2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness) U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end. Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance. Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing. Questioned Costs: $33,439 Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager. Repeat Finding: No Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
2023-002 Internal Controls over Period of Performance and Procurement, Suspension and Debarment (Material Weakness) U.S. Department of Housing and Urban Development 14.267 Continuum of Care Program 2023-2024 Funding Criteria: Under 2 CFR Section 200.303(a), non-federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Furthermore, under 2 CFR Section 200.320, the Organization must have and use documented procurement procedures for acquisition of property and services under a federal award or a sub-award. Condition: AIH’s control process relied on the review of Director of Housing and Supportive Services for maintaining compliance with the period of performance and procurement, suspension and debarment requirements under the Compliance Supplement. However, that control appears to not have worked as intended during the year because of identified fraud relating to questionable procurements for certain services obtained throughout the year that were subject to approval and review by the Director of Housing and Supporting Services. Note that the fraud was identified by management and has already been reported to the grantor. In addition, an accrual for the fraudulent reimbursements was recorded at year end. Cause: The Director of Housing and Supportive Services did not adequately review credit card and check transactions to ensure transactions were for legitimate business purposes and within the period of performance. Effect: Allowable cost was not required to be tested under the compliance supplement. However, AIH has already identified and accrued for remittances to be made to the grantor for fraudulent reimbursements. For testing of period of performance and procurement, suspension and debarment compliance requirements, sample sizes had to be increased to gain comfort over the requirements to be tested. No compliance issues were identified during our testing. Questioned Costs: $33,439 Perspective: Identified fraud by management was specific to one former program coordinator and one former case manager. Repeat Finding: No Recommendation: Director of Housing and Supportive Services and any other approvers should be retrained to identify allowable and reasonable costs under the grant before approving such requests. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
Finding No.2023-003: Improve Controls Over Expense Reporting and Payroll Charges Assistance Listing Number: 93.566 Assistance Listing Program Title: Refugee and Entrant Assistance – State - Administered Programs Federal Agency: Department of Health and Human Services (HHS) Passed Through Entity: 1. San Diego Refugee Communities Coalition/United Women of East Africa Support Team 2. California Department of Social Services (CDSS) Federal Award Number: 1. Not available in the contract 2. ACS22-05-CAIR-A1 Federal Award Year: 1. February 1, 2023 – March 31, 2024 2. November 1, 2022 – March 31, 2025 Compliance Requirement: Allowable Costs/Cost Principles Criteria or Specific Requirements: In accordance with 2 CFR 200.403 and 200.405, costs charged to a federal award must be necessary, reasonable, and allocable. In addition, 2 CFR 200.430 Compensation-personal services, provides that compensation for personal services must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our testing of 21 non-payroll expenses, we identified one instance wherein translation services amounting to $795, provided by a staff member, were charged under professional fees, even though the individual's salary was recorded and billed under salary expenses. Additionally, in our testing of 25 payroll expenses, we identified one instance of overbilling in the amount $622. This occurred because the payroll charge was based on budgeted Full Time Equivalents (FTEs) rather than the actual time worked. Cause: CAIR-CA's current internal controls for reviewing billings under the federal program were not sufficient to consistently prevent or detect duplicate or inaccurate charges. Furthermore, CAIR-CA lacked adequate internal controls to ensure that payroll allocations were based on actual time worked on the federal program. Effect: These control deficiencies resulted in the overbilling of federal funds. Questioned Cost: $1,417 Recommendation: To ensure compliance with the Uniform Guidance, we recommend that CAIR-CA strengthen its internal controls over expense reporting by implementing enhanced review procedures to verify the allowability of costs charged to federal awards. Additionally, CAIR-CA should establish formal procedures to ensure that payroll charges to federal programs are based on actual time and effort records. Management should conduct regular reviews and make necessary adjustments to payroll allocations to accurately reflect the work performed on federally funded activities. Views of Responsible Officials and Corrective Action Plan: Management concurs with the finding and has already initiated enhancements to its review process to ensure that expense reports are consistently reviewed and approved by both supervisors and finance personnel prior to being charged to federal awards. These steps are designed to further strengthen internal controls and support compliance with federal requirements. In addition, Finance staff are formalizing procedures to reconcile payroll charges on a regular basis to ensure compliance with federal requirements and to confirm that all charges to federal programs are supported by actual time and effort records. Responsible person: Jackie Ramirez, Operations & Finance Associate Director Expected Implementation date: October 31, 2025
Finding No.2023-003: Improve Controls Over Expense Reporting and Payroll Charges Assistance Listing Number: 93.566 Assistance Listing Program Title: Refugee and Entrant Assistance – State - Administered Programs Federal Agency: Department of Health and Human Services (HHS) Passed Through Entity: 1. San Diego Refugee Communities Coalition/United Women of East Africa Support Team 2. California Department of Social Services (CDSS) Federal Award Number: 1. Not available in the contract 2. ACS22-05-CAIR-A1 Federal Award Year: 1. February 1, 2023 – March 31, 2024 2. November 1, 2022 – March 31, 2025 Compliance Requirement: Allowable Costs/Cost Principles Criteria or Specific Requirements: In accordance with 2 CFR 200.403 and 200.405, costs charged to a federal award must be necessary, reasonable, and allocable. In addition, 2 CFR 200.430 Compensation-personal services, provides that compensation for personal services must be based on records that accurately reflect the work performed. These records must be supported by a system of internal control that provides reasonable assurance that the charges are accurate, allowable, and properly allocated. Condition: During our testing of 21 non-payroll expenses, we identified one instance wherein translation services amounting to $795, provided by a staff member, were charged under professional fees, even though the individual's salary was recorded and billed under salary expenses. Additionally, in our testing of 25 payroll expenses, we identified one instance of overbilling in the amount $622. This occurred because the payroll charge was based on budgeted Full Time Equivalents (FTEs) rather than the actual time worked. Cause: CAIR-CA's current internal controls for reviewing billings under the federal program were not sufficient to consistently prevent or detect duplicate or inaccurate charges. Furthermore, CAIR-CA lacked adequate internal controls to ensure that payroll allocations were based on actual time worked on the federal program. Effect: These control deficiencies resulted in the overbilling of federal funds. Questioned Cost: $1,417 Recommendation: To ensure compliance with the Uniform Guidance, we recommend that CAIR-CA strengthen its internal controls over expense reporting by implementing enhanced review procedures to verify the allowability of costs charged to federal awards. Additionally, CAIR-CA should establish formal procedures to ensure that payroll charges to federal programs are based on actual time and effort records. Management should conduct regular reviews and make necessary adjustments to payroll allocations to accurately reflect the work performed on federally funded activities. Views of Responsible Officials and Corrective Action Plan: Management concurs with the finding and has already initiated enhancements to its review process to ensure that expense reports are consistently reviewed and approved by both supervisors and finance personnel prior to being charged to federal awards. These steps are designed to further strengthen internal controls and support compliance with federal requirements. In addition, Finance staff are formalizing procedures to reconcile payroll charges on a regular basis to ensure compliance with federal requirements and to confirm that all charges to federal programs are supported by actual time and effort records. Responsible person: Jackie Ramirez, Operations & Finance Associate Director Expected Implementation date: October 31, 2025
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile the balance sheet accounts, such as cash, receivables, payables, and payroll-related liabilities to the underlying supporting documentation available at the City (which includes reconciliations of cash prepared independently by City personnel but do not agree to amounts reported in the various general ledgers). This included ‘Funds” containing significant federal funding such as the City’s Community Development Block Grant (CDBG) Program and American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. However, it should be noted that the Community Development Department of the City and other City personnel maintain separate financial reporting for these federal funds, independent of the aforementioned ‘Fund’ general ledgers sufficient to ascertain the revenues and expenditures of the federal programs. This is a repeat finding (2022-001) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process.In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the applicable general ledgers of the City. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, issues such as non-postings, and inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: City business office personnel perform a variety of duties such as accounting for deposits, invoice processing, reconciliation of cash (but not to the various general ledger accounts of the City), preparation of payroll, and posting of financial transactions to the City’s general ledgers. However, no one individual is responsible for managing and reconciling all of the aforementioned procedures to the various ‘Fund’ general ledgers at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
CONDITION: During the calendar year 2023, the City did not utilize a formal general ledger system of accounting to track the financial activity (financial position and results of operations) for several ‘Funds’ held at the City. The activity of these funds is either 1) maintained in spreadsheet fashion similar to a checkbook used in personal finances, 2) recorded partially (expenses only with no revenue), or 3) not tracked at all. As these funds are not maintained using the City’s accounting software package, management does not have the ability to efficiently generate financial reports necessary to provide management with the proper fiscal oversight. This condition included the American Rescue Plan Act (ARPA) funding known as the Coronavirus State and Local Fiscal Recovery Fund. However, it should be noted that City personnel were able to prepare spreadsheets to document which expenditures were utilized to prepare the necessary quarterly reporting requirements to the Department of Treasury. This is a repeat finding (2022-002) from the prior year. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include maintaining a formal general ledger system of accounting to track the activity of all ‘Funds’ maintained by the City. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the maintaining of a formal general ledger system of accounting for all ‘Funds’ of the City. EFFECT: The lack of procedures in place for maintaining a formal general ledger system of accounting for all ‘Funds’ of the City 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: The City began the process during calendar year 2019 of creating general ledgers on the computer accounting software system for all funds of the City, however due to changes in business office personnel, and other workload responsibilities, the City has not been able to fully complete this process. RECOMMENDATION: I am recommending that the City continue the process of making sure the financial activity for all funds individually is entered into the software accounting system. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
FINDING 2023-003 Subject: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds - Activities Allowed or Unallowed, Allowable Costs/Cost Principles Federal Agency: Department of the Treasury Federal Program: COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Assistance Listings Number: 21.027 Federal Award Number and Year (or Other Identifying Number): IN0263 Compliance Requirements: Activities Allowed or Unallowed, Allowable Costs/Cost Principles Audit Findings: Material Weakness, Modified Opinion Repeat Finding This is a repeat finding from the immediately prior audit report. The prior audit finding number was 2022-004. Condition and Context Prior to receipt of direct State and Local Fiscal Recovery Funds (SLFRF) award funds, all eligible entities were required to execute a Financial Assistance Agreement (Agreement), which included the award terms and conditions that recipients must comply with in carrying out the objectives of their award. Per the Agreement, the City was responsible for the effective administration of the federal award, as well as the application of sound management practices and administration of federal funds in a manner consistent with program objectives and terms and conditions of the award. Activities Allowed or Unallowed, Allowable Costs/Cost Principles As part of sound management of the federal award, the City was responsible for implementing a system of internal controls that would ensure compliance with the applicable requirements. The City had not properly designed or implemented such a system. There was no evidence of segregation of duties, such as an oversight, review, or approval process related to these expenditures that would have ensured that expenditures of award funds were made only for activities and costs that were allowable under the federal award and federal regulations. The City passed Ordinance 2022-45 approving a "commitment of up to but not to exceed $400,000 for Infrastructure at the Junction." However, the City made no formal agreements for the payment of claims in relation to the "Junction" Project. Of the ten claims paid with SLFRF funds during 2023, two claims totaling $400,000 were for the "Junction" project. Both claims were paid without itemized invoices and adequate supporting documentation to support amounts paid. INDIANA STATE BOARD OF ACCOUNTS 19 CITY OF LOGANSPORT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Additionally, the City did not ensure a proper system of internal controls was in place to accurately track expenditures for the SLFRF grant. In 2022, $2.5 million of SLFRF grant funds were transferred out of the City's SLFRF fund into the City of Logansport Project Fund at a financial institution in the name of the City (bank account) and were subsequently comingled with other nonfederal funds as part of a Build Operate Transfer (BOT) Agreement. Of this $2.5 million, $1,626,043 was spent during 2022, leaving $873,957 of the original $2.5 million to be spent in 2023. During 2023, the City disbursed $4,369,454 from its BOT bank account, where SLFRF and other funding sources were comingled without tracking which expenditures were expressly for the purpose of SLFRF. It was not possible to obtain a population of federal expenditures for the BOT expenditures due to this comingling; therefore, a portion of the Activities Allowed or Unallowed and Allowable Costs/Cost Principles compliance requirements could not be tested. Costs totaling $1,273,957 were not properly documented and were considered questioned costs. The lack of internal controls and noncompliance was a systemic issue throughout the audit period. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.302 states in part: "(a) Each state must expend and account for the Federal award in accordance with state laws and procedures for expending and accounting for the state's own funds. In addition, the state's and the other non-Federal entity's financial management systems, including records documenting compliance with Federal statutes, regulations, and the terms and conditions of the Federal award, must be sufficient to permit the preparation of reports required by general and program specific terms and conditions; and the tracing of funds to a level of expenditures adequate to establish that such funds have been used according to the Federal statutes, regulations, and the terms and conditions of the Federal award. . . . (b) The financial management system of each non-Federal entity must provide for the following . . . (1) Identification, in its accounts, of all Federal awards received and expended and the Federal programs under which they were received. Federal program and Federal award identification must include, as applicable, the Assistance Listings title and number, Federal award identification number and year, name of the Federal agency, and name of the pass-through entity, if any. INDIANA STATE BOARD OF ACCOUNTS 20 CITY OF LOGANSPORT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (2) Accurate, current, and complete disclosure of the financial results of each Federal award or program in accordance with the reporting requirements set forth in §§ 200.328 and 200.329. . . . (3) Records that identify adequately the source and application of funds for federally funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. (4) Effective control over, and accountability for, all funds, property, and other assets. . . ." 2 CFR 200.400 states in part: "The application of these cost principles is based on the fundamental premises that: (a) The non-Federal entity is responsible for the efficient and effective administration of the Federal award through the application of sound management practices. (b) The non-Federal entity assumes responsibility for administering Federal funds in a manner consistent with underlying agreements, program objectives, and the terms and conditions of the Federal award. (c) The non-Federal entity, in recognition of its own unique combination of staff, facilities, and experience, has the primary responsibility for employing whatever form of sound organization and management techniques may be necessary in order to assure proper and efficient administration of the Federal award. . . ." 2 CFR 200.403(g) states in part: "Be adequately documented. . . ." 2 CFR 200.404 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: . . . (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." Cause Due to the lack of internal controls, the City was unable to differentiate expenditures made from federal and nonfederal funds once it commingled nonfederal funds and federal grant awards in a single bank account. Additionally, the City did not obtain appropriate supporting documentation for federal expenditures. INDIANA STATE BOARD OF ACCOUNTS 21 CITY OF LOGANSPORT SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Effect The City was unable to identify all the expenditures paid with federal funds and cannot ensure, nor can we determine, expenditures of the grant were not unallowable and adhered to established practices and polices. This could result in the misuse of funds and the potential loss of funding for future federal awards. Questioned Costs We identified $1,273,957 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended that management of the City establish a system of internal controls to ensure that grant award funds are accounted for and tracked in a designated grant fund. All activity of the grant should be in this fund with supporting documentation for each transaction. Additionally, the City should obtain appropriate supporting documentation for all federal grant expenditures. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Finding #2023-005 Federal Program: 21.027 - Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) Repeat Finding: No Condition: During our audit of CSLFRF expenditures, we noted that the Organization charged $37,600 in office rent costs entirely to one CSLFRF grant (CSLFRF – Juntos). However, the rented office space was used to support activities under the CSLFRF – Juntos grant, a separate CSLFRF grant (CSLFRF – Centro Comunitario) and the general operations of the Organization. The Organization did not allocate rent costs between the two grants and general operations based on relative benefits received, resulting in an improper direct charge to a single award. Criteria: Per 2 CFR § 200.405, costs must be allocated to federal awards in accordance with the relative benefits received. Additionally, 2 CFR § 200.403 requires that costs charged to federal awards be necessary, reasonable, and allocable. Costs benefiting more than one award should be distributed among those awards to reflect the proportionate benefit each award received. Cause: The Organization did not properly implement procedures to allocate shared costs among multiple federal awards, resulting in the entire rent expense being charged to a single grant rather than distributed proportionally between both CSLFRF grants. Effect: The Organization has two grants under the CSLFRF program (Juntos Adelante and Centro Communitario Adelante on the Schedule of Expenditures of Federal Awards). The Organization charged $37,600 to the Juntos Adelante grant; however, determined that $4,324 should have been expensed under the Centro Communitario Adelante grant and $8,836 should not have been charged to either grant based on the proportionate benefit. Context: During testing of rent expenditures for the CSLFRF program, we noted the Organization’s lease agreement covered office space used by staff working on both Grant A and Grant B. The Organization confirmed no cost allocation methodology was used to split costs between the grants. Questioned Costs: See “Effect” Recommendation: We recommend that the Organization reallocate rent costs between the CSLFRF grants in accordance with the relative benefit each grant receives; develop and implement written procedures to allocate shared costs appropriately among federal awards; provide training to accounting staff on cost allocation requirements under Uniform Guidance. Reporting Views of Responsible Officials: Management concurs with the finding and will develop an allocation methodology for shared costs and reclassify expenses between CSLFRF grants. Management will work with the grantor to correct the costs charged to each grant.
Criteria: Under the Uniform Guidance, specifically 2 CFR 200.430, charges to Federal awards for compensation must be supported by a system of internal control which provides reasonable assurance that costs are allocated appropriately and accurately. Per 2 CFR §200.403, allowable costs must be "necessary, reasonable, and adequately documented." Additionally, 2 CFR §200.302(b)(3) requires non-Federal entities to maintain records that sufficiently detail financial transactions to support Federal expenditures. Condition: During our testing of payments charged to the federal major program, we noted that employee timesheets lacked evidence of review and approval. Certain employees charged to the grant did not prepare timesheets and a separate tracking system was used. Federal regulations require that expenditures charged to Federal awards be properly reviewed, approved, and documented to ensure allowability and compliance with grant terms. Cause: The Federal program was new to the organization and controls over the program had not been fully established. Turnover in the accounting department contributed to the lack of resources for tracking these costs. Effect or potential effect: Management provided documentation on personnel costs allocated to the program, but was unable to provide evidence of review. Lack of review increases the risk of unauthorized or unallowable costs being charged to the Federal award, potentially leading to questioned costs and noncompliance with Federal grant requirements. Context: This issue applied to less than 10% of the grant expenditures, $54,505 out of the $897,736 of total expenditures charged to the grant. Recommendation: Management should review the requirements of CFR 200.430 and ensure that current processes, whether digital or hard-copy driven, are consistent with the requirements of the Uniform Guidance. In addition, management should consider adding additional staff to its accounting and/or grants management team. Views of responsible officials: Management will evaluate systems and processes to ensure time tracking procedures meet the standards outlined in the Uniform Guidance.
2023-003 Compliance and Internal Controls over Matching (Material Weakness) Internal Controls over Period of Performance and Earmarking (Material Weakness) U.S. Department of Housing and Urban Development 14.267 – Continuum of Care Program 2023 Funding Criteria: Under 2 CFR Section 200.303(a), non‐federal entities must establish and maintain effective internal controls to provide reasonable assurance that the entity is managing the federal awards in compliance with statues, regulations, and the terms and conditions of the award. Additionally, under 24 CFR Section 578.73, the Organization must match all grant funds, except for leasing funds, with no less than 25 percent of funds or in-kind contributions from other sources. Furthermore, under 2 CFR Section 200.403 (g) and (h), the Organization’s expenditures must be adequately documented and incurred during the approved budget period, respectively. Condition: Payroll costs that could be potentially chargeable to the grant but were not, were claimed as a matching contribution under the grant by the Organization. However, as noted in finding 2023-001 above, payroll cost allocated to the grants did not agree to the grant hours reported in the approved timesheets for certain samples selected for testing. Because of this finding, we cannot establish the accuracy of payroll claimed as a match for the grant. Review and approval of each payroll batch was conducted, but in 6 out of 6 instances tested, errors in grant allocation were not detected. Cause: While there is a process in place for upper management to review and approve each payroll batch based on hours incurred per timesheet, it appears that the control was not operating effectively as the payroll cost charged to the grant in several instances exceeded the corresponding hours charged to the grant per the timesheet. Effect: Unmatched funds may be required to be returned back to grantor and / or impact future funding. Questioned Costs: Undeterminable Perspective: Payroll charged to the grants exceeded time incurred in 7 out of the 60 samples tested, including 1 out of the 17 samples for contract TX0275L6E002112 where payroll was used as a match. Repeat Finding: Yes. Recommendation: We recommend that part of the review process for payroll include verification that the cost charged to the grant does not exceed the grant hours reported on employee timesheet. Views of Responsible Officials: We concur with the recommendation, please see Corrective Action Plan.
Criteria:The Services and TransitionalHousingforTraffickingVictimsprogramrequires thatcosts chargedto theFederalaward shallbeallowable and supportable in accordancewith 2CFR§ 200.403.Adequate sourcedocumentationmustberetainedtosupportreimbursedcosts. Condition:During testing ofreimbursedexpenses charged tothefederalaward,itwasnotedthataninvoice wasnotretained foroneprogram participant.Theprogramparticipanthadreceivedtheoriginalreceipts;however,copies ofallrequiredsupportingdocumentation couldnotbeobtained. Asa result,adequate source documentationwas notavailable to fully supportthereimbursedexpense. Cause:The conditionoccurreddue to inadequate proceduresforensuringthatinvoices andsupportingdocumentationwereretainedbytheorganizationpriortoreimbursement.Specifically,reliance onparticipants to maintain originalreceipts without obtainingand retainingcopies resulted inincomplete documentationbeingavailable forauditpurposes. QuestionedCost:$-0- Effect:The lackof retained invoices limits theability to verify thatreimbursed expenseswereallowable, properly supported,and in compliancewith federalrequirements.This conditionincreases theriskofquestioned costs,noncompliance with federalrecord retentionrequirements,andpotentialrepaymentofunsupportedexpenditures. Recommendation:Managementshould implementandenforceprocedures to ensurethatallinvoices and supportingdocumentationareobtained and retained priortoassistance beingprovided toparticipants.Additionally,managementshouldprovideguidancetoparticipantsregardingdocumentation requirementsand periodically reviewreimbursementfiles to confirmcompliance with federalrecord retentionrequirements. Classification: Compliance finding and control deficiency in internal controls
Criteria: The Services and Transitional Housing for Trafficking Victims program requires that costs charged to the Federal award shall be allowable and supportable in accordance with 2 CFR § 200.403. Adequate source documentation must be retained to support reimbursed costs. Condition: During the audit, it was noted that while the original lease agreements were obtained and retained, lease extension agreement was neither obtained nor retained to support the expenses for 3 of the 31 Rent Assistance items selected for testing. Cause: The condition occurred because management did not obtain or retain an extension to the original lease agreement to cover the month in which assistance was provided. This gap indicates a lapse in the organization’s document retention requirements, which resulted in the lease not aligning with the period of expenditure. Questioned Cost: $-0- Effect: As a result of the lease not covering the month for which assistance was provided, there is a risk that the related expenditure may be considered unsupported. This could lead to questioned costs, audit findings, or other financial reporting and compliance issues. Recommendation:Managementshould tracklease expirations andensureextensions orrenewals are obtained andretained,implementa checklistto verifyalllease documentation iscurrent,providestafftrainingontheimportanceof maintainingvalid agreements,andconductperiodic reviews to confirmdocumentation aligns with rentalassistance periods. Classification:Compliancefindingandcontroldeficiency in internalcontrols
Criteria:The Services and TransitionalHousingforTraffickingVictimsprogramrequires thatcosts chargedto theFederalaward shallbeallowable and supportable in accordancewith 2CFR§ 200.403.Adequate sourcedocumentationmustberetainedtosupportreimbursedcosts. Condition: During the audit, it was noted that 4.5 hours of overtime for an employee were not processed in payroll. The discrepancy appears to have resulted from either a data entry error in the payroll system or the system failing to save the entered hours. As a result, the employee was not paid for the overtime worked. As reimbursed payroll amounts were lower than the actual costs incurred, no questioned costs were identified. Cause: The procedures for payroll review and processing were not followed to ensure payroll is properly accounted for and processed. The lack of proper review represents a failure to fully comply with payroll processing requirements and procedures leading to inaccurate employee compensation and program reporting. Questioned Cost: $-0- Effect: The lack of formal review, approval, and reconciliation of the payroll process led to an employee not being originally paid for the overtime worked and an inaccurate payroll amount being reimbursed. However, the overall payroll expenditures were lower than the amount reimbursed by the program as a result of the error and did not lead to excess funds provided. Recommendation:We recommend managementcontinuetoemphasizethepayrollcontrols byensuring allhours,includingovertime,are accurately entered,reviewed,and verifiedin thepayrollsystem.Managementshould implementa formalreviewprocess to reconcile payrollentries againsttimesheets priortoprocessingandensure thatthesystem properly savesallentries.Ongoingtrainingforaccounting personneland periodic audits ofpayrolldatacanfurtherreducetherisk oferrors and ensurecompliance with payrollprocessingrequirements. Classification:Compliancefindingandcontroldeficiency in internalcontrols
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile certain balance sheet accounts, such as interfund receivables and payables, and payroll-related liabilities to the underlying supporting documentation available at the City. This included the City’s Community Development Block Grant (CDBG) Program. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the City’s Federal Programs general ledger which accounts for the financial activity of the City’s Community Development Block Grant Program. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: During calendar year 2023, the City does not employ an in-house accountant with the requisite skills necessary to manage and reconcile the various interfund receivables and payables, and payroll-related liabilities to the underlying supporting documentation available at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
FINDING 2023-003 Subject: COVID-19 - Emergency Rental Assistance Program - Period of Performance Federal Agency: Department of the Treasury Federal Program: COVID-19 - Emergency Rental Assistance Program Assistance Listings Number: 21.023 Federal Award Number and Year (or Other Identifying Number): ERA-0359 Compliance Requirement: Period of Performance Audit Findings: Material Weakness, Modified Opinion INDIANA STATE BOARD OF ACCOUNTS 22 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Condition and Context The County received a federal Emergency Rental Assistance (ERA) Program grant, that was created during the COVID-19 pandemic, to help provide financial and housing stability assistance to eligible households to help prevent eviction and ensure stable housing. Recipients had a period of performance to incur costs that was between the start of the grant until September 30, 2022, for the Emergency Rental Assistance Program 1 (ERA1) and could be extended until December 29, 2022, if the recipient received reallocated funds from the Department of the Treasury. The County did receive reallocated funds from the Department of the Treasury; therefore, the County had until December 29, 2022, to incur costs for the ERA1 program. The costs that were incurred during the period of performance then had a liquation date of April 28, 2023. The County did not have internal controls in place to ensure costs were incurred within the grant period of performance and those costs incurred were properly paid by the liquidation date. Five out of seven of the expenditures tested, totaling $124,787, were for costs incurred after the period of performance. One expenditure included a December obligation to a subrecipient of $31,026, which was within the period of performance. But, the County did not pay the subrecipient by the liquidation date, so a total of $155,813 was paid after the liquidation date. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: . . . (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3)." Cause Due to turnover in the Economic Development Department and lack of knowledge of the period of performance dates of the ERA1 program, noncompliance went undetected by the County. Effect Noncompliance with the provisions of federal statutes, regulations, and terms and conditions of the federal award resulted in the request by the Department of the Treasury for the County to refund $154,945. INDIANA STATE BOARD OF ACCOUNTS 23 LAKE COUNTY SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Questioned Costs We identified $155,813 in known questioned costs as noted above in the Condition and Context. Recommendation We recommended that management of the County establish a system of internal controls to ensure compliance with period of performance requirements. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
CONDITION: During the calendar year 2023, the City did not record the necessary adjustments to the various ‘Fund’ general ledgers of the City to properly reconcile certain balance sheet accounts, such as interfund receivables and payables, and payroll-related liabilities to the underlying supporting documentation available at the City. This included the City’s Community Development Block Grant (CDBG) Program. As a result, the financial position and results of operations as shown throughout the calendar year were inaccurately stated. CRITERIA: Prudent internal control procedures in the areas of general ledger management and financial reporting include the reconciliation of all general ledger account balances to underlying supporting documentation monthly with independent oversight and approval as part of the process. In specific as it relates to federal programs, Section 2 CFR 200.403(g) of the Uniform Guidance requires that federal costs must be adequately documented which would include the City’s Federal Programs general ledger which accounts for the financial activity of the City’s Community Development Block Grant Program. EFFECT: The lack of procedures in place for reconciling balance sheet accounts throughout the calendar year, with independent oversight, 1) reduces the City’s internal control over the financial reporting processes, 2) exposes the City to inaccurate financial reporting to management for decision-making purposes, and 3) increases the potential for irregularities that may result (unintentional or otherwise) that are not detected in a timely manner. Had these reconciliations been performed, inaccurate postings to the City’s various general ledgers could have been detected and corrected in a timely manner to enhance internal controls and financial reporting in this important area of financial management. As a result, the City is not incompliance with Section 2 CFR 200.403(g) of the Uniform Guidance which requires federal costs to be adequately documented in the applicable general ledgers of the City. CAUSE: During calendar year 2023, the City does not employ an in-house accountant with the requisite skills necessary to manage and reconcile the various interfund receivables and payables, and payroll-related liabilities to the underlying supporting documentation available at the City.RECOMMENDATION: I am recommending that the management of the City establish written procedures for all accounting functions, but most notably for recording the necessary adjustments to the City’s general ledgers throughout the calendar year (monthly) to ensure that all balance sheet account balances are supported by the underlying documentation available at the City. It is anticipated that additional training will be required for in-house personnel to perform this function, or the City may want to consider contracting these services to a third-party professional with the expertise to perform these functions for the City on a monthly or quarterly basis throughout the year. These procedures should significantly enhance the internal control over the financial accounting and reporting process relative to the City’s general ledgers for each Fund. VIEWS OF RESPONSIBLE OFFICIALS: The City concurs with the above noted finding and addresses this issue in the ‘Corrective Action Plan’ included within this report.
Finding 2022-03 – Inability to Support Allowable Costs and Cost Principles Federal Program Information Program Number: 93.224, 93.225, 93.493, 93.527 Type of Finding: Internal Control, Compliance and Material Weakness Condition During our audit, we were unable to perform sufficient testing of allowable costs and allocability due to inadequate and inconsistent supporting documentation. Management primarily provided journal entries and limited supporting invoices, with significant gaps in documentation necessary to support cost allowability, reasonableness, and allocability under federal requirements. Specifically: ▪ Supporting invoices and contracts were missing or incomplete for a significant portion of transactions ▪ Documentation supporting the nature, purpose, and benefit of costs to the federal program was not provided ▪ There was no evidence of cost allocation methodologies for shared or indirect costs ▪ Journal entries were recorded without adequate supporting detail or justification As a result, we were unable to determine whether costs charged to the federal program were allowable, reasonable, or allocable. Criteria Under 2 CFR 200.403 (Factors Affecting Allowability of Costs), costs must be: ▪ Necessary and reasonable ▪ Allocable to the federal award ▪ Adequately documented Further, 2 CFR 200.302(b)(3) requires that financial management systems provide records that identify adequately the source and application of funds, including supporting documentation for expenditures. Cause These deficiencies appear to result from weak internal controls over financial reporting and cost documentation, lack of formal procedures for maintaining supporting documentation, and insufficient understanding of Uniform Guidance cost principles. CARESTL HEALTH SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED DECEMBER 31, 2022 40 SECTION III – FEDERAL AWARD FINDINGS AND QUESTION COSTS (Continued) Effect As a result: ▪ We were unable to verify the allowability and allocability of costs charged to the federal program ▪ There is a significant risk that unallowable or unsupported costs were charged to the award ▪ The organization is exposed to potential disallowance of costs, repayment obligations, and increased regulatory scrutiny The lack of documentation significantly impairs auditability and financial transparency Questioned Costs Likely Questioned Costs: Undeterminable due to insufficient documentation The inability to support costs charged to federal awards with adequate documentation constitutes a material weakness in internal control over compliance and results in noncompliance with Uniform Guidance cost principles. Recommendation We recommend that management: ▪ Implement procedures requiring complete supporting documentation for all costs charged to federal awards ▪ Ensure costs are reviewed for allowability, reasonableness, and allocability prior to recording ▪ Establish and document formal cost allocation methodologies ▪ Require approval and documentation of all journal entries affecting federal programs ▪ Provide training to staff on Uniform Guidance cost principles (2 CFR 200 Subpart E) ▪ Conduct periodic internal reviews to ensure compliance Management Response Management respectfully disagrees with the characterization of a material weakness related to the inability to support allowable costs and cost principles. The four cited conditions do not reflect a lack of documentation or internal controls, but rather the limited time afforded to the health center to compile and submit the requested materials. The HRSA mandated April 30, 2026 deadline, during a period of significant operational strain. As a result, the health center was not provided a reasonable opportunity to gather and produce the full set of supporting documentation. CARESTL HEALTH SCHEDULE OF FINDINGS AND QUESTIONED COSTS YEAR ENDED DECEMBER 31, 2022 41 SECTION III – FEDERAL AWARD FINDINGS AND QUESTION COSTS (Continued) Specifically, we disagree with the following statements: • “Supporting invoices and contracts were missing or incomplete for a significant portion of transactions.” The health center maintains invoices, contracts, and supporting documentation; however, due to the compressed audit timeline and competing federal deadlines, staff were unable to assemble and transmit the full set of documents before the cutoff. • “Documentation supporting the nature, purpose, and benefit of costs to the federal program was not provided.” Documentation exists within our financial management system and program files. The inability to provide it during fieldwork was due to time constraints, not the absence of records. • “There was no evidence of cost allocation methodologies for shared or indirect costs.” Cost allocation methodologies are in place and were included in the financial management response submitted to HRSA. The audit team did not receive these materials because the request coincided with overlapping federal reporting requirements and limited staffing capacity. • “Journal entries were recorded without adequate supporting detail or justification.” Supporting detail for journal entries is maintained internally. The challenge was not lack of documentation but insufficient time to compile and submit the supporting files during the abbreviated fieldwork window. • While we disagree with the stated conditions, we fully agree with all recommendations and view them as aligned with the improvements already underway as part of our financial management corrective actions submitted to HRSA. Management is committed to strengthening documentation practices, enhancing internal controls, and ensuring full compliance with Uniform Guidance. • Accordingly, the health center will: o Implement procedures requiring complete supporting documentation for all costs charged to federal awards o Ensure costs are reviewed for allowability, reasonableness, and allocability prior to recording o Establish and document formal cost allocation methodologies o Require approval and documentation of all journal entries affecting federal programs o Provide staff training on Uniform Guidance cost principles (2 CFR 200 Subpart E) o Conduct periodic internal reviews to ensure compliance These actions are already in progress and will be fully integrated into the organization’s financial management and internal control framework.
2023 – 005 Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Low-Income Home Energy Assistance Program (LIHEAP) Assistance Listing Number: 93.568 Federal Award Identification Number and Year: G-2302ILLIEA 10/1/2022; G-2202ILLIEA 10/1/2021 Pass-Through Agency: Illinois Department of Commerce and Economic Opportunity Pass-Through Numbers: 23-221038; 22-224038 Award Period: June 1, 2023 through September 30, 2024 and October 1, 2021 through June 30, 2023 Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria or specific requirement: Uniform Grant Guidance (2 CFR 200.303) requires non-federal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Uniform Grant Guidance (2 CFR 200.308, 200.309, and 200.403(h)) requires non-federal entities charge only allowable costs incurred during the approved budget period of a general award’s period of performance. Effective internal controls should include procedures to ensure transactions for costs recorded for the beginning of the period of performance were not incurred prior to the start of the period of performance and transactions for cost recorded for the end of the period of performance were not incurred after the end of the period of performance for Federal awards. Condition: The County allocated costs to federal awards prior to the beginning of the period of performance and after the end of the period of performance. Questioned costs: $31,837 Context: 9 of 10 transactions tested were incurred prior to the period of performance and 1 of 15 transactions tested were incurred after the period of performance end date. Cause: Costs were inadvertently claimed that fell outside the period of performance. Effect: May result in unallowable costs being charged to the Federal program. Repeat Finding: This finding is a partial repeat of a finding in the prior year. The prior year finding number was 2022-005. Recommendation: We recommend the County review its procedures relative to allocating costs to Federal programs, and ensure only cost within the grant period are included. Views of responsible officials: There is no disagreement with the audit finding.
2023 – 005 Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Low-Income Home Energy Assistance Program (LIHEAP) Assistance Listing Number: 93.568 Federal Award Identification Number and Year: G-2302ILLIEA 10/1/2022; G-2202ILLIEA 10/1/2021 Pass-Through Agency: Illinois Department of Commerce and Economic Opportunity Pass-Through Numbers: 23-221038; 22-224038 Award Period: June 1, 2023 through September 30, 2024 and October 1, 2021 through June 30, 2023 Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria or specific requirement: Uniform Grant Guidance (2 CFR 200.303) requires non-federal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Uniform Grant Guidance (2 CFR 200.308, 200.309, and 200.403(h)) requires non-federal entities charge only allowable costs incurred during the approved budget period of a general award’s period of performance. Effective internal controls should include procedures to ensure transactions for costs recorded for the beginning of the period of performance were not incurred prior to the start of the period of performance and transactions for cost recorded for the end of the period of performance were not incurred after the end of the period of performance for Federal awards. Condition: The County allocated costs to federal awards prior to the beginning of the period of performance and after the end of the period of performance. Questioned costs: $31,837 Context: 9 of 10 transactions tested were incurred prior to the period of performance and 1 of 15 transactions tested were incurred after the period of performance end date. Cause: Costs were inadvertently claimed that fell outside the period of performance. Effect: May result in unallowable costs being charged to the Federal program. Repeat Finding: This finding is a partial repeat of a finding in the prior year. The prior year finding number was 2022-005. Recommendation: We recommend the County review its procedures relative to allocating costs to Federal programs, and ensure only cost within the grant period are included. Views of responsible officials: There is no disagreement with the audit finding.
2023 – 005 Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Low-Income Home Energy Assistance Program (LIHEAP) Assistance Listing Number: 93.568 Federal Award Identification Number and Year: G-2302ILLIEA 10/1/2022; G-2202ILLIEA 10/1/2021 Pass-Through Agency: Illinois Department of Commerce and Economic Opportunity Pass-Through Numbers: 23-221038; 22-224038 Award Period: June 1, 2023 through September 30, 2024 and October 1, 2021 through June 30, 2023 Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria or specific requirement: Uniform Grant Guidance (2 CFR 200.303) requires non-federal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Uniform Grant Guidance (2 CFR 200.308, 200.309, and 200.403(h)) requires non-federal entities charge only allowable costs incurred during the approved budget period of a general award’s period of performance. Effective internal controls should include procedures to ensure transactions for costs recorded for the beginning of the period of performance were not incurred prior to the start of the period of performance and transactions for cost recorded for the end of the period of performance were not incurred after the end of the period of performance for Federal awards. Condition: The County allocated costs to federal awards prior to the beginning of the period of performance and after the end of the period of performance. Questioned costs: $31,837 Context: 9 of 10 transactions tested were incurred prior to the period of performance and 1 of 15 transactions tested were incurred after the period of performance end date. Cause: Costs were inadvertently claimed that fell outside the period of performance. Effect: May result in unallowable costs being charged to the Federal program. Repeat Finding: This finding is a partial repeat of a finding in the prior year. The prior year finding number was 2022-005. Recommendation: We recommend the County review its procedures relative to allocating costs to Federal programs, and ensure only cost within the grant period are included. Views of responsible officials: There is no disagreement with the audit finding.
2023 – 005 Period of Performance Federal Agency: U.S. Department of Health and Human Services Federal Program Name: Low-Income Home Energy Assistance Program (LIHEAP) Assistance Listing Number: 93.568 Federal Award Identification Number and Year: G-2302ILLIEA 10/1/2022; G-2202ILLIEA 10/1/2021 Pass-Through Agency: Illinois Department of Commerce and Economic Opportunity Pass-Through Numbers: 23-221038; 22-224038 Award Period: June 1, 2023 through September 30, 2024 and October 1, 2021 through June 30, 2023 Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria or specific requirement: Uniform Grant Guidance (2 CFR 200.303) requires non-federal entities receiving Federal awards establish and maintain internal controls designed to reasonably ensure compliance with Federal laws, regulations, and program compliance requirements. Uniform Grant Guidance (2 CFR 200.308, 200.309, and 200.403(h)) requires non-federal entities charge only allowable costs incurred during the approved budget period of a general award’s period of performance. Effective internal controls should include procedures to ensure transactions for costs recorded for the beginning of the period of performance were not incurred prior to the start of the period of performance and transactions for cost recorded for the end of the period of performance were not incurred after the end of the period of performance for Federal awards. Condition: The County allocated costs to federal awards prior to the beginning of the period of performance and after the end of the period of performance. Questioned costs: $31,837 Context: 9 of 10 transactions tested were incurred prior to the period of performance and 1 of 15 transactions tested were incurred after the period of performance end date. Cause: Costs were inadvertently claimed that fell outside the period of performance. Effect: May result in unallowable costs being charged to the Federal program. Repeat Finding: This finding is a partial repeat of a finding in the prior year. The prior year finding number was 2022-005. Recommendation: We recommend the County review its procedures relative to allocating costs to Federal programs, and ensure only cost within the grant period are included. Views of responsible officials: There is no disagreement with the audit finding.
2023-001 – Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles Information on Federal Program(s) - Department of Education Assistance Listing Number: 84.351 Assistance Listing Name: Arts in Education National Program Grant Award Numbers: S351A220007 Award Period: October 1, 2022 to September 30, 2023 Criteria or Specific Requirement – The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federallyfinanced program in either the current or a prior period. (g) Be adequately documented. (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3).” Condition – In evaluating the Center’s compliance with the requirements of Activities Allowed or Unallowed and Allowable Costs Cost Principles, our test work identified two instances out of a sample of sixty payroll transactions, totaling $41,872.98, in which employees were not paid according to their contract. For the two exceptions, the employees were underpaid a total of $1.48. Cause – The Center did not adhere to their internal process to ensure approved salary information was accurately applied. Effect or Potential Effect – Without adequate internal controls in place to ensure costs are properly verified and applied, the Center could inaccurately charge expenditures to the federal program. Questioned Costs – N/A Context – This is a condition based on testing of the Center’s compliance. Based on tested samples, we noted a total underpayment of $1.48. The prevalence of the finding is detailed in the condition section above. The samples were selected using a non-statistical method. Repeat Finding – This is a repeat finding from prior year. While the prior year finding resulted in a net overpayment and current year finding resulted in a net underpayment, the fact that management is not adhering to their internal control processes requires this finding to be considered a repeat finding. This was reported as finding 2022-002 in the 2022 report. Recommendation - We recommend management ensure the Center strengthen their internal process to ensure that employee salary information recorded in the payroll system are approved, supported by salary documentation in the personnel files, and accurately applied. Views of Responsible Officials – After performing a detailed analysis, the Center’s management identified that the likely net underpayment amounted to $111.52, while the likely net overpayment was $83.20. The likely underpayment and overpayment were determined by management through examination of the total salary charged to the federal program. The Center’s management agrees with the finding and will strengthen the internal process surrounding the activities allowed or unallowed and allowable costs and will ensure adequate documentation is in place and approved salary rates are consistently and properly applied. See the Center’s corrective action for more details.
2023-001 – Internal Control over Compliance and Compliance with Activities Allowed or Unallowed and Allowable Costs/Cost Principles Information on Federal Program(s) - Department of Education Assistance Listing Number: 84.351 Assistance Listing Name: Arts in Education National Program Grant Award Numbers: S351A220007 Award Period: October 1, 2022 to September 30, 2023 Criteria or Specific Requirement – The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. In addition, per 2 CFR Section 200.403, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federallyfinanced program in either the current or a prior period. (g) Be adequately documented. (h) Cost must be incurred during the approved budget period. The Federal awarding agency is authorized, at its discretion, to waive prior written approvals to carry forward unobligated balances to subsequent budget periods pursuant to § 200.308(e)(3).” Condition – In evaluating the Center’s compliance with the requirements of Activities Allowed or Unallowed and Allowable Costs Cost Principles, our test work identified two instances out of a sample of sixty payroll transactions, totaling $41,872.98, in which employees were not paid according to their contract. For the two exceptions, the employees were underpaid a total of $1.48. Cause – The Center did not adhere to their internal process to ensure approved salary information was accurately applied. Effect or Potential Effect – Without adequate internal controls in place to ensure costs are properly verified and applied, the Center could inaccurately charge expenditures to the federal program. Questioned Costs – N/A Context – This is a condition based on testing of the Center’s compliance. Based on tested samples, we noted a total underpayment of $1.48. The prevalence of the finding is detailed in the condition section above. The samples were selected using a non-statistical method. Repeat Finding – This is a repeat finding from prior year. While the prior year finding resulted in a net overpayment and current year finding resulted in a net underpayment, the fact that management is not adhering to their internal control processes requires this finding to be considered a repeat finding. This was reported as finding 2022-002 in the 2022 report. Recommendation - We recommend management ensure the Center strengthen their internal process to ensure that employee salary information recorded in the payroll system are approved, supported by salary documentation in the personnel files, and accurately applied. Views of Responsible Officials – After performing a detailed analysis, the Center’s management identified that the likely net underpayment amounted to $111.52, while the likely net overpayment was $83.20. The likely underpayment and overpayment were determined by management through examination of the total salary charged to the federal program. The Center’s management agrees with the finding and will strengthen the internal process surrounding the activities allowed or unallowed and allowable costs and will ensure adequate documentation is in place and approved salary rates are consistently and properly applied. See the Center’s corrective action for more details.
Finding 2023-002 Significant deficiency in internal controls over compliance related to allowable costs and period of performance. Federal Agency: U.S. Department of Commerce Program Title: Pacific Fisheries Data Program Assistance Listing Number: 11.437 Award Numbers: NOAA-NMFS-AK-2023-2007663 Award Period: October 1, 2022 to September 30, 2027 Criteria 2 U.S. CFR Part 200.403, 404, and 405 of Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards require that costs must be necessary and reasonable for the performance of the Federal Award, that costs be determined in accordance with GAAP, and that costs be adequately documented including the allocation of those costs. Condition/Context for Evaluation IPHC’s internal controls over non-payroll charges to the Federal Award did not include review for allowability, accrual in the proper period, or that adequate documentation existed to support the amounts charged or allocated. Three out of 25 non-payroll disbursements tested did not include evidence supporting one or more of these controls. Questioned Costs $2,674 Cause IPHC’s operation of internal controls were not sufficient to ensure allowable costs were charged in accordance with 2 U.S. CFR Part 200.403, 404, and 405 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Effect or Potential Effect As a result, charges were made to Federal awards that were not allowable or allocable to the award. Repeat Finding Not applicable. Recommendation We recommend that IPHC ensure internal controls include reviewing costs charged to the Federal Award for conformity with 2 U.S. CFR Part 200.403, 404, and 405 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards for allowability, allocability, and reasonableness. Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying corrective action plan.
Federal Program Information: COVID-19 Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027) Transitional Living for Homeless Youth (ALN 93.550) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): B. Allowable Costs: In accordance with 2 CFR § 200.403(e), costs must be determined in accordance with generally accepted accounting principles. Additionally, costs must be adequately documented (2 CFR 200.403(g)). Condition: For 3 out of the 26 transactions selected for the COVID-19 Coronavirus State and Local Fiscal Recovery Funds program, the expenditures were recorded for an inaccurate amount. For 1 out of 25 transactions selected for the Transitional Living for Homeless Youth program, the expenditure was not accrued in the appropriate fiscal year in accordance with U.S. GAAP. Cause: Administrative oversight in expenditure review caused inaccurate recording of expenditures. Additionally, the Organization did not have policies in place to review year-end grant expenditures for proper cutoff below a certain threshold. Effect or Potential Effect: The Organization was not in compliance with allowable cost requirements. Questioned Costs: Below reportable threshold. Context: Federal expenditures must meet allowable cost requirements in accordance with 2 CFR 200. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the Organization enhance its procedures over allowable costs. Views of Responsible Officials and Planned Corrective Actions: An additional level of review by Director of Finance and Business will be added to ensure accuracy of expenditures. Management will add additional controls to year end check list to identify and accrue any expenses incurred on or prior to year end.
Federal Program Information: COVID-19 Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027) Transitional Living for Homeless Youth (ALN 93.550) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): B. Allowable Costs: In accordance with 2 CFR § 200.403(e), costs must be determined in accordance with generally accepted accounting principles. Additionally, costs must be adequately documented (2 CFR 200.403(g)). Condition: For 3 out of the 26 transactions selected for the COVID-19 Coronavirus State and Local Fiscal Recovery Funds program, the expenditures were recorded for an inaccurate amount. For 1 out of 25 transactions selected for the Transitional Living for Homeless Youth program, the expenditure was not accrued in the appropriate fiscal year in accordance with U.S. GAAP. Cause: Administrative oversight in expenditure review caused inaccurate recording of expenditures. Additionally, the Organization did not have policies in place to review year-end grant expenditures for proper cutoff below a certain threshold. Effect or Potential Effect: The Organization was not in compliance with allowable cost requirements. Questioned Costs: Below reportable threshold. Context: Federal expenditures must meet allowable cost requirements in accordance with 2 CFR 200. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the Organization enhance its procedures over allowable costs. Views of Responsible Officials and Planned Corrective Actions: An additional level of review by Director of Finance and Business will be added to ensure accuracy of expenditures. Management will add additional controls to year end check list to identify and accrue any expenses incurred on or prior to year end.
Federal Program Information: COVID-19 Coronavirus State and Local Fiscal Recovery Funds (ALN 21.027) Transitional Living for Homeless Youth (ALN 93.550) Criteria or Specific Requirement (Including Statutory, Regulatory or Other Citation): B. Allowable Costs: In accordance with 2 CFR § 200.403(e), costs must be determined in accordance with generally accepted accounting principles. Additionally, costs must be adequately documented (2 CFR 200.403(g)). Condition: For 3 out of the 26 transactions selected for the COVID-19 Coronavirus State and Local Fiscal Recovery Funds program, the expenditures were recorded for an inaccurate amount. For 1 out of 25 transactions selected for the Transitional Living for Homeless Youth program, the expenditure was not accrued in the appropriate fiscal year in accordance with U.S. GAAP. Cause: Administrative oversight in expenditure review caused inaccurate recording of expenditures. Additionally, the Organization did not have policies in place to review year-end grant expenditures for proper cutoff below a certain threshold. Effect or Potential Effect: The Organization was not in compliance with allowable cost requirements. Questioned Costs: Below reportable threshold. Context: Federal expenditures must meet allowable cost requirements in accordance with 2 CFR 200. Identification as a Repeat Finding: No similar findings noted in the prior year. Recommendation: We recommend the Organization enhance its procedures over allowable costs. Views of Responsible Officials and Planned Corrective Actions: An additional level of review by Director of Finance and Business will be added to ensure accuracy of expenditures. Management will add additional controls to year end check list to identify and accrue any expenses incurred on or prior to year end.
Finding 2023-002 Significant deficiency in internal controls over compliance related to allowable costs and period of performance. Federal Agency: U.S. Department of Commerce Program Title: Pacific Fisheries Data Program Assistance Listing Number: 11.437 Award Numbers: NOAA-NMFS-AK-2023-2007663 Award Period: October 1, 2022 to September 30, 2027 Criteria 2 U.S. CFR Part 200.403, 404, and 405 of Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards require that costs must be necessary and reasonable for the performance of the Federal Award, that costs be determined in accordance with GAAP, and that costs be adequately documented including the allocation of those costs. Condition/Context for Evaluation IPHC’s internal controls over non-payroll charges to the Federal Award did not include review for allowability, accrual in the proper period, or that adequate documentation existed to support the amounts charged or allocated. Three out of 25 non-payroll disbursements tested did not include evidence supporting one or more of these controls. Questioned Costs $2,674 Cause IPHC’s operation of internal controls were not sufficient to ensure allowable costs were charged in accordance with 2 U.S. CFR Part 200.403, 404, and 405 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Effect or Potential Effect As a result, charges were made to Federal awards that were not allowable or allocable to the award. Repeat Finding Not applicable. Recommendation We recommend that IPHC ensure internal controls include reviewing costs charged to the Federal Award for conformity with 2 U.S. CFR Part 200.403, 404, and 405 of the Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards for allowability, allocability, and reasonableness. Views of Responsible Officials of Auditee Management concurs with the finding and has provided the accompanying corrective action plan.
2023-002 Grant Payroll Documentation and Recordkeeping Federal Agency: U.S Department of Treasury Federal Program Name: Coronavirus State and Local Fiscal Recovery Funds Assistance Listing Number: 21.027 Federal Award Identification Number and Year: SLFRP3404 - 2021 Award Period: March 3, 2021 through December 31, 2024 Type of Finding: Significant Deficiency in Internal Control over Compliance, Other Matter Criteria: Compliance: 2 CFR 200.302(b)(3) states that records that identify adequately the source and application of funds for federally-funded activities. These records must contain information pertaining to Federal awards, authorizations, financial obligations, unobligated balances, assets, expenditures, income and interest and be supported by source documentation. 2 CFR 200.403 states that costs must be adequately documented. Controls: Per 2 CFR section 200.303(a), a non-Federal entity must: Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should comply with guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the ”Internal Control Integrated Framework,” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Condition: The County did not maintain documentation supporting certain payroll expenditures charged to the grant. Questioned Costs: Under $25,000. Context: For four of the sixty employee pays selected for testing the underlying payroll records did not support the amount charged to the grant. Cause: Payroll documentation supporting the wage amounts charged to the grant program was not properly maintained by the County. Effect: Failure to maintain supporting documentation to the employee payroll charged to grant programs may result in unallowed cost and activities being charged to the grant, causing noncompliance with the Federal compliance requirements. Repeat Finding: No Recommendation: We recommend the County establish internal control procedures to ensure that all amounts charged to grant programs for employee payroll costs be reconciled to the specific employee payroll records and that supporting documentation be maintained throughout the grant award period and beyond.
Questioned Cost $ 5,174 Finding No. 2023 002: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Federal Agency: U.S. Department of State Assistance Listing Number and Title: 19.015 – Cultural, Technical and Educational Centers Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Cultural, Technical and Educational Centers program for 2 out of 26 individuals selected for testing. Furthermore, at the end of the fiscal year, management recorded an adjustment in an attempt to correct the error, however, the amounts calculated in the adjustment were inaccurate. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. Code of Federal Regulations (“CFR”) Part 200, states “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles… (g) Be adequately documented.” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles We were informed by management that the inaccurate allocation of amounts to the Cultural, Technical and Educational Centers program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment may be attributed to general management oversight. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of amounts included in the correcting adjustment resulted in the following: • An overstatement of $5,174 in expenditures allocated to the Cultural, Technical and Educational Centers grant. • An overstatement of $5,032 in expenditures allocated to a non Federal grant. • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant. • An understatement of $10,229 in expenditures allocated to the U.S. Department of State – Public Diplomacy Programs grant. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 26 salaries and wages related expenditures totaling approximately $117,000 were selected for audit from a population of approximately $14,020,000 in salaries and wages related expenditures. Our test found two instances in which salaries and wages were erroneously recorded under the Cultural, Technical and Educational Centers program. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles Ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated in an accurate manner. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
$4,521 Finding No. 2023 003: Activities Allowed and Unallowed (Control Deficiency) Allowable Costs and Cost Principles (Control Deficiency) Reporting (Control Deficiency) Subrecipient Monitoring (Control Deficiency) Federal Agency: U.S. Department of Commerce U.S. Department of the Interior U.S. Agency for International Development Assistance Listing Number and Title: 11.431 – Climate and Atmospheric Research 11.468 – Applied Meteorological Research 15.820 – National and Regional Climate Adaptation on Science Centers 98.001 – Foreign Assistance for Programs Overseas Condition During our audit, we noted the following instances of noncompliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles We noted the following with regards to salaries and wages expenditures selected for testing: Due to the application of an incorrect allocation rate, we noted salaries and wages were inaccurately allocated to the Research and Development Cluster (“R&D Cluster”) program for 4 out of 16 individuals selected for testing. We noted that at the end of the fiscal year management recorded an adjustment in an attempt to correct the error, however, for two of the impacted individuals the amounts calculated in the adjustment were inaccurate. For the remaining two individuals, the amounts calculated in the adjustment were accurate, however the program accounts to which such costs were approved to be allocated as stated per the individual’s “Personnel Budget Form” did not agree to the actual program accounts to which the expenses were recorded in the Center’s general ledger. In addition to the samples selected for testing, we noted salaries and wages were inaccurately allocated to the R&D Cluster program for one individual due to the application of an incorrect allocation rate. We noted the following with regards to non-salaries and wages expenditures selected for testing: We noted that for 3 out of 24 non salaries and wages expenditures selected for testing, we were unable to obtain documentation evidencing Fiscal Officer approval of the expenditure. Reporting We noted two instances in which the Center did not complete the reporting required by Section 2, Full Disclosure of Entities Receiving Federal Funding, of the Federal Funding Accountability and Transparency Act (“FFATA”) for subgrants made during 2023. Subrecipient Monitoring We noted an instance in which the Center did not properly communicate the federal assistance listing number to a subrecipient upon execution of the subaward agreement. Criteria Activities Allowed and Unallowed / Allowable Costs and Cost Principles Section 200.403 – Factors affecting allowability of costs of Title 2 U.S. CFR Part 200, states “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles… (g) Be adequately documented.” Reporting Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA requires an entity to report subcontracts made under federally-awarded contracts by the end of the month following the month in which the prime recipient awards any subgrant greater than or equal to $30,000. Section 2, Full Disclosure of Entities Receiving Federal Funding, of the FFATA also specifies the data elements to be included by an entity in their reporting submission. Subrecipient Monitoring Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200, states “All pass-through entities must: (a) Ensure that every subaward is clearly identified to the subrecipient as a subaward and includes the following information at the time of the subaward and if any of these data elements change, include the changes in subsequent subaward modification. When some of this information is not available, the pass-through entity must provide the best information available to describe the Federal award and subaward. Required information includes: (xii) Assistance Listings Number and Title; the pass-through entity must identify the dollar amount made available under each Federal award and the Assistance Listings Number at time of disbursement;” Cause Activities Allowed and Unallowed / Allowable Costs and Cost Principles For the identified instances of noncompliance associated with salaries and wages expenditures, we were informed by management that the inaccurate allocation of amounts to the R&D Cluster program may be due to the untimely updating of level of effort allocation percentages on the individual’s “Personnel Budget Form.” The inaccurate calculation of amounts included in the correcting adjustment and the recordation of amounts to inaccurate program accounts within the Center’s general ledger may be attributed to general management oversight. For the identified instances of noncompliance associated with non salaries and wages expenditures, we were informed by management that although the Fiscal Officer has the ability to electronically approve transactions within the general ledger, the historical retention of such information is an additional service which management did not elect to activate. Reporting The lack of FFATA reporting may be attributed to general management oversight. Subrecipient Monitoring We were informed by management that an outdated template which did not include a field for the federal assistance listing number was utilized when executing the subaward agreement. Effect Activities Allowed and Unallowed / Allowable Costs and Cost Principles Failure to adhere to the allowable cost principles of Title 2 U.S. CFR Part 200 exposes the Center to an undue risk of misuse of federal funds. Furthermore, the inaccurate calculation of salaries and wages expenditures included in the correcting adjustment resulted in the following: • An overstatement of $24 in expenditures allocated to the U.S. Agency for International Development – Foreign Assistance for Program Overseas grant within the R&D Cluster grant. • An understatement of $24 in expenditures allocated to the Cultural, Technical and Educational Centers grant. Reporting Failure to file required reports reduces transparency on the use of program funds and represents an instance of noncompliance with the requirements of Title 2 U.S. CFR Part 200. Subrecipient Monitoring Failure to communicate the required information to subrecipients exposes the Center to an undue risk of misuse of federal funds. Context Activities Allowed and Unallowed / Allowable Costs and Cost Principles A sample of 16 salaries and wages expenditures totaling approximately $57,000 were selected for audit from a population of approximately $402,000 in salaries and wages expenditures. Our test found four instances in which salaries and wages were erroneously recorded under the R&D Cluster program. Our sample is a statistically valid sample. A sample of 24 non salaries and wages related expenditures totaling approximately $98,000 were selected for audit from a population of approximately $601,000 in non salaries and wages related expenditures. Our test found three instances in which documentation of the Fiscal Officer approval of the non salaries and wages related expenditures were not properly retained. Our sample is a statistically valid sample. Reporting A sample of two subawards totaling approximately $129,000 were selected for audit from a population of two subawards totaling approximately $129,000. Our test found two instances in which the FFATA reports were not completed in a timely manner. Our sample is a statistically valid sample. Subrecipient Monitoring A sample of one subaward totaling approximately $92,000 was selected for audit from a population of two subawards totaling approximately $129,000. Our test found one instance in which the federal assistance listing number was not properly communicated to the subrecipient upon execution of the subaward agreement. Our sample is a statistically valid sample. Repeat Finding This is not a repeat finding. Recommendation We recommend that the Center perform the following to ensure compliance: Activities Allowed and Unallowed / Allowable Costs and Cost Principles With regards to salaries and wages expenditures, ensure the level of effort allocation percentages on an individual’s “Personnel Budget Form” are updated in an accurate and timely manner. Also, ensure that correcting adjustments, as necessary, are calculated and recorded within the general ledger in an accurate manner. With regards to non salaries and wages expenditures, ensure that documentation is maintained evidencing Fiscal Officer approval of the expenditure. Reporting Ensure that required FFATA reports are completed in a timely and accurate manner. Subrecipient Monitoring Ensure that information required pursuant to Section 200.332 – Requirements for pass-through entities of Title 2 U.S. CFR Part 200 is properly communicated to subrecipients upon execution of a subaward agreement. Cause and View of Responsible Officials Activities Allowed and Unallowed / Allowable Costs and Cost Principles New payroll allocation procedures were implemented during fiscal 2023 in an effort to streamline the allocation process. Starting in fiscal 2024, management has reverted to the fiscal 2022 payroll allocation procedures to ensure that the proper percentages are used in calculating charges to its contracts and grants. The procedures used in fiscal 2022 and prior resulted in clean audit opinions and can be trusted to allocate payroll properly. The allocation errors noted during the audit were corrected in the subsequent fiscal year. Reporting The FFATA report was filed in fiscal 2024. Procedures were modified to ensure that necessary information is requested from Center subaward recipients to assist in preparing the FFATA reports. Furthermore, the subaward agreement template was revised to make reference to the need for filing FFATA reports. Subrecipient Monitoring Management has revised procedures to ensure that the subaward recipients are notified of the federal assistance listing number. In addition, Finance staff have been reminded of the necessity to communicate the assistance number to our subaward recipients.
Finding Number: 2023-033 Prior Year Finding Number: N/A Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Program: Government Department/Agency: U.S. Department of Health and Human Services Opioid STR ALN: 93.788 Award #: Various Award Year: 09/30/2020 – 09/29/2024 Department of Behavioral Health (DBH) Criteria - The Uniform Guidance in 2 CFR Section 200.303 requires that non-Federal entities receiving Federal awards (i.e., auditee management) establish and maintain internal control designed to reasonably ensure compliance with Federal statues, regulations, and the terms and conditions of the Federal award. Per 2 CFR Section 200.403, “Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity. (d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost. (e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part. (f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period. (g) Be adequately documented.” Condition – During our testwork for the Activities Allowed or Unallowed and Allowable Costs/Cost Principles, we noted the following in our sample of sixty-four (64) items: • For one (1) out of the 64 samples, DBH did not provide adequate supporting documentation for year-end accrual for subrecipient expenditures amounting to $238,548. Questioned Costs – Known amount is $238,548. Context – This is a condition identified per review of DBH’s compliance with specified requirements using a statistically valid sample. Total amount of samples selected for testing amounted to $7,294,191. Effect – Lack of supporting documentation could result in disallowances of costs and DBH may have drawn down federal monies in excess of the expenditures incurred. Cause – DBH did not have adequate controls in place to ensure that expenditures accrued were actually incurred by the subrecipient. Recommendation – We recommend that DBH strengthen internal control procedures to ensure that expenditures are allowable, and that sufficient documentation is retained to support that allowability. Related Noncompliance – Noncompliance. Views of Responsible Officials and Planned Corrective Actions – DBH concurs with the finding. The District’s corrective action is described in the Management’s Corrective Action Plan included as Appendix B of the attached Management’s Section.
Criteria: Per section 3401(a) of the American Rescue Plan (ARP) Act of 2021, ARP funds shall be available for reimbursement for: (a) payroll of public transportation entities, (b) operating costs to maintain service due to lost revenue due as a result of the coronavirus public health emergency, and (c) paying administrative leave of operations or contractor personnel due to reductions of service. In addition, Title 2 CFR § 200.303 requires the recipient of federal funds establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Moreover, Title 2 CFR 200.403 (a) and (b) state that except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) be necessary and reasonable for the performance of the Federal award and be allocable thereto under 2 CFR part 200, subpart E, and (b) conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E or in the Federal award as to types or amount of cost items. Condition: As part of audit procedures over a sample of 25 non-payroll transactions we identified one transaction for $8,510 relating to legislative consulting services which was not an allowable activity under the grant agreement. As a result of further review of the general ledger account in which the above item was recorded, we identified 13 additional transactions for similar unallowable activities representing $581,987. We did not identify any indirect costs that were associated with these unallowable costs. Total questioned cost identified through the audit procedures performed was approximately $590,403. Total expenditures for the Federal Transit Cluster were approximately $243,258,597. Cause: Historically, grants received by METRO have generally been specific to specified projects, which allowed METRO to establish projects in advance for tracking, accumulating, and approving/monitoring costs incurred. As such, METRO’s internal controls are designed with this project-based focus in mind. In the current year METRO received this grant which allows them to seek reimbursement for certain prior year costs not already reimbursed by the Federal government. Given the broad nature of costs allowed under this grant and the ability to seek reimbursement for prior year costs, management identified costs which were included in general ledger accounts not typically subject to detailed allowability assessments in accordance with federal requirements, and as a result METRO inadvertently placed an increased reliance on the knowledge of grants department personnel to understand the nature of general ledger accounts and transactions, as well as an increased reliance on reviewers identifying unallowable costs in the summary of expenditures submitted for reimbursement. Effect: Certain of the costs incurred and submitted for reimbursement by METRO were unallowable. Auditor’s Recommendation: METRO should establish appropriate processes and controls to guide grant personnel in the aggregation of grant costs. In particular, management should focus on the processes and controls associated with grants for which predefined projects are not established in advance of incurring grant related expenditures.
Criteria: Per section 3401(a) of the American Rescue Plan (ARP) Act of 2021, ARP funds shall be available for reimbursement for: (a) payroll of public transportation entities, (b) operating costs to maintain service due to lost revenue due as a result of the coronavirus public health emergency, and (c) paying administrative leave of operations or contractor personnel due to reductions of service. In addition, Title 2 CFR § 200.303 requires the recipient of federal funds establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Moreover, Title 2 CFR 200.403 (a) and (b) state that except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) be necessary and reasonable for the performance of the Federal award and be allocable thereto under 2 CFR part 200, subpart E, and (b) conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E or in the Federal award as to types or amount of cost items. Condition: As part of audit procedures over a sample of 25 non-payroll transactions we identified one transaction for $8,510 relating to legislative consulting services which was not an allowable activity under the grant agreement. As a result of further review of the general ledger account in which the above item was recorded, we identified 13 additional transactions for similar unallowable activities representing $581,987. We did not identify any indirect costs that were associated with these unallowable costs. Total questioned cost identified through the audit procedures performed was approximately $590,403. Total expenditures for the Federal Transit Cluster were approximately $243,258,597. Cause: Historically, grants received by METRO have generally been specific to specified projects, which allowed METRO to establish projects in advance for tracking, accumulating, and approving/monitoring costs incurred. As such, METRO’s internal controls are designed with this project-based focus in mind. In the current year METRO received this grant which allows them to seek reimbursement for certain prior year costs not already reimbursed by the Federal government. Given the broad nature of costs allowed under this grant and the ability to seek reimbursement for prior year costs, management identified costs which were included in general ledger accounts not typically subject to detailed allowability assessments in accordance with federal requirements, and as a result METRO inadvertently placed an increased reliance on the knowledge of grants department personnel to understand the nature of general ledger accounts and transactions, as well as an increased reliance on reviewers identifying unallowable costs in the summary of expenditures submitted for reimbursement. Effect: Certain of the costs incurred and submitted for reimbursement by METRO were unallowable. Auditor’s Recommendation: METRO should establish appropriate processes and controls to guide grant personnel in the aggregation of grant costs. In particular, management should focus on the processes and controls associated with grants for which predefined projects are not established in advance of incurring grant related expenditures.
Criteria: Per section 3401(a) of the American Rescue Plan (ARP) Act of 2021, ARP funds shall be available for reimbursement for: (a) payroll of public transportation entities, (b) operating costs to maintain service due to lost revenue due as a result of the coronavirus public health emergency, and (c) paying administrative leave of operations or contractor personnel due to reductions of service. In addition, Title 2 CFR § 200.303 requires the recipient of federal funds establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Moreover, Title 2 CFR 200.403 (a) and (b) state that except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) be necessary and reasonable for the performance of the Federal award and be allocable thereto under 2 CFR part 200, subpart E, and (b) conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E or in the Federal award as to types or amount of cost items. Condition: As part of audit procedures over a sample of 25 non-payroll transactions we identified one transaction for $8,510 relating to legislative consulting services which was not an allowable activity under the grant agreement. As a result of further review of the general ledger account in which the above item was recorded, we identified 13 additional transactions for similar unallowable activities representing $581,987. We did not identify any indirect costs that were associated with these unallowable costs. Total questioned cost identified through the audit procedures performed was approximately $590,403. Total expenditures for the Federal Transit Cluster were approximately $243,258,597. Cause: Historically, grants received by METRO have generally been specific to specified projects, which allowed METRO to establish projects in advance for tracking, accumulating, and approving/monitoring costs incurred. As such, METRO’s internal controls are designed with this project-based focus in mind. In the current year METRO received this grant which allows them to seek reimbursement for certain prior year costs not already reimbursed by the Federal government. Given the broad nature of costs allowed under this grant and the ability to seek reimbursement for prior year costs, management identified costs which were included in general ledger accounts not typically subject to detailed allowability assessments in accordance with federal requirements, and as a result METRO inadvertently placed an increased reliance on the knowledge of grants department personnel to understand the nature of general ledger accounts and transactions, as well as an increased reliance on reviewers identifying unallowable costs in the summary of expenditures submitted for reimbursement. Effect: Certain of the costs incurred and submitted for reimbursement by METRO were unallowable. Auditor’s Recommendation: METRO should establish appropriate processes and controls to guide grant personnel in the aggregation of grant costs. In particular, management should focus on the processes and controls associated with grants for which predefined projects are not established in advance of incurring grant related expenditures.
Criteria: Per section 3401(a) of the American Rescue Plan (ARP) Act of 2021, ARP funds shall be available for reimbursement for: (a) payroll of public transportation entities, (b) operating costs to maintain service due to lost revenue due as a result of the coronavirus public health emergency, and (c) paying administrative leave of operations or contractor personnel due to reductions of service. In addition, Title 2 CFR § 200.303 requires the recipient of federal funds establish and maintain effective internal control over the federal award that provides reasonable assurance that the non-federal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Moreover, Title 2 CFR 200.403 (a) and (b) state that except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) be necessary and reasonable for the performance of the Federal award and be allocable thereto under 2 CFR part 200, subpart E, and (b) conform to any limitations or exclusions set forth in 2 CFR part 200, subpart E or in the Federal award as to types or amount of cost items. Condition: As part of audit procedures over a sample of 25 non-payroll transactions we identified one transaction for $8,510 relating to legislative consulting services which was not an allowable activity under the grant agreement. As a result of further review of the general ledger account in which the above item was recorded, we identified 13 additional transactions for similar unallowable activities representing $581,987. We did not identify any indirect costs that were associated with these unallowable costs. Total questioned cost identified through the audit procedures performed was approximately $590,403. Total expenditures for the Federal Transit Cluster were approximately $243,258,597. Cause: Historically, grants received by METRO have generally been specific to specified projects, which allowed METRO to establish projects in advance for tracking, accumulating, and approving/monitoring costs incurred. As such, METRO’s internal controls are designed with this project-based focus in mind. In the current year METRO received this grant which allows them to seek reimbursement for certain prior year costs not already reimbursed by the Federal government. Given the broad nature of costs allowed under this grant and the ability to seek reimbursement for prior year costs, management identified costs which were included in general ledger accounts not typically subject to detailed allowability assessments in accordance with federal requirements, and as a result METRO inadvertently placed an increased reliance on the knowledge of grants department personnel to understand the nature of general ledger accounts and transactions, as well as an increased reliance on reviewers identifying unallowable costs in the summary of expenditures submitted for reimbursement. Effect: Certain of the costs incurred and submitted for reimbursement by METRO were unallowable. Auditor’s Recommendation: METRO should establish appropriate processes and controls to guide grant personnel in the aggregation of grant costs. In particular, management should focus on the processes and controls associated with grants for which predefined projects are not established in advance of incurring grant related expenditures.
Section III – Federal Award Findings and Questioned Costs Finding 2023-002: Overdrawn Federal Funding Compliance Requirement: Allowable Costs/Costs Principles and Cash Management Type: Material Noncompliance and Material Weakness over Internal Control Federal Agency: U.S. Department of Health and Human Services AL Numbers and Titles: 93.809 – National Center for Chronic Disease Prevention and Health Promotion Federal Award Number: NU58DP006510 Questioned Costs: $380,644 Repeat Finding: No Criteria: NACDD requests funds from the U.S. Department of Health and Human Services under the advance payment method. In accordance with 45 CFR 74.22, cash advances to a recipient organization shall be limited to the minimum amounts needed and be timed to be in accordance with the actual, immediate cash requirements of the recipient organization in carrying out the purpose of the approved program or project. The timing and amount of cash advances shall be as close as is administratively feasible to the actual disbursements by the recipient organization for direct program or project costs and the proportionate share of any allowable indirect costs. According to 2 CFR §200.403 - §200.405 (Allowable Costs/Cost Principles), costs must be necessary, reasonable, and allocable to the federal award. Additionally, Section 200.303 of the Uniform Guidance indicates that the nonfederal entity must establish and maintain effective internal control over the federal award that provides reasonable assurance that the nonfederal entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. The Uniform Guidance also indicates that these internal controls should be in compliance with guidance in “Standards for Internal Control in the Federal Government” (Green Book) issued by the Comptroller General of the United States or the “Internal Control Integrated Framework,” issued by COSO. The Office of Management and Budget (OMB) has clarified that the references to the Green Book and COSO were only provided as best practices and not requirements. Condition: During our testing, we identified duplicated federal award expenditures amounting to $380,644, resulting in overdrawn federal funds by $380,644. The excess cash on hand was not returned to the funding source in a timely manner. Cause: This issue occurred due to inadequate controls over the recording of expenses and the drawdown of federal funds. 28 ASSOCIATION OF STATE AND TERRITORIAL CHRONIC DISEASE PROGRAM DIRECTORS D/B/A THE NATIONAL ASSOCIATION OF CHRONIC DISEASE DIRECTORS SCHEDULE OF FINDINGS AND QUESTIONED COSTS - Continued Section III – Federal Award Findings and Questioned Costs – continued Finding 2023-002: Overdrawn Federal Funding - continued Effect: NACDD is not in compliance with federal regulations concerning allowable costs, disbursement of federal funds and excess cash. In addition, a lack of adequate controls over allowable costs and cash management could result in a reasonable possibility that NACDD would not detect errors in the normal course of performing duties and correct them in a timely manner. Recommendation: We recommend that management conduct regular reconciliations of grant expenses to identify and correct duplicate entries promptly and review cash management practices to prevent overdraws on federal funds. Views of Responsible Officials Corrective Actions: Management agrees with this finding. Please refer to the Corrective Action Plan.
2023-005: Written Policies and Procedures Assistance Listing Number, Federal Agency, and Program Name: Assistance Listing Number 93.696, Certified Community Behavioral Health Clinic Expansion Grant Federal Award Identification Number and Year: 1H79SM086680-01, Program Grant Period 09/29/2022-09/29/2023 Pass-through Entity: N/A Type: Material weakness in internal control and noncompliance with laws and regulations Repeat Finding: No Criteria: As a precondition to receive federal awards, prospective recipients must have effective internal controls over the federal award. As described in 2 CFR, Part 200.303, nonfederal entities must have certain written policies and procedures surrounding the management of their federal awards. Such policies should include procedures for collecting payments of federal funds per 2 CRF 200.305, cash management (i.e., minimizing the time between draws and actual disbursing of federal awards) per 2 CFR 200.302(b)(6), allowable cost per 2 CFR 200.403, and conflict of interest per 2 CFR 200.318. Per 2 CFR 200.319(d), the non-Federal entity must have written procedures for procurement transactions. Condition: The Authority did not have written procedures for cash management and allowable cost. Identification of How Likely Questioned Costs Were Computed: N/A Known Questioned Costs: None Context: N/A Cause/Effect: Although the Authority is aware that they were required to have written policies and procedures for the items noted above, they were using the grant agreement guidelines that provide grantees with guidance for ensuring the existing accounting and personnel policies and procedures include the necessary controls. These guidelines address the compliance areas required by the Uniform Guidance. Recommendation: We recommend the Authority adopt written policies and procedures over cash management and allowable costs required under the Uniform Guidance. View of Responsible Officials and Planned Corrective Action Plan: See attached corrective action plan.
Title 2 U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance), 2 CFR 200.403(g) outlines the factors affecting allowability of costs charged to a federal award, specifically that costs should be adequately documented. The documentation for disbursements is to be maintained in order to provide a basis for amounts recorded in the Schedule of Expenditures of Federal Awards, to demonstrate compliance with legal requirements, and to substantiate the allowability of purchases. In a test of 40 expenditures charged to the Education Stabilization Fund, nine expenditures were not adequately documented, and in some cases, no documentation was provided. Internal control procedures were not in place to ensure costs charged to the Education Stabilization Fund were adequately documented. As a result, the Barbour County Board of Education did not comply with the Uniform Guidance as it pertains to documentation of costs charged to the Education Stabilization Fund. Recommendation The Board should implement internal control procedures to ensure costs charged to the COVID-19 Education Stabilization Fund are adequately documented.
Title 2 U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance), 2 CFR 200.403(g) outlines the factors affecting allowability of costs charged to a federal award, specifically that costs should be adequately documented. The documentation for disbursements is to be maintained in order to provide a basis for amounts recorded in the Schedule of Expenditures of Federal Awards, to demonstrate compliance with legal requirements, and to substantiate the allowability of purchases. In a test of 40 expenditures charged to the Education Stabilization Fund, nine expenditures were not adequately documented, and in some cases, no documentation was provided. Internal control procedures were not in place to ensure costs charged to the Education Stabilization Fund were adequately documented. As a result, the Barbour County Board of Education did not comply with the Uniform Guidance as it pertains to documentation of costs charged to the Education Stabilization Fund. Recommendation The Board should implement internal control procedures to ensure costs charged to the COVID-19 Education Stabilization Fund are adequately documented.