Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed, allowable costs/cost principles, and eligibility Questioned costs: $36,945 Assistance Listings number and name: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles Questioned costs: $38,169 Total questioned costs: $75,114 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Community Assistance and Development (Division) made unallowable benefits payments totaling $75,114 during fiscal year 2023 to rental assistance program applicants for the Emergency Rental Assistance Program (ERAP) and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) federal programs.1 Specifically, for 10 of 50 CSLFRF and 10 of 65 ERAP benefit payments tested, we found that the Division made unallowable benefits payments of $38,169 for CSLFRF and $36,945 for ERAP, to or on behalf of ineligible program applicants or those that lacked required eligibility documentation and for other inappropriate costs, as follows: • The Division inappropriately paid $43,642 of benefit payments to or on behalf of 8 ineligible program applicants, including: o $42,993 paid to or on behalf of 7 program applicants who did not reside in an eligible Maricopa County service area at the time of application ($30,618 for 5 ERAP program applicants and $12,375 for 2 CSLFRF applicants). o $649 paid to or on behalf of 1 ERAP program applicant whose income exceeded allowable program limits. • The Division inappropriately paid $17,655 of benefit payments to or on behalf of 8 program applicants without obtaining required documentation to support they were eligible to receive them, including: o $12,567 paid to or on behalf of 6 CSLFRF program applicants without required proof of income, a signed lease agreement, and other documentation supporting household size and the reimbursement of late penalties and fees related to rent and/or utility account bills. o $5,088 paid to or on behalf of 2 ERAP program applicants without a required lease agreement listing the applicants. • The Division inappropriately paid $13,817 of benefit payments to or on behalf of 4 program applicants, including: o $13,731 paid to or on behalf of 3 participants for rental arrears—rent not paid by the date specified in the lease agreement—payments exceeding the allowable one-time, lump sum payments ($13,227 for 2 CSLFRF participants and $504 for 1 ERAP participant). o $86 paid to or on behalf of 1 ERAP applicant for utility services the Division previously paid. Effect—The Division’s making unallowable benefits payments to ineligible program applicants or without required documentation increases the risk that the program applicants received utility and rental payments for which they were not entitled. Also, the Division’s paying for inappropriate costs spent inconsistent with program requirements increases the risk that those who were intended to benefit from the program may not have received all the benefits they otherwise would have received. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.2 During fiscal year 2023, the Division paid $193.7 million in benefit payments to or on behalf of program applicants requesting emergency rental and utility assistance for these 2 federal programs, as illustrated in the figure below, and is at risk that more of its benefit payment expenditures are inappropriate than those identified in our sample. Benefit payments expenditures (in millions) Total program expenditures (in millions) Percent of benefit payments expenditures to total program expenditures ERAP $162.8 $194.7 83.6% CSLFRF $30.9 $379.5 8.1% Totals for ERAP and CSLFRF $193.7 $574.2 33.7% Cause—Division management reported that personnel responsible for evaluating program applications and determining program applicant’s eligibility and allowability of related costs did not have time to perform thorough evaluations, including making appropriate eligibility determinations, obtaining required documentation, or ensuring costs were allowable, because of the large quantity of program applications. Further, the Division failed to identify the program evaluation errors during post-reviews of eligibility determinations because the checklist Division personnel used lacked detailed guidance for verifying that the determinations aligned with the Division’s written policies and procedures and were supported by required documentation. Criteria—Federal regulations require costs to be reasonable and adequately documented to be allowable under federal awards, and the Division’s written policies and procedures require certain documentation to support eligibility requirements related to where the applicant lives and their income.3,4,5 Specifically, Division policy requires a program application evaluation to ensure complete and reasonable documentation is obtained including lease agreements; any bills related to utility accounts; and proof of income, household size, eligible service area residency, and risk of homelessness or housing instability. Also, the Division’s policies prohibit incomplete applications to be acted upon until applicants provide the required information and documentation to complete their applications. Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Ensure benefit payments are for allowable costs paid to or on behalf of eligible program applicants. 2. Follow existing policies and procedures to obtain required documentation to support requirements related to where the applicant lives and their income to ensure program applicants are eligible to receive benefit payments. 3. Allocate sufficient staffing resources to perform a thorough evaluation of program benefits applications and provide training on eligibility requirements and allowable benefit payments. 4. Update the checklist Division personnel use to perform a post-review of eligibility determinations to include detailed guidance for verifying the determinations aligned with the Division’s written policies and procedures and supported by adequate documentation. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The Arizona Department of Economic Security’s Emergency Rental Assistance Program (ERAP) was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). Further, the Arizona Department of Economic Security’s ERAP was extended through the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security, Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 2 Federal Uniform Guidance audit requirements require its federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Department, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 3 Federal Uniform Guidance cost principles require costs to be adequately documented (2 CFR 200.403[g]) and reasonable (2 CFR 200.404). In determining the reasonableness of a given cost, consideration must be given to several factors, including requirements imposed by federal laws and regulations and the terms and conditions of the federal award (2 CFR 200.404[b]). 4 U.S. Department of the Treasury published guidance to assist grantees in ERAP administration, including a requirement for ERAP grantees to establish policies and procedures to govern the implementation of their ERAP programs consistent with the ERAP statutes and U.S. Department of the Treasury FAQs (U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions, Revised March 5, 2024. Retrieved 10/16/2024 from https://home.treasury.gov/system/files?file=136/ERA-FAQs03052024.pdf). 5 To be eligible for program benefits, individuals had to have filed, received, and been deemed eligible in accordance with the Division’s written policies and procedures. The benefit payments consisted of rent and/or utility payments for past-due amounts (a one-time lump sum payment) and for 3 months of payments on each reapplication up to a total of 18 months. Applicants must provide proof of income or self-attestation of no income and cannot earn an income that is above the area median income as determined by the HUD income limits (Section 8) set at 80 percent AMI (Area Median Income). These limits are updated annually and can be viewed at https://www.huduser.gov/portal/datasets/il.html#year2024. Further, applicants who live in Maricopa County must reside in the City of Phoenix. This policy was updated in April 2023 to include the City of Mesa. Rental applications must include a housing agreement with the applicant’s name and current rental address. Utility assistance applications must include bills or invoices or outstanding payments. Applications are reviewed by adjudicators, who ensure the documentation for proof of residence, proof of income, housing agreement, any bills related to utility accounts and proof of risk of homelessness or housing instability are complete and reasonable. Any decisions made contrary to policy must include a rationale for the decision in the supporting documentation for the application (Department of Economic Security Emergency Rental Assistance Program Policy, Rev 8 [7/1/2022] and Rev 9 [4/1/2023]).
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed, allowable costs/cost principles, and eligibility Questioned costs: $36,945 Assistance Listings number and name: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles Questioned costs: $38,169 Total questioned costs: $75,114 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Community Assistance and Development (Division) made unallowable benefits payments totaling $75,114 during fiscal year 2023 to rental assistance program applicants for the Emergency Rental Assistance Program (ERAP) and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) federal programs.1 Specifically, for 10 of 50 CSLFRF and 10 of 65 ERAP benefit payments tested, we found that the Division made unallowable benefits payments of $38,169 for CSLFRF and $36,945 for ERAP, to or on behalf of ineligible program applicants or those that lacked required eligibility documentation and for other inappropriate costs, as follows: • The Division inappropriately paid $43,642 of benefit payments to or on behalf of 8 ineligible program applicants, including: o $42,993 paid to or on behalf of 7 program applicants who did not reside in an eligible Maricopa County service area at the time of application ($30,618 for 5 ERAP program applicants and $12,375 for 2 CSLFRF applicants). o $649 paid to or on behalf of 1 ERAP program applicant whose income exceeded allowable program limits. • The Division inappropriately paid $17,655 of benefit payments to or on behalf of 8 program applicants without obtaining required documentation to support they were eligible to receive them, including: o $12,567 paid to or on behalf of 6 CSLFRF program applicants without required proof of income, a signed lease agreement, and other documentation supporting household size and the reimbursement of late penalties and fees related to rent and/or utility account bills. o $5,088 paid to or on behalf of 2 ERAP program applicants without a required lease agreement listing the applicants. • The Division inappropriately paid $13,817 of benefit payments to or on behalf of 4 program applicants, including: o $13,731 paid to or on behalf of 3 participants for rental arrears—rent not paid by the date specified in the lease agreement—payments exceeding the allowable one-time, lump sum payments ($13,227 for 2 CSLFRF participants and $504 for 1 ERAP participant). o $86 paid to or on behalf of 1 ERAP applicant for utility services the Division previously paid. Effect—The Division’s making unallowable benefits payments to ineligible program applicants or without required documentation increases the risk that the program applicants received utility and rental payments for which they were not entitled. Also, the Division’s paying for inappropriate costs spent inconsistent with program requirements increases the risk that those who were intended to benefit from the program may not have received all the benefits they otherwise would have received. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.2 During fiscal year 2023, the Division paid $193.7 million in benefit payments to or on behalf of program applicants requesting emergency rental and utility assistance for these 2 federal programs, as illustrated in the figure below, and is at risk that more of its benefit payment expenditures are inappropriate than those identified in our sample. Benefit payments expenditures (in millions) Total program expenditures (in millions) Percent of benefit payments expenditures to total program expenditures ERAP $162.8 $194.7 83.6% CSLFRF $30.9 $379.5 8.1% Totals for ERAP and CSLFRF $193.7 $574.2 33.7% Cause—Division management reported that personnel responsible for evaluating program applications and determining program applicant’s eligibility and allowability of related costs did not have time to perform thorough evaluations, including making appropriate eligibility determinations, obtaining required documentation, or ensuring costs were allowable, because of the large quantity of program applications. Further, the Division failed to identify the program evaluation errors during post-reviews of eligibility determinations because the checklist Division personnel used lacked detailed guidance for verifying that the determinations aligned with the Division’s written policies and procedures and were supported by required documentation. Criteria—Federal regulations require costs to be reasonable and adequately documented to be allowable under federal awards, and the Division’s written policies and procedures require certain documentation to support eligibility requirements related to where the applicant lives and their income.3,4,5 Specifically, Division policy requires a program application evaluation to ensure complete and reasonable documentation is obtained including lease agreements; any bills related to utility accounts; and proof of income, household size, eligible service area residency, and risk of homelessness or housing instability. Also, the Division’s policies prohibit incomplete applications to be acted upon until applicants provide the required information and documentation to complete their applications. Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Ensure benefit payments are for allowable costs paid to or on behalf of eligible program applicants. 2. Follow existing policies and procedures to obtain required documentation to support requirements related to where the applicant lives and their income to ensure program applicants are eligible to receive benefit payments. 3. Allocate sufficient staffing resources to perform a thorough evaluation of program benefits applications and provide training on eligibility requirements and allowable benefit payments. 4. Update the checklist Division personnel use to perform a post-review of eligibility determinations to include detailed guidance for verifying the determinations aligned with the Division’s written policies and procedures and supported by adequate documentation. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The Arizona Department of Economic Security’s Emergency Rental Assistance Program (ERAP) was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). Further, the Arizona Department of Economic Security’s ERAP was extended through the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security, Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 2 Federal Uniform Guidance audit requirements require its federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Department, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 3 Federal Uniform Guidance cost principles require costs to be adequately documented (2 CFR 200.403[g]) and reasonable (2 CFR 200.404). In determining the reasonableness of a given cost, consideration must be given to several factors, including requirements imposed by federal laws and regulations and the terms and conditions of the federal award (2 CFR 200.404[b]). 4 U.S. Department of the Treasury published guidance to assist grantees in ERAP administration, including a requirement for ERAP grantees to establish policies and procedures to govern the implementation of their ERAP programs consistent with the ERAP statutes and U.S. Department of the Treasury FAQs (U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions, Revised March 5, 2024. Retrieved 10/16/2024 from https://home.treasury.gov/system/files?file=136/ERA-FAQs03052024.pdf). 5 To be eligible for program benefits, individuals had to have filed, received, and been deemed eligible in accordance with the Division’s written policies and procedures. The benefit payments consisted of rent and/or utility payments for past-due amounts (a one-time lump sum payment) and for 3 months of payments on each reapplication up to a total of 18 months. Applicants must provide proof of income or self-attestation of no income and cannot earn an income that is above the area median income as determined by the HUD income limits (Section 8) set at 80 percent AMI (Area Median Income). These limits are updated annually and can be viewed at https://www.huduser.gov/portal/datasets/il.html#year2024. Further, applicants who live in Maricopa County must reside in the City of Phoenix. This policy was updated in April 2023 to include the City of Mesa. Rental applications must include a housing agreement with the applicant’s name and current rental address. Utility assistance applications must include bills or invoices or outstanding payments. Applications are reviewed by adjudicators, who ensure the documentation for proof of residence, proof of income, housing agreement, any bills related to utility accounts and proof of risk of homelessness or housing instability are complete and reasonable. Any decisions made contrary to policy must include a rationale for the decision in the supporting documentation for the application (Department of Economic Security Emergency Rental Assistance Program Policy, Rev 8 [7/1/2022] and Rev 9 [4/1/2023]).
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed, allowable costs/cost principles, and eligibility Questioned costs: $36,945 Assistance Listings number and name: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles Questioned costs: $38,169 Total questioned costs: $75,114 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Community Assistance and Development (Division) made unallowable benefits payments totaling $75,114 during fiscal year 2023 to rental assistance program applicants for the Emergency Rental Assistance Program (ERAP) and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) federal programs.1 Specifically, for 10 of 50 CSLFRF and 10 of 65 ERAP benefit payments tested, we found that the Division made unallowable benefits payments of $38,169 for CSLFRF and $36,945 for ERAP, to or on behalf of ineligible program applicants or those that lacked required eligibility documentation and for other inappropriate costs, as follows: • The Division inappropriately paid $43,642 of benefit payments to or on behalf of 8 ineligible program applicants, including: o $42,993 paid to or on behalf of 7 program applicants who did not reside in an eligible Maricopa County service area at the time of application ($30,618 for 5 ERAP program applicants and $12,375 for 2 CSLFRF applicants). o $649 paid to or on behalf of 1 ERAP program applicant whose income exceeded allowable program limits. • The Division inappropriately paid $17,655 of benefit payments to or on behalf of 8 program applicants without obtaining required documentation to support they were eligible to receive them, including: o $12,567 paid to or on behalf of 6 CSLFRF program applicants without required proof of income, a signed lease agreement, and other documentation supporting household size and the reimbursement of late penalties and fees related to rent and/or utility account bills. o $5,088 paid to or on behalf of 2 ERAP program applicants without a required lease agreement listing the applicants. • The Division inappropriately paid $13,817 of benefit payments to or on behalf of 4 program applicants, including: o $13,731 paid to or on behalf of 3 participants for rental arrears—rent not paid by the date specified in the lease agreement—payments exceeding the allowable one-time, lump sum payments ($13,227 for 2 CSLFRF participants and $504 for 1 ERAP participant). o $86 paid to or on behalf of 1 ERAP applicant for utility services the Division previously paid. Effect—The Division’s making unallowable benefits payments to ineligible program applicants or without required documentation increases the risk that the program applicants received utility and rental payments for which they were not entitled. Also, the Division’s paying for inappropriate costs spent inconsistent with program requirements increases the risk that those who were intended to benefit from the program may not have received all the benefits they otherwise would have received. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.2 During fiscal year 2023, the Division paid $193.7 million in benefit payments to or on behalf of program applicants requesting emergency rental and utility assistance for these 2 federal programs, as illustrated in the figure below, and is at risk that more of its benefit payment expenditures are inappropriate than those identified in our sample. Benefit payments expenditures (in millions) Total program expenditures (in millions) Percent of benefit payments expenditures to total program expenditures ERAP $162.8 $194.7 83.6% CSLFRF $30.9 $379.5 8.1% Totals for ERAP and CSLFRF $193.7 $574.2 33.7% Cause—Division management reported that personnel responsible for evaluating program applications and determining program applicant’s eligibility and allowability of related costs did not have time to perform thorough evaluations, including making appropriate eligibility determinations, obtaining required documentation, or ensuring costs were allowable, because of the large quantity of program applications. Further, the Division failed to identify the program evaluation errors during post-reviews of eligibility determinations because the checklist Division personnel used lacked detailed guidance for verifying that the determinations aligned with the Division’s written policies and procedures and were supported by required documentation. Criteria—Federal regulations require costs to be reasonable and adequately documented to be allowable under federal awards, and the Division’s written policies and procedures require certain documentation to support eligibility requirements related to where the applicant lives and their income.3,4,5 Specifically, Division policy requires a program application evaluation to ensure complete and reasonable documentation is obtained including lease agreements; any bills related to utility accounts; and proof of income, household size, eligible service area residency, and risk of homelessness or housing instability. Also, the Division’s policies prohibit incomplete applications to be acted upon until applicants provide the required information and documentation to complete their applications. Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Ensure benefit payments are for allowable costs paid to or on behalf of eligible program applicants. 2. Follow existing policies and procedures to obtain required documentation to support requirements related to where the applicant lives and their income to ensure program applicants are eligible to receive benefit payments. 3. Allocate sufficient staffing resources to perform a thorough evaluation of program benefits applications and provide training on eligibility requirements and allowable benefit payments. 4. Update the checklist Division personnel use to perform a post-review of eligibility determinations to include detailed guidance for verifying the determinations aligned with the Division’s written policies and procedures and supported by adequate documentation. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The Arizona Department of Economic Security’s Emergency Rental Assistance Program (ERAP) was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). Further, the Arizona Department of Economic Security’s ERAP was extended through the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security, Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 2 Federal Uniform Guidance audit requirements require its federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Department, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 3 Federal Uniform Guidance cost principles require costs to be adequately documented (2 CFR 200.403[g]) and reasonable (2 CFR 200.404). In determining the reasonableness of a given cost, consideration must be given to several factors, including requirements imposed by federal laws and regulations and the terms and conditions of the federal award (2 CFR 200.404[b]). 4 U.S. Department of the Treasury published guidance to assist grantees in ERAP administration, including a requirement for ERAP grantees to establish policies and procedures to govern the implementation of their ERAP programs consistent with the ERAP statutes and U.S. Department of the Treasury FAQs (U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions, Revised March 5, 2024. Retrieved 10/16/2024 from https://home.treasury.gov/system/files?file=136/ERA-FAQs03052024.pdf). 5 To be eligible for program benefits, individuals had to have filed, received, and been deemed eligible in accordance with the Division’s written policies and procedures. The benefit payments consisted of rent and/or utility payments for past-due amounts (a one-time lump sum payment) and for 3 months of payments on each reapplication up to a total of 18 months. Applicants must provide proof of income or self-attestation of no income and cannot earn an income that is above the area median income as determined by the HUD income limits (Section 8) set at 80 percent AMI (Area Median Income). These limits are updated annually and can be viewed at https://www.huduser.gov/portal/datasets/il.html#year2024. Further, applicants who live in Maricopa County must reside in the City of Phoenix. This policy was updated in April 2023 to include the City of Mesa. Rental applications must include a housing agreement with the applicant’s name and current rental address. Utility assistance applications must include bills or invoices or outstanding payments. Applications are reviewed by adjudicators, who ensure the documentation for proof of residence, proof of income, housing agreement, any bills related to utility accounts and proof of risk of homelessness or housing instability are complete and reasonable. Any decisions made contrary to policy must include a rationale for the decision in the supporting documentation for the application (Department of Economic Security Emergency Rental Assistance Program Policy, Rev 8 [7/1/2022] and Rev 9 [4/1/2023]).
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed, allowable costs/cost principles, and eligibility Questioned costs: $36,945 Assistance Listings number and name: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles Questioned costs: $38,169 Total questioned costs: $75,114 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Community Assistance and Development (Division) made unallowable benefits payments totaling $75,114 during fiscal year 2023 to rental assistance program applicants for the Emergency Rental Assistance Program (ERAP) and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) federal programs.1 Specifically, for 10 of 50 CSLFRF and 10 of 65 ERAP benefit payments tested, we found that the Division made unallowable benefits payments of $38,169 for CSLFRF and $36,945 for ERAP, to or on behalf of ineligible program applicants or those that lacked required eligibility documentation and for other inappropriate costs, as follows: • The Division inappropriately paid $43,642 of benefit payments to or on behalf of 8 ineligible program applicants, including: o $42,993 paid to or on behalf of 7 program applicants who did not reside in an eligible Maricopa County service area at the time of application ($30,618 for 5 ERAP program applicants and $12,375 for 2 CSLFRF applicants). o $649 paid to or on behalf of 1 ERAP program applicant whose income exceeded allowable program limits. • The Division inappropriately paid $17,655 of benefit payments to or on behalf of 8 program applicants without obtaining required documentation to support they were eligible to receive them, including: o $12,567 paid to or on behalf of 6 CSLFRF program applicants without required proof of income, a signed lease agreement, and other documentation supporting household size and the reimbursement of late penalties and fees related to rent and/or utility account bills. o $5,088 paid to or on behalf of 2 ERAP program applicants without a required lease agreement listing the applicants. • The Division inappropriately paid $13,817 of benefit payments to or on behalf of 4 program applicants, including: o $13,731 paid to or on behalf of 3 participants for rental arrears—rent not paid by the date specified in the lease agreement—payments exceeding the allowable one-time, lump sum payments ($13,227 for 2 CSLFRF participants and $504 for 1 ERAP participant). o $86 paid to or on behalf of 1 ERAP applicant for utility services the Division previously paid. Effect—The Division’s making unallowable benefits payments to ineligible program applicants or without required documentation increases the risk that the program applicants received utility and rental payments for which they were not entitled. Also, the Division’s paying for inappropriate costs spent inconsistent with program requirements increases the risk that those who were intended to benefit from the program may not have received all the benefits they otherwise would have received. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.2 During fiscal year 2023, the Division paid $193.7 million in benefit payments to or on behalf of program applicants requesting emergency rental and utility assistance for these 2 federal programs, as illustrated in the figure below, and is at risk that more of its benefit payment expenditures are inappropriate than those identified in our sample. Benefit payments expenditures (in millions) Total program expenditures (in millions) Percent of benefit payments expenditures to total program expenditures ERAP $162.8 $194.7 83.6% CSLFRF $30.9 $379.5 8.1% Totals for ERAP and CSLFRF $193.7 $574.2 33.7% Cause—Division management reported that personnel responsible for evaluating program applications and determining program applicant’s eligibility and allowability of related costs did not have time to perform thorough evaluations, including making appropriate eligibility determinations, obtaining required documentation, or ensuring costs were allowable, because of the large quantity of program applications. Further, the Division failed to identify the program evaluation errors during post-reviews of eligibility determinations because the checklist Division personnel used lacked detailed guidance for verifying that the determinations aligned with the Division’s written policies and procedures and were supported by required documentation. Criteria—Federal regulations require costs to be reasonable and adequately documented to be allowable under federal awards, and the Division’s written policies and procedures require certain documentation to support eligibility requirements related to where the applicant lives and their income.3,4,5 Specifically, Division policy requires a program application evaluation to ensure complete and reasonable documentation is obtained including lease agreements; any bills related to utility accounts; and proof of income, household size, eligible service area residency, and risk of homelessness or housing instability. Also, the Division’s policies prohibit incomplete applications to be acted upon until applicants provide the required information and documentation to complete their applications. Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Ensure benefit payments are for allowable costs paid to or on behalf of eligible program applicants. 2. Follow existing policies and procedures to obtain required documentation to support requirements related to where the applicant lives and their income to ensure program applicants are eligible to receive benefit payments. 3. Allocate sufficient staffing resources to perform a thorough evaluation of program benefits applications and provide training on eligibility requirements and allowable benefit payments. 4. Update the checklist Division personnel use to perform a post-review of eligibility determinations to include detailed guidance for verifying the determinations aligned with the Division’s written policies and procedures and supported by adequate documentation. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The Arizona Department of Economic Security’s Emergency Rental Assistance Program (ERAP) was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). Further, the Arizona Department of Economic Security’s ERAP was extended through the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security, Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 2 Federal Uniform Guidance audit requirements require its federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Department, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 3 Federal Uniform Guidance cost principles require costs to be adequately documented (2 CFR 200.403[g]) and reasonable (2 CFR 200.404). In determining the reasonableness of a given cost, consideration must be given to several factors, including requirements imposed by federal laws and regulations and the terms and conditions of the federal award (2 CFR 200.404[b]). 4 U.S. Department of the Treasury published guidance to assist grantees in ERAP administration, including a requirement for ERAP grantees to establish policies and procedures to govern the implementation of their ERAP programs consistent with the ERAP statutes and U.S. Department of the Treasury FAQs (U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions, Revised March 5, 2024. Retrieved 10/16/2024 from https://home.treasury.gov/system/files?file=136/ERA-FAQs03052024.pdf). 5 To be eligible for program benefits, individuals had to have filed, received, and been deemed eligible in accordance with the Division’s written policies and procedures. The benefit payments consisted of rent and/or utility payments for past-due amounts (a one-time lump sum payment) and for 3 months of payments on each reapplication up to a total of 18 months. Applicants must provide proof of income or self-attestation of no income and cannot earn an income that is above the area median income as determined by the HUD income limits (Section 8) set at 80 percent AMI (Area Median Income). These limits are updated annually and can be viewed at https://www.huduser.gov/portal/datasets/il.html#year2024. Further, applicants who live in Maricopa County must reside in the City of Phoenix. This policy was updated in April 2023 to include the City of Mesa. Rental applications must include a housing agreement with the applicant’s name and current rental address. Utility assistance applications must include bills or invoices or outstanding payments. Applications are reviewed by adjudicators, who ensure the documentation for proof of residence, proof of income, housing agreement, any bills related to utility accounts and proof of risk of homelessness or housing instability are complete and reasonable. Any decisions made contrary to policy must include a rationale for the decision in the supporting documentation for the application (Department of Economic Security Emergency Rental Assistance Program Policy, Rev 8 [7/1/2022] and Rev 9 [4/1/2023]).
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed, allowable costs/cost principles, and eligibility Questioned costs: $36,945 Assistance Listings number and name: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles Questioned costs: $38,169 Total questioned costs: $75,114 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Community Assistance and Development (Division) made unallowable benefits payments totaling $75,114 during fiscal year 2023 to rental assistance program applicants for the Emergency Rental Assistance Program (ERAP) and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) federal programs.1 Specifically, for 10 of 50 CSLFRF and 10 of 65 ERAP benefit payments tested, we found that the Division made unallowable benefits payments of $38,169 for CSLFRF and $36,945 for ERAP, to or on behalf of ineligible program applicants or those that lacked required eligibility documentation and for other inappropriate costs, as follows: • The Division inappropriately paid $43,642 of benefit payments to or on behalf of 8 ineligible program applicants, including: o $42,993 paid to or on behalf of 7 program applicants who did not reside in an eligible Maricopa County service area at the time of application ($30,618 for 5 ERAP program applicants and $12,375 for 2 CSLFRF applicants). o $649 paid to or on behalf of 1 ERAP program applicant whose income exceeded allowable program limits. • The Division inappropriately paid $17,655 of benefit payments to or on behalf of 8 program applicants without obtaining required documentation to support they were eligible to receive them, including: o $12,567 paid to or on behalf of 6 CSLFRF program applicants without required proof of income, a signed lease agreement, and other documentation supporting household size and the reimbursement of late penalties and fees related to rent and/or utility account bills. o $5,088 paid to or on behalf of 2 ERAP program applicants without a required lease agreement listing the applicants. • The Division inappropriately paid $13,817 of benefit payments to or on behalf of 4 program applicants, including: o $13,731 paid to or on behalf of 3 participants for rental arrears—rent not paid by the date specified in the lease agreement—payments exceeding the allowable one-time, lump sum payments ($13,227 for 2 CSLFRF participants and $504 for 1 ERAP participant). o $86 paid to or on behalf of 1 ERAP applicant for utility services the Division previously paid. Effect—The Division’s making unallowable benefits payments to ineligible program applicants or without required documentation increases the risk that the program applicants received utility and rental payments for which they were not entitled. Also, the Division’s paying for inappropriate costs spent inconsistent with program requirements increases the risk that those who were intended to benefit from the program may not have received all the benefits they otherwise would have received. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.2 During fiscal year 2023, the Division paid $193.7 million in benefit payments to or on behalf of program applicants requesting emergency rental and utility assistance for these 2 federal programs, as illustrated in the figure below, and is at risk that more of its benefit payment expenditures are inappropriate than those identified in our sample. Benefit payments expenditures (in millions) Total program expenditures (in millions) Percent of benefit payments expenditures to total program expenditures ERAP $162.8 $194.7 83.6% CSLFRF $30.9 $379.5 8.1% Totals for ERAP and CSLFRF $193.7 $574.2 33.7% Cause—Division management reported that personnel responsible for evaluating program applications and determining program applicant’s eligibility and allowability of related costs did not have time to perform thorough evaluations, including making appropriate eligibility determinations, obtaining required documentation, or ensuring costs were allowable, because of the large quantity of program applications. Further, the Division failed to identify the program evaluation errors during post-reviews of eligibility determinations because the checklist Division personnel used lacked detailed guidance for verifying that the determinations aligned with the Division’s written policies and procedures and were supported by required documentation. Criteria—Federal regulations require costs to be reasonable and adequately documented to be allowable under federal awards, and the Division’s written policies and procedures require certain documentation to support eligibility requirements related to where the applicant lives and their income.3,4,5 Specifically, Division policy requires a program application evaluation to ensure complete and reasonable documentation is obtained including lease agreements; any bills related to utility accounts; and proof of income, household size, eligible service area residency, and risk of homelessness or housing instability. Also, the Division’s policies prohibit incomplete applications to be acted upon until applicants provide the required information and documentation to complete their applications. Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Ensure benefit payments are for allowable costs paid to or on behalf of eligible program applicants. 2. Follow existing policies and procedures to obtain required documentation to support requirements related to where the applicant lives and their income to ensure program applicants are eligible to receive benefit payments. 3. Allocate sufficient staffing resources to perform a thorough evaluation of program benefits applications and provide training on eligibility requirements and allowable benefit payments. 4. Update the checklist Division personnel use to perform a post-review of eligibility determinations to include detailed guidance for verifying the determinations aligned with the Division’s written policies and procedures and supported by adequate documentation. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The Arizona Department of Economic Security’s Emergency Rental Assistance Program (ERAP) was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). Further, the Arizona Department of Economic Security’s ERAP was extended through the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security, Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 2 Federal Uniform Guidance audit requirements require its federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Department, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 3 Federal Uniform Guidance cost principles require costs to be adequately documented (2 CFR 200.403[g]) and reasonable (2 CFR 200.404). In determining the reasonableness of a given cost, consideration must be given to several factors, including requirements imposed by federal laws and regulations and the terms and conditions of the federal award (2 CFR 200.404[b]). 4 U.S. Department of the Treasury published guidance to assist grantees in ERAP administration, including a requirement for ERAP grantees to establish policies and procedures to govern the implementation of their ERAP programs consistent with the ERAP statutes and U.S. Department of the Treasury FAQs (U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions, Revised March 5, 2024. Retrieved 10/16/2024 from https://home.treasury.gov/system/files?file=136/ERA-FAQs03052024.pdf). 5 To be eligible for program benefits, individuals had to have filed, received, and been deemed eligible in accordance with the Division’s written policies and procedures. The benefit payments consisted of rent and/or utility payments for past-due amounts (a one-time lump sum payment) and for 3 months of payments on each reapplication up to a total of 18 months. Applicants must provide proof of income or self-attestation of no income and cannot earn an income that is above the area median income as determined by the HUD income limits (Section 8) set at 80 percent AMI (Area Median Income). These limits are updated annually and can be viewed at https://www.huduser.gov/portal/datasets/il.html#year2024. Further, applicants who live in Maricopa County must reside in the City of Phoenix. This policy was updated in April 2023 to include the City of Mesa. Rental applications must include a housing agreement with the applicant’s name and current rental address. Utility assistance applications must include bills or invoices or outstanding payments. Applications are reviewed by adjudicators, who ensure the documentation for proof of residence, proof of income, housing agreement, any bills related to utility accounts and proof of risk of homelessness or housing instability are complete and reasonable. Any decisions made contrary to policy must include a rationale for the decision in the supporting documentation for the application (Department of Economic Security Emergency Rental Assistance Program Policy, Rev 8 [7/1/2022] and Rev 9 [4/1/2023]).
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed, allowable costs/cost principles, and eligibility Questioned costs: $36,945 Assistance Listings number and name: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles Questioned costs: $38,169 Total questioned costs: $75,114 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Community Assistance and Development (Division) made unallowable benefits payments totaling $75,114 during fiscal year 2023 to rental assistance program applicants for the Emergency Rental Assistance Program (ERAP) and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) federal programs.1 Specifically, for 10 of 50 CSLFRF and 10 of 65 ERAP benefit payments tested, we found that the Division made unallowable benefits payments of $38,169 for CSLFRF and $36,945 for ERAP, to or on behalf of ineligible program applicants or those that lacked required eligibility documentation and for other inappropriate costs, as follows: • The Division inappropriately paid $43,642 of benefit payments to or on behalf of 8 ineligible program applicants, including: o $42,993 paid to or on behalf of 7 program applicants who did not reside in an eligible Maricopa County service area at the time of application ($30,618 for 5 ERAP program applicants and $12,375 for 2 CSLFRF applicants). o $649 paid to or on behalf of 1 ERAP program applicant whose income exceeded allowable program limits. • The Division inappropriately paid $17,655 of benefit payments to or on behalf of 8 program applicants without obtaining required documentation to support they were eligible to receive them, including: o $12,567 paid to or on behalf of 6 CSLFRF program applicants without required proof of income, a signed lease agreement, and other documentation supporting household size and the reimbursement of late penalties and fees related to rent and/or utility account bills. o $5,088 paid to or on behalf of 2 ERAP program applicants without a required lease agreement listing the applicants. • The Division inappropriately paid $13,817 of benefit payments to or on behalf of 4 program applicants, including: o $13,731 paid to or on behalf of 3 participants for rental arrears—rent not paid by the date specified in the lease agreement—payments exceeding the allowable one-time, lump sum payments ($13,227 for 2 CSLFRF participants and $504 for 1 ERAP participant). o $86 paid to or on behalf of 1 ERAP applicant for utility services the Division previously paid. Effect—The Division’s making unallowable benefits payments to ineligible program applicants or without required documentation increases the risk that the program applicants received utility and rental payments for which they were not entitled. Also, the Division’s paying for inappropriate costs spent inconsistent with program requirements increases the risk that those who were intended to benefit from the program may not have received all the benefits they otherwise would have received. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.2 During fiscal year 2023, the Division paid $193.7 million in benefit payments to or on behalf of program applicants requesting emergency rental and utility assistance for these 2 federal programs, as illustrated in the figure below, and is at risk that more of its benefit payment expenditures are inappropriate than those identified in our sample. Benefit payments expenditures (in millions) Total program expenditures (in millions) Percent of benefit payments expenditures to total program expenditures ERAP $162.8 $194.7 83.6% CSLFRF $30.9 $379.5 8.1% Totals for ERAP and CSLFRF $193.7 $574.2 33.7% Cause—Division management reported that personnel responsible for evaluating program applications and determining program applicant’s eligibility and allowability of related costs did not have time to perform thorough evaluations, including making appropriate eligibility determinations, obtaining required documentation, or ensuring costs were allowable, because of the large quantity of program applications. Further, the Division failed to identify the program evaluation errors during post-reviews of eligibility determinations because the checklist Division personnel used lacked detailed guidance for verifying that the determinations aligned with the Division’s written policies and procedures and were supported by required documentation. Criteria—Federal regulations require costs to be reasonable and adequately documented to be allowable under federal awards, and the Division’s written policies and procedures require certain documentation to support eligibility requirements related to where the applicant lives and their income.3,4,5 Specifically, Division policy requires a program application evaluation to ensure complete and reasonable documentation is obtained including lease agreements; any bills related to utility accounts; and proof of income, household size, eligible service area residency, and risk of homelessness or housing instability. Also, the Division’s policies prohibit incomplete applications to be acted upon until applicants provide the required information and documentation to complete their applications. Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Ensure benefit payments are for allowable costs paid to or on behalf of eligible program applicants. 2. Follow existing policies and procedures to obtain required documentation to support requirements related to where the applicant lives and their income to ensure program applicants are eligible to receive benefit payments. 3. Allocate sufficient staffing resources to perform a thorough evaluation of program benefits applications and provide training on eligibility requirements and allowable benefit payments. 4. Update the checklist Division personnel use to perform a post-review of eligibility determinations to include detailed guidance for verifying the determinations aligned with the Division’s written policies and procedures and supported by adequate documentation. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The Arizona Department of Economic Security’s Emergency Rental Assistance Program (ERAP) was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). Further, the Arizona Department of Economic Security’s ERAP was extended through the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security, Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 2 Federal Uniform Guidance audit requirements require its federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Department, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 3 Federal Uniform Guidance cost principles require costs to be adequately documented (2 CFR 200.403[g]) and reasonable (2 CFR 200.404). In determining the reasonableness of a given cost, consideration must be given to several factors, including requirements imposed by federal laws and regulations and the terms and conditions of the federal award (2 CFR 200.404[b]). 4 U.S. Department of the Treasury published guidance to assist grantees in ERAP administration, including a requirement for ERAP grantees to establish policies and procedures to govern the implementation of their ERAP programs consistent with the ERAP statutes and U.S. Department of the Treasury FAQs (U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions, Revised March 5, 2024. Retrieved 10/16/2024 from https://home.treasury.gov/system/files?file=136/ERA-FAQs03052024.pdf). 5 To be eligible for program benefits, individuals had to have filed, received, and been deemed eligible in accordance with the Division’s written policies and procedures. The benefit payments consisted of rent and/or utility payments for past-due amounts (a one-time lump sum payment) and for 3 months of payments on each reapplication up to a total of 18 months. Applicants must provide proof of income or self-attestation of no income and cannot earn an income that is above the area median income as determined by the HUD income limits (Section 8) set at 80 percent AMI (Area Median Income). These limits are updated annually and can be viewed at https://www.huduser.gov/portal/datasets/il.html#year2024. Further, applicants who live in Maricopa County must reside in the City of Phoenix. This policy was updated in April 2023 to include the City of Mesa. Rental applications must include a housing agreement with the applicant’s name and current rental address. Utility assistance applications must include bills or invoices or outstanding payments. Applications are reviewed by adjudicators, who ensure the documentation for proof of residence, proof of income, housing agreement, any bills related to utility accounts and proof of risk of homelessness or housing instability are complete and reasonable. Any decisions made contrary to policy must include a rationale for the decision in the supporting documentation for the application (Department of Economic Security Emergency Rental Assistance Program Policy, Rev 8 [7/1/2022] and Rev 9 [4/1/2023]).
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed, allowable costs/cost principles, and eligibility Questioned costs: $36,945 Assistance Listings number and name: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles Questioned costs: $38,169 Total questioned costs: $75,114 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Community Assistance and Development (Division) made unallowable benefits payments totaling $75,114 during fiscal year 2023 to rental assistance program applicants for the Emergency Rental Assistance Program (ERAP) and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) federal programs.1 Specifically, for 10 of 50 CSLFRF and 10 of 65 ERAP benefit payments tested, we found that the Division made unallowable benefits payments of $38,169 for CSLFRF and $36,945 for ERAP, to or on behalf of ineligible program applicants or those that lacked required eligibility documentation and for other inappropriate costs, as follows: • The Division inappropriately paid $43,642 of benefit payments to or on behalf of 8 ineligible program applicants, including: o $42,993 paid to or on behalf of 7 program applicants who did not reside in an eligible Maricopa County service area at the time of application ($30,618 for 5 ERAP program applicants and $12,375 for 2 CSLFRF applicants). o $649 paid to or on behalf of 1 ERAP program applicant whose income exceeded allowable program limits. • The Division inappropriately paid $17,655 of benefit payments to or on behalf of 8 program applicants without obtaining required documentation to support they were eligible to receive them, including: o $12,567 paid to or on behalf of 6 CSLFRF program applicants without required proof of income, a signed lease agreement, and other documentation supporting household size and the reimbursement of late penalties and fees related to rent and/or utility account bills. o $5,088 paid to or on behalf of 2 ERAP program applicants without a required lease agreement listing the applicants. • The Division inappropriately paid $13,817 of benefit payments to or on behalf of 4 program applicants, including: o $13,731 paid to or on behalf of 3 participants for rental arrears—rent not paid by the date specified in the lease agreement—payments exceeding the allowable one-time, lump sum payments ($13,227 for 2 CSLFRF participants and $504 for 1 ERAP participant). o $86 paid to or on behalf of 1 ERAP applicant for utility services the Division previously paid. Effect—The Division’s making unallowable benefits payments to ineligible program applicants or without required documentation increases the risk that the program applicants received utility and rental payments for which they were not entitled. Also, the Division’s paying for inappropriate costs spent inconsistent with program requirements increases the risk that those who were intended to benefit from the program may not have received all the benefits they otherwise would have received. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.2 During fiscal year 2023, the Division paid $193.7 million in benefit payments to or on behalf of program applicants requesting emergency rental and utility assistance for these 2 federal programs, as illustrated in the figure below, and is at risk that more of its benefit payment expenditures are inappropriate than those identified in our sample. Benefit payments expenditures (in millions) Total program expenditures (in millions) Percent of benefit payments expenditures to total program expenditures ERAP $162.8 $194.7 83.6% CSLFRF $30.9 $379.5 8.1% Totals for ERAP and CSLFRF $193.7 $574.2 33.7% Cause—Division management reported that personnel responsible for evaluating program applications and determining program applicant’s eligibility and allowability of related costs did not have time to perform thorough evaluations, including making appropriate eligibility determinations, obtaining required documentation, or ensuring costs were allowable, because of the large quantity of program applications. Further, the Division failed to identify the program evaluation errors during post-reviews of eligibility determinations because the checklist Division personnel used lacked detailed guidance for verifying that the determinations aligned with the Division’s written policies and procedures and were supported by required documentation. Criteria—Federal regulations require costs to be reasonable and adequately documented to be allowable under federal awards, and the Division’s written policies and procedures require certain documentation to support eligibility requirements related to where the applicant lives and their income.3,4,5 Specifically, Division policy requires a program application evaluation to ensure complete and reasonable documentation is obtained including lease agreements; any bills related to utility accounts; and proof of income, household size, eligible service area residency, and risk of homelessness or housing instability. Also, the Division’s policies prohibit incomplete applications to be acted upon until applicants provide the required information and documentation to complete their applications. Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Ensure benefit payments are for allowable costs paid to or on behalf of eligible program applicants. 2. Follow existing policies and procedures to obtain required documentation to support requirements related to where the applicant lives and their income to ensure program applicants are eligible to receive benefit payments. 3. Allocate sufficient staffing resources to perform a thorough evaluation of program benefits applications and provide training on eligibility requirements and allowable benefit payments. 4. Update the checklist Division personnel use to perform a post-review of eligibility determinations to include detailed guidance for verifying the determinations aligned with the Division’s written policies and procedures and supported by adequate documentation. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The Arizona Department of Economic Security’s Emergency Rental Assistance Program (ERAP) was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). Further, the Arizona Department of Economic Security’s ERAP was extended through the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security, Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 2 Federal Uniform Guidance audit requirements require its federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Department, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 3 Federal Uniform Guidance cost principles require costs to be adequately documented (2 CFR 200.403[g]) and reasonable (2 CFR 200.404). In determining the reasonableness of a given cost, consideration must be given to several factors, including requirements imposed by federal laws and regulations and the terms and conditions of the federal award (2 CFR 200.404[b]). 4 U.S. Department of the Treasury published guidance to assist grantees in ERAP administration, including a requirement for ERAP grantees to establish policies and procedures to govern the implementation of their ERAP programs consistent with the ERAP statutes and U.S. Department of the Treasury FAQs (U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions, Revised March 5, 2024. Retrieved 10/16/2024 from https://home.treasury.gov/system/files?file=136/ERA-FAQs03052024.pdf). 5 To be eligible for program benefits, individuals had to have filed, received, and been deemed eligible in accordance with the Division’s written policies and procedures. The benefit payments consisted of rent and/or utility payments for past-due amounts (a one-time lump sum payment) and for 3 months of payments on each reapplication up to a total of 18 months. Applicants must provide proof of income or self-attestation of no income and cannot earn an income that is above the area median income as determined by the HUD income limits (Section 8) set at 80 percent AMI (Area Median Income). These limits are updated annually and can be viewed at https://www.huduser.gov/portal/datasets/il.html#year2024. Further, applicants who live in Maricopa County must reside in the City of Phoenix. This policy was updated in April 2023 to include the City of Mesa. Rental applications must include a housing agreement with the applicant’s name and current rental address. Utility assistance applications must include bills or invoices or outstanding payments. Applications are reviewed by adjudicators, who ensure the documentation for proof of residence, proof of income, housing agreement, any bills related to utility accounts and proof of risk of homelessness or housing instability are complete and reasonable. Any decisions made contrary to policy must include a rationale for the decision in the supporting documentation for the application (Department of Economic Security Emergency Rental Assistance Program Policy, Rev 8 [7/1/2022] and Rev 9 [4/1/2023]).
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed, allowable costs/cost principles, and eligibility Questioned costs: $36,945 Assistance Listings number and name: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles Questioned costs: $38,169 Total questioned costs: $75,114 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Community Assistance and Development (Division) made unallowable benefits payments totaling $75,114 during fiscal year 2023 to rental assistance program applicants for the Emergency Rental Assistance Program (ERAP) and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) federal programs.1 Specifically, for 10 of 50 CSLFRF and 10 of 65 ERAP benefit payments tested, we found that the Division made unallowable benefits payments of $38,169 for CSLFRF and $36,945 for ERAP, to or on behalf of ineligible program applicants or those that lacked required eligibility documentation and for other inappropriate costs, as follows: • The Division inappropriately paid $43,642 of benefit payments to or on behalf of 8 ineligible program applicants, including: o $42,993 paid to or on behalf of 7 program applicants who did not reside in an eligible Maricopa County service area at the time of application ($30,618 for 5 ERAP program applicants and $12,375 for 2 CSLFRF applicants). o $649 paid to or on behalf of 1 ERAP program applicant whose income exceeded allowable program limits. • The Division inappropriately paid $17,655 of benefit payments to or on behalf of 8 program applicants without obtaining required documentation to support they were eligible to receive them, including: o $12,567 paid to or on behalf of 6 CSLFRF program applicants without required proof of income, a signed lease agreement, and other documentation supporting household size and the reimbursement of late penalties and fees related to rent and/or utility account bills. o $5,088 paid to or on behalf of 2 ERAP program applicants without a required lease agreement listing the applicants. • The Division inappropriately paid $13,817 of benefit payments to or on behalf of 4 program applicants, including: o $13,731 paid to or on behalf of 3 participants for rental arrears—rent not paid by the date specified in the lease agreement—payments exceeding the allowable one-time, lump sum payments ($13,227 for 2 CSLFRF participants and $504 for 1 ERAP participant). o $86 paid to or on behalf of 1 ERAP applicant for utility services the Division previously paid. Effect—The Division’s making unallowable benefits payments to ineligible program applicants or without required documentation increases the risk that the program applicants received utility and rental payments for which they were not entitled. Also, the Division’s paying for inappropriate costs spent inconsistent with program requirements increases the risk that those who were intended to benefit from the program may not have received all the benefits they otherwise would have received. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.2 During fiscal year 2023, the Division paid $193.7 million in benefit payments to or on behalf of program applicants requesting emergency rental and utility assistance for these 2 federal programs, as illustrated in the figure below, and is at risk that more of its benefit payment expenditures are inappropriate than those identified in our sample. Benefit payments expenditures (in millions) Total program expenditures (in millions) Percent of benefit payments expenditures to total program expenditures ERAP $162.8 $194.7 83.6% CSLFRF $30.9 $379.5 8.1% Totals for ERAP and CSLFRF $193.7 $574.2 33.7% Cause—Division management reported that personnel responsible for evaluating program applications and determining program applicant’s eligibility and allowability of related costs did not have time to perform thorough evaluations, including making appropriate eligibility determinations, obtaining required documentation, or ensuring costs were allowable, because of the large quantity of program applications. Further, the Division failed to identify the program evaluation errors during post-reviews of eligibility determinations because the checklist Division personnel used lacked detailed guidance for verifying that the determinations aligned with the Division’s written policies and procedures and were supported by required documentation. Criteria—Federal regulations require costs to be reasonable and adequately documented to be allowable under federal awards, and the Division’s written policies and procedures require certain documentation to support eligibility requirements related to where the applicant lives and their income.3,4,5 Specifically, Division policy requires a program application evaluation to ensure complete and reasonable documentation is obtained including lease agreements; any bills related to utility accounts; and proof of income, household size, eligible service area residency, and risk of homelessness or housing instability. Also, the Division’s policies prohibit incomplete applications to be acted upon until applicants provide the required information and documentation to complete their applications. Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Ensure benefit payments are for allowable costs paid to or on behalf of eligible program applicants. 2. Follow existing policies and procedures to obtain required documentation to support requirements related to where the applicant lives and their income to ensure program applicants are eligible to receive benefit payments. 3. Allocate sufficient staffing resources to perform a thorough evaluation of program benefits applications and provide training on eligibility requirements and allowable benefit payments. 4. Update the checklist Division personnel use to perform a post-review of eligibility determinations to include detailed guidance for verifying the determinations aligned with the Division’s written policies and procedures and supported by adequate documentation. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The Arizona Department of Economic Security’s Emergency Rental Assistance Program (ERAP) was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). Further, the Arizona Department of Economic Security’s ERAP was extended through the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security, Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 2 Federal Uniform Guidance audit requirements require its federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Department, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 3 Federal Uniform Guidance cost principles require costs to be adequately documented (2 CFR 200.403[g]) and reasonable (2 CFR 200.404). In determining the reasonableness of a given cost, consideration must be given to several factors, including requirements imposed by federal laws and regulations and the terms and conditions of the federal award (2 CFR 200.404[b]). 4 U.S. Department of the Treasury published guidance to assist grantees in ERAP administration, including a requirement for ERAP grantees to establish policies and procedures to govern the implementation of their ERAP programs consistent with the ERAP statutes and U.S. Department of the Treasury FAQs (U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions, Revised March 5, 2024. Retrieved 10/16/2024 from https://home.treasury.gov/system/files?file=136/ERA-FAQs03052024.pdf). 5 To be eligible for program benefits, individuals had to have filed, received, and been deemed eligible in accordance with the Division’s written policies and procedures. The benefit payments consisted of rent and/or utility payments for past-due amounts (a one-time lump sum payment) and for 3 months of payments on each reapplication up to a total of 18 months. Applicants must provide proof of income or self-attestation of no income and cannot earn an income that is above the area median income as determined by the HUD income limits (Section 8) set at 80 percent AMI (Area Median Income). These limits are updated annually and can be viewed at https://www.huduser.gov/portal/datasets/il.html#year2024. Further, applicants who live in Maricopa County must reside in the City of Phoenix. This policy was updated in April 2023 to include the City of Mesa. Rental applications must include a housing agreement with the applicant’s name and current rental address. Utility assistance applications must include bills or invoices or outstanding payments. Applications are reviewed by adjudicators, who ensure the documentation for proof of residence, proof of income, housing agreement, any bills related to utility accounts and proof of risk of homelessness or housing instability are complete and reasonable. Any decisions made contrary to policy must include a rationale for the decision in the supporting documentation for the application (Department of Economic Security Emergency Rental Assistance Program Policy, Rev 8 [7/1/2022] and Rev 9 [4/1/2023]).
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed, allowable costs/cost principles, and eligibility Questioned costs: $36,945 Assistance Listings number and name: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles Questioned costs: $38,169 Total questioned costs: $75,114 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Community Assistance and Development (Division) made unallowable benefits payments totaling $75,114 during fiscal year 2023 to rental assistance program applicants for the Emergency Rental Assistance Program (ERAP) and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) federal programs.1 Specifically, for 10 of 50 CSLFRF and 10 of 65 ERAP benefit payments tested, we found that the Division made unallowable benefits payments of $38,169 for CSLFRF and $36,945 for ERAP, to or on behalf of ineligible program applicants or those that lacked required eligibility documentation and for other inappropriate costs, as follows: • The Division inappropriately paid $43,642 of benefit payments to or on behalf of 8 ineligible program applicants, including: o $42,993 paid to or on behalf of 7 program applicants who did not reside in an eligible Maricopa County service area at the time of application ($30,618 for 5 ERAP program applicants and $12,375 for 2 CSLFRF applicants). o $649 paid to or on behalf of 1 ERAP program applicant whose income exceeded allowable program limits. • The Division inappropriately paid $17,655 of benefit payments to or on behalf of 8 program applicants without obtaining required documentation to support they were eligible to receive them, including: o $12,567 paid to or on behalf of 6 CSLFRF program applicants without required proof of income, a signed lease agreement, and other documentation supporting household size and the reimbursement of late penalties and fees related to rent and/or utility account bills. o $5,088 paid to or on behalf of 2 ERAP program applicants without a required lease agreement listing the applicants. • The Division inappropriately paid $13,817 of benefit payments to or on behalf of 4 program applicants, including: o $13,731 paid to or on behalf of 3 participants for rental arrears—rent not paid by the date specified in the lease agreement—payments exceeding the allowable one-time, lump sum payments ($13,227 for 2 CSLFRF participants and $504 for 1 ERAP participant). o $86 paid to or on behalf of 1 ERAP applicant for utility services the Division previously paid. Effect—The Division’s making unallowable benefits payments to ineligible program applicants or without required documentation increases the risk that the program applicants received utility and rental payments for which they were not entitled. Also, the Division’s paying for inappropriate costs spent inconsistent with program requirements increases the risk that those who were intended to benefit from the program may not have received all the benefits they otherwise would have received. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.2 During fiscal year 2023, the Division paid $193.7 million in benefit payments to or on behalf of program applicants requesting emergency rental and utility assistance for these 2 federal programs, as illustrated in the figure below, and is at risk that more of its benefit payment expenditures are inappropriate than those identified in our sample. Benefit payments expenditures (in millions) Total program expenditures (in millions) Percent of benefit payments expenditures to total program expenditures ERAP $162.8 $194.7 83.6% CSLFRF $30.9 $379.5 8.1% Totals for ERAP and CSLFRF $193.7 $574.2 33.7% Cause—Division management reported that personnel responsible for evaluating program applications and determining program applicant’s eligibility and allowability of related costs did not have time to perform thorough evaluations, including making appropriate eligibility determinations, obtaining required documentation, or ensuring costs were allowable, because of the large quantity of program applications. Further, the Division failed to identify the program evaluation errors during post-reviews of eligibility determinations because the checklist Division personnel used lacked detailed guidance for verifying that the determinations aligned with the Division’s written policies and procedures and were supported by required documentation. Criteria—Federal regulations require costs to be reasonable and adequately documented to be allowable under federal awards, and the Division’s written policies and procedures require certain documentation to support eligibility requirements related to where the applicant lives and their income.3,4,5 Specifically, Division policy requires a program application evaluation to ensure complete and reasonable documentation is obtained including lease agreements; any bills related to utility accounts; and proof of income, household size, eligible service area residency, and risk of homelessness or housing instability. Also, the Division’s policies prohibit incomplete applications to be acted upon until applicants provide the required information and documentation to complete their applications. Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Ensure benefit payments are for allowable costs paid to or on behalf of eligible program applicants. 2. Follow existing policies and procedures to obtain required documentation to support requirements related to where the applicant lives and their income to ensure program applicants are eligible to receive benefit payments. 3. Allocate sufficient staffing resources to perform a thorough evaluation of program benefits applications and provide training on eligibility requirements and allowable benefit payments. 4. Update the checklist Division personnel use to perform a post-review of eligibility determinations to include detailed guidance for verifying the determinations aligned with the Division’s written policies and procedures and supported by adequate documentation. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The Arizona Department of Economic Security’s Emergency Rental Assistance Program (ERAP) was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). Further, the Arizona Department of Economic Security’s ERAP was extended through the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security, Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 2 Federal Uniform Guidance audit requirements require its federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Department, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 3 Federal Uniform Guidance cost principles require costs to be adequately documented (2 CFR 200.403[g]) and reasonable (2 CFR 200.404). In determining the reasonableness of a given cost, consideration must be given to several factors, including requirements imposed by federal laws and regulations and the terms and conditions of the federal award (2 CFR 200.404[b]). 4 U.S. Department of the Treasury published guidance to assist grantees in ERAP administration, including a requirement for ERAP grantees to establish policies and procedures to govern the implementation of their ERAP programs consistent with the ERAP statutes and U.S. Department of the Treasury FAQs (U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions, Revised March 5, 2024. Retrieved 10/16/2024 from https://home.treasury.gov/system/files?file=136/ERA-FAQs03052024.pdf). 5 To be eligible for program benefits, individuals had to have filed, received, and been deemed eligible in accordance with the Division’s written policies and procedures. The benefit payments consisted of rent and/or utility payments for past-due amounts (a one-time lump sum payment) and for 3 months of payments on each reapplication up to a total of 18 months. Applicants must provide proof of income or self-attestation of no income and cannot earn an income that is above the area median income as determined by the HUD income limits (Section 8) set at 80 percent AMI (Area Median Income). These limits are updated annually and can be viewed at https://www.huduser.gov/portal/datasets/il.html#year2024. Further, applicants who live in Maricopa County must reside in the City of Phoenix. This policy was updated in April 2023 to include the City of Mesa. Rental applications must include a housing agreement with the applicant’s name and current rental address. Utility assistance applications must include bills or invoices or outstanding payments. Applications are reviewed by adjudicators, who ensure the documentation for proof of residence, proof of income, housing agreement, any bills related to utility accounts and proof of risk of homelessness or housing instability are complete and reasonable. Any decisions made contrary to policy must include a rationale for the decision in the supporting documentation for the application (Department of Economic Security Emergency Rental Assistance Program Policy, Rev 8 [7/1/2022] and Rev 9 [4/1/2023]).
Assistance Listings number and name: 21.023 COVID-19 - Emergency Rental Assistance Program Award numbers and years: ERA-2101070596, January 8, 2021 through September 30, 2022; ERA2-0165, May 10, 2021 through September 30, 2025 Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed, allowable costs/cost principles, and eligibility Questioned costs: $36,945 Assistance Listings number and name: 21.027 COVID-19 - Coronavirus State and Local Fiscal Recovery Funds Award number and year: None Federal agency: U.S. Department of the Treasury Compliance requirements: Activities allowed or unallowed and allowable costs/cost principles Questioned costs: $38,169 Total questioned costs: $75,114 Condition—Contrary to federal regulations and its policies and procedures, the Department of Economic Security—Division of Community Assistance and Development (Division) made unallowable benefits payments totaling $75,114 during fiscal year 2023 to rental assistance program applicants for the Emergency Rental Assistance Program (ERAP) and Coronavirus State and Local Fiscal Recovery Funds (CSLFRF) federal programs.1 Specifically, for 10 of 50 CSLFRF and 10 of 65 ERAP benefit payments tested, we found that the Division made unallowable benefits payments of $38,169 for CSLFRF and $36,945 for ERAP, to or on behalf of ineligible program applicants or those that lacked required eligibility documentation and for other inappropriate costs, as follows: • The Division inappropriately paid $43,642 of benefit payments to or on behalf of 8 ineligible program applicants, including: o $42,993 paid to or on behalf of 7 program applicants who did not reside in an eligible Maricopa County service area at the time of application ($30,618 for 5 ERAP program applicants and $12,375 for 2 CSLFRF applicants). o $649 paid to or on behalf of 1 ERAP program applicant whose income exceeded allowable program limits. • The Division inappropriately paid $17,655 of benefit payments to or on behalf of 8 program applicants without obtaining required documentation to support they were eligible to receive them, including: o $12,567 paid to or on behalf of 6 CSLFRF program applicants without required proof of income, a signed lease agreement, and other documentation supporting household size and the reimbursement of late penalties and fees related to rent and/or utility account bills. o $5,088 paid to or on behalf of 2 ERAP program applicants without a required lease agreement listing the applicants. • The Division inappropriately paid $13,817 of benefit payments to or on behalf of 4 program applicants, including: o $13,731 paid to or on behalf of 3 participants for rental arrears—rent not paid by the date specified in the lease agreement—payments exceeding the allowable one-time, lump sum payments ($13,227 for 2 CSLFRF participants and $504 for 1 ERAP participant). o $86 paid to or on behalf of 1 ERAP applicant for utility services the Division previously paid. Effect—The Division’s making unallowable benefits payments to ineligible program applicants or without required documentation increases the risk that the program applicants received utility and rental payments for which they were not entitled. Also, the Division’s paying for inappropriate costs spent inconsistent with program requirements increases the risk that those who were intended to benefit from the program may not have received all the benefits they otherwise would have received. Consequently, the Division may be required to return these monies to the federal agency in accordance with federal requirements.2 During fiscal year 2023, the Division paid $193.7 million in benefit payments to or on behalf of program applicants requesting emergency rental and utility assistance for these 2 federal programs, as illustrated in the figure below, and is at risk that more of its benefit payment expenditures are inappropriate than those identified in our sample. Benefit payments expenditures (in millions) Total program expenditures (in millions) Percent of benefit payments expenditures to total program expenditures ERAP $162.8 $194.7 83.6% CSLFRF $30.9 $379.5 8.1% Totals for ERAP and CSLFRF $193.7 $574.2 33.7% Cause—Division management reported that personnel responsible for evaluating program applications and determining program applicant’s eligibility and allowability of related costs did not have time to perform thorough evaluations, including making appropriate eligibility determinations, obtaining required documentation, or ensuring costs were allowable, because of the large quantity of program applications. Further, the Division failed to identify the program evaluation errors during post-reviews of eligibility determinations because the checklist Division personnel used lacked detailed guidance for verifying that the determinations aligned with the Division’s written policies and procedures and were supported by required documentation. Criteria—Federal regulations require costs to be reasonable and adequately documented to be allowable under federal awards, and the Division’s written policies and procedures require certain documentation to support eligibility requirements related to where the applicant lives and their income.3,4,5 Specifically, Division policy requires a program application evaluation to ensure complete and reasonable documentation is obtained including lease agreements; any bills related to utility accounts; and proof of income, household size, eligible service area residency, and risk of homelessness or housing instability. Also, the Division’s policies prohibit incomplete applications to be acted upon until applicants provide the required information and documentation to complete their applications. Further, federal regulation requires establishing and maintaining effective internal control over federal awards that provides reasonable assurance that federal programs are being managed in compliance with all applicable laws, regulations, and award terms (2 CFR §200.303). Recommendations—The Division should: 1. Ensure benefit payments are for allowable costs paid to or on behalf of eligible program applicants. 2. Follow existing policies and procedures to obtain required documentation to support requirements related to where the applicant lives and their income to ensure program applicants are eligible to receive benefit payments. 3. Allocate sufficient staffing resources to perform a thorough evaluation of program benefits applications and provide training on eligibility requirements and allowable benefit payments. 4. Update the checklist Division personnel use to perform a post-review of eligibility determinations to include detailed guidance for verifying the determinations aligned with the Division’s written policies and procedures and supported by adequate documentation. The State’s corrective action plan at the end of this report includes the views and planned corrective action of its responsible officials. We are not required to audit and have not audited these responses and planned corrective actions and therefore provide no assurances as to their accuracy. 1 The Arizona Department of Economic Security’s Emergency Rental Assistance Program (ERAP) was established by Section 501 of Title V, Division N, of the Consolidated Appropriations Act of 2021 (Public Law No. 116-260) in response to the coronavirus pandemic and to provide financial relief to help keep individuals who rent housing in their homes and provide financial assistance to landlords who rely on rental income. The initial program is referred to as ERAP 1. ERAP 2 was established by Sec. 3201 of Title III, Subtitle B, of the American Rescue Plan Act of 2021 (Public Law No. 117-2). Further, the Arizona Department of Economic Security’s ERAP was extended through the federal Coronavirus State and Local Fiscal Recovery Funds, an American Rescue Plan Act of 2021 program (Public Law 117-2), as administered by the Office of the Governor. The Department of Economic Security began operating the program on July 1, 2022 (State of Arizona, Office of the Governor and Department of Economic Security, Interagency Service Agreement No. ISA-DES-ARPA-021623-01). 2 Federal Uniform Guidance audit requirements require its federal awarding agencies to follow up on audit findings and issue a management decision to ensure the recipient, the Department, takes appropriate and timely corrective action (2 CFR §200.513[c]). Further, it requires that federal awarding agencies’ management decisions clearly state whether or not the audit finding is sustained, the reasons for the decision, and the expected auditee action to repay disallowed costs, make financial adjustments, or take other action, as directed by the federal awarding agencies (2 CFR §200.521). 3 Federal Uniform Guidance cost principles require costs to be adequately documented (2 CFR 200.403[g]) and reasonable (2 CFR 200.404). In determining the reasonableness of a given cost, consideration must be given to several factors, including requirements imposed by federal laws and regulations and the terms and conditions of the federal award (2 CFR 200.404[b]). 4 U.S. Department of the Treasury published guidance to assist grantees in ERAP administration, including a requirement for ERAP grantees to establish policies and procedures to govern the implementation of their ERAP programs consistent with the ERAP statutes and U.S. Department of the Treasury FAQs (U.S. Department of the Treasury Emergency Rental Assistance Frequently Asked Questions, Revised March 5, 2024. Retrieved 10/16/2024 from https://home.treasury.gov/system/files?file=136/ERA-FAQs03052024.pdf). 5 To be eligible for program benefits, individuals had to have filed, received, and been deemed eligible in accordance with the Division’s written policies and procedures. The benefit payments consisted of rent and/or utility payments for past-due amounts (a one-time lump sum payment) and for 3 months of payments on each reapplication up to a total of 18 months. Applicants must provide proof of income or self-attestation of no income and cannot earn an income that is above the area median income as determined by the HUD income limits (Section 8) set at 80 percent AMI (Area Median Income). These limits are updated annually and can be viewed at https://www.huduser.gov/portal/datasets/il.html#year2024. Further, applicants who live in Maricopa County must reside in the City of Phoenix. This policy was updated in April 2023 to include the City of Mesa. Rental applications must include a housing agreement with the applicant’s name and current rental address. Utility assistance applications must include bills or invoices or outstanding payments. Applications are reviewed by adjudicators, who ensure the documentation for proof of residence, proof of income, housing agreement, any bills related to utility accounts and proof of risk of homelessness or housing instability are complete and reasonable. Any decisions made contrary to policy must include a rationale for the decision in the supporting documentation for the application (Department of Economic Security Emergency Rental Assistance Program Policy, Rev 8 [7/1/2022] and Rev 9 [4/1/2023]).
DEPARTMENT OF REHABILITATION SERVICES PERIOD OF PERFORMANCE Significant Deficiency 2023-007 Strengthen Controls to Ensure Compliance with the Period of Performance for the Social Security Disability Insurance Program. ALN Number(s) 96.001 Social Security-Disability Insurance 96.006 Supplemental Security Income Federal Award No. 2104MSD100 2204MSD100 2304MSD100 Questioned Costs $13,517 Criteria Per the Code of Federal Regulations (2 CFR 200.308, 200.309, and 200.403(h)), A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity. A period of performance may contain one or more budget periods. Code of Federal Regulations (2 CFR 200.303(a)), a non-Federal entity must: “Establish, document, and maintain effective internal control over the Federal award that provides reasonable assurance that the recipient or subrecipient is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should align with the guidance in “Standards for Internal Control in the Federal Government” issued by the Comptroller General of the United States or the “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).” Condition Program expenditures were not charged to the grant within the period of performance. We identified the following: • Two instances in which the expenditure was charged to the grant prior to the start of the grant, • Three instances in which the expenditure was charged after the grant’s end date. Cause The Department charging the grants outside of the period of performance was due to an error that was not identified during the review process. In addition, one expenditure supported costs for an annual agreement in which the service period started in one grant period and ended in another grant period. The Department elected to charge the costs to the grant starting after to expenditure incurred date, since most of the service would occur during that grant’s period. Effect The grantor may deem the costs charged outside of the period of performance as unallowable. Recommendation We recommend that the department enhance its internal controls to ensure all costs are incurred within the period of performance specified in the notice of award. Repeat Finding No. Statistically Valid No.
CRITERIA/SPECIFIC REQUIREMENT: The Regional Office of Education No. 39 procedure requires the Regional Superintendent or the Program Director to review and approve invoices and requisitions before forwarding to the business office for processing. The Code of Federal Regulations (Code) (2 CFR §200.403(g)) states that costs must be adequately documented in order to be allowable under Federal Awards. In addition, the Code (2 CFR §200.303 (a)) requires the Regional Office of Education No. 39 to establish and maintain effective internal control over the federal award to provide reasonable assurance the Regional Office of Education No. 39 is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Effective internal controls should include procedures to ensure expenditures under Federal awards are supported, reviewed and approved. CONDITION: The Regional Office of Education No. 39 did not ensure costs or expenditures were adequately documented, reviewed, and approved to ensure allowability under the federal award. CONTEXT: During testing of 60 expenditures totaling $854,868, we noted the following: Ten (17%) expenditures had invoices or receipts that were not initialed by the Program Director or Regional Superintendent to indicate review and approval of the expenditures; and, Two (3%) expenditures were not supported with a requisition form. EFFECT: Inadequate controls of expenditures may result in unallowable costs charged to the Federal award. CAUSE: Management indicated that expenditures were not signed by the Regional Superintendent or Program Director due to oversight and the supporting requisition forms were misplaced by previous responsible personnel. RECOMMENDATION: We recommend the Regional Office of Education No. 39 ensures all expenditures are properly supported, reviewed, and approved prior to payment. MANAGEMENT’S RESPONSE: The Regional Office of Education No. 39 agrees with the audit findings and is implementing a new process to ensure all expenditures have documented approval and review.
FA 2023-002 Strengthen Budgetary Controls over Expenditures Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Significant Deficiency Compliance Impact: Nonmaterial Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education AL Number and Title: COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund Federal Award Number: S425U210012 (Year: 2021) Questioned Costs: $7,360 Description: A review of expenditures charged to the Elementary and Secondary School Emergency Relief Fund program revealed instances in which expenditures had not been properly approved by the pass-through entity. Background: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $1,743,621 were expended and reported on the Crawford County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Additionally, provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” Furthermore, to assist school districts in improving their financial management systems and associated compliance over federal programs, GaDOE published the Financial Management for Georgia Local Units of Administration (FMGLUA) manual. The FMGLUA manual requires that LEAs submit a budget as part of each federal program’s Consolidated Application process. The program budget reflects details regarding the manner in which each school district intends to expend the program funds. The Consolidated Application, including the budget, for each program must be reviewed and approved by GaDOE personnel before the LEA is authorized to expend program funds. Amendments to the budget are to be submitted to and approved by GaDOE when a school district intends to spend funds in a manner not initially reported. Lastly, LEA personnel must also provide program-specific assurances related to the ESSER program within the Consolidated Application system. These assurances are reflected in the Uniform Guidance, Section 200.415 – Required Certifications, and include provisions that require LEAs “to assure that expenditures are proper and in accordance with the terms and conditions of the Federal award and approved project budgets...” Condition: A sample of 25 nonpersonal services expenditures was randomly selected for testing using a non-statistical sampling approach. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. It was noted that prior approval was not obtained from GaDOE for one expenditure totaling $7,360 as this expenditure was not reflected in the approved budget or subsequent amendments within the Consolidated Application system, as required. Questioned Costs: Upon testing a sample of $262,816 in nonpersonal services expenditures, known questioned cost of $7,360 was identified for the expenditure not properly approved through the Consolidated Application process. Using the population being sampled, which totaled $1,133,086, we project the likely questioned costs to be approximately $31,731. Cause: Due to oversight, management was unaware that the expenditure was not approved on the GaDOE Consolidated Application. Effect: The School District is not in compliance with the Uniform Guidance or GaDOE guidance related to the ESSER program. Failure to accurately develop and amend budget information through the Consolidated Application process and verify compliance with applicable policies and regulations prior to the expenditure of federal program funds may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unapproved and unallowable expenditures. Recommendation: The School District should revise current internal control procedures related to the ESSER program. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that potential expenditures are approved through the Consolidated Application process and deemed to be allowable before spending federal funds. In addition, management should develop and implement a monitoring process to ensure that control procedures are being followed. Views of Responsible Officials: We concur with this finding.
FA 2023-001 Strengthen Controls over Expenditures Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education Assistance Listing Number and Title: 84.010 - Title I Grants to Local Educational Agencies Federal Award Number: S010A210010-21A (Year: 2022), S010A220010 (Year 2023) Questioned Costs: $6,942 Repeat of Prior Year Finding: FA 2022-001 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it relates to the Title I Grants to Local Educational Agencies program. Background: The Title I Grants to Local Educational Agencies (Title I) program was authorized under the Elementary and Secondary Education Act of 1965 to help local educational agencies (LEAs) improve teaching and learning in high-poverty schools in particular for children failing or most at-risk of failing, to meet challenging State academic standards. LEAs may operate targeted assistance programs in which children who are failing or most at-risk of failing may be served or schoolwide programs in which all children in eligible schools may be served. Title I funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. Title I funds totaling $523,820 were expended and reported on the Talbot County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. lll FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Additionally, provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation-Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) … Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity…” Condition: Three nonpersonal services expenditures were randomly selected for testing using a non-statistical sampling approach. The expenditures were reviewed to determine if internal controls were implemented and applicable compliance requirements were met. For one sampled expenditure in the amount of $31, adequate supporting documentation in the form of an invoice was not maintained. Additionally, three personal services expenditures were randomly selected for testing using a non-statistical sampling approach. One individually significant expenditure was also selected for testing. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • For all employees tested, supporting documentation was not maintained for additional payments totaling $6,194. • For two employees tested, specific administrative supplements were overpaid and underpaid by $717 and $500, respectively. Questioned Costs: Upon testing a sample of $1,275 in nonpersonal service expenditures, known questioned costs of $31 were identified for expenditures that were not supported by adequate documentation. Using the total nonpersonal services expenditures population of $74,447, we project the likely questioned costs to be approximately $1,810. lll FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Additionally, upon testing a sample of $38,405 in personal services expenditures, known questioned costs of $6,611 were identified for expenditures not supported by adequate documentation. Using the total personal services expenditures population of $143,515 (excluding benefits payments), we project the likely questioned costs to be approximately $24,705. Furthermore, known questioned costs identified for undocumented personal services payments associated with individually significant items tested totaled $300. Therefore, the known and likely questioned costs identified for all unallowable and/or undocumented payments throughout the sample and individually significant items tested totaled $6,942 and $26,815, respectively. Cause: Per discussion with management, the School District believes that this is due to change in management in the financial department. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance or ED guidance related to the Title I program. Failure to ensure that documentation exists to support the allowability of payments from the Title I fund may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to Title I program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that expenditures are supported by appropriate documentation. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with the School District's purchasing and employee compensation policies and procedures. Views of Responsible Officials: We concur with this finding.
FA 2023-001 Strengthen Controls over Expenditures Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education Assistance Listing Number and Title: 84.010 - Title I Grants to Local Educational Agencies Federal Award Number: S010A210010-21A (Year: 2022), S010A220010 (Year 2023) Questioned Costs: $6,942 Repeat of Prior Year Finding: FA 2022-001 Description: The policies and procedures of the School District were insufficient to provide adequate internal controls over expenditures as it relates to the Title I Grants to Local Educational Agencies program. Background: The Title I Grants to Local Educational Agencies (Title I) program was authorized under the Elementary and Secondary Education Act of 1965 to help local educational agencies (LEAs) improve teaching and learning in high-poverty schools in particular for children failing or most at-risk of failing, to meet challenging State academic standards. LEAs may operate targeted assistance programs in which children who are failing or most at-risk of failing may be served or schoolwide programs in which all children in eligible schools may be served. Title I funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. Title I funds totaling $523,820 were expended and reported on the Talbot County Board of Education’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. lll FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Additionally, provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation-Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) … Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity…” Condition: Three nonpersonal services expenditures were randomly selected for testing using a non-statistical sampling approach. The expenditures were reviewed to determine if internal controls were implemented and applicable compliance requirements were met. For one sampled expenditure in the amount of $31, adequate supporting documentation in the form of an invoice was not maintained. Additionally, three personal services expenditures were randomly selected for testing using a non-statistical sampling approach. One individually significant expenditure was also selected for testing. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • For all employees tested, supporting documentation was not maintained for additional payments totaling $6,194. • For two employees tested, specific administrative supplements were overpaid and underpaid by $717 and $500, respectively. Questioned Costs: Upon testing a sample of $1,275 in nonpersonal service expenditures, known questioned costs of $31 were identified for expenditures that were not supported by adequate documentation. Using the total nonpersonal services expenditures population of $74,447, we project the likely questioned costs to be approximately $1,810. lll FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Additionally, upon testing a sample of $38,405 in personal services expenditures, known questioned costs of $6,611 were identified for expenditures not supported by adequate documentation. Using the total personal services expenditures population of $143,515 (excluding benefits payments), we project the likely questioned costs to be approximately $24,705. Furthermore, known questioned costs identified for undocumented personal services payments associated with individually significant items tested totaled $300. Therefore, the known and likely questioned costs identified for all unallowable and/or undocumented payments throughout the sample and individually significant items tested totaled $6,942 and $26,815, respectively. Cause: Per discussion with management, the School District believes that this is due to change in management in the financial department. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance or ED guidance related to the Title I program. Failure to ensure that documentation exists to support the allowability of payments from the Title I fund may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to Title I program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that expenditures are supported by appropriate documentation. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with the School District's purchasing and employee compensation policies and procedures. Views of Responsible Officials: We concur with this finding.
FA 2023-002 Improve Controls over Expenditures Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education Assistance Listing Numbers and Titles: COVID-19 – 84.425D – Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425W – American Rescue Plan Elementary and Secondary School Emergency Relief Fund – Homeless Children and Youth Federal Award Numbers: S425D210012 (Year: 2021), S425U210012 (Year: 2021), S425W210011 (Year: 2021) Questioned Costs: $98,807 Repeat of Prior Year Finding: FA 2022-002 Description: A review of expenditures charged to the Elementary and Secondary School Emergency Relief Fund program revealed that the School District’s internal control procedures were not operating to ensure that expenditures were appropriately documented to support allowability. Background: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to the coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $1,201,097 were expended and reported on the Talbot County School District’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. lll FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation-Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) … Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity…” Condition: A sample of 12 nonpersonal services expenditures was randomly selected for testing using a non-statistical sampling approach. In addition, two individually significant items were selected for testing. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • A purchase order was not maintained for two of the expenditures. • The check amount, invoice, and purchase requisition form for one expenditure did not agree. lll FEDERAL AWARD FINDINGS AND QUESTIONED COSTS In addition, a sample of 23 employees was randomly selected for testing using a non-statistical sampling approach. These employees were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • Timesheets or other supporting documentation could not be provided for payments made to 15 employees. • Timesheets provided for 15 employees did not agree to amounts paid for the corresponding time period. • One employee received a salary increase that was not supported by a board-approved salary scale. Questioned Costs: Upon testing a sample of $34,392 in nonpersonal services expenditures, known questioned costs of $1,365 were identified. Using the total non-personal services expenditures population of $144,208, we project the likely questioned costs to be approximately $5,723. Additionally, upon testing a sample of $274,649 in personal services expenditures, known questioned costs of $97,442 were identified. Using the total personal services expenditures population of $864,482, we project the likely questioned costs to be approximately $306,706. Therefore, the known and likely questioned costs identified for unallowable payments totaled $98,807 and $312,429. The following Assistance Listing Numbers were affected by known and questioned costs: 84.425D and 84.425U. Cause: Per discussion with management, the School District believes that this is due to change in management in the financial department. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance or ED guidance related to the ESSER program. Failure to ensure that documentation exists to support the allowability of payments from the ESSER fund may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to ESSER program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures are supported by appropriate documentation. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with the School District’s purchasing and employee compensation policies and procedures. Views of Responsible Officials: We concur with this finding.
FA 2023-002 Improve Controls over Expenditures Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education Assistance Listing Numbers and Titles: COVID-19 – 84.425D – Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425W – American Rescue Plan Elementary and Secondary School Emergency Relief Fund – Homeless Children and Youth Federal Award Numbers: S425D210012 (Year: 2021), S425U210012 (Year: 2021), S425W210011 (Year: 2021) Questioned Costs: $98,807 Repeat of Prior Year Finding: FA 2022-002 Description: A review of expenditures charged to the Elementary and Secondary School Emergency Relief Fund program revealed that the School District’s internal control procedures were not operating to ensure that expenditures were appropriately documented to support allowability. Background: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to the coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $1,201,097 were expended and reported on the Talbot County School District’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. lll FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation-Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) … Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity…” Condition: A sample of 12 nonpersonal services expenditures was randomly selected for testing using a non-statistical sampling approach. In addition, two individually significant items were selected for testing. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • A purchase order was not maintained for two of the expenditures. • The check amount, invoice, and purchase requisition form for one expenditure did not agree. lll FEDERAL AWARD FINDINGS AND QUESTIONED COSTS In addition, a sample of 23 employees was randomly selected for testing using a non-statistical sampling approach. These employees were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • Timesheets or other supporting documentation could not be provided for payments made to 15 employees. • Timesheets provided for 15 employees did not agree to amounts paid for the corresponding time period. • One employee received a salary increase that was not supported by a board-approved salary scale. Questioned Costs: Upon testing a sample of $34,392 in nonpersonal services expenditures, known questioned costs of $1,365 were identified. Using the total non-personal services expenditures population of $144,208, we project the likely questioned costs to be approximately $5,723. Additionally, upon testing a sample of $274,649 in personal services expenditures, known questioned costs of $97,442 were identified. Using the total personal services expenditures population of $864,482, we project the likely questioned costs to be approximately $306,706. Therefore, the known and likely questioned costs identified for unallowable payments totaled $98,807 and $312,429. The following Assistance Listing Numbers were affected by known and questioned costs: 84.425D and 84.425U. Cause: Per discussion with management, the School District believes that this is due to change in management in the financial department. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance or ED guidance related to the ESSER program. Failure to ensure that documentation exists to support the allowability of payments from the ESSER fund may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to ESSER program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures are supported by appropriate documentation. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with the School District’s purchasing and employee compensation policies and procedures. Views of Responsible Officials: We concur with this finding.
FA 2023-002 Improve Controls over Expenditures Compliance Requirement: Activities Allowed or Unallowed Allowable Costs/Cost Principles Internal Control Impact: Material Weakness Compliance Impact: Material Noncompliance Federal Awarding Agency: U.S. Department of Education Pass-Through Entity: Georgia Department of Education Assistance Listing Numbers and Titles: COVID-19 – 84.425D – Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425U – American Rescue Plan Elementary and Secondary School Emergency Relief Fund COVID-19 – 84.425W – American Rescue Plan Elementary and Secondary School Emergency Relief Fund – Homeless Children and Youth Federal Award Numbers: S425D210012 (Year: 2021), S425U210012 (Year: 2021), S425W210011 (Year: 2021) Questioned Costs: $98,807 Repeat of Prior Year Finding: FA 2022-002 Description: A review of expenditures charged to the Elementary and Secondary School Emergency Relief Fund program revealed that the School District’s internal control procedures were not operating to ensure that expenditures were appropriately documented to support allowability. Background: On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law. The CARES Act was designed to mitigate the economic effects of the COVID-19 pandemic in a variety of ways, including providing additional funding for local educational agencies (LEAs) navigating the impact of the COVID-19 outbreak. Provisions included in Title VIII of the CARES Act created the Education Stabilization Fund to provide financial resources to educational entities to prevent, prepare for, and respond to the coronavirus. The CARES Act allocated $30.75 billion, the Coronavirus Response and Relief Supplemental Appropriations Act allocated an additional $81.9 billion, and the American Rescue Plan Act added $165.1 billion in funding to the Education Stabilization Fund. Multiple Education Stabilization Fund subprograms were created and allotted funding through the various COVID-19-related legislation. Of these programs, the Elementary and Secondary School Emergency Relief (ESSER) Fund was created to address the impact that COVID-19 has had, and continues to have, on elementary and secondary schools across the nation. ESSER funding was granted to the Georgia Department of Education (GaDOE) by the U.S. Department of Education (ED). GaDOE is responsible for distributing funds to LEAs and overseeing the expenditure of funds by LEAs. ESSER funds totaling $1,201,097 were expended and reported on the Talbot County School District’s Schedule of Expenditures of Federal Awards (SEFA) for fiscal year 2023. lll FEDERAL AWARD FINDINGS AND QUESTIONED COSTS Criteria: As a recipient of federal awards, the School District is required to establish and maintain effective internal control over federal awards that provides reasonable assurance of managing the federal awards in compliance with federal statutes, regulations, and the terms and conditions of the federal awards pursuant to Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance), Section 200.303 – Internal Controls. Provisions included in the Uniform Guidance, Section 200.403 – Factors Affecting Allowability of Costs state that “costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles, (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items, (c) Be consistent with policies and procedures that apply uniformly to both federally-financed and other activities of the non-Federal entity… (g) Be adequately documented…” Furthermore, provisions included in the Uniform Guidance, Section 200.430 – Compensation-Personal Services prescribe standards for documentation of personnel expenses and state, in part, that “(a) … Costs for compensation are allowable to the extent that they satisfy… specific requirements…, and that the total compensation for individual employees: (1) is reasonable for the services rendered and conforms to the established written policy of the non-Federal entity consistently applied to both Federal and non-Federal activities; (2) Follows an appointment made in accordance with a non-Federal entity’s laws and/or rules or written policies and meets the requirements of Federal statute, where applicable; and (3) Is determined and supported as provided in paragraph (i)…, [as follows:] (i) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity…” Condition: A sample of 12 nonpersonal services expenditures was randomly selected for testing using a non-statistical sampling approach. In addition, two individually significant items were selected for testing. These expenditures were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • A purchase order was not maintained for two of the expenditures. • The check amount, invoice, and purchase requisition form for one expenditure did not agree. lll FEDERAL AWARD FINDINGS AND QUESTIONED COSTS In addition, a sample of 23 employees was randomly selected for testing using a non-statistical sampling approach. These employees were reviewed to determine if appropriate internal controls were implemented and applicable compliance requirements were met. The following deficiencies were noted: • Timesheets or other supporting documentation could not be provided for payments made to 15 employees. • Timesheets provided for 15 employees did not agree to amounts paid for the corresponding time period. • One employee received a salary increase that was not supported by a board-approved salary scale. Questioned Costs: Upon testing a sample of $34,392 in nonpersonal services expenditures, known questioned costs of $1,365 were identified. Using the total non-personal services expenditures population of $144,208, we project the likely questioned costs to be approximately $5,723. Additionally, upon testing a sample of $274,649 in personal services expenditures, known questioned costs of $97,442 were identified. Using the total personal services expenditures population of $864,482, we project the likely questioned costs to be approximately $306,706. Therefore, the known and likely questioned costs identified for unallowable payments totaled $98,807 and $312,429. The following Assistance Listing Numbers were affected by known and questioned costs: 84.425D and 84.425U. Cause: Per discussion with management, the School District believes that this is due to change in management in the financial department. Effect or Potential Effect: The School District is not in compliance with the Uniform Guidance or ED guidance related to the ESSER program. Failure to ensure that documentation exists to support the allowability of payments from the ESSER fund may expose the School District to unnecessary financial strains and shortages as GaDOE may require the School District to return funds associated with unallowable expenditures. Recommendation: The School District should review current internal control procedures related to ESSER program expenditures. Where vulnerable, the School District should develop and/or modify its policies and procedures to ensure that all expenditures are supported by appropriate documentation. In addition, the School District should implement a monitoring process to ensure that all expenditures are compliant with the School District’s purchasing and employee compensation policies and procedures. Views of Responsible Officials: We concur with this finding.
Department of Health and Human Services, Passed Through Substance Abuse and Mental Health Services Administration, Section 223 Demonstration Programs to Improve Community Mental Health Services Listing 93.829, H79SM085287, 8/31/2022 – 8/30/2023 Allowable Activities or Unallowed, Allowable Costs/Cost Principles, Cash Management, and Matching, Level of Effort, and Earmarking Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: Per Uniform Guidance (2 CFR Section 200.403) as it relates to federal grants: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items; c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity; d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost; e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part; f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period; g) Be adequately documented; h) Cost must be incurred during the approved budget period. Per the grant policy manual for Department of Health and Human Services: Non-federal entities must minimize the time elapsing between any advance payment under this award and the disbursement of the funds for direct program costs. 2 CFR Part 200, OMB Compliance Supplement, defines Level of Effort as follows: Level of effort includes requirements for (a) a specified level of service to be provided from period to period, (b) a specified level of expenditures from non-federal or federal sources for specified activities to be maintained from period to period, and (c) federal funds to supplement and not supplant non-federal funding of services. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: Hope could not readily provide the appropriate documentation to support the allocations of compensation applicable to the referenced programs for actual time worked, or to support the drawdown from grant funding or that the level of effort requirements, as outlined in the grant contract, was achieved. Cause: The process used to track employee payroll does not adequately track the allocations of payroll or time worked to the respective federal grant programs. Or, if such documentation did exist, it could not be provided as audit evidence. As a result, certain expenditures were claimed as program expenditures, but could not be substantiated for purposes of allowable costs or level of effort. Much of the issue can be attributed to employee turnover. Effect: Hope is at risk for noncompliance with allowable activities and allowable costs, as well as cash management and level of effort requirements. Questioned costs: None reported. Context: A nonstatistical sampling of 70 out of over 1,500 transactions were selected for testing of Activities Allowed and Unallowed, and Allowable Costs/Cost Principles. Allocation support could not be provided for any of the 60 items selected. Two of 7 drawdowns of grant funds were selected for testing of Cash Management which where nonstatistical. Support could not be provided for the 2 items selected. 2 of 2 employees were tested with respect to level of effort requirements as outlined in the program contract, but supporting information could not be provided. Repeat Finding From Prior Year: Yes Recommendation: Controls should be put in place to ensure that expenditures of program funds allocated through payroll expense are reviewed and approved by program management and are properly allocated based on time and activities worked consistent with the grant requirements. Additionally, level of effort requirements as made known in grant contracts should be substantiated by payroll allocation or other records. Controls should be put in place to ensure that direct expenditures of program funds are reviewed and approved by program management and are consistent with the grant reimbursements for those expenditures. Such reconciliations can be done monthly, quarterly, or annually, at Hope’s discretion. Controls should also ensure that program expenditures are made prior to requesting reimbursement of funds and are allowable in accordance with the federal program requirements. Views of Responsible Officials: We agree with the finding.
Department of Health and Human Services, Passed Through Oklahoma Department of Mental Health and Substance Abuse Services, Block Grants for Community Mental Health Services Listing 93.958, 4529063664/4529063519, 7/1/2022 – 6/30/2023 Allowable Activities or Unallowed and Allowable Costs/Cost Principles Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: Per Uniform Guidance (2 CFR Section 200.403) as it relates to federal grants: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items; c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity; d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost; e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part; f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period; g) Be adequately documented; h) Cost must be incurred during the approved budget period. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: Hope could not readily provide the appropriate documentation to support the allocations of compensation applicable to the referenced programs for actual time worked, or to support allowable costs. Cause: The process used to track employee payroll does not adequately track the allocations of payroll or time worked to the respective federal grant programs. Or, if such documentation did exist, it could not be provided as audit evidence. As a result, certain expenditures were claimed as program expenditures, but could not be substantiated for purposes of allowable costs. Much of the issue can be attributed to employee turnover. Effect: Hope is at risk for noncompliance with allowable activities and allowable costs. Questioned costs: $116,222 in payroll was identified as questionable allowable costs that could not be substantiated. Context: A nonstatistical sampling of 40 out of over 4,000 transactions were selected for testing of Activities Allowed and Unallowed, and Allowable Costs/Cost Principles. Allocation support could not be provided for any of the 40 items selected. Repeat Finding From Prior Year: No Recommendation: Controls should be put in place to ensure that expenditures of program funds allocated through payroll expense are reviewed and approved by program management and are properly allocated based on time and activities worked consistent with the grant requirements. Such support should be retained. Views of Responsible Officials: We agree with the finding.
Department of Health and Human Services, Passed Through Oklahoma Department of Mental Health and Substance Abuse Services, Block Grants for Community Mental Health Services Listing 93.958, 4529063664/4529063519, 7/1/2022 – 6/30/2023 Allowable Activities or Unallowed and Allowable Costs/Cost Principles Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: Per Uniform Guidance (2 CFR Section 200.403) as it relates to federal grants: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items; c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity; d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost; e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part; f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period; g) Be adequately documented; h) Cost must be incurred during the approved budget period. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: Hope could not readily provide the appropriate documentation to support the allocations of compensation applicable to the referenced programs for actual time worked, or to support allowable costs. Cause: The process used to track employee payroll does not adequately track the allocations of payroll or time worked to the respective federal grant programs. Or, if such documentation did exist, it could not be provided as audit evidence. As a result, certain expenditures were claimed as program expenditures, but could not be substantiated for purposes of allowable costs. Much of the issue can be attributed to employee turnover. Effect: Hope is at risk for noncompliance with allowable activities and allowable costs. Questioned costs: $116,222 in payroll was identified as questionable allowable costs that could not be substantiated. Context: A nonstatistical sampling of 40 out of over 4,000 transactions were selected for testing of Activities Allowed and Unallowed, and Allowable Costs/Cost Principles. Allocation support could not be provided for any of the 40 items selected. Repeat Finding From Prior Year: No Recommendation: Controls should be put in place to ensure that expenditures of program funds allocated through payroll expense are reviewed and approved by program management and are properly allocated based on time and activities worked consistent with the grant requirements. Such support should be retained. Views of Responsible Officials: We agree with the finding.
Department of Health and Human Services, Passed Through Oklahoma Department of Mental Health and Substance Abuse Services, Block Grants for Community Mental Health Services Listing 93.958, 4529063664/4529063519, 7/1/2022 – 6/30/2023 Allowable Activities or Unallowed and Allowable Costs/Cost Principles Material Weakness in Internal Control over Compliance and Material Noncompliance Criteria: Per Uniform Guidance (2 CFR Section 200.403) as it relates to federal grants: Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles; b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items; c) Be consistent with policies and procedures that apply uniformly to both federally financed and other activities of the non-Federal entity; d) Be accorded consistent treatment. A cost may not be assigned to a Federal award as a direct cost if any other cost incurred for the same purpose in like circumstances has been allocated to the Federal award as an indirect cost; e) Be determined in accordance with generally accepted accounting principles (GAAP), except, for state and local governments and Indian tribes only, as otherwise provided for in this part; f) Not be included as a cost or used to meet cost sharing or matching requirements of any other federally-financed program in either the current or a prior period; g) Be adequately documented; h) Cost must be incurred during the approved budget period. 2 CFR 200.303(a) establishes that the auditee must establish and maintain effective internal control over the federal award that provides assurance that the entity is managing the federal award in compliance with federal statutes, regulations, and the terms and conditions of the federal award. Condition: Hope could not readily provide the appropriate documentation to support the allocations of compensation applicable to the referenced programs for actual time worked, or to support allowable costs. Cause: The process used to track employee payroll does not adequately track the allocations of payroll or time worked to the respective federal grant programs. Or, if such documentation did exist, it could not be provided as audit evidence. As a result, certain expenditures were claimed as program expenditures, but could not be substantiated for purposes of allowable costs. Much of the issue can be attributed to employee turnover. Effect: Hope is at risk for noncompliance with allowable activities and allowable costs. Questioned costs: $116,222 in payroll was identified as questionable allowable costs that could not be substantiated. Context: A nonstatistical sampling of 40 out of over 4,000 transactions were selected for testing of Activities Allowed and Unallowed, and Allowable Costs/Cost Principles. Allocation support could not be provided for any of the 40 items selected. Repeat Finding From Prior Year: No Recommendation: Controls should be put in place to ensure that expenditures of program funds allocated through payroll expense are reviewed and approved by program management and are properly allocated based on time and activities worked consistent with the grant requirements. Such support should be retained. Views of Responsible Officials: We agree with the finding.
Finding 2023-004 – Period of Performance Federal Agency: Department of Health and Human Services Federal program title: Block Grants for Community Mental Health Services Assistance Listing Number: 93.958 Pass-Through Agency: Illinois Department of Human Services Pass-Through Number: 45CBB04278; 45CBB03514; 45CBB00648 Award Period: 07/01/2022 – 06/30/2023 Criteria or specific requirement: A non-federal entity may charge only allowable costs incurred during the approved budget period of a federal award's period of performance and any costs incurred before the federal awarding agency or pass-through entity made the federal award that were authorized by the federal awarding agency or pass-through entity (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Condition: Costs outside of the period of performance were charged to the grant. Questioned Costs: $7,253 Context: Four (4) of the sixteen (16) transactions selected for testing. Cause: The Organization did not have a control in place to ensure the proper cut-off of expense charged to federal awards. Effect: The Organization allocated unallowable costs to the federal grant. Repeat Finding: No Recommendation: Management should review and revise its process for allocating costs to federal grants to include additional layers of review related to the cut-off of grant expenditures. Particular attention should be focused on the first and last month of the grant budget period. Views of responsible officials: There is no disagreement with the audit finding.
Assistance Listing, Federal Agency, and Program Name - 21.027, U.S. Department of the Treasury, COVID 19 Coronavirus State and Local Fiscal Recovery Funds Federal Award Identification Number and Year - N/A Pass through Entity - Illinois Department of Public Health (38080704K and 38080714K) & Illinois Department of Healthcare and Family Services (ARPA231010 and ARPA231002) Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - A non federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass through entity made the federal award that were authorized by the federal awarding agency or pass through entity (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Condition - The Organization's controls did not identify expenses submitted to the State of Illinois, for reimbursement, were outside of the period of performance. Questioned Costs - $3,441,315 Identification of How Questioned Costs Were Computed - PM obtained the entire list of expenses submitted to the State of Illinois to assess the amount of questioned costs. The listing submitted to the State of Illinois was filtered to show the invoices that were outside of the period of performance. Context - In our testing of 40 allowability samples, we identified 12 invoices whereby the expense was incurred outside the period of performance, i.e., July 1, 2022 - June 30, 2023. As noted above, PM filtered the complete listing of expenses charged to the grant and discovered that $3,441,315 was charged to grant and outside of the period of performance. The questioned costs are included in the approximate $13.5M reported on the SEFA for the year ended June 30, 2023 under ALN 21.027. Cause and Effect - The lack of effective period of performance controls did not identify invoices that were outside the period of performance. The lack of controls resulted in a material amount of questioned costs and an opinion modification of 21.027, COVID 19 Coronavirus State and Local Fiscal Recovery Funds. Recommendation - As the grant period as ended for the grant, we recommend that the Organization work with the funding agency to remedy the noncompliance. In addition, we recommend that the Organization reassess its period of performance controls to identify where enhancements or additional controls are needed. Views of Responsible Officials and Corrective Action Plan - Background: Sinai began the process of risk assessment in the government grants area at the end of 2022. At that time, Sinai engaged outside counsel to assist in this process. In December of 2023, Sinai created the Office of Government Grant Administration (OGGA) and developed a comprehensive grant compliance policy and procedure. The Audit and Compliance Committee of the Board was updated on this initiative. In 2024, the OGGA created a Grant Compliance Manual which sets forth processes and procedures in grant management to ensure compliance with government regulations. Unfortunately, these controls were not implemented until after the relevant time period at issue in this audit. In 2025, Sinai is continuing to improve its compliance procedures with respect to government grants, and has developed the following plan: 1. Working Group: Sinai will implement a process of convening a Working Group for each government grant, which will consist of a representative from Finance, the OGGA, and the stakeholder involved (i.e., nursing, medicine, etc.) The Working group will be responsible for, among other things, ensuring that that the reported qualifying expenditures are incurred during the period of performance of the grant. In other words, allowable costs will be discussed early in the process, so that there is fulsome understanding among the key individuals involved. 2. Record-Keeping: The OGGA will also establish shared folders to house all of the pertinent documentation relative to the grant. 3. Invoice/Supporting Documentation Review. The Grant Accounting Manager will review all invoices and other supportive documentation to ensure that allowable costs are submitted for reimbursement. This compliance check will be completed prior to submission of the documentation for reimbursement. Monthly reviews of these activities will be performed by the Grant Accountant, the Compliance Grant Manager, and other OGGA staff as needed. Proactive review to prevent or resolve issues in the upcoming month’s billings should be pursued. 4. Annual Assessment. The Chief Compliance Officer, with the assistance of the General Counsel, will meet with the OGGA team annually to assess procedures and risk controls; a report of this assessment will be made to the Audit and Compliance Committee of the Board of Directors
Assistance Listing, Federal Agency, and Program Name - 21.027, U.S. Department of the Treasury, COVID 19 Coronavirus State and Local Fiscal Recovery Funds Federal Award Identification Number and Year - N/A Pass through Entity - Illinois Department of Public Health (38080704K and 38080714K) & Illinois Department of Healthcare and Family Services (ARPA231010 and ARPA231002) Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - A non federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass through entity made the federal award that were authorized by the federal awarding agency or pass through entity (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Condition - The Organization's controls did not identify expenses submitted to the State of Illinois, for reimbursement, were outside of the period of performance. Questioned Costs - $3,441,315 Identification of How Questioned Costs Were Computed - PM obtained the entire list of expenses submitted to the State of Illinois to assess the amount of questioned costs. The listing submitted to the State of Illinois was filtered to show the invoices that were outside of the period of performance. Context - In our testing of 40 allowability samples, we identified 12 invoices whereby the expense was incurred outside the period of performance, i.e., July 1, 2022 - June 30, 2023. As noted above, PM filtered the complete listing of expenses charged to the grant and discovered that $3,441,315 was charged to grant and outside of the period of performance. The questioned costs are included in the approximate $13.5M reported on the SEFA for the year ended June 30, 2023 under ALN 21.027. Cause and Effect - The lack of effective period of performance controls did not identify invoices that were outside the period of performance. The lack of controls resulted in a material amount of questioned costs and an opinion modification of 21.027, COVID 19 Coronavirus State and Local Fiscal Recovery Funds. Recommendation - As the grant period as ended for the grant, we recommend that the Organization work with the funding agency to remedy the noncompliance. In addition, we recommend that the Organization reassess its period of performance controls to identify where enhancements or additional controls are needed. Views of Responsible Officials and Corrective Action Plan - Background: Sinai began the process of risk assessment in the government grants area at the end of 2022. At that time, Sinai engaged outside counsel to assist in this process. In December of 2023, Sinai created the Office of Government Grant Administration (OGGA) and developed a comprehensive grant compliance policy and procedure. The Audit and Compliance Committee of the Board was updated on this initiative. In 2024, the OGGA created a Grant Compliance Manual which sets forth processes and procedures in grant management to ensure compliance with government regulations. Unfortunately, these controls were not implemented until after the relevant time period at issue in this audit. In 2025, Sinai is continuing to improve its compliance procedures with respect to government grants, and has developed the following plan: 1. Working Group: Sinai will implement a process of convening a Working Group for each government grant, which will consist of a representative from Finance, the OGGA, and the stakeholder involved (i.e., nursing, medicine, etc.) The Working group will be responsible for, among other things, ensuring that that the reported qualifying expenditures are incurred during the period of performance of the grant. In other words, allowable costs will be discussed early in the process, so that there is fulsome understanding among the key individuals involved. 2. Record-Keeping: The OGGA will also establish shared folders to house all of the pertinent documentation relative to the grant. 3. Invoice/Supporting Documentation Review. The Grant Accounting Manager will review all invoices and other supportive documentation to ensure that allowable costs are submitted for reimbursement. This compliance check will be completed prior to submission of the documentation for reimbursement. Monthly reviews of these activities will be performed by the Grant Accountant, the Compliance Grant Manager, and other OGGA staff as needed. Proactive review to prevent or resolve issues in the upcoming month’s billings should be pursued. 4. Annual Assessment. The Chief Compliance Officer, with the assistance of the General Counsel, will meet with the OGGA team annually to assess procedures and risk controls; a report of this assessment will be made to the Audit and Compliance Committee of the Board of Directors
Assistance Listing, Federal Agency, and Program Name - 21.027, U.S. Department of the Treasury, COVID 19 Coronavirus State and Local Fiscal Recovery Funds Federal Award Identification Number and Year - N/A Pass through Entity - Illinois Department of Public Health (38080704K and 38080714K) & Illinois Department of Healthcare and Family Services (ARPA231010 and ARPA231002) Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - A non federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass through entity made the federal award that were authorized by the federal awarding agency or pass through entity (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Condition - The Organization's controls did not identify expenses submitted to the State of Illinois, for reimbursement, were outside of the period of performance. Questioned Costs - $3,441,315 Identification of How Questioned Costs Were Computed - PM obtained the entire list of expenses submitted to the State of Illinois to assess the amount of questioned costs. The listing submitted to the State of Illinois was filtered to show the invoices that were outside of the period of performance. Context - In our testing of 40 allowability samples, we identified 12 invoices whereby the expense was incurred outside the period of performance, i.e., July 1, 2022 - June 30, 2023. As noted above, PM filtered the complete listing of expenses charged to the grant and discovered that $3,441,315 was charged to grant and outside of the period of performance. The questioned costs are included in the approximate $13.5M reported on the SEFA for the year ended June 30, 2023 under ALN 21.027. Cause and Effect - The lack of effective period of performance controls did not identify invoices that were outside the period of performance. The lack of controls resulted in a material amount of questioned costs and an opinion modification of 21.027, COVID 19 Coronavirus State and Local Fiscal Recovery Funds. Recommendation - As the grant period as ended for the grant, we recommend that the Organization work with the funding agency to remedy the noncompliance. In addition, we recommend that the Organization reassess its period of performance controls to identify where enhancements or additional controls are needed. Views of Responsible Officials and Corrective Action Plan - Background: Sinai began the process of risk assessment in the government grants area at the end of 2022. At that time, Sinai engaged outside counsel to assist in this process. In December of 2023, Sinai created the Office of Government Grant Administration (OGGA) and developed a comprehensive grant compliance policy and procedure. The Audit and Compliance Committee of the Board was updated on this initiative. In 2024, the OGGA created a Grant Compliance Manual which sets forth processes and procedures in grant management to ensure compliance with government regulations. Unfortunately, these controls were not implemented until after the relevant time period at issue in this audit. In 2025, Sinai is continuing to improve its compliance procedures with respect to government grants, and has developed the following plan: 1. Working Group: Sinai will implement a process of convening a Working Group for each government grant, which will consist of a representative from Finance, the OGGA, and the stakeholder involved (i.e., nursing, medicine, etc.) The Working group will be responsible for, among other things, ensuring that that the reported qualifying expenditures are incurred during the period of performance of the grant. In other words, allowable costs will be discussed early in the process, so that there is fulsome understanding among the key individuals involved. 2. Record-Keeping: The OGGA will also establish shared folders to house all of the pertinent documentation relative to the grant. 3. Invoice/Supporting Documentation Review. The Grant Accounting Manager will review all invoices and other supportive documentation to ensure that allowable costs are submitted for reimbursement. This compliance check will be completed prior to submission of the documentation for reimbursement. Monthly reviews of these activities will be performed by the Grant Accountant, the Compliance Grant Manager, and other OGGA staff as needed. Proactive review to prevent or resolve issues in the upcoming month’s billings should be pursued. 4. Annual Assessment. The Chief Compliance Officer, with the assistance of the General Counsel, will meet with the OGGA team annually to assess procedures and risk controls; a report of this assessment will be made to the Audit and Compliance Committee of the Board of Directors
Assistance Listing, Federal Agency, and Program Name - 21.027, U.S. Department of the Treasury, COVID 19 Coronavirus State and Local Fiscal Recovery Funds Federal Award Identification Number and Year - N/A Pass through Entity - Illinois Department of Public Health (38080704K and 38080714K) & Illinois Department of Healthcare and Family Services (ARPA231010 and ARPA231002) Finding Type - Material weakness and material noncompliance with laws and regulations Repeat Finding - No Criteria - A non federal entity may charge only allowable costs incurred during the approved budget period of a federal award’s period of performance and any costs incurred before the federal awarding agency or pass through entity made the federal award that were authorized by the federal awarding agency or pass through entity (2 CFR sections 200.308 200.309 and 200.403(h)). A period of performance may contain one or more budget periods. Condition - The Organization's controls did not identify expenses submitted to the State of Illinois, for reimbursement, were outside of the period of performance. Questioned Costs - $3,441,315 Identification of How Questioned Costs Were Computed - PM obtained the entire list of expenses submitted to the State of Illinois to assess the amount of questioned costs. The listing submitted to the State of Illinois was filtered to show the invoices that were outside of the period of performance. Context - In our testing of 40 allowability samples, we identified 12 invoices whereby the expense was incurred outside the period of performance, i.e., July 1, 2022 - June 30, 2023. As noted above, PM filtered the complete listing of expenses charged to the grant and discovered that $3,441,315 was charged to grant and outside of the period of performance. The questioned costs are included in the approximate $13.5M reported on the SEFA for the year ended June 30, 2023 under ALN 21.027. Cause and Effect - The lack of effective period of performance controls did not identify invoices that were outside the period of performance. The lack of controls resulted in a material amount of questioned costs and an opinion modification of 21.027, COVID 19 Coronavirus State and Local Fiscal Recovery Funds. Recommendation - As the grant period as ended for the grant, we recommend that the Organization work with the funding agency to remedy the noncompliance. In addition, we recommend that the Organization reassess its period of performance controls to identify where enhancements or additional controls are needed. Views of Responsible Officials and Corrective Action Plan - Background: Sinai began the process of risk assessment in the government grants area at the end of 2022. At that time, Sinai engaged outside counsel to assist in this process. In December of 2023, Sinai created the Office of Government Grant Administration (OGGA) and developed a comprehensive grant compliance policy and procedure. The Audit and Compliance Committee of the Board was updated on this initiative. In 2024, the OGGA created a Grant Compliance Manual which sets forth processes and procedures in grant management to ensure compliance with government regulations. Unfortunately, these controls were not implemented until after the relevant time period at issue in this audit. In 2025, Sinai is continuing to improve its compliance procedures with respect to government grants, and has developed the following plan: 1. Working Group: Sinai will implement a process of convening a Working Group for each government grant, which will consist of a representative from Finance, the OGGA, and the stakeholder involved (i.e., nursing, medicine, etc.) The Working group will be responsible for, among other things, ensuring that that the reported qualifying expenditures are incurred during the period of performance of the grant. In other words, allowable costs will be discussed early in the process, so that there is fulsome understanding among the key individuals involved. 2. Record-Keeping: The OGGA will also establish shared folders to house all of the pertinent documentation relative to the grant. 3. Invoice/Supporting Documentation Review. The Grant Accounting Manager will review all invoices and other supportive documentation to ensure that allowable costs are submitted for reimbursement. This compliance check will be completed prior to submission of the documentation for reimbursement. Monthly reviews of these activities will be performed by the Grant Accountant, the Compliance Grant Manager, and other OGGA staff as needed. Proactive review to prevent or resolve issues in the upcoming month’s billings should be pursued. 4. Annual Assessment. The Chief Compliance Officer, with the assistance of the General Counsel, will meet with the OGGA team annually to assess procedures and risk controls; a report of this assessment will be made to the Audit and Compliance Committee of the Board of Directors
1. Schedule of Expenditures of Federal Awards Finding Number: 2023-006 Assistance Listing Number and Title: AL # 84.425 Education Stabilization Fund Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Education Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Pass-Through Entity: Ohio Department of Education and Workforce Repeat Finding from Prior Audit? No Noncompliance and Material Weakness 2 C.F.R. § 3474.1 gives regulatory effect to the Department of Education for 2 CFR 200.403(b) which requires, in part, except where otherwise authorized by statute, costs must conform to any limitations or exclusions set forth in 2 CFR Part 200 Subpart E or in the Federal award as to types or amount of cost items in order to be allowable under Federal awards. Further, Section 18003(d) of the Coronavirus Aid, Relief, and Economic Security Act provides a list of allowable ESSER I activities. Section 313(3) of the Coronavirus Response and Relief Supplemental Appropriations Act, 2021, includes additional allowable uses of funds under ESSER II. The District was awarded $405,474 of COVID-19 Elementary and Secondary School Emergency Relief Fund (ESSER I) grant funding (AL #84.425D) in 2021 and $1,448,106 in COVID-19 Elementary and Secondary School Emergency Relief Fund (ESSER II) grant funding (AL #84.425D) in 2022 and 2023 by the Ohio Department of Education and Workforce. The District maintained Education Stabilization Fund (AL# 84.425) activity in a separate fund to allow for accountability of federal expenditures. However, the District posted expenditures to this fund in excess of available Education Stabilization Fund funding of $238,050 pertaining to ESSER II and $847 pertaining to ESSER I. As such, the internal controls relating to monitoring the fund and transactions to ensure reasonable assurance that the charges were accurate were not operating effectively. The lack of effective controls resulted in overspending of the grant and overstatement of expenditures on the Schedule of Expenditures of Federal Awards. Noncompliance with grant requirements could have an adverse effect on future grant awards by the awarding agency in addition to an inaccurate assessment of major federal programs that would be subjected to audit. District management should review all grant and loan award documents in order to execute policies and procedures which help ensure compliance with grant requirements. The District should implement a system to track all federal expenditures and related information separately from other expenditures and report federal expenditures with proper support including, but not limited to, grant agreements, calculation of the expenditures, and any federal reporting requirements. This will help ensure the District is in compliance with grant requirements and major federal programs are accurately identified for audit. The District spending more grant funding than was awarded also resulted in adjustments to the financial statements to move the expenditures in excess of the grant award to the General fund as reported in Finding 2023-005. See Finding 2023-005 in Section 2 above. The District spending more grant funding than was awarded also contributed to errors in the Final Expenditure reports submitted to the grantor. See Finding 2023-010 below.
1. Schedule of Expenditures of Federal Awards Finding Number: 2023-006 Assistance Listing Number and Title: AL # 84.425 Education Stabilization Fund Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Education Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Pass-Through Entity: Ohio Department of Education and Workforce Repeat Finding from Prior Audit? No Noncompliance and Material Weakness 2 C.F.R. § 3474.1 gives regulatory effect to the Department of Education for 2 CFR 200.403(b) which requires, in part, except where otherwise authorized by statute, costs must conform to any limitations or exclusions set forth in 2 CFR Part 200 Subpart E or in the Federal award as to types or amount of cost items in order to be allowable under Federal awards. Further, Section 18003(d) of the Coronavirus Aid, Relief, and Economic Security Act provides a list of allowable ESSER I activities. Section 313(3) of the Coronavirus Response and Relief Supplemental Appropriations Act, 2021, includes additional allowable uses of funds under ESSER II. The District was awarded $405,474 of COVID-19 Elementary and Secondary School Emergency Relief Fund (ESSER I) grant funding (AL #84.425D) in 2021 and $1,448,106 in COVID-19 Elementary and Secondary School Emergency Relief Fund (ESSER II) grant funding (AL #84.425D) in 2022 and 2023 by the Ohio Department of Education and Workforce. The District maintained Education Stabilization Fund (AL# 84.425) activity in a separate fund to allow for accountability of federal expenditures. However, the District posted expenditures to this fund in excess of available Education Stabilization Fund funding of $238,050 pertaining to ESSER II and $847 pertaining to ESSER I. As such, the internal controls relating to monitoring the fund and transactions to ensure reasonable assurance that the charges were accurate were not operating effectively. The lack of effective controls resulted in overspending of the grant and overstatement of expenditures on the Schedule of Expenditures of Federal Awards. Noncompliance with grant requirements could have an adverse effect on future grant awards by the awarding agency in addition to an inaccurate assessment of major federal programs that would be subjected to audit. District management should review all grant and loan award documents in order to execute policies and procedures which help ensure compliance with grant requirements. The District should implement a system to track all federal expenditures and related information separately from other expenditures and report federal expenditures with proper support including, but not limited to, grant agreements, calculation of the expenditures, and any federal reporting requirements. This will help ensure the District is in compliance with grant requirements and major federal programs are accurately identified for audit. The District spending more grant funding than was awarded also resulted in adjustments to the financial statements to move the expenditures in excess of the grant award to the General fund as reported in Finding 2023-005. See Finding 2023-005 in Section 2 above. The District spending more grant funding than was awarded also contributed to errors in the Final Expenditure reports submitted to the grantor. See Finding 2023-010 below.
1. Schedule of Expenditures of Federal Awards Finding Number: 2023-006 Assistance Listing Number and Title: AL # 84.425 Education Stabilization Fund Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Education Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Pass-Through Entity: Ohio Department of Education and Workforce Repeat Finding from Prior Audit? No Noncompliance and Material Weakness 2 C.F.R. § 3474.1 gives regulatory effect to the Department of Education for 2 CFR 200.403(b) which requires, in part, except where otherwise authorized by statute, costs must conform to any limitations or exclusions set forth in 2 CFR Part 200 Subpart E or in the Federal award as to types or amount of cost items in order to be allowable under Federal awards. Further, Section 18003(d) of the Coronavirus Aid, Relief, and Economic Security Act provides a list of allowable ESSER I activities. Section 313(3) of the Coronavirus Response and Relief Supplemental Appropriations Act, 2021, includes additional allowable uses of funds under ESSER II. The District was awarded $405,474 of COVID-19 Elementary and Secondary School Emergency Relief Fund (ESSER I) grant funding (AL #84.425D) in 2021 and $1,448,106 in COVID-19 Elementary and Secondary School Emergency Relief Fund (ESSER II) grant funding (AL #84.425D) in 2022 and 2023 by the Ohio Department of Education and Workforce. The District maintained Education Stabilization Fund (AL# 84.425) activity in a separate fund to allow for accountability of federal expenditures. However, the District posted expenditures to this fund in excess of available Education Stabilization Fund funding of $238,050 pertaining to ESSER II and $847 pertaining to ESSER I. As such, the internal controls relating to monitoring the fund and transactions to ensure reasonable assurance that the charges were accurate were not operating effectively. The lack of effective controls resulted in overspending of the grant and overstatement of expenditures on the Schedule of Expenditures of Federal Awards. Noncompliance with grant requirements could have an adverse effect on future grant awards by the awarding agency in addition to an inaccurate assessment of major federal programs that would be subjected to audit. District management should review all grant and loan award documents in order to execute policies and procedures which help ensure compliance with grant requirements. The District should implement a system to track all federal expenditures and related information separately from other expenditures and report federal expenditures with proper support including, but not limited to, grant agreements, calculation of the expenditures, and any federal reporting requirements. This will help ensure the District is in compliance with grant requirements and major federal programs are accurately identified for audit. The District spending more grant funding than was awarded also resulted in adjustments to the financial statements to move the expenditures in excess of the grant award to the General fund as reported in Finding 2023-005. See Finding 2023-005 in Section 2 above. The District spending more grant funding than was awarded also contributed to errors in the Final Expenditure reports submitted to the grantor. See Finding 2023-010 below.
1. Schedule of Expenditures of Federal Awards Finding Number: 2023-006 Assistance Listing Number and Title: AL # 84.425 Education Stabilization Fund Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Education Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Pass-Through Entity: Ohio Department of Education and Workforce Repeat Finding from Prior Audit? No Noncompliance and Material Weakness 2 C.F.R. § 3474.1 gives regulatory effect to the Department of Education for 2 CFR 200.403(b) which requires, in part, except where otherwise authorized by statute, costs must conform to any limitations or exclusions set forth in 2 CFR Part 200 Subpart E or in the Federal award as to types or amount of cost items in order to be allowable under Federal awards. Further, Section 18003(d) of the Coronavirus Aid, Relief, and Economic Security Act provides a list of allowable ESSER I activities. Section 313(3) of the Coronavirus Response and Relief Supplemental Appropriations Act, 2021, includes additional allowable uses of funds under ESSER II. The District was awarded $405,474 of COVID-19 Elementary and Secondary School Emergency Relief Fund (ESSER I) grant funding (AL #84.425D) in 2021 and $1,448,106 in COVID-19 Elementary and Secondary School Emergency Relief Fund (ESSER II) grant funding (AL #84.425D) in 2022 and 2023 by the Ohio Department of Education and Workforce. The District maintained Education Stabilization Fund (AL# 84.425) activity in a separate fund to allow for accountability of federal expenditures. However, the District posted expenditures to this fund in excess of available Education Stabilization Fund funding of $238,050 pertaining to ESSER II and $847 pertaining to ESSER I. As such, the internal controls relating to monitoring the fund and transactions to ensure reasonable assurance that the charges were accurate were not operating effectively. The lack of effective controls resulted in overspending of the grant and overstatement of expenditures on the Schedule of Expenditures of Federal Awards. Noncompliance with grant requirements could have an adverse effect on future grant awards by the awarding agency in addition to an inaccurate assessment of major federal programs that would be subjected to audit. District management should review all grant and loan award documents in order to execute policies and procedures which help ensure compliance with grant requirements. The District should implement a system to track all federal expenditures and related information separately from other expenditures and report federal expenditures with proper support including, but not limited to, grant agreements, calculation of the expenditures, and any federal reporting requirements. This will help ensure the District is in compliance with grant requirements and major federal programs are accurately identified for audit. The District spending more grant funding than was awarded also resulted in adjustments to the financial statements to move the expenditures in excess of the grant award to the General fund as reported in Finding 2023-005. See Finding 2023-005 in Section 2 above. The District spending more grant funding than was awarded also contributed to errors in the Final Expenditure reports submitted to the grantor. See Finding 2023-010 below.
1. Schedule of Expenditures of Federal Awards Finding Number: 2023-006 Assistance Listing Number and Title: AL # 84.425 Education Stabilization Fund Federal Award Identification Number / Year: 2023 Federal Agency: U.S. Department of Education Compliance Requirement: Activities Allowed or Unallowed and Allowable Costs/Cost Principles Pass-Through Entity: Ohio Department of Education and Workforce Repeat Finding from Prior Audit? No Noncompliance and Material Weakness 2 C.F.R. § 3474.1 gives regulatory effect to the Department of Education for 2 CFR 200.403(b) which requires, in part, except where otherwise authorized by statute, costs must conform to any limitations or exclusions set forth in 2 CFR Part 200 Subpart E or in the Federal award as to types or amount of cost items in order to be allowable under Federal awards. Further, Section 18003(d) of the Coronavirus Aid, Relief, and Economic Security Act provides a list of allowable ESSER I activities. Section 313(3) of the Coronavirus Response and Relief Supplemental Appropriations Act, 2021, includes additional allowable uses of funds under ESSER II. The District was awarded $405,474 of COVID-19 Elementary and Secondary School Emergency Relief Fund (ESSER I) grant funding (AL #84.425D) in 2021 and $1,448,106 in COVID-19 Elementary and Secondary School Emergency Relief Fund (ESSER II) grant funding (AL #84.425D) in 2022 and 2023 by the Ohio Department of Education and Workforce. The District maintained Education Stabilization Fund (AL# 84.425) activity in a separate fund to allow for accountability of federal expenditures. However, the District posted expenditures to this fund in excess of available Education Stabilization Fund funding of $238,050 pertaining to ESSER II and $847 pertaining to ESSER I. As such, the internal controls relating to monitoring the fund and transactions to ensure reasonable assurance that the charges were accurate were not operating effectively. The lack of effective controls resulted in overspending of the grant and overstatement of expenditures on the Schedule of Expenditures of Federal Awards. Noncompliance with grant requirements could have an adverse effect on future grant awards by the awarding agency in addition to an inaccurate assessment of major federal programs that would be subjected to audit. District management should review all grant and loan award documents in order to execute policies and procedures which help ensure compliance with grant requirements. The District should implement a system to track all federal expenditures and related information separately from other expenditures and report federal expenditures with proper support including, but not limited to, grant agreements, calculation of the expenditures, and any federal reporting requirements. This will help ensure the District is in compliance with grant requirements and major federal programs are accurately identified for audit. The District spending more grant funding than was awarded also resulted in adjustments to the financial statements to move the expenditures in excess of the grant award to the General fund as reported in Finding 2023-005. See Finding 2023-005 in Section 2 above. The District spending more grant funding than was awarded also contributed to errors in the Final Expenditure reports submitted to the grantor. See Finding 2023-010 below.
Lack of Supporting Documentation for Non-Payroll Disbursements - Activities Allowed or Unallowed and Allowable Costs/Cost Principles (Significant Deficiency) AL Number and Title: 84.362A - Native Hawaiian Education Program Award Number: S362A200024 Award Year: 2023 Federal Agency: Department of Education Criteria: Under 2 CFR § 200.302(b)(3) and 2 CFR § 200.403(g), non-Federal entities are required to maintain documentation to support costs charged to federal awards. Costs must be necessary, reasonable, allocable, and adequately documented to be allowable under a federal program. Internal controls should ensure proper retention of records for audit and compliance purposes. Condition: During our testing of compliance and internal controls over compliance for Activities Allowed or Unallowed and Allowable Costs/Cost Principles, we selected a haphazard sample of 40 non-payroll disbursements. The auditee was unable to provide any supporting documentation (such as invoices or receipts) for five transactions totaling $200.19. These transactions were for program and class supplies from various vendors. Cause: The lack of documentation appears to result from weaknesses in the Organization’s record-keeping practices and non-compliance with established documentation retention policies. The Organization’s internal controls did not ensure that all supporting documentation for federal expenditures was consistently maintained Effect: Without adequate supporting documentation, we were unable to determine whether these costs were allowable, allocable, and reasonable in accordance with federal grant requirements. This noncompliance increases the risk that unallowable or unauthorized costs could be charged to the federal program without detection. Repeat Finding? No Recommendation: We recommend that the Organization: 1. Enhance internal controls to ensure that all federal expenditures are properly supported and retained for compliance purposes; 2. Implement a centralized documentation retention system to track and store invoices, receipts, and other supporting records; 3. Provide staff training on documentation requirements for federal grant expenditures to ensure compliance with 2 CFR § 200.302(b)(3) and 2 CFR § 200.403(g); and 4. Conduct periodic internal reviews of disbursement records to verify that required documentation is maintained and readily available for audit purposes. Views of Responsible Officials and Planned Corrective Action: Mana Maoli agrees with the finding and the recommendation. See Part V, Corrective Action Plan.
Reference Number: 2023-019 Category of Finding: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency and Instance of Noncompliance State Administering Department: California Department of Social Services (CDSS) Assistance Listing Numbers: 96.001 Federal Program Title: Disability Insurance/SSI Cluster: Social Security Disability Insurance Federal Award Number and Year: 04-2204CADI00; 2022 Criteria Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart D – Post Federal Award Requirements. Standards for Financial and Program Management. §200.303 Internal controls (2 CFR 200.303): 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). Title 2 – Grants and Agreements. Subtitle A – Office of Management and Budget Guidance for Grants and Agreements. Chapter II – Office of Management and Budget Guidance. Part 200 – Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. Subpart E – Cost Principles. §200.403 Factors affecting allowability of costs. Except where otherwise authorized by statute, costs must meet the following criteria to be allowable under Federal awards: (g) Be adequately documented. See §200.300 through §200.309. Condition The documentation for one of forty samples selected for testing did not agree to the payment disbursed to a provider for medical evidence of record (MER) services. The provider was overpaid by $5. Identification as a Repeat Finding This was not a repeat finding from the immediate prior year. Cause CDSS has represented that the cause was an input error in the Midas subledger when processing the vendor payment. Effect CDSS did not have appropriate oversight controls to ensure that the data entry was accurate. Accordingly, there is an increased risk for data entry directly affecting the amount reported on the schedule of expenditures of federal awards to be inaccurate. Questioned Costs Questioned costs are projected to be $54,398. Context The total MER expenditures for the fiscal year ended June 30, 2023, were $4,432,781, which represents 1.8% of the total program expenditures of the Disability Insurance/SSI Cluster of $242,946,482. The sample was not a statistically valid sample. Recommendation CDSS should strengthen its controls over the review for accuracy of the provider invoice amounts input into Midas. Views of Responsible Officials and Corrective Action Plan Management’s response is reported in “Management’s Response and Corrective Action Plan” included in a separate section at the end of this report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context A cash reimbursement is provided to the School Corporation based on meals served under the School Breakfast Program, National School Lunch Program, and Summer Food Service Program for Children. The cash reimbursement is to be used for the benefit of the food service program. An effective system of internal controls, which would include segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance should be designed and implemented to ensure expenditures charged to the food service program fund (fund 800) are for the benefit of the food service program. The School Corporation's process for payroll disbursements included a segregation of duties; however, no individual reviewer or approver was provided detailed payroll information that would have allowed them to determine the expense was being paid from the food service program. Due to the lack of internal controls, the School Corporation paid $23,682 of administrative salaries based on fixed percentages without supporting documentation to indicate how the percentages were determined or time records indicating time spent on the program by the applicable administrators. The amount paid, $23,682, is considered questioned costs. INDIANA STATE BOARD OF ACCOUNTS 19 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to the salaries identified above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430 states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; or two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." INDIANA STATE BOARD OF ACCOUNTS 20 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, administrative payroll was charged to the school lunch fund without appropriate supporting documentation. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $23,682 were identified as noted in the Condition and Context. Recommendation We recommended the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context A cash reimbursement is provided to the School Corporation based on meals served under the School Breakfast Program, National School Lunch Program, and Summer Food Service Program for Children. The cash reimbursement is to be used for the benefit of the food service program. An effective system of internal controls, which would include segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance should be designed and implemented to ensure expenditures charged to the food service program fund (fund 800) are for the benefit of the food service program. The School Corporation's process for payroll disbursements included a segregation of duties; however, no individual reviewer or approver was provided detailed payroll information that would have allowed them to determine the expense was being paid from the food service program. Due to the lack of internal controls, the School Corporation paid $23,682 of administrative salaries based on fixed percentages without supporting documentation to indicate how the percentages were determined or time records indicating time spent on the program by the applicable administrators. The amount paid, $23,682, is considered questioned costs. INDIANA STATE BOARD OF ACCOUNTS 19 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to the salaries identified above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430 states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; or two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." INDIANA STATE BOARD OF ACCOUNTS 20 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, administrative payroll was charged to the school lunch fund without appropriate supporting documentation. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $23,682 were identified as noted in the Condition and Context. Recommendation We recommended the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context A cash reimbursement is provided to the School Corporation based on meals served under the School Breakfast Program, National School Lunch Program, and Summer Food Service Program for Children. The cash reimbursement is to be used for the benefit of the food service program. An effective system of internal controls, which would include segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance should be designed and implemented to ensure expenditures charged to the food service program fund (fund 800) are for the benefit of the food service program. The School Corporation's process for payroll disbursements included a segregation of duties; however, no individual reviewer or approver was provided detailed payroll information that would have allowed them to determine the expense was being paid from the food service program. Due to the lack of internal controls, the School Corporation paid $23,682 of administrative salaries based on fixed percentages without supporting documentation to indicate how the percentages were determined or time records indicating time spent on the program by the applicable administrators. The amount paid, $23,682, is considered questioned costs. INDIANA STATE BOARD OF ACCOUNTS 19 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to the salaries identified above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430 states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; or two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." INDIANA STATE BOARD OF ACCOUNTS 20 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, administrative payroll was charged to the school lunch fund without appropriate supporting documentation. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $23,682 were identified as noted in the Condition and Context. Recommendation We recommended the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context A cash reimbursement is provided to the School Corporation based on meals served under the School Breakfast Program, National School Lunch Program, and Summer Food Service Program for Children. The cash reimbursement is to be used for the benefit of the food service program. An effective system of internal controls, which would include segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance should be designed and implemented to ensure expenditures charged to the food service program fund (fund 800) are for the benefit of the food service program. The School Corporation's process for payroll disbursements included a segregation of duties; however, no individual reviewer or approver was provided detailed payroll information that would have allowed them to determine the expense was being paid from the food service program. Due to the lack of internal controls, the School Corporation paid $23,682 of administrative salaries based on fixed percentages without supporting documentation to indicate how the percentages were determined or time records indicating time spent on the program by the applicable administrators. The amount paid, $23,682, is considered questioned costs. INDIANA STATE BOARD OF ACCOUNTS 19 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to the salaries identified above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430 states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; or two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." INDIANA STATE BOARD OF ACCOUNTS 20 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, administrative payroll was charged to the school lunch fund without appropriate supporting documentation. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $23,682 were identified as noted in the Condition and Context. Recommendation We recommended the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-004 Subject: Child Nutrition Cluster - Allowable Costs/Cost Principles Federal Agency: Department of Agriculture Federal Programs: School Breakfast Program, National School Lunch Program, Summer Food Service Program for Children Assistance Listings Numbers: 10.553, 10.555, 10.559 Federal Award Numbers and Years (or Other Identifying Numbers): FY2022, FY2023 Pass-Through Entity: Indiana Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context A cash reimbursement is provided to the School Corporation based on meals served under the School Breakfast Program, National School Lunch Program, and Summer Food Service Program for Children. The cash reimbursement is to be used for the benefit of the food service program. An effective system of internal controls, which would include segregation of duties, that would likely be effective in preventing, or detecting and correcting, noncompliance should be designed and implemented to ensure expenditures charged to the food service program fund (fund 800) are for the benefit of the food service program. The School Corporation's process for payroll disbursements included a segregation of duties; however, no individual reviewer or approver was provided detailed payroll information that would have allowed them to determine the expense was being paid from the food service program. Due to the lack of internal controls, the School Corporation paid $23,682 of administrative salaries based on fixed percentages without supporting documentation to indicate how the percentages were determined or time records indicating time spent on the program by the applicable administrators. The amount paid, $23,682, is considered questioned costs. INDIANA STATE BOARD OF ACCOUNTS 19 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) The lack of internal controls was a systemic issue throughout the audit period. The noncompliance was isolated to the salaries identified above. Criteria 2 CFR 200.303 states in part: "The non-Federal entity must: (a) Establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award. These internal controls should be in compliance with guidance in 'Standards for Internal Control in the Federal Government' issued by the Comptroller General of the United States or the 'Internal Control Integrated Framework', issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). . . ." 2 CFR 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430 states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities . . . (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; or two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." INDIANA STATE BOARD OF ACCOUNTS 20 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Cause A proper system of internal controls was not designed by management of the School Corporation, which would include segregation of key functions. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, administrative payroll was charged to the school lunch fund without appropriate supporting documentation. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs Known questioned costs of $23,682 were identified as noted in the Condition and Context. Recommendation We recommended the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-010 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context The Elementary and Secondary School Emergency Relief (ESSER) Fund provided funding to states and school districts to help safely reopen and sustain the safe operation of schools and to address the impact of the coronavirus pandemic on the nation's students. States were required to subgrant a portion of their ESSER allocations to Local Educational Agencies (LEA). Prior to the LEAs receiving their respective subgrants, the LEAs were required to complete an application for the ESSER funding, which was submitted to the Indiana Department of Education (IDOE), the pass-through entity for approval. The application included a district level budget identifying how the LEA intended to spend program funds. A sample of 25 claims charged to the ESSER grant program for which reimbursement was received during the audit period was selected for testing to verify that the expenditures were in conformance with the applicable cost principles. Of the 25 claims tested, the following errors were noted: INDIANA STATE BOARD OF ACCOUNTS 32 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Two claims, totaling $983, were for payments to a teacher for part-time tutoring. However, there was not a School Board approved contract or Salary Ordinance that showed the approval of this position or the rate to be paid. Two claims, totaling $318,922, were for payments for playground equipment; however, the related contract supporting the purchase was not provided. The lack of effective internal controls and noncompliance were systemic issues 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . INDIANA STATE BOARD OF ACCOUNTS 33 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls was not designed by the School Corporation's management. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, expenses were paid without adequate supporting documentation. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-010 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context The Elementary and Secondary School Emergency Relief (ESSER) Fund provided funding to states and school districts to help safely reopen and sustain the safe operation of schools and to address the impact of the coronavirus pandemic on the nation's students. States were required to subgrant a portion of their ESSER allocations to Local Educational Agencies (LEA). Prior to the LEAs receiving their respective subgrants, the LEAs were required to complete an application for the ESSER funding, which was submitted to the Indiana Department of Education (IDOE), the pass-through entity for approval. The application included a district level budget identifying how the LEA intended to spend program funds. A sample of 25 claims charged to the ESSER grant program for which reimbursement was received during the audit period was selected for testing to verify that the expenditures were in conformance with the applicable cost principles. Of the 25 claims tested, the following errors were noted: INDIANA STATE BOARD OF ACCOUNTS 32 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Two claims, totaling $983, were for payments to a teacher for part-time tutoring. However, there was not a School Board approved contract or Salary Ordinance that showed the approval of this position or the rate to be paid. Two claims, totaling $318,922, were for payments for playground equipment; however, the related contract supporting the purchase was not provided. The lack of effective internal controls and noncompliance were systemic issues 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . INDIANA STATE BOARD OF ACCOUNTS 33 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls was not designed by the School Corporation's management. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, expenses were paid without adequate supporting documentation. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-010 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context The Elementary and Secondary School Emergency Relief (ESSER) Fund provided funding to states and school districts to help safely reopen and sustain the safe operation of schools and to address the impact of the coronavirus pandemic on the nation's students. States were required to subgrant a portion of their ESSER allocations to Local Educational Agencies (LEA). Prior to the LEAs receiving their respective subgrants, the LEAs were required to complete an application for the ESSER funding, which was submitted to the Indiana Department of Education (IDOE), the pass-through entity for approval. The application included a district level budget identifying how the LEA intended to spend program funds. A sample of 25 claims charged to the ESSER grant program for which reimbursement was received during the audit period was selected for testing to verify that the expenditures were in conformance with the applicable cost principles. Of the 25 claims tested, the following errors were noted: INDIANA STATE BOARD OF ACCOUNTS 32 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Two claims, totaling $983, were for payments to a teacher for part-time tutoring. However, there was not a School Board approved contract or Salary Ordinance that showed the approval of this position or the rate to be paid. Two claims, totaling $318,922, were for payments for playground equipment; however, the related contract supporting the purchase was not provided. The lack of effective internal controls and noncompliance were systemic issues 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . INDIANA STATE BOARD OF ACCOUNTS 33 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls was not designed by the School Corporation's management. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, expenses were paid without adequate supporting documentation. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
FINDING 2023-010 Subject: COVID-19 - Education Stabilization Fund - Allowable Costs/Cost Principles Federal Agency: Department of Education Federal Program: COVID-19 - Education Stabilization Fund Assistance Listings Numbers: 84.425D, 84.425U Federal Award Numbers and Years (or Other Identifying Numbers): S425D210013, S425U210013 Pass-Through Entity: Department of Education Compliance Requirement: Allowable Costs/Cost Principles Audit Findings: Material Weakness, Other Matters Condition and Context The Elementary and Secondary School Emergency Relief (ESSER) Fund provided funding to states and school districts to help safely reopen and sustain the safe operation of schools and to address the impact of the coronavirus pandemic on the nation's students. States were required to subgrant a portion of their ESSER allocations to Local Educational Agencies (LEA). Prior to the LEAs receiving their respective subgrants, the LEAs were required to complete an application for the ESSER funding, which was submitted to the Indiana Department of Education (IDOE), the pass-through entity for approval. The application included a district level budget identifying how the LEA intended to spend program funds. A sample of 25 claims charged to the ESSER grant program for which reimbursement was received during the audit period was selected for testing to verify that the expenditures were in conformance with the applicable cost principles. Of the 25 claims tested, the following errors were noted: INDIANA STATE BOARD OF ACCOUNTS 32 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) Two claims, totaling $983, were for payments to a teacher for part-time tutoring. However, there was not a School Board approved contract or Salary Ordinance that showed the approval of this position or the rate to be paid. Two claims, totaling $318,922, were for payments for playground equipment; however, the related contract supporting the purchase was not provided. The lack of effective internal controls and noncompliance were systemic issues 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 200.403 states in part: "Except where otherwise authorized by statute, costs must meet the following general criteria in order to be allowable under Federal awards: (a) Be necessary and reasonable for the performance of the Federal award and be allocable thereto under these principles. (b) Conform to any limitations or exclusions set forth in these principles or in the Federal award as to types or amount of cost items. . . . (g) Be adequately documented. . . ." 2 CFR 200.430(i) states in part: "Standards for Documentation of Personnel Expenses (1) Charges to Federal awards for salaries and wages must be based on records that accurately reflect the work performed. These records must: (i) Be supported by a system of internal control which provides reasonable assurance that the charges are accurate, allowable, and properly allocated; (ii) Be incorporated into the official records of the non-Federal entity; (iii) Reasonably reflect the total activity for which the employee is compensated by the non- Federal entity, not exceeding 100% of compensated activities (for IHE, this per the IHE's definition of IBS); . . . INDIANA STATE BOARD OF ACCOUNTS 33 SHENANDOAH SCHOOL CORPORATION SCHEDULE OF FINDINGS AND QUESTIONED COSTS (Continued) (vii) Support the distribution of the employee's salary or wages among specific activities or cost objectives if the employee works on more than one Federal award; a Federal award and non-Federal award; an indirect cost activity and a direct cost activity; two or more indirect activities which are allocated using different allocation bases; or an unallowable activity and a direct or indirect cost activity. . . ." Cause A proper system of internal controls was not designed by the School Corporation's management. Embedded within a properly designed and implemented internal control system should be internal controls consisting of policies and procedures. Policies reflect the School Corporation's management statements of what should be done to effect internal controls, and procedures should consist of actions that would implement these policies. Effect Without the proper implementation of an effectively designed system of internal controls, the internal control system cannot be capable of effectively preventing, or detecting and correcting, material noncompliance. As a result, expenses were paid without adequate supporting documentation. Noncompliance with the grant agreement and the compliance requirement could result in the loss of future federal funds to the School Corporation. Questioned Costs There were no questioned costs identified. Recommendation We recommended that the School Corporation's management establish a proper system of internal controls and develop policies and procedures to ensure costs are adequately documented. Views of Responsible Officials For the views of responsible officials, refer to the Corrective Action Plan that is part of this report.
Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Housing and Urban Development Federal Program Name: Community Service Block Grant; Community Development Block Grant Assistance Listing Number: 93.569; 14.218 Pass-through Agency: Pennsylvania Department of Community and Economic Development; City of Bethlehem (CB); Northampton County (NC) Pass-Through Number: Contract #C000067069; Contract #C000082084; B-22-MC-42-0003 (CB) Award Period: April 1, 2020 – September 30, 2022; January 1, 2022 – December 31, 2027; January 1, 2022 - December 31, 2023 (CB); July 1, 2020 - December 31, 2022 (NC) Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria: 3 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of period of performance. The Organization should have procedures and controls in place to ensure expenses are charged to a federal program within the approved period of performance. In addition, in accordance with 2 CFR Part 200.403, allowable costs should be determined in accordance with generally accepted accounting principles (GAAP), therefore payroll accruals should be appropriately reflected when recording program expenditures. Condition: During our testing, we noted there were several salary expenditures charged to the grant based on the payroll period ending date, however the costs were incurred for the period 12/24/22 - 1/6/23, which the first eight days were prior to the start of the period of performance. There was also one transaction selected for testing where no supporting documentation was able to be located and one transaction that was incurred after the period of performance for the program. Questioned Costs: No questioned costs above the $25,000 threshold have been identified. Context: During the review of community service block grant costs recorded at the beginning of the approved period of performance (January 2023), seventeen transactions charged to the federal program in January 2023 for salary and related payroll taxes were observed. A portion of these expenses was incurred before the start of the contract period, specifically covering the payroll period from 12/24/22 to 1/6/23, with the first eight days outside the approved period of performance. The total amount of these transactions was $11,606. Additionally, one transaction for facilities maintenance totaling $2,625 lacked supporting documentation. Furthermore, during testing of costs recorded towards the end of the period of performance (September 2022), there was one transaction for outside computer services amounting to $1,125, with the invoice indicating services performed in October 2022. During the testing of community development block grant costs recorded at the beginning of the approved period of performance (January 2023), seventeen transactions charged to the federal program in January 2023 for salary and related payroll taxes were noted, with a portion incurred prior to the start of the contract period. The total amount of these transactions was $1,079. Cause: The Organization recorded the transactions into the general ledger based on the payroll period ending date and invoice date rather than the date the transactions were incurred by the Organization. In addition, the Organization experienced turnover within the finance department and the missing supporting documentation was likely misfiled and therefore unable to be located. Effect: If the Organization includes expenses either incurred before the start date or after the end date of the approved period of performance, it could result in funds being required to be returned to the funding agency. Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2022-005. Recommendation: The Organization should work with the federal agency to provide additional documentation or justification for the expenses, or to adjust the budget or funding limits to ensure that all expenses are within the approved period of performance. It is important to address any period of performance findings as soon as possible to avoid potential penalties or repayment obligations. The Organization should also review its process of entering invoices and payroll related expenses into the accounting software to ensure the correct period is used for federal expenditures. View of Responsible Officials and Planned Corrective Action: Please refer to Community Action Committee of the Lehigh Valley, Inc. and subsidiaries’ Corrective Action Plan.
Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Housing and Urban Development Federal Program Name: Community Service Block Grant; Community Development Block Grant Assistance Listing Number: 93.569; 14.218 Pass-through Agency: Pennsylvania Department of Community and Economic Development; City of Bethlehem (CB); Northampton County (NC) Pass-Through Number: Contract #C000067069; Contract #C000082084; B-22-MC-42-0003 (CB) Award Period: April 1, 2020 – September 30, 2022; January 1, 2022 – December 31, 2027; January 1, 2022 - December 31, 2023 (CB); July 1, 2020 - December 31, 2022 (NC) Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria: 3 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of period of performance. The Organization should have procedures and controls in place to ensure expenses are charged to a federal program within the approved period of performance. In addition, in accordance with 2 CFR Part 200.403, allowable costs should be determined in accordance with generally accepted accounting principles (GAAP), therefore payroll accruals should be appropriately reflected when recording program expenditures. Condition: During our testing, we noted there were several salary expenditures charged to the grant based on the payroll period ending date, however the costs were incurred for the period 12/24/22 - 1/6/23, which the first eight days were prior to the start of the period of performance. There was also one transaction selected for testing where no supporting documentation was able to be located and one transaction that was incurred after the period of performance for the program. Questioned Costs: No questioned costs above the $25,000 threshold have been identified. Context: During the review of community service block grant costs recorded at the beginning of the approved period of performance (January 2023), seventeen transactions charged to the federal program in January 2023 for salary and related payroll taxes were observed. A portion of these expenses was incurred before the start of the contract period, specifically covering the payroll period from 12/24/22 to 1/6/23, with the first eight days outside the approved period of performance. The total amount of these transactions was $11,606. Additionally, one transaction for facilities maintenance totaling $2,625 lacked supporting documentation. Furthermore, during testing of costs recorded towards the end of the period of performance (September 2022), there was one transaction for outside computer services amounting to $1,125, with the invoice indicating services performed in October 2022. During the testing of community development block grant costs recorded at the beginning of the approved period of performance (January 2023), seventeen transactions charged to the federal program in January 2023 for salary and related payroll taxes were noted, with a portion incurred prior to the start of the contract period. The total amount of these transactions was $1,079. Cause: The Organization recorded the transactions into the general ledger based on the payroll period ending date and invoice date rather than the date the transactions were incurred by the Organization. In addition, the Organization experienced turnover within the finance department and the missing supporting documentation was likely misfiled and therefore unable to be located. Effect: If the Organization includes expenses either incurred before the start date or after the end date of the approved period of performance, it could result in funds being required to be returned to the funding agency. Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2022-005. Recommendation: The Organization should work with the federal agency to provide additional documentation or justification for the expenses, or to adjust the budget or funding limits to ensure that all expenses are within the approved period of performance. It is important to address any period of performance findings as soon as possible to avoid potential penalties or repayment obligations. The Organization should also review its process of entering invoices and payroll related expenses into the accounting software to ensure the correct period is used for federal expenditures. View of Responsible Officials and Planned Corrective Action: Please refer to Community Action Committee of the Lehigh Valley, Inc. and subsidiaries’ Corrective Action Plan.
Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Housing and Urban Development Federal Program Name: Community Service Block Grant; Community Development Block Grant Assistance Listing Number: 93.569; 14.218 Pass-through Agency: Pennsylvania Department of Community and Economic Development; City of Bethlehem (CB); Northampton County (NC) Pass-Through Number: Contract #C000067069; Contract #C000082084; B-22-MC-42-0003 (CB) Award Period: April 1, 2020 – September 30, 2022; January 1, 2022 – December 31, 2027; January 1, 2022 - December 31, 2023 (CB); July 1, 2020 - December 31, 2022 (NC) Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria: 3 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of period of performance. The Organization should have procedures and controls in place to ensure expenses are charged to a federal program within the approved period of performance. In addition, in accordance with 2 CFR Part 200.403, allowable costs should be determined in accordance with generally accepted accounting principles (GAAP), therefore payroll accruals should be appropriately reflected when recording program expenditures. Condition: During our testing, we noted there were several salary expenditures charged to the grant based on the payroll period ending date, however the costs were incurred for the period 12/24/22 - 1/6/23, which the first eight days were prior to the start of the period of performance. There was also one transaction selected for testing where no supporting documentation was able to be located and one transaction that was incurred after the period of performance for the program. Questioned Costs: No questioned costs above the $25,000 threshold have been identified. Context: During the review of community service block grant costs recorded at the beginning of the approved period of performance (January 2023), seventeen transactions charged to the federal program in January 2023 for salary and related payroll taxes were observed. A portion of these expenses was incurred before the start of the contract period, specifically covering the payroll period from 12/24/22 to 1/6/23, with the first eight days outside the approved period of performance. The total amount of these transactions was $11,606. Additionally, one transaction for facilities maintenance totaling $2,625 lacked supporting documentation. Furthermore, during testing of costs recorded towards the end of the period of performance (September 2022), there was one transaction for outside computer services amounting to $1,125, with the invoice indicating services performed in October 2022. During the testing of community development block grant costs recorded at the beginning of the approved period of performance (January 2023), seventeen transactions charged to the federal program in January 2023 for salary and related payroll taxes were noted, with a portion incurred prior to the start of the contract period. The total amount of these transactions was $1,079. Cause: The Organization recorded the transactions into the general ledger based on the payroll period ending date and invoice date rather than the date the transactions were incurred by the Organization. In addition, the Organization experienced turnover within the finance department and the missing supporting documentation was likely misfiled and therefore unable to be located. Effect: If the Organization includes expenses either incurred before the start date or after the end date of the approved period of performance, it could result in funds being required to be returned to the funding agency. Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2022-005. Recommendation: The Organization should work with the federal agency to provide additional documentation or justification for the expenses, or to adjust the budget or funding limits to ensure that all expenses are within the approved period of performance. It is important to address any period of performance findings as soon as possible to avoid potential penalties or repayment obligations. The Organization should also review its process of entering invoices and payroll related expenses into the accounting software to ensure the correct period is used for federal expenditures. View of Responsible Officials and Planned Corrective Action: Please refer to Community Action Committee of the Lehigh Valley, Inc. and subsidiaries’ Corrective Action Plan.
Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Housing and Urban Development Federal Program Name: Community Service Block Grant; Community Development Block Grant Assistance Listing Number: 93.569; 14.218 Pass-through Agency: Pennsylvania Department of Community and Economic Development; City of Bethlehem (CB); Northampton County (NC) Pass-Through Number: Contract #C000067069; Contract #C000082084; B-22-MC-42-0003 (CB) Award Period: April 1, 2020 – September 30, 2022; January 1, 2022 – December 31, 2027; January 1, 2022 - December 31, 2023 (CB); July 1, 2020 - December 31, 2022 (NC) Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria: 3 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of period of performance. The Organization should have procedures and controls in place to ensure expenses are charged to a federal program within the approved period of performance. In addition, in accordance with 2 CFR Part 200.403, allowable costs should be determined in accordance with generally accepted accounting principles (GAAP), therefore payroll accruals should be appropriately reflected when recording program expenditures. Condition: During our testing, we noted there were several salary expenditures charged to the grant based on the payroll period ending date, however the costs were incurred for the period 12/24/22 - 1/6/23, which the first eight days were prior to the start of the period of performance. There was also one transaction selected for testing where no supporting documentation was able to be located and one transaction that was incurred after the period of performance for the program. Questioned Costs: No questioned costs above the $25,000 threshold have been identified. Context: During the review of community service block grant costs recorded at the beginning of the approved period of performance (January 2023), seventeen transactions charged to the federal program in January 2023 for salary and related payroll taxes were observed. A portion of these expenses was incurred before the start of the contract period, specifically covering the payroll period from 12/24/22 to 1/6/23, with the first eight days outside the approved period of performance. The total amount of these transactions was $11,606. Additionally, one transaction for facilities maintenance totaling $2,625 lacked supporting documentation. Furthermore, during testing of costs recorded towards the end of the period of performance (September 2022), there was one transaction for outside computer services amounting to $1,125, with the invoice indicating services performed in October 2022. During the testing of community development block grant costs recorded at the beginning of the approved period of performance (January 2023), seventeen transactions charged to the federal program in January 2023 for salary and related payroll taxes were noted, with a portion incurred prior to the start of the contract period. The total amount of these transactions was $1,079. Cause: The Organization recorded the transactions into the general ledger based on the payroll period ending date and invoice date rather than the date the transactions were incurred by the Organization. In addition, the Organization experienced turnover within the finance department and the missing supporting documentation was likely misfiled and therefore unable to be located. Effect: If the Organization includes expenses either incurred before the start date or after the end date of the approved period of performance, it could result in funds being required to be returned to the funding agency. Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2022-005. Recommendation: The Organization should work with the federal agency to provide additional documentation or justification for the expenses, or to adjust the budget or funding limits to ensure that all expenses are within the approved period of performance. It is important to address any period of performance findings as soon as possible to avoid potential penalties or repayment obligations. The Organization should also review its process of entering invoices and payroll related expenses into the accounting software to ensure the correct period is used for federal expenditures. View of Responsible Officials and Planned Corrective Action: Please refer to Community Action Committee of the Lehigh Valley, Inc. and subsidiaries’ Corrective Action Plan.
Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Housing and Urban Development Federal Program Name: Community Service Block Grant; Community Development Block Grant Assistance Listing Number: 93.569; 14.218 Pass-through Agency: Pennsylvania Department of Community and Economic Development; City of Bethlehem (CB); Northampton County (NC) Pass-Through Number: Contract #C000067069; Contract #C000082084; B-22-MC-42-0003 (CB) Award Period: April 1, 2020 – September 30, 2022; January 1, 2022 – December 31, 2027; January 1, 2022 - December 31, 2023 (CB); July 1, 2020 - December 31, 2022 (NC) Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria: 3 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of period of performance. The Organization should have procedures and controls in place to ensure expenses are charged to a federal program within the approved period of performance. In addition, in accordance with 2 CFR Part 200.403, allowable costs should be determined in accordance with generally accepted accounting principles (GAAP), therefore payroll accruals should be appropriately reflected when recording program expenditures. Condition: During our testing, we noted there were several salary expenditures charged to the grant based on the payroll period ending date, however the costs were incurred for the period 12/24/22 - 1/6/23, which the first eight days were prior to the start of the period of performance. There was also one transaction selected for testing where no supporting documentation was able to be located and one transaction that was incurred after the period of performance for the program. Questioned Costs: No questioned costs above the $25,000 threshold have been identified. Context: During the review of community service block grant costs recorded at the beginning of the approved period of performance (January 2023), seventeen transactions charged to the federal program in January 2023 for salary and related payroll taxes were observed. A portion of these expenses was incurred before the start of the contract period, specifically covering the payroll period from 12/24/22 to 1/6/23, with the first eight days outside the approved period of performance. The total amount of these transactions was $11,606. Additionally, one transaction for facilities maintenance totaling $2,625 lacked supporting documentation. Furthermore, during testing of costs recorded towards the end of the period of performance (September 2022), there was one transaction for outside computer services amounting to $1,125, with the invoice indicating services performed in October 2022. During the testing of community development block grant costs recorded at the beginning of the approved period of performance (January 2023), seventeen transactions charged to the federal program in January 2023 for salary and related payroll taxes were noted, with a portion incurred prior to the start of the contract period. The total amount of these transactions was $1,079. Cause: The Organization recorded the transactions into the general ledger based on the payroll period ending date and invoice date rather than the date the transactions were incurred by the Organization. In addition, the Organization experienced turnover within the finance department and the missing supporting documentation was likely misfiled and therefore unable to be located. Effect: If the Organization includes expenses either incurred before the start date or after the end date of the approved period of performance, it could result in funds being required to be returned to the funding agency. Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2022-005. Recommendation: The Organization should work with the federal agency to provide additional documentation or justification for the expenses, or to adjust the budget or funding limits to ensure that all expenses are within the approved period of performance. It is important to address any period of performance findings as soon as possible to avoid potential penalties or repayment obligations. The Organization should also review its process of entering invoices and payroll related expenses into the accounting software to ensure the correct period is used for federal expenditures. View of Responsible Officials and Planned Corrective Action: Please refer to Community Action Committee of the Lehigh Valley, Inc. and subsidiaries’ Corrective Action Plan.
Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Housing and Urban Development Federal Program Name: Community Service Block Grant; Community Development Block Grant Assistance Listing Number: 93.569; 14.218 Pass-through Agency: Pennsylvania Department of Community and Economic Development; City of Bethlehem (CB); Northampton County (NC) Pass-Through Number: Contract #C000067069; Contract #C000082084; B-22-MC-42-0003 (CB) Award Period: April 1, 2020 – September 30, 2022; January 1, 2022 – December 31, 2027; January 1, 2022 - December 31, 2023 (CB); July 1, 2020 - December 31, 2022 (NC) Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria: 3 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of period of performance. The Organization should have procedures and controls in place to ensure expenses are charged to a federal program within the approved period of performance. In addition, in accordance with 2 CFR Part 200.403, allowable costs should be determined in accordance with generally accepted accounting principles (GAAP), therefore payroll accruals should be appropriately reflected when recording program expenditures. Condition: During our testing, we noted there were several salary expenditures charged to the grant based on the payroll period ending date, however the costs were incurred for the period 12/24/22 - 1/6/23, which the first eight days were prior to the start of the period of performance. There was also one transaction selected for testing where no supporting documentation was able to be located and one transaction that was incurred after the period of performance for the program. Questioned Costs: No questioned costs above the $25,000 threshold have been identified. Context: During the review of community service block grant costs recorded at the beginning of the approved period of performance (January 2023), seventeen transactions charged to the federal program in January 2023 for salary and related payroll taxes were observed. A portion of these expenses was incurred before the start of the contract period, specifically covering the payroll period from 12/24/22 to 1/6/23, with the first eight days outside the approved period of performance. The total amount of these transactions was $11,606. Additionally, one transaction for facilities maintenance totaling $2,625 lacked supporting documentation. Furthermore, during testing of costs recorded towards the end of the period of performance (September 2022), there was one transaction for outside computer services amounting to $1,125, with the invoice indicating services performed in October 2022. During the testing of community development block grant costs recorded at the beginning of the approved period of performance (January 2023), seventeen transactions charged to the federal program in January 2023 for salary and related payroll taxes were noted, with a portion incurred prior to the start of the contract period. The total amount of these transactions was $1,079. Cause: The Organization recorded the transactions into the general ledger based on the payroll period ending date and invoice date rather than the date the transactions were incurred by the Organization. In addition, the Organization experienced turnover within the finance department and the missing supporting documentation was likely misfiled and therefore unable to be located. Effect: If the Organization includes expenses either incurred before the start date or after the end date of the approved period of performance, it could result in funds being required to be returned to the funding agency. Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2022-005. Recommendation: The Organization should work with the federal agency to provide additional documentation or justification for the expenses, or to adjust the budget or funding limits to ensure that all expenses are within the approved period of performance. It is important to address any period of performance findings as soon as possible to avoid potential penalties or repayment obligations. The Organization should also review its process of entering invoices and payroll related expenses into the accounting software to ensure the correct period is used for federal expenditures. View of Responsible Officials and Planned Corrective Action: Please refer to Community Action Committee of the Lehigh Valley, Inc. and subsidiaries’ Corrective Action Plan.
Federal Agency: U.S. Department of Health and Human Services; U.S. Department of Housing and Urban Development Federal Program Name: Community Service Block Grant; Community Development Block Grant Assistance Listing Number: 93.569; 14.218 Pass-through Agency: Pennsylvania Department of Community and Economic Development; City of Bethlehem (CB); Northampton County (NC) Pass-Through Number: Contract #C000067069; Contract #C000082084; B-22-MC-42-0003 (CB) Award Period: April 1, 2020 – September 30, 2022; January 1, 2022 – December 31, 2027; January 1, 2022 - December 31, 2023 (CB); July 1, 2020 - December 31, 2022 (NC) Type of Finding: • Material Weakness in Internal Control over Compliance • Other Matters Criteria: 3 CFR Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Award requires compliance with the provisions of period of performance. The Organization should have procedures and controls in place to ensure expenses are charged to a federal program within the approved period of performance. In addition, in accordance with 2 CFR Part 200.403, allowable costs should be determined in accordance with generally accepted accounting principles (GAAP), therefore payroll accruals should be appropriately reflected when recording program expenditures. Condition: During our testing, we noted there were several salary expenditures charged to the grant based on the payroll period ending date, however the costs were incurred for the period 12/24/22 - 1/6/23, which the first eight days were prior to the start of the period of performance. There was also one transaction selected for testing where no supporting documentation was able to be located and one transaction that was incurred after the period of performance for the program. Questioned Costs: No questioned costs above the $25,000 threshold have been identified. Context: During the review of community service block grant costs recorded at the beginning of the approved period of performance (January 2023), seventeen transactions charged to the federal program in January 2023 for salary and related payroll taxes were observed. A portion of these expenses was incurred before the start of the contract period, specifically covering the payroll period from 12/24/22 to 1/6/23, with the first eight days outside the approved period of performance. The total amount of these transactions was $11,606. Additionally, one transaction for facilities maintenance totaling $2,625 lacked supporting documentation. Furthermore, during testing of costs recorded towards the end of the period of performance (September 2022), there was one transaction for outside computer services amounting to $1,125, with the invoice indicating services performed in October 2022. During the testing of community development block grant costs recorded at the beginning of the approved period of performance (January 2023), seventeen transactions charged to the federal program in January 2023 for salary and related payroll taxes were noted, with a portion incurred prior to the start of the contract period. The total amount of these transactions was $1,079. Cause: The Organization recorded the transactions into the general ledger based on the payroll period ending date and invoice date rather than the date the transactions were incurred by the Organization. In addition, the Organization experienced turnover within the finance department and the missing supporting documentation was likely misfiled and therefore unable to be located. Effect: If the Organization includes expenses either incurred before the start date or after the end date of the approved period of performance, it could result in funds being required to be returned to the funding agency. Repeat Finding: The finding is a repeat of a finding in the immediately prior year. Prior year finding number was 2022-005. Recommendation: The Organization should work with the federal agency to provide additional documentation or justification for the expenses, or to adjust the budget or funding limits to ensure that all expenses are within the approved period of performance. It is important to address any period of performance findings as soon as possible to avoid potential penalties or repayment obligations. The Organization should also review its process of entering invoices and payroll related expenses into the accounting software to ensure the correct period is used for federal expenditures. View of Responsible Officials and Planned Corrective Action: Please refer to Community Action Committee of the Lehigh Valley, Inc. and subsidiaries’ Corrective Action Plan.