internal controls intended to prevent charging amounts to more than one award includes a separate spreadsheet listing all employees and identifying the budgeted percentage of salaries and wages associated with each federal and state awards. The system was not accurately updated to reflect changes throughout the year or monitored when the Organization prepared “catch-up” drawdowns after-the-fact to justify use of remaining available grant funds. Identification as a repeat finding, if applicable – Not a repeat finding Recommendation – The Organization should consolidate tracking of salaries and wages charged to federal and state awards into a single listing for each payroll period rather than separate spreadsheets based on summarized monthly payroll data. The Organization should support the distribution of employees’ salaries and wages amongst federal and state awards to accurately reflect the work performed through the timekeeping system and payroll records. Views of responsible officials and planned corrective actions – Upon identification of costs allocated to more than one grant, the Organization identified allowable costs previously charged to program income and reallocated the duplicated expenditures without creating other instances of noncompliance (such as cash management or period of performance). Although the initial support provided to auditors contained instances of expenditures charged to more than one grant, expenditure justification has been updated to reflect corrections and all subsequent grant expenditure detail has been reviewed to ensure no recurrence in the subsequent period. The Organization has also reviewed our internal processes to capture all salaries supported by grants accurately and timely. Additional internal controls such as limiting the number of grants an employee can be on at one time and the reduction of more catch-up drawdowns to account for staffing changes within the organization were implemented. We are also working with our accounting software vendor and payroll vendor to automate the allocation of grant salaries based on time and effort of each individual rather than after-the-fact allocations to grants. This will reduce the need to maintain manual spreadsheets to track staff and essentially eliminate the risk of charging expenditures to more than one grant. Further, relevant staff participated in a training focused on CHC grants management matters in December 2024 and will continue to look for learning opportunities to support and challenge compliance matters.
Health Center Program Cluster – Assistance Listing Nos. 93.224 and 93.527 U.S. Department of Health and Human Services Award No. 6 H80CS00751-22-03, April 1, 2023 – March 31, 2024 Award No. 6 H8FCS41089‐01‐03, April 1, 2021 – March 31, 2024 Community Health Center Program – State Identifying No. 435.151301 Wisconsin Department of Health Agreement No. 435100-G24-3919588107-90, July 1, 2023 – June 30, 2024 Agreement No. 435100-G23-3919588107-390, July 1, 2022 – June 30, 2023 Criteria or Specific Requirement – Allowable Costs/Cost Principles – Federal: 45 CFR 75.403. State: Wisconsin Department of Health Services Allowable Cost Policy Manual (ACPM) and 2 CFR 200.403. Condition – Costs were included as a cost on more than one federal and/or state award program in the current period. Questioned Costs – Federal: $88,199. State: $4,792. Questioned costs were determined by identifying all employees who appeared on more than one grant expenditure listing and reviewing the specific payroll periods charged to each award for duplicates. Questioned costs by federal award identification number are: • Assistance Listing No. 93.224 Award No. 6 H8FCS41089 and Agreement No. 435100-G24-3919588107-390 - $2,056 • Assistance Listing No. 93.527 Award No. 6 H80CS00751 and Agreement No. 435100-G24-3919588107-90 – $2,736 • Assistance Listing No. 93.527 Award No. 6H80CS00751 and Assistance Listing No. 93.224 Award No. 6 H8FCS41089 – $83,407 Context – Salaries and wages for two employees of the Organization were identified as being charged to both Award No. 6 H80CS00751 and 6 H8FCS41089 within the Health Center Program Cluster (HCP) for five to seven months during the fiscal year. For two other employees, salaries and wages were identified as being charged to both the Wisconsin Department of Health Community Health Center Program (CHCG) and one of the awards in the HCP, but instances were limited to only certain payroll periods. Effect – The Organization charged payroll expenditures to more than one funding stream within the HCP and CHCG grant awards. Cause – Salaries and wages are charged to federal and state awards through separate manual tracking spreadsheets, which link back to payroll supporting documentation summarized monthly based on pay date. The Organization’s internal controls intended to prevent charging amounts to more than one award includes a separate spreadsheet listing all employees and identifying the budgeted percentage of salaries and wages associated with each federal and state awards. The system was not accurately updated to reflect changes throughout the year or monitored when the Organization prepared “catch-up” drawdowns after-the-fact to justify use of remaining available grant funds. Identification as a repeat finding, if applicable – Not a repeat finding Recommendation – The Organization should consolidate tracking of salaries and wages charged to federal and state awards into a single listing for each payroll period rather than separate spreadsheets based on summarized monthly payroll data. The Organization should support the distribution of employees’ salaries and wages amongst federal and state awards to accurately reflect the work performed through the timekeeping system and payroll records. Views of responsible officials and planned corrective actions – Upon identification of costs allocated to more than one grant, the Organization identified allowable costs previously charged to program income and reallocated the duplicated expenditures without creating other instances of noncompliance (such as cash management or period of performance). Although the initial support provided to auditors contained instances of expenditures charged to more than one grant, expenditure justification has been updated to reflect corrections and all subsequent grant expenditure detail has been reviewed to ensure no recurrence in the subsequent period. The Organization has also reviewed our internal processes to capture all salaries supported by grants accurately and timely. Additional internal controls such as limiting the number of grants an employee can be on at one time and the reduction of more catch-up drawdowns to account for staffing changes within the organization were implemented. We are also working with our accounting software vendor and payroll vendor to automate the allocation of grant salaries based on time and effort of each individual rather than after-the-fact allocations to grants. This will reduce the need to maintain manual spreadsheets to track staff and essentially eliminate the risk of charging expenditures to more than one grant. Further, relevant staff participated in a training focused on CHC grants management matters in December 2024 and will continue to look for learning opportunities to support and challenge compliance matters.
2024-005 Period of Performance Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.403(h) requires that costs be incurred in the approved budget period for the applicable awards and Title 2 CFR 200.403(e) requires that those costs be determined according to generally accepted accounting principles (GAAP). Condition The Organization’s federal expenditures includes costs for goods and/or services outside of the approved budget periods for the awards. Cause The Organization’s internal controls over compliance did not include consideration of when the goods were received or services were performed compared to the budget periods for the awards. Lack of understanding of GAAP and the requirements of accrual basis accounting allowed expenditures outside of the applicable budget periods to be approved and claimed as current federal expenditures based solely on management’s decision to pay for the expenditure in the current year. Effect The Organization may allocate unallowable costs to the federal awards. Questioned Costs $321,877 (of which $283,128 was previously reported in finding 2024-004 above) Context In a sample of sixty invoices, we noted eight included expenditures for goods or services that were not provided in the current budget period. $283,129 of expenditures charged to the program were for goods or services related to future budget periods. $38,748 of expenditures charged to the program were for goods or services related to previous budget periods. Recommendation We recommend management personnel authorized to approve expenditures of federal awards be limited to those who have a basic understanding of GAAP and the relationship between the accrual basis of accounting and the period of performance requirements. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-005 Period of Performance Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.403(h) requires that costs be incurred in the approved budget period for the applicable awards and Title 2 CFR 200.403(e) requires that those costs be determined according to generally accepted accounting principles (GAAP). Condition The Organization’s federal expenditures includes costs for goods and/or services outside of the approved budget periods for the awards. Cause The Organization’s internal controls over compliance did not include consideration of when the goods were received or services were performed compared to the budget periods for the awards. Lack of understanding of GAAP and the requirements of accrual basis accounting allowed expenditures outside of the applicable budget periods to be approved and claimed as current federal expenditures based solely on management’s decision to pay for the expenditure in the current year. Effect The Organization may allocate unallowable costs to the federal awards. Questioned Costs $321,877 (of which $283,128 was previously reported in finding 2024-004 above) Context In a sample of sixty invoices, we noted eight included expenditures for goods or services that were not provided in the current budget period. $283,129 of expenditures charged to the program were for goods or services related to future budget periods. $38,748 of expenditures charged to the program were for goods or services related to previous budget periods. Recommendation We recommend management personnel authorized to approve expenditures of federal awards be limited to those who have a basic understanding of GAAP and the relationship between the accrual basis of accounting and the period of performance requirements. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-005 Period of Performance Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.403(h) requires that costs be incurred in the approved budget period for the applicable awards and Title 2 CFR 200.403(e) requires that those costs be determined according to generally accepted accounting principles (GAAP). Condition The Organization’s federal expenditures includes costs for goods and/or services outside of the approved budget periods for the awards. Cause The Organization’s internal controls over compliance did not include consideration of when the goods were received or services were performed compared to the budget periods for the awards. Lack of understanding of GAAP and the requirements of accrual basis accounting allowed expenditures outside of the applicable budget periods to be approved and claimed as current federal expenditures based solely on management’s decision to pay for the expenditure in the current year. Effect The Organization may allocate unallowable costs to the federal awards. Questioned Costs $321,877 (of which $283,128 was previously reported in finding 2024-004 above) Context In a sample of sixty invoices, we noted eight included expenditures for goods or services that were not provided in the current budget period. $283,129 of expenditures charged to the program were for goods or services related to future budget periods. $38,748 of expenditures charged to the program were for goods or services related to previous budget periods. Recommendation We recommend management personnel authorized to approve expenditures of federal awards be limited to those who have a basic understanding of GAAP and the relationship between the accrual basis of accounting and the period of performance requirements. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.
2024-005 Period of Performance Program Information Federal Organization U.S Department of Health and Human Services Assistance Listing Numbers 93.224 & 93.527 Health Center Program Cluster Award Numbers H80CS00513, H8FCS41684, H8GC48547, H8LCS51197 Criteria [X] Compliance Finding [ ] Significant Deficiency [X] Material Weakness Title 2 CFR 200.403(h) requires that costs be incurred in the approved budget period for the applicable awards and Title 2 CFR 200.403(e) requires that those costs be determined according to generally accepted accounting principles (GAAP). Condition The Organization’s federal expenditures includes costs for goods and/or services outside of the approved budget periods for the awards. Cause The Organization’s internal controls over compliance did not include consideration of when the goods were received or services were performed compared to the budget periods for the awards. Lack of understanding of GAAP and the requirements of accrual basis accounting allowed expenditures outside of the applicable budget periods to be approved and claimed as current federal expenditures based solely on management’s decision to pay for the expenditure in the current year. Effect The Organization may allocate unallowable costs to the federal awards. Questioned Costs $321,877 (of which $283,128 was previously reported in finding 2024-004 above) Context In a sample of sixty invoices, we noted eight included expenditures for goods or services that were not provided in the current budget period. $283,129 of expenditures charged to the program were for goods or services related to future budget periods. $38,748 of expenditures charged to the program were for goods or services related to previous budget periods. Recommendation We recommend management personnel authorized to approve expenditures of federal awards be limited to those who have a basic understanding of GAAP and the relationship between the accrual basis of accounting and the period of performance requirements. Views of responsible officials and planned corrective action Management is in agreement with this finding and will take corrective action as outlined below.